I have a design that provides us with 2 voltage rails, one for an LED drive and one for a microcontroller. I am having significant thermal issues however. In open air the transformer and surrounding area runs at about 70c. In an enclosure it overheats and shuts down. Input AC rms current was measured at 180mA at 120VAC [0.65PF, 21.6VA , 15W]. Output current is regulated through an LED driver (36V 300mA [10.8W]). The LED driver itself is measured to be operating at 95% efficiency [0.57W]. The microcontroller is consuming 5V at 35mA [0.175W]. The zener from 36V to 5V is used to prop up my 5V rail when there is no load on the 36V rail, but it drops 32.5V at 15mA [0.49W]. Which leaves me with:

15 - 10.8 - 0.57 - 0.175 - 0.49 = 3W [70%]

How do I increase the efficiency of my design? 

Any insight or suggestions are welcome. 

Thanks,

Nathan