Post office seeks rate hike for first-class mail

WASHINGTON The financially ailing Postal Service is seeking a 3-cent increase in the cost of mailing a letter - and that would raise the price of a first-class stamp to 49 cents.

The chairman of the postal Board of Governors, Mickey Barnett, cites the "precarious financial condition" of the agency and the uncertain prospects for postal overhaul legislation in Congress.

The post office expects to lose $6 billion this year. Last year the agency lost $16 billion.

Wednesday's request for the increase in stamp prices must be approved by the independent Postal Regulatory Commission.

The Postal Service said it would ask for adjustment to bulk mail rates in a filing with the commission Thursday. No details were immediately provided.

Media and marketing businesses say a big increase in rates could hurt them and lower postal volume and revenues.

The Postal Service's request was met with immediate response on Capitol Hill.

"Today's rate increase is a desperate cry for help from an insolvent Postal Service," Rep. Darrell Issa, R-Calif., who chairs the House Oversight and Government Reform Committee that oversees the Postal Service, said in a statement. "Revenue and volume are down dramatically and our mail delivery service, hamstrung by congressional mandates and onerous labor contracts, has been unable to sufficiently reduce costs."

Postmaster General Patrick Donahoe said Thursday his agency is in "the midst of a financial disaster."

"The Postal Service as it exists today is financially unsustainable," he told the Senate Homeland Security and Governmental Affairs Committee. It's a message that the postmaster general has been delivering to Congress with regularity over the past several months.

Donahoe pressed lawmakers Thursday for swift action on legislation to fix his agency's finances. Without help from Congress, the agency expects its multibillion-dollar annual losses to worsen. He warned that the agency's cash liquidity remains dangerously low.

"The Postal Service is quickly moving down a path that leads to becoming a massive, long-term burden to the American taxpayer," he said.

Under federal law the post office cannot raise its prices more than the rate of inflation unless it gets approval from the regulatory commission. The Postal Service must cite exceptional circumstances in seeking an "exigent" or emergency rate hike.

The agency last raised postage rates on Jan. 27. At the time, the cost of a first-class stamp went up by a penny, to 46 cents.

Lawmakers are considering cost-cutting moves that include ending Saturday mail delivery and door-to-door delivery. But many lawmakers, along with postal worker unions, have resisted such changes, saying they would inconvenience customers.

Jeanette Dwyer, president of the National Rural Letter Carriers' Association, said rural customers would be especially hard hit if Saturday mail delivery ends.

"The livelihoods, and often health and well-being, of entire communities depend on the Postal Service to facilitate communication and deliver goods," Dwyer said. "In many parts of rural America there simply are no alternatives."

In February, a CBS News poll found that most Americans supported a proposal ending Saturday mail with the continued delivery of packages.

The Postal Service says it would like to end Saturday mail delivery. It also is seeking to reduce its $5.6 billion annual payment for future retiree health benefits. It missed two of those $5.6 billion payments last year, one deferred from the previous year, and is expected to miss another at the end of this month when its fiscal year ends.

"The pre-funding requirement has created hardships for postal workers and it threatens to destroy the Postal Service," said Cliff Guffey, president of the American Postal Workers Union.

The Senate Homeland Security and Governmental Affairs Committee is considering a bipartisan proposal to stabilize the agency's finances, including changing the method by which retiree health care costs are calculated.

Saturday mail delivery would be ended in a year and the Postal Service could start shipping alcoholic beverages to compete with private shippers such as FedEx under a bipartisan proposal by the committee's chairman, Tom Carper, D-Del., and the panel's ranking Republican, Tom Coburn of Oklahoma.

The agency says ending Saturday mail delivery would save $2 billion each year.

"Whether it happens today, next month or next year, it's likely that postal customers will need to sacrifice at least some of the conveniences they enjoy today," Carper said.

Door-to-door service for new residential and business addresses would cease in a move that would help the agency shift to less costly curbside and cluster box delivery, under the bill. The measure would require the agency to try to convert residential addresses on a voluntary basis from door-to-door service to curbside and cluster box delivery.

The Senate plan includes changes in how pensions and retiree health care costs are calculated in an attempt to stabilize the agency's finances.

It also would impose a two-year moratorium on closing mail processing plants.

The House Oversight and Government Reform Committee earlier this year approved a bill by Issa for the service to gradually shift from door delivery to cluster box and curbside delivery. No Democrats on the panel voted for the measure.

Issa's bill also would end Saturday delivery and would change how pension and retiree health costs are calculated to bolster the agency's budget.

The Postal Service is an independent agency that receives no tax dollars for its day-to-day operations but is subject to congressional control.