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Postal Service expects $1.8b deficit in '06

WASHINGTON -- Even with a planned rate increase, the US Postal Service expects to lose almost $2 billion next year.

The Postal Service's chief financial officer, Richard J. Strasser, told the board of governors yesterday that rising costs will result in a $1.8 billion deficit in 2006.

The agency plans a 5.4 percent increase in January, which would raise the cost of sending a first-class letter by two cents, to 39 cents. ''We project revenue of $72.3 billion, an increase of 3.4 percent, to be offset by a like percentage increase in expenses," Strasser said.

Strasser said the agency plans reductions of $1.1 billion, including cuts of 42 million work hours.

But, he added, the post office also faces a congressionally imposed requirement to place $3.1 billion in an escrow account.

Strasser also noted that costs are now expected to be higher than planned when the rate increase was approved. The postal fiscal year for the US Postal Service begins Oct. 1.

At the meeting, the board also approved a transformation plan for the agency through 2010.

''We will continue to reduce costs by improving efficiency in all our operational and business processes," said the postmaster general, John E. Potter.

''We will bring service performance to even higher levels," Potter added in a statement accompanying the Postal Service's report.

''We will use the best technology to make the mail a rich source of information both for our customers and our operations managers. We will achieve all this with an energized . . . workforce."

The board chairman, Jim Miller, noted that the changing business world affects the post office.

''We cannot predict how events halfway around the world, or in our own backyard, will affect our costs. We cannot predict the final form of postal reform legislation -- or even if it will occur," he said. ''But we can do our best to prepare for the impact of these external factors. We understand that our plan must be dynamic and adaptable. It must help us manage and succeed through periods of uncertainty."

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