POSTAL SERVICE PROPOSES CHANGE IN POSTAGE RATES
The Board of Governors of the Postal Service said today they will propose a three-cent increase in the price of a First-Class stamp as part of an overall rate increase request, which is less than 9 percent. The request will be formally submitted to the Postal Rate Commission later this month and is well below initial predictions of 10 to15 percent. For the past 30 years, the price of stamps have tracked the Consumer Price Index.
The Postal Service's mail volume growth is hurting from the volatility of the economy and despite management's aggressive cost-cutting, the fact remains that in the near future the cost of maintaining this vital public service will exceed postal revenues. The Board is requesting an expedited decision because of Postal Service finances, economic trends and mail volume growth.
"This was a very difficult decision," said Robert F. Rider, Chairman of the Postal Service's Board of Governors. "But we simply don't have the basic tools necessary to operate in a modern business-like manner." The Board stated that raising rates was necessary to protect the ever expanding universal delivery system. "We will continue to manage this institution with the 30-year-old laws that govern us, but it's like trying to listen to a CD on an 8-track player."
The Postal Service, which will end its fiscal year on September 30, 2001, is projecting a deficit in the range of $1.65 billion due to a slowdown in the economy and high labor, fuel, and health care costs. Pressure continues as the Postal Service begins arbitration with three of the four largest unions. In addition, costs continue to grow as some 1.7 million new addresses are added annually, which represent significant infrastructure cost.
Given the current economic slowdown and subsequent reductions of revenue, the Postal Service management team initiated actions to further cut costs. A $1 billion capital spending freeze has stopped construction and renovation on more than 800 postal projects, which will continue into next year.
Rider said that even with the further cost cutting measures, the Postal Service has maintained record service performance and high levels of customer satisfaction. For a record nine straight quarters, the Postal Service has achieved productivity gains.
Postmaster General John E. Potter explained that from 2001 to 2003 another $2.5 billion in costs are being taken out of the system and that further study of consolidating mail processing operations would continue. In the past two years, 21,000 positions have been taken out of the system, while another 13,000 workyear reduction is planned for this year.
Potter recently announced an organizational restructuring that will bring added focus to the Postal Service's core business. It includes reducing administrative costs, reorganizing the marketing and sales organization and reviewing e-commerce activities that are not tied to the mail.
The ratemaking process requires the Board to request a recommended decision from the independent Postal Rate Commission (PRC), which then holds public hearings on the proposal. During these hearings, any interested party, including Postal Service competitors, have the opportunity to present arguments presenting information from their perspectives. Following the review process, the PRC makes a recommended decision back to the Board, who then ultimately take action on rates.
For 226 years, the U.S. Postal Service has been the gateway to the household, binding friends, families, and neighbors together. It is an independent agency that handles 46 percent of the world's mail volume, with annual revenues exceeding $66 billion. The Postal Service received no taxpayer dollars, but derives its revenues solely from the sale of postal products and services. Its unrivaled service network means the Postal Service delivers money, messages and merchandise to 135 million addresses every day with one of the most affordable postage rates in the world.
USPS PRess Release
