Postal executives today must feel as if they just lost a round of the old children’s game called "Mother May I?".
Putting it in simplistic terms, The U.S. Postal Service said to the Postal Regulatory Commission, “May we impose exigent (emergency) price increases to make up for the money we lost because of the recession?”
The PRC gave its unanimous answer today: “Well, the recession does qualify as an emergency that justifies special rate increases, but you can’t have the money because you didn’t ask properly.”
Another rate request?
The question now is whether the Postal Service will return to the PRC and ask, “Mother, may we impose emergency price increases to help pay for the recession.” That seems to be a more likely path than appealing the PRC’s decision to a federal appeals court.
After all, the PRC’s ruling was a partial victory for the USPS because the commission decided that “the recession and its impact on the Postal Service constitute an extraordinary or exceptional circumstance” that satisfies the legal requirements for an exigent rate increase.
The problem, however, is that the Postal Service didn’t show “how either the rate increases in general, or the specific rate increases proposed, relate to the extraordinary or exceptional circumstances that purportedly give rise to them,” the commission wrote. “Instead, the proposed rate increases are identified as part of a long-term plan designed to address, among other things, liquidity issues.”
Impending liquidity crisis
The ruling acknowledges that the Postal Service faces “an impending liquidity crisis.” But it said that crisis is caused primarily by the “overly optimistic” prefunding of retiree health benefits that is draining more than $5 billion annually from the Postal Service’s coffers.
“The Postal Service can not resolve severe shortcomings in its business model by resorting to the exigent rate provision,” the ruling states.
The PRC’s analysis of the pre-payments may help efforts to reform the payment structure. That's because the commission probably has more credibility right now than postal executives do with Congress, where some members have inaccurately described reform as a bailout.
As Dead Tree Edition has explained previously (See Postal Relief? How About No More Congressional Thievery? and How USPS Could Bypass Congress on Saturday Delivery), these prepayments are of no benefit to USPS retirees and are actually an accounting game that uses USPS money to make the federal deficit look smaller.
In a concurring opinion, Commissioner Dan G. Blair emphasized the benefits of inflation-based price caps: “Congress adopted a price cap system as a means of forcing the Postal Service to engage in more efficient behavior. Evidence of this more efficient behavior can be found in the Postal Service’s efforts to trim more than $6 billion in costs during 2009. Were it not for the discipline the price cap imposes, I doubt the Service would have achieved such significant cost reductions.”