Price Cap's Significant Impact on the Clerk Craft

(This article first appeared in the November-December 2017 issue of the American Postal Worker magazine)

By Clerk Craft Directors 

Any day now, the Postal Regulatory Commission (PRC) will be making a decision on the postage price cap that will significantly affect service to the American people and possibly the wages, benefits, and working conditions of the Clerk Craft and other postal workers.

The price cap was part of the harmful bipartisan Postal Accountability and Enhancement Act (PAEA) passed in 2006 at the urging of the large mailers. Although not discussed nearly as much as the impact of the PAEA requiring the prefunding of retiree health care, the price cap is arguably much worse.

The old way of determining rates was for the USPS to propose postage costs for service based on prior and expected expenses. Anyone could provide input and the PRC would make the final determination of the appropriate rates. By contrast, PAEA imposes a price cap on dominant products (most letters and flats) and mandates that postage cannot be raised higher than the Consumer Price Index (CPI) for Urban Workers. This index is a poor fit for a large organization like the USPS.

At the time the PAEA was passed in 2006, Congress was aware that a reduction in the volume of mail was forecast for the future and revenue would go down. Congress was also aware that the number of delivery points was forecast to increase and drive up costs. Given these factors and other unexpected costs, a price cap is an artificial measure that interferes with the mission of the USPS to provide prompt service to all American people, regardless of where they live.

In 2007, the USPS had one last opportunity before the price cap kicked in to raise rates to match actual costs (referred to as a true-up). However, at the urging of the large mailers, the USPS failed to take advantage of that opportunity. As a result, the USPS started the new rate system, which is insufficiently funded and has never been able to make up the deficit.

Financial Instability

The government organizations that monitor the USPS have determined that it is in serious financial straits.

The PRC reported in 2016, “The Postal Service is not currently generating sufficient funds to cover mandated expenses or invest in critically deferred capital needs.” The Postal Service has not been able to adequately upkeep buildings, equipment or vehicles.

In 2016, the Government Accountability Office (GAO) reported the Postal Service, “faces a serious financial situation and does not have sufficient revenues to cover its expenses, putting its mission of providing prompt, reliable, and efficient universal services to the public at risk.”

Service & Wage Cuts

The price cap has led to severe service cuts to the American people. The USPS has consolidated processing plants, thereby delaying the mail and even eliminating overnight delivery. The Postal Service also reduced hours that post offices are open, and continually understaff retail windows. These are clear violations of the mission of the USPS to provide prompt, reliable and efficient service.

The USPS has utilized the fiscally flawed price cap to reduce postal worker wages and benefits. Through understaffing, the USPS has created stressful and unhealthy working conditions for its workforce, and poor service for the American people.

Decision in Hands of Republican Party

The PRC has five appointed commissioners. With one vacancy, Republicans have a 3-1 majority on the commission. Therefore, the Republican Party will play a big role in determining the future of the Postal Service when the Republican majority PRC commissioners decide whether or not to end the price cap.

What Can We Do?

We can hold the PRC, the USPS and our political representatives accountable for supporting a postal rate structure that allows the Postal Service to fulfill its mandate of providing prompt and efficient service to the American public.