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Despite Reform, Postage Rates May Still Increase

(Sept. 19, 2005) A postal reform bill passed by the U.S. House of Representatives in July was supposed to eliminate the need for a postage rate increase in 2006, but the projected savings may be diverted for other purposes.

Earlier this year, the United States Postal Service (USPS) filed a request for a rate increase of 5.4 percent with the Postal Rate Commission. The USPS noted that the only reason for the increase was to meet the requirements of the Civil Service Retirement System escrow obligation. Currently, money owed to the USPS due to an overpayment into the CSRS fund must be held in an escrow account. This escrow requirement costs the USPS more than $3 billion annually.

The postal reform bill (H.R. 22) includes provisions that would eliminate the escrow requirement for the USPS and return responsibility for funding CSRS pension benefits to the Department of the Treasury. The USPS has said that if the bill becomes law, it would withdraw its proposal for a rate increase in 2006.

Money Diverted for Health Care Costs

However, according to the Alliance of Nonprofit Mailers, the money that was earmarked for the escrow fund is being diverted to fund USPS retiree healthcare costs. 'There will be some limited savings targeted for rate relief--but very little,' says Neal Denton, president of the Alliance. 'Mailers should brace for 5.4 percent increases early in 2006 and more increases in 2007.'

Another obstacle for the bill has been the White House's position that any postal reform bill presented to it must be 'deficit neutral.' However, by shifting the pension funding, the bill actually has a negative effect on the budget. A statement from the White House said that 'should the final bill have such an adverse impact on the federal budget, the president's senior advisers would recommend that he veto the bill.'

A compromise might be reached whereby only a limited amount of money is available for rate relief, thus necessitating a postage rate increase in 2006, albeit smaller than 5.4 percent.

Your Help Needed

Members are encouraged to mail or fax letters to their two U.S. senators and urge them to pass S. 662, the Senate version of this legislation, and ensure that the escrow requirement for the USPS is eliminated. A sample letter is below.

If you don't know who your U.S. senators are, or don't have their contact information, use this link to find out. AFP recommends sending letters to senators' state offices as opposed to their D.C. offices to better show that these are local community issues that affect constituents.

Sample Letter

The Honorable XXXXXX

The Senate


Dear Senator XXXXXX:

Charities need postage rate relief, so please support postal reform legislation this year and pass S. 662 immediately!

The United States Postal Service has proposed a 5.4 percent postage rate increase in 2006, but only because it is responsible for funding pension benefits related to the military service of postal retirees. The Postal Service is the only federal agency required to make these payments, and those costs are passed on to mailers like my own organization.


The House has already passed legislation (H.R. 22) that would eliminate the Postal Service's escrow requirement for the pension fund and transfer that responsibility to the Department of the Treasury.

Please pass S. 662, the Senate version of this legislation, and ensure that it too eliminates the USPS escrow requirement. Otherwise, we will again be hit with another rate increase that simply takes money away from programs and services we could be offering the community.

Thank you for your consideration, and I look forward to hearing from you.


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