The Postal Service is a self-sufficient agency and is not funded by appropriations. Achieving net income — the difference between total revenues and costs — is essential to its continued ability to provide affordable universal service. Roughly 80 percent of revenue is generated by commercial customers, and in 2009 these customers, especially those in the financial services and retail industries, were particularly hard hit by the recession. Mail volume and postage revenue declined precipitously as a result.

The Postal Service generated operating revenues of $68.1 billion, a decrease of $6.8 billion (9.1 percent). Mail volume of 177.1 billion pieces declined by 25.6 billion, or 12.7 percent. First-Class Mail and Standard Mail, which make up 94 percent of volume, decreased almost 24.3 billion pieces, or 12.7 percent, with an associated 9.4 percent drop in revenue, amounting to $5.5 billion. The Postal Service incurred a net loss of $3.8 billion in 2009.. Revenue is expected to continue to decrease into 2010, and even with continuing substantial cost reductions, it projects a 2010 net loss of over $7 billion2

2 Based on the assumption that there will be no change in the number of delivery days per week and no change in the current retiree health benefits pre-funding payment schedule.

The Postal Service is able to fund some obligations through increased debt; however, it is limited by statute to annual debt increases of $3 billion and total outstanding debt of $15 billion. The Postal Service expects to add $3 billion in debt in 2010 to $13.2 billion total, but will continue working to mitigate a possible cash shortfall. Ultimately, its ability to generate sufficient cash flows is dependent on the strength and speed of the economic recovery and its flexibility to increase revenue, improve efficiency, and reduce costs.