In October 2001, numerous incidents of biological terrorism targeted U.S. senators and members of the national media. Other untargeted innocent persons were also affected by the attacks. Some individuals consequently died while others were made gravely or seriously ill. Because infectious biological agents were sent by mail in these attacks, the Postal Service was directly and severely affected. Two Postal Service employees died of anthrax infection. Mail services in some areas were curtailed; two mail processing facilities had to be closed for the long term because of anthrax contamination; and mail volume declined.

Our viability and our value to the American people depend upon an open and accessible mail system. Following the anthrax attacks, it was critical that we put in place new and enhanced technology applications and process changes that can enhance the safety of the mail system and reduce risks to both employees and customers.

Shortly after the initial bioterrorist attacks, the President of the United States authorized an initial funding of $175 million for 2002 to assist in paying for these safety measures. In November 2001, Congress appropriated an additional $500 million to “protect postal employees and postal customers from exposure to biohazardous material, to sanitize and screen the mail and to replace or repair postal facilities destroyed or damaged in New York City as a result of the September 11, 2001, terrorist attacks.” Our use of the funds provided by this appropriation was contingent on the submission of an emergency preparedness plan to combat the threat of biohazards in the mail. We submitted the required Emergency Preparedness Plan in March 2002.

In August 2002, Congress appropriated an additional $87 million for emergency expenses, as detailed in our Emergency Preparedness Plan, to be incurred by the Postal Service, to further protect postal employees and customers from exposure to biohazardous material and to sanitize and screen the mail.

(dollars in millions)

	Year	Total Mail Revenue	Mail Revenue Without Appropriations	Appropriation Category	Income From Appropriation	Appropriation as a Percent of Total Mail Revenue
	1971*	$  8,752	$  6,665	Deficiency in rates and fees; and Public Service	$ 2,807	23.8%
	1976	$ 12,844	$ 11,199		$ 1,645	**12.8%
				Free and Reduced Rate Mail	725
				Reconciliation for Prior Years	none
				Public Service	920
	1986	$ 30,818	$ 30,102		$   716	2.3%
				Free and Reduced Rate Mail	750
				Reconciliation for Prior Years	(34)
				Public Service	none
	2002	$ 66,463	$ 66,415		$    67	0.1%
				Free Mail for the Blind and Overseas Voting Material	56
				Reconciliation for Prior Years	(8)
				Public Service	none

	*		The figures for 1971 are from the Post Office department in the year prior to the creation of the Postal Service.
	**		This figure does not include the appropriation for Post Office Department Transitional Costs, which, upon receipt, are transferred directly to the Department of Labor.

All funding will remain available until expended. We are required to submit quarterly expenditure plans on the obligation of all 2002 supplemental appropriations, as well as annual updates of the Emergency Preparedness Plan.

Funding has been expended during 2002 as follows (dollars in millions):

		Presidential Authorization	Congressional Appropriation
	Funding	$175	$587
	Operating expenses	16	—
	Non-operating expenses	121	42
	Capital equuipment	38	—
	Balance at September 30,2002	$  0	$545

We recorded the balance of $545 million as a current liability. Detection and filtration systems are being tested and evaluated and will then be deployed in 2003. The liability will be reduced as expenses occur. Appropriations received for capital equipment will be offset against depreciation expense over the life of the equipment.