[Senate Hearing 109-549]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-549
 
                      NOMINATION OF MARK D. ACTON

=======================================================================


                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                                 ON THE

NOMINATION OF MARK D. ACTON, TO BE COMMISSIONER, POSTAL RATE COMMISSION


                               __________

                             MARCH 31, 2006

                               __________

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        Committee on Homeland Security and Governmental Affairs



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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

           Michael D. Bopp, Staff Director and Chief Counsel
            Jennifer A. Hemingway, Professional Staff Member
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
         Adam R. Sedgewick, Minority Professional Staff Member
                  Trina Driessnack Tyrer, Chief Clerk



                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Collins..............................................     1
    Senator Akaka................................................     2
    Senator Coburn...............................................     3

                                WITNESS
                         Friday, March 31, 2006

Mark D. Action, to be Commissioner, Postal Rate Commission
    Testimony....................................................     3
    Prepared statement...........................................    13
    Biographical and professional information....................    14
    Responses to pre-hearing questions...........................    19
    Letter from U.S. Office of Government Ethics.................    32


                      NOMINATION OF MARK D. ACTON

                              ----------                              


                         FRIDAY, MARCH 31, 2006

                                       U.S. Senate,
                       Committee on Homeland Security and  
                                      Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 11:01 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Susan M. 
Collins, Chairman of the Committee, presiding.
    Present: Senators Collins, Coburn and Akaka.

             OPENING STATEMENT OF CHAIRMAN COLLINS

    Chairman Collins. The Committee will be in order.
    The Committee will now consider the nomination of Mark 
Acton to be a Commissioner of the Postal Rate Commission.

    This Committee is very familiar with the many serious 
issues facing the U.S. Postal Service and has spent a great 
deal of time crafting postal reform legislation. Our 
legislation has been passed by the Senate, and it is my hope 
that the conference with the House will begin shortly.
    The Postal Rate Commission will play an important role in 
ensuring the success of postal reform.
    As an independent regulatory agency, the Commission reviews 
Postal Service requests for new domestic mail rates, fees, and 
classifications, and for major changes in service.
    The five commissioners review these requests in public 
proceedings and then make recommendations to the Governors of 
the Postal Service. They provide a forum for postal customers 
to be heard, and their proceedings provide the transparency and 
accountability that are necessary to justify changes in rates 
or service.
    In addition, the Commission also investigates complaints 
from postal customers concerning rates, fees, classifications, 
and service changes.
    Mark Acton, our nominee, has been a Special Assistant to 
the Chairman of the Postal Rate Commission since March 2002. As 
such, he has been involved in managing the operations of the 
Commission and participates in its briefings and deliberations. 
He also serves as the Commission's liaison to the White House, 
Congress, the Postal Service, and other government and private 
sector entities, and he represents the Commission at the Postal 
Service Board of Governors meetings.
    If confirmed, he would fill the remainder of a term that 
expires in the year 2010.
    From his work as an Assistant to the Commission Chairman, I 
am sure that Mr. Acton is very aware of the challenges facing 
the Postal Service and of the challenges facing the Commission 
as a partner in reform. Under the legislation that I authored 
with our colleague, Senator Carper, the Postal Rate Commission 
will be renamed the Postal Regulatory Commission. As that 
change suggests, the powers and responsibilities of the 
Commission will be expanded considerably.
    Under the current law, the Rate Commission has very narrow 
authority. Among other changes, our postal reform bill would 
grant the Postal Regulatory Commission the authority to 
regulate rates for noncompetitive products and services, ensure 
financial transparency, establish limits on the accumulation of 
retained earnings by the Postal Service, obtain information 
from the Postal Service if need be through the use of a new 
subpoena power, and review and act on complaints filed by those 
who believe that the Postal Service has exceeded its authority.
    As the members of this Committee know, the U.S. Postal 
Service is a vital part of our society and our economy. We know 
that the fiscal challenges facing the Postal Service threaten 
the future of affordable universal service unless reform 
legislation is enacted and implemented.
    I look forward to discussing these challenges with Mr. 
Acton today. I am very pleased that the President has appointed 
an individual with a great deal of experience on these very 
issues, and I welcome him to the Committee. Senator Akaka.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Madam Chairman.
    I want to add my welcome to you to the Committee, Mr. 
Acton. And I want to commend you for accepting the nomination 
to serve as a Commissioner on the U.S. Postal Rate Commission.
    Mr. Acton, I know it is so easy to say to a nominee that 
his tenure comes at the pivotal time for the agency to which he 
has been nominated. However, today I can say to you that your 
nomination comes at a significantly critical time.
    As you know, the Postal Rate Commission will be 
strengthened under the two postal reform bills that are now 
awaiting conference action.
    Having served as a Chairman and Ranking Member of the 
Committee's former Postal Subcommittee, and as a Member of the 
upcoming conference on postal reform, I believe that the 
flexibilities granted to the U.S. Postal Service demand strong 
accountability. Both postal reform bills would significantly 
strengthen the Postal Rate Commission.
    That is an important step to me because I believe the 
continued stability and viability of the U.S. Postal Service 
will depend on a strong Postal Rate Commission. Reaching that 
goal will require the dedication of individuals such as you, 
Mr. Acton, who, if confirmed, will be called on to make some 
really tough decisions.
    Madam Chairman, I also wish to note the critical vacancies 
that exist on the U.S. Postal Board of Governors, and I call on 
the President to select nominees as soon as possible.
    There are nine members of the Board, of which no more than 
five may be affiliated with the same political party. 
Currently, there are only five sitting board members, four of 
whom are from the President's party. A Republican nominee and a 
Democratic nominee have been referred to this Committee. 
However, given the critical role that the Postal Service plays 
in the Nation's economy, it is imperative that the U.S. Postal 
Service Board of Governors, which directs and controls 
expenditures and controls postal policy, have nine members.
    Thank you very much, Madam Chairman, and I look forward to 
our discussion with Mr. Acton.
    Chairman Collins. Thank you. Senator Coburn.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. Madam Chairman, just a short opening 
statement.
    First of all, I want to welcome Mr. Acton and congratulate 
him on his nomination. I am going to have several questions 
that came up in the staff briefing with my staff, and I will 
hold those.
    It is an important thing, and I will say again, we do need 
postal reform and the Chairman's bill. Other than one little 
small part of it that I had a problem with, it is a great step 
forward. But we are not going to be there to bail you out, I 
can just tell you that, if you look at the long-range financial 
projections for the Congress in terms of appropriating money.
    So I am very interested in how aggressive we can become in 
making the changes that make it viable, efficient, and 
effective in surviving.
    Chairman Collins. Thank you.
    Mr. Acton has filed responses to a biographical and 
financial questionnaire, answered pre-hearing questions 
submitted by the Committee, and had his financial statements 
reviewed by the Office of Government Ethics.
    Without objection, this information will be made part of 
the hearing record, with the exception of the financial data 
that are on file and available for public inspection in the 
Committee's offices.
    Our Committee's rules require that all witnesses at 
nomination hearings give their testimony under oath, so Mr. 
Acton I would ask that you stand and raise your right hand.
    Do you swear that the testimony you are about to give to 
the Committee will be the truth, the whole truth, and nothing 
but the truth, so help you, God?
    Mr. Acton. I do.
    Chairman Collins. You may proceed with your statement.

TESTIMONY OF MARK D. ACTON,\1\ TO BE COMMISSIONER, POSTAL RATE 
                           COMMISSION

    Mr. Acton. Thank you, Madam Chairman, and Members of the 
Committee.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Acton appears in the Appendix on 
page 13.
---------------------------------------------------------------------------
    I am honored to be here with you today to thank you for 
holding this hearing to consider my nomination as Postal Rate 
Commissioner. I want to thank President Bush for his confidence 
in me and for the honor of nominating me for this appointment.
    I am grateful, too, for the support of my home State 
senators, Mitch McConnell and Jim Bunning, as well as the 
Senate Majority Leader, Bill Frist.
    My thanks to the Committee staff for their expert guidance. 
And I also would like to acknowledge the loving support of my 
family and my friends.
    As many of you know, I spent most of the past 4 years on 
staff at the Postal Rate Commission, assisting the Agency 
Chairman in administering Postal Rate Commission operations. I 
believe that this experience has afforded me a clear 
appreciation of the key postal rate issues, as well as a close 
familiarity with the concerns of the postal community 
stakeholders.
    If confirmed, I pledge to work with this Committee in 
advancing the vital element of fair and impartial due process 
for all that Congress has tasked the Postal Rate Commission to 
ensure.
    Madam Chairman, I look forward to working with you and 
other Members of the Committee, and I would be pleased to 
answer any questions you may have.
    Chairman Collins. Thank you very much.
    The Collins-Carper bill establishes the Consumer Price 
Index (CPI) as the rate cap on each class of mail, as you are 
well aware. And it only allows for exigency rate changes in 
``unexpected and extraordinary circumstances.''
    The Postal Service Board of Governors has expressed support 
for the CPI-based rate cap but wants a far lower standard 
which, in my opinion, would render the rate cap meaningless. 
They are advocating language more similar to the House version 
of the Postal Reform bill and that there be a standard of 
reasonable and necessary.
    My concern is that a reasonable and necessary standard is 
so easy to meet and so ill-defined that the CPI cap on rates 
would be easily breached and it would essentially be 
meaningless. Obviously, reasonable and necessary is very 
different from the language in our bill, which is unexpected 
and extraordinary.
    What is your opinion of the circumstances under which an 
exception should be allowed under a CPI-based rate cap?
    Mr. Acton. I think that the term exigent holds meaning and 
that there are at least three competing assessments of what 
that meaning is. There is the Senate version, the House 
version, and the Postal Service version, as well.
    It seems to me that a key element in this legislation is an 
exchange of greater pricing freedoms for the Postal Service 
and, in return, adherence to a strict exigency standard. And I 
abide by the Senate language in this regard.
    I think that, in terms of examples of types of exceptions 
that may qualify, you can look to the last two rate cases. 
Certainly the September 11 circumstance, I think, would be an 
exceptional case. And perhaps even the compelling argument that 
the Postmaster General made on behalf of the escrow obligations 
could also be considered.
    So in light of this history and in keeping with the spirit, 
I think, of the Senate language, I would agree that going 
forward we would want to work to ensure that the Senate 
language is used in the final form of the legislation.
    Chairman Collins. Thank you.
    In your answer to written questions, you expressed the 
importance of the Postal Service providing high-quality, timely 
data to the Postal Rate Commission. The Senate-passed postal 
bill increases the Postal Service's obligation to provide 
additional data, including requiring annual cost, revenue, 
rates, and service reports, requiring SEC-type reporting, and 
granting the Postal Rate Commission subpoena power that could 
be used to get other information if necessary.
    Do you support those changes?
    Mr. Acton. I do support it. I think that the accountability 
provisions in the new legislation are particularly important. 
Transparency and sharing information is key to a successful 
rate-making process.
    History has shown us at the Postal Rate Commission that 
when the Postal Service develops new data and shares it in a 
timely way with the Postal Rate Commission then the postal rate 
setting process is enhanced.
    I also believe that subpoena power is a useful tool for any 
regulatory authority, but one that should be used prudently and 
only in an instance of last resort.
    Chairman Collins. I actually think that just having the 
authority to subpoena information often makes its use 
unnecessary.
    Mr. Acton. I think there is considerable truth in that 
view.
    Chairman Collins. In a recent Postal Service filing at the 
Postal Rate Commission, the Postal Service included as part of 
its testimony information on its service standards. As I 
understand it, with the exception of first-class mail, the 
Postal Service has not updated those standards since the 1970s.
    In addition, the Postal Service does not appear to track or 
measure its performance against those standards. It is fine to 
establish service standards, but if you are not measuring your 
performance against them, they really do not have much meaning.
    The need for standards and new measurement systems is an 
issue that is of great importance to the mailing community. I 
was giving a speech in Maine last week, and a local newspaper 
publisher came up to me, and he said, ``It is not really the 
rates. It is the service. It is ensuring on-time delivery of 
our products that matters even more to us.''
    This is an issue of great importance to all of us who have 
been working on the postal bill, and we have included language 
in our bill to improve the process by which service standards 
are set. We have also asked for GAO to take a look at this 
issue.
    My question for you, Mr. Acton, is what do you believe is 
the appropriate role for the Postal Rate Commission in defining 
requirements for performance standards for postal products and 
services and for monitoring compliance with those standards? 
How well is the Postal Service doing in meeting those 
standards?
    Mr. Acton. Performance standards are a key concern. My 
experience is similar to yours in the sense that when I visit 
the various postal forums and functions, one clear message that 
comes through on regular occasion is the need for better 
performance measures. And not just for first-class mail but 
also for business-class mail. It is an important piece of 
information for a business mailer to know when a given piece of 
mail in the mailstream arrives at its destination. There is 
real value in that information.
    And I think the Postal Service needs to contemplate that 
going forward, given the fact that standard mail is such a 
growing portion of total revenue.
    As far as how the Postal Rate Commission may participate, 
or the Postal Regulatory Commission, in facilitating that 
process, performance standards are met or established in answer 
to demand. And I think that the Postal Regulatory Commission is 
well-positioned to solicit what the consumer needs are, to work 
with the Postal Service in establishing suitable standards, and 
then making sure that those standards are met.
    Chairman Collins. Thank you. Senator Akaka.
    Senator Akaka. Thank you, Madam Chairman.
    Mr. Acton, the ability of the Postal Service to carry out 
its universal service's obligation is critically important to 
my State of Hawaii, which has over 628,000 delivery points 
throughout the State.
    My question to you is, in serving as a Commissioner of the 
Postal Rate Commission, how will you address the preservation 
of this important function of the Postal Service?
    Mr. Acton. The universal service obligation is a key 
concern regardless of whether we reform or not. It is an 
important dynamic that acts to tie the Nation together by 
making affordable Postal Service available in even the most 
remote regions of the country.
    I think a good start in terms of how we might advance its 
preservation would be offering a real definition of exactly 
what constitutes the obligation. I am not sure that an official 
definition of the universal service obligation exists.
    And I believe that the Postal Regulatory Commission holds 
the expertise to offer some guidance and advice and a 
leadership role in terms of developing a definition that would 
help preserve the obligation in the long term.
    Senator Akaka. Thank you, Mr. Acton. The Senate's postal 
reform bill, which as you know passed unanimously on February 
9, balances rate flexibility for the Postal Service while 
ensuring financial accountability and transparency of 
operations. Concerns have been expressed about this bill in its 
current form, that it would allow the new Postal Regulatory 
Commission to become too involved in the day-to-day operations 
of the Postal Service.
    My question to you is do you agree with that assumption?
    Mr. Acton. Senator, I am familiar with those concerns. I 
would respectfully disagree. I think that the legislation, as 
it is drafted, provides the Postal Service management, 
including the Postmaster General and the top executives, with 
both the responsibility and the authority to manage the daily 
operations of the Postal Service.
    I think the concerns that you describe stem from worries 
about the complaint process. People are concerned that under 
the new program, individuals who are interested in what is 
happening can bring complaints before the Postal Regulatory 
Commission and then the Agency would go about intervening in 
the daily minutiae of the operations of the Postal Service.
    I think history proves that concern unwarranted from the 
standpoint that there is already a complaints process in place. 
The Postal Rate Commission has properly imposed certain rules 
that limit our intervention to those instances of complaints 
brought on issues of national scope only. I see no indication 
that going forward our approach in that regard would be any 
different than it is now.
    Senator Akaka. Under the Senate bill, the Postal Rate 
Commission will be required to develop rules for carrying out 
its new responsibilities in a number of areas. For example, our 
bill provides the Commission with 12 months to develop a system 
for adjusting rates while the House version allows 24 months.
    Has the Commission begun thinking about what resources, 
including personnel, will be needed to carry out the new 
responsibilities? In particular, how much time will be 
necessary to develop the rules for charging rates?
    Mr. Acton. As you would imagine, there has been 
considerable discussion and thought and energy applied at the 
Postal Rate Commission about how to manage the transition to 
the Postal Regulatory Commission. The Chairman has appointed an 
internal working group of individuals, including our General 
Counsel, Steve Sharfman, as well as our Human Resource 
Director, our Chief Administrative Officer, and a number of 
other key personnel to advise the Commission on how best to go 
about managing this transition.
    We have been searching for a qualified organizational 
management consultant with expertise in Federal reform. We have 
been engaged in informal discussions with other agencies that 
have undergone similar type legislative reform to get an 
indication on what the important pitfalls are and what worked 
best and what did not.
    In terms of the time frames, it is so much a matter of 
timing. And the two key elements are when will the rate case be 
filed? And when will the legislation be enacted? If the rate 
case is filed early and nearly completed by the time that the 
bill is made law, then there is really not much of a 
competition in resources. But if they coincide, then we are 
going to have a real challenge on our hands.
    I know that Congress has spelled out two specific time 
frames, 12 and 24 months. We will pursue the goal at hand in 
the time frame that Congress deems best. Twelve months is a 
very ambitious schedule. Twenty-four would allow for a more 
thoughtful review.
    In preliminary discussions with the Chairman and with our 
General Counsel, the general thought is that we could 
accomplish and manage the transition well in approximately 18 
months if allowed.
    Senator Akaka. Mr. Acton, strengthening financial 
transparency and accountability at the Postal Service is a 
longtime goal of mine. The Rate Commission and the public 
benefit from timely and accurate data. If confirmed, how will 
you address the related objectives of Postal Service 
accountability and transparency as outlined in the postal 
reform legislation?
    Mr. Acton. The accountability provisions are key to the 
success of the new ratemaking process. Of course, the Postal 
Rate Commission has a wealth of experience in accepting data 
from the Postal Service. Sometimes not as much as we would 
like.
    But in terms of what is called for under the new 
obligations, it is SEC-type reporting and auditing of certain 
expertise that we do not presently have a lot of experience in. 
In order for us to deal effectively with the new obligations, 
we likely would have to hire a small staff of individuals with 
professional experience in SEC-type auditing and reporting.
    Senator Akaka. Thank you very much, Madam Chairman.
    Chairman Collins. Thank you. Senator Coburn.
    Senator Coburn. Thank you. You are obviously well qualified 
for this position, so there are no doubts about that.
    Your bachelor's degree is in what field?
    Mr. Acton. Chemistry.
    Senator Coburn. And you are working on a MBA, I understand.
    Mr. Acton. That is right, University of Maryland.
    Senator Coburn. My only concern I have is when you have a 
monopolistic process--and I am not talking about parcels, I am 
talking about first-class mail and on down--you have two events 
of control. One is cost control and the other is price 
increase.
    We have a commission established, and we will have the 
Regulatory Commission. We have that. But when you are in that 
type of environment, the easiest thing to do is to raise 
prices. And so I really want to hear your philosophy about 
innovation and competition and streamlining and budgeting and 
how does the Postal Service establish the cost reductions and 
the efficiencies that are going to be necessary?
    When I look at what I think is going to happen with mail, 
there is going to be a whole lot less of it, other than 
advertisement, newspapers, and that type of thing, and a 
markedly increased number of parcels. How do we handle that? 
And how do you stimulate the type of competition within the 
Postal Service?
    And I know you do not manage it, you just regulate it. But 
how do you set the expectation from your position that you are 
going to hold, so that that is integrated within the Postal 
Service?
    Mr. Acton. It is a sensitive question, of course, Senator, 
for a lot of individuals, particularly the Postal Service and 
the interested stakeholders. I think that a lot of these issues 
were explored in the greater context of the work that Congress 
has done here in crafting the legislation that is currently 
pending. I know that the President's Commission was involved in 
a thorough assessment of all the different options.
    But I do think that the price cap scheme that you are 
contemplating in this present legislation is going to go a long 
way toward forcing new efficiencies in the Postal Service. I 
think that sort of default response that you described on how 
to deal with rising costs is raising the rates is going to have 
to be thrown by the wayside when you introduce a situation 
where you have a mechanism in place such as the price cap, 
which forces the development of new efficiencies to meet cost 
rather than raising the price of the product.
    Senator Coburn. What happens when, if we have the new 
postal reform bill, and you do not have--there is no exigent 
circumstances for a rate increase and yet you do not have the 
cost controls? What happens?
    Mr. Acton. Well, it is a worst-case scenario, of course. I 
think the Postal Service is recognizing the new challenge. I 
think that they understand the inevitability of the passage of 
this legislation, as much as anyone else. I think part of their 
efforts to reoptimize their networks, the realignments and 
changes in the way that they are dealing with post offices and 
postal facility arrangements is an indication that they are 
looking to increase efficiencies that meet the sort of 
requirements that are pending.
    Senator Coburn. Do you think there is ways to have postal 
reform in a way that costs are borne by those utilizing the 
service instead of the taxpayers?
    Mr. Acton. Do I think that there is a way that can be done?
    Senator Coburn. Yes.
    Mr. Acton. I would have to give that some thought, Senator. 
A successful approach does not come immediately to mind. I know 
that there have been a number of theories in this regard, 
certain new approaches in terms of how they go about doing 
pricing and particularly rate review, in general. But I do not 
know offhand what specific approach we would want to engage in.
    Senator Coburn. One final question, one of the things that 
I would worry about as a Commissioner would be would we price 
ourselves out of business based on technology? That would be 
one of the things that I would think everybody working in the 
Postal Service would be concerned with, that as technology 
advances further and further that, in fact, even under the 
reform bills many of the people who have well served the Postal 
Service for years and are new into the Postal Service may, in 
fact, find that there is not a market there any more because 
technology has superseded them. Any comments on that?
    Mr. Acton. Yes. What you are describing is the postal death 
spiral phenomena, and it is attributed, in large part, to what 
is called electronic diversion, which is people using e-mail 
rather than postal services.
    But it has been my impression and I think there have been 
some interesting studies done on this by Pitney Bowes and 
others that show that the expectation on how technology is 
going to impact the postal mail stream is not necessarily 
predictable.
    It seems to be as you describe, but on the other hand more 
people using the Internet, for instance, means more packages to 
be delivered, which means more product and service deliveries 
for the Postal Service. Now it is not an even exchange in terms 
of first-class versus parcel delivery, but I think there are 
some uncertain dynamics at work that are difficult to 
anticipate.
    Senator Coburn. Just one little comment before my time runs 
out. I can envision somebody innovating, say come to us. We 
will, in fact, print all of your catalogs and all of the junk 
mail I get every day. And we will package them in a box. And we 
will use somebody outside the postal--we will use another 
competitive market, or the parcel service of the post office, 
rather than that class of mail today.
    And in fact, we do not have mail as we know it today. What 
we have is packages.
    And so in that area you are competing effectively. And the 
question I would have is as a revenue stream, are you 
profitable in that? And is that subsidizing the other? Or is 
one subsidizing that? Because if that kind of thing happens, 
will you be in the position where you are competitive enough in 
the parcel business to compete if that were to happen?
    Mr. Acton. I think it is important to point out that the 
Postal Service has been very active in terms of dealing with 
what is happening with new technology. In fact, the situation 
you describe is comparable to their online mailing service, 
which has been a big success for them. And I think that they 
are realizing that they are going to have to do more of that 
sort of innovative thought across the board, not just in terms 
of how they approach their service obligations but also in 
terms of the rate-making process.
    So I am hopeful that the Postal Service, particularly under 
the leadership of someone like General Potter, is going to see 
what the vision of the future is and come to terms with it in a 
positive, productive, profitable way.
    Senator Coburn. Thank you very much.
    Mr. Acton. Thank you, Senator.
    Chairman Collins. Mr. Acton, I just want to clarify an 
exchange that you just had with Senator Coburn because I think 
it is based on an outdated perception.
    It is my understanding that the Postal Service has not 
received a taxpayer subsidy for a number of years, except for 
services provided to the blind and for overseas mailing. Is 
that correct?
    Mr. Acton. I would have to research that to know the answer 
in a definitive way, Senator, but I do believe I have heard 
that.
    Chairman Collins. That is correct.
    Senator Coburn. Can I raise a question? Not all of the 
costs of the Postal Service are borne by the Postal Service, 
especially when it comes to health care, retirement, benefits, 
and everything else. So my question just relates--not implying 
that there was but under the reform that preceded this one that 
is coming when it was reorganized, not all of it is a cost 
center within it.
    So when decisions are made within it, it does not truly 
reflect necessarily all of the costs associated with the U.S. 
Postal Service.
    Chairman Collins. There are issues on allocating costs to 
various users and classes of mail, and how much should be 
allocated. But it has been a number of years since the Postal 
Service has received an appropriation.
    Senator Coburn. I understand that.
    Chairman Collins. One of the problems that our bill, which 
Senator Akaka is a cosponsor of, is intended to help with are 
those unfunded liabilities for workers compensation claims and 
for retiree health insurance, which amount to billions of 
dollars.
    The legislation that we have advanced makes a big dent in 
those unfunded liabilities by requiring three-quarters of the 
funds from the escrow account to be used to prefund the health 
insurance obligations that are due to future retirees.
    Moreover, the debt that the Postal Service did owe to the 
U.S. Treasury has largely been eliminated in the past few years 
by being paid down. I just wanted to clarify the record on that 
point.
    Mr. Acton, in my haste to discuss policy issues with you, I 
skipped over the standard questions that we ask of every 
nominee. So let me do that now.
    First, is there anything you are aware of in your 
background which might present a conflict of interest with the 
duties of the office to which you have been nominated?
    Mr. Acton. No.
    Chairman Collins. Second, do you know of anything personal 
or otherwise that would in any way prevent you from fully and 
honorably discharging the responsibilities of the office?
    Mr. Acton. No.
    Chairman Collins. And finally, do you agree without 
reservation to respond to any reasonable summons to appear and 
testify before any duly constituted committee of Congress, if 
you are confirmed?
    Mr. Acton. Yes.
    Chairman Collins. Thank you. Senator Akaka.
    Senator Akaka. Thank you, Madam Chairman.
    Mr. Acton, given the new responsibilities we discussed in 
the previous question, I am curious what additional funds will 
be needed by the Postal Rate Commission? Has this aspect been 
examined by the Commission?
    Mr. Acton. This aspect of the transformation has not been 
thoroughly defined, Senator. Presently our budget is near $10 
million. I think we are going to need more than that perhaps to 
accomplish the goals in the new legislation.
    But I would hesitate to offer you a guess without more 
information. But this is one of the questions that the working 
group is planning on advising the Chairman of the Agency soon 
in very close term, hopefully prior to the filing of the next 
rate case.
    Senator Akaka. Mr. Acton, it is expected that the Postal 
Service will file a new rate case sometime this spring or 
summer. If the Postal Rate Commission is considering a rate 
increase under existing law when the legislation is enacted, 
how will this impact the Commission's ability to meet all of 
its additional responsibilities as proposed in the current 
legislation?
    Mr. Acton. It will be a great challenge. I think I 
mentioned earlier a lot of it is dependent upon timing, the two 
factors being when the bill is enacted and when the rate case 
is filed. If we are able to complete most of the work that is 
required in terms of fully litigating the case prior to the 
enactment of the bill, then the conflict of resources will not 
exist as predominantly as they would if the circumstances were 
different.
    It is really an instance by instance sort of assessment. We 
will have to deal with it as it comes, but certainly there will 
be a stretch of resources if we are asked to not only complete 
the existing final cost-based omnibus rate case but also 
implement the new obligations of the new legislation.
    I just want to add that the key consideration here, 
Senator, is understanding, as I know you do, that the final 
omnibus rate case set under the old scheme will act as the 
baseline going forward under the new price cap regimen. It is 
important that we have a fully litigated case so we can resolve 
any inequities and go forth with a fully balanced and equitable 
rate plan so that the implementation of the new legislation can 
be met with great success.
    Senator Akaka. I thank you so much for your responses. 
Thank you, Madam Chairman.
    Chairman Collins. Thank you. Senator Coburn.
    Senator Coburn. No questions.
    I would note, however, my question regarding taxpayer 
liability was really about the future, not really about the 
past. That is our worry and that is the Postal Service's worry. 
They have to become totally self-sufficient and independent 
given the fiscal situation. So mine is really about the future, 
not the past.
    Chairman Collins. That is a helpful clarification. One of 
the motivations for the postal reform legislation is to prevent 
the need for a taxpayer bailout.
    Senator Coburn. I will get there, Madam Chairman, I 
promise.
    Chairman Collins. Eventually I am going to get a yes vote 
from you on something.
    Senator Coburn. You are.
    Chairman Collins. I want to thank our witness for appearing 
before the Committee today.
    Senator Akaka, I should ask if you have any further 
questions?
    Senator Akaka. I am fine. Thank you.
    Chairman Collins. Without objection, the record will be 
kept open until 12 noon on Monday, April 3, for the submission 
of written questions or statements for the record.
    And again, Mr. Acton, I would encourage you to turn around 
those questions as rapidly as possible because it will help us 
move your nomination along.
    I thank you very much for your willingness to serve. This 
hearing is now adjourned.
    [Whereupon, at 11:39 a.m., the Committee was adjourned.]


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