POSTAL governors approve higher rates _ but not for 34-cent stamp

<br>WASHINGTON (AP)_ Struggling to reduce a loss that could top $2 billion, the Postal Service will increase most mail rates on July 1. The basic 34-cent price to mail a letter will stay the same, however.

Tuesday, May 8th 2001, 12:00 am

By: News On 6

WASHINGTON (AP)_ Struggling to reduce a loss that could top $2 billion, the Postal Service will increase most mail rates on July 1. The basic 34-cent price to mail a letter will stay the same, however.

The increases will come just six months after the last rate boost. Postal Board Chairman Robert F. Rider said the agency acted reluctantly Tuesday, but the step was necessary ``to assure the financial integrity of the nation's postal system.''

To impose the new rates, the postal board had to take the unusual step of overruling the independent Postal Rate Commission, something that had happened only once before, in 1981. Last January's increases were less than the post office had sought, having been cut by the rate commission.

Richard F. Strasser, postal chief financial officer, said the agency faces losses of between $1.6 billion and $2.4 billion this year.

He said that as recently as February the loss had been estimated at $3 billion, but the agency has cut spending by freezing hiring and some 800 building projects and by increasing productivity.

While the 34-cent rate for the first ounce of first-class mail remains the same, the cost for each additional ounce will climb from 21 cents to 23 cents. That's what it had been 1995 to 1999.

The price of sending a post card will rise a penny to 21 cents.

Strasser said the new rates will raise the cost of sending a piece of advertising mail by one-half to three-quarters of a cent and for the typical magazine it will add one-half cent to the postage.

Robert Brinkmann, vice president of the Newspaper Association of America, said that newspapers sent outside their home counties use the same rates as magazines, which rose 2.6 percent. He said that would also be about a half-cent per paper. For smaller papers mailed within their home counties, he said, the increase is about one-tenth of a cent per paper.

The increases drew prompt criticism from mailers.

``I hope the Postal Service knows what it's doing,'' said Neal Denton of the Alliance of Nonprofit Mailers. ``The Board of Governors may have just launched the U.S. Postal Service into a death spiral.''

Nina Link, president of the Magazine Publishers Association, added: ``Enough is enough. This 'raise the rates' mentality must be stopped.

``This increase shows a disregard by the Board of Governors for the needs of its smallest, most dependent customers. Mail service for newspapers is down, the economy is declining, and this board is unilaterally increasing rates,'' complained Ken Allen, National Newspaper Association executive vice president. ``Raising rates again is a knee-jerk reaction, not leadership.''

Postal rate requests have to be reviewed by the independent Rate Commission, which can reduce the postal service's request. The postal governors can overrule the commission and impose the prices they originally asked for, but only by a unanimous vote.

Postal officials also have suggested cutting mail deliveries to five days a week instead of the current six, a proposal that drew a storm of criticism in Congress and elsewhere.

And the board has discussed filing another rate case this summer designed to raise rates sometime next year.

While the post office no longer receives tax money for its operations, it remains a part of the government subject to supervision.

For the past several years postal leaders have sought changes in the law to give them more flexibility to cope with rising costs _ including soaring fuel expenses _ and changes in competition.

The post office had a $199 million loss last fiscal year, after five years in the black.

The post office has disagreed with the rate commission in the past but only once before has it overruled that body. In 1980, with stamp prices at 15 cents, the post office applied for a jump to 20 cents. The commission reduced that to 18 cents, which took effect March 22, 1981.

The postal service later overruled the commission and raised the rate to 20 cents on Nov. 1, 1981.

That resulted in the confusing situation of one stamp, honoring James Hoban, architect of the White House, being issued at both the 18-cent and 20-cent rates.

Meanwhile, the postal governors are searching for a replacement for Postmaster General William Henderson, who is leaving at the end of May. Speculation has focused on Deputy Postmaster General John Nolan, but others reportedly are also under consideration.