US Postal Service seeks rate hike, plus stamp immune to increases

The Postal Service said today it wants to raise the price of a first-class stamp by 3 cents – to 42 cents – and proposed a "forever" stamp that people could use as hedge against future rate increases. The changes would take effect in the spring of 2007 if approved by the independent Postal Rate Commission.

"A forever stamp would help ease the transition to any future price adjustments," board Chairman James C. Miller III said.

Postmaster General John E. Potter said the agency would not be making a rate change if it were not necessary.

"The Postal Service is not immune to the cost pressures affecting every household and business in America," he said.

For example, each penny increase in the price of a gallon of gasoline costs the post office $8 million, and payroll, health expenses and other costs also have been rising.

And, unlike private delivery companies, the post office cannot simply add a fuel surcharge to its rates.

In addition to the increase in first-class prices, the package of rate changes includes boosts in other categories – and even some rate cuts.

For example, while the first ounce of a letter would rise 3 cents to 42 cents, additional ounces would cost 20 cents instead of the current 24 cents. That means a saving on heavier items such as wedding invitations. The cost to mail a 2-ounce letter would drop from 63 cents to 62 cents.

Other changes would include Express Mail, flat rate up from $14.40 to $16.25; 2-ounce barcoded bank statement, down from 54.5 cents to 48.6 cents; bulk-mailed weekly newsmagazine, up from 17.9 cents to 20 cents; presorted catalog, up from 32.1 cents to 33.6 cents; post card, up from 24 cents to 27 cents.

The forever stamp would help soften the blow of a rate increase by allowing customers to stock up. As originally proposed it would sell for the first class rate and, once purchased, the special stamp would remain valid for whatever the first-class rate is when it is used, regardless of future increases.

Once the post office proposes a rate change, including the new stamp, the matter goes to the Postal Rate Commission, which holds hearings and has 10 months to consider the matter before responding.

The earliest a change would take effect would be May 2007.

The cost of a first-class stamp went from 37 cents to 39 cents in January. Before that, the price had been unchanged since 2002.

The proposed increase would boost the price of mailing a letter to 42 cents.

The increase in January was required so the post office could place some $3 billion in an escrow account, a step required in law.

The House and Senate have both passed bills to eliminate that requirement and efforts are under way to resolve differences between the two versions, but it also faces the threat of a presidential veto.

Since that increase went into the escrow account, the Postal Service still must cover rising costs of fuel, salaries, equipment and other expenses.

In addition to its own fuel expenses, the post office has about 70,000 employees who use their own vehicles and are reimbursed for fuel costs, and there are some 17,000 contractors whose rates are adjusted for rising fuel costs.

Overall, the Postal Service expects to finish this fiscal year about $2 billion in the red.

While a 3-cent increase in first-class stamps would be the most visible change, rates will change for other types of mail also.

For example, it currently costs 63 cents to mail a two-ounce first-class item whether it's a letter, large flat envelope or package. But the post office makes more than 30 cents on the letter, 10 cents on the flat and loses money on the package.

That means the agency will be looking at shape as well as weight in setting new rates, officials have said, particularly in the face of a decline in first-class mail as more people pay bills and send messages via the Internet.

Congress mandated the escrow requirement in 2003 when it passed a law reducing the amount of money the agency has to pay into its retirement system, which auditors said was being overfunded. Instead, Congress ordered the money to be used to reduce debt and, when that was done, to be put into the escrow fund.

The White House has opposed the release of the money from the fund because placing it there counts as income for the federal government and releasing it would have the effect of raising the deficit.

Buy once and avoid price hikes, Postal Service proposes
St. Louis Post-Dispatch (MO), Third Edition, Sec. News, p A1 05-04-2006
By Randolph E. Schmid THE ASSOCIATED PRESS

What is a forever stamp?

Sold at whatever the current price would be for other first-class stamps, it would be honored despite future rate increases.

Not just diamonds are forever. Add stamps to the list. The post office is planning a "forever" stamp for letters, good no matter how many times postal rates increase.

That means folks could say goodbye to those annoying 2- or 3-cent stamps that have to be added to letters every time rates go up. Sheets, rolls, books or loose stamps in the drawer would still be good. Forever.

The idea for the special stamps, which would be sold at the same price as other first-class stamps, was included in proposals announced Wednesday that would also raise stamp prices 3 cents — to 42 cents — next year.

"A forever stamp would help ease the transition to any future price adjustments," board chairman James C. Miller III said.

So, would people stock up on them?

"No, because I'd probably lose them," said Timothy Cummings, 31, of Lakeland, Fla.

But Layne Rico, a corporate pilot from Valencia, Calif., was more enthusiastic. Although he mainly uses stamps for greeting cards, he thinks the forever stamp is a good idea: "Five hundred or 1,000 would cover me in my lifetime."

Adela Checino of Orange County, Calif., said she would stock up on the stamps because she used many of them to pay bills.

And Inez Miller of The Villages, Fla., agreed that she too would stock up, though she expressed a bit of skepticism that they would really be good forever.

The idea must still pass muster with the independent Postal Rate Commission, but that shouldn't be a major problem because commission member Ruth Goldway urged the post office to consider such a stamp a year ago.

"All of us at the commission who have followed the issue are delighted that this is something we will be able to consider," Goldway said Wednesday.

The number of letters, cards, bill payments and other first-class mail items has been declining in recent years as people turn to the Internet. At the same time, there has been an increase in advertising mail.

Raising postal rates is a complex process that takes nearly a year, meaning consumers would have plenty of time to get the special stamps when they knew an increase was coming.

Hoarding isn't expected to be a problem.

Here's how it would work: If the 3-cent increase takes effect next year, the forever stamp would be made available for 42 cents, the same as other first-class stamps. If the first-class rate were to rise to 45 cents in a few years, the 42-cent forever stamp would still be honored for postage on letters. Once the new price took effect, forever stamps would then sell for 45 cents.

The proposed rate changes would take effect in May 2007 at the earliest, postal officials said.

As for the postage increase, Postmaster General John E. Potter said, "The Postal Service is not immune to the cost pressures affecting every household and business in America."

For example, each penny increase in the price of a gallon of gasoline costs the post office $8 million, and the post office cannot simply add a fuel surcharge to its rates.

In addition to the increase in first-class prices, the rate changes would include boosts in other categories — along with some rate cuts.

For example, while the first ounce of a letter would rise 3 cents to 42 cents, additional ounces would cost 20 cents instead of the current 24. That means a saving on heavier items such as wedding invitations. The cost to mail a 2-ounce letter would drop to 62 cents from 63 cents.

The cost of a first-class stamp went to 39 cents in January, from 37 cents. Before that, the price had been unchanged since 2002.

The increase in January was required so the post office could place some $3 billion in an escrow account, a step required by law.