Other Interest Expense
In 2008, interest expense was $36 million, an increase of $26 million compared to 2007. The net loss of $2.8 billion in 2008 decreased the number of days we were debt free in 2008 compared to 2007, and resulted in the increase in interest expense. In 2007 and 2006, with less debt to repay, and increased cash on hand, other interest expense was $10 million and $5 million respectively.
Interest and Investment Income
When we determine that our available funds exceed our current needs, we invest those funds with the U.S. Treasury’s Bureau of Public Debt in overnight securities issued by the U.S. Treasury. Due to increased levels of debt in 2008, excess cash was mostly used to repay debt, resulting in investment income of $10 million.
In 2007 and 2006, with less debt to repay, and increased cash on hand, we earned investment income of $169 million in 2007 and $140 million in 2006.
We also recognize imputed interest on the funds owed to us under the Revenue Forgone Reform Act of 1993. Under the Act, Congress agreed to reimburse the Postal Service $29 million annually through 2035 for services performed in prior years. See Note 12, Revenue forgone, in the Notes to the Financial Statements for additional information.
Interest and Investment Income |
2008 |
2007 |
2006 |
|---|---|---|---|
(Dollars in millions) |
|||
Investment Income |
$ 10 |
$ 169 |
$ 140 |
Imputed Interest on Accounts Receivable from the |
25 |
25 |
25 |
Other Interest |
1 |
1 |
2 |
Total |
$ 36 |
$ 195 |
$ 167 |
LEGISLATIVE UPDATE
Appropriations
Although the Postal Service is self-funded and does not receive any Congressional appropriations to support its operations, some funding is provided to cover the costs of certain statutorily mandated services. In September 2008, the President signed into law P.L. 110-329, to fund the federal government until March 6, 2009. The Postal Service received the October 2008 – March 2009 portion of its $29 million revenue foregone reimbursement. On October 1, 2008, the Postal Service received $88.9 million, to cover cost associated with free mail for the blind and overseas voters mailed in previous years.
International Air Transportation Bill
In October 2008, the President signed the Air Carriage of International Mail Act (P.L. 110-405), which eliminated the authority of the Department of Transportation (DOT) to set the prices paid by the Postal Service for the air transport of international mail. Under the new provision, the Postal Service is permitted to competitively negotiate the terms of international air mail transportation contracts directly with air carriers, just as we do with our domestic transportation. We will benefit by paying international mail transportation rates set by negotiation, not regulatory procedures.
Medicare Improvements for Patients
and Providers Act
The Medicare Improvements for Patients and Providers Act, (P.L. 110-275) was signed into law July 15, 2008. The law reduces the Medicare reimbursement rate for mail order of durable medical equipment, but does not make a similar reduction for retail suppliers of such equipment. These changes could have a potential annual negative revenue impact of approximately $40 million.