What is the current situation?

The Postal Regulatory Commission (PRC) granted the USPS a new rate authority in late 2020, allowing for hefty twice-annual increases like those in January and July 2024. The authority is an add-on to the previous system, which permitted increases only up to a ceiling determined by the annual consumer price index (CPI), a measure of inflation.

What does this mean for nonprofits?

The consequence of this new authority to increase rates has been accumulated increases between 15.7 and 19.6% in a mere 18-month period. The USPS will continue to have this authority for two or more years. When it has run its course, nonprofit mailers will have absorbed increases of up to 50-60% from start to finish.

How did we get here?

The 2006 Postal Reform Act limited price increases to a formula derived from the Consumer Price Index (CPI). Therefore, since 2006, aside from a small increase due to the Great Recession, postal rates have increased approximately at the rate of inflation, predictable as to both amount and timing.

Under the 2006 Act, the PRC was given the task of conducting a ten-year review of the law’s effectiveness. The PRC concluded that USPS’s poor financial health was due to the CPI cap, as opposed to a lack of operational efficiency or cost control. Therefore, it proposed a new formula, adopted in December 2020, which gave USPS new rate-making authority, permitting variable surcharges to be added to the CPI.

What can we do now?

TNPA strongly believes a long-term solution can only be found through structural reform of the USPS and its funding methods. The USPS cannot successfully be run as a business while incorporating substantial and obligatory public service missions into its operations. The ideal policy for the nonprofit sector—and all mailers—would be a return to the original goals of the Postal Reform Act of 2006: predictable rate increases in line with the rate of inflation.

Collectively, mailers took a logical first step. In late 2020, a coalition of mailers’ associations sued the PRC, asserting that it did not have the authority to raise rates above the 2006 Act’s CPI cap. TNPA contributed to this effort. In November 2021, the US Court of Appeals (DC Circuit) ruled against the mailers’ suit. The court ruled that the PRC acted within its authority, thus allowing the large rate increases beyond the CPI to continue.

With this disappointing court decision, the focus moved to Capitol Hill. H.R. 3076, the Postal Reform Act of 2022, passed the House in May 2021 and was working its way through the Senate. In March 2022, the Senate passed the bill without amending it to include pricing caps, and in April 2022, President Biden signed the measure into law.

While the legislation has several positive provisions, including shifting the large postal retiree healthcare cost off the Postal Service and to Medicare, where most retiree healthcare costs reside, it does not contain any language limiting future postal rate increases.

Our challenge now is to gain the enactment of legislation that would force the PRC to do a new, second study of the postal rate structure, taking into account the USPS’s freeing of the large retiree healthcare cost. It will be no easy task to enact this legislation, but a bipartisan group of seven Senators seems ready to push forward on this effort. Even if legislation mandating a new postal rate study were enacted, there is no guarantee that the PRC will conclude that the pricing structure should be fundamentally changed.

TNPA is part of Keep US Posted, an important coalition committed to a reliable, affordable USPS.