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.