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Commission Approves Postage Increase to Thirty-Three Cents

By Bill McAllister
The Washington Post

The U.S. Postal Service won permission Monday to increase the price of a letter to 33 cents, a one-cent hike that postal regulators said they doubt the agency, which has rung up annual profits of more than $1 billion for three years running, needs before January "at the earliest."

At the same time, regulators cut the agency's requested rate increases for bulk mailers, reduced rates for heavy first-class letters and increased postage rates for periodicals and newspapers.

Members of the independent Postal Rate Commission expressed concern that the cash-rich Postal Service had "seriously misestimated its need for a rate hike," but "reluctantly" approved the requested hike nonetheless. Chairman Edward J. Gleiman said the panel endorsed the increase because it had no legal basis to challenge the agency's multiyear billion-dollar spending program that underpinned the request.

Just when the new rates will be imposed will be up to the Postal Service's Board of Governors, a presidentially appointed panel that oversees the nation's mail service.

Some senior postal executives have said they will pressure the governors, who meet June 2, to impose the new rates as soon as possible, perhaps within 90 days. In private sessions with the governors, they have argued that the agency could "crash and burn" unless it quickly spends billions on new equipment to successfully compete with the growing competition from e-mail and other forms of electronic communications.

At a news conference announcing the decision, Gleiman pointedly questioned whether the agency could spend the $720 million for new equipment it has budgeted for this year, because it has spent only $116 million thus far.

The rate commission did not give the Postal Service a number of increases it wanted, lopping one-third off the $2.4 billion in new revenue it sought. The commission said it cut that much off because the agency has failed to properly calculate "the benefits of lower-than-expected inflation" since it filed its request in July. "The commission believes that the Postal Service is unlikely - in the absence of either the economy going into free fall, a spending binge or some very creative accounting - to incur any of the $1.4 billion loss it projected for fiscal year 1998," Gleiman said.

Indeed, Postmaster General Marvin T. Runyon has said the agency should make more than $1 billion this year as well.