In the midst of "financial disaster," leaders of the United States Postal Service announced proposed mailing price changes, including a 3 cent increase to mail letters.
Last week, Postmaster General Patrick R. Donahoe told a U.S. Senate committee that the organization's cash liquidity remains dangerously low. Donahoe is seeking legislation that will enable the Postal Service to change its operations and close a $20 billion budget gap by 2017.
"The Postal Service plays an incredibly important role in the American economy and in America’s communities," Donahoe said, according to a news release. "And yet, it is in the midst of a financial disaster."
Over the past two years, the Postal Service recorded roughly $20 billion in net losses and defaulted on $11.1 billion in retiree health benefits payments to the United States Treasury.
Donahoe told the Senate Committee on Homeland Security and Governmental Affairs that the Postal Service will default on another $5.6 billion retiree health benefits payment that is due Sept. 30.
Mailing cost increases
On Wednesday, USPS leaders said that the increase in stamp prices would go into effect in January 2014 and create $2 billion in incremental annual revenue.
Highlights of the new single-piece first-class mail pricing, effective Jan. 26, 2014, include:
—Letters (1 ounce): 3 cent increase to 49 cents
—Letters with additional ounces: 1 cent increase to 21 cents
—Letters to all international destinations (1 ounce): $1.15
—Postcards: 1 cent increase to 34 cents
Officials said in a news release that stamp prices have stayed consistent with the average annual rate of inflation of 4.2 percent since the Postal Service was formed in 1971.
Pricing for standard mail, periodicals, package services and extra services also will be adjusted as part of a filing to the Postal Regulatory Commission, scheduled to take place Sept. 26.
The Board of Governors of the Postal Service voted on Sept. 24 to seek price increases above the typical annual increases associated with changes in the Consumer Price Index.
In a letter sent to customers today, Board of Governors Chairman Mickey Barnett said the USPS said the "precarious financial condition" and "uncertain path toward enactment of postal reform legislation" are the main reasons for seeking price changes above the Consumer Price Index increase, according to a news release.
He also indicated that the price adjustment above the Consumer Price Index increase is necessary in order to ensure that the Postal Service will be able to maintain and continue the development of postal services of the type and quality that America needs.
"Of the options currently available to the Postal Service to align costs and revenues, increasing postage prices is a last resort that reflects extreme financial challenges," Barnett said in the letter. "However, if these financial challenges were alleviated by the timely enactment of laws that close a $20 billion budget gap, the Postal Service would reconsider its pricing strategy."
The Postal Regulatory Commission will review the prices before they become effective Jan. 26, 2014, and must agree the prices are consistent with applicable law.
The full text of the board chairman’s letter sent to postal customers about the pricing decision will be available later today here.
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