A Penny More For Postage

Despite three years of billion-dollar postal profits, the independent Postal Rate Commission Monday agreed to a post office request to raise the price of stamps by a penny.

The increase could take place later this summer.

The commission chided the Postal Service for not delaying its request in order to provide more up-to-date information on costs and expenses.

But in the end, the commission agreed to most of what the Postal Service had asked for.

It approved the one-cent increase in first-class letters and a series of increases for other types of mail.

"These changes will provide added funds to enable the Postal Service to proceed with its plans to spend $5.6 billion on equipment and service enhancement programs in the 1998 fiscal year," the commission said in announcing its decision.

The commission strongly recommended against instituting the rate change before Jan. 1, 1999, saying the funds won't be needed before then. But CBS News Producer Lloyd Devries reports that the Postal Commission has little power to determine when that rate change will be instituted.

The current 32-cent price to mail a first-class letter took effect Jan. 1, 1995, following a year in which the mail agency lost nearly $1 billion.

In the three fiscal years since then, the Postal Service has reported profits of $1.8 billion, $1.6 billion, and $1.3 billion, which have helped reduce, but not eliminate, debts accumulated over decades of red ink.

"We want to avoid the mistakes made in the 1980s when we waited too long before raising rates," a top postal manager said last week. "Then our million-dollar profits turned to billion-dollar losses."

"In the past three years, we have made great strides, but we still have a long way to go. At our current margins of 2 to 3 percent of sales, we need at least another four years of profitability to make the American people whole on their original investment," said the manager, who spoke on condition of anonymity.

The taxpayer subsidies that kept the post office afloat for many years were ended two decades ago. The agency currently generates all its own income.

Postal officials say the request for higher prices is based on looking toward the future, not the past three years.

With labor negotiations coming up this fall, transportation costs rising, and the need for investment in new buildings and equipment, they foresee going back into the red unless they can charge more.

The boost to 33 cents in the cost of sending a greeting card or paying a bill is the most obvious portion of the rate increase. But complex changes also affect other rates for mailing packages, magazines and newspapers, advertising mail, and for such services as post office boxes, certified and registered mail, and insurance.

The total request for higher rates is expected to increase Postal Service revenue by $2.4 billion, of which bout $1 billion would result from the extra penny on first-class mail. In fiscal 1997, which ended last September, the agency's revenue totaled $58.3 billion.
  • CBSNews.com staff CBSNews.com staff

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