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The Postal Revenue Forgone Appropriation: Overview and Current Issues

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Publication Date: December 2005

Publisher(s): Library of Congress. Congressional Research Service

Series: RS21025

Topic: Transportation (Mail and delivery service)

Abstract:

When Congress put the U.S. Postal Service (USPS) on a self-sustaining basis in 1971, it continued to subsidize the mailing costs of such groups as the blind, non-profit organizations, local newspapers, and publishers of educational material, by providing an appropriation to USPS to cover the revenues that were given up, or "forgone," in charging below-cost rates to these groups. Appropriations for these subsidies mounted as postage rates and the number of non-profits grew, approaching $1 billion annually in the mid-1980s. Successive administrations sought to cut these costs by reducing eligibility and having other mailers bear more of the burden. Congress failed to appropriate enough to cover costs in the early 1990s, and refused as well to allow USPS to invoke its statutory right to raise rates to cover the shortfall. USPS pleaded that providing social subsidies was not part of its mission, hindered its competitiveness, and was more regressive than taxation in its impact on the public.

The Revenue Forgone Reform Act of 1993 eliminated appropriations to support reduced rates for non-profits, transferring the costs to other mailers. The act retained free postage only for the blind and for overseas absentee balloting materials. Appropriations for subsidizing that narrow purpose since then have been in the range of $60 million to $100 million each year. Most of this has lately been provided as an advance appropriation for the next fiscal year, a practice the Bush Administration termed "misleading" in 2001. The 1993 act also provided for an annual payment of $29 million each year for 42 years to pay off the debt accumulated in the early 1990s. Congress appropriated this amount every year from 1994 through 2006, even though the President's FY2005 and FY2006 budgets proposed to eliminate the payment.

This report will be updated for the FY2007 budget cycle.