POSTAL SERVICE NEWS

USPS RATE CASE – May 9, 2006

The USPS filed for a rate increase with the Postal Rate Commission on May 3rd, seeking to raise rates by a system-wide average of 8.5% or $4 billion in new revenue for the test year of 2008. The rate case will take at least ten months to litigate with new rates going into effect as late as next May, 2007.

Mailers are anxious for postal reform legislation to pass, since it will ensure rates are tied to a reasonable rate index and that the $3 billion CSRS and military spending obligations are eliminated or reduced. Without reform postal rates are likely to increase each year simply to meet these obligations, and we could be involved in a rate case once every year or two years, draining resources. Congress must approve legislation to eliminate the escrow account and allow the USPS to operate under a new retirement funding formula, and also to return the responsibility of paying for the retirement cost of postal employees earned through military service to the U.S. Treasury Department.

DMANF Position: The DMANF supports passage of postal reform, and is currently reviewing the rate case filing. We will participate actively in the rate case . The filing provides new approaches to rate setting by combining the usual considerations of weight with shape, which the USPS is arguing will offset increased costs if the mailer has the time, awareness, and ability to presort their mail and select the appropriate shape to offset their increase.

For the numerous small organizations the complexity of the case coupled with the dramatic increases in certain categories presents a severe challenge. Organizations face yearly increases as their costs of providing services and serving their mission also increase. Nonprofits are seeing a decline in mail delivery and are being asked to pay more for less service--an argument that is hard to accept.

Proposed Rate Increases

USPS ENDS 2005 WITH REMARKABLE RESULTS

The results are in - the U.S. Postal Service ended 2005 with a record sixth consecutive year of growth in productivity, wiped out its debt and delivered fifty percent more mail to 32 million more homes and businesses than it did 20 years ago while doing it at 1985 staffing levels. These results are highlighted in the just released 2005 Annual Report of the U.S. Postal Service. View the report

FY 06 YEAR-TO-DATE FINANCIALS: MAIL VOLUME FALLS 1.5%

For the USPS's fiscal 2006 year to date (YTD) (Oct. 1 through Nov. 30), total revenue was $12.0 billion, which was $244.0 million under planned budget. Total expenses of $11.4 billion was $103.4 million under plan. YTD net income before escrow allocation was $605.1 million, which was $140.6 million under plan; net income after escrow allocation was $106.1 million. YTD mail volume was down 1.5% compared to the same time last year. View the Fiscal Report

We had very good success the Personalization front due to joint efforts with members, the USPS and other impacted organizations.

USPS issues CSR PS-323 on Personalization Rule

DMANF Files Comments Opposing the USPS's Proposed Changes to the Definition of Standard Mail

The United States Postal Service proposed changes on April 19, 2004 to "clarify the circumstances in which mail containing 'personal' information may be eligible for Standard mail rather than First Class mail rates". The DMANF and many other organizations and nonprofits submitted comments protesting the suggested changes and offering revisions to the rule. The groups fear that the new rule will force nonprofit mailers that use personalization in their mail pieces into the higher First Class rate category.

In its proposal, the USPS said that the increased use of personalization requires such a change, and that a bright line test is needed so that its customers, including nonprofit mailers, know when to use the Standard rate versus the First Class rate. The USPS states that it is attempting clarify its standards to "benefit mailers and consumers," due to a lack of guidance from the Service if they are uncertain whether a piece would be accepted at the Standard rate, making budgeting and marketing decisions difficult. Secondly, a competitive advantage might be created if they are required to mail at the higher First Class rate, while a business competitor is permitted to mail a similar piece at Standard mail rates. There was no mention of a specific reason for the change for the nonprofit community.

Therefore it proposes that the rule be revised to an "exclusive purpose" test, eliminating today's test listing the following conditions for eligibility for Standard mail rates:

If a mail piece contains personal information concerning the addressee, it will be eligible for Standard mail rates only if it meets each of the following conditions:
(1) It contains explicit advertising for a product or service for sale or lease or a solicitation for a donation;
(2) All of the personal information concerning the addressee is directly related to the advertising or solicitation; and
(3) Advertising or soliciting is the exclusive purpose of the mail piece.
(4) The USPS says the requirement that the mail piece contain advertising for a product or service for sale or lease or a solicitation for a donation is similar to the current standard, except that the proposal states that the advertising or solicitation must be "explicit." It should not be "subtle" or "implied," and anyone reading the piece should be able to easily identify the product or service advertised or the cause for which donations are sought. If the proposal is adopted, its effective date would be January 1, 2005.

The DMANF said in its comments "We are concerned that uncertainty will continue despite the articulation of a new 'bright line,' due to the portions of the proposal that require a totally subjective review of the mail piece by postal employees, and places the Postal Service in a role that is far beyond its mandate". The proposal's call for "explicit advertising for a product or service" asks the Postal Service to determine how strong the pitch of sell is, leaving the test falling "prey to the personal views and suppositions of local personnel and leaving the mailer facing the whims of case-by-case rulemaking."

More importantly, the proposal's requirement that advertising or solicitation be the "exclusive purpose" of the mail piece would disqualify a huge volume of fundraising mail pieces and bump these pieces into the higher First Class rate. "The Nonprofit Federation is concerned that this new rule places nonprofit organizations using personalization in the untenable position of stripping out educational and charitable messages in their mail pieces in favor of a pure solicitation for a donation."

The DMANF asked the USPS to revise its proposal to allow nonprofits to include other matter that advances one or more qualifying purposes of the organization in the mail piece, as has the Alliance of Nonprofit Mailers

Coop Mail in Postal Reform Legislation

The United States Postal Service has changed its restrictions on cooperative mail arrangements to allow a nonprofit to partner with for profit fundraisers when soliciting monetary donations as of November 13^, 2004.

United States Postal Service...
Cooperative Mail Ruling.

We urge members to go to use the DMANF guidance document on contracting with professional fundraisers to ensure your organization is reviewing appropriate safeguards, and also to consult with local counsel on these arrangements.

Cooperative Mail Ruling

The USPS published a final rule change in the Federal Register that enables nonprofit organizations better access to nonprofit mail rates for fund-raising. This action modifies the "Cooperative Mail Rule" that was established in the 1970s and amends the Domestic Mail Manual. USPS Release

GAO Publishes Two 'Postal Pension Funding Reform' Reports

The GAO has published a 44-page report entitled Postal Pension Funding Reform: Issues Related to the Postal Service's Proposed Use of Pension Savings, and a 54-page report entitled Postal Pension Funding Reform: Review of Military Service Funding Proposals.

In April 2004, Congress enacted the Postal Civil Service Retirement System (CSRS) Funding Reform Act, which lowered the USPS's annual payment for its CSRS obligation by over $2.5 billion beginning in fiscal year 2003. Now, the GAO recommends, among other things, that, "to ensure continuing progress in addressing the USPS's financial challenges, Congress should consider repealing the escrow requirement after it receives an acceptable plan on rationalizing the USPS's infrastructure and workforce."

The CSRS also required the USPS, Department of the Treasury, and Office of Personnel Management to prepare proposals detailing whether and to what extent the Treasury and USPS should fund the benefits attributable to the military service of the USPS's current and former CSRS employees. Among other things, the GAO said, "if the Congress requires the Postal Service to fund the military service component of CSRS benefits, then it may wish to have other self-supporting agencies do so as well."

DMANF Member Testifies before House Committee

Lester C. Hess, Jr., past national president and chairman of the Grand Lodge Advisory Committee, Benevolent and Protective Order of the Elks of the United States of America, a DMA Nonprofit Federation member, testified February 11, 2004 before the House Government Reform Committee's Special Panel on Postal Reform and Oversight. The Special Panel is holding a series of hearings to establish a record for moving forward with postal reform legislation in light of the President's Commission on the United States Postal Service. Read the full testimony

Updated February 2007

DMA Nonprofit Federation
1615 L Street, NW, Suite 1100, Washington, DC 20036
202.861.2447
nonprofitfederation@the-dma.org