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First-class stamps headed up to 39 cents
Mail carrier seeks 5.4% rate increase to cover pension costs; first-class stamp rising 2 cents.
April 8, 2005: 4:31 PM EDT

NEW YORK (CNN/Money) - The Postal Service Friday proposed a sweeping rate increase that would boost the price of a first-class stamp from 37 to 39 cents.

If approved by the independent commission that oversees the post office, the increase would take effect early next year.

The move, which would raise the price of postage for letters and most packages 5.4 percent, would help cover the postal service's employee pensions and the revenue gap from the recent drop in mail usage, Reuters reported.

The request was prompted in part by a Congressional mandate that ordered the mail service to create a $3.1 billion account to cover pension expenses, the news agency said.

The postal service has fought to lift this restriction and said it would drop the proposed increase if the funding requirement is lifted.

The price change by the agency is lower than initially expected. The Wall Street Journal reported in November that the Postal Service was expected to ask for an increase in postage early next year of at least 10 percent -- possibly increasing the price of a first-class stamp to 41 cents from 37 cents.

Under the proposed increase, in addition to first-class postage, an Express Mail package sent overnight would rise to $14.39 from $13.65. Priority Mail service would climb to $4.06 from $3.85 for a package weighing two pounds.

Stamp prices have risen three times in the past six years, with the most recent price jump coming in June 2002 when a first-class stamp rose 3 cents to 37 cents.

The request comes as e-mail and competitors like United Parcel Service (down $1.22 to $71.70, Research) and FedEx Corp. (down $1.89 to $91.02, Research) have eaten into the postal service's sales.

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