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.

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