Executive Summary

The budget status of the U.S. Postal Service has been a matter of both contention and confusion since the 1970 Postal Reorganization Act (PRA) put the Postal Service on a self-sustaining basis, exempting it from general budget and funding laws and denying the executive branch control over its finances. In the 1970s and 1980s, the Postal Service was sometimes included and sometimes excluded from the president’s budget by administrative decision often hinging on whether it was running a surplus or a deficit. When it was on budget, the Postal Service was commonly caught up in deficit reduction squabbles, and took on obligations belonging to the Treasury.

In the Omnibus Budget Reconciliation Act of 1989, the Postal Service won a hard-fought legislative battle, at some cost, to put its funding permanently off budget. Congress agreed that mail delivery was a self-financing business whose operations should not be scaled up or down depending on national budget considerations. For the past two decades, only the Social Security Trust Funds have shared off-budget status with the Postal Service.

Despite its off-budget status, however, the Postal Service is still caught up in budget scoring decisions that erode its finances and obstruct its legislative program in Congress. This situation primarily results from three facts: (1) the Postal Service’s revenues and expenses remain part of the unified budget, which is the measure most commonly used for calculating budget effects, (2) the Postal Service’s contributions for its retiree obligations are held in on-budget accounts, and (3) the Postal Service receives a small on-budget appropriation to subsidize mail for the blind and overseas voters.

More specifically, our review demonstrates that

  • Although the Postal Service Fund is technically not included in the budget the president sends to Congress each year, it is included in a broad economic concept called the “unified federal budget” that captures all government transactions with the public.
  • Both the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO) concentrate their attention on scoring changes to the unified federal budget, primarily because it allows large surpluses in the Social Security Trust Funds to offset deficit spending elsewhere in government. The Postal Service is an inadvertent victim of this strategy.
  • The two funds that hold the Postal Service’s contributions for future retiree benefits are on budget. As a result, reductions in payments for the Postal Service’s retiree obligations have a negative effect on the federal deficit because of the scoring process.
  • Because CBO scores postal legislation against the unified budget, any legislative proposals that have the effect of reducing postal net revenues or transfers to the Treasury are subject to point-of-order objections under House “pay-as-you-go” (PAYGO) rules which require unified budget neutrality. Although the Senate’s PAYGO rule requires only on-budget neutrality, it too can be triggered by any legislative proposal that reduces the Postal Service’s contributions to on-budget retiree benefit funds.
  • Postal reform was delayed for years by unified budget-driven objections and finally passed only at the cost of accepting a scoring-driven requirement to contribute more than $5 billion annually, first to an escrow fund and then to a retiree health benefits fund with no actuarial foundation.
  • The current proposals (S. 1507 and H.R. 22 in the 111th Congress) to restructure the way the Postal Service pays its share of retiree health care premiums are only the latest examples of needed legislation being held up by a possible budget effect.
  • The small postal appropriation each year routinely shifts costs to the Postal Service and subjects it to riders that prevent closing small post offices or experimenting with 5-day-a-week delivery.

The unified federal budget is an economic rather than a statutory concept. Nevertheless, the current emphasis on the budget neutrality of postal legislation negates the considered Congressional judgment in 1989 that the Postal Service should be shielded from budget negotiations between the president and Congress.

To foster the principle of postal independence from national budget considerations, we recommend that the Postal Service pursue three changes to its current relationship with Congress and the budget process:

  • Amend the House of Representatives' PAYGO rule that allows a point of order to block legislation that increases the off-budget deficit to match the Senate's PAYGO rule that allows a point of order only in response to increases in the on budget deficit.
  • Shift to off-budget status the Postal Service’s share of the Civil Service Disability and Retirement Fund (CSRDF) and the Postal Service Retiree Health Benefits Fund (PSRHBF) to match the off-budget status of the Postal Service Fund.
  •  Either (a) Opt out of the appropriations process and its attendant restrictions or (b) shift the cost of these mailings to the federal agencies most responsible or affected by the mailings. Option (a) would cost about $100 million a year in support for free mail for the blind and overseas voters, but this cost is small compared to the public service and non-profit costs the Postal Service already bears. In addition, it would be a small price to pay for cementing the financial independence of the Postal Service and would free it from riders to appropriations acts. Under option (b), Congress would appropriate the needed funds to the appropriate agencies, and they, in turn, would pay the Postal Service the required postage.

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For questions, media inquiries, or to obtain more information regarding this report, please contact Agapi Doulaveris at 703-248-2286 or by email