Increase in Stamp Prices Proposed

Postal Service Would Relent if Escrow Account Were Scrapped

The U.S. Postal Service wants an extra 2 cents' worth for its stamps.

But as the agency proposed the increase in stamp prices yesterday, it also invited Congress to eliminate the need for the rate hike.

The proposal sent to the independent Postal Rate Commission calls for increases to take effect early next year. They would boost first-class stamps from 37 cents to 39 cents, increase postcards from 23 cents to 24 cents and raise other postal prices similarly.

The Postal Service said the rate increases are needed only because a 2003 law requires the agency to place $3.1 billion annually in an escrow account.

Postal officials have been urging Congress to drop that requirement and said they will withdraw the rate request if Congress does so.

Postage rates last went up June 30, 2002, rising from 34 cents to 37 cents for a typical first-class letter.

Congress mandated the escrow requirement in 2003 when it passed a law reducing the money the agency has to pay into its retirement system, which auditors said was being overfunded. Instead, Congress ordered the money to be put into an escrow fund.

Elimination of that fund has been included in bills that would make other changes in postal operations, but Congress has not acted on the proposals.

"To continue to require the Postal Service to hold these funds in an escrow or other account would simply continue the overpayment and unfairly burden postal ratepayers," the Postal Service's governing board said in a letter to Sen. Susan Collins (R-Maine), chairman of the Committee on Homeland Security and Governmental Affairs.

Now that the post office has formally requested a 5.4 percent increase, the Postal Rate Commission will hold hearings and collect information before ruling on the proposal. That process can take as long as 10 months, so if the rate increase is approved it will not take effect until early next year.

Although electronic communications such as the Internet have taken some business from the Postal Service, there has been an increase in advertising mail. Officials have said that, if not for the escrow requirement, the agency would not need to seek an increase for at least another year.

Overall, the Postal Service had $68.9 billion in income last year and $65.8 billion in expenses.