Alliance Meets with President’s Task Force

May 30, 2018

We had the chance to meet last week at the historic Main Treasury Building with several members of the President’s Task Force on the United States Postal System.  We were heartened to find several very good things about the members of the task force:

  • They are very professional and already quite well informed about the postal system.
  • They ask very good questions.
  • They seem to be planning to lay everything on the table for a complete look at the system.
  • They do not seem satisfied with the partial efforts to “reform” the postal system underway in other quarters.
  • They are very interested in the nonprofit sector of the postal system, asking many questions.

We were able to give the task force members a pretty good overview of the nonprofit sector’s use of mail, its critical importance in fundraising and communications, the potential impact of excessive postage increases, and the value that nonprofit mail brings to the relevance and sustainability of our postal system.

Here are some of the topics we covered in a very productive meeting:

Nonprofits and USPS Rely on Each Other

 

  • Nonprofits raised $390 billion from donations in 2016, $282 billion from individuals, and an estimated $150 billion through mail.
  • Nonprofits mail about one-tenth of all USPS mail volume, 15 billion pieces: 12.3 billion Marketing Mail, 1.3 billion Periodicals, and 1.4 billion First Class Mail.
  • Many nonprofits raise the majority of their funding through mail. They do not have ready replacements for mail.  Digital media works well as an adjunct to mail, but not as a replacement.
  • Nonprofit budgets are limited by rating agencies such as Charity Navigator, CharityWatch, and the BBB Wise Giving Alliance. Their main metric is spending on programs versus overhead, including fundraising.  Nonprofits must keep their overhead to no more than 25-30 percent to receive a good rating.
  • Giving by individuals, much of it through mail, provides 72 percent of the funding of U.S. charities. If postage rates go up much faster than inflation, nonprofits would be forced by rating agency metrics to reduce mailings.  Then the funding of charities, and their delivery of programs, would drop.  There is a direct connection between postage rates and nonprofit programs.

Nonprofit Rates

 

  • In 1894, Congress allowed nonprofit organizations to send their publications at second-class rates, the rates for newspapers and magazines. That statutory language evolved to create the nonprofit subclass in Second Class, a class now known as Periodicals.
  • In 1951, Congress created a nonprofit subclass in Third Class, later Standard Mail, today’s Marketing Mail. Nonprofit preferred rates are public policy similar to tax exemption and deductibility.
  • When preferred rates were established, congressional appropriations funded USPS operations. Until 1993, Congress appropriated funds to reimburse the Postal Service for revenues it lost by providing lower rates for certain types of preferred mail.
  • Since 2000, nonprofit Marketing Mail rates are set to yield average revenue per piece 40 percent below that of commercial Marketing Mail. Nonprofit Periodicals rates are set 5 percent below the commercial editorial rate.  The nonprofit Library Rate is set 5 percent below commercial Media Mail rates.

Nonprofits Bring Value to USPS

 

  • Nonprofit mail contributes to the current and future relevance of USPS, as it provides diverse content in household mailboxes that many people look forward to receiving. These are causes that people are passionate about, give money to, and subscribe to magazines and newsletters.
  • Nonprofits expect to stay in the mail as long as rates stay within inflation and service is reliable.

We shared the following Giving USA infographic with task force members to emphasize the size and scope of nonprofit fundraising in our economy:

Because there was much interest in how nonprofits would react to postage increases, we brought their attention to several links to real-world stories about nonprofits, fundraising and mail.

While the task force is probably aware of the websites below, but we want to bring their attention to the nonprofit components of them.  There are no data on aggregate price elasticity of nonprofits, but there are many letters and stories about how much they rely on mail, how they would have to reduce mailings if rates went up more than inflation, and how their programs would be negatively affected.

It also is important to note that historical elasticity data cover a long period in which postal pricing generally rose at the rate of inflation.  We do not believe the historical look-back data are an accurate indicator of what will happen if above-inflation increases become the norm.  We also note that we made the point in our comments on the PRC rulemaking that the regulator made no effort to measure the probable impact on volume of 5 to 7% rate increases annually that they proposed.

Smithsonian National Postal Museum Online Exhibit: America’s Mailing Industry

Comments on PRC Regulatory Review, including many letters from nonprofits

Comments on USPS technical proposal to change calculation of nonprofit rates, rejected by PRC, including many letters from nonprofits

Nonprofit Marketing Mail Volume

 

The majority of nonprofit mail is Marketing Mail (formerly Standard Mail).  Its volume is driven by the economy and its impact on donations, and by the cost of mailing which is affected heavily by postage pricing.  Approximately one-third of the cost of direct mail is postage.

We offer the following graph that shows the major decline in NPMM volume caused by the great recession, and the further decline following the 4.3 percent exigent surcharge. Volume continued at 12.3 billion pieces in FY 2017.

The 2009 recession-driven decline from 14.8 billion to 13.5 billion pieces was 8.8 percent. The exigent surcharge drop in volume from 13.4 billion to 12.3 billion in 2014 was 8.3 percent.  The exigent surcharge added 4.3 percent above the CPI on all types of mail and lasted from January 26, 2014 to April 10, 2016, costing all mailers $4.634 billion.

During this period the USPS made a concerted effort to ensure that the surcharge would be permanent in both the U.S. Court of Appeals and Congress. So, mailers faced an extended period of uncertainty about whether the increase would be permanent.  And of course, that uncertainty continues with bills in Congress including rate increases, and the PRC proposal to surcharge the CPI cap by 3 to 5 percentage points.

 

Next Steps

 

We believe our experience so far with the President’s Task Force validates our Board of Directors’ decision to endorse the initiative on April 24: Press Release–Nonprofit Mailers Applaud President’s Task Force on our Postal System.  We continue to believe what we said then: “The Task Force envisions very much needed comprehensive analysis leading to a balanced set of reforms taking into account massive changes in communications, technology, and e-commerce.”

The task force will complete its report by August 10, 2018.  The issuance of the report will be proceeded by an internal, cross-agency review that typically lasts up to 60 days but could be shorter in this case.  We do not expect either Congress or the Postal Regulatory Commission to act on their partial efforts before the President’s Task Force issues its report.  The worst-case scenario, however, still hangs over the mailing community for up to 7 percent rate increases in January 2019 if the PRC acts precipitously.

 

 Main Treasury Building, 4th Floor, Washington, DC

 

 

 

 

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