Free and Reduced Rates

Mar 02 2009
OIG Blog Category: Pricing & Rates 5 Comments

Have you ever wondered why the Postal Service offers free rates for the blind, balloting materials for overseas voters, and items sent by some consular officials? Or why it offers reduced rates to qualified nonprofit organizations, election officials, local newspapers, and publishers of educational material? It is because Congress mandates that the Postal Service provide free or reduced rates to these mailers and then appropriates money to reimburse the Postal Service for the revenue “forgone.”

Initially, Congress reimbursed the Postal Service for all types of reduced rate mail. Over the years, as rates increased and the number and size of nonprofit organizations grew, the revenue forgone appropriation more than doubled from $441 million in fiscal year (FY) 1972 to $970 million in FY 1985. The increase spurred a debate about who should bear the cost of reduced rates: taxpayers or other mailers. To address these concerns as well as other matters, the Congress passed the Revenue Forgone Reform Act of 1993. Under the Act, the annual appropriation for free postage for the blind, overseas absentee balloting materials, and consular officials continued; however, new appropriations for reduced rate mail stopped. The Act required nonprofit mailers to cover more institutional or overhead cost and shifted the rest of these costs to other mailers.
Currently, nonprofit mailers that use Standard Mail pay approximately 60 percent of commercial Standard Mail regular rates. The remaining share is absorbed within rates charged to other mailers. Congress continues to reimburse the Postal Service for revenue forgone for free mail, but the amount appropriated is usually less than the Postal Service requests. For example, although the Postal Service requested $124 million in FY 2008 to cover the costs of revenue forgone, free mail and adjustments from previous years, it received only about $89 million.
What do you think are some of the pros and cons of offering free or reduced rates to certain organizations? Tell us what you think.

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Comments (5)

  • anon

    Reduced rates for not-for-profits may be desirable, but the question is: who should pay to cover the costs? Forcing other mailers to pony up seems unfair. So who does that leave to foot the bill? Taxpayers, who will be on the receiving end of these not-for-profit solicitations? That option may be just as bad or even worse from a fairness standpoint. (It's worth noting that not-for-profits are not the only mailers getting postage breaks. The postage paid by magazine publishers.)

    Mar 16, 2009
  • anon

    Many nonprofits provide a great service to their communities; it is important to support them. The question is how to do it efficiently. You can either subsidize specific nonprofit activities (mailing in this case) or give them direct grants and let them decide how to put these funds to a better use. The first option amounts to the government attempting to micromanage nonprofits, which is rarely a good idea. The second option devolves the decision-making to the people who know their work the best – nonprofits themselves. Instead of requiring USPS to provide services to nonprofits at reduced rates, Congress should provide financial support to nonprofits directly. In addition to offering nonprofits more freedom in decision-making, this would reduce the burden for extra housekeeping for the USPS.

    Mar 04, 2009
  • anon

    I do support the reduced rates. If the USPS is going to remain viable in the 21st century, we have to maintain a consistent customer base. If we rescind the discounted rate for the non profits, they will find another medium to reach their customers/constituency. We are hemoraging commercial customers at an unsustainable rate because our products are losing their value in the eyes of our customers.

    Mar 03, 2009
  • anon

    we would lose money .lesss mail would be generTED

    Mar 03, 2009
  • anon

    Definitely No

    Mar 03, 2009

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