Preserving Reduced Postal Rates for Nonprofit Mail
The overall level of nonprofit rates has also been a central concern of the Alliance. Congress first offered special reduced periodical rates to nonprofit organizations in 1917. Congress authorized reduced rates for nonprofit users of Third-Class Mail (the predecessor of Standard Mail) in 1951. Both sets of rate preferences were adopted in recognition of the unique benefits to society provided by charities and other nonprofit organizations. Preserving these rates benefits has been one of the central missions of the Alliance.
Before 1970, postal rates were set by Congress, and Congress preserved special nonprofit rates by legislation. In 1970, Congress reorganized the Post Office Department—a cabinet-level department—into the Postal Service, a quasi-independent “establishment” of the executive branch. The 1970 legislation also took Congress out of the business of setting postal rates. Henceforth, most rates would be set by the Postal Service and the Postal Rate Commission. Congress acted to preserve special nonprofit rates, however, by authorizing the appropriation of payments to the Postal Service (the so-called “revenue forgone” appropriation) that would buy down the rates paid by nonprofit categories of mail.
By the mid-1980s, this arrangement was under siege. Congress, faced with growing budget deficits, became increasingly reluctant to continue funding the revenue foregone appropriation each year. Without the appropriation, however, the law required that nonprofit rates rise to the same level as commercial rates. In 1985, Congress ordered the Commission to investigate whether the appropriation could be reduced by narrowing eligibility for nonprofit postal rates, or changing the revenue foregone appropriation formula in other ways. The Alliance participated actively in the Commission proceeding. The Commission ultimately recommended several restrictions in nonprofit eligibility, but special nonprofit rates remained otherwise intact.
Pressure to defund nonprofit rates in Congress continued to mount, however. For several years, negotiations among Congress, nonprofit and commercial mailers and the Postal Service proceeded without result. In 1992, the Postal Service and several major commercial mailers moved to eliminate nonprofit postal rates entirely. At the 11th hour, the Alliance obtained a legislative fix from Chairman Ed Roybal (D-CA) of the House Appropriations Subcommittee on Treasury, Postal Service and General Government. The “Roybal Fix” froze nonprofit rates for one year—without any offsetting appropriation from Congress—to give the Postal Service and commercial mailers an incentive to negotiate in good faith over a permanent legislative solution.
The “Roybal Fix” brought commercial mailers and the Postal Service back to the negotiating table. In 1993, the Alliance led the nonprofit mailing community in securing passage of the 1993 Revenue Forgone Reform Act, which preserved nonprofit postage rates and ended nonprofit mailer reliance on federal appropriations.
In 1994, the Alliance drafted and secured passage of the “DeConcini Amendent,”which modified the 1993 legislation to allow nonprofit Standard Mail publications to accept most outside advertising.
In 1999, the Alliance enlisted the support of Chairman John McHugh (R-NY) of the House Subcommittee on the USPS to pressure the Commission and the Postal Service to correct a rate structure anomaly that caused some nonprofit periodicals with little or no advertising to pay inflated rates.
By 2000, another flaw in the current law became apparent. The 1993 legislation had defined nonprofit postal rates in terms of a specified percentage markups over the “attributable” costs (essentially, variable costs) of nonprofit mail. By the late 1990s, however, the Postal Service’s costing systems appeared to be breaking down, reporting disproportionate increases in nonprofit costs for no apparent reason. The Alliance led the negotiations that culminated in legislation that delinked nonprofit rates from nonprofit attributable costs, and redefined nonprofit rates in terms of specified markdowns from commercial rates. The 2000 statutory formulas remain in effect today:
- Nonprofit Standard Mail rates are set to yield average revenue per piece 40 below the average revenue per piece of commercial Standard Mail.
- Nonprofit Periodicals: Rates are set 5% below commercial editorial rate.
- Library Rate: set 5% below commercial book (or Media Mail) rates.
By 2003, a consensus developed that the 1970 legislation needed fundamental reform to prevent the Postal Service’s costs from ballooning out of control. At the recommendation of many experts, President Bush appointed a blue-ribbon commission, The President’s Commission on the Postal Service, to consider potential legislative changes. The Alliance participated actively in these proceedings—both to advocate general reforms and to protect against renewed attacks on special nonprofit rates. The Alliance’s efforts prompted the President’s Commission to recommend in its final report that “the existing preferences for favorable rates for the mailing of periodicals and non-profit correspondence should be maintained.”
The recommendations of the President’s Commission led to the enactment of the Postal Accountability and Enhancement Act of 2006. The legislation fundamentally changed the basic standard for setting postal rates. Between 1971 and 2006, postal rates were based mainly on the Postal Service’s costs and resultant “revenue requirement.” Since then, postal rates for captive mailers have been set mainly by reference to changes in the Consumer Price Index (CPI). This mechanism—also known as the CPI cap—has avoided billions of dollars of rate increases that likely would have been allowed under the pre-2006 law. The Alliance was instrumental in obtaining passage of 2006 legislation, and in ensuring that it preserved reduced postage rates for nonprofit mail.
In the eight years since the enactment of the 2006 legislation, several postal interest groups have asked the Commission to increase many of the rates charged for nonprofit mail—particularly nonprofit Periodicals Mail—on the theory that the revenue from this mail fails to cover the Postal Service’s costs of carrying it. The Alliance, working with several other trade associations, has fended off these claims by arguing that the Postal Service’s cost systems overstate the costs caused by nonprofit mail, and that the 2006 law in any event forbids above-inflation rate adjustments on this ground.
During the past few years, proposals to eliminate reduced rates for nonprofit mail have again begun to resurface on Capitol Hill. The Alliance has again succeeded in preserving reduced nonprofit rates. This issue may very well resurface again, however.