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_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
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Congressional Research Service (CRS)

 

The U.S. Postal Service’s Financial Condition: Overview and Issues for Congress
Kevin R. Kosar. Analyst in American National Government
January 19, 2010
http://www.opencrs.com/document/R41024/2010-01-19/download/1013/
[full-text, 14 pages]

 

Summary

This report provides an overview of the U.S. Postal Service’s (USPS’s) financial condition, recent

legislation to alleviate the USPS’s financial challenges, and possible issues for the 111th Congress.

 

Since 1971, the USPS has been a self-supporting government agency that covers its operating

costs with revenues generated through the sales of postage and related products and services.

 

Recently, the USPS has experienced significant financial challenges. After running modest profits

from FY2004 through FY2006, the USPS lost $5.3 billion in FY2007 and $2.8 billion in FY2008.

In May 2009, the USPS warned that it might experience a cash shortage at the end of September

2009. Two months later, the Government Accountability Office added the USPS’s financial

condition “to the list of high-risk areas needing attention by the Congress and the executive

branch.”

 

On September 30, 2009, Congress enacted H.R. 2918, the Legislative Branch Appropriations Act

[of] 2010. President Barack H. Obama signed the bill into law (P.L. 111-68) the next day. Section

164 of the law alleviated the USPS’s cash shortage by reducing the USPS’s statutorily required

September 30, 2009, payment to the Postal Service Retiree Health Benefits Fund from $5.4

billion to $1.4 billion. (The USPS must repay the $4 billion deferred obligation after FY2016.)

 

While Congress alleviated the USPS’s FY2009 cash shortage, it is unclear what the future holds

for the USPS’s finances. Even with this assistance, the USPS had an FY2009 operating loss of

$3.8 billion. As the USPS’s finances have deteriorated, its ability to absorb operating losses has

been diminished. Between FY2005 and FY2009, the USPS’s debt rose from $0 to $10.2 billion.

(The agency’s statutory debt limit is $15 billion.) The USPS has predicted operating deficits in

FY2010, and its auditor has stated that there is “significant uncertainty” as to whether the USPS

will have the cash required to make its FY2010 payment to its Retiree Health Benefits Fund.

 

A number of ideas for incremental reforms have been put forth that would improve the USPS’s

financial condition in the short-term so that it might continue as a self-funding government

agency, all of which would require Congress to amend current postal law. The ideas include (1)

increasing the USPS’s revenues by altering postage rates and increasing its offering of nonpostal

rates and services; and (2) reducing the USPS’s expenses by a number of means, such as

recalculating the USPS’s retiree health care obligation and payments, closing postal facilities, and

reducing mail delivery from six to five days.

 

This report will be updated to reflect significant developments.

 

Contents

Background ...............................................................................................................................1

The USPS’s Financial Difficulties, FY2006-FY2009...................................................................1

Flattening Then Declining Revenues .....................................................................................1

Growing Expenses ................................................................................................................3

Congress Acts to Alleviate the USPS’s Immediate Financial Distress.....................................5

Issues for Congress .....................................................................................................................6

Increasing Revenues .............................................................................................................7

Altering Postage Rates ....................................................................................................7

Offering More Nonpostal Products and Services .............................................................7

Reducing Costs .....................................................................................................................7

Reducing the USPS’s PSRHBF Obligation and Payments ...............................................7

Reducing the USPS’s Contributions Toward Employee Health Premiums and Life Insurance ........................8

Reducing the USPS’s Retail and Nonretail Facilities .......................................................9

Reducing Mail Delivery from Six to Five Days Per Week..............................................10

Increasing the USPS’s Powers to Control Labor Costs...................................................10

 

Figures

Figure 1. The USPS’s Mail Volume, FY2004-FY2009.................................................................2

Figure 2. The USPS’s Operating Revenues, FY2004-FY2009......................................................3

Figure 3. The USPS’s Operating Revenues and Expenses, FY2004-FY2009................................4

Figure 4. The USPS’s Operating Income Without the Annual PAEA Payments to the

Postal Service Health Benefits Fund, FY2004-FY2009.............................................................5

Figure 5. U.S. Postal Service Retail and Non-Retail Facilities, FY2007-FY2009 .........................9

 

Tables

Table 1. Postal Service Retiree Health Benefits Fund Payments Under PAEA..............................4

 

Contacts

Author Contact Information ...................................................................................................... 11

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This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.

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Stuart Basefsky                   
Director, IWS News Bureau                
Institute for Workplace Studies 
Cornell/ILR School                        
16 E. 34th Street, 4th Floor             
New York, NY 10016                        
                                   
Telephone: (607) 255-2703                
Fax: (607) 255-9641                       
E-mail: smb6@cornell.edu                  
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