USPS announces its long-sought above-CPI rates

June 1, 2021

Late Friday afternoon, May 28, 2021, the United States Postal Service announced and filed with the regulator its decision to use all of the new above-inflation rate increase authority (red bars) plus the additional CPI authority accrued this year (yellow bars).  The average increase will be 6.9 percent effective August 29, 2021.  This follows the previous rate increase implemented on January 24, 2021 for an average 1.8 percent (blue, orange and gray bars).  Here are the increases for the three major classes.

 

 

 

 

 

 

 

 

 

 

 

 

 

These unprecedented rate increases are pursuant to the November 30, 2020 ruling by the Postal Regulatory Commission.  As required by the 2006 Postal Accountability and Enhancement Act, the PRC performed a review of rate regulation beginning in December 2016.

The regulator concluded that the CPI cap on rate increases was preventing the USPS from achieving long-term financial stability and that the only thing it could do to mitigate the situation was to allow rate increases above the CPI.  It created three additional rate bumps above inflation, the largest of which rewards USPS with larger rate increase the more mail volume declines the previous year.  The so-called density formula accounted for 4.5 percent of the new 2021 authority because mail volume dropped by 10 percent during the pandemic last fiscal year.

 

How will these increases affect nonprofit marketing mail?

As with every rate increase, we have provided spreadsheets to our members showing the changed in every rate cell for nonprofit mail.  The latest version is attached.  It includes marketing mail, periodicals, and first-class mail.  We show the before and after rates, the dollar changes, and the percentage changes.  We include a new feature this time showing the percentage rate discounts for nonprofit marketing mail relative to commercial, which vary for each type of mail.

Here is a summary of the rate hikes for major categories of nonprofit marketing mail:

Nonprofit Marketing Mail Rate Increases Aug. 29

Letters                                            +5.7%

Flats                                                +10.4%

Parcels                                            +8.6%

HD/Sat/CR Letters                      +10.1%

HD/Sat Flats                                 +14.6%

CR Letters, Flats, and Parcels    +13.9%

Total Nonprofit MM                     +7.8%

Every category of nonprofit marketing mail, except letters, is going up much more than the average increase of 6.9 percent for all mail.  Nonprofit MM also is going up more than commercial MM on average:  7.8 percent versus 6.7 percent.

 

Why are nonprofit marketing mail rates going up more than commercial?

By law, every rate increase must include a calculation showing that the expected revenue per piece of nonprofit marketing mail will equal as closely as practicable 60 percent of commercial mm revenue per piece.  This is what we refer to as nonprofit preferred rates.

The table below is the calculation for this rate increase.  Because commercial is larger, and the mail mix is different, the rate increase varies for different types of mail.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What about stamps?

Single-piece first-class mail is going up from 55 cents to 58 cents, or 5.5 percent.  First-class is extremely important to nonprofits as many of our payments come back via mail.  This applies whether a stamp is used by the nonprofit or its donor, member, subscriber, or bill-payer.  It also applies to business reply mail that is frequently provided by nonprofit mailers.  And a number of nonprofits use stamps on outbound mail to increase response rates and ensure timely delivery.  Some apply stamps to response envelopes to be used by respondents. Those not used are pure profit for USPS.

As stamps went up 10 percent in 2019, and now 5.5 percent, many will be seeking alternatives.  Electronic bill payment and presentment will have even greater incentives.

An alternative for nonprofit mailers is to stockpile as many first-class forever stamps as you can afford before August 29.  Call the USPS Stamp Fulfillment Services center in Kansas City at 844-SFS-Stamp (1-844-737-7826).  It is open Monday thru Friday from 7:00 a.m. to 3:30 p.m. CST.

 

Is there any chance these rates will not happen?

Realistically, no.  The PRC is expected to give their approval for these rates.  Comments are due June 28.  It should be a formality, basically checking the math.  That’s because USPS is doing exactly what the PRC said it could with the latest CPI increase announced on May 12:

What about Congress?

Both the House and Senate oversight committees are moving quickly with postal legislation that provides no protection from these rates.  The main two things the identical bills do are (1) remove the retiree health benefit prefunding requirement that has caused large paper losses, even though USPS is not paying them, and (2) require USPS retirees to use Medicare Part B as their primary health insurance.  These actions are supposed to save the Postal Service at least $30 billion over the next ten years.

It is unusual to have any postal legislation moving in Congress.  It is even more uncommon for it to have bi-partisan support.  The really unusual stars in alignment have Republicans wanting to support major donor and Trump associate Louis DeJoy and his Plan, and the Democrats voting for actions that save USPS money while not hurting their main postal constituents, the unions.  Indeed, the unions have identified retiree prefunding as the main postal financial problem since 2006.

Likewise, mailers receive no rate protection from Congress as the new rate authority is a major part of DeJoy’s Plan and it is supported by the postal unions.

There are three major sources of money left to solve the USPS financial troubles: (1) return to annual government subsidies that helped fund the post office for its first 200 years, (2) reduce labor costs that make up about 75 percent of the USPS budget, and (3) allow the agency to raise rates paid for monopoly mail delivery well above inflation.  Partisan opposition to (1) and (2) far outweighs any concern about captive mailing customers.  So, it’s the mail customers who get thrown under the Long-Life Vehicle.

While the postal bills are very positive in saving USPS significant costs, there is significant risk that this will be all the postal reform we get from Congress for an extended period.

 

What about the new Governors?

Three new USPS Governors appointed by President Biden have now been confirmed by the Senate.  For the first time in years, the agency has a full set of nine presidentially-appointed Governors.

  1. Ron Bloom, Chair (D) – Dec 8, 2020 – in holdover year
  2. Roman Martinez, IV, Vice Chair (R) – Dec 8, 2024
  3. John M. Barger (R) – Dec 8, 2021
  4. Robert M. Duncan (R) – Dec 8, 2025
  5. Donald L. Moak (D) – Dec 8, 2022
  6. William D. Zollars (R) – Dec 8, 2022
  7. Anton Hajjar (D) – Dec 8, 2023
  8. Amber McReynolds (I) – Dec 8, 2026
  9. Ron Stroman (D) – Dec 8, 2028

The three Biden-appointed Governors have not yet attended a Board of Governors meeting nor are they listed on the USPS website, probably because they are not yet officially sworn in.  The six Governors appointed by President Trump are fully supportive of PMG DeJoy and have presided over an accelerated implantation.  Indeed, everything new or significant that the USPS announced is credited to The Plan, even though many were in motion, attempted, or considered well before it was unveiled on March 23, only 69 days ago.

So, it remains to be seen whether the new Governors will do anything to alter the trajectory of the DeJoy Plan to remake our postal agency.  The speed with which it has been rolled out, and the cult-like dedication to The Plan that has been fostered with iron-fist control by DeJoy, and constant messaging developed by an outside public relations firm, make midcourse corrections unlikely.

 

Are these rates an invention by Louis DeJoy and his Plan?

Not at all.  The USPS started publicly advocating for an end to the CPI cap on postage as early as its release of a strategic plan in March 2010.  From that point forward it repeated the mantra over and over again.  The ten-year regulatory review starting in December 2016 presented USPS managers with their best opportunity and they pressured the regulator relentlessly to make busting the CPI cap the only outcome of the review.  The PRC sided with the USPS over the legal-, fact-, and data-driven objections of the Alliance and commercial customer organizations.

 

What about the court appeal?

The Alliance joined a handful of commercial customer associations in filing an appeal of the PRC ruling in the U.S. Court of Appeals.  We believe we have strong arguments and a good chance of prevailing.  We presented three main arguments in our initial brief:

  • Final rules violate PAEA
    • PRC rules breach the price cap, which is “not in accordance with law” and is “in excess of statutory … limitations”.
  • PRC’s interpretation violates the non-delegation doctrine
    • Congress cannot delegate its legislative powers to other entities.
  • PRC’s rules are arbitrary and capricious
    • Ignore other objectives, like maximizing incentives for efficiency, predictable and stable rates, just and reasonable rates, and financial stability.
    • Density authority is irrational.
    • PRC ignored important facts about USPS’ revenue growth and cash position.

The main problem is not the strength of our position, but timing.  The court likely will not make a final ruling until early 2022, after at least one major rate hike.

 

How can I help?

The court appeal remains our best chance to reverse the excessive rate increases.  It will require patience, hard work, and funding.

The Alliance of Nonprofit Mailers is the only association representing nonprofits that is a petitioner filing briefs and funding lawyers to ensure we have the best chance of winning the appeal.  It is not an inexpensive effort.

We need your financial support, whether through renewing your annual membership and/or contributing extra to our litigation fund.  Please contact us at 202-463-5132 or steve@nonprofitmailers.org to discuss your contribution.  Or you can send us a credit card donation through our membership form here.

You can help by contacting your members of Congress representing where you live and work.  Tell them about how important mail is to you how the announced rate hikes will hurt your mission.  Find and contact your Representatives here, and your Senators here.

You also could contact members of the oversight committees with USPS jurisdiction.  Thank them for the new postal reform bills, but let them know that we need rate protection with the CPI cap on postage increases.

 

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