USPS Blasted for Using Outdated Financial Data

Outrage over the proposed postal rate hike grew yesterday as direct marketers expressed anger over the U.S. Postal Service’s use of outdated financial data to justify the hike.

Industry representatives said they were angered that the postal service used financial data from fiscal 1998 rather than 1999 to justify hiking rates. The increases proposed are between 5.6% and 14.8%, with an average increase of 6.4%. The average commercial increase is 7.7%.

“The USPS is using obsolete cost and revenue data from fiscal 1998 to project ahead to fiscal 2001,” said Alliance of Nonprofit Mailers executive director Neal Denton. That data, he added, “ignores” the effects of the January 1999 rate hike that raised $2 billion in new revenue, helping the USPS to gross just over $61 billion in fiscal 1999 and post a $363 million surplus, its fourth in as many years.

Nonprofit mailers, hit hard by the rate case, will face a 14.8% increase if they send Enhanced Carrier Route (ECR) mail.

Denton, and National Federation of Nonprofits executive director Lee Cassidy, said the USPS should have delayed seeking an increase until it had the final audited financial data from fiscal 1999, which ended in September. The two blasted the postal service’s governing board for once again allowing the USPS to use outdated financial data to justify a rate hike.

Two years ago the postal service had angered the PRC by submitting outdated financial data from 1997 in support of its then proposed rate increase. Requests by the PRC for more up-to-date financial information were rejected by both the USPS and its Board of Governors.

While he would not comment directly on the pending rate case, PRC Chairman Ed Gleiman said that it would have been better if the USPS delayed its filing by about two months. The delay would have provided the commission with the most recent financial data so “we could avoid the kind of wrangling over stale numbers that became the focus of the last rate case,” Gleiman said.

There was no immediate response to Gleiman’s comment from postal officials.

The proposed rates, which include boosting the price of a first class stamp by 3.6%, or one cent, to 34 cents, are expected to raise $3.7 billion in new revenue for the postal service.

The rate case was formally filed Tuesday with the Postal Rate Commission, one day after being authorized by the postal service’s Board of Governors.

“It looks to me as though [the USPS] have really taken a shot at direct marketers,” said Jerry Cerasale, the Direct Marketing Association’s senior vice president, government affairs. “We all know the postal service needs money, but to propose a rate increase significantly over the [national] rate of inflation is just preposterous. It’s a kick in the teeth for marketers,” he added.

Projected growth in US inflation is expected to be about 5% for the period of time between the last rate increase and the proposed increase.

Experts speculated that the USPS, in the face of steep rate hikes, will see a reduction in revenue and volume as mailers seek alternatives.

“The only reason the USPS is able to grow is because we in the direct mail industry need them,” Cassidy said. “But if they did have competition, and I mean real competition, they’d soon be out of business the way the operate.”

The USPS proposal also calls for the following general rate changes:

* The price of a Standard A basic automatable letter will rise from 18.3 cents to 20 cents–a 9.3% increase.

* The basic automatable flat will rise from 24.5 cents to 26.7 cents–a 9% increase. One of the largest hikes is 14% for some automated flats (catalogs.)

* The nonprofit basic automatable letter will go from 11.9 cents to 12.9 cents.

* The nonprofit basic automatable flat will decrease from 18.2 cents to 17.8 cents.