Advertisements


(Courtesy USPS)

What’s Going On?

Last week, the U.S. Postal Service announced that it would raise first-class stamp prices to 45 cents on January 22, 2012, a one-cent increase. It’s the first rate increase in over two and a half years. Prices on other mailed items will increase as well:

  • • Letters (1 oz.) – 1-cent increase to 45 cents
  • • Letters additional ounces – unchanged at 20 cents
  • • Postcards – 3-cent increase to 32 cents
  • • Letters to Canada or Mexico (1 oz.) – 5-cent increase to 85 cents
  • • Letters to other international destinations – 7-cent increase to $1.05

Why is this Happening?

The increase comes at a time when the agency faces problems with its finances and business model. However, the price increase wasn’t necessarily enacted because of the financial problems. Confusing? You betcha.

The Postal Service is expected to finance itself, but cannot set it’s own prices, hours of operation or many of its own policies. In fact, the price increase is capped by law at an annual rate of 2.1 percent and reviewed by the Postal Regulatory Commission.

Unfortunately, the agency is saddled with a myriad of problems, including:

  • • Declining mail volume thanks to the increasing popularity of email and the Internet
  • • High labor costs by employing one of the Federal Government’s largest workforces
  • • High operating costs because of the Federal mandate of delivering mail to every single residence and business in
    America, six days a week.
  • • A long-standing no-layoff policy and other union obligations
  • • Most importantly, the high cost of contributions to the employee pension (retirement) fund ($5.5 billion in the
    month of September alone)


(Courtesy USPS)

What Happens Going Forward?

There’s no solution for the agency’s financial problems that’s close to being approved. Congressional leaders have proposed emergency funding to keep the agency solvent, but who knows how long that will last, if approved. An emergency funding bill would not solve the long-term problems, so both the House and the Senate are focused on passing their own postal reform bills. Investigations into determining the root cause of the agency’s problem are still being conducted. But frankly, the problem is a lack of money coming in (revenue), too much money going out (expenses), and too many obligations (liabilities). A killer combination that would bring any business to it’s knees.

The agency itself has proposed ending Saturday mail delivery and closing rural post offices to save costs. In small towns, the Postal Service is moving forward with the idea of Village Post Offices, which are post offices located in existing businesses, like the town convenience store. While neither ideas are the silver bullet to solving the agency’s financial problems, it could go a long way to shoring up some of its finances. Unfortunately, the idea of stopping Saturday mail delivery has already received a chilly reception in Congress. It’s a “want you cake and eat it too” situation, you could say.

What Should I Do?

There’s not much you can do to help the Postal Service, other than deciding to mail more packages and sending more letters through the postal service. But that still doesn’t solve their overall financial issues.

In the mean time, the only thing you can do for your own benefit is try to offset the increase in first-class postage rates by mailing items, like packages, in a smarter way. For example:

  • • Take advantage of free Delivery Confirmation service on Priority Mail packages when you create and pay for your
    mailing label online.
  • • If your shipping only CD’s, DVD’s or books, see if your package could qualify for the “Media Mail” postage rates.
    It’ll take longer for your package to reach its destination, but you can save yourself a bundle in postage.
  • • Buy Forever Stamps. Pay today’s first-class stamp rates and use the stamps whenever you want in the future. Just
    be sure to stock up before the new first-class stamp rates take effect in January.
Advertisements

Become Money Smart!

Sign up to hear the latest news and advice from 2MF about your money.