Largest Ever Stamp Price Increase Approved

Nov 14, 2018

stamp

On November 13, the United States Postal Service regulator approved the largest ever price increase for the stamps, a 10% jump, bringing the cost of sending a letter up to 55¢. The jump was approved after the Postal Regulatory Commission determined the Postal Service’s proposal complied with requirements, such as ensuring any price surge is not more than inflation.

Prices will increase across the agency by an average of 2.5%, the inflationary cap. The price for a regular, first-class mail stamp will outpace that rate. Packages sent as Priority Mail will see costs rise by 5.9%, while Priority Mail Express will have a 3.9% increase.

The new prices will go into effect January 27, 2019.

On “competitive products” such as packages and shipping, the regulatory commission must also ensure USPS is covering all of its costs without cross-subsidization from its “market-dominant products” like regular, First-Class Mail. The PRC also said USPS proposals for both classes of mail “meet all statutory requirements.”

The 5¢ increase on stamps is the largest since 1991 when USPS raised the price 4¢ to $0.29, a 16% increase.

For years, USPS has sought more autonomy to set higher prices for its products. In 2016, PRC forced the Postal Service to roll back its prices after allowing for an emergency increase higher than the rate of inflation, citing the economic recession. That decrease has cost the agency hundreds of millions of dollars each quarter, USPS said. Since then, Postal Management has requested that it have full control over setting prices as it sees fit. PRC has denied that request in a proposed new system but allows for price increases that outpace inflation.

The USPS Board of Governors, when announcing its proposed rate increases for 2019, said they believe “these new rates will keep the Postal Service competitive while providing the agency with needed revenue.”

There was some quick pushback to the announcement from some of the Postal Service’s biggest customers. Steve Kearney, executive director of the Alliance of Nonprofit Mailers, called the proposal “surprising and shocking” saying his member organizations would have to “quickly review their mailing budgets for next year.”

President Trump has criticized the Postal Service for undercharging many of its large customers, mainly Amazon, for shipping services. He signed an Executive Order creating a task force to recommend changes to USPS operations, including its pricing structure. That task force has delivered its preliminary recommendations to the president and is working on their final report, which is expected before the end of the year.

USPS Loses $3.9 Billion in FY2018

This comes at a time when the USPS saw a $3.9 billion loss in FY2018, a 44% larger drop over the previous year, despite a $1 billion revenue increase. Ongoing volume losses of 3.6% led to a “controllable loss” of $2 billion, more than double from its previous year. Outside expenses such as funding for retiree health benefits attributed to that. The agency declined to make required payments of nearly $7 billion to pay for future retirees’ pensions and healthcare.

For the first time in 5 years, the Postal Service failed to turn a profit on controllable operations. The increase in stamp price would have added close to $1.7 billion in revenue if it were in place in FY2018, said Chief Financial Officer Joe Corbett.

Postmaster General Megan Brennan said without changes, USPS will continue to see losses at “an accelerating rate”. “Simply put, we cannot generate revenue or cut enough costs to pay our bills,” she said.

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