Alliance Alert – USPS Death Spiral Requires Immediate Actions by Regulator
Alerts
Statement – Alliance of Nonprofit Mailers
May 6, 2024
Contact: Stephen Kearney, Executive Director
The Alliance of Nonprofit Mailers Warns of a USPS Death Spiral, Urges Immediate Actions by its Regulator
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USPS behavior is actively reducing its customer base and creating massive barriers to entry for new mail
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Regulatory action is essential now to enable longer-term reforms by Congress
Representing nonprofit organizations that rely on the United States Postal Service, the Alliance of Nonprofit Mailers (“the Alliance”) urges immediate actions to stem the death spiral underway at the Postal Service. The USPS is provoking its downward spiral by raising prices on monopoly mail much higher than inflation, twice yearly, with no end in sight.
Alliance President James Asselmeyer, said, “We are deeply concerned that the organizations and businesses that fund USPS with millions in postage purchases are being forced out of the mail by very unreasonable and inexplicable rate hikes. No business or nonprofit could succeed with such a misguided strategy.”
Alliance Executive Treasurer Tracey Burgoon, Chief Development Officer at Disabled American Veterans, added, “Many nonprofit organizations provide vitally important services that the federal government does not, and if rates continue to rise, they will be being forced to cut back as a direct result of USPS rate increases.”
“Since it started the destructive pricing strategy, USPS has seen very little revenue growth and it is losing over $6 billion per year despite Congressional assistance of over $100 billion in 2022. Recent mail volume losses have been the largest ever except during the Great Recession and the COVID-19 pandemic. This self-destructive approach makes no sense and must be stopped,” said Alliance Executive Secretary Sandra Miao, Associate Vice President, Membership at the National Wildlife Federation.
Alliance board member John Hamre, Executive Vice President, Direct Response at Wounded Warrior Project added, “I am very concerned about the future of USPS. They are pricing as though they want to go out of business. Thousands of organizations that depend on U.S. Mail are now being forced to consider a future without the U.S. Postal Service.”
Actions Needed to Stem the USPS Death Spiral
The Alliance urgently recommends three immediate actions by the Postal Regulatory Commission (PRC) and the U.S. Congress to stem the death spiral that the mail agency is experiencing.
Action 1: Today, the Alliance filed comments at the Postal Regulatory Commission urging the regulator to deny the USPS request to raise postage rates on July 13, 2024.
The proposed increases ranging from 7% to 17% or more will likely accelerate the death spiral of volume declines and revenue losses caused by price increases (combined with poor service), leading to even larger volume declines and continued revenue losses.
The Alliance recommends a moratorium on further postage rate increases until (a) the USPS needs more cash in the coming year (it has been sitting on $18 to $20 billion for months); (b) the USPS returns mail delivery service to its promised service standards for First-Class Mail, Marketing Mail, and Periodicals; and (c) the PRC completes its announced review of the current rate regulations that the regulator admits are not working as intended.
Action 2: The Postal Regulatory Commission needs to change the new add-ons to the Consumer Price Index (CPI) cap on postal rates that it instituted starting in 2021.
The most damaging rate add-on is the “mail density” surcharge that rewards the USPS with more pricing power for delivering less mail volume year-over-year. Because of the 9% mail volume decline in Fiscal Year 2023, the USPS added 4.3% to the 1.6% CPI inflation authority it has for the July increases.
The Alliance will participate actively and aggressively in the upcoming regulatory review to be conducted by the PRC. Comments are due on July 9 with reply comments by August 13.
The PRC said in its order initiating the review: “…the Postal Service’s financial situation has also failed to improve significantly in the years since implementation of the modified ratemaking system.”
Separate from the new PRC additions to rates, the USPS decided to raise prices twice a year. This frequency has never happened before, is very disruptive to the mailing industry and any organization that relies on mail, and is accelerating the death spiral. The Alliance urges the PRC to allow postage increases no more frequently than once a year.
Action 3: Congress must oversee a major reassessment of the USPS business and funding model.
The current objective of the USPS operating as a self-funding businesslike organization was started in 1970 and is outmoded and unrealistic.
The model seemed to work during the 1980s and 1990s when mail volume doubled from 100 billion to 200 billion. But as volume has dropped back close to 100 billion, the agency cannot handle both the costs of the businesslike elements that it performs and the public service mandates imposed by Congress.
If the first three years of the ten-year strategic plan Delivering for America have proved anything, they validate that the USPS funding model is broken. Despite Congressional financial relief exceeding $100 billion, the USPS is losing over $6 billion yearly with no end in sight. This contrasts with the USPS plan to break even in Fiscal Year 2023 and make profits after that.
The reassessment must: (a) clearly define the full extent of the public service mandates or universal service obligation required of the USPS; (b) assign an independent expert body such as the PRC to arrive at a dollar value of the USPS public service mandates annually; and (c) provide federal government funding for the public service requirement imposed on the USPS that no private sector business would take on.
USPS rate increases since January 2021 provided by Quad.
FY 2023 and 2024 rate increases have led to mail volume declines exceeded only by the Great Recession and the COVID-19 pandemic. (Sources: USPS Cost and Revenue Analysis and USPS FY 2024 Integrated Financial Plan)
Alliance of Nonprofit Mailers Board of Directors
- AARP
- American Heart Association
- Consumer Reports
- Disabled American Veterans
- Guideposts
- National Wildlife Federation
- New England Journal of Medicine
- St. Jude Children’s Research Hospital
- Wounded Warrior Project
We are a grassroots organization of nonprofits working to preserve affordable, reliable U.S. Mail so that our Nation’s nonprofits continue to fulfill vital missions. Nonprofits are essential to our Nation, and affordable mail is essential to nonprofits. We use mail to raise funds, serve donors, members, and beneficiaries, advocate, deliver publications, and achieve our missions. The Alliance has been completely independent for over 44 years, with 100 percent nonprofit governance. We are a 501(c)(4) nonprofit organization, non-partisan, and unaffiliated with any other association.