updated 12/6/2005 2:25:46 PM ET 2005-12-06T19:25:46

The Postal Service is in a position not many Americans can claim: debt free. But even a projected surplus won't stop next month's postal rate increase, which the service says is needed to cover a congressionally mandated expense.

Once $11 billion in the red, the post office paid off the remaining $1.8 billion of its debt in 2005, postal Chief Financial Officer Richard Strasser said Tuesday.

It's the first time the Postal Service has been without debt since it was organized from the old post office in the 1970s.

Overall, the Postal Service finished fiscal 2005 with a $1.4 billion surplus on revenue of $69.9 billion and investment income of $86 million, minus expenses of $68.3 billion and interest of $265 million.

Strasser said the agency's plan for 2006 was for a $1.3 billion surplus, but a requirement that it place $3 billion in escrow is forcing it to raise postal rates on Jan. 8 to cover the added expense. The price of a first-class stamp will go from 37 cents to 39 cents and other rates will rise accordingly.

And since January's increase is needed solely to cover the escrow requirement the agency is expected to announce another increase next year to take effect in 2007, to cover rising costs.

Fiscal 2005 was also the first time advertising mail has topped first-class mail in volume. The post office handled more than 100 billion pieces of what it calls standard mail, compared to 98 billion first class letters.

Both were up and total mail volume rose 2.7 percent to 212 billion items, the agency said.

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