Postal rate hike rejected, but other changes likely to come

U.S. Postal Service, stampsThe Postal Service may be in deep financial trouble, but it won't mean consumers will have to pay two-cents more for a stamp come January.

The Postal Regulatory Commission today rejected the Postal Service's request for a 5.6% rate increase. The commission's action wasn't a complete surprise. The Affordable Mailers Alliance, a group of mailers who normally fight among themselves on rate hikes, argued that the proposed increase violates the law, which generally limits rate increases to the cost of living except in extraordinary circumstances.

The Postal Regulatory Commission said the Postal Service, which had blamed the recession and the popularity of e-mail for the "extraordinary circumstance," hadn't fully documented its claim.

With a bigger hike postponed (for the moment), the Postal Service is expected to move forward with a far smaller cost of living increase, as well as the closure of some post offices and a possible switch to five-day delivery. Some of these changes will require Congressional approval, however. Congress, which requires the Postal Service to be self sufficient, bars the Postal Service from closing unneeded post offices.

Postmaster General John E. Potter today dismissed some of the doom and gloom about the Postal Service, referring to the postal business as a "a viable business." He said maintaining the business requires eliminating several Congressional constraints, "that hamper our ability to operate efficiently and profitably."

Besides closing post offices, one of the changes he mentioned was altering the six-day delivery of mail. He said Congress should "enable us to alter frequency of delivery consistent with use of the mail."

Along with changes in pension payments, and procedures for labor negotiations, he also suggested that Congress should let the Postal Service "create and offer products and services beyond mail."

The Postal Service has to pay $5.5 billion to fund pension payments annually and the payment was due today. Potter said it made today's payment but the Postal Service won't have enough money to fund next year's payment.

"We will carefully manage every dollar we spend in the upcoming fiscal year," he said.

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