Amendment Will Boost Postal Rates Again

January 17, 2014       Paul Clolery      

Nonprofit mailers are about to be smacked again. Fresh on the heels of a rate increase, the U.S. Senate Committee on Homeland Security and Governmental Affairs is set to release a substitute amendment to S. 1486, the Postal Reform Act of 2013 that will boost costs more.

According to a spokesman for the Direct Marketing Association (DMA), the part of the bill that deals with postal rate structure would eliminate the Consumer Price Index (CPI) cap on postage rates for market dominant classes of mail, including nonprofit Standard Mail. The substitute amendment restores the Postal Regulatory Commission (PRC)’s role in approving exigent requests to raise rates more than the rate cap.

It would adjust the rate cap by making the temporary exigent rate request recently approved by the PRC the new baseline for future rate increases and the cap to CPI+1 percent applied to all of the United States Postal Service’s “Market Dominant” products as a whole. The new cap would remain in place until at least the end of 2016. Beginning in 2017, USPS may by majority vote of the Board of Governors establish a new rate system.

Spokesman for the substitute amendment authors, Sen. Tom Coburn (R-Okla.) and Sen. Tom Carper (D-Del.) were not available for comment.

The DMA’s Nonprofit Federation has opposed the amendment, according to Xenia “Senny” Boone, DMA’s general counsel.

The Senate is expected to mark-up the bill on Jan. 29th, according to Boone. She urged nonprofit leaders to contact federal legislators. “With your congressmen and senators at home for congressional work week, take this opportunity to speak with them about how ill-advised these measures are for you & those you serve,” she said.

The PRC recently approved a 4.3 percent exigent rate increase for the USPS, but rejected the Postal Service’s request to make the increase permanent. The exigent increase is in addition to a 1.7 percent hike approved in November. The USPS projected it would bring in $1.8 billion annually.

The average increase for nonprofits is estimated to be $0.009 per piece of standard mail, $0.011 per piece for periodicals and $0.019 per piece for first-class mail, according to the Alliance of Nonprofit Mailers in Washington, D.C.

“(The PRC commissioners) are the Grinch this Christmas,” said Jerry Cerasale, the DMA’s senior vice president of government affairs, via a statement. “It was time for the PRC to stand up and it failed. It is a sad day for mailers.”

The postal service asked for the exigent rate increase in September to make up for an estimated $2.8 billion shortfall it suffered due to the Great Recession. PRC Spokeswoman Gail Adams said the exigent rate increase would be in effect for no longer than two years. “Part of our ruling is that the postal service report to us quarterly on the revenue generated by the exigent rate increase,” she said. “Based on those reports, we’ll be able to tell if they’ve recouped what they lost. We believe it will be less than two years.” Adams said two years is a hard cap on the exigent increase.

The Postal Accountability and Enhancement Act of 2006 (PAEA) requires the USPS to show just cause to the PRC for rate increases greater than the rate of inflation, also known as the consumer price index (CPI). The USPS last asked for an exigent rate increase in 2010, which was denied because the post office could not quantify its losses, according to the order granting this exigent increase. Both the exigent increase and the CPI increase will go into effect on January 26.

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