WASHINGTON — Facing a "precarious financial condition" as fewer customers use its services, the United States Postal Service proposed another round of rate increases Wednesday to go into effect in January — its largest price hike since 2002.
The plan — which would raise the cost of first-class stamps for one-ounce letters to 49 cents from 46 cents, among other changes — is intended to generate an additional $2 billion in annual revenue for the Postal Service. The agency expects to lose about $6 billion in the current fiscal year.
Postage rates jumped one cent in January 2012 and again in January 2013, but those changes were tied to increases in the Consumer Price Index, according to the Postal Service. The proposed three-cent increase was the result of "extraordinary circumstances."
In a letter sent to customers, Chairman Mickey D. Barnett said the Postal Service put together a five-year plan earlier this year to close a $20-billion budget gap and reduce its debt, but "the uncertain path toward enactment of postal reform legislation" had necessitated its rate adjustments.
"Of the options currently available to the Postal Service to align costs and revenues, increasing postage prices is a last resort that reflects extreme financial challenges," Barnett wrote.
The Postal Service has already cut back 22,000 delivery routes, laid off 203,000 workers and trimmed its annual operating costs by $16 billion since 2006 in an attempt to reach profitability, he added.
Members of Congress from both parties immediately reacted to the announcement with calls for comprehensive legislative reform. Bills were introduced in the Senate and the House this summer to address the Postal Service's financial condition and are still in committee.
"While some rate increases may be necessary, the long-term key to USPS's future is addressing its costly, inefficient delivery network," Rep. Darrell Issa (R-Vista), who introduced a bill to the House, said in a statement. Failure to address those costs will force "a string of rate increases much larger than the ones today that will inevitably trigger an irrecoverable death spiral for the agency."
Among the most controversial reforms suggested has been the elimination of Saturday delivery, which would save about $2 billion a year. A proposal by the Postal Service was abandoned in April after Congress passed a spending bill that prohibited cutting back to five-day service.