• by John Gaffney , November 6, 2002

It is true that on Wednesday postmaster general John Potter predicted that postal rates could remain flat for the next four years. But before magazine publishers and direct mail houses exhibit any irrational exuberance about that announcement, understand that there’s a lot of behind the scenes activity that stands between flat postal rates becoming a reality.

“I wouldn’t run to the bank with it,” said Jim Cregan, Magazine Publisher’s Association EVP for government affairs. “There is no such thing as a guarantee of no rate hikes until 2006, but if the legislation attached to this is passed and signed by the Bush administration in short order, we won’t have any rate hikes until 2006.”

The news came from Potter’s speech to the postal service board of governors in which he disclosed that the U.S. Postal Service has been paying too much into a pension fund. A new financial analysis of payments dating to 1971 has revealed that the Postal Service could amass a balance of $243.6 billion in the Civil Service Retirement System (CSRS) fund. That’s more than the $172.6 billion needed.

Most of the media has been covering the potential savings to consumers who would see stamp prices frozen at 34 cents. But for magazine publishers rising rate hikes have been an unwelcome yearly line item that makes a tough climate tougher. Flat postal rates for magazines would be cause for celebration. But keep the champagne on ice. Many industry veterans predict that found money won’t last long in a sector of the government suffering from rising overhead and shrinking revenues.

“Anytime a government agency says they’ve found money that puts them in a better position that’s welcome news,” says Glenn Hotchkiss, COO of online and offline direct marketing firm GreenMail. “But I don’t believe this addressees the fundamental problem. And the fundamental problem is the Postal Service has very high fixed overhead and its revenue has been sliced by email and email marketing. I don’t see how the postal service can estimate four years down the road with any real accuracy.”

The MPA’s Cregan says there is reason for guarded optimism. First, he says, the audit that found the money and made the predictions was conducted by the Bush Administration and Treasury Department. Second, he expects the Bush Administration to push a package of legislation through Congress early next year that will reduce the administration’s liabilities to the postal employee retirement system, freeing up money for the rate freeze. And third, he expects his organization as well as the Direct Marketing Association to actively support the measure..

“We are pleased about the possible delay in any future rate increase and call on Congress to enact the necessary legislative change to fix this broken system quickly," said H. Robert Wientzen, president & CEO, The DMA. "We will work with the Postal Service and others to effect necessary changes which will ensure that the American mailing public receives the lowest possible mailing rates."