Americans pay $100 million too much a year for passports, report says

WASHINGTON — The U.S. government has overcharged Americans by more than $100 million a year in its fee for new passports, according to cost figures uncovered by congressional investigators and analyzed by two senators and The Associated Press.

The two senators said Americans have been quietly gouged since 2002. The report they initiated showed the costs incurred by the State Department and the U.S. Postal Service, for accepting passport applications, were considerably less than the fee charged.

The $97 adult fee for new passports is set by the State Department, which denied Friday that it overcharges anyone.

“We are not trying to gouge the American public,” deputy department spokesman Tom Casey said.

The costs surfaced only months after thousands of Americans fell victim to passport processing delays, finding their vacations, weddings, honeymoons and business trips ruined — and their nonrefundable deposits gone.

Over the past year, as the government issued nearly 14 million new passports, Americans paid at least $111.4 million more in passport fees than the government’s stated costs, according to calculations by the AP using information from State Department and the Government Accountability Office.

Sens. Byron Dorgan, D-N.D., and Charles Schumer, D-N.Y., who jointly asked for the GAO study, estimated the government overcharged travelers $112.7 million during 2002, when less than half the number of new passports were issued.

The senators demanded a State Department accounting of where the passport profits have gone, at a time when more Americans than ever are required to have the travel documents as an anti-terrorism measure.

The revelation of the costs has angered some of the people who had passport problems this year, as well as at least one major travelers’ group.

“It’s outrageous,” said Linda Kocher, of Wahpeton, N.D., who ended up paying twice for three passports after the initial passports she ordered failed to arrive on time for a family vacation.

“You always trust the Post Office. You think they’re not trying to make any money off me. That’s baloney,” she said.

Most Americans apply for their passports at post offices. For handling the applications, the Postal Service gets to keep part of the fee and — according to the GAO figures — make a handsome profit.

“It’s the combination of excessive fees plus the long wait that’s most galling to passengers,” said David Stempler, president of the Air Travelers Association. “It’s just another way the federal government has ill-served passengers. Airline passengers are taxed and fee’d more than any other group. To see that we’re being gouged on top of that is most irritating.”

The $97 passport fee — $82 for children under $16 — dates back to 2005. The GAO studied whether a $30 portion of that fee was justified.

The $30 is intended to cover the cost of clerks examining and accepting passport applications at post offices, State Department passport offices, courthouses, libraries, municipal offices and universities.

The investigators’ findings? The government’s $30 fee was roughly double the actual cost when imposed in 2002. The Postal Service, which operates 5,382 locations where people can apply for passports, estimated its costs at $13.31 in 2002. The State Department, which operates 14 passport offices, said its costs were $16.20 at that time.

“This is not supposed to be a profit-making venture,” Dorgan said. “They charge 30 bucks just for passing something across the counter.”

The remaining $67 is spent producing the passport booklet and for related costs, such as rent at passport offices, security guards and background checks. Investigators did not look into that portion of the fee.

A Postal Service spokeswoman, Joanne Veto, said the agency’s $13.31 figure was not an accurate reflection of its costs when the fee was imposed. Congressional investigators, however, said that was the figure the Postal Service gave the State Department for use in setting the $30 fee.

Casey, the State Department spokesman, said, “We always want to make sure we’re providing a good and high-quality service for the American people. We are comfortable (the $30 fee) represents our actual costs.”

The department told the GAO it has hired a contractor to perform a new cost study of the fee before December 2008.

“It’s sort of a tax,” Schumer said. “Where did all the money go? What are they going to do to correct it?”

The GAO said the State Department and the Postal Service also benefited from a dramatic surge in the numbers of passports issued, rising from 7 million in 2002, including renewals, to more than 18 million over the past year.

More Americans are required to have passports because of new anti-terrorism laws. The State Department has said it expects to issue as many as 23 million passports next year and 30 million more in 2010.

Since January, for the first time, travelers visiting Canada, Mexico, Central and South America, the Caribbean and Bermuda by air have needed passports — or proof they applied for passports. The requirement will take effect for land and sea travelers before June 2009.

Since many Americans travel often to these areas, including regular cross-border travel to Canada and Mexico, the State Department plans to introduce a new $45 Western Hemisphere passport card next spring.

The fee for accepting the applications would drop from $30 to $25 for the card and traditional passport books, under a State Department proposal.

The State Department told congressional investigators its cost for accepting applications at its offices in 2005 had risen to $24.36, virtually the same as the proposed new $25 fee. But consular officials could not describe how they calculated that estimate, investigators said.

The Postal Service initially told the GAO, in April 2006, its cost for accepting applications had jumped to $19. But later the mail service revised its cost estimate upward to $32.86 — adding overhead costs not associated with passport processing — making its cost appear to be higher than the $25 fee it would collect.

“It is unclear whether USPS’s estimate accurately reflects its costs,” the GAO said.

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