Post office announces 2-cent rate increase

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The post office wants to increase the price of a stamp by 2 cents to 46 cents starting in January. The agency has been battered by massive losses and declining mail volume and faces a financial crisis.

Postal officials announced a wide-ranging series of proposed price increases Tuesday, averaging about 5 percent, and covering first class, advertising mail, periodicals, packages and other services.

The request now goes to the independent Postal Rate Commission which has 90 days to respond. If approved, the increase would take effect Jan. 2.

“The Postal Service faces a serious risk of financial insolvency,” postal vice president Stephen M. Kearney said.

Kearney said the agency is facing a $7 billion loss in 2011. The rate increase will bring in an extra $2.5 billion, meaning it still faces a $4.7 billion loss.

The rate increase is part of a series of money-saving plans announced in March. These also include reducing mail deliveries to five days a week, closing offices and making other cuts in expenses. Congress must agree to eliminating deliveries on Saturdays.

While the cost of a first-class stamp would go up to 46 cents, people who bought “Forever” stamps at lower prices will still be able to use them for first-class mail without paying the difference.

Officials also said they plan a new design for Forever stamps, which currently have am image of the Liberty Bell. New Forever stamps will have images of evergreen trees. All Forever stamps would remain valid.

In addition to the 46-cent rate for the first ounce of a letter the cost for each additional ounce would go up a penny to 18 cents. The cost to mail a post card would go up 2 cents to 30 cents.

The price to send periodicals would go up about 8 percent and other rates for advertising mail, parcels and services will also go up by varying amounts.

The current 44-cent first-class rate took effect May 11, 2009.

The agency lost $3.8 billion last fiscal year despite cutting 40,000 full-time positions and making other reductions. It has continued to face significant losses this year.

The weak economy has sharply reduced mail volume as companies cut their advertising. At the same time there has been a significant drop in lucrative first-class mail, with more and more people turning to the Internet to communicate with each other as well as to receive and pay bills.

The proposal drew a prompt complaint from the mailing industry.

“This proposed rate increase amounts to another tax imposed on Americans at a time when the economy can least afford it,” said Tony Conway, executive director of the Alliance of Nonprofit Mailers, a group representing charities and other organizations.

“Consumers everywhere will pay more for the letters and packages they need to send; businesses – large and small – will suffer and even more jobs will be lost,” complained Conway, who was designated spokesman for the Affordable Mail Alliance, a coalition of businesses, charities and other mailers formed to oppose the increase.

Postal officials also have proposed eliminating Saturday mail delivery as a means of cutting costs, a change that would require congressional approval.

Post office finances are also complicated by the requirement that the agency make annual payments to pre-fund future health benefits for retirees, something not required of other government agencies.

And the postal inspector general contends that the Postal Service has been overcharged billions of dollars for retirement benefits for employees who worked for the old Post Office Department before it was converted to the Postal Service in 1970.

Associated Press