Postal Board raises rates again

The Postal Service's board of governors announced May 8 that they will increase rates-again. The decision comes just four months after the board instituted a 4.6 percent rate hike. The new increases, averaging 1.6 percent, will go into effect July 1 and may result in a new focus on reform of the troubled agency. While the price of the basic first-class stamp will not increase under the new rates, many other costs will. Postcards will go up one cent. Express Mail and certified mail prices also increase, as will costs to such major mailers as magazine and catalogue publishers. The increases are necessary to soften the impact of an economic slowdown, rising fuel costs and higher than anticipated health care costs, according to postal officials. The governors "reluctantly decided to adjust the rates to make up a shortfall of about $975 million," board chairman Robert Rider said. Essentially, the board voted to put money back into its original January 2000 request for higher rates. By law, the board sends a recommendation for new rates to the independent Postal Rate Commission. Following a 10-month review, the rate commission can make adjustments. It did just that last fall, suggesting a 4.6 percent increase rather than the requested 6 percent. With a unanimous vote, the board can overrule the rate commission, which is what happened during a closed meeting May 7. Even with the additional hike, the board is expected to file a new rate case this summer. The action is getting the attention of key players on Capitol Hill. Senate Majority Leader Trent Lott, R-Miss., House Majority Leader Dick Armey, R-Texas, House Majority Whip Tom Delay, R-Texas and House Government Reform Committee Chairman Dan Burton, R-Ind., individually sent letters to the board asking that they not increase rates. Congressional sources said the news of another rate increase will likely push leadership to increase its scrutiny of postal affairs. At a hearing two weeks ago, Burton said Postal Service reform will become a priority for his committee. Agency leaders complain that they do not have the flexibility needed to confront their current financial plight. While agreeing that some new flexibility may be necessary, major mailing groups argue that agency managers have failed to make significant strides in productivity despite advances in automation. Further, they argue that the agency failed to prepare for the economic slowdown. "They overestimated their income when they went into the last rate case," says Gene Del Polito, president of the Association of Postal Commerce, a trade group representing mailers. "They could have developed best practices plans to pull down costs. They have access to the same information that everybody in the private sector has. How is it that the private sector could see it and adjust?" Earlier this year, the board announced plans to save $2.5 billion by 2003 by taking such actions as halting all capital projects for the remainder of the fiscal year. Rate increases only serve as a downward spiral, says Del Polito. Mailers will curtail activities, leading to even slower growth for the Postal Service. In fact, says Del Polito, many of his association's members are already looking at plans to reduce the number of catalogues they send. Seeing that the Postal Service faced $3 billion in losses this year, the General Accounting Office on April 4 added the Postal Service's long-term outlook and its efforts to make significant organizational changes to its "high-risk" list, which identifies government agencies and programs vulnerable to fraud, waste, abuse and mismanagement. The board meeting was William Henderson's last as postmaster general. The 30-year postal service veteran leaves the agency at the end of the month. Observers speculate that his successor will be Deputy Postmaster General John Nolan. Stephen Goldsmith, former mayor of Indianapolis and a Bush campaign advisor, and Gary Gensler, former treasury undersecretary, have taken their names out of consideration. The board still hopes to name a new postmaster general before Henderson leaves on May 31.
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