Prior to enactment of the Postal Reorganization Act of 1970 (PRA), mail delivery in the United States was the responsibility of the U.S. Post Office Department, a Cabinet-level department in the executive branch. PRA reform efforts were driven largely by the view that the Post Office Department was ill equipped to meet the demands of the growing U.S. population and the changing economy. Mail volume had risen sharply and the Post Office Department lacked the institutional flexibility to quickly respond to market changes. Today, the U.S. Postal Service (USPS or Postal Service) faces similar challenges but for different reasons. Between 2006 and 2015, total mail volume dropped sharply. Market changes and global economic conditions contributed to the Postal Service's financial challenges and affected its efforts to control expenses and expand revenue. Statutory mandates, such as the requirements to maintain six-day delivery and prefund health benefits for future retirees, may limit the actions USPS might take to mitigate these challenges. According to the Postal Service, "many of the structural reforms needed to ensure long-term financial viability, such as the resolution of our unsupportable [retiree health benefit] liability, can only be achieved with comprehensive legislation." This section of the report covers the current financial responsibilities, challenges, and limitations facing USPS. These issues are the result of a confluence of factors including (1) the USPS's statutorily designed organizational and financial structure, (2) U.S. and global economic conditions over the past decade, and (3) the impact that technological innovations have had on the demand for postal products and services. On the one hand, the USPS must sell enough postal products to maintain self-sufficiency and meet other statutory requirements, such as the retiree health benefit prefunding obligation. On the other hand, the USPS generally cannot expand its operations beyond the scope of postal products and services and other limited nonpostal products authorized by statute. Statute also limits the USPS's ability to raise rates on certain postal products. These facts underlie many of the challenges facing the USPS and are also at the core of many of the reform efforts undertaken by the USPS and considered by Congress. The current financial structure of the USPS was largely established by two statutes: the PRA and the Postal Accountability and Enhancement Act of 2006 (PAEA). The PRA created the USPS, which replaced the U.S. Post Office Department, as an independent agency of the executive branch, responsible for generating enough revenue to finance its own operations. Prior to the PRA, the U.S. Post Office Department was a Cabinet-level agency and was not financially self-sustaining. Since the passage of the PRA, the USPS has generated nearly all of its funding—about $69 billion in FY2015 according to the USPS's most recent financial report—by charging users of the mail for the costs of the services it provides. Congress, however, does provide an annual appropriation—about $55 million in FY2016—to compensate the USPS for revenue it forgoes in providing free mailing privileges to the blind and certain overseas voters. In addition, the annual appropriation compensates the USPS for debt it accumulated in the 1990s while providing postal services at below-cost rates to non-profit organizations. Funds appropriated to the USPS for the annual reimbursement and revenue forgone are deposited in the Postal Service Fund, a revolving fund in the Treasury that consists largely of revenues generated from the sale of postal products and services. The revenue in the Postal Service Fund is used to fund the operations of (1) the Postal Service, which includes the U.S. Postal Inspection Service (USPIS); (2) the U.S. Postal Service Office of Inspector General (USPSOIG); and (3) the Postal Regulatory Commission (PRC). The USPS's end-of-year financial results for FY2015 marked the ninth consecutive year of losses for the agency. In the years immediately prior to FY2007, the USPS ran modest profits. Between FY2007 and FY2015, the USPS accumulated $56.8 billion in financial losses, including a net loss of $5.1 billion in FY2015. This trend was reversed in the first quarter of FY2016, which showed a net income of $300 million, compared to a net loss of $800 million at the same point in FY2015. The first quarter of FY2016 includes the holiday shipping season, which is one of the busiest times for USPS. The improvement in USPS's first quarter financial results is due in part to an increase in shipping and package volume and revenue as compared to the first quarter of FY2015. Additional factors, such as a temporary increase in select postal rates, known as a "temporary exigent surcharge" or "exigent increase," will be discussed in greater detail later in this section. Constituents may ask if the USPS receives appropriations, subsidies, or a "bailout" when it ends the fiscal year with a net financial loss. The USPS does not receive additional appropriations when it ends a fiscal year with a financial loss. The USPS does, however, benefit from access to debt instruments from the U.S. Treasury. The USPS has statutory authority to borrow a maximum of $3 billion per fiscal year and hold a maximum total debt of $15 billion. At the end of FY2012, the USPS reached its statutory debt limit. Further, USPS's total debt obligations have remained at $15 billion since FY2012. As the USPS pays down its existing debt, it accumulates new debt up to its statutory maximum. For example, on October 1, 2015, the USPS repaid $4 billion of its debt. It is expected, however, to borrow up to its statutory ceiling amount by the end of FY2016. USPS's $15 billion in debt is issued through a variety of loan instruments, which includes fixed and floating rate loans, an overnight credit line of $600 million, and a short-term credit line that allows the USPS to borrow up to $3.4 billion with two days prior notice. The USPS's credit lines were fully drawn at the end of FY2015. Additionally, financial losses have caused the USPS to default on certain statutorily required payments, such as the retiree health benefit prefunding obligations. Since FY2012, the USPS has defaulted on over $28 billion in statutorily required retiree health benefit prefunding obligations. Use of debt instruments and default on certain retiree health prefunding payments has likely allowed the USPS to maintain cash-on-hand sufficient to cover its operational expenses throughout each fiscal year. As Table 1 shows, the USPS has ended each fiscal year since FY2007 with at least $889 million cash-on-hand. As shown in Table 1 and Figure 1 , in FY2015, the USPS had, on average, about 24 days of operating cash-on-hand, sufficient to pay its day-to-day operating expenses, despite ending the year with $15 billion total debt outstanding. As of the end of FY2015, when all assets and liabilities are considered (including retirement accounts, health fund balances, cash and other assets), the USPS's total liabilities exceeded its assets by about $101 billion. The PAEA, for the first time, provided a definition of the term postal service . Under the PAEA, postal service is defined as "the delivery of letters, printed matter, or mailable packages, including acceptance, collection, sorting, transportation, or other functions ancillary thereto." This definition is significant because it prevents the Postal Service from developing new nonpostal products (e.g., expanded banking and financial services) that could compete with private industry. The PAEA also changed how postal rates are established and divided postal products into two distinct groups: market dominant products and competitive products. Prior to the passage of the PAEA, there was concern that the USPS was using its revenue from market dominant products to subsidize the costs of competitive products. Cross-subsidization could, potentially, provide an advantage for the USPS in the competitive market by creating artificially low prices that did not include all the costs attributable to those products. The PAEA addressed this issue by forbidding the subsidization of competitive products with market dominant revenue and establishing the Competitive Products Fund (CPF), which receives deposits from the Postal Service Fund for revenues derived from the sale of competitive products. In FY2015, overall revenue from postal products and services was $68.951 billion, which was an increase of $1.097 billion (or 1.6%) from FY2014. The increase was due in large part to revenue from competitive products, which offset decreased revenue from market dominant products. Nevertheless, revenue generated from the sale of market dominant products accounts for approximately 74% of USPS's annual operating revenue. As shown in Figure 2 , total revenue from market dominant products was $52.426 billion in FY2015, a decrease of approximately $340 million (or 0.64%) from FY2014. Total revenue from competitive products, however, was approximately $16.52 billion in FY2015, an increase of $1.437 billion (or 9.52%) from FY2014. Within the market dominant category, standard mail (i.e., advertising mail) remained one of the few profitable products. Revenue from standard mail increased approximately $217 million (or 1.24%) from FY2014 to FY2015. Historically, competitive products have constituted a much smaller share of USPS revenue than market dominant products. Competitive products account for a larger proportion of USPS revenue than they do of USPS volume. For example, in FY2015, competitive products represented approximately 3% of mail volume, but they accounted for approximately 24% of USPS revenue. See Figure 3 below.