Nonprofits Hurt By New Postal Rules

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Six of the United States Postal Service’s (USPS) new workshare discount rates, that took effect yesterday, are shallower for nonprofit mailers than for commercial mailers, and unfairly discriminate against nonprofits, contends the Association of Nonprofit Mailers (ANM), based in Washington, D.C.

Three of the new discounts -- high density letters, high density flats, and automated 5-digit flats -- are higher than the old rates, two categories (high density plus letters and high density plus flats) are new and the discount for non-automated 3-digit flats is slightly lower than the old rate. But the key issue is the discrepancy between the nonprofit and commercial rates.

According to ANM Executive Director Tony Conway, worksharing discounts are provided when mail is prepared in certain ways, such as presorting it by ZIP code, effectively taking some of the burden of sorting and transporting off the United States Postal Service (USPS). The goal is to create incentives to drive the most efficient mailing behavior.

The difference is less than 4 percent or $0.003 per piece for four of the categories (high density letters, high density plus letters, high density flats and high density plus flats), with auto 5-digit flats being 8 percent or $0.007 per piece and a 13.5 percent difference, or $0.007 per piece, for non-automated 3-digit flats.

“We saw that for certain types, nonprofits are receiving a lesser discount than commercial counterparts,” said Conway. “We called the Postal Service on that, raised the issue with the Postal Regulatory Commission (PRC) and filed comments (in November) saying the discrepancies are not allowed by law.”

Section 403(c) of U.S. Code Title 39 prohibits discrimination among mail users when it establishes fees unless it has a reasonable justification. The USPS claims it cannot equalize the nonprofit and commercial rates “without setting the nonprofit base rate higher than would be most efficient and preferable from a policy perspective,” according to PRS Docket No. R2013-1. Conway said the USPS’s argument boils down to setting rates being a complicated process for everything to work perfectly all the time. That argument does not hold water, said Conway.

“So the PRC, unfortunately, instead of pushing back on the postal service, chose not to do that and told the postal service they could implement the new rates,” said Conway. “From a nonprofit standpoint, they’re doing the same things commercial mailers are doing, and to be provided a lesser discount, that’s just blatant discrimination for no good reason.”

Diana Aviv, president and CEO of Independent Sector in Washington, D.C., said, “Independent Sector has long worked to ensure that nonprofit organizations receive equitable treatment under the law relative to their counterparts in the for-profit sector. The proposed worksharing discount is another example of the disparate treatment of nonprofit organizations that should be rejected.” Independent Sector was a signatory along with eight other organizations on a letter of protest that was sent to Rep. Darrell Issa (R-Calif.), chairman of the Committee on Oversight and Government Reform. Issa has previously helped to block legislation that would eliminate the nonprofit rates.

Conway said his organization is prepared to fight the new rates in court, but he hopes that will not be necessary. When the PRC produces its annual compliance determination report in the first quarter of 2013, Conway said he believes it will recognize and correct the oversight. “It appears it was just sloppy work by the postal service in designing new rates and inattention to the argument we raised,” he said.

That is in contrast to two other cases where Conway said the USPS deliberately kept the nonprofit sector out of worksharing discounts. The first time was 1980, when worksharing discounts were established. The USPS said the discounts were only available to the commercial sector. The organization Easter Seals took the USPS to court and won, and from that case ANM was born. In 1996, the USPS again tried to discriminate against nonprofits, said Conway. This time, ANM was the plaintiff and won the case.

If the PRC continues to accept the USPS’s explanation for why some discounts are lower for nonprofits, Conway said ANM will again go to court. “We hope to get it straightened out through the regulatory process, but we’re geared up to go to court and I’m confident we will prevail,” he said.

If the new workshare discounts are allowed to stand, said Conway, that would “drive more inefficiency and send the wrong signals.” It’s not so much a question of revenue foregone, he said, as it is not allowing discrimination against the sector. “We’re not talking about monstrous overpayment, but it’s the principle,” said Conway. “To not (correct the mistake), be called on it and just blow it off is wrong,” he said.