September 22, 2022

Nonprofit mailer updates

USPS sitting on record cash as it hits mailers with large semi-annual rate hikes

On August 31, 2022, the United States Postal Service held non-marketable Treasury Securities in the Postal Service Fund valued at $22,747,000,000. The agency continues to hold cash very near the record high, and well above historical norms.

For many years, the timing and amount of postage rate increases were heavily influenced by the agency’s cash position and need for the cash going forward. For months in 2021 and 2022, the Postal Service has been holding much more cash than ever before, earning minimal interest.

The following chart shows USPS cash on December 31 each year from 1900 through 2021. The $22.7 billion at the end of August is very close to the latest December 31 balance of $23.4 billion. From 1990 through 2013, USPS minimized excess cash which proper professional cash management for a breakeven agency.

Holding all that cash at near-record low interest rates while raising rates on captive Market Dominant mailers at record high rates is the height of fiscal irresponsibility by USPS management. It also is a sad example of the government taking money from the private sector, both nonprofit and for-profit, which is deploying the capital much more efficiently and effectively than stuffing it in a nonmarketable Treasuries mattress.

The agency will have raised postage rates well above 20% while sitting on record cash in 2021-22 when it implements the next, now semi-annual, hike in January 2023.

DeJoy loses union support

The Postal Service Reform Act of 2022 was signed into law on April 6, 2022, largely because it had unusually widespread support from postal stakeholders. Perhaps the two strangest bedfellows were the USPS unions and management. The unions garnered the Democratic votes, and Louis DeJoy personally lobbied hard for Republican support. Of course, what was called “reform” was almost entirely financial relief from retiree health benefits expenses. The painless nature of the “reform” made it easy to support.

Now the honeymoon is over. The growing opposition by the American Postal Workers Union (APWU) to DeJoy and his Delivering for America plan bubbled into public view with the resolution calling for his departure released on September 16. APWU is one of two large USPS unions, representing more than 200,000 USPS employees and retirees, and nearly 2,000 private-sector mail workers.

Postmaster General Louis DeJoy Should Resign or Be Removed

WHEREAS, new Postmaster General Louis DeJoy’s first months in office were marked by changes in policy that, in the name of “efficiency” delayed mail and undermined public confidence in the Postal Service, and

WHEREAS, these changes were halted by public outcry, congressional inquiries, and court orders, yet these same destructive changes could resume any time after the 2020 election ends, and

WHEREAS, proposed changes, such as cuts in retails (sic) hours and delaying mail to cut overtime, in the name of “efficiency” sound like the preliminary steps to privatization and the weakening of unions that the Trump White House has supported, and

WHEREAS, the postal service should be preserved as a public good and part of our basic infrastructure, with a Universal Service Obligation to serve everyone, which private companies would never want to have to do and,

WHEREAS, Postmaster General DeJoy has also been compromised by massive political donations just prior to his appointment, by allegations of campaign finance violations, and by charges of conflict of interest regarding ties to postal competitors, therefore be it

Resolved, that this body urges that Postmaster General Louis DeJoy either resign or be removed from office, to be replaced by a Postmaster General who is committed to support a strong, public postal service and who will defend it from attack rather than attacking it, and be it

Resolved, that APWU publicize the decision of this delegation within 30 days of the close of this convention.

The union about-face only six months after the grand accomplishment of the “reform” act was driven by its anxiety and opposition to the more painful stage of the DFA plan—the rationalization of the network that will relocate many employees and reduce jobs by 50,000.

The mailer-customers who provide the funding for the agency already are deeply into their painful absorption of massive rate hikes enabled by the new rules created by the PRC, by 40-year record high inflation, and by the USPS decision to raise rates semi-annually to the full authority despite sitting on a record cash hoard. The APWU is signaling that it intends to fight for the removal of the PMG to avoid pain for itself and its members.

Alliance consistently urges cost containment before rate hikes based on unnecessary and unfunded costs

Shortly after the Postal Service released its Delivering for America ten-year plan in March 2021, the Alliance issued a statement pledging an open mind toward the plan and emphasizing the critical importance of keeping mail affordable while working on removing extensive excess costs from the postal system. Indeed, we and other mailer associations documented the excess costs and inefficiencies throughout the multi-year PRC rate review with expert witnesses and analysis.

Postmaster General Louis DeJoy has agreed in many speeches that USPS suffers from many types of excess costs driven by unfunded government mandates, excess capacity, inefficient operations, and irrational logistics networks.

Our main point is that until you deal with the unneeded costs, it makes no sense to force mailers out of the system with excessive rate hikes based on said costs. It would be better to keep a critical mass of volume in the system to be there when operations and funding get to where they should be.

The statement that we made shortly after the release of the Delivering for America Plan still makes sense:

Alliance of Nonprofit Mailers

Statement on the New USPS Strategic Plan

March 23, 2021 – On behalf of the hundreds of nonprofit organizations that use USPS mail to raise funds, distribute publications, build membership, communicate with members, donors, constituents, and lawmakers, we thank the leadership of the U.S. Postal Service for their work on a new strategic plan.  We will take some time to read and analyze the new plan before offering a more complete take on it.

We strongly believe that the USPS must continue to be an affordable, reliable public service to all Americans, including the organizations and businesses that provide approximately 90 percent of its funding.  Key to doing this is retention and growth of existing mail customers.  The postal network depends on adequate volume to fund universal service.

Also very important is adequate funding for the many non-businesslike functions the postal agency performs.  We urge Congress to accurately measure the universal public service costs of USPS and provide public funding on an annual basis, as it did for 200 years.

We want to make it clear that we were not consulted or briefed on this plan, in spite of the fact that nonprofits mail 10 percent of all mail volume. 

We also believe that relying on rate increases above inflation on captive market dominant mailers for $44 billion of $160 billion in projected losses will not work.  Mailers will accelerate their exit from the USPS.  Requiring customers to cover over one-fourth of the goal with higher prices has not been a component of previous successful industry restructurings, such as autos.

The USPS rate structure has not been “frozen” since 2006: First-Class stamps, for example, have increased 41 percent from 39 cents to 55 cents.

The Consumer Price Index cap on postage increases is not an “experiment” that the Postal Regulatory Commission has the authority to end.  The CPI cap is a requirement written into law by Congress that is state of the art pricing regulation necessary to protect captive mailers from the monopoly power granted by Congress to the postal agency.

The Alliance of Nonprofit Mailers is the leading voice for nonprofits on postal issues for over 40 years.

www.nonprofitmailers.org

We also made a statement less than two months later for the record of the House Committee on Oversight and Reform that continues to make sense:

Alliance of Nonprofit Mailers Statement

May 13, 2021 – Representing the interests of nonprofit organizations that rely on USPS mail for over 40 years, we thank the House Committee on Oversight and Reform for moving forward legislation to greatly reduce the agency’s costs for retiree health benefits.  This is an important step forward, and a key component of the USPS ten-year plan.

Unfortunately, the USPS strategic plan also includes massive above-inflation rate increases that will force much nonprofit and other mail out of the system, at a time when the agency needs as much volume as it can get.  The rate increases will be concurrent with slowing down First-Class Mail that is so important to nonprofits.

We remain very concerned that these planned rate increases, starting with 6 percent to 8 percent expected this year, will have a major negative impact on the nonprofit sector that is so important for our nation, especially at times of crisis such as the current pandemic. 

Nonprofits rely on mail for their very existence, raising a substantial portion of their funding.  Mail is critically important for fundraising, publications subscriptions, memberships, and general communication of critical information.  A large part of our population remains reliant on hard-copy communications and transactions, including seniors and rural residents. 

Nonprofits cannot increase their spending on non-program expenses such as postage at the rate that USPS is planning to increase rates.  They will have no choice but to greatly reduce their use of mail, damaging the missions of our nation’s charities while endangering the future of our public postal service. 

We urge Congress to ensure the future of postal mail by keeping postage rates in line with general inflation.

We continue to urge cost containment before excessive rate hikes based on unnecessary and unfunded costs. So far, we are getting the opposite.

Ensuring Accurate Postage Rates Act

The Ensuring Accurate Postal Rates Act was introduced on September 9^th (the day after our board meeting) by Rep. Gerald Connolly (D-VA-11). It has three cosponsors: Rep Sam Graves (R-MO-6), Rep Jake LaTurner (R-KS-2), and Rep Emmanuel Cleaver (D-MO-5). The bill was referred to the House Committee on Oversight and Reform.

It appears the lobby group called Keep Us Posted which is backed by Hallmark Cards via the Greeting Card Association (GCA) lobbied for this, which is why it got support from the Kansas City area.

The bill might nudge the Postal Regulatory Commission toward acting on the Alliance and GCA’s separate but similar petitions. On the merits, the bill by itself does not achieve much for Market Dominant mailers. Section 2(a) requires the PRC to review the system “in effect immediately before the adoption of” Order 5763.  That’s effectively a re-do of the 10-year review, which is not really what we want or what our petition requests.

And whether the PRC concludes that the pre-Nov 2020 system requires modification or it doesn’t, it will issue such proposed final rules as are necessary to carry out such a system either way. Nothing prevents the PRC from re-issuing new rules with the above-CPI rate authority.

What we want is for Congress to make clear in a statute that any MD rate system – old/new/modified/alternative – must comply with the Consumer Price Index (CPI) cap. This bill doesn’t do that:

H. R. 8781

To direct the Postal Regulatory Commission to review and modify market-dominant ratemaking system rules as a result of the enactment of the USPS Fairness Act, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

September 9, 2022

Mr. Connolly (for himself, Mr. Graves of Missouri, Mr. LaTurner, and Mr. Cleaver) introduced the following bill; which was referred to the Committee on Oversight and Reform

A BILL

To direct the Postal Regulatory Commission to review and modify market-dominant ratemaking system rules as a result of the enactment of the USPS Fairness Act, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; FINDINGS.

(a) Short Title.—This Act may be cited as the “Ensuring Accurate Postal Rates Act”.

(b) Findings.—Congress finds the following:

(1) The review of the market-dominant ratemaking system conducted by the Postal Regulatory Commission (in this Act referred to as the “Commission”) pursuant to section 3622(d)(3) of title 39, United States Code, resulted in the Commission’s Order Number 5763 (submitted on November 30, 2020) adopting final rules for the system of regulating rates and classes for market dominant products.

(2) Such final rules rely in major part upon an earlier finding of the Commission that the then-existing system of market-dominant ratemaking had not enabled the United States Postal Service to achieve medium- and long-term financial stability.

(3) The Commission’s findings as to medium- and long-term financial stability rested upon its calculation of deficits (largely relating to retiree benefit obligations) accumulated on the Postal Service’s books of account.

(4) Section 102(c)(1) of the USPS Fairness Act (section 102 of Public Law 117–108) canceled the unpaid Postal Service obligations under section 8909a of title 5, United States Code, thereby removing an essential basis of such final rules.

(5) Such final rules also did not adequately take into account the benefit to the Postal Service’s financial condition from the growth of its competitive products and competitive revenues or other improvements in its financial condition during and following the Covid–19 pandemic.

SEC. 2. POSTAL REGULATORY COMMISSION REVIEW AND MODIFICATION OF MARKET-DOMINANT RATEMAKING SYSTEM RULES.

(a) Review.—Not later than 90 days after the date of enactment of this Act, the Commission shall, pursuant to subsection (d)(3) of section 3622 of title 39, United States Code, and subject to the requirements, terms, and conditions of such section, conduct a review of the market-dominant ratemaking system in effect immediately prior to the adoption of Commission Order Number 5763 to determine whether such system can achieve the objectives of subsection (b) of such section 3622, taking into account the factors in subsection (c) of such section.

(b) Rules Carrying Out System. —Not later than 1 year after the date of enactment of this Act—

(1) if under the review conducted in subsection (a) the Commission determines that such system requires modified rules or alternative rules to achieve such objectives, the Commission shall issue such proposed final rules as are necessary to carry out such system; or

(2) if under the review conducted in subsection (a) the Commission determines that such system does not require modified rules or alternative rules to achieve such objectives, the Commission shall issue such proposed final rules as are necessary to carry out such system.

PRC Supports Alliance Request to Report Nonprofit Mail Separately

We are happy to report a win in something represented only by the Alliance on behalf of the nonprofit sector.

Recall that we filed comments on June 3 that in its new service “dashboard” mandated by the Postal Service Reform Act of 2022, the USPS be required to report nonprofit Marketing Mail (NPMM) and Periodicals Mail separately from commercial Marketing Mail. Yesterday, the PRC filed a Notice of Proposed Rulemaking to Revise Periodic Reporting of Service Performance in which the regulator supports our comments on nonprofit mail. The PRC also agreed with our suggestion to report election and political mail that is sent via NPMM as a separate category.

The PRC describes our proposal on page 20:

Additionally, the Alliance of Nonprofit Mailers (ANM) recommends that reporting
for USPS Marketing Mail, Periodicals, and First-Class Mail (including root cause point
impact data) should be done separately for nonprofit and commercial mail (including
further disaggregation between regular nonprofit, political, and balloting-use mail). ANM Comments at 2-5. ANM states that, for USPS Marketing Mail, disaggregation of nonprofit mail for reporting purposes would enhance the transparency and usability of
service performance data, particularly for nonprofit mailers. ANM Comments at 2. ANM
asserts that this is important considering the large and increasing volume of nonprofit
mail and the importance of the mail system to nonprofits. Id. at 2-4. Within nonprofit
USPS Marketing Mail, it also suggests disaggregating political mail and ballots because
they serve different purposes and tend to fluctuate in volume. Id. at 3. It also notes that
breaking out nonprofit mail within USPS Marketing Mail (and political and balloting mail separately) will not be onerous or entail costly new data collection. Id. at 3

On page 22, the Commission responds:

With respect to political and election mail, the Commission proposes that these
mailpieces be measured and reported on the proposed service performance dashboard.
The Postal Service has historically reported political and election mail, which indicates
that the data reporting architecture for this information is already in place.8 This will
allow the Commission and the general public to better understand the performance of
political mail and election mail. The Commission does not support the use of separate
service standards for reporting purposes because political mail and election mail are not
discrete products, and the Postal Service has not assigned separate service standards
for political mail and election mail.

With respect to nonprofit mail, the Commission supports ANM’s recommendations insofar as the Commission proposes that USPS Marketing Mail mailpieces that qualify for reduced rates pursuant to 39 U.S.C. 3626(a)(6) and the regulations promulgated thereunder and Periodicals mailpieces that qualify for reduced rates pursuant to 39 U.S.C. 3626(a)(4) and the regulations promulgated thereunder be separately reported on the proposed service performance dashboard. The Commission finds that such information will be useful for nonprofit mailers and should not be unduly burdensome for the Postal Service to report. This information will be particularly useful for nonprofit mailers that qualify for preferential rate treatment in improving the transparency and usability of service performance data due to their reliance on this category of mail for their nonprofit activities.

Comments will be due 30 days from publication in the Federal Register. The Alliance will file comments supporting the proposed rules that align with our recommendations. We also will consider suggesting some clarification and enhancement of the PRC proposal.