Postal Hike Capped At 3.8 Percent Average

January 19, 2009       Mark Hrywna      

Plummeting energy prices during the last quarter of 2008 could very well have saved nonprofits untold thousands in future postal increases.

The Postal Regulatory Commission (PRC) determined a cap of 3.8 percent on the average postal class after new economic data were released Friday morning by the U.S. Bureau of Labor Statistics. Postal reform legislation approved by Congress in December 2006 allows the United States Postal Service (USPS) to adjust rates annually by no more than the Consumer Price Index for All Urban Consumers (CPI-U) for the preceding 12 months. The PRC’s rate cap is determined by incorporating the December CPI-U figure and a percentage change between years.

The USPS will file its request for rate hikes next month after which the PRC will review them to ensure they are within the caps for each mail class. The new rates would take effect in May.

After increasing steadily most of the year, consumer prices began to decline in September, led by gasoline prices, and haven’t stopped dropping. Just a few months ago it appeared the cap might reach 5 or 6 percent, until the economy started to falter, said Tony Conway, executive director of the Alliance of Nonprofit Mailers (ANM), a Washington, D.C.-based coalition. “I’m not sure which is better, a 6 percent rate or a 4 percent rate with a tanking economy,” he said.

While the average rate hike cannot be more than 3.8 percent for each class of mail, subclasses of mail can vary above or below that figure, as long as the average for the class remains below 3.8 percent. The law also provides that if the USPS does not use the full cap available in a given year, it can bank the difference in that class and use it within the next two years, Conway said. There’s usually a residual in each class because it’s impossible to structure the numbers to get every bit of available increase, he added.

For instance, there was a 0.2 percent increase left over from a previous increase in periodicals, so the average in that class could conceivably reach 4 percent this year.

Conway expects the Postal Service to file its new rates before Feb. 15. Legislation calls for the USPS to use the most recent CPI-U data, which are released the 15th of each month, and probably would drop lower by February.

In the first increase under the new pricing system, the standard mail category used widely by nonprofits saw an average increase of 2.875 percent, just under the 2.9-percent cap.

Inflation for the entire year 2008 was 0.1 percent, a far cry from the 4.1 percent increase in 2007, thanks to falling energy prices.

 

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This article is from NPT Weekly, a publication of The NonProfit Times.

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