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Postal Service seeks rate hike
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May 5, 1998: 4:04 p.m. ET
Agency's request for $2.4B in added revenues could mean a 33-cent stamp
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NEW YORK (CNNfn) - Neither rain, nor snow, nor heat, nor gloom of night...can stay the U.S. Postal Service from its appointed rounds in quest of more money for its already brimming coffers.
The latest round will come this Friday, when the Postal Rate Commission is expected to render its "recommended decision" on an agency request, made last July, for $2.4 billion in additional revenue.
Half of that money would come from a 1-cent increase in the price of a first-class stamp, which currently costs 32 cents. The remainder, postal officials say, would be raised through lesser fee increases on other services ranging from second-class and standard mail to postcards.
Should the increase go into effect -- a move that requires final action by the Board of Governors -- it would mark the fourth such jump in postal fees since 1988, when a first-class stamp cost 25 cents. The last increase, on Jan. 1, 1995, raised first-class rates from 29 to 32 cents.
The Postal Service's Board of Governors, a nine-member panel appointed by the president for nine-year terms, contends that the added revenues are necessary to help fund an automation drive within the agency. This year's budget calls for $5.8 billion in spending on capital improvements.
Opponents of a rate hike counter that an increase can be avoided at a time when both the U.S. Postal Service and the American economy are booming. In 1997, they note, the Postal Service posted earnings of $1.26 billion -- a third straight year of billion-dollar-plus profits.
Postmaster General Marvin Runyon alluded to the comeback in his recent annual report when he acknowledged: "As we looked toward a third year with stable prices, we expected earnings to be almost non-existent, eroded by inflation and other costs over that period. That turned out not to be the case."
One of the parties pressing for a delay in any rate increase is the Mailers Council, an Arlington, Va.-based coalition of more than 50 corporations, nonprofit organizations and major mailing associations that account for about 70 percent of the nation's mail volume.
Pleas to delay an increase
In letter to the USPS Board of Governors dated April 7, the coalition's chairman, Robert McLean, urged the agency to defer an increase until 1999. The plea was a reversal of the Mailers Council's role, back in 1994, in helping the agency to enact an increase. Then, the USPS plan called for a 20 percent rise in the price of a first-class stamp to 35 cents.
The Council, warning of declines in mail volume, prevailed on the agency to alter its position and accept a more modest 3-cent increase. This time around, however, the Council said the USPS has seen record levels of mail volume, decreased expenses, and mild winter weather that has reduced overtime costs. All of these factors, it argues, obviate the need for a present hike.
"In light of these positive trends," McLean wrote, "the Mailers Council believes that raising rates immediately after the Commission delivers its decision in early May would place an unnecessary burden on business and nonprofit mailers, as well as individual consumers."
The Postal Service has been equally adamant about the need for an increase. It cites a $1.4 billion increase in program expenses, soaring capital expenditures and an obligation to erase billions of dollars in negative equity that has been mounting for nearly a quarter of a century.
Then there is what the agency calls the "strong desire of the American people for the government to reduce its debt." The USPS reduced its debt from $9.9 billion to $5.9 billion from 1992 to 1997. Without a price increase, it asserts, it will have to borrow an amount nearly equal to its annual capital limit for 1998.
"Sound business strategy dictated we choose a historic, low rate increase to keep hard copy mail as the cost effective medium of choice in the 21st century," Mike Riley, the agency's chief financial officer, wrote in a recent statement.
The PRC, which under federal law has 10 months to render an opinion on increases, can, of course, recommend a lower revenue increase -- an outcome many believe is likely. Likewise, the Board of Governors has the right to accept or reject the PRC's recommendation, or allow it under protest.
At the time the Postal Service requested the rate hike last July, it projected a loss of $1.4 billion in 1998 barring an increase. That figure was subsequently revised to $1.1 billion. Instead, the agency is in the midst of a fourth year of profits. 
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U.S. Postal Service
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