- The Washington Times - Thursday, May 4, 2006

The Postal Service said yesterday 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 a hedge against future rate increases.

The changes would take effect next spring 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.

Unlike private delivery companies, the Postal Service 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 bar-coded 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; postal 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 Postal Service 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 next May.

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 Postal Service could place about $3 billion into an escrow account, a step required under law.

The House and Senate have passed bills to eliminate that requirement, and efforts are under way to resolve differences between the two versions, but the legislation 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 about 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.

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

For example, it currently costs 63 cents to mail a 2-ounce first-class item whether it is a letter, large flat envelope or package. But the Postal Service makes more than 30 cents on the letter and 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 enacted 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 completed, 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.

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