Financial Section Part II

Legislative Update

APPROPRIATIONS

Although we are self-funded and do not receive an appropriation for our operations, we have received appropriations to reimburse us for certain statutorily-mandated services.

In September 2007, the President signed P.L.110-92 making continuing appropriations for 2008. The measure provides funding for the federal government through November 16, 2007 at essentially the same levels as that provided in 2007. For the Postal Service, this includes $29 million for revenue forgone and $80 million for free mail for the blind.

These amounts are subject to change because the 2008 appropriations process has not yet been finalized. See Note 12, Revenue Forgone, in the Notes to Financial Statements for additional information.

Do Not Mail Legislation

In 2007, Do Not Mail legislative bills were introduced in 15 state legislatures nationwide. These bills, modeled after the Do Not Call registry, are designed to limit or stop advertising mail from being mailed to households.

We oppose legislation that would limit mailing or interfere with the availability of an affordable, universal postal system. Our response to Do Not Mail legislation is to provide information to stakeholders, including the American public, on the value of mail, including the impact the mailing industry has on the U.S. economy, and the fact that mail supports the free exchange of ideas, a cornerstone of our democracy.

We are working on educating the American public on ways that they can manage their mail. Consumers currently have options that allow them to limit the catalogs they receive, temporarily halt advertising mail through the Direct Marketing Association’s “Mail Preference Service”, and stop unwanted credit card solicitations by signing on a number of web sites.

In addition, we have been working closely with the mailing industry on ways to help the industry maintain accurate mailing address lists. Several working groups within the Postal Service and within the mailing industry are examining ways in which Intelligent Mail can be used to help keep addresses as current as possible. For example, the list of all residential and business addresses will now be updated every three months on First-Class Mail service; this is a change from the previous twice-a-year updates, and for the first time, Move Update services will occur every three months for Standard Mail service.

We are also educating direct marketers on the need to send targeted direct mailpieces to consumers who are interested in their products and services. By using existing data, mailers can customize mailings and send cost-efficient targeted mailing campaigns. A consumer choice approach to mailings will not only increase the value of the mail, but will provide a greater return on investment for mailers.

Should a state pass Do Not Mail legislation it would result in lost revenue for the Postal Service. While none of the state bills passed during 2007, in seven states the 2007 legislation automatically will be carried over to the 2008 session. The bills in those seven states do not need to be re-introduced in order to be considered.

Aviation Security

On August 10, 2007, President Bush signed the Implementing Recommendations of the 9/11 Commission Act of 2007 (P.L.110-53) into law. This law mandates the screening of half of all air cargo on passenger planes within 18 months, and 100% of all such cargo after three years.

The screening must provide a level of security commensurate with the level of security for the screening of passenger-checked baggage. Screening is defined as physical examination or the use of non-intrusive methods of assessing whether cargo poses a threat to transportation security. Methods of screening identified in the law include X-ray systems, explosive detection systems, explosives trace detection, explosive detection canine teams certified by the TSA, or a physical search together with manifest verification. The TSA may approve additional methods, such as a program to certify the security methods used by shippers.

The precise effects of the law, however, are uncertain and will depend on how the TSA implements the law, as well the screening methods that are approved.

Evolutionary Network Development

The Evolutionary Network Development process systematically identifies potential operations and network changes to create a more flexible postal distribution and transportation network. For network changes, our focus has been to reduce redundancy inherent in maintaining different transportation networks for different mail classes. A successful transportation network must be flexible and allowed to adapt to provide low cost, reliable service in a fluctuating market.