Why are dues going up?In my president's column last month I reported actions taken by your Board of Directors at our meeting in August. One of those actions was the elimination of the early payment discount for dues. What this really means is that we will all be paying $5 more for dues this year.
Why? Let me tell you that we did not make this decision lightly. Nobody likes raising the dues, especially when we know that it is a hardship for some who are on a fixed income. But it is the Board's responsibility as fiduciaries of the Society to preserve the organization's financial integrity.
In June, the APS Finance Committee convened in Bellefonte to review the Society's operating budget for 2005. The Society's proposed $3.85 million budget showed a deficit of $260,000. The Finance Committee and staff looked long and hard at ways to reduce this deficit, and the Committee recommended the elimination of the $5 discount for those who pay their dues before January 1. This still leaves us with an operating deficit, but it is a less serious draw on our invested capital. You are probably wondering what is causing the shortfall. Rightfully so because the APS belongs to its members! Let me tell you about it.
Let's put one myth to rest once and for all. An APS operating deficit is not caused by the restoration and move to the beautiful new American Philatelic Center in Bellefonte. The costs of the project have been borne by our sister organization, the American Philatelic Research Library (APRL) through the sale of the former building in State College and by the extraordinary generosity of members of the APS who have contributed to the Project One Capital Campaign. The APS operating budget is not affected by the building project.
What is impacting the operating budget can be summed up in two phrases: increased costs and reduced income.
Costs. Let's talk about increased costs first. Personnel costs are going up. Even though the Society had about 15% fewer employees in 2004 than in 2001, personnel costs were up nearly 5%. This is principally due to the rising cost of health insurance. We anticipate that the cost of health insurance for our employees will rise another 15% between 2003 and 2004, even though we have reduced the amount of coverage provided. We also need to pay our exceptional staff at least a cost of living increase. That currently means 2% per year.
Staff costs are only a part of the picture. As most other businesses can attest, the cost of utilities, office equipment and supplies, and insurance have all risen and will continue to rise even more.
Income. So what about reduced income? In 1997 our membership peaked at 56,000. At the end of this July it was less than 46,000. Those 10,000 lost members represent over $200,000 in lost net income, which is essentially the current shortfall in the operating budget.
If I keep stressing the need for recruiting new members, this is part of the reason. We need about 3,500 new members a year just to maintain our current membership levels. Last year we got 2,300. If we are to stabilize, we need 1,200 additional new members each year, or roughly 25 more members each week in addition to those we are currently recruiting. That doesn't seem onerous, but we are not doing it. This year we are running about 200 new applicants ahead of last year, but we still need 1,100 new members to make any inroads in growing the membership. It is that growth that will provide additional income.
The APS has a healthy $3 million invested in long-term funds. In 2003 this made about $200,000 for us in realized and unrealized gains. That's pretty good for these days, and certainly much better than we made in 2002, but our investments will not do that for us this year and we cannot count on returning to the double-digit gains of the 1990s anytime soon. The national economic forecast is predictably unpredictable, but with the majority of the APS endowment in fixed income instruments we can at least hope to have a very modest positive return.
So how are we addressing the operating deficit? What has your Finance Committee and Board been considering?
The dues structure. The latest increase brings the dues to $35 for U.S. members. We went from 1994 to 2001 - a total of seven years - without a dues increase even though our costs increased during those year. That was the longest period since the 1960s without a dues increase. We held that level of dues because we made up the shortfall in our operating budget from generous returns on our investments. We believe we are now back in line with the costs of doing business provided we can begin to grow the membership. In the future we should be increasing dues at the general rate of inflation and costs of running the business.
Costs of member services. We have looked at cutting services. What should be cut? Staffing the library? Our education program? Youth activities? Reduced number of issues of American Philatelist? Eliminating the color in AP? None of these were attractive options.
We know we are trying to do more things than our budget comfortably allows, and we continue to seek further economies in our budget. All of the services we offer are a part of the goals and objectives of the Society. We do not want to cut member services or reduce programs that are important to the hobby.
Staff costs. We looked at additional staff cuts, but staff has already been cut substantially. The result of those cuts is that those who remain on staff work incredibly long hours, including weekends and holidays. We can't reduce staff further without also cutting some services.
Moneymaking activities. I'm sure some of you are wondering about the rental income from the American Philatelic Center. As I mentioned earlier, the APRL owns the property (as it did the old property in State College). Any income from rentals goes back to the APRL.
In the past we have added new services such as Internet Sales, which has been a popular and successful venture (www.stampstore.org), and has provided members a way to buy and sell on the Internet. Our objective when we add new services is to enhance your collecting pleasure. Each new service has related start-up costs that impact the operating budget until such time as they become profitable. We constantly look for additional ways to add new services that will generate some income for the Society, but we have not yet found a moneymaking activity that will provide instant relief to our operating budget deficit.
Fundraising. In 2003 the APS launched its most aggressive fundraising campaign in its history, with the goal of raising $10 million within 10 years. We have a full year of the program under our belts, and I am pleased to report that through the generosity of our membership, we are going to make our first year goal. But we need commitment to achieve our overall goal. Presently most of the money being raised is being channeled to the American Philatelic Center building fund. Rightfully so! There is no relief to the operating budget in the near term to be had here.
The bottom line. The APS is financially healthy. We have $3 million in investments, which provides some of our needed income. We have about 46,000 generous members who have made the first year of our capital campaign a success. We have a Finance Committee, a Board, and a Staff all committed to addressing the fiscal challenge and we are meeting that challenge head on. We will achieve our goal, but it will take time, focus, and hard work. We ask your support.
Renew your dues! You can help most by renewing your dues when you receive your dues notice. Recently a member wrote to me about whether or not he would renew his "subscription." The American Philatelic Society is not a subscription, although your annual dues include with it the monthly American Philatelist. Your membership also brings a host of other services. You can buy new stamps or make money by selling stamps from your collection through the APS Sales Division or Internet Sales Unit. You receive discounts on collecting supplies, books, and educational opportunities. You may have your stamps and covers expertized for a discounted fee. Your membership also provides access to the superb American Philatelic Research Library and plethora of research materials available for loan. You can buy insurance for your stamp collection at group rates because you are an APS member. Your APS membership supports outreach activities for youth and beginners of all ages, the APS STAMPSHOW and Ameristamp Expo. Your membership in the American Philatelic Society marks you as a collector who has chosen to uphold the high ethical standards the Society endorses and enforces.
Happy Thanksgiving! Here in the United States we will soon be celebrating our Thanksgiving holiday. It is a day to reflect on all the good things in life and express our gratitude for them. I am grateful to have a hobby that has sustained me in good times and bad, kept my mind active and inquisitive, and provided cherished friendships. I am grateful and honored to be President of the American Philatelic Society, the best philatelic organization in the world. I am grateful to you, the membership of the Society, for the incredible successes of this past year. I wish each of you a safe and happy Thanksgiving shared with those you love.