U.S. Postal Service losing tens of millions annually subsidizing shipments to Alaska

The U.S. Postal Service has lost about $2.5 billion since the early 1980s delivering goods to Alaskas remote villages. The program, called the Alaska Bypass, was created in part to help curb the otherwise high cost of shipping groceries to Alaska Natives. Critics say the savings are not passed on to customers and are pressing for a lower postal subsidy.

HOOPER BAY, Alaska In the soggy, unforgiving tundra on the shores of the Bering Sea, Royala Bell defrosts a rack of beef ribs for dinner in a kitchen that doubles as a bedroom for six of her seven children.

A dead owl lies on the floor, ready for her husband, Carlton, to defeather it for a headdress. Fish dry on a line out back, for the larder in winter. On a small counter are some of the groceries the Bells consume from the Lower 48: Sailor Boy Pilot Bread, potatoes, Kool-Aid, Aunt Jemima pancake mix and a can of Coca-Cola.

The U.S. Postal Service paid to ship the items on a turboprop bush plane to this small settlement of Yupik Indians on Alaskas western edge. The Bells brought them home on the back of their all-terrain vehicle from Hooper Bays only grocery store. The 12-pack of Coke alone cost the Postal Service $21 to get here.

Under a federal program exclusive to Alaska, the Postal Service is responsible for shipping more than 100million pounds a year of apples, frozen meat, dog food, diapers and countless other consumer items to off-road villages in the sparsely populated outposts known as the bush. Over three decades acting as freight forwarder, the agency has lost $2.5billion.

In many ways, the Alaska Bypass, as its called, keeps Hooper Bay and 100 other isolated villages in rural Alaska afloat. But groceries do not come cheap for Royala Bell, 43, and her neighbors, most of whom, like her family, survive on food stamps and federal subsidies.

I think the food is too, too high, the slight Yupik woman said of the prices at the Alaska Commercial store here, stretching her hands wide like an accordion. It takes about $200 for a little tiny amount of groceries.

Rural Alaskans are not the only ones paying a steep price. The system cost the Postal Service $77.5million last year, agency officials said, with ordinary stamp-buying customers covering the tab, while a long line of commercial interests here benefited, from the airline and shipping industries to rural grocery chains.

Retailers pay the Postal Service about half of what it would cost them to ship the goods commercially; the subsidy allows them to charge a hefty markup on a can of Coke, for example, in some cases 30percent or more. The agency, by law, must pay private air carriers well above market rates in the only corner of the country where airline prices are still regulated.

In the name of families such as the Bells, the late senator Ted Stevens (R-Alaska) pushed an earmark through Congress 33 years ago aimed at helping his constituents back home. But today, the Postal Service is going broke. On Capitol Hill, this is the kind of federal spending lawmakers in Washington have said they will swear off in a time of austerity.

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U.S. Postal Service losing tens of millions annually subsidizing shipments to Alaska