Budgeting for Postage in 2018

September 21, 2017 by Tim Johnson

It’s the time of year when users of the Postal Service start to plan next year’s postage budgets. For early budgeting purposes, based on the best information that is currently available and the five points of explanation that follow, here are my prognostications for the postage rate increases that will almost certainly take effect January 21, 2018.

• First Class and First Class Presorted rates will increase by approximately 2%
• USPS Marketing Mail Commercial (formerly known as Standard Mail) and Non-Profit rates with No Destination Entry discount will increase by approximately 1.5 – 2.0%
• USPS Marketing Mail Commercial (formerly known as Standard Mail) and Non-Profit rates that earn NDC or SCF discounts will increase by approximately 3.0 – 3.5%

Five points of explanation for my prognostications:

1. The Consumer Price Index (CPI) and the Rate Cap – The CPI has remained relatively stable since last September when the Postal Service filed for its 2017 price adjustment. The rate cap currently is just below 2% and isn’t expected to rise significantly before the Postal Service files for its 2018 postage rates.
2. The Board of Governors – The Board of Governors currently has no presidentially-appointed governors. That’s a problem that calls into question whether the Postal Service will be able to legally file for a rate increase. However, based on what I’ve read and heard, it appears that the CPI-capped rate will be treated as if it has been preapproved and the Postal Service will be able to file. We won’t know for sure until later this fall; however, my prognostications assume that the Postal Service will be able to file.
3. Better align drop-shipment discounts with projected cost savings – In 2017 the percentage of the postage rate increase for drop shipped mail was greater than the percentage of the postage rate increase for non-drop shipped mail. Early indications are that the Postal Service plans to continue making that same type of pricing adjustment in 2018.
4. Postal Reform Legislation – Postal Reform Legislation could potentially affect postage rates in 2018; however, I don’t think it will. Earlier this year significant bi-partisan progress toward healthy Postal Reform was occurring; however, the momentum has definitely slowed. It now seems unlikely that Congress will address Postal Reform until larger issues such as health care and tax reform are off the table. Though Postal Reform Legislation is much needed, I doubt that any new legislation will impact the rates that will take effect in January, 2018.
5. The Postal Regulatory Commission (PRC) Review – The law that currently governs USPS rates and rate-setting regulations was passed in 2006. Because it has been 10 years since the 2006 law was passed, the PRC is now required to review that legislation. Later this month the Commission is expected to release its first ruling as part of their review. If the PRC finds that the current rate-setting process does not provide “adequate revenues” for the Postal Service to maintain financial stability, it will likely call for stakeholder input on how to ensure adequate revenue before issuing another ruling mandating changes in the process. It is unlikely that such a ruling would happen before December 2017. Therefore, it seems unlikely that the outcome of this process will impact the rates that will take effect in January 2018.

Impact will continue to track the issues that drive the rate making process. As we learn more, we will provide updates.

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