financial and structural challenges it faced, stating: "The Service's ability to

provide universal postal service .. will be increasingly threatened unless changes

are made, both within current law and to the legal and regulatory framework that
governs the Service."
At the GAO's request, in April 2002, the USPS submitted to Congress a plan to
improve its financial health." In response, in late 2002, President Bush
established the President's Commission on the Postal Service and tasked it with
identifying the operational, structural, and financial chalienges facing the USPS,
and developing a plan to "build a healthy financial foundation."6
In the meantime, earlier that year the federal Office of Personnel Management
discovered that the Postal Service had been significantly over-contributing to its
pension fund--far more than what was needed to meet its employee retirement
liabilities. 7 (Like many employers, the Postal Service provided pensions for its
retired employees--and was required, as private companies were, to set aside money
from current income to cover its pension obligations.)
To prevent further overfunding, Congress passed the Postal Civil Service Retirement
System (CSRS)
Funding Reform Act of 2003, which lowered USPS's annual retirement fund payment by
$2.5 billion, starting in fiscal year 2003. The Act also specified that the USPS
must use the annual savings to pay down its debt in 2003 and 2004 and forego a
postage rate increase in 2005. The Act further required that in 2006, the USPS send
the estimated annual savings to an escrow account where it would be held for a
future, undetermined use.
The projected savings, however, quickly diminished, wiped away by inflation and
declining revenue.
By 2005, the USPS had to request an across-the-board rate increase of 5.4% solely
to fund the escrow account. The PRC and the Board of Governors approved the request
and warned the G4 that a biannual increase of 1% to 1.5% to fund this account might
be needed in the future."
Postal Accountability and Enhancement Act of 2006
in
July 2003, the President's Commission on the Postal Service issued its findings and
recommendations in a report, Embracing the Future. The report blamed the Postal
Service's poor fiscal health on an "outdated and inflexible business model."
The report recommendations included giving the Board of Governors broader authority
to oversee
Postal Service operations; allowing the Postal Service to set rates (within limits
set by the PRC) without obtaining prior approval; repealing caps on annual
borrowing for capital and operating needs; allowing the Postal Service to retain
earnings; repealing statutes that limited the Postal Service's ability to close
post offices; allowing for outsourcing to the private sector; encouraging
"appropriately sizing" the Postal Service workforce in 2010 when 47% of career
employees would become eligible for retirement;
introducing a cap on total compensation for new employees and eliminating the
compensation