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HIGHER POSTAL RATES APPROVED

May 9, 2001 12:00 AM


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The 34-cent price of a first-class stamp will not change, but most other rates will rise July 1 as the post office struggles to cope with rising costs and shrinking income. The announcement today by the agency’s governing board comes just four months after stamp prices increased, including a one-cent rise in first class.
But at that time the full set of increases proposed by the post office was cut back by the independent Postal Rate Commission, a step that reduced postal income by an estimated $900 million.
Yesterday the postal governing board overrode the commission, a step it can take only by unanimous vote. Postal Board chairman Robert F. Rider said the governors acted reluctantly, but felt obligated "to assure the financial integrity of the nation’s postal system."
Richard F. Strasser, postal chief financial officer, said the agency faces losses of between $1.6 billion and $2.4 billion this year and the added income is essential. He noted that as recently as February the loss had been estimated at $3 billion, but the agency has cut spending sharply by freezing hiring and some 800 building projects and by increasing productivity.
While the 34-cent rate for the first ounce of first-class mail will remain the same, the cost for each additional ounce will climb from 21 cents to 23 cents. And the price of sending a post card will jump a penny to 21 cents. Strasser said the new rates will raise the cost of sending a piece of advertising mail by one-half to three-quarters of a cent and for the typical magazine it will add one-half cent to the postage.
The increase drew prompt criticism from the Magazine Publishers Association. "Enough is enough. This 'raise the rates' mentality must be stopped," said Nina Link, MPA president.
Under the law, rate requests have to be reviewed by the independent Rate Commission before taking effect, a process that takes nearly a year while the commission holds hearings. The commission can reduce the postal service’s request, which it did last year.
The postal governors can overrule the commission and impose the prices they originally asked for by an unanimous vote, which they did today. That happened once before, in 1981, when the rate went to 20 cents.
Postal officials also have suggested cutting mail deliveries to five days a week instead of the current six, a proposal that drew a storm of criticism in Congress and elsewhere. While the post office no longer receives tax money for its operations, it remains a part of the government subject to supervision.
For the past several years postal leaders have sought changes in the law to give them more flexibility in changing rates and services so they can better cope with rising costs and changes in competition. Postmaster General William Henderson commented that the necessity to overrule the rate commission stresses the need for changes in the laws governing the post office to give the agency more flexibility in meeting financial challenges.
Long negotiations and hearings produced a postal change bill that officials felt would solve many of their problems last year, but the measure never came up for a vote and died with the end of the last Congress. The post office had a $199 million loss last fiscal year, after five years in the black during which it was able to reduce, but not eliminate, accumulated losses from earlier years. Under the law, the agency is required to break even over time.
Meanwhile, the postal governors are searching for a replacement for Henderson, who is leaving at the end of May. Speculation has focused on Deputy Postmaster General John Nolan, but others reportedly are also under consideration.