How USPS Stays Afloat: Funding Facts (Simplified)

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The United States Postal Service (USPS) has to serve places where running a post office does not pay for itself. Federal law requires regular service to rural communities and small towns, and forbids closing a small post office solely because it operates at a deficit. Yet USPS says it pays for ordinary operations primarily through sales of postal products and services and borrowing.

So the price of a stamp has to help pay for the whole delivery network, not just the cost of carrying one letter. USPS relies chiefly on customers to finance a public delivery network, but federal assistance and deferred payments have also helped it keep operating. Even so, it lost $9.0 billion in fiscal year 2025.

Customers pay most of the bill

USPS is an independent establishment within the federal executive branch, rather than a private delivery company. In its fiscal year 2025 financial report, USPS said it generally received no tax dollars for ongoing operations and funded them primarily through sales and borrowing.

Its revenue categories include First-Class Mail, Marketing Mail, Shipping and Packages, international mail, periodicals, and other services. Its annual report also describes services such as Certified Mail, Registered Mail, Signature Confirmation, and insurance.

USPS reported $80.5 billion in operating revenue for fiscal year 2025, which ended September 30, 2025.

Where stamp revenue actually goes

Federal law puts postal-service revenue into the Postal Service Fund, a revolving fund in the Treasury, with separate provisions for competitive products. Competitive products, such as Priority Mail, are all products outside the category in which USPS has a legal monopoly or a large share of the market with limited competition. Money in the fund remains available across fiscal years for the Postal Service’s authorized functions. The sale of a stamp supplies money to the institution rather than setting aside a separate payment for one carrier’s trip.

The law makes that fund available for USPS expenses incurred in carrying out its functions, other than those the separate Competitive Products Fund covers. Those costs include salaries and benefits, transportation, depreciation, supplies, rent, and utilities. Postage supports people and equipment across the delivery process, not just the final handoff at a mailbox.

Postal costs are sorted into two kinds. The Postal Regulatory Commission, the independent federal agency that oversees USPS, uses the definition in federal law: attributable costs are costs that can be reliably traced to a particular class or type of mail, plus other costs reasonably assignable to it. Institutional costs are common costs that cannot be assigned to a particular product or service, including carrier network travel time and some administrative and retirement-related costs. The commission cautions that these common costs can include variable costs as well as costs often described as fixed.

Money left after a mail product covers its own attributable costs helps pay the institutional costs that all products share. That sharing is different from letter senders paying to carry packages. Federal law requires the regulator to prohibit subsidizing competitive products with market-dominant products, the monopoly or limited-competition category that includes First-Class Mail. It also requires each competitive product to cover its attributable costs, and competitive products collectively to cover an appropriate share of institutional costs.

Why a public service must cover its costs

Before the Postal Reorganization Act of 1970, the Cabinet-level Post Office Department was funded through annual appropriations. That act established USPS as an independent agency funded by revenue from postal products and services. The self-supporting model was a choice about how to finance government-provided mail service, not a decision to end its public responsibilities.

Postal policy requires rates to distribute the costs of postal operations among mail users on a fair and equitable basis. The same policy protects service to rural areas and small towns, and says a small post office cannot be closed solely because it operates at a deficit.

USPS must maintain an integrated network for market-dominant and competitive products and generally deliver at least six days a week. The delivery rule allows exceptions for weeks with a federal holiday, emergencies such as natural disasters, and certain areas with fewer delivery days under policies already in place when the Postal Service Reform Act of 2022 was enacted.

The Government Accountability Office (GAO) explains that reaching every address makes mail processing and transportation a large cost area for USPS. The nationwide promise has to be financed along with the individual delivery.

Federal help comes in several forms

Congress reimburses USPS each year for revenue it gives up on services such as free mail for blind people and overseas voting in U.S. elections, GAO reports. The appropriation has been between about $50 million and $60 million a year since fiscal year 2019, less than 0.1 percent of USPS’s annual operating revenue. It pays for specific public services rather than replacing postage as the main source of money.

Congress also authorized $10 billion in Treasury borrowing under the 2020 CARES Act, then removed the requirement to repay those amounts in the Consolidated Appropriations Act, 2021. The Inflation Reduction Act of 2022 provided $3 billion for zero-emission vehicles and associated infrastructure. These were specific federal interventions, not evidence that all postal operating expenses come from a standing taxpayer subsidy.

Ordinary borrowing is constrained by a $15 billion statutory ceiling on outstanding debt and a combined $3 billion limit on the annual net increase for operating expenses and capital improvements. In its fiscal year 2026 third-quarter filing, USPS reported $15 billion in outstanding debt as of June 30, 2026, all issued to a Treasury-supervised government bank. That is the full amount the ceiling allows, so USPS cannot count on more borrowing to cover recurring losses.

The Postal Service Reform Act of 2022 repealed the requirement to prepay future retiree health benefits and canceled unpaid past-due prefunding payments. That produced a $57 billion noncash benefit, according to GAO. Removing an obligation can improve the financial accounts without delivering the same amount of new spendable cash. The reform law also requires certain Medicare-eligible postal retirees and family members to enroll in Medicare Part B to remain in the Postal Service Health Benefits program, with some exceptions. OPM lists exceptions for retirees who retired on or before January 1, 2025 and are not already enrolled in Part B, and their families; employees who were 64 or older on that date and their families; and qualifying people living overseas or eligible for certain VA benefits or Indian Health Service services. GAO says integration with Medicare reduced USPS’s unfunded retiree health-care liability. Retirees should confirm with the Office of Personnel Management, which publishes the requirement, whether it applies to them before making an enrollment decision.

Who controls spending and postage prices

The USPS Board of Governors directs and controls postal expenditures and reviews USPS practices and policies. The board also conducts long-range planning and considers service standards and capital investments.

Congress is entitled to annual testimony and information about the postal budget, operations, plans, and policies under federal law. Congress sets the statutory framework, while the board makes spending and policy decisions within it.

The Postal Regulatory Commission reviews and approves changes in rates for monopoly products such as First-Class Mail. For competitive products, the governors establish prices subject to the law and the regulator’s cost-coverage rules.

USPS’s Notice 123 retail price list, effective July 12, 2026, sets the base price of a one-ounce stamped First-Class Mail letter at $0.82. Letters USPS classifies as nonmachinable, including those too rigid for its transport belts, carry an additional $0.49 surcharge under that price list.

Why revenue has not solved the losses

For fiscal year 2025, USPS reported a $9.0 billion net loss under generally accepted accounting principles and a $2.7 billion controllable loss. USPS defines controllable loss as an adjusted measure that excludes certain costs outside management’s control. Those include changes in the calculated value of future workers’ compensation payments and scheduled charges for pension obligations not covered by assets set aside to pay them. The smaller adjusted loss helps identify operating pressures, but it does not eliminate the obligations excluded from that measure.

For the third quarter of fiscal year 2026, USPS reported $19.9 billion in revenue and a $2.5 billion net loss. Its controllable loss for that quarter was $1.0 billion, and the release said the long-term liquidity crisis continued.

Mail volume peaked above 213 billion pieces in fiscal year 2006 and began declining in fiscal year 2007, according to GAO. USPS told GAO that price increases were expected to offset only part of the effect of declining mail volume, growth in delivery points, and other rising costs not reflected in the Consumer Price Index. Fewer pieces of mail weaken the revenue base without removing the obligation to maintain the network. Adding addresses can widen the service burden even when the amount of mail going through that system shrinks.

USPS suspended its biweekly employer cash payments toward pensions for employees covered by the Federal Employees Retirement System (FERS), effective April 10, 2026, according to its third-quarter fiscal year 2026 filing. USPS said it continued to record the obligations and that the suspension has no impact on its employees. It reported approximately $1.4 billion in deferred cash payments as of June 30, 2026. Delaying the payments keeps cash for immediate operations without erasing the bill, which is part of how deliveries can continue during a period of losses.

What financial improvement has to accomplish

USPS’s Delivering for America transformation strategy combines investment in processing centers and package sorters with a shift from air to surface transportation and reductions in work hours. USPS reported $422 million in lower transportation expenses during fiscal year 2025.

A September 2026 GAO report concluded that the plan’s cost-cutting initiatives contributed to declining service performance. GAO found that 20 of 27 market-dominant product categories missed their fiscal year 2025 service-performance targets despite lower targets and longer delivery standards. USPS told GAO that longstanding structural and operating problems had also contributed to missed targets before the plan.

GAO calls for Congress to address the level of postal service the country requires, how financially self-supporting USPS should be, and a sustainable path for retiree health benefits.