OK, we'll back up for a second and relate the riveting tale of the civil service retirement system (CSRS) account. In 2003, the USPS learned that it was slated to overpay the retirement fund for its employees by a mere $80 billion. The U.S. government rectified the situation (sort of), but tacked a two-headed monster onto the so-called correction: the retirement fund overpayment amount was shifted into an escrow fund. Additionally, the postal service was mandated to pick up the portion of retirement annuities based on their employees' military service. The 5.4 percent increase request only addresses the pension escrow.
Without reform that addresses the escrow issue, future USPS increases could become an annual event, prompting major advertisers—the printers' customers—to look at cheaper, alternative mediums for delivering their message. And even if there is a hint of Chicken Little cynicism involved here, there are tangible ramifications if the USPS is not allowed to get its house in order.
"If things keep going on the way they are now, the current rate case is just the tip of the iceberg," notes Leo Raymond, director of postal affairs for the Mailing & Fulfillment Service Association (MFSA), one of about four dozen associations hammering away at Congress and the White House for needed reform relief. "Next year the USPS will have to go back to the Rate Commission and ask for another rate increase to raise more money to put into the 2007 escrow payment. Every year there is a new payment, and every year the payment goes up.
"At some point, this unbelievable escalation of rates is going to have an effect on mail volume," Raymond adds. "The USPS is going to be stuck in a situation where it will still be going to 142 million addresses six days a week and it's going to have significantly lower volumes of mail, less revenue, to pay for this. So (the USPS) will go into the proverbial death spiral with both feet."