Stamp prices going up - 46-cent rate asked

WASHINGTON (AP) - Buy those Forever stamps now. The cost of mailing a letter is going up again.

Fighting to survive a deepening financial crisis, the Postal Service said Tuesday it wants to increase the price of first-class stamps by 2 cents - to 46 cents - starting in January. Other postage costs would rise as well.

The agency's persisting problem: ever-declining mail volume as people and businesses shift to the Internet and the declining economy reduces advertising mail.

"The Postal Service faces a serious risk of financial insolvency," postal vice president Stephen M. Kearney said, an indication that without significant changes a time could come when the agency would be unable to pay its bills.

The post office lost $3.8 billion last year, despite cutting 40,000 full-time positions and making other reductions, and Kearney said it is facing a $7 billion loss for this year and the same for fiscal 2011, which begins in October. The rate increase would bring in $2.5 billion, meaning there still would be a large loss for next year.

The post office, though part of the government, does not receive a tax subsidy for its operations.

While the cost of a first-class stamp would go up, people who bought Forever stamps at the current 44 cents or at lower prices would still be able to use them without paying the difference.

Officials also said they plan a new design for Forever stamps, which currently have an image of the Liberty Bell. New Forever stamps will have images of evergreen trees. All Forever stamps would remain valid.

Under the proposed increases, in addition to the 46-cent rate for the first ounce, the cost for each additional ounce would go up a penny to 18 cents. The cost to mail a postcard would go up 2 cents to 30 cents.

The price to send periodicals would go up about 8 percent, and other rates for advertising mail, parcels and services would rise by varying amounts.

The current 44-cent first-class rate took effect May 11, 2009.

The rate increases proposed Tuesday now go to the independent Postal Regulatory Commission, which has 90 days to respond. If approved the new prices would take effect Jan. 2, Kearney said. Besides the first-class increase, postage costs would rise an average of 5 percent.

After going more than three years without an increase, the post office has raised stamp prices annually since 2006.

The latest increase is part of a series of deficit-fighting plans, announced in March, that include reducing mail deliveries to five days a week, closing offices and making other cuts in expenses. Congress would have to agree to eliminating deliveries on Saturdays.

The weak economy has sharply reduced mail volume as companies cut their advertising. At the same time there has been a significant drop in lucrative first-class mail, with more and more people turning to the Internet to communicate with each other as well as to receive and pay bills.

The proposal drew a quick complaint from the mailing industry.

"This proposed rate increase amounts to another tax imposed on Americans at a time when the economy can least afford it," said Tony Conway, executive director of the Alliance of Nonprofit Mailers, a group representing charities and other organizations.

"Consumers everywhere will pay more for the letters and packages they need to send; businesses - large and small - will suffer, and even more jobs will be lost," complained Conway, who was designated spokesman for the Affordable Mail Alliance, a coalition of businesses, charities and other mailers formed to oppose the increase.

Post office finances are complicated by a requirement that the agency make annual payments of more than $5 billion to fund future health benefits for retirees, something not required of other government agencies. The post office avoided financial disaster last year only after Congress allowed it to delay $4 billion of that payment.

The postal inspector general also contends that the Postal Service has been overcharged billions of dollars for retirement benefits for employees who worked for the old Post Office Department before it was converted to the Postal Service in 1970.