As the U.S. Postal Service considers cutting delivery service in the face of dwindling mail volume and rising costs, the postmaster general received a big pay raise and a performance bonus last year, all authorized by Congress.

Postmaster General John Potter's base salary climbed to $265,000 last year from $186,000 in 2007. He also received a performance bonus of $135,000. In all his total compensation -- salary, bonuses, retirement benefits and other perks -- topped $850,000, a spokesman with the U.S. Postal Service told FOXNews.com on Wednesday.

At the same time, the Postal Service, an independent federal agency, is crumbling alongside the economy and as online communications increase competition. The Postal Service lost $2.8 billion last year when total mail volume recorded 202 billion pieces of mail, its largest single drop in history -- down more than 9 billion pieces from a year earlier. 

Despite annual rate increases, including stamp prices set to rise another two cents in May, 2009 could be the first year since 1946 that the actual amount of money collected by the service declines.

Potter told a Senate committee last month that if current trends continue, the agency could lose $6 billion or more this fiscal year.