Postal Charges for Nonprofit Mailers Could Double in Plan Before Congress

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Washington--Educational organizations and other nonprofit groups that rely on the mail to raise funds and disseminate information could see their postal costs more than double on Oct. 1 under a Reagan Administration proposal now moving through the Congress.

Elimination of the so-called "revenue foregone" subsidy, under which the government absorbs the difference between the nonprofit mailers' costs and the U.S. Postal Service's commercial rates, would save the federal treasury nearly $1 billion in the fiscal year 1986.

But according to George E. Miller, president of the Nonprofit Mailers Association, its elimination would have "draconian effects" on nonprofit groups, including the nation's largest education organizations, which already spend millions of dollars a year communicating with their members though the mail.

The same third-class letter that now costs a nonprofit organization 6 cents to mail could cost as much as 12.5 cents if the Administration's proposal goes through, Mr. Miller said.

Congress Divided

In a budget resolution passed last month, the Senate Budget Committee went along with the Administration and voted to eliminate the postal subsidy.

But the House Appropriations Commit-tee subsequently voted to maintain it, setting up a possible conference clash on the issue later this year.

In its budget proposal, the Administration indicated it would send to the Congress legislation maintaining most subsidies for nonprofit groups by shifting the cost from taxpayers to the postal service. But critics say no one in the Congress has seen such legislation, and they say they are skeptical it will ''see the light of day."

Lacking such legislation, nonprofit groups could soon find themselves paying the same rate as commercial mailers. "That may be what will happen," said Wayne Schley, staff director of the Senate Subcommittee on Civil Service, Post Office, and General Services. "But I see no evidence that that is the intent."

According to Mr. Miller, eliminat4ing the revenue-foregone subsidy would probably force private schools, education organizations, colleges and universities, and libraries to divert funds from programs to pay for postage. The same would be true of charitable organizations, such as the American Cancer Society.

In the case of the National School Boards Association, a doubling of the amount spent yearly for postage "would eat up our entire revenue to expand our educational programs," said Gwen Gregory, nsba's deputy general counsel. The nsba. spent $437,000 on postage in 1985, or about 4.5 percent of its budget, most of it in nonprofit-rate mailings, according to Ms. Gregory.

Impact on Bulk Mail

Elimination of the subsidy would have an especially severe impact on high-volume mailers because it would come on top of a 15.5-percent hike on third-class nonprofit bulk mail that went into effect on Feb. 17.

That rate hike, which the American Federation of Teachers estimates could cost it $35,000 a year, already has some groups scrambling to make up the cost.

Unlike private companies, which can pass increased costs on to consumers, nonprofit mailers would have to increase members' dues, cut back on production costs, or find savings in other areas to offset postal increases.

"Our concern is that our income is generated from teacher dues, and it's difficult to pass increases on," said Howard Carroll of the National Education Association. Mr. Carroll said the nea spent $1.2 million on second- and third-class nonprofit mail in 1984. He said the February rate hike will raise that total by $200,000.

"Nonprofit mailers have already taken a big increase," said Carolyn A. Emigh, vice president of the Nonprofit Mailers Federation. "Another increase six months from now would be devastating."

'No Choice'

Yet education organizations, including the two big teachers' unions, say they have little choice but to absorb postal increases because they need to maintain contact with their members.

"We're basically direct mail-driven," said Laura Bono of the National School Public Relations Association, which uses the nonprofit rates to send out promotional materials and three separate newsletters. "Virtually everything we do is through the mail."

Eliminating the subsidy "would really hurt us," she said.

"If in fact our nonprofit status were eliminated, it would be a devastating blow," said Trish Gorman, director of the aft's editorial department. "It would be a real dilemma for us, because our publications are the only link many of our members have with the organization. Eliminating that is not an option for us."

But with a postal bill of $237,000 in 1984--32 percent of her publications budget--Ms. Gorman added, "I don't know where we would be able to make up the difference."

"I don't think there is any question that the Administration's proposal will have draconian effects on all nonprofit organizations that use the mail to communicate with donors and members," Mr. Miller said.

Postal Regulations

Under Title 39 of the U.S. Code, nonprofit educational organizations qualify for reduced postal-service rates, along with eight other categories of nonprofit groups.

Public schools and state departments of education do not qualify, because local and state government units are exempt. But otherwise, "if a group's primary purpose is education, it is very likely to use nonprofit postal rates," according to Mr. Miller.

In many cases, groups that qualify for nonprofit, or so-called "preferred," postal rates pay less than half of what the postal service charges its regular, for-profit customers. The revenue-foregone subsidy, which totaled $801 million in the fiscal year 1985 and would increase to $981 million in 1986, funds the difference.

Revenue foregone is a double subsidy--it pays the nonprofit mailers' share of postal-service overhead costs, from which nonprofit groups are exempt, and it pays the difference between the real cost of processing nonprofit mail and the rate the nonprofit groups actually pay.

Since 1970, nonprofit mailers have been paying the postal service an increased percentage each year of the actual or "attributable" cost of processing their mail. Now in the 14th year of a 16-year plan to phase out that subsidy, the nonprofit groups would not pay the full attributable cost until 1987.

Preferred Rates

The postal sevice offers three categories of preferred mailing rates: second, third, and fourth class, as well as free delivery of books and other materials for the blind and physically handicapped.

All are subsidized by revenue foregone.

The second-class category includes a "classroom" rate that subsidizes the delivery to schools of for-profit publications, such as My Weekly Reader. In fiscal 1985, revenue foregone paid $5.8 million, or 73.4 percent, of the cost of delivering these publications to schools.

Eliminating the subsidy would increase the cost of mailing these publications by 155 percent, according to Louis Delgado, staff director of the House Subcommittee on Postal Service Operations. The cost would probably be passed on to the schools, he said.

Many education organizations, colleges, and universities send their publications, including newsletters and course catalogues, by nonprofit second-class mail or by third-class nonprofit bulk mail.

Third-class nonprofit bulk is by far the largest of the preferred mailing categories, accounting for $468.8 million of the revenue-foregone subsidy in 1985.

Libraries also benefit from revenue foregone, which paid half of the cost--$41.5 million--of sending library materials through the mail in 1985.

Disagreement on Proposals

Although the Administration proposes replacing the current federal subsidy with a subsidy underwritten by the quasi-autonomous postal service, critics point out that postal regulations forbid cross-subsidization of postal rates, and they ques-tion whether commercial-rate payers would be willing to subsidize the nonprofit organizations.

"No one is quite sure how cross-subsidization would work, and most reasonable people have come to the conclusion that it is not workable,'' said Sheldon Steinbach, general counsel to the American Council on Education, which represents colleges and universities. "How are they going to do it? Are they going to turn to Time, Newsweek, and Hallmark Cards to subsidize nonprofit mailers? These people spend a fortune fighting a fraction of a rate increase. Now they're voluntarily going to pay more to subsidize us?"

"You can see how ludicrous it is," he said.

"We don't know if that proposal will see the light of day," said Jerry Cerasale, legal advisor to the chairman of the Postal Rate Commission.

"Whatever they send up here is not going to do the job," Mr. Delgado added.

The Administration's budget proposal would also end that part of the subsidy that allows nonprofit mailers to pay less than the full attributable cost of their postage, forcing them to pay the full cost by Oct. 1.

Others Affected

Colleges, universities, and libraries would be especially hard hit by the elimination of the revenue-foregone subsidy, their spokesmen say.

It would "knock the hell out" of colleges and universities, according to Walt Schaw, director of alumni communications at Indiana University and chairman of the Nonprofit Mailers Federation, because they depend on cheap postal rates to solicit gifts.

"Good old nonprofit third class is the easiest way to reach alumni,'' he said. "Yet at a time when we need to get the word out, we're being constrained by increased costs."

In 1980, colleges and universities sent some 90,000 items, many of them catalogues, through nonprofit second-class mail, and more than 500,000 items at the third-class bulk rate, according to Janet Jackley, program manager for the National Association of College and University Business Officers.

Much of the third-class mail was used for fundraising, she said.

Less Money for Books

Libraries would be hurt because any increase in postal rates "comes right out of the funds allocated for books," according to Anne Heanue, associate director of the American Library Association's Washington office.

Elimination of postal subsidies would increase the cost of mailing a two-pound package of books from New York to Chicago from 54 cents to 94 cents, Ms. Heanue said.

"That would just be a tremendous hardship on libraries," she said.

Prior to the February rate increase, the same package cost 47 cents to mail, she added.

Ms. Heanue said elimination of the fourth-class library rate would have a disproportionate effect on libraries in rural areas, where patrons routinely borrow books through the mail. It would also discourage libraries from borrowing books from one another, she said.

"If postal rates are priced out of the reach of libraries, it could very much limit sharing between librar-ies and the efficient use of resources," she said. "It would be a tremendous step backwards."

Independent Schools

According to Arthur G. Broadhurst, director of business services for the National Association of Independent Schools, private schools would feel the effect of the elimination of postal subsidies in two ways: fundraising and communication with parents.

Independent schools send out "a great deal" of fundraising mail, he said, although much of it goes out first class as well as third-class bulk rate.

"The real concern is not even the charitable part of it," he said, "but communications to parents and other constituents. Everything from special reports from the headmaster to alumni bulletins--the loss of that subsidy would impact a number of school budgets in a substantial way."

nais itself spends about 1.6 percent of its budget, or $35,000 a year, on postage, Mr. Broadhurst said.

Blind and Handicapped

Elimination of the subsidy would also end free mailing of Braille materials to the blind, a program in effect since 1904, according to Ms. Heanue. The physically handicapped have enjoyed the same privilege since 1967, she said.

The Library of Congress, through its national reading program for the blind and physically handicapped, serves 630,000 people nationwide, Ms. Heanue said.

In fiscal 1984, it sent more than 19 million "talking books" and books in Braille through the mail, she said.

Eliminating the subsidy would make the cost of these services "prohibitive" and could force many people to drop out of the program, she said.

Vol. 04, Issue 28

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