[Senate Hearing 107-284]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 107-284
 
             FINANCIAL SECURITY OF THE U.S. POSTAL SERVICE
=======================================================================





                                HEARING

                                before a

                          SUBCOMMITTEE OF THE

                      COMMITTEE ON APPROPRIATIONS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                            SPECIAL HEARING

                    NOVEMBER 8, 2001--WASHINGTON, DC

                               __________

         Printed for the use of the Committee on Appropriations




 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 senate
                                 ______


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                      COMMITTEE ON APPROPRIATIONS

                ROBERT C. BYRD, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii             TED STEVENS, Alaska
ERNEST F. HOLLINGS, South Carolina   THAD COCHRAN, Mississippi
PATRICK J. LEAHY, Vermont            ARLEN SPECTER, Pennsylvania
TOM HARKIN, Iowa                     PETE V. DOMENICI, New Mexico
BARBARA A. MIKULSKI, Maryland        CHRISTOPHER S. BOND, Missouri
HARRY REID, Nevada                   MITCH McCONNELL, Kentucky
HERB KOHL, Wisconsin                 CONRAD BURNS, Montana
PATTY MURRAY, Washington             RICHARD C. SHELBY, Alabama
BYRON L. DORGAN, North Dakota        JUDD GREGG, New Hampshire
DIANNE FEINSTEIN, California         ROBERT F. BENNETT, Utah
RICHARD J. DURBIN, Illinois          BEN NIGHTHORSE CAMPBELL, Colorado
TIM JOHNSON, South Dakota            LARRY CRAIG, Idaho
MARY L. LANDRIEU, Louisiana          KAY BAILEY HUTCHISON, Texas
JACK REED, Rhode Island              MIKE DeWINE, Ohio
                     Terry Sauvain, Staff Director
                 Charles Kieffer, Deputy Staff Director
               Steven J. Cortese, Minority Staff Director
            Lisa Sutherland, Minority Deputy Staff Director
                                 ------                                

            Subcommittee on Treasury and General Government

                BYRON L. DORGAN, North Dakota, Chairman
BARBARA A. MIKULSKI, Maryland        BEN NIGHTHORSE CAMPBELL, Colorado
MARY L. LANDRIEU, Louisiana          RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island              MIKE DeWINE, Ohio
ROBERT C. BYRD, West Virginia        TED STEVENS, Alaska
  (ex officio)                         (ex officio)

                           Professional Staff

                              Chip Walgren
                             Nicole Rutberg
                         Pat Raymond (Minority)
                    Lula Edwards (Minority)
                           



                             C O N T E N T S

                              ----------                              
                                                                   Page

Statement of John E. Potter, Postmaster General/CEO, United 
  States Postal Service..........................................     1
Opening statement of Senator Byron L. Dorgan.....................     1
Postmaster General's opening statement...........................     7
Prepared statement of John E. Potter.............................    10
Mail sanitization technology.....................................    12
Financial consequences of terrorists attacks.....................    26

                               (iii) 
















             FINANCIAL SECURITY OF THE U.S. POSTAL SERVICE

                              ----------                              


                       THURSDAY, NOVEMBER 8, 2001

                           U.S. Senate,    
                       Subcommittee on Treasury    
                            and General Government,
                               Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10 a.m., in room SD-124, Dirksen 
Senate Office Building, Hon. Byron L. Dorgan (chairman) 
presiding.
    Present: Senators Dorgan, Mikulski, Reed, Byrd, Campbell, 
DeWine, and Stevens.

                      UNITED STATES POSTAL SERVICE

STATEMENT OF JOHN E. POTTER, POSTMASTER GENERAL/CEO
ACCOMPANIED BY:
        RICHARD STRASSER, CHIEF FINANCIAL OFFICER
        THOMAS DAY, VICE PRESIDENT OF ENGINEERING
        ROBERT RIDER, CHAIRMAN, BOARD OF GOVERNORS


              opening statement of senator byron l. dorgan


    Senator Dorgan. The hearing will come to order.
    The subcommittee meets today to receive testimony from John 
Potter, the Postmaster General, on the unanticipated financial 
needs now facing the Postal Service as a result of the 
September 11 terrorist attacks and also the incidence of 
anthrax exposure resulting from transmittal through the postal 
system.
    The Postal Service is one of the few Government 
organizations which touches nearly every person on a daily 
basis in the United States, and it helps knit this Nation 
together through the concept of universal service. It is 
imperative, it seems to me, the Postal Service remain a viable 
and a robust institution.
    Tragically, the Postal Service has become yet another front 
in this country's new war against terrorism. The men and women 
who daily wear the postal uniform and make their appointed 
rounds are on the front lines of this battle, and as in any 
battle, there are casualties. The Postal Service has lost two 
of its D.C. area employees to anthrax, while others are 
hospitalized and thousands are on antibiotics as a 
precautionary measure.
    Mr. Postmaster General, one morning I was reading the 
newspaper here in Washington, D.C., and was reading about the 
postal workers who had lost their lives. I recall both stories 
were of wonderful public servants, one of whom had worked the 
night shift for 15 years and had not used one day of sick leave 
in 15 years. I think it is important for our country to 
understand the dedication of the men and women who work in the 
Postal Service. Our hearts go out to you and all the men and 
women in the Postal Service for this loss. We want to work with 
you to respond to these threats.
    This new threat to our homeland has the potential to reach 
into every household and to undermine our collective belief in 
the security of our mail. This threat must be defeated and the 
national confidence restored.
    Now, just as the airlines and others were unable to budget 
for the closure of the Nation's airports following the 
September 11 attacks, the Postal Service could not possibly 
have planned for the destruction of the major facility in New 
York City, much less a bioterrorist tainting of the mail.
    There is a legitimate need for a Federal Government 
contribution to assist the Postal Service as it addresses this 
crisis. As one who firmly believes in the mission of the Postal 
Service, I will support that effort.
    Since the Postal Service was created in 1970, the Federal 
Government's direct appropriation of funds has been reduced 
significantly. In fact, the last time Congress provided a 
specific appropriation to offset the Postal Service's deficits 
was in 1976 and 1977. Currently, we in Congress only 
appropriate funds to cover the loss of revenue associated with 
the cost of certain free mailings for the blind and overseas 
voting.
    A direct appropriation to the Postal Service would be 
extremely unusual, but these are unusual times. And if the 
Congress and the Federal Government are to make any payment to 
the Postal Service, we need to be careful and clear on the 
exact items we will be paying for and the associated costs of 
those items.
    The question for us--in my judgment, is not whether but how 
and how much, and we will explore those issues today.
    I want to make an additional point before I call on my 
colleagues. This issue in many ways is at the top of the list 
with respect to homeland security. Every mail recipient in this 
country is nervous and concerned about the fact that terrorists 
have used the mail as an instrument of violence against the 
American people. So this is about homeland security.
    We have a question here about funding. I know, Mr. 
Postmaster General, you are going to give us recommendations 
today about funding needs. You know from reading the newspaper 
in the last couple of days there have been discussions between 
the White House and Congress about what kind of resources are 
available, threats about vetoing appropriations bills with any 
additional money attached to them. We have appropriated $40 
billion for the purpose of responding to threats of terrorism 
and for the purpose of helping rebuild New York and responding 
to the terrible calamity of September 11.
    Some of that money, a substantial amount, is dedicated to 
New York. A substantial amount is an amount the President has 
some discretion to use. My understanding is that the amount 
that is as of yet uncommitted is largely reserved for the 
Pentagon or military needs. So I think all of us have to try to 
think through, with especially what has happened in recent days 
about the threats of vetoes of additional funding needs, we 
need to think through what are the needs, what are our 
priorities, and how do we find the resources to deal with the 
priorities. Is it something that is optional for us to deal 
with? Can we just today say, well, whatever the consequences of 
the mail, whatever the condition of the mail, whatever someone 
tries to do to deal with the mail in a manner that the 
terrorists did with respect to anthrax, let it happen and we 
will wait to see what the consequences are? The answer to that 
clearly is no. That would be unthinkable and unforgivable.
    Every family in this country is affected by the threat of 
terrorists using the mail as an instrument of terror and of 
violence. And so we must, it seems to me, take the steps 
necessary to do what we can to respond to these issues, and 
that is the purpose of this hearing today.
    Mr. Postmaster General, we welcome you today, and we want 
you to make the case that you feel you must make on behalf of 
the Postal Service as you address this current crisis. And, 
again, let me say as I conclude, our hearts go out to the 
families of those who have been affected by the anthrax crisis. 
We want to say how much we admire the men and women who work in 
the Postal Service, and we want to do what we can to protect 
them and protect the American people.
    Let me call on my ranking member, Senator Campbell?
    Senator Campbell. Thank you, Mr. Chairman, and welcome, Mr. 
Postmaster. I want like to add my condolences to that of the 
chairman, too, for the postal workers. Almost everywhere out in 
ranch country where we both live, we know our postmasters, we 
know our postal workers. They are our friends and our 
neighbors. We know the people who deliver the mail and the 
letters to our houses every day, and it is not like just some 
unseen face that you see in the newspaper. For us, there is a 
real family involved when we hear postal workers that have 
unfortunately contracted anthrax and are under the threat of 
further attacks.
    So thank you for being here, and in light of that, I want 
to tell you that I am very interested in finding out more about 
the additional requirements that you are going to need. I think 
we can all appreciate the situation you find yourself in. It is 
new to everybody. Obviously, there are no game plans; there are 
no previous rules that we can fall back on. But one thing we 
are learning very fast is that terrorism has a very hefty price 
tag, and it seems to be changing literally day to day.
    I don't know what the bottom line is going to be. As the 
chairman mentioned, we have appropriated $40 billion. I don't 
know, it might end up being the first installment because these 
things are going up. But certainly we have to do our best to 
work together to ensure the future vitality of the Postal 
Service, and I look forward to doing that. I know we will 
probably never get back to the day when the postman's worst 
fear was an angry dog when he was walking down the street, but 
clearly we can do better.
    I know that you are under some duress from the postal 
workers themselves, who feel that they were not contacted early 
enough about the mail that was delivered to Senator Daschle's 
office and the media's office, too. I understand there are some 
lawsuits going on with that. I just hope we can get through all 
this and we recognize that we have a long way to go in this war 
against terrorism. It is going to be something like we have 
never faced before.
    But thank you for being here. Thank you for your testimony.
    Senator Dorgan. Senator Campbell, thank you very much.
    Next I will call on Senator Mikulski.
    Senator Mikulski. Thank you very much, Mr. Chairman, and I 
want to thank you for holding this very timely hearing today. 
And I want to welcome the Postmaster General, Mr. Potter.
    Mr. Potter, I would like to again express my deepest 
condolences to the families of the two Maryland postal workers 
who died because of anthrax. Mr. Morris and Mr. Curseen were 
residents of my State. By all accounts, they were good 
neighbors and great guys. And our heart goes out to those 
families.
    Our heart also goes out to the thousands of people who work 
at Brentwood facility. I was over at D.C. General, walked the 
halls to see how they were being treated as they lined up to be 
able to get their Cipro. And our strength and our support also 
goes to them and the people in Linthicum and throughout all of 
the postal facilities in our Nation.
    I really want to compliment the Nation's postal workers for 
staying on the job. We see them out there every day. The post 
offices are open. The mail is being delivered. I see them with 
their leather bags out in our communities. And I just really 
want to congratulate them for their steadfastness, their 
loyalty, their bravery, and really their patriotism, because 
they are showing confidence in the way our country is working.
    But I believe that we need to be able to thank them not 
only with words but with deeds. And I believe we, as the United 
States Congress, need to move heaven, earth, and our budget to 
make sure that we ensure worker safety and mail safety; that 
the postal workers themselves and all who use the post office 
know that their highest elected officials are on their side. 
And I think we need to listen to you today on what it is that 
we need to do to help you make sure that the workers are safe, 
that the mail is safe, and all who come to those facilities are 
helped.
    At the same time, we know that the postal workers 
themselves are under incredible pressure, and I know you have a 
great reputation for listening to your workers, and I thank you 
for that. But I think we have to agree that the postal workers 
themselves have a right to be heard, they have a right to know 
what is going on, and they have a right to be protected. This 
is what homeland security is all about.
    I look forward to working with you on this because the 
events of last month were deeply troubling. On October 15th, 
there was the Daschle letter. This Capitol Hill campus 
responded quickly. I know that you tried to respond quickly to 
the Brentwood situation. But, alas and alack, you didn't get 
the information or the agency support that you needed. I am 
deeply troubled by that.
    But now we have to look ahead to the future about the 
reopening of other facilities, the reopening of Brentwood. Just 
as we worry about the Hart Building, you worry about these 
other facilities. And I want to be sure that Brentwood gets 
exactly what we are getting from the Hart Building. So we want 
to work with you and we want to marshal the resources of the 
United States Government to be sure that when our facilities 
are open and yours are, that they are as fit for duty as the 
people who will bravely walk into those doors.
    God bless you and God bless the Postal Service, and I look 
forward to working with you and being on your side.
    Mr. Potter. Thank you, Senator.
    Senator Dorgan. I am going to recognize members in order of 
appearance. Senator Reed?
    Senator Reed. Thank you very much, Mr. Chairman, and 
welcome, Mr. Potter. I want to join my colleagues in expressing 
my sympathy for the postal workers who have died, their 
families and their coworkers. This unprecedented attack upon 
America using anthrax through the mail has put tremendous 
stress on the postal service, and it has in an unbelievable way 
made anthrax an occupational hazard for postal workers.
    But there are other occupational hazards that they face 
every day in buildings throughout this country, and I would 
hope that when you present to us your plans for the Postal 
Service they are not simply in terms of responding to this 
crisis, but also in terms of responding to all the occupational 
hazards that postal workers face each and every day.
    I think one legacy for the sacrifice made by these two 
postal workers would be not only that we respond to this crisis 
but also that we provide a better working environment for all 
their coworkers. And we want to work with you to do that.
    Thank you, Mr. Potter.
    Mr. Potter. Thank you.
    Senator Dorgan. Senator DeWine?
    Senator DeWine. Thank you, Mr. Chairman.
    Postmaster Potter, let me also join my colleagues in 
expressing to you and the Postal Service, and specifically to 
the families of Mr. Morris and Mr. Curseen, our deepest 
sympathy for their deaths. This is a great tragedy. It is a 
great tragedy that has affected this entire country.
    Members of the Postal Service are our friends, they are our 
neighbors, they are literally the fabric of our communities, as 
Ben has indicated. So, we feel very deeply about this.
    I think we have an obligation, as, of course, you do, to 
try to do whatever we can to make the changes that we can to 
ensure the safety of our postal workers and the sanctity and 
safety of our mail.
    When it comes time for my questioning, I am going to be 
asking you about the contract that you have entered into with 
Titan, what your ideas are in regard to the sanitation of the 
mail, whether or not--what testing has actually been done that 
would indicate that the procedure that Titan is doing and will 
be doing in the future really has been tested and that we know 
that it will, in fact, work. So, that is where I will be going 
with my questions. I look forward to having the opportunity to 
talk with you in a few minutes.
    Mr. Potter. Thank you.
    Senator Dorgan. Finally, we are joined by the chairman of 
the full Appropriations Committee of the Senate, Senator Robert 
Byrd.
    Senator Byrd. Thank you, Mr. Chairman, and I thank the 
other members of the subcommittee.
    The Continental Congress first met on September 5, 1774, 
and the next year, in the Second Continental Congress, in 1775, 
the Continental Congress appointed Benjamin Franklin Postmaster 
General. And so the Articles of Confederation, which became 
effective in 1781, mentioned the United States of America for 
the first time. It included those words. That was our first 
Constitution, the Articles of Confederation. And the United 
States of America, that splendid verbiage appeared for the 
first time in the first Constitution.
    At that time, of course, the confederation was a weak 
confederation. It was a confederation of colonies that were 
scattered along the Eastern seaboard. And the new postal system 
that Congress created helped to bind our infant Nation together 
by supporting the growth of commerce and the free flow of ideas 
and free flow of information.
    Anthrax today threatens to rip that bond apart. I am 
concerned that the fear of bioterrorism--and I share it with 
every other American, and I particularly have concerns for the 
people, the postal workers, and I share the concerns of my 
colleagues here who have spoken and who have been very close to 
this situation since it began, such as the Senator from 
Maryland, Senator Mikulski.
    So I am concerned about that fear that grips this Nation. 
It is an atmosphere of fear. And I am fearful that it will send 
our economy into--hopefully not a free fall, but it is 
conceivable that that could happen.
    I hope that in the weeks ahead, Mr. Postmaster General, we 
can work together to ensure that the free flow of ideas and 
information is not disrupted further by the threat of an unseen 
microbe. We must work to protect postal employees and the 
millions of American citizens who want nothing more than a 
letter or a package to arrive in their mailbox.
    We are coming upon the holidays of Thanksgiving and 
Christmas and New Year's, and it would be a time when people 
will be receiving and will be hoping to receive packages and 
mail from loved ones and from friends across the Nation and 
from throughout the world. And we must do everything that we 
possibly can to make those packages and that mail safe, and 
most of all to give our people renewed confidence that their 
government is acting to secure them, the people.
    And so remembering that a postal system existed in the 
Confederation of States before the United States existed when 
its birth was brought forward in 1787 with the writing of the 
U.S. Constitution, the current Constitution, that is a 
memorable history. And I salute you for the work you are doing. 
We simply cannot allow terrorists to destroy or further impede 
the mission of this important institution, the institution that 
you head.
    Thank you very much, Mr. Chairman.
    Senator Dorgan. Senator Byrd, thank you very much.
    We are also joined by the ranking member of the full 
committee, former chairman of the committee, Senator Stevens.
    Senator Stevens. Well, thank you very much. I am sorry to 
be a little late. I just left the Library of Congress where we 
are dealing with the veterans history project, Mr. Postmaster 
General, and I apologize for not having been properly briefed. 
They said, well, we mailed this to you almost a month ago.
    It is somewhere stuck in the mail.
    On the Constitution, I am not one to follow Senator Byrd in 
regard to the history of it, but it does provide that the 
Congress has the duty to provide post offices and post roads. 
We set up the United States Postal Service as a semi-government 
function. The ratepayers really support it now rather than 
taxpayers, but there is still a taxpayer obligation and a 
congressional obligation. I am pleased to be here to listen to 
your statement because I think you have a terrible problem on 
your hands right now.
    Thank you very much, Mr. Chairman.
    Senator Dorgan. Senator Stevens, thank you very much.
    Postmaster General John Potter is accompanied by Richard 
Strasser to our right, who is chief financial officer, and Tom 
Day, Vice President of Engineering, to his left. We also have 
the Chairman of the Postal Service Board of Governors, Robert 
Rider, who is sitting directly behind the Postmaster General.
    Mr. Postmaster General, why don't you proceed?


                 postmaster general's opening statement


    Mr. Potter. Thank you, Mr. Chairman, and good morning to 
you and to the members of the committee. I appreciate the 
opportunity to meet with you today to discuss the unanticipated 
financial burdens that have been placed on the Postal Service 
as a result of the terrorist attacks on September 11 and the 
subsequent use of the mail as a vehicle for bioterrorism.
    Today postal employees find themselves on the front lines 
of a new war. It is not a role they have sought, but it is one 
that they have accepted. They have become quiet heroes simply 
by doing their jobs, serving the American public. We mourn the 
loss of two courageous members of our postal family. We pray 
for the health of seven others who have suffered from this 
attack.
    I am grateful that the subcommittee acted quickly to 
convene this hearing. Your desire to hear from the Postal 
Service says a great deal about your collective and individual 
interest in protecting this basic and fundamental 
communications service provided for the American people by the 
Government.
    The Postal Service is a critical element of the Nation's 
infrastructure. It is the one element of our National 
Government that has daily presence in every community in the 
Nation, from the smallest town to the largest cities. The 
Postal Service is the linchpin of the 9-million-person, $900 
billion mailing industry.
    The Postal Service is coming off 2 years of negative net 
income for fiscal years 2000 and 2001, this despite record 
productivity increases during that same period. Expenses rose 
faster than our rate of growth as a result of serving an ever-
growing number of delivery points, an additional 1.6 million 
new delivery addresses each year, combined with hikes in 
employees' salaries, hikes in energy costs, and increases in 
health benefit costs.
    The fiscal year 2002 plan envisioned more of the same, with 
a planned loss of $1.35 billion, despite our having just raised 
rates earlier this year.
    The potential for a $2.5 billion loss in fiscal year 2003 
compelled the Board of Governors of the Postal Service to vote 
for a rate case filing with the Postal Rate Commission on 
September 10th this year for implementation of new rates in the 
fall of next year at the earliest.
    Terrorism has exacerbated this bleak financial picture. The 
Nation has been subjected to two distinct attacks: the 
September 11 terror attacks and the subsequent anthrax attacks 
using the mail. Both were intended to kill and frighten 
Americans. The Postal Service has been the victim of both 
attacks.
    Clearly, many Americans were concerned about what lay ahead 
in the future and the threat of anthrax in their mail. These 
concerns were reflected in significant losses in volume and 
revenue in September and October.
    These months mark the start of the holiday mailing season, 
our busiest and most important time of the year. During this 
season, we generate a financial surplus which carries us 
through lower volume and revenue periods in the summer months.
    While we are getting our hands around the short-term and 
long-term financial impact of the attacks, let me assure you 
that they are enormous. The financial impact falls into two 
categories: the first are costs directly related to the 
September 11 and anthrax attacks; the second category relates 
to the business impact of these incidents.
    In the category of direct impact of the terror attacks, the 
Postal Service has and will incur costs for damage to 
facilities and equipment in New York City; disruption of 
facility operations and associated mail-handling costs; medical 
testing and emergency treatment of employees exposed to 
anthrax; protective equipment for our employees; environmental 
testing and, where necessary, decontamination of postal 
facilities; communication and education of employees and 
customers; implementation of new security procedures; detection 
technology; cleaning and filtration systems; and equipment to 
sanitize the mail.
    The most significant of these expenses will be the purchase 
of equipment to sanitize mail and the costs associated with 
integrating this equipment into current operating systems. 
Three criteria have been established for selection of the 
appropriate technology for use nationally.
    First, the technology must be capable of eliminating 
biochemical materials in the mail.
    Second, the technology must be compatible with postal 
operations. It should enable us to treat the mail and maintain 
current service levels.
    Finally, it should be the least costly, most effective 
technology when considering both initial purchase cost and 
ongoing operating cost.
    A risk assessment is underway to determine the location and 
the amount of equipment to be purchased. With the assistance of 
Dr. John Marburger, Director of the President's Office of 
Science and Technology, we have been able to assemble experts 
from various Federal agencies, as well as research facilities 
throughout the United States. They have helped us to identify 
the available technologies that are compatible with our needs.
    Over the coming months, we will be evaluating and testing 
these options. In the interim, we will use readily available 
technology and lease private sector facilities where there is 
existing effective equipment.
    President Bush has made $175 million available to the 
Postal Service from monies authorized by Congress for homeland 
security. We are using these monies to defray costs in the 
short run, including the initial purchase of sanitizing 
equipment.
    Based on current information, we estimate our entire cost 
for terrorism and dealing with homeland security to be $3 to $4 
billion. We will refine these estimates as we aggressively 
pursue our review of the technology and the modifications we 
have to make to our systems.
    We are working on the premise that the leaders of the 
Nation want to ensure that all of the Nation's mail system is 
protected from this kind of terrorist threat in the future. We 
are proceeding with our plans and actions on this basis. While 
we need some funding soon to make this happen, just as 
important is the commitment to meet this challenge with full 
funding.
    As I have noted, direct costs of responding to these terror 
attacks is only one of two types of financial consequences we 
are facing. The second is the large and negative impact on our 
business. This is reflected in significant declines in mail 
volumes and revenue that are related to and impacted by the 
terrorist attacks.
    During September and October, mail volume was more than 2 
billion pieces less than last year. Even with postage rates 6 
percent higher, total revenues were below last year and $634 
million below what had been anticipated. Operationally, we have 
trimmed our cost by more than $200 million beyond reductions we 
had already planned.
    The bottom line for September and October put us $418 
million below where we should have been, which means we are 
already facing a $1.8 billion deficit this fiscal year versus 
the $1.35 billion we had forecast last summer.
    With concerns about the mail system driving individuals and 
businesses to consider alternatives, we believe this could 
affect our bottom line by $2 billion this fiscal year. However, 
it will take us a number of months to assess the full impact on 
the Postal Service.
    Mr. Chairman, the financial impacts I have described are 
the consequence of terror attacks on the Nation. They should be 
considered costs of homeland security. Despite the leadership 
and support from our customers, our employees, our unions, our 
management associations, Health and Human Services Secretary 
Thompson, and Governor Ridge, the Postal Service requires 
financial help if we are to rebuild faith in the integrity of 
what is in the mail and maintain the level of service we have 
provided over the years.
    From those small businesses who depend on the daily mail, 
to citizens who save money by receiving prescriptions by mail, 
to local newspapers and churches who rely on the local Post 
Office to deliver, Postal customers should not be burdened by 
extra costs of terrorism through the price of postage. This 
could quickly threaten the foundation of a universal Postal 
system serving all Americans.
    We are doing everything that we can to reduce our expenses 
by streamlining operations and our administrative costs. We are 
also moving forward to do everything we can to keep the mail 
safe. Both are imperative if we are to continue to maintain the 
levels of trust and confidence necessary to protect the 
viability of our national Postal system. We will deliver on 
this expectation. We will do everything possible to protect the 
lives and safety of employees and customers, and we will keep 
the mail moving. This is vital to the Nation, to our economy 
and to the men and women who work in the entire mailing 
industry that represents 9 million jobs and fuels 8 percent of 
the country's gross domestic product.


                           prepared statement


    We will need your help, and I look forward to working with 
the committee.
    Thank you very much, and we will be pleased to answer any 
questions you may have.
    [The statement follows:]

                  Prepared Statement of John E. Potter

    Good morning, Mr. Chairman and members of the Subcommittee. I 
appreciate the opportunity to meet with you today to discuss the 
unanticipated financial burdens that have been placed on the Postal 
Service as a result of the terrorist attacks of September 11 and the 
subsequent use of the mail as a vehicle for bio-terrorism.
    Mr. Chairman, with me today are Richard Strasser, the Postal 
Service's Chief Financial Officer and Thomas Day, Vice President of 
Engineering. I would also like to recognize Robert Rider, the Chairman 
of the Postal Service's Board of Governors.
    Today, Postal Service employees find themselves on the front lines 
of a new kind of war. It is not a role they have sought, but it is one 
they have accepted. They have become quiet heroes simply by doing their 
jobs, serving the American public. We mourn the loss of two courageous 
members of our postal family. We pray for the health of seven others 
who have suffered from this attack.
    I am grateful that the subcommittee acted quickly to convene this 
hearing. Your desire to hear from the Postal Service says a great deal 
about your collective and individual interest in protecting this basic 
and fundamental communications service provided for the American people 
by the government.
    The Postal Service is a critical element of the nation's 
infrastructure. It is the one element of our national government that 
has a daily presence in every community in the Nation--from the 
smallest towns to our largest cities. The Postal Service is the 
lynchpin of the 9 million person, $900 billion mailing industry.
    The Postal Service is coming off two years of negative net income--
in fiscal year 2000 and fiscal year 2001--this despite record 
productivity increases during this same period. Expenses rose faster 
than our rate of growth as a result of serving an ever growing number 
of delivery points, an additional 1.6 million new delivery addresses 
each year, combined with hikes in employee salaries, energy costs and 
increases in health benefit costs.
    The fiscal year 2002 plan envisioned more of the same with a 
planned loss of $1.35 billion despite having just raised rates earlier 
this year. The potential for a $2.5 billion loss in fiscal year 2003 
compelled the Board of Governors of the Postal Service to vote for a 
rate case filing with the Postal Rate Commission on September 10th this 
year for implementation of new rates in the fall of next year, at the 
earliest.
    Terrorism has exacerbated this bleak financial picture. The Nation 
has been subjected to two distinct attacks--the September 11 terror 
attack and the subsequent anthrax attacks using the mail. Both were 
intended to kill and frighten Americans. The Postal Service has been 
the victim of both attacks. Clearly, many Americans were concerned 
about what lay ahead in the future and the threat of anthrax in their 
mail. These concerns were reflected in significant losses in volume and 
revenue in September and October. These months mark the start of the 
holiday mailing season, our busiest and most important time of the 
year.
    During this season we generate a financial surplus which carries us 
through lower volume and revenue periods in the summer months.
    While we are just getting our hands around the short-term and long-
term financial impact of the attacks, let me assure you that they are 
enormous.
    The financial impact falls into two categories. The first are costs 
directly related to the September 11 and anthrax attacks. The second 
category relates to the business impact of these incidents.
    In the category of direct impact of the terrorist attacks, the 
Postal Service has and will incur costs for:
  --Damage to facilities and equipment in New York City
  --Disruption of facility operations and associated mail handling 
        costs
  --Medical testing and emergency treatment of employees exposed to 
        anthrax
  --Protective equipment for employees
  --Environmental testing and where necessary, remediation of postal 
        facilities
  --Communication and education of employees and customers
  --Implementation of new security procedures
  --Detection technology -Cleaning and filtration systems, and
  --Equipment to sanitize mail.
    The most significant of these expenses will be the purchase of 
equipment to sanitize mail and the costs associated with integrating 
this equipment into current operating systems. Three criteria have been 
established for selection of the appropriate technology for use 
nationally.
    First, the technology must be capable of eliminating bio-chemical 
materials in the mail. Second, the technology must be compatible with 
postal operations. It should enable us to treat the mail and maintain 
current service levels. And finally, it should be the least costly, 
most effective technology when considering both initial purchase cost 
and ongoing operating cost. A risk assessment is underway to determine 
the location and amount of equipment to be purchased.
    With the assistance of Dr. John Marburger, director of the 
President's Office of Science and Technology, we have been able to 
assemble experts from various Federal agencies, as well as research 
facilities throughout the United States. They have helped us to 
identify the available technologies compatible with our needs. Over the 
coming months we will be evaluating and testing these options. In the 
interim, we will use readily available technology and lease private 
sector facilities where there is existing effective equipment.
    President Bush has made $175 million available to the Postal 
Service from monies authorized by Congress for homeland security. We 
are using these monies to defray costs in the short run, including the 
initial purchase of sanitizing equipment.
    Based on current information, we estimate these costs of dealing 
with homeland security to be $3 to $4 billion. We will refine these 
estimates as we aggressively pursue our review of the technology and 
the modifications we have to make to our systems.
    We are working on the premise that the leaders of the Nation want 
to ensure that all of the nation's mail system is protected from this 
kind of terrorist threat in the future.
    We are proceeding with our plans and actions on this basis. While 
we need some funding soon to make this happen, just as important is the 
commitment to meet this challenge with full funding.
    As I have noted, the direct costs of responding to these terror 
attacks is only one of two types of financial consequences we are 
facing. The second is the large- and negative-impact on our business. 
This is reflected in significant declines in mail volume and revenue 
that are related to and impacted by the terrorist acts.
    During September and October, mail volume was more than 2 billion 
pieces less than last year. Even with postage rates 6 percent higher, 
total revenues were below last year and $634 million below what had 
been anticipated. Operationally, we have trimmed our costs by more than 
$200 million beyond reductions we had already planned.
    The bottom line for September and October put us $418 million below 
where we should have been, which means we are already facing a $1.8 
billion deficit this fiscal year versus the $1.35 billion we had 
forecast last summer.
    With concerns about the mail system driving individuals and 
businesses to consider alternatives, we believe this could effect our 
bottom line by $2 billion this fiscal year. However, it will take a 
number of months to assess the full impact on the Postal Service.
    Mr. Chairman, the financial impacts I have described are the 
consequences of terror attacks on the Nation. They should be considered 
costs of homeland security. Despite the leadership and support from our 
customers, employees, unions, management associations, Health and Human 
Services' Secretary Thompson, and Governor Ridge, the Postal Service 
requires financial help if we are to rebuild faith in the integrity of 
what's in the mail and maintain the level of service we have provided 
over the years.
    From those small businesses who depend on the daily mail to 
citizens who save money by receiving prescriptions by mail, to local 
newspapers and churches who rely on the local post office to deliver, 
postal customers should not be burdened by extra costs of terrorism 
through the price of postage.
    This could quickly threaten the foundation of a universal postal 
system serving all Americans.
    We are doing everything to reduce our expenses by streamlining 
operations and administrative costs. We are also moving forward to do 
everything we can to keep the mail safe. Both are imperative if we are 
to continue to maintain the levels of trust and confidence necessary to 
protect the viability of our national postal system.
    We will deliver on this expectation. We will do everything possible 
to protect the lives and safety of our employees and customers. And we 
will keep the mail moving. This is vital to the Nation, its economy, 
and the men or women who work in the entire mailing industry that 
represents 9 million jobs and fuels 8 percent of the country's gross 
domestic product.
    We need your help, and I look forward to working with the 
Committee. Thank you very much. We will be pleased to answer any 
questions.

    Senator Dorgan. Mr. Potter, thank you very much.
    About 2 weeks ago I received a call from a county sheriff 
in North Dakota. A constituent of mine in North Dakota had 
received a letter from me that apparently my office had mailed 
just prior to the anthrax letter coming to the Hart Building, 
probably October 10th or 12th we had put a letter in the mail 
in response to a constituent. The letter found its way to 
southeastern North Dakota, and the recipient of the letter then 
called the county sheriff to ask if he could check to see if it 
was safe to open mail from Senator Dorgan.
    People are worried all across the country about mail, not 
just mail that comes from Capitol Hill, but mail that comes 
from everywhere. We face a circumstance where some sick, 
twisted minds have decided to use the U.S. mail system to 
deliver terror, and that has changed a lot of things.
    Now you have suggested to us some significant consequences 
for the postal system. We are obviously going to need much more 
detail. I understand you do not have all of the details today, 
but I want to ask some questions about that. We need to 
understand much more about the timing of the issues you have 
raised with respect to funding needs.
    My understanding is the President has requested approval 
for the release of $175 million from the $10 billion emergency 
supplemental funds that are subject to 15-day notification. 
Apparently, these funds are for the Postal Service to purchase 
initial irradiation and remediation equipment, 4.8 million 
respirator masks, 88 million pair of plastic gloves for its 
800,000 employees. Also, that money would be used to cover the 
medication costs for its employees, as well as a national 
communications effort to inform the public about the safety of 
the mail.
    That $175 million will be available to you soon, I expect, 
and I assume, based on your testimony, that will be used 
rapidly and is not part of what you are now addressing in your 
testimony today; is that correct?

                      Mail Sanitization Technology

    Mr. Potter. That is correct. Yes, we will use that money 
rapidly. We have spent a considerable amount of that $175 
million already.
    Senator Dorgan. Let me address the question of treating the 
mail, so that those who receive the mail do not have to worry 
that there is some microbe or some spore or bacteria in it that 
is harmful to them. Those of us who are refugees from the Hart 
Building know that the best people in the country who think 
about this have not yet exactly concluded how they would deal 
with the spores that exist in the Hart Building.
    How confident are you that the technology exists and that 
the technology will be decided upon will give you and the 
American people an assurance that we have treated this mail in 
a manner that makes it safe?
    Mr. Potter. Obviously, we will conduct extensive tests of 
this equipment to assure that it works. Today we are treating 
mail from the Washington, D.C., area in Lima, Ohio, and we have 
conducted extensive tests on that mail to make sure that any 
bioagents that are in the mail are eliminated. I would like to 
turn to Tom Day, who can probably give a lot more detail about 
how that is being done.
    Mr. Day. Senator, we have worked with Dr. John Marburger, 
who has been very gracious in assembling the group of experts 
we need to appropriately assess the technology and then make 
sure we are using it in the right way and then getting the 
appropriate results.
    The facility in Ohio has been tested extensively, not just 
theoretically as to what should happen, but we've actually run 
tests, and it was not just the Postal Service. We have gotten 
assistance from the Department of Energy, the EPA, and the Food 
and Drug Administration. One particular part of the Department 
of Defense that has done extensive research with this is the 
Armed Forces Radiobiology Research Institute. We have relied 
greatly upon them as well.
    We did extensive testing in Ohio, not only to assure that 
it had the right dose, the right level of energy to kill the 
anthrax spores, but we also ran biosimulants through an 
environment with mail, in with the mail that we are processing, 
and we had a 100-percent kill rate. No spores grew at all from 
that biosimulant. So we are at the highest possible level of 
confidence from a broad group of experts that this technology 
indeed works and is very reliable.
    Senator Dorgan. Mr. Day, when fully implemented, is it your 
intention to deal with all of the mail and treat all of the 
mail in this country?
    Mr. Day. Our concept, as we look at it now, is that we 
would capture mail at origin. Our concern is, as we saw with 
this threat, mail that you are not sure who sent it. It is 
anonymous, to some extent.
    There are other processes that we have used for many years 
to accept mail in bulk quantity from known mailers. The machine 
would be capable of handling that, the technology would, but 
our thought is we need to concentrate on the threat. So we 
would scope out a system that handles what we believe will be 
the threat, but it is capable of doing more if it was needed.
    Senator Dorgan. Would the Postal Service be considering 
using one technology or multiple technologies?
    Mr. Day. We have kept open, very much open, the option on 
technology. I think, as has been widely reported, we are using 
the electronic beam technology in Ohio. We have another 
facility under contract now in New York that has both 
electronic beam and X-ray technology. We will use both of 
those, and we are also looking at some gaseous treatments.
    Again, using Dr. Marburger as a great resource, we are 
pulling together the experts. If there are ways to effectively 
sanitize mail, we will keep all of those options open.
    Senator Dorgan. My understanding is that the use of 
chlorine dioxide, once dissipated, leaves a powdery white 
substance on whatever it has sanitized; is that the case?
    Mr. Day. Senator, I would have to check on that. We have 
had some discussion, quite a bit of discussion, actually, about 
chlorine dioxide. I was not aware that there would be a white 
powdery substance. That is not my understanding, but I could 
check into that.
    Senator Dorgan. Just a quick question. I will come back and 
ask my questions at the end. I have more questions. But some 
would say, if you have problems, and you do, how about just 
increasing Postal rates? I mean, all of our colleagues will get 
questions like that from constituents. What about just 
increasing postage rates to cover the costs?
    Mr. Potter. Obviously, that was a consideration that we 
had, but in light of the fact that we had just raised rates 
last year, that we had filed for a rate increase at the end of 
September this year, and we understand that it has put a 
tremendous burden on the ratepayer. So our concern is that 
pushing or adding these costs on to the ratepayers will do some 
significant damage to the economy in the short run, given the 
pressure that everybody is under, and it may do some serious 
damage to the Postal Service in the long run.
    So our concern was that we not increase the burden on the 
ratepayer such that we make the long-term viability of the 
Postal Service something less than it already is.
    Senator Dorgan. Is it the case in a new age of technology, 
where people use instant messaging and e-mails, that this 
anthrax attack, coming at a time when you have already seen 
decreased use of the mail and coming at a time with a soft 
economy perhaps persuading people to use the mail less, that 
there has been permanent damage done to the Postal Service and 
that you may not recover, in the long term, the load that you 
were accustomed to and that produced the revenue that you were 
accustomed to?
    Mr. Potter. Well, certainly that is a fear of ours, but 
only time will tell. Our hope is that the mail would bounce 
back, but certainly there are alternatives to the mail and each 
and every American will make those decisions based on their own 
needs, and businesses will make decisions regarding that.
    We do not want to encourage them to leave the mail, and we 
would love for everyone to mail a lot of Christmas cards this 
year because now, more than ever, I think we need to stay in 
touch with one another. But, certainly, that is a fear that we 
have.
    Senator Dorgan. Mr. Potter, I will ask you specific 
questions about the specific amounts of money you mentioned in 
your testimony at the conclusion of my colleagues' questions.
    Senator Campbell?
    Senator Campbell. Thank you, Mr. Chairman. I assume you are 
going to do this in rounds.
    Senator Dorgan. Yes.
    Senator Campbell. Then I will save a few of my questions if 
you are going to do a second round.
    Since you did talk somewhat about the apparatus for 
sanitizing the mail, and I understood you to say that point of 
origin is where you are going to try to install these, correct?
    Mr. Potter. Yes. Yes, Senator.
    Senator Campbell. What is the cost of one of these machines 
that I read about in the newspapers that you are using now in 
some of the bigger distribution centers?
    Mr. Potter. Currently, we do not have sanitizing equipment 
in our centers.
    Senator Campbell. You do not have any? I thought there was 
some being installed.
    Mr. Potter. We did procure eight machines at a cost of 
about $5 million per machine, but we are not committed to that 
technology as the production technology.
    Senator Campbell. With 38,000 Post Offices, we probably are 
not going to put one in every Post Office.
    Mr. Potter. No, we are not, sir.
    Senator Campbell. There must be, as you mentioned, avenues 
for looking at alternative methods. Is it true that a 
microwave, if you leave an envelope with some bio chemical in 
it long enough will actually do that too? Of course, that is 
after you have touched, but I mean in theory would a microwave 
kill those spores and the things that you are worried about?
    Mr. Potter. The scientists tell me that that is not the 
case.
    Senator Campbell. You say that that is not the case.
    Senator Mikulski. You mean like microwave at your home?
    Senator Campbell. It seems like I heard that or read that.
    Senator Mikulski. Yes, I have read that.
    Senator Campbell. But that is not true, he is saying.
    Mr. Potter. There is another one out saying that you should 
iron your mail. But, again, scientists tell me that is not the 
case.
    Senator Campbell. I cannot even iron my shirts.
    The President recently asked all citizens to try to help in 
any capacity that they could, and I am sure that the other 
people on this dias are getting the same kind of response we 
are getting, and that is everybody with a plan or a gizmo wants 
to notify the Postal Service how it would fix all of your 
problems. I am sure some of them are very well-meaning and some 
of them just want to sell gizmos, I guess.
    I received got a letter from a man. I read the letter, and 
it sounded very good to me. I am not a technical person, but 
the apparatus that he developed, he is sure that it is 
inexpensive, and easy to use and could be put in all Post 
Offices. I noted with interest, though, he said he has written 
to you several times and never received an answer. That is not 
surprising. The mail is not running very efficiently now.
    I want to know if you are looking at all of those different 
alternatives, and who is actually doing the testing and the 
looking for you?
    Mr. Potter. Well, we are looking at all alternatives. Some 
are redundant, some are not effective, for example, ultraviolet 
light was something that initially we started to take a look 
at. When we found out that it only might be effective on 
surface spores, as opposed to penetrating an envelope, we 
obviously looked in other directions.
    Tom Day is coordinating this effort. I think he is one of 
the most popular men in America right now in that industry, and 
if you would like, I will ask him to comment some more.
    Senator Campbell. We are going to build a statue for him.
    Mr. Day. I hope not, Senator.
    What we have done, in fact, I was just discussing this 
morning on how do we set up the process to review this because 
we have been swamped, through the mail, and, actually, it is 
getting through quite effectively. I have gotten e-mails and 
then just telephone calls. We are trying to put all of this 
together.
    I think there is a lot of well-meaning intent out there. 
What has happened is people do not necessarily understand the 
application for which we need it. And so there are people with 
ideas on how you kill an anthrax spore or any type of 
biohazard. They are not at all familiar with the type of 
process that we need to incorporate it into. As I have gotten 
into discussions with some of these people, as you describe the 
environment we need to bring it into to effectively kill 
anthrax, they then come to understand the difficulties we face.
    So we are sorting through the technology. In fact, what I 
went over this morning with my staff is we need to categorize 
this, and we owe these people a response. So there are some 
that we have quickly determined are not effective technologies. 
We will respond to them and let them know it. There are some 
that pose some interest, and we need to do further exploration. 
We will respond as such. And then, finally, there are ones that 
have the appropriate technology, but as Mr. Potter has already 
indicated, some of it is redundant, things we already have 
pursued.
    So we will get those answers back to those people.
    Senator Campbell. My own hope is that you will eventually 
have some kind of standard procedure. I think one of the 
problems we are facing with the airline security now is that in 
one airport you go through, they take away your nail clippers, 
and then you go through another, and guns have gone through 
without any observation. I would hope that people in the small 
towns, like where I come from and where Senator Dorgan comes 
from, have the same kind of faith in being secure that a person 
in the big cities would have when we get this apparatus set up.
    Let me just say one thing, Mr. Chairman, before I yield the 
floor, and that is, we are going to deal with two issues here. 
Obviously, one is going to be loss to revenue which we probably 
are not going to cover, as you probably know. I do not know 
what you are going to do about that. You may have to have 
another raise in the Postal Service rates, and the other one is 
going to be security. I know some of us are already in 
disagreement with the President about how much more we have to 
add to a supplemental.
    So I just wanted to tell you, from my standpoint, I am 
certainly going to do the best I can to help you, but I have 
been around here long enough to know that supplementals are 
like flypaper--the longer they hang out there, the more things 
seem to stick to them. After a while, you have got all kinds of 
things that are sometimes described as pork that are stuck in 
those packages, and you end up with just a huge mess to try to 
address a much smaller problem. I hope we are going to be able 
to get through that in a good fashion without it deteriorating 
into a great big mess or, worse yet, into some kind of a 
partisan thing.
    I read, with interest, Roll Call this morning about how a 
veto threat may divide the Hill and some are already seeing it 
as a campaign issue. My God, if there was ever a time we ought 
to get away from the partisanship and the campaign issues it 
ought to be now in trying to protect American people. I just 
wanted to say that for the record.
    Thank you, Mr. Chairman.
    Mr. Potter. Thank you, Senator.
    Senator Dorgan. Senator Mikulski?
    Senator Mikulski. Thank you, Mr. Chairman.
    Mr. Potter, I think you are the right guy for the right 
time. I really am impressed, as I look at your biography and 
know that you have come up through the ranks, you have got 
graduate degrees from MIT in management, you know this capital 
region well, and you have won awards for your labor management 
relationships. And if ever there is a time where we need 
excellent labor management relationships and a trust by the 
workers with the boss, it is really now. So we are pleased that 
you are on the job.
    Let me go to the issues related to worker safety. Because 
if the workers are not safe and the facilities that they work 
in are not safe, then the mail is not going to be safe. Let me 
go then to the Brentwood issue and also the fact that you have 
turned to Dr. Marburger, the President's Science and Technology 
Adviser to help you.
    Here is my question: First, why did you turn to him and not 
EPA? We are using EPA. Did you know who to turn to for the 
evaluation of the technology for worker safety, facility 
safety, and mail safety?
    Mr. Potter. We turned to Governor Ridge for support. As you 
know, the Postal Service is quasi-Government, so we do not 
have, and have not had, the type of relationships with the rest 
of the Federal Government that an agency would have. So we had 
to learn how the organization worked.
    So we worked through Governor Ridge's office to contact all 
of those agencies. We have the Army Corps of Engineers, EPA, 
anybody who could help us we reached out to. Dr. Marburger, 
because of his position, was a natural person to coordinate 
that effort.
    Senator Mikulski. So was it Governor Ridge who told you to 
go to Dr. Marburger?
    Mr. Potter. It was Governor Ridge who suggested that we 
bring the right people together. I do not know who in the 
organization suggested specifically Dr. Marburger.
    Senator Mikulski. Mr. Chairman, this is exactly my point, 
and I am a greater admirer of Governor Ridge and what he is 
trying to do, but we are all going into different directions. 
We are going to EPA, and then EPA is the coordinator of the 
coordinators. I understand they have got a trailer at Brentwood 
where they are doing this experimentation on what works. So we 
are meeting with EPA Administrator Whitman. Then, after they 
tell us it was okay to gas the Hart Building, then they alter 
their plans and say we should not fumigate, we should go to 
another procedure.
    I am not faulting EPA, what I am faulting for is the mess 
we have on our hands about who do we turn to and who is in 
charge of giving us the best information on decontamination. 
And right now I am looking for the best information on the 
decontamination for Brentwood, as we look for it here.
    Now I have no idea why we are not turning to Dr. Marburger 
or why you did not use it this way. But you went one track; we 
went another track. I am pleased that--I am not being 
critical--I am pleased that Dr. Marburger is doing that for 
you, but that is my whole point. There is nobody in charge. 
There is no clarity. There is no consistency. There is no 
uniformity as we look to decontaminate any facility. So we are 
kind of bumping into each other with that.
    I look forward to hearing how you are going to 
decontaminate Brentwood. I think one of the most important 
parts of your testimony is to say that you want to assess the 
use of beam irradiation and other techniques on how to deal 
with this, but I do not want workers to go into Brentwood, any 
more than I want to go into the Hart Building, until we really 
know that the facilities are safe not only from anthrax, but 
the consequences of decontamination. I know you are worried 
about that too.
    So how do you feel that it is going? Mr. Day has talked 
about the process, but who is in charge of the process? Is it 
Dr. Marburger? Is he doing the evaluation of the technologies 
or did he kind of put a group together and you are on your own?
    Mr. Potter. They are working very closely with us on the 
testing. We are using Government facilities to evaluate these 
tests. I will let Tom talk, but before I do----
    Senator Mikulski. But who is in charge?
    Mr. Day. Senator, what Dr. Marburger does, and it is a 
unique position, the Office of Science and Technology Policy, 
he has the ability to pull together the appropriate experts. 
Now, depending upon the technology, you find there are 
different groups of experts. So, as we have sought to use 
irradiation to decontaminate mail, there is a set of experts 
that we pulled together. We are also looking at chlorine 
dioxide not only for building contamination, but the mail.
    Ultimately, what it comes down to, Dr. Marburger pulls 
people together, he has advice and tries to craft policy, but 
it does come down to the Agency, as he gets them connected with 
the appropriate experts, to make----
    Senator Mikulski. Is he in charge of the evaluation of 
these different technologies?
    Mr. Day. I do not know that you can say that ``in charge'' 
is the right terminology. He is pulling people together to try 
to find the right group of experts to----
    Senator Mikulski. This is a new name, I know, to this--it 
is not a new name about Dr. Marburger. His office is in my 
appropriations, and we admire him.
    They are telling him I have one minute left, but can you 
see where I am heading with this?
    Mr. Day. Senator, I see where you are going, and I want to 
give full credit to Dr. Marburger for the efforts he has made 
over the last couple of weeks. What we have done in polling the 
appropriate experts, and understand that it is experts that 
have done different types of research, and you are trying to 
blend it together to face an entirely new situation, we have 
erred on the side of caution to be absolutely sure that what we 
say we are doing actually will be done. When we say we sanitize 
the mail, we are sure, and it is safe for people to handle. So 
we are erring on the side of caution, and collectively, as a 
group of experts, and with the Agency, in this case the Postal 
Service's knowledge of the operation to say, yes, this will 
work.
    Senator Mikulski. My time has expired. Let me say one thing 
in conclusion.
    First of all, I think you have got a process underway, but 
you should know the way I feel. I really was very reluctant to 
go back into Hart Building over this gas, chlorine dioxide. It 
has never been tried in a civilian facility. I was worried 
about me and I was worried about Brentwood. What was I worried 
about? The consequences of the decontamination. I was sure that 
they were going to kill anthrax, but I did not know if when 
killing anthrax, they would set me up for other respiratory and 
other consequences. This is what we need to be standing sentry 
over. I really want to work with you. We have bipartisan 
support here.
    Last, but not at all least, I would also urge you to bring 
into your process, through Dr. Marburger, the retired people at 
Fort Detrick, the retired workers at Fort Detrick who worked on 
anthrax decontamination, and I am going to give you an article 
from the Baltimore Sun about who they are.
    Mr. Potter. Great.
    Senator Mikulski. But these were the guys who worked with 
it. But, again, God bless you, and we look forward to working 
with you.
    Mr. Potter. I appreciate your support, Senator.
    Senator Dorgan. Senator Reed?
    Senator Reed. Thank you very much, Mr. Chairman.
    Mr. Potter, thank you for your testimony today, you and 
your colleagues. It is good to see Tom Day here, formerly from 
the Providence Post Office.
    You have several serious challenges. One is to protect the 
health of your workers and also to, once again, inspire 
confidence in the mails. Sanitizing the mails is one approach, 
but even if that works extremely well, are you still 
contemplating having a regular testing of Postal facilities on 
an ongoing basis, not just for anthrax, but for other 
occupational problems?
    Mr. Potter. Yes. One of the things I listed was the 
placement of detection equipment throughout our facilities. We 
are taking a number of steps and have taken a number of steps 
to reduce any risk from anthrax or dust, and one of the things 
that we are going to do is put detection equipment throughout 
our system. We are modifying our operations to eliminate dust 
in the air. At our machines, we are going to have vacuums. We 
are going to create down-drafts on machines. We have changed a 
lot of our cleaning agents so that if there is an incident of 
anthrax, it will be cleaned in the normal process of doing 
business.
    So we are looking at everything, and we would like to be a 
model for the rest of America, when all is said and done.
    Senator Reed. Now your focus is, as it should be at this 
point, on anthrax, but I presume that you are also obviously 
interested in other occupational hazards that are in the 
workplace in the Postal offices. Are you planning more 
generally than just counteracting anthrax?
    Mr. Potter. The type of equipment we are talking about will 
take care of any biochemical agents. As I said, we are looking 
at the environment within the Postal Service and making 
modifications as we speak to assure that our employees are not 
subjected to threats in the mail.
    We had just completed this past summer a review of our 
hazardous material instructions and had just gone through a 
retraining of our employees and our safety teams around 
America. So this is something we give constant attention to, 
have constant concern about, and certainly, as we go through 
this process, we are looking at anything that is a threat to 
our employees.
    Senator Reed. At the conclusion of your proposed plans, 
will you have tested all of the Postal facilities in the United 
States and installed detection devices in every facility?
    Mr. Potter. We are in the process of testing all of the 
main processing plants throughout America. Over 250 facilities 
will be tested, not for any other reason than just as a 
precaution. We are going to test them specifically for anthrax.
    We have no plan right now to test all 40,000 locations that 
we have. However, if, in these hub facilities, because all of 
the mail comes into our plants and then moves out from those 
plants to Post Offices that you are familiar with, the stations 
and the branches, if we detect a problem there, then we would 
proceed to test other facilities.
    Senator Reed. Now my question follows on the comments that 
Senator Mikulski made. Is this plan to test based upon advice 
from the CDC, from experts in the field or this simply is kind 
of what your gut tells you to do right now?
    Mr. Potter. Every day at 10 o'clock--in fact, I am missing 
the meeting today--we meet with the leadership from our unions 
and management associations to discuss all of the issues around 
what we are dealing with. We are talking about protocol, about 
closing facilities, and they are concerned obviously for their 
membership. And they wanted to take, and suggested that we 
take, some precautionary measures. One measure that they 
suggested, not only to test for anthrax, but just to reassure 
those people in areas that are not affected or have not been 
affected that their facilities are safe, they suggested that we 
go beyond the East Coast and those where we have problems, but 
look at the entire country, again, as a precautionary measure, 
as a means of reassuring our employees that they are in a safe 
workplace.
    Senator Reed. I understand that, but my question, getting 
back to it, goes to the level of ongoing scientific and 
technical advice you are getting now by the experts--
presumably, CDC, Public Health Service--and looking ahead to 
the extent that you are going to internalize, as an ongoing 
process, this type of collaboration with these other agencies 
because we all hope and pray that this is the only incident of 
this kind, but if it happens in the future, I do not think 
anyone here wants you to go back to square one and start 
coordinating again. Can you give us an idea?
    Mr. Potter. We are very much up the learning curve. All 
that we have learned in the Florida, New Jersey, Washington, 
D.C., and New York areas, that is shared throughout the 
country.
    Again, we are building protocol on what should occur if and 
when anthrax appears either in somebody's office or at 
somebody's home. We have an immediate procedure so that we can 
back up, and we now know that, you know, if there is a threat, 
in terms of where that mail moved through the system.
    We have gone through a systematic approach of analyzing 
those pieces, determining what information on those pieces is 
available to us so that we can plot the path of the mail and 
take the appropriate measures, in terms of closing facilities, 
making sure employees are appropriately medically treated, and 
so we have a game plan around that, and we are ready to go with 
that game plan. We are all praying, though, that October 9th 
was the last anthrax letter that we will see.
    Senator Reed. So do I. Thank you, very much, Mr. Potter.
    Senator Dorgan. Senator DeWine.
    Senator DeWine. Thank you, Mr. Chairman.
    Postmaster Potter, let me again wish you well. We 
appreciate your leadership. We know you have a very tough and 
difficult job. I appreciate the comments that the panel has 
made in regard to how effective the procedure will be and is at 
Lima, the Titan procedure. Though, for the record, I would like 
to get a couple of things clarified, if I could. I would like 
for you to make some comment on this.
    There was an article in the Chicago Tribune, a person by 
the name of Ashkoff Chopra, a professor of microbiology and 
immunology at the University of Texas, was quoted as saying 
that Sure-Beam--and this is Titan's--technique for cleaning the 
mail in Lima may kill only 50 to 60 percent of the spores. Any 
comment about that?
    Mr. Potter. Well, again, we had and conducted an extensive 
test, and it did kill 100 percent of the spores that we put in 
to be tested.
    Senator DeWine. This was not anthrax, of course, though?
    Mr. Potter. No, it killed everything. It killed any living 
organism. I will let Tom----
    Senator DeWine. Excuse me. But that was irrespective of the 
package, size of the package, what was in the package, the 
configuration of the package, et cetera?
    Mr. Day. Senator, I do not want to get too specific on----
    Senator DeWine. We do not want you to get too specific.
    Mr. Day. Okay. I would just say that I think--and I am not 
aware of the article you are referencing or the doctor--the 
person who is speaking may have referenced food irradiation 
technology and the dosing levels used there. What they may be 
unaware of is what we are doing in Ohio and exactly the level 
of irradiation being applied. Again, I can provide you a copy 
of the test documents. We clearly have shown it to be 
effective.
    Senator DeWine. Well, I would like that. I would appreciate 
that very much. And, I would just ask you to at least check the 
article and get your comments on that.
    When I first contacted your office, I was told about the 
study that was conducted by your office. And, this actually was 
a--we found out it was a joint study conducted by the Titan 
Corporation, itself, in partnership with the University of 
North Carolina, at the AFRI facility.
    According to AFRI, multiple errors remained in the draft 
version, and AFRI will not approve the study until corrections 
are made. Furthermore, despite statements by Titan and your 
office, the participants in the study from AFRI and the 
University of North Carolina informed my staff that they did 
not test the effectiveness of electronic-beam radiation on 
actual contaminated mail.
    Now, maybe you are well beyond that, but when I contacted 
your office, they said and said, ``Oh, no. This test shows that 
this can be done on mail.'' And, when we got into it and we 
looked at what the Government said, the Government comes back 
and says, ``No, we did not test mail, and in fact the study is 
not complete. There were some errors in the study and we have 
not signed off on the final draft.'' So, I just want to make 
sure, that is not what we are relying on for this. Is that 
correct?
    Mr. Potter. Absolutely not. We were concerned----
    Senator DeWine. Because that is--excuse me--but that is 
what your office told me when we called.
    Mr. Potter. Right. We had some concerns about some initial 
studies. That is why the movement of mail to Lima did not move 
out as quickly as it did, because we wanted to make sure that 
that technology worked. So we did put biochemical agents in the 
mail. They were not anthrax. And we actually tested the 
equipment. We also have quality control checks being placed on 
this mail. They put a meter into trays of mail to determine 
whether or not sufficient energy hits the center of the mail 
that is being treated.
    Senator DeWine. Good.
    Mr. Potter. So we have done actual tests on mail. We have 
the results of those tests, and we have an ongoing quality 
effort to assure that what we treat is successfully treated.
    Senator DeWine. And you are convinced that even though you 
did not use anthrax, what you did use is, from a scientific 
point of view, is the equivalent in the sense of eradication, 
testing the eradication?
    Mr. Day. Yes, Senator.
    Senator DeWine. That is fine. I see my time is almost up. 
And, I appreciate it. This does in fact clarify this.
    One final question. Tell me about the contract with Titan, 
because when I contacted Titan, they could give me a little 
information, but they said, ``We really cannot tell you much 
because we have a nondisclosure contract,'' which I found, 
quite candidly, to be rather strange, that the Post Office 
would enter into a contract and Titan could not tell me much 
about it, could not tell the public much about it because you 
had insisted that they had a nondisclosure statement.
    Mr. Potter. Well, we were concerned that people might 
assume that that was the technology of choice as we described 
earlier. It is certainly technology that we can get off the 
shelf, but not necessarily technology of choice.
    Senator DeWine. And, I appreciate that. I understand that. 
What is the contract then? Just briefly as my time is up.
    Mr. Day. Senator, with Titan we have done two basic things. 
First we have brought under contract the processing capability 
of their facility in Ohio. We have full capacity, 24 hours a 
day, 7 days a week.
    Senator DeWine. You bought the operation?
    Mr. Day. We bought the whole thing for 6 months.
    In addition, we bought available technology systems that 
they could sell to us, eight systems that we are deploying. We 
are looking at a location here in the D.C. Metropolitan area. 
We are also looking to get a site in the New York/New Jersey 
Metropolitan area.
    Senator DeWine. That was in the statement you gave us 
earlier.
    Mr. Day. Yes, it is.
    Senator DeWine. And, what is the figure for the 6 months in 
Lima?
    Mr. Day. I believe it is $2.4 million.
    Mr. Potter. I will provide it for the record.
    Senator DeWine. Yes. If it is any different than that, just 
let us know. Thank you very much.
    Thank you, Mr. Chairman.
    Senator Dorgan. Senator Byrd?
    Senator Byrd. Mr. Chairman, I understand that my colleague, 
Senator Stevens, has another engagement. At this point I would 
be happy to have him go ahead of me if he wishes.
    Senator Stevens. Thank you very much, Senator. I canceled 
that to stay here and I will be here till 11:30. Thank you.
    Senator Byrd. All right. Mr. Postmaster General, we laugh 
about it here, ironing your mail like my wife used to iron my 
shirts--I have about worn them all out by now--spraying your 
mail with Lysol as a disinfectant, putting your mail in a 
microwave. Why are the American people doing these things? Why 
are they asking these questions? Because there is an atmosphere 
of concern and fear that permeates this country.
    You are here today to ask the Congress for money. Cicero 
said, ``There is no fortress that money cannot take.'' You are 
up against a very impregnable fortress in dealing with this 
concern that permeates the country.
    That is our business, is to help you at this point. Now, 
you have asked for--you have estimated your cost to be $3 to $4 
billion, and you have listed certain major elements, one of 
which, and I see eight items on that list shown in your speech, 
purchase of equipment to sanitize mail entering our system. 
That is what we have been talking about mainly here. You have 
been allocated $175 million to date. How much of that has been 
spent? You said a lot of it had been spent already. How much of 
it has been spent?
    Mr. Potter. $100 million of the $175 million was identified 
for sanitizing equipment. We have spent some $40 million of 
that amount. The monies for gloves, medication, et cetera, I 
think the last tally we had was somewhere in the neighborhood 
of $60 million has already been spent.
    Senator Byrd. All right. Now, you mention costs to be $3 to 
$4 billion, and I take it that this purchase of equipment to 
sanitize mail entering your system is probably going to 
constitute the major portion of that overall cost. We have 
already passed our bill dealing with the Postal Service. The 
last train out of the station is the Defense appropriations 
bill. Of course, there is that appropriation that we have 
already agreed upon, the $40 billion appropriation, about $30 
billion of that which is, I think, possibly a way to help fund 
this need.
    When you talk about $3 to $4 billion, over what period of 
time are you contemplating spending $3 to $4 billion, if 
Congress appropriates?
    Mr. Potter. Senator, I hope to spend it as quickly as 
possible, but in reality, it is going to take several years to 
spend that type of money.
    Senator Byrd. When you say ``several years'' what are you 
talking about, 2 years?
    Mr. Potter. Two, maybe three. It is all going to be a 
function of the type of technology that we choose, Senator, and 
the ability of those that provide it to manufacture the numbers 
of equipment that we need. So I wish I could be more specific, 
Senator, but until we have the technology selected and until we 
understand the production capability of those who would provide 
it, I cannot give you a better answer.
    Senator Byrd. All right. As I understand it, the x-ray 
irradiation and the electronic beam irradiation are the two--or 
one of those two that you have most confidence in--and then 
there is the chlorine dioxide, which I understand you are still 
testing.
    Mr. Potter. Right.
    Senator Byrd. Well, now, of those three which is the most 
sure, which would cost the most, which would cost the least, 
and which can be put into place the earliest?
    Mr. Potter. The one we are most sure about right now is 
electron-beam x-ray. It is the most expensive technology, but 
it can be made, and it would be compatible with our operations 
as I described earlier, allow us to maintain current service 
levels.
    Senator Byrd. I am reading the words. Electronic-beam 
irradiation, x-ray irradiation. Is that one or two items?
    Mr. Potter. There are two different technologies, Senator. 
One is electron beam and the other is electron-beam radiation. 
And the electron beam radiation is the better technology. It is 
more compatible. It is more productive, allow us to again meet 
current service standards.
    Senator Byrd. What would that cost as compared with the 
chlorine dioxide?
    Mr. Potter. My estimate is about twice as much, but I will 
turn it to Tom Day, if I could.
    Mr. Day. Senator, let me just clarify. On the x-ray, 
typically what an x-ray technology is----
    Senator Byrd. You do not need to be too specific along that 
line. I am interested in the dollar figure, and that is why you 
are here.
    Mr. Day. Okay. Either electronic beam or the x-ray version, 
we do not have specific figures, but I would tell you on order 
of magnitude that if--and I emphasize if chlorine dioxide were 
to be effective on the treatment of mail, and we do not know 
that now, that is why we are still testing.
    Senator Byrd. All right.
    Mr. Day. If it were to be effective, it would be at 
substantially lower cost than either electronic beam or x-ray.
    Senator Byrd. When do you think, when will you know?
    Mr. Day. I am working with several companies right now to 
build prototypes to put into a live mail environment or at 
least--let me rephrase that--use live mail as a test means, 
again, working with the Armed Forces Radiobiology Research 
Institute to test the biosimulants, so as to get past theory, 
and test that this technology really works. I am moving forward 
with that over the next couple of weeks to get at least 
preliminary results to decide is this worth pursuing or are we 
simply not getting the effectiveness that is necessary?
    Senator Byrd. How lengthy is the period of time when you 
will know that, 6 months?
    Mr. Day. On the negative side, I think in a matter of weeks 
we could know that it may not work, and I do not mean to be 
pessimistic, but we would know that quicker. If we get 
favorable results, then we need some very strict tests and 
research protocol that I think collectively the scientific 
community could say reliably to the American public, that, yes, 
this is a safe technology that truly does the job. That could 
take months.
    Senator Byrd. 6 months?
    Mr. Day. I think we could get an answer in 6 months.
    Senator Byrd. It is conceivable then, you do not want to 
wait 6 months. You need to be doing something, I assume, to 
deal with this. The something that you could do within that 
period would be perhaps what you are doing, the installation of 
the electronic beam irradiation technology medium, whatever 
that is. Is that right?
    Mr. Day. Yes, sir.
    Senator Byrd. That would be something.
    Mr. Day. In a short term, that is why we have contracted 
for irradiation and gotten some systems because we do know at 
this point that that technology works.
    Senator Byrd. Yes. Now, the $3 to $4 billion figure, I 
assume that is contemplating the use of the more expensive 
approach; is that a fair assumption?
    Mr. Day. Yes, Senator.
    Senator Byrd. Now, I believe you said it would take 2 years 
probably, or 3, to spend the $3 to $4 billion. Conceivably, you 
are going to have a mixed approach, at least in the beginning, 
and you may discard the chlorine dioxide approach all together, 
you may at some point depending upon your tests. How much of 
this $3 to $4 billion are you asking for, Mr. Postmaster 
General, now? Let us say we have the last train out of the 
station. We have two trains here. We have the $40 billion train 
that we have already agreed upon, and perhaps at least the 
initial cost, in addition to the $175 million that you have 
already gotten from that approach. If we meet the total need, 
if we would say this money, okay, you are going to get your $3 
to $4 billion. Now, how much of that do you need Congress to 
give or to allocate in the next 6 months?
    Mr. Potter. In the next 6 months? There are a number of 
things that are in there that we are going to have to have and 
not just electron beam. We are changing all of our vacuum 
cleaning systems to go to HEPA vacs, so that we do not spread 
dust. We are modifying our ventilation systems in our 
facilities so that if a spore were to become airborne, it would 
be captured by that system. So in the next 6 months I think we 
are talking on the order of $750 to a billion. Again, we will 
provide more detail for the Committee as we plow through the 
numbers, but we are working feverishly to identify suppliers, 
and identify specific costs. So, again, I hesitate to be so 
general about it, but you can understand, this is a work in 
progress.
    Senator Byrd. Yes. You have been very helpful. If I have 
further questions, I will await Senator Stevens and the others. 
I will await the next round. Thank you very much.
    Mr. Potter. Thank you, Senator.
    Senator Mikulski. Senator Stevens, could I ask where this 
Army Radiology--is this in Aberdeen or is it Fort Detrick?
    Mr. Day. Senator, it is in Maryland. It is in Bethesda.

              Financial Consequences of Terrorists Attacks

    Senator Dorgan. Senator Stevens.
    Senator Stevens. Thank you very much, Mr. Chairman. I want 
to follow up for the same purpose as Senator Byrd. We have to 
figure out what kind of freight goes on that train as it leaves 
the station, and in which car we put the money for your 
request. We have a defense bill, and we have a bill to deal 
with the $20 billion that is available to the President. We 
have got a request for allocation of that money completely, and 
we have the possibility of adding emergency money, which in the 
last couple of days has been very seriously challenged, and I 
seriously question whether we are going to be able to add any 
emergency money. So we are going to have to figure out what of 
the money that you need must be made available to you before, 
say, May of next year at the earliest. I assume we will 
probably get a supplemental out by May to June next year, and 
we will still be dealing with 2002 money, but the question is, 
what do you need--and this is what Senator Byrd and I are 
thinking about right now--what must you have before we leave 
town for Christmas so that you can do the things that you must 
do to protect your people and the American public, and assure 
that the mail will continue and the system will be set up as 
rapidly as possible.
    I have got to add, you know, I have not been home since 
September 11. I have not received a letter from my State. 
Unfortunately all of my mail was addressed to the office since 
we travel so often. I think most of us get all of our mail at 
the office. I am waiting for my water to be turned off and 
other things around here, because even the bills came to the 
office and they are somewhere in your system. So I have a 
parochial interest in getting that system up and running and 
make sure my water is not turned off.
    Senator Stevens. But beyond that, we really need to know, 
what do you need to have in the bank so you can draw against it 
between now and June 1st? But we have to have that by Tuesday, 
Postmaster General.
    Mr. Potter. You will have that by Tuesday, and I am not 
trying to be evasive. I just----
    Senator Stevens. I am not trying to be overly demanding 
either, but that is our time frame.
    Mr. Potter. Well, we heard it. He has got it.
    Senator Stevens. If we do not have it by then, we will not 
be able to get the bill done by Thursday, and hopefully, we are 
trying to get the bill done before we leave for Thanksgiving.
    So I do not have any other questions other than to 
emphasize that we need to assure you that we are going to do 
something to get you the money you need. The only question I 
have is the $175 million part of the billion dollars?
    Mr. Potter. No, no, it was not part of the----
    Senator Stevens. It is in addition to 175 million?
    Mr. Potter. Yes, Senator.
    Senator Stevens. Well, be sure you have some people with 
awfully sharp pencils, because if we give you a billion 
dollars, someone else is going to lose a billion dollars, other 
people who have convinced the President's people that their 
needs have the highest priorities are in that list now, and we 
will have to determine that your priority is higher than 
theirs, and take out something and put it in. So I hope you 
have real sharp pencils.
    Mr. Potter. We will, sir.
    Senator Stevens. Thank you, sir.
    Thank you, Mr. Chairman.
    Senator Dorgan. To underscore what Senator Stevens and 
Senator Byrd have said, if the money is not made available in 
the immediate time period ahead with the stimulus or economic 
recovery package or Homeland Security piece, if it is not part 
of that, it would likely be part of the next fiscal year's 
appropriation in some form or another, which would be available 
to you next October 1st. And I assume from your testimony today 
that there is an urgency here that is significant.
    Now, you are talking about two different requests. One is a 
request that deals with security of the postal system, and the 
second deals with your financial losses. And I want to talk 
about both of them just for a moment. But first I want to ask a 
question about safeguarding the mail. You indicated that you 
wanted to treat the mail at its origin, but it seems to me, you 
have a mail system at the present that has a blue postal box on 
the corner of a street someplace, and you have got a postal 
worker that picks the mail out of that box and takes it to a 
distribution center and then sends it downstream from the 
distribution center, finally to the mailbox of the customer, 
and there is an upstream from the distribution system to where 
it is gathered from all the various boxes.
    Mr. Potter. Right.
    Senator Dorgan. How does one safeguard the upstream portion 
of this collection? That is the point I do not understand.
    Mr. Potter. Well, we are working on a number of 
methodologies. We have that same concern. We are looking at a 
number of different options that we might have to do that. It 
may require that we modify the mailbox, but the idea would be 
that our employees would not come into contact with any dust 
that might be generated as the mail is collected.
    Today what we have, we have provided employees with masks 
and with gloves to protect them from anything that might become 
airborne there. But in the future we are looking at redesign of 
the mailbox such that we could collect mail from that box 
without having employees come into contact or be exposed.
    Once it got to the facility, that same device would be then 
introduced. The first thing we would do when we got it to a 
processing plant would be to treat that mail.
    Senator Dorgan. You say that you had predicted a loss of 
$1.35 billion as you entered this fiscal year, and what has 
happened since September 11 and then subsequently the anthrax 
attacks, may affect your bottom line by as much as $2 billion 
additionally. Tell me how much of that $2 billion is 
annualized, because we are talking about a relatively short 
period of time.
    Mr. Potter. Well, we just extrapolated the $418 million in 
terms of our shortfall in the first two accounting periods of 
the year, and we projected out. So it is an annualized number, 
the $2 billion.
    Senator Dorgan. All right. So the $2 billion is an effect 
from September 11 forward?
    Mr. Potter. Forward.
    Senator Dorgan. On a full-year basis.
    Mr. Potter. Right, through next September. The reason we 
couched it in the terms that we did is that we are hopeful, 
very hopeful that that projection is high. You know, we do know 
that we have the $418 million effect, and, you know, we can't 
accurately predict what the behavior of our customers or the 
mailing public is going to be moving into the future. But, 
again, it was just a rough projection.
    Senator Dorgan. Are you delivering this same request to the 
White House, Mr. Potter?
    Mr. Potter. I have had discussions, yes, with Governor 
Ridge about our situation. In fact, those early discussions are 
what led to the White House authorizing the $175 million that 
they did.
    Senator Dorgan. And the testimony you have provided here 
today suggests that on the issue of security you expect you 
will need $3 billion or more, quote-unquote, according to the 
testimony. Senator Byrd, I think, in probing a bit, elicited 
information that suggested certain technologies might cost less 
than that $3 billion. Is that correct?
    Mr. Day. Yes, sir, that is correct.
    Senator Dorgan. Can you tell us how much less? Instead of 
$3 billion or more, what would the best case be if you were to 
use a less expensive technology that you discovered to be 
effective?
    Mr. Day. I couldn't give you an exact number, Senator. I 
would just say that we do know it would be significantly less. 
We are looking at different technologies. If it was chlorine 
dioxide, the major component is it requires far less 
construction, although we haven't fully scoped out the level of 
venting and filtration systems that would be needed for 
chlorine dioxide. So we still need to work out the scale, but I 
would tell you it would be substantially less.
    Senator Dorgan. From your testimony, I didn't understand 
completely. You are not questioning whether chlorine dioxide 
kills anthrax spores, are you?
    Mr. Day. No.
    Senator Dorgan. It does, right?
    Mr. Day. Chlorine dioxide clearly kills anthrax spores, as 
I understand it. The question is its penetration capability. If 
it is inside a sealed envelope, how long do you need to expose 
the mail to chlorine dioxide in order to achieve the kill.
    Senator Dorgan. I understand. Now, the $3 billion or more, 
which may be less, is for security. The $2 billion is what you 
say you need to continue operations and to make up for the loss 
that you are experiencing as a result of the diminished use, 
and interrupted use, I might say, of the postal system because 
of the terrorist attacks. Is that correct?
    Mr. Potter. Yes. Yes, that is the case.
    Senator Dorgan. The $2 billion is something that Congress 
is going to have to come to grips with. Does it feel it has an 
obligation to make the Postal Service whole? Should that be 
made up with respect to increased postal rates and so on? It is 
different than the $3 billion. The $3 billion, either more or 
less, I think Senator Byrd and Senator Stevens both asked the 
questions about the security piece of the $3 billion with 
respect to timing. You have been relatively non-specific, and I 
understand why with respect to both the amount and the timing 
today. And I think the quicker that you are able to get that 
information to us, the better for our planning.
    But with respect to the $3 billion, plus or minus, on 
security issues, did you indicate that $1 billion of that you 
think is needed in a time certain prior to--the period between 
now and next summer? Is that what you are testifying to?
    Mr. Potter. Yes. And----
    Senator Dorgan. And what are the consequences of your not 
getting that in that time period?
    Mr. Potter. Well, the consequences are that obviously it 
will put the Postal Service in a weaker financial position. And 
depending on whether or not we get those monies, we would 
probably be bumping up against our ability to borrow money. We 
would probably exhaust that ability. That would happen in the 
next September time frame.
    Do you want to add to that?
    Mr. Strasser. Yes, Senator, our ability to finance the 
security as well as the business impact is extremely 
constrained. Even before the attacks, coming into this fiscal 
year we saw structural changes in the growth of mail that we 
have counted on historically to cover the increased costs. For 
example, in October we delivered to 1,270,000 locations that we 
didn't deliver to last October. And so when we talk about our 
revenues being below last year, we are trying to cover the 
costs of the universal service delivery network as well as 
cover the normal increase in costs like health benefits.
    So we are severely constrained. If, in fact, this $400 
million shortfall in net income continues for a number of 
months and approaches the $2 billion and we exceed $3 billion 
in deficits--we already have frozen all facilities 
construction. We haven't constructed facilities since last 
February. So we have done everything possible from a financing 
point of view.
    If we have a $2 billion business impact, we will be at the 
maximum borrowing level that we can be at. We will be talking 
about concerns of severe service reductions because we won't be 
able to finance payroll or the payments to OPM for our 
retirement liabilities.
    Senator Dorgan. Well, let me conclude by saying we need for 
you to get us good information as quickly as is possible. We do 
not have the option, in my judgment, of saying that what has 
happened here with respect to anthrax and the discovery of some 
pathetic human beings to use the U.S. mail service as an 
instrument of delivery of terror, we can't say that this 
doesn't matter and that we are not concerned about security and 
we are going to do nothing about it. The question is not 
whether we are going to do something about it. The question is 
how and when. And so we really need information and good 
information from you in a very timely way.
    Let me, before I call on my two colleagues for additional 
questions, tell you that I grew up in a town of 300 people, and 
the post office was the center of our social life. I mean I 
remember as a kid and growing up in my hometown the post office 
was the center where people came and visited and exchanged 
views about things. I had a town meeting in Glenburn, North 
Dakota one day and a fellow said to me--and town meetings are 
often complaints about things that are going wrong, and a 
fellow stood up and he said I want to tell you, Mr. Senator, a 
good thing about the U.S. mail system. And I said gee, that is 
interesting, you have got some good news. He said yes. He said 
I received a letter that was addressed to Grampa, Glenburn, 
North Dakota, and I received it from the local post office here 
in Glenburn, and it was a letter that was intended for me.
    I said, well, how on earth could that have happened? He 
said, well, the postmaster is right over there. The postmaster 
had stopped in at the meeting. And I said to the postmaster, 
how did that happen? Well, he said, we had this letter come in 
that says Grampa, Glenburn, North Dakota, and the postmark was 
Silver Spring, Maryland, and we knew that Ernie had some 
relatives out in Silver Spring, Maryland, so we sent it to him 
and it turns out to be his grandson writing Grampa in Glenburn, 
North Dakota.
    That probably can only happen in a very small community, 
but it is a wonderful thing to know it does happen around our 
country. I am a big believer in the U.S. postal system. You 
sometimes do things in the system that gives me heartburn. I 
clench my teeth and grind my teeth sometimes when I read the 
news about one thing or another, bonuses and so on, but despite 
all of that, this system is important to this country. This 
Congress has an obligation to make this system work and help 
you make it work. These terrorist attacks were things that you 
could not have anticipated. They are not something you are 
responsible for, and this country must respond as a country to 
these threats.
    Senator Byrd has talked a lot about homeland security with 
respect to the economic recovery package. Clearly, homeland 
security, in my judgment, also means security of America's 
mails, and so I want to thank you for your testimony. I am 
going to call on my ranking member, and then Senator Byrd, for 
additional questions. Senator Campbell.
    Senator Campbell. Thank you, Mr. Chairman. You mentioned 
the mail in your small hometown. We compare small hometowns 
very often. I got a letter that there was no ZIP code and no 
post office box that was delivered to me. It just said Senator 
S.O.B. Campbell, Ignacio, Colorado.
    And, darn it, they delivered it.
    Let me make just a couple of general observations that 
clearly Senator Byrd has alluded to, and Senator Dorgan, too, 
that this is going to be some tough decisions. And from my 
perspective, security has got to take priority over lost 
revenues, at least at first.
    I wanted to just ask one question, though, and that is I 
was looking at an article in The Washington Post, and a 
gentleman by the name of Robert McLean, executive director of 
the Mailers Council, noted that the operating costs of these 
machines would be about $1 billion a year. Have you factored 
that into your request, too?
    Mr. Strasser. No, Senator, not entirely. The ultimate 
system design that we determine to use and the design of the 
equipment would affect that figure. There have been estimates 
that the operating costs could run as high as an extra billion 
dollars a year.
    What we have factored in, and we are attempting to factor 
in once we get the configuration and understanding, is the 
training for the employees and the phasing in of the necessary 
security equipment.
    Senator Campbell. I see. And maybe just one last question, 
Mr. Chairman, because I see some friends in the audience from 
the Letter Carriers and the Postal Workers.
    Mr. Postmaster General, you talked about the flow of 
tracking letters that could be contaminated and you--I think 
part of my potential question was already answered when you 
said the mailboxes, the drop boxes that are on the street 
corners in many cities and towns after the post offices closed, 
you are trying to devise some kind of a system where the people 
who pick that mail up would not actually touch the letters. Is 
that not correct?
    Mr. Potter. Well, they would be protected from it, yes, 
Senator.
    Senator Campbell. Some kind of a thing that is sealed or 
something, where they take the whole bag in and then in turn it 
goes through a sanitizing machine?
    Mr. Potter. Yes.
    Senator Campbell. I think that is my last question, Mr. 
Chairman. Thank you.
    Senator Dorgan. Thank you, Senator Campbell. Senator Byrd?
    Senator Byrd. Thank you again, Mr. Chairman.
    The 6-day rural free delivery got its start where?
    Mr. Potter. West Virginia.
    Senator Byrd. Right.
    Senator Dorgan. That was not a lucky guess, I know.
    Senator Byrd. I have a little horse-drawn buggy, first 
rural free delivery sitting right in my office. I will show it 
to you if you ever get over there.
    Senator Campbell. That is when you get your whole request.
    Senator Byrd. What year was that?
    Mr. Potter. I don't know.
    Mr. Strasser. 1893.
    Mr. Potter. I thought it was 1896, but, anyhow.
    Senator Byrd. And where did this rural delivery start in 
West Virginia? Charles Town, Halltown, and Uvilla. Write that 
down.
    Mr. Potter. I am going to study up on West Virginia history 
before I come back.
    Senator Byrd. Also I would say, Mr. Postmaster General, for 
several years I have insisted on there being language in the 
committee report that goes to the Floor with the bill making 
appropriations for the Postal Service, that there be language 
providing for 6-day mail service. I come from a rural area 
where the flag means something, and in many little communities 
there is the flag at the post office, and that represents the 
Federal Government. That represents the man in the striped 
pants, Uncle Sam.
    The first letter that my two daughters wrote to me to 
congratulate me on my 36 birthday, is the first year I came to 
Congress, had three one-cent stamps on it. Three cents. I was 
36 years old. And within 12 days, I will be 84 years old, but I 
am still young.
    Now let me ask you just a couple of questions. Suppose you 
do not get this money. Suppose Congress were to be unresponsive 
to your request. Then what will your option be? Will you only 
sanitize mail that goes in and out of the service where you 
have machines in New York and Washington? Will you have to 
limit the sanitization to two or three of your largest post 
offices, largest cities? You will get some of this, I am sure. 
But how are you going to live within your means if you do not 
get this $2-$3 billion?
    Mr. Potter. Well, Senator----
    Senator Byrd. And still protect as many people as you can 
protect?
    Mr. Potter. Certainly that is one of the things that we 
have thought, I would not say long and hard because we have 
only been dealing with this for a short period of time, but it 
has been on the forefront of our thinking. Certainly, as you 
described, one option that we would have is to look at risk and 
only use these systems where the risk might exist today, and we 
would use our Inspection Service and the FBI and other law 
enforcement agencies to help us to assess that risk.
    I have a concern about that because if you have a system 
that does not cover the entire width and breadth of the United 
States, you have a vulnerability. So we would like to shore up 
and eliminate any vulnerability in our system.
    Certainly then if we made a commitment to do that, one 
option is again to deploy equipment based on risk and extend 
deployment over a number of years, which leaves us vulnerable. 
We might have to look at service because the key here for the 
Postal Service is the confidence that the American public has 
in the mail. You know, a lack of confidence in the mail is very 
detrimental to our system, and it really is going to take away 
one of the freedoms that the American public enjoys today.
    Senator Byrd. What will be the impact? I know you cannot 
set a dollar figure on this. Just comment on this question. 
What will be the impact on the American economy if we do not 
act together to provide the kind of confidence that people have 
a right to expect in the safety to themselves and to their 
loved ones of the U.S. mail?
    Mr. Potter. Well, as I described in my testimony, the 
mailing industry is not just the Postal Service, you know. We 
are a $68 billion organization with some 800,000 employees, but 
we just recently went through an exercise with leaders in the 
mailing community, and what we have determined was that the 
mailing industry employs some 9 million Americans. The mailing 
industry is a $900 billion entity, 8 percent of the gross 
domestic product. So a lack of confidence in the system that 
carries trillions of dollars of payments through the mail 
certainly would disrupt this economy and at a time when the 
economy, is challenged. Having the mail system, losing 
credibility would exacerbate the economic downturn that we have 
seen.
    Senator Byrd. I have only one final comment, Mr. Chairman. 
We talk about waiting until next year on a supplemental. Bin 
Laden is not going to wait for a supplemental if he decides to 
strike. I assume that you can make this money that you are 
requesting work more effectively, and it can give a more 
effective protection to the postal workers and to the American 
people if it is provided to you earlier rather than later. I 
guess you would like to have this billion dollars you are 
talking about, at least that much, up front.
    Mr. Potter. Yes, sir.
    Senator Byrd. Rather than spread throughout the first year.
    Mr. Potter. Yes, sir, we would like to have the ability to 
know that it is there so we can aggressively spend. Now, to be 
very candid with you, we would not spend it on the day we got 
it. It would be spent over a period of months.
    You heard from Mr. Day about all the analysis that is 
currently under way. There are things that we do not need 
analysis on. Vacuum cleaning systems, the HEPA vacs, that would 
capture the spores. Ventilation systems. We want to move out as 
aggressively as we can with those, and yes, and we would spend 
that money over the course of the next few months.
    Senator Byrd. Mr. Chairman, thank you. I think this has 
been a very informative hearing, as far as I am concerned, and 
I think your witnesses have been good and among the best that I 
have heard.
    Senator Dorgan. Senator Byrd, thank you very much. I think 
the point that you made is critically important for all of us 
to understand, and that is terrorists will not wait for 
Congress. Terrorists commit acts of evil on their own time 
frame, not ours. We must, it seems to me, take action as 
quickly as is prudent and as we are capable of taking to try to 
provide the security for the American people, the postal 
workers and others.
    Let me ask two additional questions. You indicated that 
going into the fiscal year--now this is about not the security 
piece, but the other $2 billion with respect to operational 
costs--you had a $1\1/2\ billion expected deficit in the Postal 
Service going into the fiscal year, and you think the 
consequences of the terrorist acts will add $2 billion to that. 
That is $3\1/2\ billion. You have implemented some cost-cutting 
and streamlining and consolidation measures which will reduce 
that some.
    Assume for a moment that Congress does nothing with respect 
to that piece of your request, we do what we need to do with 
respect to security, but do nothing on the operational side. 
Can you tell us what kind of postal increase would be required 
to make up the difference in the Postal Service financing?
    Mr. Strasser. Senator, that is a multi-dimensional 
question. Due to the nature of the process that we set, we are 
already in a process to raise postage rates from 34 with a 
recommended rate of 37 cents. That assumed that we would break 
even in 2003.
    The issue is more along the lines if in fact we start this 
spiral that the old Post Office Department was in, where the 
constant raising of rates caused a diminution of volume growth, 
what we have been able to see in the 30 years since the 
Congress and the president enacted Postal Reorganization is an 
ability on the part of the Postal Service to cover its expenses 
and the addition of some 50 million addresses to the universal 
delivery system through postage revenues, for the most part.
    As you mentioned yourself in 1976 and 1977, we were 
increasing rates rapidly during a poor economic period, and the 
delicate balance of raising rates during that time was 
problematic. If we in fact lost $3 billion and had to go 
further into debt, we would have to have some mechanism to 
substantially change our current rate situation. Moving 
forward, depending on how much mail volume decline we saw, we 
could be--if we saw a 10 percent mail volume decline, for 
example, that has to make up $7 billion in revenue, which very 
roughly would translate into postage rates that would be in the 
order of 15 to 20 percent across the board, which would then 
further threaten the volume and the mail business that counts 
on moderate rates. And that is why it is very, very difficult--
it is not just the First Class stamp, it is the entire effect 
on the industry.
    Senator Dorgan. Well, I understand a couple of things. One 
is the uncertainty about what this does to the long term use of 
the mail by the American citizen and, therefore, what it does 
to your demand.
    Second, the only way for you to deal with a loss is to try 
to increase your revenue, which is a postal rate increase, or 
diminish service. I want to say that Senator Byrd's discussion 
about 6-day mail delivery service, you should understand that 
he is the general of a very large army on that issue. We are 
not about to allow folks to go to 5-day delivery in this 
country. I have signed up as a corporal, I guess, or whatever 
service I can be, but I was pleased to work with him to include 
that language again in our appropriation bill.
    Let me make one final point. I mentioned the grampa from 
Glenburn, but I do this only because I think it is important 
for the American people to understand what the mail system 
means, especially the Postal Service.
    I was last weekend with a man named Les Snavely in Bismarck 
who is a long-time friend of mine. He is from Bowman, North 
Dakota, and some while ago, a couple of years ago--he collects 
antique motorcycles and restores them and he is well known for 
that. And someone from Kentucky wrote him a letter and he 
addressed it to the man who collects antique motorcycles in 
southwestern North Dakota. That is even more non-specific. But 
somehow it got to western North Dakota and one of the postal 
workers or letter carriers or postmasters happened to know that 
it was Les Snavely down in Bowman, a high school teacher who is 
the man who collects antique motorcycles, and he got a letter 
addressed to the man who collects antique motorcycles in 
southwestern North Dakota.

                         Conclusion of Hearing

    Again, one more piece of good news, it seems to me, for a 
postal system that sometimes has some problems, but in most 
cases works well for this country. I hope you will pass our 
commendation on to those postal workers and letter carriers and 
the rest of the folks in the system that every day in every way 
go out and provide public service; service that has been deemed 
now to be more dangerous in recent weeks, but service that we 
nonetheless very much appreciate as American citizens.
    This hearing is recessed.
    [Whereupon, at 11:51 a.m., Thursday, November 8, the 
hearing was concluded, and the subcommittee was recessed, to 
reconvene subject to the call of the Chair.]

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