September 25, 2013

Postal board seeks to increase cost of stamps to 49 cents

The proposed increase defies a law that ties postage prices to the rate of inflation.

Bloomberg News

WASHINGTON - The U.S. Postal Service, after failing to get congressional support to change its business model, should raise postage rates beyond the rate of inflation, its board said. A sponsor of postal legislation called the move a "desperate cry for help."

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U.S. Postal Service letter carrier Jamesa Euler delivers mail in Atlanta. The post office expects to lose $6 billion this year and is seeking help from Congress to fix its finances.

The Associated Press

The service's board said it wants to raise the price of a first-class stamp three cents, or 6.5 percent, to 49 cents and to increase rates for magazines, advertising mail and packages more than is allowed without consulting the service's regulator.

"Of the options currently available to the Postal Service to align costs and revenues, increasing postage prices is a last resort that reflects extreme financial challenges," Postal Service Board Chairman Mickey Barnett said in a letter sent to postal customers on Wednesday.

The board may reconsider if Congress passes postal legislation, he said.

The price-increase plan, for which the board will seek approval from the U.S. Postal Regulatory Commission, is the latest volley from the service on how it plans to close its budget gap. Earlier this year, it backed off its plan to defy the law and end Saturday mail delivery.

The board met Tuesday and Wednesday in a closed-door meeting in Washington. The service had said it would consider raising rates as it expects a $6 billion loss this year following a $15.9 billion loss last year. The rate increase would generate an additional $2 billion in revenue annually, the board said.

The service, which is supposed to fund its operations through postage sales, is allowed by law to raise most rates -- including those for the price of a stamp for a letter -- each year by no more than the rate of inflation.

The price increases would take effect Jan. 26, 2014.

A Washington-based trade group whose members include Hallmark Cards, the closely held greeting-card company, said the postal regulators should stop the increase.

"Raising rates or cutting critical services will exacerbate the Postal Service's current predicament by driving away much-needed mail volume to other competitors," Rafe Morrissey, vice president of postal affairs for the Greeting Card Association, said Wednesday in an emailed statement. "Pursuing both simultaneously, as some propose, is a recipe for disaster."

A group representing magazine publishers said a rate increase will worsen the decline in mail volume.

"No private company would increase prices when sales are already plummeting," Mary Berner, chief executive officer of the Association of Magazine Media, said in an email. "The board's request -- if approved by the Postal Regulatory Commission -- will cause significant declines in mail volume and further job losses across the industry without addressing the USPS's core issues."

The trade association, based in New York, includes Bloomberg Businessweek among the 175 media companies representing 900 titles that are members. Bloomberg Businessweek is owned by Bloomberg LP, the parent company of Bloomberg News.

The top Democrat and top Republican on the House Oversight and Government Reform Committee, which oversees the Postal Service, issued statements saying the postal board plan shows Congress needs to act.

Rep. Darrell Issa, the California Republican who has sponsored legislation to change the Postal Service business model, called the plan a "desperate cry for help."

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