Why the USPS Has Lost $2.5B in Alaska

33-year-old earmark fuels operation

By Matt Cantor,  Newser Staff

Posted Jun 30, 2014 10:40 AM CDT

(Newser) – For the past three decades, the US Postal Service has subsidized deliveries to remote parts of Alaska. Law requires the agency to pay private air carriers above the market rate for shipments there, and the agency then charges retailers just half of the commercial shipping price. The results have hammered a struggling Postal Service: Thanks to the subsidies, the agency has lost $2.5 billion over 33 years, the Washington Post reports. Last year alone, the subsidies cost the USPS $77.5 million, officials say; the money comes from the Postal Service's customers.

The subsidies benefit rural Alaskan businesses, but locals still pay high prices for goods. Retailers may mark up prices by as much as 30% or more, Lisa Rein writes in the Post. A pallet of drinks, for instance, cost the Postal Service $3,200 to send, but Alaska Commercial paid only $485 for the postage. Even so, a 12-pack of Coke from the shipment cost a family more than $15 at the Alaska Commercial store. It's all because of an earmark by former senator Ted Stevens to ensure delivery to remote Alaska—but that was 33 years ago, and these days the Postal Service's finances are dangerously tight. Still, legislative action is difficult, Rein explains: Lawmakers don't want to see distant areas of the country lose access to goods. Click for the full piece.

In this Thursday, Feb. 7, 2013, file photo, US Postal Service letter carrier Michael McDonald delivers mail.   (AP Photo/David Goldman, File)
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