Sun, Mar 11, 2001 EST
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Postal Service Facing Serious Financial Problems
By Randolph E. Schmid   Associated Press
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WASHINGTON — The Postal Service is freezing new construction and leasing for hundreds of planned projects across the country, saying the agency is facing serious financial losses.

The announcement Thursday was accompanied by a warning from the postal governing board that universal service to every home every day could be in danger without changes to the laws that regulate operation.

More than 800 planned projects in all states will be affected by the freeze. Postal officials didn't provide a dollar estimate for the affected work.

While first class mail went up a penny to 34 cents in January, several increases in other types of mail that had been sought by the agency were rejected or trimmed by the independent Postal Rate Commission. With rising costs, postal officials now say they face a $2 billion to $3 billion loss this fiscal year. They are planning to apply this summer for another rate increase to take effect next year.

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

Among the problems cited by the Postal Service are wage rate increases that exceed the rate of inflation, escalating fuel costs, changes in the type of mail being processed, a communications marketplace marked by increased competition and forecasts calling for the diversion of some first-class mail to electronic alternatives.

The construction and leasing freeze affects facilities that the agency has made commitments to but where construction has not yet begun.

"All new construction, new leasing and expansion planned for 2001 is frozen," postal spokeswoman Judy de Torok said.

The projects already under way won't be halted, she added, and a few planned projects will continue if needed for health and safety reasons.

Meanwhile, the universal service that Americans take for granted could be in jeopardy unless laws regulating operations are changed, said the postal governing board.

"Regrettably, our call for an additional rate increase, following so soon after the last one, reflects the fact that the 30-year-old statutory model that governs the Postal Service is in need of change to protect universal service at affordable rates," said board chairman Robert F. Rider.

For the past several years postal leaders have sought changes in the law to give them more flexibility in changing rates and services to cope with rising costs and changes in competition. Under current rules it takes nearly a year to change rates.

Long negotiations and hearings produced a bill they felt would solve many of their problems last year, but the measure never came up for a vote and died with the end of the last Congress in January,

Feeling increased financial problems, the postal governors this week asked the Rate Commission to reconsider the changes it made in their request.

They also sent a letter to President Bush seeking his assistance in getting legislation to provide them more freedom to operate.

Universal service to every address at uniform and affordable rates has been a requirement since the founding of the nation. For years Congress subsidized the service, but when the current system was created in the 1970s the subsidies were phased out, and the post office no longer receives taxpayer money for its operations.

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