Revenue Forgone Appropriation
Revenue Forgone is an appropriation from Congress, that covers our cost of providing free and reduced rate mailing services to groups designated by Congress. The amount of expense estimated by the Postal Service is submitted to Congress annually. Congress subsequently approves or alters the amount and funds the necessary appropriation. See Note 12, Revenue forgone, in the Notes to the Financial Statements for additional information.
Emergency Preparedness Appropriation
Emergency preparedness appropriations are funds we received from the federal government to help pay the costs of keeping the mail, postal employees, and postal customers safe, and are restricted for such use. These funds were accounted for as deferred revenue upon receipt and were largely utilized to procure capital equipment. We recognize revenue for emergency preparedness appropriations at the same time we recognize depreciation expense for capital equipment purchased with these appropriations. The emergency preparedness appropriations revenue recognized during the years ended September 30 was $61 million in 2008, $76 million in 2007, and $85 million in 2006.
Appropriations that have not been recognized as revenue during the years ended September 30 were $550 million in 2008 and $611 million in 2007. The current portion is included in prepaid box rent and other deferred revenue, and the long-term portion is in deferred appropriations and other revenue on our balance sheets.
Note 3 — Recent pronouncements
In September 2006, the Financial Accounting Standards Board (FASB) issued FAS 157, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of FAS 157 are effective as of the beginning of our 2009 fiscal year. FAS 157 does not change any of our measurement or disclosure reporting.
Note 4 — Postal Accountability and Enhancement Act, Public Law 109-435
(P.L. 109-435)
P.L.109-435, enacted December 20, 2006, made significant reforms in the governance of the Postal Service and significantly altered some of our financial responsibilities, particularly in respect to the funding of CSRS benefits and retiree health benefits. The legislation does not change our parent-subsidiary type relationship as an “independent establishment of the executive branch of the Government of the United States.” Our employees and retirees continue to participate in all federally sponsored retirement and health benefit plans. Therefore, we continue to account for our participation in U.S. government–sponsored health benefit and retirement plans using multiemployer plan accounting rules in accordance with FAS 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions, and FAS 87, Employers’ Accounting for Pensions.
A number of major provisions of P.L.109-435 directly impact our financial statements and are briefly summarized here. For a complete understanding of the law, one must consult the full text, which can be found at www.thomas.gov.
P.L.109-435 returned to the U.S. Treasury the obligation to fund the portion of the CSRS retirement benefit earned while serving in the military by participants who retire as postal employees. With the return of this funding requirement to the U.S. Treasury, it was estimated by OPM that we had fully funded our CSRS pension obligation as of September 30, 2006. See Note 10, Retirement programs, in the Notes to the Financial Statements for more information on our retirement obligations.
Under P.L. 109-435, the Postal Service Retiree Health Benefits Fund (PSRHBF), which is held by the U.S. Treasury and controlled by OPM, was created. The PSRHBF will be used, commencing in 2017, to pay our share of the health insurance premiums for current and future Postal Service retirees. The initial funding of the PSRHBF consisted of $17.1 billion, which was identified by OPM to be the surplus of the Postal Service’s portion of the CSRS as of September 30, 2006. Beginning in 2007, P.L.109-435 required us to make annual payments into the PSRHBF. The payment schedule in the law requires us to pay, on average, $5.6 billion per year into the fund for 10 years, which began in 2007. This is in addition to our regularly allocated cost of premiums for current retirees, which will continue to be payable through 2016. After these annual payments are complete, OPM will make an actuarial valuation and determine whether any further payments into the PSRHBF are required. We paid $5.6 billion into the PSRHBF in 2008 and $5.4 billion in 2007.
P.L.109-435 repealed the escrow provisions of P.L.108-18, which required us to place into an escrow account by September 2006, any “savings” from the change in the retirement provisions created by P.L.108-18. OPM calculated the savings at $2,958 million as of September 30, 2006. These escrowed funds were shown as restricted cash on our September 30, 2006, balance sheet. P.L.109-435 required that we pay the 2006 escrowed “savings” to the PSRHBF. In 2007, we expensed the entire amount payable to the PSRHBF. On April 6, 2007, these “savings” were transferred to the PSRHBF.