The Postal Service said it will have to seek a rate increase that by next year would boost the price of a first- class stamp by two cents to 39 cents -- unless Congress steps in to help.
Postmaster General John E. Potter told a gathering of national mailers in Nashville last week that the Postal Service had asked its board of governors for permission to seek a rate increase of 5 to 6 percent. Potter said the increase, which must be approved by the independent Postal Rate Commission, would be needed in 2006 to cover the $3.1 billion annual cost of a special escrow fund that Congress required the Postal Service to establish when lawmakers restructured the agency's payments to its employee pension funds in 2003.
If Congress were to eliminate that requirement, "we likely would break even in 2006 and could have put off a rate increase until 2007," Potter said. "Unfortunately, unless there's a change in the law, that won't happen."
The retirement system changes allowed the Postal Service to scale back by billions of dollars annual payments to its over-funded pension accounts and helped restore the Postal Service to profitability.
The last postal rate increase came in 2002, when the cost of a first-class stamp rose to 37 cents. Gerry McKiernan, a postal spokesman, said officials have not yet filed a request with the Postal Rate Commission, but hope to win approval for an increase by fall and implement it in January.
Last reorganized in 1970, the Postal Service recently has been plagued by stagnant revenue, rising costs and declining mail volume. Especially worrisome to postal officials is the accelerating decline in first-class mail, a lucrative line of business that has traditionally covered two-thirds of the Postal Service's costs, as Americans increasingly turn to the Internet to pay bills and communicate.
Some lawmakers have backed legislation in recent years that would grant the Postal Service more flexibility in the services it offers and the prices it charges for them, while continuing to guarantee delivery six days a week. The bills have fallen short, but their chief sponsors -- Sen. Susan Collins (R-Maine) and Rep. John M. McHugh (R-N.Y.) -- have introduced legislation again this year.
Supporters of the legislation are willing to repeal the escrow requirement as part of the larger legislative overhaul, but they want to restrict how the Postal Service could use the money. Collins's bill would require that it go to fund postal retiree health-benefit obligations, repay outstanding debt and limit operating expenses.
"Failure to repeal the [escrow] provision will directly impact the Postal Service's rate planning and will trigger annual rate increases, over and above any rate increases needed to fund postal operations," Collins and Sen. Thomas R. Carper (D-Del.), a co-sponsor of the bill, said in a statement.
The Bush administration has been reluctant to go along with such a repeal because it would add to the federal budget deficit.
Collins, chairman of the Senate Homeland Security and Governmental Affairs Committee, has scheduled a hearing on her bill April 7. One question is whether lawmakers will face pressure to deal with the escrow issue separately, a move that would stave off a rate increase but potentially reduce momentum for the larger bill.