As the nonprofit community determines just how much they might see postal rates increase next year, it's clear that Standard Mail Parcels will get hit with the largest increases – 23 percent – under an exigent rate case filed by the United States Postal Service (USPS) today.

How much the nonprofit rate for Standard Parcel or other categories used by nonprofits will increase is unclear, but USPS appears to be moving toward having categories cover more of their costs to handle.

“It's not clear how badly this will impact nonprofit mailers,” said Christopher Quinn, executive director of the Direct Marketing Association's Nonprofit Federation. “However, the USPS has been pointing out classes of mail that are ‘underwater' and nonprofits is one they singled out,” he said.

“If it isn't letter shaped, it's a problem -- that's basically what the data shows,” said Tony Conway, executive director of the Alliance of Nonprofit Mailers in Washington, D.C. Work-sharing discounts would decrease by about 3 percent, he added.

The overall average price increase will be about 5 percent, with most products and services ranging from 4 to 6 percent, but periodicals and Media/Library Mail will also be hit hard, with average increases of 8 and 7 percent, respectively.

The Postal Regulatory Commission (PRC) is expected to decide the case by October and new prices would take effect Jan. 2, 2011, if approved.

Standard Mail letters would increase by about 5 percent, while flats would go up 5.1 percent. First Class mail would rise from 44 to 46 cents and First Class postcards would rise from 28 to 30 cents.

If approved, the proposed price change would generate about $2.3 billion for the first nine months of 2011 and an estimated $3 billion for the full 12 months of Fiscal Year 2012.
Postal officials pointed to substantial operational savings during the past several years, including eliminating 200,000 positions through attrition. Cost savings were estimated at $6 billion in 2009 and on track for $3.5 billion in 2010, yet projections still indicate a $6.5-billon loss this year. USPS is still projecting a $238-billion shortfall over the next 10 years.

The Affordable Mail Alliance -- a coalition of mailers, publishers, printers and associations -- will ask that the PRC not grant the Postal Service a rate hike above the cap on the Consumer Price Index (CPI), less than 1 percent last year, as spelled out in the Postal Reform Act of 2006.

“Never before in the history of the Postal Service has its entire customer base joined as one in passionate opposition to a rate proposal,” said James Creegan, executive vice president for government affairs at the Magazine Publishers of America (MPA). “Usually we've spent rate cases fighting about whose ox is being gored,” he said, but the coalition of the entire mailing community is growing as word of the rate hike gets out. “We firmly believe this filing is unlawful, bad economics and bad public policy,” said Creegan.

“A CPI-driven increase is what we were promised with the 2006 reform act,” said Conway. “Here we are three years later and they're trying to break the cap tenfold.” Postal officials said the legislation allows for an increase beyond the CPI if the USPS proves “exceptional or extraordinary circumstances.” The PRC can approve the request if it finds to be “reasonable and equitable and necessary.” The price cap this year, based on CPI, was less than 1 percent.

The Affordable Mail Alliance is ready for a fight. “All the mailers have risen up as one here,” said Jerry Cerasale, senior vice president, government affairs for the Direct Marketing Association (DMA). “They've done it because even though USPS has said this is a multifaceted, balanced approach to right their fiscal ship, they're focusing on mailers. Their customers are the first to get hit,” he said. “There is no sound rational basis to come after mailers; it's self-defeating,” Cerasale said.

Conway said the USPS should “bite the bullet” and take out unnecessary costs in its system, which is designed to handle 300 billion pieces of mail but this year handled only 170 billion pieces, a number he said that could decline even faster with the proposed increase as mailers find alternate routes of reaching poeple. Postal officials did not rule out the possibility of pulling the rate case if Congress provides some kind of financial relief but leaders of the Affordable Mail Alliance contend they cannot wait for that.

The Postal Service has asked Congress to waive a health benefit liability payment of $5.5 billion, which Conway suggested could eliminate the need for an exigent rate case. The Postal Service also has overpaid its retirement fund by as much as $50 billion to $75 billion and has requested Congress to restructure the prepayment for retiree health benefits, along with other cost-cutting measures, such as reducing delivery frequency.

Eliminating Saturday delivery could save as much as $3 billion but Creegan said no one in Congress has shown an inclination to go along with the Postal Service's suggestion to reduce delivery days -- either this year or in the near future. The PRC is expected to issue a nonbinding advisory opinion on reduce delivery later this year.

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