‘Dire’ Fiscal Outlook for Post Office

A U.S. congressional report warned Thursday of even more postage rate increases down the road on the eve of a decision expected to back raising the cost of a regular stamp to 37 cents from 34 cents.

The General Accounting Office said the financial outlook for the U.S. Postal Service was “increasingly dire,” with mail volumes declining and costs increasing.

“USPS’ basic business model is not sustainable,” the GAO said in a report to the Senate Governmental Affairs Committee. The postal service could no longer count on rising mail volumes to cover rising costs and mitigate rate increases, it said.

The GAO said slashing costs and raising rates might work in the short term, but this strategy risked seeing customers turn increasingly to e-mail and commercial delivery companies as service levels declined and prices increased.

The postal service lost $1.7 billion in fiscal 2001 ended Sept. 30, as a slumping economy, the Sept. 11 attacks and anthrax-contaminated mail saw volumes fall for the first time in a decade.

The postal service is set to raise the price of a regular first-class stamp to 37 cents this year, with approval for the increase expected as early as Friday at a meeting of the independent Postal Rate Commission.

The GAO report comes days before the postal service releases its transformation plan to Congress.

The service has previously lobbied Congress for a more flexible pricing system that would give it more flexibility to raise prices during peak volume periods.

The GAO, which last April placed the postal service on its “high-risk” list of government agencies, agreed that lawmakers should enact reforms.

Without speedy approval of its pending stamp price increase, annual losses “could be over $3 billion, maybe $4 billion,” Postmaster General John Potter said last week.

The postal service has frozen capital spending and said it will cut up to 20,000 jobs this year.