Coming in June: Budget now for rate hikes. (Going Postal).

It appears as though mailers and the U.S. Postal Service (USPS) will avoid a long, drawn-out battle concerning rate increases by agreeing on 8.7 percent average increases to be implemented on June 30.

Nonprofit Standard fundraising pieces and other bulk mail will experience 6.7 percent hikes. Periodicals will be hit with 10 to 12 percent increases and the First Glass rate will jump from 34 cents to 37 cents.

Originally these increases weren't to be applied until August or September of 2002. But the effects of the softened economy and the anthrax crisis have crippled the USPS and have led to an earlier implementation date.

Postal finances have been in a downward spiral for the last two years. Despite two rate increases during 2001 (January 7 and July 1), the USPS lost $1.7 billion in fiscal year 2001. The USPS had lost $199 million in fiscal year 2000 after posting surpluses in the previous four years.

The current rate case saga began during the early morning meeting of the USPS Board of Governors on September 11. That morning, the board authorized USPS to file for new postal rate increases, effective sometime in the autumn of 2002. As the meeting progressed, attendees watched the horror at the Pentagon from the top story windows of postal headquarters a few miles away in Washington, D.C.

When the USPS filed the formal case on September 24, some postal officials expressed serious concern that the revenue request would be insufficient.

The October anthrax crisis claimed the lives of two USPS employees and brought the threats of terrorism into postal facilities and to the postal family in ways that no one could have ever foreseen. Additional costs to ensure the safety of the mail were never contemplated in the rate increase request.

At the October 25 pre-hearing conference before the Postal Rate Commission, Vice Chairman George Omas suggested, "Recent events make it appropriate to think about alternative ways for us to do our jobs." Omas urged the postal community to recognize that "if there was ever a time when 'business as usual' was not an attractive course of action, and when cooperative efforts to promptly resolve issues through settlement might be the right course of action, that time is now."

Discussions began between mailers and the USPS about the possibilities of a rate case settlement. Failure to settle the case would have lead to the filing of a new increased revenue requirement reflecting changed economic circumstances and the increased security costs. 'Some had feared the increases would rise from 8.7 percent to over 12-15 percent.

Eventually, the White House approved emergency funding of $175 million to assist in the added USPS costs associated with protective gear and mail irradiation. And on December 20, Congress approved $500 million in appropriations to assist the USPS in defraying the costs associated with the security of the mail.

The costs involved in irradiation or detection of biological agents will likely soar into billions -- not millions of dollars. Nonprofit mailers are joining with others to ask Congress to pay these Homeland Security costs to protect the mail. It appears to be a difficult sell as some appropriators point to postal ratepayers as the best source of cash to address these new expenses.

So, the rates to be implemented on June 30 may be short-lived. Nonprofits can expect the USPS to file for additional hikes to take effect in 2003. And, while nonprofit executives are comforted in knowing that legislation passed in 2000 will protect the value of the nonprofit preferred postal rate vs. the commercial rate, it's the larger questions surrounding the health and vitality of the USPS that will preoccupy much of our work in 2002.

Some suggest that the USPS can't continue to operate under the current legislative framework crafted more than 30 years ago. Others argue that sluggish productivity and mismanaged resources have bogged down the USPS.

Perhaps it's time that we appointed a top-flight Presidential Commission made up of business, labor and nonprofit leaders to review the different reform proposals and cut through the politics.

Should the USPS be privatized? Should the USPS be sold in an employee stock offering to mail handlers and letter carriers? Should the White House reclaim the USPS in the name of the federal government and return the position of postmaster general to the cabinet? Or, can enlightened postal management steer the USPS through a smooth transformation towards a more profitable, leaner, meaner competitive enterprise?

These are the questions to be considered on Capitol Hill in the coming months. Mailers have given their pound of flesh in the rate increase. Now nonprofits must work with Congress and postal management to better provide for the future of the national mail delivery network.

Neal Denton is executive director of the Alliance of Nonprofit Mailers in Washington, D.C.