Nonprofit Postal Rates Set to Skyrocket
The United States Postal Service (USPS) filed notice with the Postal Regulatory Commission (PRC) under the cover of a holiday weekend on May 28, requesting rate increases of 6.9 percent on average, with different categories ranging from 5.7 percent to as much 14.6 percent. New rates would take effect on Aug. 29.
Nonprofit Marketing Mail (NMM) revenue per piece will equal 60 percent of commercial as closely as practicable, as required by law, according to the Alliance of Nonprofit Mailers (ANM). The overall average increase for Nonprofit Marketing Mail would be 7.8 percent, with increases within categories ranging from 5.7 percent to more than 14 percent:
Letters: +5.7 percent
Flats: +10.4 percent
Parcels: +8.6 percent
HD/Sat/CR Letters: +10.1 percent
HD/Sat Flats: +14.6 percent
CR Letters, Flats, and Parcels: +13.9 percent
First-Class Mail prices would jump by 6.8 percent to offset declining revenue. Mail volume in the past decade has decreased 28 percent, or about 46 billion pieces, and continues to decline, including a 32 percent decline in First-Class Mail volume and 47 percent drop in single-piece First-Class mail volume.
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Postal rates rose by an average of almost 2 percent in January. This latest rate hike is part of “Delivering for America,” the USPS’ 10-year plan to achieve financial sustainability and service excellence released in March.
“For the past 14 years, the Postal Service has had limited pricing authority to respond to changing market realities,” Postmaster General and CEO Louis DeJoy said via a statement. “As part of our 10-year plan to achieve financial sustainability and service excellence, the Postal Service and the Board of Governors are committed to judiciously implementing a rational pricing approach that helps enable us to remain viable and competitive and offer reliable postal services that are among the most affordable in the world,” he said.
“As much as we anticipated the full use of the new postal rate authority, it is shocking to see a government monopoly harming captive mailers for the sake of its profitability,” said Stephen Kearney, executive director of the Washington, D.C.-based ANM. “A private sector monopoly business might try this, but it’s not what our public Postal Service should do,” he said.
“In addition to being bad public policy, we strongly believe that the regulator granted this authority unlawfully and without properly taking into account the recent major changes that have greatly improved the outlook for USPS,” Kearney said. “The missions and services of many nonprofit organizations will be greatly diminished as a direct result of this action by USPS,” he said.
The Postal Accountability and Enhancement Act (PAEA) of 2006 capped price increases for mailing services at the Consumer Price Index (CPI), the rate of inflation. The PAEA also required the PRC to evaluate the price cap system 10 years after the date of enactment and to modify or replace the system if it was not meeting objectives of the law, which resulted in the “Delivering for America” report.
In November, the PRC announced new rules of market-dominant prices, allowing inflation price increases on the basis of certain factors and allowing the USPS more flexibility in establishing prices for mailing services. The ruling allowed the Postal Service higher rate authority in establishing prices for mailing services, above the rate of inflation. “Aligning our prices for market-dominant products will allow us to grow revenue and help achieve financial sustainability to fulfill our universal service mission,” USPS Chief Financial Officer and Executive Vice President Joseph Corbett said.
USPS estimates it would have generated $55 billion in cumulative gross revenue since 2006 based on the density rate authority of the recent PRC ruling. The PRC allows for above-inflation rate authority based on density (4.6 percent), non-compensatory mail (2 percent), and retirement costs (1 percent).
According to the USPS, the 10-year plan is designed to reverse a projected $160 billion in operating losses over the next decade, including proposed pricing changes, together with necessary legislation, that would allow $40 billion over the next 10 years to modernize and improve infrastructure.
Almost two-thirds of the $160 billion identified in Delivering for America will require approval from Congress and the PRC. Postal increases above the rate of inflation would account for $44 billion of the $160 billion, according to ANM, and likely accelerate the exit by mailers from the postal system.
This article first ran at The NonProfit Times. It is reprinted with permission.