CRS Issue Statement on the U.S. Postal Service: Finances and Operations

CRS Issue Statement on the U.S. Postal Service: Finances and Operations

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CRS Issue Statement on the U.S. Postal
Service: Finances and Operations
Kevin R. Kosar, Coordinator
Analyst in American National Government
Wendy R. Ginsberg
Analyst in Government Organization and Management
Jerry W. Mansfield
Information Research Specialist
Thomas J. Nicola
Legislative Attorney
Janemarie Mulvey
Specialist in Aging Policy
January 6, 2010
Congressional Research Service
7-5700
www.crs.gov
IS41008
CRS Report for Congress
P
repared for Members and Committees of Congress

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CRS Issue Statement on the U.S. Postal Service: Finances and Operations

ince 1971, the U.S. Postal Service (USPS) has been a self-supporting, governmental entity.
Unlike most other government agencies, the USPS does not rely upon annual
S appropriations. The Postal Service is a marketized government agency, that is, it is
designed to cover its operating costs by generating revenues through the sales of postage and
related products and services
Prior to 1971, the federal government provided postal services via the U.S. Post Office
Department, a government agency that received annual appropriations from Congress. The Postal
Reorganization Act (PRA; P.L. 91-375; 84 Stat. 725) replaced USPOD with the USPS, an
“independent establishment of the executive branch” (39 U.S.C. 201). The PRA deemed the
USPS as
a basic and fundamental service provided to the people by the Government of the United
States, authorized by the Constitution ... and supported by the people. The Postal Service
shall.... provide prompt, reliable, and efficient services to patrons in all areas and shall render
postal services to all communities (39 U.S.C. 101(a)).
On December 9, 2006, Congress enacted H.R. 6407, the Postal Accountability and Enhancement
Act (PAEA). President George W. Bush signed it into law on December 20, 2006 (PAEA; P.L.
109-435; 120 Stat. 3198). The PAEA was the first major revision of the PRA, and it made many
changes to current postal law. However, the PAEA did not alter the fundamental aspects of the
U.S. postal system—government-operated, universal mail acceptance and delivery throughout the
United States and its territories.
During the past three years, the USPS has experienced significant financial challenges. The USPS
lost $5.3 billion in FY2007, $2.8 billion in FY2008, and $3.8 billion in FY2009. Were it not for
congressional action to reduce a statutorily required retiree health benefits payment (P.L. 111-68,
Section 164), the USPS would have lost $7.8 billion in FY2009. Come September 30, 2010, the
USPS is scheduled to make a $5.5 billion payment to its Retiree Health Benefits Fund. Already,
there is widespread doubt within the postal community that the USPS will have sufficient funds
to make that payment. The ramifications of such a default, if it were to occur, are unclear. The
Postal Service’s ability to borrow money to cover its operating losses is diminishing. Between
FY2005 and FY2009, the USPS’s debt rose from $0 to $10.2 billion, and federal statute limits its
outstanding debt to $15 billion.
John E. Potter, the Postmaster General, has said that the U.S. Postal Service’s model is “broken,”
and that the USPS will continue to run deficits absent fundamental changes to the USPS. While
the Postal Service does have more operational freedoms than the typical federal agency, much of
its structure and operations remains the creation of federal law. Thus, if the U.S. Postal Service
needs to be fundamentally altered in order to make it financially self sufficient, then Congress
may have to enact such changes through statute.
Policy Problem
The USPS has run large deficits in FY2007 through FY2009, and it is predicting a large deficit in
FY2010. Is the USPS on a financially unsustainable path? What, if anything, should Congress do
to assist the USPS?
Congressional Research Service
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CRS Issue Statement on the U.S. Postal Service: Finances and Operations

Specific Policy Questions
1. Is the government obliged to provide universal delivery of mail? Is the USPS
necessary?
2. Are the USPS’s financial difficulties remediable or must the USPS’s business
model be reinvented to ensure its viability?
3. Should the USPS be permitted to offer nonpostal products and services in order
to increase it revenues?
4. Should Congress require the USPS to carry all classes of mail at rates that are no
less than their costs? Or should the USPS be free to price all its services at
whatever it deems the market will bear?
5. Does the USPS have sufficient authorities to adjust its mail delivery and retail
service networks in response to changing mailer demand?
6. Should the USPS continue to deliver mail six days per week?
7. Should the USPS’s schedule of mandatory annual payments to prefund its future
retiree health benefits (as required by the Postal Accountability and Enhancement
Act of 2006) be further amended?

Issue Team Members

Kevin R. Kosar, Coordinator
Thomas J. Nicola
Analyst in American National Government
Legislative Attorney
kkosar@crs.loc.gov, 7-3968
tnicola@crs.loc.gov, 7-5004
Wendy R. Ginsberg
Janemarie Mulvey
Analyst in Government Organization and
Specialist in Aging Policy
Management
jmulvey@crs.loc.gov, 7-6928
wginsberg@crs.loc.gov, 7-3933
Jerry W. Mansfield

Information Research Specialist
jmansfield@crs.loc.gov, 7-0106

Congressional Research Service
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