United States Postal Service

Fact Box

United States Postal Service
Formed in 1775 (reorganized into USPS in 1971)
Government-owned corporation
Headquarters- 475 L'Enfant Plaza SW, Washington, D.C.
United States Postmaster General- Patrick R. Donahoe
Revenue (2010) $67.05 billion
Operating income (2010) $-8.37 billion
Net income (2010) $-8.51 billion
Total assets- NA
Total equity- NA
Employees (2010) 583,908
Annual budget- Self sufficient, does not directly receive taxpayer dollars
Website- usps.com

The United States Postal Service (USPS) is an independent branch of the federal government responsible for providing Postal Service in the United States. The USPS handles the mailing of letters and packages, sorting and delivering mail, and selling postal products like stamps, mailing supplies and commemoratives. The Postal Service has long been one of the most criticized federal operations, accused of rampant inefficiency and bloated bureaucracy. Over the past several years, the critically ill state of the economy and the widespread use of electronic communication have contributed to putting the agency into financial crisis, as it suffers annual multi-billion-dollar losses. In the past five years, mail volume has declined by more than 43 billion pieces, with single-piece First-Class letters declining by 36%. First-Class Mail volume has dropped by 50% in the past 10 years. Calls for privatizing the Postal Service have been uttered time and again, but they have yet to gain any real traction with lawmakers or the White House. The USPS has made a series of proposals to a wary Congress for ways to avoid all-out bankruptcy.


Before mail was delivered daily, citizens depended on friends, merchants, and Native Americans to deliver messages around the country, and even to Europe. By 1639, the first official mail service in the colonies was developed by the General Court of Massachusetts. Richard Fairbanks’ tavern in Boston was chosen as the official repository for mail delivered from or going out to places overseas. 

Local authorities developed routes in their areas, and in 1673, Governor Francis Lovelace of New York set up a monthly post between New York and Boston. Although the service was short-lived, the rider’s trail became known as the Old Boston Post Road, which comprised the current U.S. Route 1.

Governor William Penn established Pennsylvania’s first post office in 1683. And in the South, private messengers, who were usually slaves, brought messages from plantation to plantation. As this network expanded, so did the routes carrying messages. 

After 1692, a central post organization was established in the colonies, when Thomas Neale received a 21-year grant from the British Crown. Although Neale never visited America, he appointed Governor Andrew Hamilton of New Jersey as his deputy postmaster general. Neale’s franchise costs were low and yet he died heavily in debt after passing his post to Andrew Hamilton and Robert West. 

The British government bought the rights to the North American Postal Service in 1707 and appointed Hamilton’s son, John, as deputy postmaster general. He was succeeded by John Lloyd of Charleston, South Carolina, in 1721. Alexander Spotswood, former lieutenant governor of Virginia, became deputy postmaster of America and appointed Benjamin Franklin to be deputy postmaster general of Philadelphia in 1737. 

Franklin made important and lasting improvements to the colonial posts, reorganizing service, touring and inspecting post offices to the north and south, and placing milestones on the postal routes for safety. He established shorter routes and sent postal riders out to carry mail at night on a speed service between Philadelphia and New York. The colonial posts turned their first profit in 1760 under Franklin’s leadership.

Franklin was dismissed by the Crown in 1774 for actions deemed sympathetic to the cause of the colonies. When he left office, post roads operated from Maine to Florida and from New York to Canada. Mail was delivered on a regular schedule with posted times.

William Goddard, a printer and newspaper publisher, set up the Constitutional Post of inter-colonial mail. It was funded by the colonies using a subscription model, and net revenues were used to improve mail service. When the Continental Congress met in Philadelphia in 1775, Goddard’s post was flourishing, and 30 post offices were in operation. The Constitutional Post set up rules for hiring reputable post riders and how riders were to secure the mail with a lock and key. 

Three weeks after the battles of Lexington and Concord, the Second Continental Congress met in May 1775 to plan for the colonies’ defense in the event of a British attack. Delivery of messages and other material was deemed necessary for freedom, so a committee, chaired by Benjamin Franklin, recommended founding a domestic postal system. After the committee reported back to the Continental Congress in July, the Congress created the position of Postmaster General and named Franklin to the post. Franklin’s son-in-law, Richard Bache, was named comptroller, and William Goddard was appointed surveyor.

During the Revolutionary War, the postal system carried communications between Congress and the armies. Riders were exempted from military duties so service would not be interrupted. Franklin served as Postmaster General until November 7, 1776, and, as such, is considered the first Postmaster General of the United States. The Postmaster General was part of the presidential cabinet and was the last person in the line of succession to the presidency. 

In the 19th century, the postal system continued to grow. The Post Office Department, which had been founded to oversee the Postal Service, developed new services and established new post routes. As the United States grew dramatically between 1789 and 1861, when the Civil War broke out, its population also increased.  This meant more mail and even more post roads. By 1819, the Postal Service served 22 states and developed faster service. By 1822, it took just 11 days to move mail between Washington D.C. and Nashville, Tennessee. 

By 1828, there were 7,530 post offices and 29,956 postal employees, mail contractors and carriers. John McLean of Ohio was the first Postmaster General to refer to the Post Office, or General Post Office, as it was sometimes called, but the organization was not officially established as an executive department until June 8, 1872. 

By 1831, postal employees accounted for 76% of the civilian federal workforce. States continued to petition Congress for new post routes regardless of their potential for profit.  The federal government struggled with this issue and decided to subsidize postal routes that supported national development. Rates were changed as well. In the past, rates were determined by the number of pages in a letter and the distance it was traveling. But in 1845, the Postal Service began charging based on weight, and whether the letter was going more or less than 300 miles. This was done through legislation adopted on March 3, 1863. The act also created three classes of mail: first class, second class, and third class.

As technology improved, with fast-moving steamboats, mail began to move faster. In 1815, operators of steamboats had to deliver the letters and packets they carried to local postmasters within three hours of docking in daylight, or two hours after sunrise the following day. In the 1820s, more than 200 steamboats were serving river communities in this way. The Postal Service also contracted three vessels to carry mail. An 1823 law declared waterways to be post roads. 

Mail service reached all the way to California by 1848, with the hopes of delivering mail within 3-4 weeks from the time it was sent. Often, this was not the case. Mail traveled by ship from New York to Panama, and then moved across Panama by canoes before it was loaded into another ship that carried it to San Francisco. The Panama Railroad made this journey slightly easier by 1855, but it wasn’t until September of 1858, when John Butterfield’s Overland Mail Company established a 2,800-mile southern stage route between Tipton, Missouri, and San Francisco, that mail began to arrive more frequently. 

The Railway Mail Service (RMS) was created in 1864 to subsidize the railway system. Railways were asked to build special cars to transport mail in exchange for a government subsidy. RMS workers became the fastest mail sorters in the business and made it possible for local carriers to deliver all of the mail at the same time. 

Mail was still delivered to a central location, usually from post office to post office. People could pick up their mail or pay two extra cents to have it delivered by local courier. In 1862, Postmaster General Montgomery Blair suggested that the Postal Service extend free delivery of mail by salaried mail carriers. Congress agreed with this suggestion and signed it into law on March 3, 1863. Income from local postage was more than sufficient to pay all expenses for the new service. Street addresses were added to letters for the first time.

On June 30, 1864, free city delivery was established in 65 cities nationwide, and 685 carriers delivered mail there. By 1880, 104 cities were served by 2,628 letter carriers.  And by 1900, 15,322 carriers provided services to 796 cities. In order to receive mail at home, a citizen had to be at home. Otherwise, mail remained in the carrier’s satchel to be redelivered later. In 1912, people were encouraged to provide mail slots or receptacles, and by March 1, 1923, they were required for delivery service.

In the 1890s, the New York Society for Suppression of Vice, spearheaded by Anthony Comstock, helped to make the mailing of obscene material illegal. This comprised indecent material, as well as anything involving abortion, contraception, or alcohol.  Comstock appointed himself “Special Postmaster” and attempted to enforce these laws using a posse comitatus of RMS workers.

By the 1930s, letter carriers began delivering to customers at the edges of cities using boxes at the curb line. As Americans began moving increasingly to the suburbs in the 1950s, more and more curbside mailboxes began to spring up. Up until that time, mail carriers worked 52 weeks per year and 9-11 hours per day on average. Many worked Monday through Saturday and sometimes on Sunday as well. A congressional act in 1884 granted them 15 days of leave per year, and in 1888, Congress declared that a day’s work would be 8 hours, and hours above and beyond that were to be paid accordingly. The 40-hour work week began in 1935. 

Mail carriers walked as many as 22 miles a day, carrying up to 50 pounds of mail at a time. There were sometimes two deliveries per day to residences, and up to four per day at businesses. This was discontinued on April 17, 1950. By the mid-1950s, the maximum weight to be carried by a postal worker was reduced to 35 pounds, which is where it remains today. 

At the beginning of the 20th Century, Americans were still being served by the Post Office Department. They lived largely in rural areas and this presented challenges to the Postal Service. By the mid-1960s, the Post Office Department had financial problems due to neglect and fragmented control. Facilities, equipment, wages, and management efficiency had to be overhauled. In October 1966, the Chicago Post Office came to a halt as the volume of mail surpassed workers’ ability to sort and deliver it. A 1967 House Appropriations Subcommittee labeled the Postal Service “a race with catastrophe.” Five to ten million pieces of mail were being sent each day, but systems could not keep up. 

In 1971, the department was reorganized as a semi-independent agency of the federal government. Its name was changed to the United States Postal Service (USPS). New laws also removed the Postmaster General from the line of succession for the presidency.

In the 37 years since the Postal Reorganization Act was signed, technological advances have improved services and operations. Although the volume of mail has continued to grow each year, it declined in 1991 for the first time since the Depression. In 1992, the post service created a new organizational structure that replaced five regions and 73 field divisions with 10 areas and 85 districts in an effort to keep rates holding steady. 

In 2006, Congress passed and President George W. Bush signed the Postal Accountability and Enhancement Act (pdf). It enacted numerous USPS reforms, including pre-funding retirees’ health-care costs, and modifying matters pertaining to budget submission, pension benefits, regulatory activity, rate-setting, Board of Governor terms, and agency transparency.

In March 2010, then-Postmaster General John Potter announced a 10-year strategy for the USPS as a means to avoid a cumulative deficit of $238 billion by 2020. The plan included elimination of Saturday deliveries, which was touted as a $3 billion per year savings. The plan also sought relief from pre-funding retiree health benefits, which would save $5.6 billion annually. It additionally sought retail partnerships and the right to hire part-time employees.

Mail volume reached record levels from 1992 to 2000. Although the terrorist attacks on September 11 diminished this volume slightly in 2001, total mail volume dropped by nearly five billion pieces in 2002. Two years later mail volume again increased. Currently the USPS sorts and delivers more than 177 billion pieces of mail annually, which is approximately 40% of the world’s total mail volume. In the past five years, mail volume has declined by more than 43 billion pieces, with single-piece First-Class letters declining by 36%. In the last year alone, First-Class Mail has declined by 6.6%, with USPS processing about 563 million pieces of mail a day. In FY 2011, overall mail volume had been forecast to fall by 3.5 billion pieces (2%), with a projected 6.5% decrease in First-Class Mail. First-Class Mail is projected to drop to 39 billion pieces annually by 2020. While commercial junk mail, now known as “Standard Mail,” has been experiencing a 1.7% increase in revenue this year, it generates only a third as much as First-Class Mail, and therefore can’t make up for the loss of First-Class business.

In the fourth quarter of 2011 alone, the USPS suffered a $3.3 billion net loss, and it is expected to lose $10 billion per year if no action is taken. The agency has asked Congress for permission to close unprofitable postal facilities, move from a six-day to five-day weekly delivery schedule, relax delivery times, and withdraw from federal retirement and health-care plans.

In his FY 2013 budget, President Obama expressed support for the termination of Saturday mail deliveries, raising the price of stamps above the rate of inflation, and relaxation of costly payments to pre-fund future postal worker retirements. As part of that, he proposed the refunding of $10.9 billion to USPS over two years from a credit it has with the Federal Employee Retirement System. USPS claims that the enactment of those proposals would save the agency $25 billion over the next 11 years.

What it Does

The United States Postal Service (USPS) is an independent federal agency responsible for providing Postal Service for the United States. This is done through collecting postage for the mailing of letters and packages, sorting and delivering mail and selling post-related products like commemorative and collectible stamps, as well as postal supplies.

The Board of Governors of the USPS sets policy, procedure and postal rates. It has a similar role as a corporate board of directors. Of the 11 board members, nine are appointed by the President and confirmed by the Senate. These nine appointed members then select the U.S. Postmaster General, who serves as the board’s tenth member. He or she also oversees the day-to-day activities of the Postal Service and acts as chief executive officer. The 10-member board then nominates a deputy postmaster general who acts as chief operating officer and takes the remaining seat on the board. 

Although the USPS is often mistaken for a government-owned corporation like Amtrak, it is legally defined as an “independent establishment of the executive branch.” As a quasi-government agency, it has many special privileges, including sovereign immunity, eminent domain powers, powers to negotiate postal treaties with foreign nations, and an exclusive legal right to deliver First-Class and Standard Mail. In 2004, the U.S. Supreme Court ruled that the USPS was not a government-owned corporation and could not be sued under the Sherman Antitrust Act. 

The Postal Service’s Independent Office of Inspector General (OIG) prevents waste, fraud, theft, and misconduct by the Postal Service. In 2004, the responsibilities of this office increased, when allegations of postal employee misconduct were added. Starting in February 2007, issues of embezzlement, record falsification, workers’ compensation fraud, contract fraud, and on-duty narcotics violations were referred to the USPS OIG.

The OIG’s staff of 1,071 members includes special agents (federal law enforcement officers authorized to carry firearms, make arrests, and investigate federal criminal violations), auditors (professionals trained in government audit and accounting standards), and others. Since it was established, the Office of Inspector General has issued 3,077 audit reports and management advisories accounting for more than $3.7 billion in questioned costs, unrecoverable costs, funds put to better use, and revenue impact. Examples of fraud uncovered by USPS OIG investigations include a trucking contractor defrauding the Postal Service of $1.5 million in fuel rebates; a highway route contractor defrauding the Postal Service of $120,468 for services not rendered; and a construction contractor charging the Postal Service $175,630 for work never done.

The Department of Defense and the USPS jointly operate a postal system to deliver mail for the military. This is known as the Army Post Office (for Army and Air Force postal facilities) and Fleet Post Office (for Navy, Marine Corps and Coast Guard postal facilities).

Where Does the Money Go?

According to the United States Postal Service USPS FY 2012 Integrated Financial Plan, the agency’s projected operating expenses for FY 2012 are as follows:

Compensation and Benefits                                                    $51.2 billion

Retiree Health Benefits Pre-funding                                       $11.1 billion

Other Non-Personnel Costs                                                     $7.3 billion

Transportation                                                                          $6.3 billion

Depreciation                                                                             $2.2 billion

Total Operating Expenses                                                       $78.1 billion

The USPS also earmarked $.9 billion to Capital Commitments projects and $1.1 billion for Capital Cash Outlays—all for facilities, equipment, and infrastructure.

According to Husch Blackwell LLP, a law firm whose specialties include a Postal Service contracting practice, about $12 billion was spent by USPS outside of the agency in FY 2010, and just over half of that—$6.32 billion—went to transportation. About half of that figure—$3.2 billion—went to highway transportation, which increased by 5.3% from last year as the USPS shifted mail from air to surface transportation. USPS spending for supplies and services totaled $2.2 billion. Spending on the agency’s roughly 30,000 facilities declined by $86 million to $1.7 billion.

Based on data compiled from a Freedom of Information Act request, the top five contractors whose services were used by USPS in FY 2010 were:

1. Federal Express Corporation                                              $1,373,140,689

2. Northrop Grumman                                                                $494,601,395

3. Kalitta Air LLC                                                                     $371,823,791

4. Pat Salmon & Sons Inc.                                                         $142,869,164

5. Siemens                                                                                  $134,774,653

Federal Express has been USPS’s biggest supplier for eight years in a row. FedEx signed a seven-year contract with the agency in 2001 to transport its Express Mail and Priority Mail for USPS. In 2007, the contract was extended until September 2013.

Northrop Grumman, a $30 billion global defense and technology company, is USPS’s second largest supplier. It provides the agency with the equipment for the automated handling of large envelopes, catalogs and magazines. In 2007 it signed an $874.6 million contract with the USPS for 100 units of the so-called FSS automation hardware.

Kalitta Air LLC provides air transportation and mail distribution services, a large portion of which is military mail bound for overseas destinations.

  • http://www.allgov.com/departments/independent-agencies/united-states-postal-service?agencyid=7284