Resources

Raising Prices Is NOT Managing Costs

January 25, 2018

I am sharing a commentary from Steve Kearney, Executive Director of the Alliance of Nonprofit Mailers, discussing his disappointment about the proposal the Postal Regulatory Commission (PRC) submitted for comment last month. Please read it keeping in mind that we would not be in this situation if all parties focused on the root causes of the postal services financial issues. In general, there has been an abdication of responsibilities throughout government and a failure to address the third rail of postal management, the inability of the USPS to manage their costs.

So, what are these abdications:

  1. In 2006, when Congress passed the Postal Accountability and Enhancement Act (PAEA) which required the USPS to pre-fund retiree health benefits. This has placed a tremendous burden on the Postal Services finances. There has been discussion about fixing this for years. In 2017 the House got as far as passing a bipartisan bill supported by a wide swath of the mailing industry, including the USPS, out of committee. Today it languishes in another committee. This bill addresses the balance sheet but does not tackle the broader issues related to the operation of the USPS.
  2. The USPS Board of Governors currently has ZERO Senate approved governors. This not only hamstrings the USPS, it harms the country by not giving the postal service a board that can give them advice. There are 9 openings on the Board of Governors and they should be filled by individuals that have experience in real world business and have demonstrated the ability to get things done. To date, the administration has nominated only 3 individuals. And the Senate has yet to take any action on them. So the USPS must continue to guide themselves. As any CEO would tell you – boards can be difficult, but it’s critical to have someone outside the day to day battles to bounce ideas off.
  3. The Postal Regulatory Commission (PRC), to their credit, has given the failure of the USPS to manage costs some attention. However, the USPS is either unable to address their concerns or is unwilling. I want to emphasize the quote from the Annual Compliance Review that Steve referenced in his article as a prime exhibit. “the information generated by the Postal Service’s existing data systems does not support reliable estimates of the impact of operational initiatives on flats costs.” As a regulator, I would expect that the PRC would continue to push the USPS to fix this – but they do not. Instead the PRC joined Congress and the administration and abdicated their responsibility to truly regulate this national treasure.
  4. As for the USPS leadership team, have they abdicated on their role to keep this institution viable into the next century? What do you think would happen to the CEO of a public company if he or she made a statement like what the USPS acknowledged in the ACR to a board of directors or shareholders?

That brings us to the PRC’s mandated 10-year review. Given the environment in D.C. of avoiding responsibility one would have expected the PRC to abdicate their role and avoid any controversy. Shockingly, they decided instead to usurp Congressional authority and have proposed rewriting the price authority sections of PAEA to allow the USPS to raise prices far in excess of the current CPI cap.

So, is this the beginning of the end? Let’s hope not. Quad is working with others in the mailing industry to be sure our voice is heard – in the halls of Congress, in comments to the PRC and in daily interactions with the USPS. While this creates a strong voice the situation we are facing requires a chorus. We need others to join us in letting the parties know that their abdication of responsibility has put the USPS on the edge of death spiral.

Whether you are a member of a mailing organization or not you should add your voice to this effort now.