Increase in Postal Rates Hits Some Charities Hard

By Peter Panepento

As higher postage rates take effect today, many nonprofit groups are figuring out how to cope with increases that more than doubles the cost of sending some direct-mail pieces.

Under the new rate structure, nonprofit groups are paying an average of 6.7 percent more on postage for fund-raising letters and other types of so-called nonprofit standard mail.

The increases, however, are much steeper for organizations that mail calendars, annual reports, and other large pieces under the category of standard flat mail — a classification that now costs many nonprofit groups 20 percent to 40 percent more than before, says Anthony Conway, executive director of the Alliance of Nonprofit Mailers in Washington.

And a new mail category that covers bulky pieces that are not easily processed by automated Postal Service mail-processing equipment means that some pieces will cost far more to send, in some cases as much as four times what nonprofit groups paid in the past.

Lobbyists for nonprofit organizations unsuccessfully attempted to get the Postal Service to delay the introduction of the new category so that charities would have time to adjust their strategies and could move forward with already scheduled mailings without paying the higher costs.

Some organizations have decided to forge ahead with mailing plans.

Among the organizations that expects a major cost increase from the postal change is the Dollywood Foundation in Pigeon Forge, Tenn., which runs the Dolly Parton Imagination Library, a literacy program that mails about 5.5 million books to preschool children annually. Those books — which are distributed to nonprofit organizations and government agencies and are then mailed directly to children — must now pass a flexibility test to avoid being placed in the non-flat machinable category.

Those that pass the test — which involves bending the books by an inch or more while dangling them over the edge of a table — will cost about 10 percent more to mail starting today than they did in the past.

Those that fail will cost 60 percent, or nearly 25 cents per book, to mail says David Dotson, the foundation's executive director.

"Our hope is up to half of them can make it. But all you can call it is hope," Mr. Dotson says. "We have zero time to respond. It will take us nine months or more to change material and format and do anything else we'd have to do to research whether our books will bend an inch."

Mr. Conway says nonprofit groups that mail items like greeting cards and rosary beads in their fund-raising solicitation packages have options for changing the packaging of their mailings to avoid the higher charges under the new classification. But many organizations have already scheduled their mailings and do not have time to adjust to today's increase.

"Those are massive increases," he says. "The vendors that produce those materials for nonprofits are hard at work trying to find alternatives. But they are not quite there yet."

The prognosis is less dire for organizations that mail periodicals and standard flat mail.

The Postal Regulatory Commision has delayed its new rates for nonprofit periodicals — which are increasing by 11.7 percent on average — until July 15.

And while the Postal Service today increased the cost for standard flat mail, it is reconsidering the rate and could retroactively reduce the size of the increase within the next month.

Mr. Conway, though, says such a move could come with a cost. The Postal Regulatory Committee, which must approve rate changes, could decide to increase the price of standard letter pieces to make up for any decrease in its flat mail rates.

In either case, Mr. Conway says nonprofit groups should be looking closely at their mailings to see if there are less costly alternatives. Some groups, for instance, are considering repackaging their solicitations to have them fit into the letter-size category.

"It saves them a whole lot of money," he says. "They don't get as much real estate, but they still felt like it was the best business decision to make. It's a big cost, and rather than just saying 'We've always done it this way,' there's an opportunity to change."

For most organization's, however, today's increase will not prompt significant changes in their mailing approach.

Mr. Conway says the vast majority of nonprofit standard mail — about 80 percent — falls into the standard letter category. As a result, today's increase is largely falling in line with other inflationary cost bumps.

"While it adds a little bit of expense, they can't find a better way to raise money," says Scott Swedenburg, chief executive for Mail Enterprises in Birmingham, Ala., a company that administers direct mail services for nonprofit organizations and other mass mailers. "For a lot of the ones we work with, it's a slight increase. They won't even notice it, hardly. If you're staying in the letter rate, you're fine."

But as most nonprofit groups adjust to the new costs, more changes could be coming soon.

A new law stipulates that the Postal Service will no longer be allowed to increase rates by more than inflation, but the service has the option of approving one more increase under the current system, which does not limit the size of such increases.

"They haven't said it directly, but they have an option to raise rates again later this year," says Senny Boone, executive director of the Direct Marketing Association's Nonprofit Federation in Washington. "We have to push back on that."

For a complete breakdown of the new fees, go to the Postal Service's Web site.