PMG Warns of Steep Postal Rate Hike in 2006

In a joint House-Senate hearing on postal reform on March 23, Postmaster General Jack Potter told the panel that if the laws governing the U.S. Postal Service aren’t changed soon, the agency will have to seek a rate hike of $0.04 or more for first class mail in 2006. While he didn’t specify standard mail rates in his testimony, it’s unlikely that the agency would seek a smaller increase in catalog postage.

Specifically, Potter told the panel that Congress needs to release $3 billion in postal funds from an escrow account. The USPS also needs an additional $27 billion for the agency to be able to cover military retirement benefits for postal workers who had served in the armed forces. This is in addition to the remedial legislation that gave the USPS $78 billion in pension relief that President Bush signed into law last year.

The relief funding has become a hot topic of debate at the hearings. On March 17, Treasury secretary John Snow protested the USPS request in a letter to congressional budget committee heads Jim Nussle (R-IA) and John Spratt Jr. (D-SC). “The President has laid out clear guiding principles for postal reform legislation,” said Snow’s letter, which was cosigned by Kay Coles James, director of the U.S. Office of Personnel Management. “One of those principles is that the Postal Service be ‘self-financing’ to ensure that it meets all of its obligations without reliance on the general Treasury….We urge Congress not to take any action which would unfairly penalize the taxpayer, would potentially destabilize future retirement funding, or permit the overall principle of postal self-funding to be carved away, a piece at a time.”

The USPS is expected to begin work on its rate case toward the end of this year. In his testimony to the panel on March 23, Snow said that the USPS will lose more money than recent acknowledgements of near-break-even have indicated. Since 1972, “the USPS has suffered real economic losses in excess of $101 billion,” he said in his testimony, rather than the $2.2 billion that’s been reported in postal financial statements.

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