USPS Smacks Nonprofit Mailers Again

Charities that use premiums to fundraise have again taken it on the chin from the United States Postal Service. Nonprofit parcels and Nonflat Machinables (NFM) will again bear the brunt of postal rate increases, with percentage increases ranging from almost 10 percent to 50 percent, according to analysis from the Direct Marketing Association (DMA).

The United States Postal Service (USPS) Board of Governors released new postage increases that are set to take effect May 11. The new rates will be reviewed by the Postal Regulatory Commission (PRC) to ensure they are within the provisions of the Postal Act of 2006, namely checking that they are within the price cap for each class of mail.

The cap, based on the most recent 12-month average of the Consumer Price Index-Urban (CPI-U), was about 3.8 percent. Each class of mail can see price increases as high as an average of 3.8 percent, but can vary within each class. If the PRC were to find that the new prices were not set correctly, the Postal Services would adjust them.

The hardest hit postal classes hit will be Standard parcels and Nonflat Machinables (NFM), according to Tony Conway, executive director of the Alliance for Nonprofit Mailers (ANM), a Washington, D.C.-based coalition. He expects average percentage increases in those two categories to reach the upper teens, calling it a sign that the cost of the Postal Service processing and handling such mail remains high. “Clearly it’s a price signal that they’re obviously not trying to incent more of that volume in their system,” Conway said.

Some nonprofits were faced with massive double-digit postage increases when the NFM category was introduced in two years ago, prompting some organizations to modify the size and shape of their mailings drastically.

Nonprofit Standard flats appear to have a slightly smaller increase than nonprofit letters, Conway said, suggesting that the USPS is sensitive to the loss of volume in flats and wants to keep it growing. Last year, flats saw a reduction, he said.

“Overall, it wasn’t at least on the face of it a real aggressive type price change with big swings,” Conway said, and USPS was likely sensitive to the current economic conditions.

The USPS could have cited extraordinary circumstances and asked the independent Postal Regulatory Commission for larger increases, but officials felt that would only result in a greater decline in mail volume. The Postal Service has been cutting costs, reducing work hours, and has asked Congress to ease requirements for advance funds for retiree benefits and to allow mail to be delivered five days a week instead of six.

When the Postal Service first created the NFM category, it suggested it as an interim move while migrating the product line into the parcel category, Conway said. “Clearly, pricing is heading in that direction,” he added.

The Postal Service projects volume to be down 12 billion to 15 billion pieces for the year, which could mean a significantly higher loss than last year’s $2.8 billion. Conway said even that figure may well be optimistic.

For the first quarter of its fiscal year (October to December), the USPS had a preliminary net loss of $384 million and a drop in volume of 5.2 billion pieces, about 9.3 percent, compared to the previous first quarter. First-Class Mail volume decreased by 1.8 billion pieces and Standard Mail volume was down 3 billion.
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