Options for Addressing the Postal Service’s Financial Gap
Research and Insights Solution Center
U.S. Postal Service Office of Inspector General
July 2026
The Postal Service’s Financial Challenges
The U.S. Postal Service must provide reliable and affordable service to the American public, creating an increasing tension between USPS’s public service mission and its mandate to be financially self-sustaining.
Despite legislative and strategic efforts, the Postal Service’s costs have exceeded revenue every year after FY 2006, and combined losses over that timeframe totaled nearly
$118 billion
Left unaddressed, ongoing losses will threaten the Postal Service’s ability to continue operations. Most recently, the agency reported a net loss for FY 2025 of nearly
$9 billion
A primary driver of the Postal Service’s financial challenges is the substantial decline in mail volume over the past 20 years. Volume is projected to fall further, threatening the agency’s revenue, while the number of delivery points USPS is legally required to serve grows by more than one million each year. As a result, mail density has sharply declined, making mail delivery increasingly less profitable for each address served.
A primary driver of the Postal Service’s financial challenges is the substantial decline in mail volume over the past 20 years. Volume is projected to fall further, threatening the agency’s revenue, while the number of delivery points USPS is legally required to serve grows by more than one million each year. As a result, mail density has sharply declined, making mail delivery increasingly less profitable for each address served.
Options for Addressing the USPS Financial Gap
The U.S. Postal Service Office of Inspector General (OIG) reviewed 15 proposals across five categories - offered as options rather than official recommendations - that could significantly boost revenue or reduce costs but come with inherent trade-offs and challenges.
Restoring Financial Health May Require Multiple Reforms
While this paper presents a wide range of potential solutions, none of the 15 options alone would be sufficient to fully eliminate annual net losses in the near term. Therefore, addressing the Postal Service’s persistent and significant net losses likely will require a combination of reform options. Congress, the Postal Regulatory Commission, and the Postal Service will need to decide which combination of revenue-generating and cost-saving options to pursue.
Ultimately, restoring the Postal Service to financial health will likely require trade-offs.
This will entail weighing cost-cutting measures that impact employees and service quality against revenue-generating solutions that would preserve employee protections and USPS infrastructure but may require taxpayer subsidies and higher prices.
Four Possible Pathways for Reform
The OIG provides examples of four pathways — or scenarios — that USPS and its stakeholders could explore. Each scenario specifies different goals and funding models for the Postal Service, ranging from a public service agency that continues to provide a full complement of services but receives substantial government funding, to a significantly downsized agency that is allowed to operate more like a business, with minimal government funding.
Scenario 1
In this scenario, the Postal Service prioritizes serving the public interest and delivering essential services to the American people (especially the most vulnerable), rather than pursuing breakeven financial operating performance. This would align the Postal Service more closely with other federal agencies.
Included in Scenario 1 are the following options:
1. Receive government funding for fulfilling the USO
2. Secure CSRS allocation relief
3. Invest CSRS and FERS assets in a diversified portfolio
4. Invest PSRHBF assets in a diversified portfolio
The OIG estimates the total financial impact of these options would be up to $11.9 billion annually.
Scenario 2
In this scenario, the Postal Service and Congress would both work towards specific reforms: the Postal Service would work on reducing costs within its control, and Congress could provide legislative relief for other costs.
Included in Scenario 2 are the following options:
1. Receive government funding for fulfilling the USO
2. Outsource the middle mile (defined as all mail activities between collection and delivery)
3. Restructure the workforce by freezing conversions to career status
4. Secure CSRS allocation relief
5. Invest CSRS and FERS assets in a diversified portfolio
6. Outsource the retail network
7. Change the Postal Service’s workers’ compensation rules
8. Invest PSRHBF assets in a diversified portfolio
The OIG estimates the total financial impact of these options would be up to $17.7 billion annually.
Scenario 3
In this scenario, the Postal Service aggressively moves to bring costs in line with revenue by streamlining its operations and no longer providing some unprofitable services.
Included in Scenario 3 are the following options:
1. Adjust Market Dominant pricing by only applying the price cap to single-piece First-Class Mail
2. Restructure the workforce by reducing employee headcount by 10%
3. Reduce delivery to five days
4. Cut some USO services; receive a government subsidy to fund the rest
5. Secure CSRS allocation relief
6. Convert door delivery to curbside or cluster box
The OIG estimates the total financial impact of these options would be $21.8 billion annually.
Scenario 4
In this scenario, the Postal Service would receive latitude to pursue breakeven financial performance but would not receive any government funding to support its operations.
Included in Scenario 4 are the following options:
1. Remove the Market Dominant price cap
2. Invest CSRS and FERS assets in a diversified portfolio
3. Adopt a new pension model
4. Reduce delivery to five days
5. Cut all remaining USO services
6. Change the Postal Service’s workers’ compensation rules
7. Amend the funding of retiree health benefits
8. Explore modifications to collective bargaining for compensation
9. Invest PSRHBF assets in a diversified portfolio
The OIG estimates the total financial impact of these options would be $31.4 billion annually.
The most consequential path forward is inaction.
Many of the Postal Service’s financial struggles are systemic and will compound if left unaddressed. Under the weight of existing and future financial pressures, current service expectations will become increasingly untenable. Given the Postal Service’s financial condition, the most consequential path forward is inaction.
Delaying action today risks that future measures to address the Postal Service’s financial challenges will be more drastic than those considered here. Strategic combinations of the options identified in this report represent viable pathways to improving the agency’s finances and ensuring a stable Postal Service for the future.
For an interactive look at USPS financial trends, visit the USPS OIG’s Deeper Dive: Financials & Productivity Dashboard.
Additional Resources from the USPS OIG
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