At issue | July 7 Associated Press article, "Deep in a hole, Postal Service seeks to raise stamp prices yet again"
Today, we have more ways to communicate with one another than ever before. While mail continues to play a vital role, there is no doubt that since the advent of e-mail and e-commerce, use of the mail has declined dramatically and, in the coming years, the pace of that decline will only accelerate.
Moreover, mail volume historically reflects the nation's financial health — and as the United States remains in a deep recession, the effect on mail volume has been dramatic and unprecedented.
This, in turn, has had a detrimental effect on the Postal Service's bottom line, as it is projecting a deficit of nearly $7 billion for the next fiscal year.
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The U.S. Postal Service Board of Governors and Postal Service management have taken aggressive steps to not only continue delivering mail to every resident of the nation at just, reasonable and affordable rates, but also to reduce costs by almost $123 billion over the next 10 years. The Postal Service has made every effort, and has pursued every available option to raise revenue and cut costs.
These actions — which have included reducing the work force, consolidating facilities and eliminating millions of work hours — have helped to achieve over $1 billion in cost reductions each year since 2001, including $6.1 billion savings in 2009. However, they are not enough to close projected budget deficits and ensure that the Postal Service survives well into the future.
In this regard, pricing flexibility is crucial for the Postal Service, which relies solely on the sale of postage products and services — not tax dollars — to fund its operations. To that end, the U.S. Postal Service Governors recently approved increasing the price of a first-class stamp by 2 cents to 46 cents and increasing the price of a postcard 2 cents to 30 cents, starting next year.
Overall, the increases proposed for products and services fall in a range between 4 percent and 6 percent, on average, and are the unfortunate result of extreme circumstances caused by the economy, the continued shift of communications and commerce to online alternatives and financial constraints placed on the Postal Service since the Postal Reform Act of 2006.
The new pricing, which must be approved by the Postal Regulatory Commission, would add less than 13 cents a month to the average American household's budget and would not go into effect until Jan. 2 — almost two years since the Postal Service last raised first-class mail rates. If approved, the price changes would generate $2.3 billion for the last three quarters of the 2011 fiscal year (January to September) and an estimated $3 billion for the full 12 months of fiscal year 2012.
Even with the new pricing, the Postal Service still faces a dismal financial situation.
As Postmaster General John Potter noted in March when he unveiled the Postal Service's 10-year action plan, a number of initiatives need to be pursued in concert. These are the same types of initiatives that other private businesses are examining. But unlike traditional private businesses, the U.S. Postal Service needs congressional approval for most of these actions.
We have therefore made the following requests to Congress: a change to delivery frequency, expanded access to products and services in locations more convenient to customers and a restructuring of prepayment of retiree health benefits. At the time, we were clear that customers would not be asked to close the entire budget gap, and that is a commitment we intend to keep.
There is no one single solution to the dire financial situation facing the Postal Service, but we believe that the proposed rate adjustments are one — but only one — part of a fair and balanced approach to ensuring mail service for all Americans well into the future. However, future price increases can be greatly impacted if the Postal Service is given the necessary tools to be a more flexible, market-oriented company.