The price of postage stamps is expected remain steady for the next several years under legislation passed by the House yesterday.
Following the Senate approval of an identical bill last week, the House unanimously passed legislation to allow the U.S. Postal Service to scale back some of its pension fund payments. The move would save the cash-strapped organization $5.5 billion over the next two years and, according to postal officials, keep postage rates flat until 2006. President Bush has indicated that he will sign the legislation.
"The passage of this legislation is good news not just for the Postal Service, but for everyone who uses the mail," the Postal Service said in a statement. "It will enable postal rates to remain stable until 2006, which will provide a much-needed boost for the $900 billion mailing industry and the economy in general."
The Postal Service asked Congress for permission to reduce payments into the Civil Service Retirement Fund last year after an Office of Personnel Management analysis showed that the agency was on course to overfund its pension obligations by $71 billion.
The change will not affect the benefits of current and future retirees, officials said. The OPM analysis found that the retirement program was on its way toward a huge surplus largely because of a yield from pension fund investments during the past 30 years that was higher than expected. Under the legislation, the Postal Service would be required to use the billions of dollars in savings to pay down its $11.2 billion debt and to stave off rate increases. It would not be able to use the money to pay bonuses to its executives.
After fiscal 2005, any savings would be held in escrow until Congress approves a Postal Service plan for spending the money.
In June, the Postal Service implemented its third rate increase in 18 months, raising the price of a first-class stamp by 3 cents, to 37 cents. Postal officials had said the agency, if not allowed to reduce the pension fund payments, would need to raise rates next year.
"You don't have to be an economist to realize that an unnecessary rate increase would have major consequences, especially in our current economic environment," said Rep. John M. McHugh (R-N.Y.), the bill's chief sponsor in the House. Rep. Danny K. Davis (D-Ill.), a key co-sponsor, said: "Businesses and consumers are in no mood for a postage rate increase."
The Postal Service, which is funded by operating revenue, has an annual budget of $70 billion and has not turned a profit since 1999. It has been hit hard by the recession, by disruptions after the Sept. 11, 2001, attacks, and by e-mail and online bill-paying.