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article imagePost office announces 2012 increase for postage stamps

By Leigh Goessl     Oct 18, 2011 in Business
The U.S. Postal Service has announced its planned increases in price and, if verified and approved by the Postal Regulatory Commission, it will cost you an extra penny to send a letter next year.
This increase brings the price of a single stamp up to 45 cents.
According the USPS release today,
"The overall average price increase is small and is needed to help address our current financial crisis," said Postmaster General Patrick Donahoe.
"We continue to take actions within our control to increase revenue in other ways and to aggressively cut costs. To return to sound financial footing we urgently need enactment of comprehensive, long-term legislation to provide the Postal Service with a more flexible business model."
In addition to stamps, other postal rates will be increasing. The cost of mailing a postcard will jump 3 cents to 32 cents, letters to Canada and Mexico will increase 5 cents, totaling 85 cents, and letters to other foreign countries will increase 7 cents, costing $1.05. Other miscellaneous mail such as periodicals, ads and parcels see price changes as well. An additional change includes availability of short-term postal box rentals, and Express Mail and Priority Mail prices are not affected.
The last increase for a postage stamp was in 2009. In accordance with law, the USPS cannot raise prices for each class of mail more than the rate of inflation, which currently stands at 2.1 percent. If the USPS were to increase more than the inflation rate, it would need special permission from the PRC; last year the PRC denied a request.
In terms of financial stability, the USPS has been experiencing turbulent times for quite a while now. Over the past couple of years there have been massive layoffs, postal office closings, scaled back hours and talk of shutting down mail service on Saturdays. Additionally thousands of additional post offices are on the potential chopping block which is causing local issues in many regions.
Most recently there was talk the agency would be broke by 2012. Technology is often blamed for USPS woes as individuals and businesses often turn to email, online billing and payments and other forms of electronic correspondences, but the agency has other serious fiscal issues as well that extend beyond decreased volume of mail.
According to the Washington Post, the post office lost $8 billion in fiscal 2010, and when numbers are released for 2011, the agency's financial position is expected to be even bleaker.
Taxpayers do not fund the USPS, however it is an agency that is tightly entwined with the U.S. Government and needs special approvals prior to making many business decisions, including job cuts and price hikes. Due to these restrictions, the agency cannot operate like other private sector delivery services are able to, and it is said this impacts both profitability and efficiency.
A significant problem the USPS is coping with is that the agency has to pay $5.5 billion a year into a fund that is established to cover medical benefits for retirees. The post office is the only agency that has this requirement, and payment is due on Nov. 18. Currently the both the postal union and Congress are working on strategies to save the agency.
The USPS is listed as the second largest employer in the U.S.; Wal-Mart is the largest.
The PRC has 45 days to review and verify that the recommended increase complies with law, and if so, in the new year consumers will see the increased postal rates by Jan 22. Previously purchased 'forever' stamps will still be usable, however new 'forever' stamps will cost more to buy.
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