The Postal Service does not receive tax dollars to sustain its operations, but relies on accurate postage payments for support. While the vast majority of the Postal Service’s customers pay the full cost of mailing, revenue loss, otherwise known as revenue leakage, can occur when individual or business customers don’t pay the appropriate postage for their mailings.
The U.S. Postal Service is used to delivering large amounts of mail. Last year, it delivered more than 177 billion pieces. More mail pieces are sent per person in the United States than almost anywhere else in the world. But mail volume has been declining. How will the Postal Service change if volumes continue to fall? Is the Postal Service even financially sustainable at lower volume levels?
GMU researchers looked at how mail volumes of 150, 125, 100, and 75 billion would affect the Postal Service’s financial position and cost structure. Their results are encouraging. They found that the Postal Service is financially sustainable at volume levels down to 100 billion pieces per year, although price increases above inflation would be needed. The cost structure of the Postal Service would also change at lower volume levels. For example, delivery would account for a much larger share of total costs.
The Sarbanes-Oxley (SOX) Act of 2002 grew out of large corporate financial scandals. SOX aims to improve corporate governance and enhance the accuracy of financial reporting. While compliance is required by the Postal Act of 2006, the Postal Service believes it is a great way to make its business stronger. SOX helps target areas of improvement and strengthen financial accounting, making the Postal Service a better business. As a result, the Postal Service designed and implemented new business mail acceptance procedures and requirements in an effort to comply with SOX. The initiative includes new check-in, verification, recording, placarding, and induction procedures for processing business mail; daily certifications of SOX compliance by business mail entry units; an updated mail acceptance handbook; and enhanced customer use of the PostalOne! system.
The Postal Accountability and Enhancement Act of 2006 (PAEA) ushered in a new regulatory structure for the U.S. Postal Service. One key element was a price cap on market dominant products. (Most of the Postal Service’s products are market dominant.) This means that price increases for market dominant products are capped by the rate of inflation as measured by the Consumer Price Index (CPI). PAEA, however, does allow the Postal Service to increase its prices beyond the CPI cap under “extraordinary and exceptional circumstances.” The Postal Service makes the exception by filing an ‘exigent’ rate case to the Postal Regulatory Commission (PRC). Before the Postal Service can increase prices, the PRC must agree with the ‘exigent’ request and find it to be reasonable, equitable, and necessary.Read More
The Federal Employees’ Retirement System (FERS) is one of the retirement programs of the U.S. government, and benefits are extended to U.S. Postal Service employees. FERS is administered by the Office of Personnel Management (OPM). Congress established the guidelines for OPM to set contribution rates and can alter them by passing new law or amending an existing law. Postal Service employees who began their careers after December 31, 1983, are automatically enrolled in the FERS. For Postal Service employees, a majority of FERS funding is accomplished through Postal Service contributions. The rest is paid by postal employees.
During fiscal year 2009, the Postal Service contributed $3 billion to FERS or 11.2 percent of the salaries for FERS employees. As of September 30, 2009, the Postal Service reported a fully funded FERS pension plan that exceeds liabilities by $6.8 billion.Read More