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10/15/2015

Four Aspects to Consider When Developing Your Postage Budget for 2016

Postal Action Alert Banner 2015

As we enter the 2016 budgeting season, RR Donnelley would like to share insights into the current postal landscape.   Following are four aspects to consider when creating your postal budget:

1.      Exigent Surcharge Rollback

  • In July of this year, the Postal Regulatory Commission (PRC) responded to a court order and allowed the Postal Service to collect an additional $1.191 billion in contribution loss – or $1.396 billion in additional revenue.   Bringing the total revenue lost “due to” the recession to $4.634 billion.   Based on the quarterly reports issued by the Postal Service, this exigent revenue is estimated to  be collected –in late March or early April of 2016 timeframe.
  • Absent legislation, postage rates will decrease in late March or early April 2016.

2.      2016 CPI Increase

  • Between now and April 2016, it is NOT likely that the USPS will raise market dominant rates further. Although it is within their authority to raise rates by CPI, as of October 15, 2015 the CPI is less than one half percent (.311%) and is trending downward.   If the trend changes and starts increasing, the Postal Service would likely implement an increase to coincide with the exigent rollback (i.e. 4.3% minus 1% CPI results in a rollback of 3.3%).

3.      USPS’ Attempts at Permanent Exigency WG

  • It is widely understood that the USPS has made attempts to make the exigent surcharge permanent, including lobbying Congress and most recently appealing the PRC’s most recent decision in the DC Court of Appeals.   Industry legal experts believe their last effort does not have merit since the PRC followed the court’s orders explicitly.   The move was likely to keep exigency “in play”, in hopes of passing legislation.

4.      Legislative Initiatives

  • In September, Senator Tom Carper introduced a comprehensive postal reform bill titled “The Improving Postal Operations Service & Transparency Act of 2015” or iPOST.   The rates provision of the bill makes the exigent surcharge permanent and freezes rates until January 2018.   However, to-date, the bill has no co-sponsors and does not have the support of the committee Chairman, Senator Ron Johnson of Wisconsin.
  • There is no indication that the House is planning to introduce postal legislation in the near term.
  • No other legislative proposals have been endorsed by the mailing industry, the USPS or its unions.

Bottom Line

Taking into consideration the four aspects, a best case scenario for 2016 postage rates would be a 4.3% decrease in April and a worst case scenario would be that the exigent surcharge remains in the base postage rates and a minimal CPI increase would be implemented sometime in 2016.   Although this appears unlikely at this time, some may consider budgeting for a .5% - 1% increase.

RR Donnelley offers a comprehensive range of mailing services that help you optimize your postage spend.  Please reach out to your RR Donnelley Account Representative to understand your most effective mailing strategies, as well as how best to take advantage of USPS promotions and workshare programs.

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For additional information, or to discuss postal mailing strategies, please contact your

RR Donnelley account representative or find us on the web at www.rrdonnelley.com

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