From USPS News Link:

The Facts

The new postal law abolishes the mandate that the Postal Service break even. Over the past 35 years, the Postal Service has succeeded in controlling/reducing costs and setting rates, thus generating sufficient revenue to cover costs and break even.

The new law creates an additional incentive for the Postal Service to reduce costs and set prices to make a profit on both market-dominant and competitive products. The goal is to invest the profit (or retained earnings) back into the business, so the Postal Service can continue to automate processing and increase the value of its products and services.

The PMG’s View

Under the new law, we all have to start thinking of the Postal Service as a business. That’s because we won’t be operating under a “break-even” requirement any more. Just as a private-sector business can make a profit, the Postal Service is now able and encouraged to retain earnings ? a real incentive to keep our own costs below inflation.

By helping to pay for big-ticket items like facilities and equipment, retained earnings can limit borrowing and interest expenses. They can help us cover a revenue shortfall ? without raising rates ? if for example the Consumer Price Index moves in an unexpected direction.

Bottom line, retained earnings can give us a cushion for a rainy day. But the law doesn’t guarantee that there will be retained earnings. That’s something each of us has to work at by watching every penny we spend, every day.

This is the continuation of a series of weekly news stories featuring the Postmaster General giving his views on the new postal law and what it means to the future of the Postal Service and its employees. Employees with comments or questions about this article are welcome to e-mail them to: postallawQandA@usps.gov. Selected responses with answers will appear in a future issue of USPS News Link.