[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
               THE ECONOMICS OF UNIVERSAL MAIL POST PAEA

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



                                HEARING

                               before the

                   SUBCOMMITTEE ON FEDERAL WORKFORCE,
                    POSTAL SERVICE, AND THE DISTRICT
                              OF COLUMBIA

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 8, 2008

                               __________

                           Serial No. 110-138

                               __________

Printed for the use of the Committee on Oversight and Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform



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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 HENRY A. WAXMAN, California, Chairman
EDOLPHUS TOWNS, New York             TOM DAVIS, Virginia
PAUL E. KANJORSKI, Pennsylvania      DAN BURTON, Indiana
CAROLYN B. MALONEY, New York         CHRISTOPHER SHAYS, Connecticut
ELIJAH E. CUMMINGS, Maryland         JOHN M. McHUGH, New York
DENNIS J. KUCINICH, Ohio             JOHN L. MICA, Florida
DANNY K. DAVIS, Illinois             MARK E. SOUDER, Indiana
JOHN F. TIERNEY, Massachusetts       TODD RUSSELL PLATTS, Pennsylvania
WM. LACY CLAY, Missouri              CHRIS CANNON, Utah
DIANE E. WATSON, California          JOHN J. DUNCAN, Jr., Tennessee
STEPHEN F. LYNCH, Massachusetts      MICHAEL R. TURNER, Ohio
BRIAN HIGGINS, New York              DARRELL E. ISSA, California
JOHN A. YARMUTH, Kentucky            KENNY MARCHANT, Texas
BRUCE L. BRALEY, Iowa                LYNN A. WESTMORELAND, Georgia
ELEANOR HOLMES NORTON, District of   PATRICK T. McHENRY, North Carolina
    Columbia                         VIRGINIA FOXX, North Carolina
BETTY McCOLLUM, Minnesota            BRIAN P. BILBRAY, California
JIM COOPER, Tennessee                BILL SALI, Idaho
CHRIS VAN HOLLEN, Maryland           JIM JORDAN, Ohio
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
JOHN P. SARBANES, Maryland
PETER WELCH, Vermont
------ ------

                     Phil Schiliro, Chief of Staff
                      Phil Barnett, Staff Director
                       Earley Green, Chief Clerk
               Lawrence Halloran, Minority Staff Director

Subcommittee on Federal Workforce, Postal Service, and the District of 
                                Columbia

                        DANNY K. DAVIS, Illinois
ELEANOR HOLMES NORTON, District of   KENNY MARCHANT, Texas
    Columbia                         JOHN M. McHUGH, New York
JOHN P. SARBANES, Maryland           JOHN L. MICA, Florida
ELIJAH E. CUMMINGS, Maryland         DARRELL E. ISSA, California
DENNIS J. KUCINICH, Ohio, Chairman   JIM JORDAN, Ohio
WM. LACY CLAY, Missouri
STEPHEN F. LYNCH, Massachusetts
                      Tania Shand, Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 8, 2008......................................     1
Statement of:
    Goff, Oscar Dale, Jr., national president, National 
      Association of Postmasters of the United States; Charles W. 
      Mapa, president, National League of Postmasters; and Ted 
      Keating, president, National Association of Postal 
      Supervisors................................................    85
        Goff, Oscar Dale, Jr.....................................    85
        Keating, Ted.............................................   109
        Mapa, Charles W..........................................    95
    Potter, John E., postmaster general and CEO, U.S. Postal 
      Service; Dan G. Blair, chairman, Postal Regulatory 
      Commission; and David Williams, Inspector General, U.S. 
      Postal Service.............................................     4
        Blair, Dan G.............................................     9
        Potter, John E...........................................     4
        Williams, David..........................................    19
    Young, William, president, National Association of Letter 
      Carriers; John Hegarty, national president, National Postal 
      Mail Handlers Union; Don Cantriel, vice president, National 
      Rural Letter Carriers Association; and Myke Reid, 
      legislative and political director, American Postal Workers 
      Union, AFL-CIO.............................................    37
        Cantriel, Don............................................    57
        Hegarty, John............................................    47
        Reid, Myke...............................................    64
        Young, William...........................................    37
Letters, statements, etc., submitted for the record by:
    Blair, Dan G., chairman, Postal Regulatory Commission, 
      prepared statement of......................................    11
    Cantriel, Don, vice president, National Rural Letter Carriers 
      Association, prepared statement of.........................    60
    Goff, Oscar Dale, Jr., national president, National 
      Association of Postmasters of the United States, prepared 
      statement of...............................................    88
    Hegarty, John, national president, National Postal Mail 
      Handlers Union, prepared statement of......................    50
    Keating, Ted, president, National Association of Postal 
      Supervisors, prepared statement of.........................   112
    Mapa, Charles W., president, National League of Postmasters, 
      prepared statement of......................................    97
    Potter, John E., postmaster general and CEO, U.S. Postal 
      Service, prepared statement of.............................     6
    Reid, Myke, legislative and political director, American 
      Postal Workers Union, AFL-CIO, prepared statement of.......    66
    Williams, David, Inspector General, U.S. Postal Service, 
      prepared statement of......................................    21
    Young, William, president, National Association of Letter 
      Carriers, prepared statement of............................    40


               THE ECONOMICS OF UNIVERSAL MAIL POST PAEA

                              ----------                              


                         THURSDAY, MAY 8, 2008

                  House of Representatives,
Subcommittee on Federal Workforce, Postal Service, 
                      and the District of Columbia,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:14 p.m., in 
room 2154, Rayburn House Office Building, Hon. Danny K. Davis 
(chairman of the subcommittee) presiding.
    Present: Representatives Davis, Cummings, Clay, Lynch, 
Marchant, and McHugh.
    Staff present: Tania Shand, staff director; Lori Hayman, 
counsel; Marcus A. Williams, clerk; Jim Moore, minority 
counsel; and Chris Espinoza, minority professional staff 
member.
    Mr. Davis. I apologize to those of you who have been 
waiting. Normally I am pretty punctual. My father was the most 
punctual guy that I have ever known, and he always believed in 
being on time, and that is a trait that I inherited. I will 
tell you a little story about that at some time, but I won't do 
it right now.
    The subcommittee will now come to order. Welcome, Ranking 
Member Marchant, members of the subcommittee, hearing 
witnesses, and all those in attendance. Welcome to the Federal 
Workforce, Postal Service, and the District of Columbia's 
oversight hearing on Economics of Universal Mail Post, the 
Postal Accountability and Enhancement Act of 2006, PAEA.
    The chairman, ranking member, and subcommittee members will 
each have 5 minutes to make opening statements, and all Members 
will have 3 days to submit statements for the record. Hearing 
no objection, so ordered.
    I will begin. Today the subcommittee is holding an 
oversight hearing to examine the degree to which the U.S. 
Postal Service has taken advantage of provisions contained in 
the Postal Accountability and Enhancement Act of 2006 to 
generate new revenue and improve operational efficiency.
    Through the years, our universal mail system has served our 
Nation well and has been a world leader in efficiency and 
economy. In 2007, it delivered over 212 billion pieces of mail 
to nearly 140 million delivery points. Over $80 billion was 
spent in providing these and other postal services required as 
part of meeting the Postal Service's universal mandate.
    Besides delivering the mail in an effective and economic 
manner, the Postal Service has always maintained the public 
trust. In 2007, for the third consecutive year, the respected 
Ponemon Institute ranked the Postal Service as the most trusted 
government agency and 1 of the top 10 trusted organizations in 
the country, public or private. A recent Roper poll found that 
Americans rate the Postal Service more favorably than any other 
government agency.
    Additionally, the Postal Service closed 2007 with the 
strongest quarter in its history in terms of mail delivery 
service scores. I am especially happy to note that following 
last May's hearing on mail delivery problems in Chicago, the 
mail service for that area has markedly improved. All this is 
good news for the Postal Service.
    In order to continue making good news and providing 
universal service at affordable prices, the Postal Service will 
have to meet several challenges during the next few years. The 
most immediate concern is the fact that mail volumes are 
declining even though nearly 5,500 new delivery points are 
being added each day. Simply stated, this means higher costs to 
deliver yet less mail.
    It is my hope that the PAEA, of which I was a cosponsor, 
will strongly position the Postal Service for the future by 
providing a more timely and predictable ratemaking process and, 
at long last, the opportunity to compete with private companies 
for increased market share of the shipping business. It is only 
through an economically vibrant Postal Service, one that can 
respond rapidly and effectively to changing market conditions, 
that we can preserve the important American ideal of universal 
service.
    Last February, the subcommittee held an oversight hearing 
where we learned that the Postal Service and the Postal 
Regulatory Commission had made significant progress in the 
implementation of the PAEA. Most importantly, the PRC developed 
and issued final regulations for a new ratemaking system nearly 
8 months prior to the statutory deadline. As a result, new 
rates for market-dominant products like first-class mail, 
periodical mail, and standard mail will increase at no more 
than the rate of inflation this coming Monday. The PRC also 
approved new rates for competitive shipping services, like 
Priority Mail and Express Mail, which will take effect on the 
same day.
    The subcommittee will continue to practice active oversight 
of the Postal Service and their responses to the changes 
brought about by the PAEA. I am especially looking forward to 
reviewing the mandated PRC Report on Universal Postal Service 
and the Postal Monopoly, which is due by December 19th of this 
year.
    I thank you all very much and look forward to hearing 
testimony from today's witnesses. I now yield to the ranking 
member, Mr. Marchant, for any opening statement he may have.
    Mr. Marchant. Thank you, Mr. Chairman. Thank you very much 
for having this hearing today.
    The Postal Accountability and Enhancement Act of 2006 
represents the first major postal reform legislation since 
1970; so it is not surprising that there have been some growing 
pains along the way. However, it is important that Congress and 
this subcommittee continue to ensure the Postal Service is 
fully implementing the PAEA.
    Many of my colleagues with whom I serve on this 
subcommittee played vital and crucial roles to ensure its 
passage in the 109th Congress and labored for many years to 
accomplish this major reform for the U.S. Postal Service. We 
must make sure that we provide the proper oversight during the 
PAEA's infancy so that the years of effort by this subcommittee 
and other Members can be fully realized.
    Within a few days we will see the very first rate increase 
under PAEA. I look forward to hearing today from the Postal 
Regulatory Commission on their assessment of the new price 
adjustments that the Postal Service has requested. I am also 
looking forward to a discussion on the Universal Mail Rule, 
especially in light of the PAEA and the ongoing postal reforms.
    One of the great benefits of the act is that it helps 
create a healthy postal system that can honestly assess what 
the American citizen truly needs from its Postal Service 
without having to worry about enterprise viability.
    Ultimately, Congress' goal is to have a Postal Service that 
is financially sound while still providing world-class services 
to Americans. I appreciate the testimony we will hear today 
from the witnesses on how we can best accomplish this goal.
    Thank you, Mr. Chairman.
    Mr. Davis. Thank you very much, Mr. Marchant.
    Mr. Lynch, do you have an opening statement?
    Mr. Lynch. Very briefly, Mr. Chairman. And I thank you and 
thank the ranking member as well for holding this hearing.
    I, too, am very interested. We are in new territory here 
with the PAEA, and we want to make sure that the Postal 
Accountability and Enhancement Act fulfills all of our 
aspirations for a more competitive and a healthier work 
situation at the Postal Service. And I guess today is a day 
that we will just take a benchmark, if you will, on how we are 
going thus far.
    And I just want to lend my voice to those who would 
encourage management to work more closely with the union, all 
of the different unions here. We want a Postal Service that 
continues to have the high reputation that the chairman spoke 
of earlier, the level of trust that the public has in the 
institution and in the letter carriers and the clerks and the 
mail handlers and the supervisors they deal with on a personal 
basis every single day. We think that therein lies much of the 
success that the Post Office has enjoyed.
    But I am very interested in hearing from our panelists. I 
want to thank this panel for lending its wisdom to the 
committee to help us deal with some of the problems that we 
have.
    I yield back the balance of my time.
    Mr. Davis. Thank you very much, Mr. Lynch.
    And, gentlemen, if you would rise and raise your right 
hands to be sworn in.
    [Witnesses sworn.]
    Mr. Davis. The record will show that the witnesses answered 
in the affirmative, and let me just make a little brief 
introduction of our panelists so that we know exactly who they 
are.
    We, of course, have Mr. John Potter, who was named 72nd 
Postmaster General of the United States of America on June 1, 
2001. Mr. Potter has led the Postal Service to record levels of 
service, efficiency, and performance. Mr. Potter, we are 
delighted.
    Mr. Dan Blair serves as the first chairman of the 
independent Postal Regulatory Commission, the successor agency 
to the former Postal Rate Commission. Mr. Blair, we are 
delighted to have you.
    And, Mr. David Williams was sworn in as the second 
independent Inspector General for the U.S. Postal Service on 
August 20, 2003. Mr. Williams is responsible for a staff of 
more than 1,100 employees that conduct independent audits and 
investigations of a work force of about 700,000 career 
employees in nearly 37,000 retail facilities.
    Gentlemen, we thank all of you for being here with us.
    Mr. Potter, we will begin with you.

STATEMENTS OF JOHN E. POTTER, POSTMASTER GENERAL AND CEO, U.S. 
   POSTAL SERVICE; DAN G. BLAIR, CHAIRMAN, POSTAL REGULATORY 
COMMISSION; AND DAVID WILLIAMS, INSPECTOR GENERAL, U.S. POSTAL 
                            SERVICE

                  STATEMENT OF JOHN E. POTTER

    Mr. Potter. Good afternoon, Chairman Davis, Congressman 
Marchant, and Congressman Lynch.
    This past year has been one of profound change for the U.S. 
Postal Service, one heightened by the effects of a difficult 
economy.
    Despite the difficult environment, our employees have kept 
their attention on service. As I reported to our Board of 
Governors yesterday, on-time delivery of first-class mail was 
very strong in our second quarter. Overnight first-class mail 
achieved a 96 percent on-time score; 2-day mail rose to 94 
percent; and 3-day mail achieved a 92 percent on-time delivery. 
In all three cases, this was the highest score ever achieved in 
the second quarter, and the overnight and 2-day scores matched 
all-time highs for their categories. Customer satisfaction 
remains strong at 92 percent.
    As the chairman mentioned, Chicago service has also shown 
steady progress. On-time delivery of first-class mail is at 95 
percent, a one-point improvement over last year. Two-day 
achievement was 94 percent, an improvement of 13 points 
compared to a year ago. And on-time delivery of 3-day mail was 
90 percent, which is at 21 points better than was achieved last 
year. Our entire Chicago service team has done an exceptional 
job, and I know they are working to keep service strong.
    Despite our service success, the economic slowdown has 
severely strained our finances. As I reported to our Board of 
Governors yesterday, we ended our second quarter with a net 
loss of $707 million for the quarter. Mail volume for the 
quarter was down by 3.3 percent, for a year-to-date decline of 
3.1 percent. If this trend continues, it will be our largest 
annual volume decline ever.
    I am very proud of the effort of the entire postal team. In 
meeting customer needs during this difficult period, every 
employee in every function, as well as the unions and 
associations that represent them, have kept their eyes on 
service as they helped us reduce expenses and operate as 
efficiently as we possibly could. This is critical in an 
environment in which prices for 90 percent of our products are 
capped, but major costs such as fuel are not.
    Long-term success in serving our Nation depends on a 
strategy that balances efficiency and growth. This was 
recognized by the Postal Act of 2006, the PAEA, which increased 
our pricing flexibility. We have begun to take full advantage 
of the new law by offering attractive and innovating published 
pricing for our shipping services. We have priced these 
products to sell because there is significant opportunity to 
grow in this area. We have introduced volume pricing and 
savings through on-line and corporate account payment options 
for shipping. For Express Mail we have expanded our overnight 
network and moved to zone-based pricing, consistent with the 
rest of the industry. We have added a larger Priority Mail 
flat-rate box that also offers reduced postage for overseas 
military addresses, and consumers are benefiting from the 
convenience and value of the Forever stamp.
    We are all anticipating the next step in pricing, 
negotiated service agreements and contract pricing. We are 
working with our customers and trying to navigate the 
regulatory process to make this possible. As with any new 
strategy, for any new business, benefits do not come without 
risk. It is important for all of our stakeholders to understand 
that there must be some tolerance for risk as we move forward 
in this important area.
    The Postal Service will continue to evolve in support of 
providing affordable universal service to every American 
through innovation, efficiency, and, above all, service.
    I would be pleased to answer any questions that you may 
have. Thank you, Mr. Chairman.
    Mr. Davis. Thank you very much, Mr. Potter.
    [The prepared statement of Mr. Potter follows:]'

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    Mr. Davis. And we will go to Mr. Blair.

                   STATEMENT OF DAN G. BLAIR

    Mr. Blair. Good afternoon, Mr. Chairman, Ranking Member 
Marchant, and members of the subcommittee. I appreciate your 
continuing interest in and oversight of the Commission's work. 
I have a longer written statement that I would ask be included 
for the record.
    It has been a productive 2008 for the Commission. You are 
familiar with our efforts last year in implementing the PAEA, 
and 2008 represents the first year the Postal Service and the 
Commission have operated under the new rules. Since I last 
appeared in February, the Commission has moved forward in 
reviewing proposed rate adjustments for both market-dominant 
and competitive postal products. In addition, we completed our 
annual compliance determination.
    In brief, we found the Postal Service's rate adjustment 
request consistent with the new regulatory requirements. Those 
new rates go into effect Monday. Some may object to annual 
increases in postal prices; however, the act granted the 
Service this new flexibility. Importantly, having these new 
rules in place allowed the Service to seek adjustments under 
the new system rather than filing an old-style cost-of-service 
rate case. As Mr. Potter pointed out in his written statement, 
this allows an infusion of $700 million this fiscal year. Had 
an old-style case been litigated, increases sought could have 
been much higher than the CPI-based rate adjustments to be 
implemented next week, and they likely would not have taken 
place until late 2008 or early 2009.
    One aspect of the new regulatory framework is the annual 
compliance determination. As time goes on, I believe this 
process will prove to be one of the most important aspects of 
the new regulatory framework. In this year's compliance 
determination, we reviewed the information submitted for 2007 
by the Postal Service. The Commission determined that the 
Service made a good first effort to provide us with essential 
costs in volume data. Improvement will be needed in some areas, 
and to that end we anticipate issuing regulations this summer 
addressing what information should be submitted by the Service 
in its annual compliance report.
    In addition to this March trifecta, the Commission last 
year issued a new strategic plan, adopted a redesigned Web 
site, and continued its consultations with the Service on 
performance goals as well as network alignment. We began work 
on the cooperative mail study and new rules governing our 
complaint procedures. Further, we are working on meeting 
deadlines for issuing accounting principles and practices for 
the Competitive Products Fund as well as completing the 
Universal Service Obligation study. This report, asked for by 
Congress, will reflect the fairness, objectivity, and substance 
that the Commission is well known for. Both of these will be 
ready by the December 19th deadline. As you can see, the 
Commission has been a hub of activity, and we look forward to 
continuing our work with the Services as we proceed with PAEA 
implementation.
    On a last note, I would like to thank, on behalf of my 
fellow Commissioners, the Commission staff for their hard work 
and effort on these important projects. They are truly the 
Commission's most significant asset, and none of these results 
could have been achieved without them.
    I would be pleased to answer your questions.
    Mr. Davis. Thank you very much, Mr. Blair.
    [The prepared statement of Mr. Blair follows:]
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    Mr. Davis. And we will proceed to Mr. Williams.

                  STATEMENT OF DAVID WILLIAMS

    Mr. Williams. Mr. Chairman and subcommittee members, I am 
testifying today concerning significant economic challenges and 
opportunities facing the Postal Service. I would like to focus 
on four areas within this large topic.
    First, strengthening revenue operations presents 
significant opportunities for the Postal Service. Management 
must collect what it is owed, while ensuring that mailers are 
not involuntarily subsidizing competitors or others.
    The Postal Service needs to update and strengthen its data 
streams and analytical disciplines for pricing and product 
costing. Discounts must incentivize mailers to achieve the 
lowest combined operational costs, and detailed, accurate 
product pricing is essential to structure work-sharing 
discounts. Additional data is needed, and existing stovepiped 
data in programs must be integrated and used by marketing for 
analysis. Without this, discounts such as work sharing and 
negotiated service agreements cannot be entered into with 
confidence to ensure fairness and viability.
    Also, customer needs must be better assessed, and private-
sector-styled sales incentives should be explored, and 
marketing should expand its search for products and market-
sector penetration strategies. And, last, the Postal Service 
should analyze its advertising investments to see if they are 
achieving desired results.
    The second challenging area is imagining and planning for a 
substantially changed business environment with the 
implementation of several current technological advances. The 
flats sequencing system will complete the delivery point 
sequencing improvements begun with letter mail. Intelligent 
mail bar-coding can provide vital internal performance data and 
give customers long-sought-after data about the location and 
delivery of their mail.
    And, last, seamless acceptance can provide a more 
convenient, streamlined virtual acceptance process.
    As these systems come on line, there will be major impacts 
to the network and facilities, staffing size and skill needs, 
revenue assurance and customer service. The Postal Act and 
current economic conditions dictate that these efficiencies be 
exploited quickly, and risks are dealt with decisively to take 
full advantage of these investments.
    Infrastructure realignment represents the third great 
challenge and opportunity. To date, the Postal Service has used 
an incremental approach to gain network efficiencies. This 
approach incorporates flexibility and anticipates changes 
requiring rapid response. The Postal Service has resisted 
committing to a rigid comprehensive plan featuring elaborate 
sequencing that would be cumbersome to amend. In other words, 
the plan resembles more an order of battle than an 
enterprisewide blueprint.
    Today's dynamic environment presents special challenges to 
realignment, including an ongoing information age revolution 
and an economic downturn, making it increasingly difficult to 
forecast mail mix and volume; significant career uncertainties 
for employees; the evolving commitment to incentivize mailer 
partnerships in search of lowest combined costs; needed 
enterprise resilience to respond to natural disasters and 
terrorist attacks; and integrating the technological advances I 
mentioned earlier.
    For infrastructure realignment to succeed without business 
disruptions, an enduring alliance is needed between the Postal 
Service and the Congress. Though realignment is absolutely 
required, there are substantial risks. For example, if 
realignment stalls, a protracted anemic staffing of an 
oversized network would predictably cause operational and 
customer service degradation.
    The last challenge involves the Postal Service's 
prepayments to the Retiree Health Benefits Fund. The 
prepayments of over $5 billion a year are greater than the 
Postal Service's traditional net income. These prepayments are 
amortized over a short 10-year period and are not tied to the 
Postal Service's ability to pay. Borrowing to pay a debt that 
will be incurred in the future is an unusual practice. I 
encourage the consideration of indexing the payment to the 
Postal Service's revenue or economic factors, or extending the 
amortization period.
    In conclusion, the Postal Service is about to experience 
the curse of living in interesting times. At the horizon is a 
different Postal Service, and one that I believe will be 
better. The Postal Act positions the Postal Service to complete 
its transition and become the successful business that Congress 
envisioned in 1970. The recent imperatives contained in the 
Postal Act for that migration have presented the Postal Service 
with readiness challenges. I believe that senior leadership and 
the work force are capable and poised to meet those challenges.
    Thank you.
    Mr. Davis. Thank you very much.
    [The prepared statement of Mr. Williams follows:]
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    Mr. Davis. And I want to thank each one of you gentlemen 
for your testimony.
    Mr. Potter, perhaps I will begin with you. I think I heard 
you mention rating scores of 90 or above a number of times, and 
I want to understand what that really means. I know in 
Missouri, where Representative Clay comes from, 90 is generally 
considered an A. Is that what 90 means in rating the postal 
production and activity?
    Mr. Potter. Those ratings are done by an outside firm, IBM, 
that puts mail into mailboxes and then tests how quickly it 
gets to a destination, and it is a raw score. They look at how 
long it takes to go from one point to the other. They have 
people who drop the mail, non-postal employees, and they have 
people who measure and give them information about when mail is 
received in their mailbox at their homes. And they are 
independent non-postal people. So, it is an independent, 
accurate measurement of how quickly mail moves through the 
system, and so I think you can have confidence in those 
numbers.
    Mr. Davis. So any way you cut it, it means you are doing 
pretty good.
    Mr. Potter. I think so.
    Mr. Davis. I would agree. And I want to congratulate you 
and the Postal Service again and all of its employees for the 
tremendous and outstanding work that you are doing.
    Let me ask you, though, in your opinion, how important is 
this concept of universal service to the future of postal 
operations and the Postal Service?
    Mr. Potter. To me, personally, having grown up in a postal 
family, my father was in the Service for 40 years, universal 
service is what we are all about.
    When I look back at the history of the Postal Service, the 
Founding Fathers saw the need to connect every American and 
provide them an opportunity to communicate with one another, 
and also to participate in this greatest economy in the world. 
And time and again we have seen Congress act to make sure and 
protect universal service. It wasn't that long ago, given our 
history in the 1900's, early 1900's, that the Congress moved 
from delivery of mail and changed the definition. Up until that 
time, it was anything up to 4 pounds. Anything beyond that was 
done by others. But the Congress recognized at the time that 
there were communities in rural areas and in some inner-city 
areas that were not getting the same type of delivery as 
others, with the same frequency, nor for the same price, and 
they turned to the Postal Service to allow everyone to 
participate on an equal footing in communication as well as in 
our great economy through the receipt of packages. So, I think 
it is the core of who we are and what we are all about, and I 
think it is vitally important.
    Mr. Davis. Let me ask you then, how impactful do you think 
that the new rate structure has been in helping the Service 
improve in processing and delivering the mail?
    Mr. Potter. I think we are just beginning to see the tip of 
the iceberg here when it comes to how that will be helpful. 
When I look at the pricing, the thing that has been very 
helpful, as a result of the efforts by Chairman Blair, his 
fellow Commissioners, and the entire Postal Regulatory 
Commission, was to enable us to move quickly to change rates 
this year. It is going to help us, given the fact that we find 
ourselves in a tough economy; we are able to make an 
adjustment.
    It is going to create a challenge in the sense that going 
forward we all, meaning everyone inside the Postal Service, is 
going to have to figure out how to keep rates below the rate of 
inflation. But when we had this discussion in years past, we 
kind of looked at it as a business imperative. If we had rates 
that were rising precipitously, all we would do would be to 
drive mail away from hard copy and probably move it to 
electronic medium or some other way of moving. So we are 
embracing the notion of a rate cap, and that is going to 
challenge us, and challenge us to work smarter, work together 
to overcome that.
    When it comes to packages, we are for the first time going 
to be able to take advantage of new package rate flexibility, 
and it is going to be reflected in prices that people are going 
to pay beginning Monday. There are going to be some discounts 
for volume, there is going to be on-line pricing that is 
different from our window pricing.
    And, for example, we are trying to do things that are a 
little unique. We were the first to come out with a flat-rate 
box for Priority Mail. One of our competitors matched it. Now 
we are increasing the number of sizes that we have to make it 
even more convenient for customers, because we found out that 
having done that in the past, it works. And we are lowering the 
price of flat-rate boxes going overseas to overseas military 
because we recognize how vitally important those packages are 
to those who are serving America overseas, and we want to do 
our small part to help them.
    So in all, Mr. Chairman, as I said earlier, I think we have 
just begun to scratch the surface, but I look forward to taking 
full advantage of the pricing flexibility afforded by the new 
law.
    Mr. Davis. Thank you very much.
    Mr. Blair, let me just ask you, one of the requirements of 
the PAEA was for the Postal Rate Commission to evaluate 
nonpostal services offered by the Postal Service and determine 
if such services should continue. Could you give us an update 
on the progress of that study?
    Mr. Blair. We are engaged in that process of evaluating 
nonpostal and postal services, and we have docketed this issue. 
As it stands right now, we have asked the Postal Service to 
provide us with fuller information as to what that inventory 
might be. I understand they are going to be asking us for some 
clarification. So the dialog is continuing, and this process is 
continuing. I understand we have a December 20th deadline to 
complete this work, and we will have this done on time.
    Mr. Davis. Thank you very much.
    I am going to shift now to Mr. Marchant and give him an 
opportunity for some questions.
    Mr. Marchant. Thank you, Mr. Chairman.
    A handful of State legislatures around the country have 
seen an introduction of bills called ``do not mail'' bills. 
While none of these bills have become law, what do you see? So 
far, I don't think we have a Federal law that has been 
introduced. What do you see as the possible impact of some of 
those laws being put into place?
    Mr. Potter. Well, first of all, let me just say that I am 
adamantly opposed to any law that would have a do not mail 
requirement--or impose do not mail on us or any user of the 
mail.
    That being said, the significant downside to that, I think, 
I would venture to say that up to $6 billion in revenue would 
be at risk in a very short period of time, and that it could 
have significant impact on Postal Service finances.
    At the same time I say that, I think that part of the issue 
here is that the full story is not being told. In that regard, 
I think that people are looking at paper and its impact on the 
environment, and they are dramatically overstating the impact. 
It is a renewable resource. Many of our mailers use recycled 
materials. We are the first organization to have cradle-to-
cradle packaging for the packaging that we provide. So I think 
we have an industry that is extremely sensitive to the 
environment and has made huge progress in terms of meeting and 
conforming to products that would be environmentally friendly.
    I know of a number of different groups within the mailing 
industry, mailers, who have voluntary programs with customers 
who can take their names off of mailing lists, and I think it 
would be detrimental to just do something via the law. I don't 
think it is necessary, and I think the industry should be given 
the opportunity to police itself.
    Mr. Marchant. Thank you.
    Mr. Williams, last fall we heard from small periodical 
publishers and printers that were experiencing a fairly 
significant rate shock in 2007. How is this class of mail being 
treated in this rate increase? And whichever one of you can 
answer that.
    Mr. Blair. I will take that on.
    Under this new rate increase, the Postal Service proposed 
rather modest increases for periodicals as a whole, and it came 
within as a class under the 2.9 percent cap. So periodical 
mailers generally shouldn't be seeing the kind of rate shock 
that has been experienced in the past under the old omnibus 
litigated cases.
    Mr. Potter. Basically, what we did is an across-the-board 
increase for periodicals because of the fact that we had just 
raised rates on them last July, and because of the significant 
changes that were built into that last rate case. It put a lot 
of burden on the industry to modify their mailings to meet the 
change requirements. And so it is an issue that we continue to 
have because, quite frankly, with the decline in the number of 
pages in periodicals, we have seen their cost coverage drop 
below 100 percent. So we are working aggressively with the 
industry. We are rolling out new equipment called a flat 
sequencer, which will affect and make flat mail much more 
productive.
    So, again, we are working on a plan to do two things: first 
of all, bring cost coverage of periodicals back up to 100 
percent, and, No. 2, build a plan going forward that will 
assure that we stay at or above 100 percent long term.
    Mr. Marchant. And, Mr. Chairman, if you will allow me just 
a little input from my district. I think that the Forever stamp 
was a great idea. I think it allowed people to take a little of 
their budget into their own hands and gives them some 
opportunity to control future rate jumps. But we are also 
experiencing in my area, an area that were growing suburbs 
maybe 20 years ago are now gentrifying a little bit, and we are 
beginning to see an increased usage of the facilities. People 
are coming into the facility and are not very savvy to 
electronic machines, and there is a little resistance. The 
business people seem to be able to adapt very easily to the 
postal machines that are being put out in the lobby to cut down 
on the lines and everything. The lines, interestingly enough, 
seem to be created from a strong immigrant population that is 
very--that loves to use the mail, U.S. mail, and I am sure that 
is to mail outside the country.
    So these are the kind of growing pains that we are 
experiencing in my suburban Dallas district. Postmaster, I 
appreciate your help in addressing some of those issues. And I 
would like to just give compliments to the adaptability, the 
kind of a--I wouldn't say newfound adaptability, but an 
increasing adaptability to just local needs that postal 
customers have, and I think it is beginning to pay off. Thank 
you.
    Mr. Potter. Thank you.
    Mr. Davis. Thank you very much.
    Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman.
    I would like to just shift a little bit to some of the more 
basic issues that are in front of you. I know, Mr. Potter, you 
had indicated earlier about the financial shortfall that we 
have had here. I was wondering if any of you can tell me about 
the impacts of--I know going back even as recently as 2005, we 
had diesel fuel at $2.50 a gallon, and now it is $4.25. I am 
not familiar with the internal purchasing arrangements that you 
might have to buy fuel, to basically get a bid on a price at a 
certain level beforehand. I know, in fact, you don't have the 
ability to pass on a surcharge like some of your competitors 
do. How is that affecting your bottom line? Where are we on 
transportation costs, on gasoline and for diesel? How is that 
going?
    Mr. Potter. Well, let me just throw some sound bites at 
you. We buy 800 million gallons of gas a year. So, every penny 
in the price of a gallon of gas is $8 million. Pick your 
benchmark. You know, several years ago we were paying $1.50 a 
gallon for gas. We pay a little less because we don't pay taxes 
depending on where we buy, when we buy for our pool. But the 
fact of the matter is, the price for a gallon of gas has gone 
up about $2. When it is a penny and it is $8 million, it is 
reasonable. But once you start looking at $8 million times 200 
pennies, it is real money, and so it has impacted our finances.
    That doesn't include the increased price for electricity 
because we have to heat buildings, increased price of all of--
anything to do associated with a facility. We have contract 
prices for our highway contract routes, they are not included 
in that, as well as our air transportation. So it has had a 
sizable impact on us.
    Now, I have to give our employees a lot of credit, because 
they have really risen to the challenge of trying to eliminate 
transportation where we don't have to have it and where we 
don't have to use it. And so we have been able to cut back on 
the number of trips that we have. We have been able to reduce 
our air transportation costs by something as simple as filling 
trays tighter. So, we are looking at every way possible to 
lower our use, as well as just finding other ways to save money 
to offset that cost.
    I will just tell you that one of the things that you did 
for us with the new law is you do enable us to do fuel 
surcharges for packages, and on an exception basis, if we went 
for an exigent rate case, we can do that for our market-
dominant or our mail products, but we have never explored that. 
And our preference would be to try and tighten our belt as best 
we can, because we know our customers are hurting at the same 
time, but we will explore those avenues if we need to.
    Mr. Lynch. What I am concerned about is, I would like to 
somehow be able to break out that energy-related cost. And, 
yeah, jet fuel, right through the roof as well. Why have you 
not considered--we have this delta here in terms of what you 
are bringing in and what we are spending in employee health 
costs. If we are sort of masking this fuel surcharge that you 
are absorbing right now, it just magnifies the impact of some 
of the other aspects of it. And I know you have with the new 
PRC--you can go before them and make a special request. I seem 
to think the language that we put in there was meant for this 
type of situation, specifically where fuel goes through the 
roof and you are stuck. So----
    Mr. Potter. If I could, Congressman. Just to add that one 
of the things we are most concerned about is our customers, and 
every one of our products has elasticities tied to it. So the 
higher we raise the price, the less mail we have, and so 
therein lies a huge challenge. At a time when people are 
hurting and looking to figure out how to save every dollar they 
can, the last thing we want to do is drive them away from the 
mail, whether that is have them move to electronic bill 
presentment or have them consider testing other forms of 
advertising. We know we have strength there, and we want to 
make sure that we do our best to work with our customers. And 
seeking an exigent rate case, I would view it almost as a last 
resort because of what I just described.
    Mr. Lynch. And I am happy to hear you say that. I am happy 
to hear you say that. I just would like that information for 
us. If you are not going to--by all means, don't pass it on to 
the customer, and I think your reasons are well founded. 
However, for this committee I would like to have some type of 
breakout that shows me what increase in your costs, what the 
impact of fuel costs are having on the Postal Service in 
general.
    The other question I had is, the other committee I serve on 
is Financial Services, and we hear a lot about the disconnect 
between CPI, which caps your market-dominant products, and the 
reality of the increase in cost to people of a basket of goods, 
whether or not CPI is really reflecting all of the increase in 
the cost of living. And have you any thoughts on that? Given 
the fact that it is a cap on 90 to 95 percent of your products, 
is this something that accurately reflects the costs out there, 
or is this something that needs to be adjusted?
    Mr. Potter. Well, it is a very interesting question,and I 
think you would really need an economist here to answer that 
question with fact rather than opinion. I will say this: 80 
percent of the Postal Service's costs are labor, and our labor 
contracts have cost-of-living adjustments in them tied to the 
CPI. So there is some relationship between the Postal Service, 
the bulk of Postal Service costs, which is labor, and the CPI 
index.
    Now, I think you have panels that will follow me that would 
be very happy to weigh in on what you just asked and can take 
it from a human vantage point, because it does control what 
people take home on a daily and weekly basis, and I think they 
will give you a little bit more of an emotional response than I 
am able to.
    Mr. Lynch. OK. I will save that question. Thank you.
    I yield back.
    Mr. Davis. Thank you, Mr. Lynch.
    Mr. Clay.
    Mr. Clay. Thank you, Mr. Chairman.
    And along the same lines as Mr. Lynch, Mr. Blair, how much 
did the last rate increase generate in funding for the Postal 
Service?
    Mr. Blair. I am told, and I get this from Mr. Potter's 
statement, it is approximately $700 million for this fiscal 
year.
    Mr. Potter. The upcoming rate increase?
    Mr. Clay. The previous one. See, I hear from my 
constituents every time you get a rate increase. So let's cover 
all of them.
    Mr. Potter. Well, are popular with everyone.
    Mr. Blair. I don't have that off the top of my head. That 
was last year, and I can tell you this year's figures.
    Mr. Potter. Let me try to answer that. We anticipated that 
we would get an additional 7.5 percent increase--approximately 
7.5 percent increase in revenue. But with the volume decline, 
right now we are running more around 3.5 because of the--closer 
to 3 percent because of the fact that volume is down 3.1 
percent this year.
    Mr. Clay. What does that translate into as far as dollar 
amount?
    Mr. Potter. On a--let's round it--an $80 billion base, 7 
percent, we anticipated a $5 million--like a $75 billion base. 
So we anticipated about a $5 billion increase, and what we are 
seeing out of it is about a $2 billion increase.
    Mr. Clay. $2 billion? And then how much of that goes into 
health care and into----
    Mr. Potter. Our health care bill on an annual basis is 
over--it is over $7 billion when you look at it. It is about 10 
percent of what we take in.
    Mr. Clay. So, May 12th will be another rate increase.
    Mr. Potter. Right. And it's 2.9 percent. Normally it would 
deliver around $2.3, $2.4 billion in additional revenues.
    Mr. Clay. What do you do with the profits?
    Mr. Potter. I pay people. Eighty percent of our costs are 
labor. When you look at paying almost 700,000 career employees 
and then with noncareer around 800,000 people, all who are 
getting base pay increases of 1 percent plus and on top of that 
are getting cost-of-living adjustments, which is about 66 
percent of CPI, it goes fast. It is above 3 percent. As a 
matter of fact, if you looked at our costs, just to stay 
current, if we weren't in this economic slowdown, we would have 
to take and save $1 billion in efficiency to close the gap 
between what we can generate in new revenues at the CPI level 
and what our costs are.
    So our costs had been growing before the economic turndown 
of about $1 billion above the rate of CPI, and it is that gap 
that we have been closing through efficiency. I am really 
grateful to all our employees for embracing that notion, 
therein lies the challenge for the Postal Service.
    Mr. Clay. Now, every time you get a rate increase, my 
constituents are telling me they think the Postal Service is 
flush with cash.
    Mr. Potter. Well, you can tell them from me that is not the 
case. I think you can tell them that is not the case.
    Mr. Clay. And, now, when you get these increases, do you 
use judicious decisionmaking as far as being prudent with the 
cash?
    Mr. Potter. Without a doubt. The Postal Service in the 
last, I believe, 7 or 8 years it has more productivity 
improvement than it had in its first 30. So we have been 
managing and tightening our belts. And I have to tell you, I 
think what is very surprising to people is the fact that we 
have had a decline of over 100,000 career employees in the past 
several years. I say that not in any way, shape, or form as we 
are bragging on that. I am saying that, collectively, unions, 
management associations, postal management, mailers have 
recognized the need to become more efficient if mail is to stay 
viable, and we are working together to do that.
    And so, as I said, when you look at the numbers, there is a 
gap every year, and if you don't improve your efficiency, you 
are going to lose money. And if you don't stay with it, that 
number is just going to grow every year. And we are very open 
about sharing that information. Let me assure you, we are very 
careful with every dollar that we get and how we spend every 
dollar that comes into the Postal Service.
    Mr. Clay. Have you seen a cost reduction in contracting out 
of employees?
    Mr. Potter. Does that save money versus using career 
employees? Yes. The same as----
    Mr. Clay. Does it save much?
    Mr. Potter. It depends on what type of employee it is and 
what activity it is. Last time I believe I testified that when 
it comes to delivery, using a contract employee saves you about 
half of what it would cost to use a career employee. We don't 
do that on--you know, the bulk of our delivery has and will 
continue to be career employees.
    Mr. Clay. How do they compare to quality and efficiency?
    Mr. Potter. The numbers say that it is the same.
    Mr. Clay. It is the same.
    Mr. Potter. That is what the numbers tell me.
    Mr. Clay. I thank you very much for your response.
    I yield back, Mr. Chairman.
    Mr. Davis. Thank you, Mr. Clay.
    Mr. Potter, let me just ask you, the Postal Service 
operations rely on employees coming to work every day, like in 
almost any other industry. When employees' sick leave usage 
increases, that has a significant impact on operational costs. 
During the next several years, many FERS employees will be 
eligible to retire, and they currently do not have any 
incentive to save their sick leave because, unlike CSRS 
employees, they do not get any retirement benefit. Do you have 
any thoughts as to how that may impact operational costs during 
the next decade?
    Mr. Potter. Mr. Chairman, I don't have a specific number. I 
am sure we can do the analysis. I will tell you this, though: 
The use of sick leave is a burden from a cost standpoint, but, 
more importantly, it is a burden from a service standpoint 
because we rely on all of our employees to show up every day to 
get the mail out. If they are not in because they are sick, we 
have to cover routes. And I think it has as much of an impact 
on service as it does on cost.
    But suffice it to say we would prefer that people did not 
use sick leave if they are not sick, and that we should 
consider some type of an incentive system or a change in the 
system that would encourage people to use sick leave only when 
they are sick and reward them for an accumulation of sick leave 
over time.
    Mr. Davis. Have you observed any change in sick leave 
usage, say, in the last year?
    Mr. Potter. Nothing that dramatic, or nothing that you 
could attribute to anything. I mean, we had a situation a 
couple months ago where the flu was very strong, and we saw a 
bump. But the long-term trend is that it has been rising, and 
what you described, I believe, is a contributing factor.
    Mr. Davis. What is the purpose of the repositioning rules 
that would allow the Postal Service to involuntarily transfer 
veterans-preference-eligible supervisors and other management 
employees without the right of appeal to locations that are far 
from their homes following a downsizing or consolidation of a 
postal facility? And does this undermine the spirit of, say, 
veterans preference?
    Mr. Potter. To the best of my knowledge--and obviously 
there is local practices everywhere, we comply with all of--in 
terms of downsizing, the RIF rules that OPM has put forward. 
And so I think we are consistent with the Federal Government in 
terms of applying veterans preference.
    Mr. Davis. Thank you.
    Mr. Williams, let me ask you a question. Based on your 
audit work concerning mail delivery problems in Chicago, what 
can the Postal Service do to prevent similar problems from 
occurring in other parts of the country?
    Mr. Williams. Thanks, Mr. Chairman.
    What we found in Chicago, and we were asked to go in very 
quickly as soon as the problem was identified, the problems 
surrounded improperly maintained equipment and poor mail-flow 
processes that did not comply with the processes of the Postal 
Service. There were vacancy problems that weren't carefully 
monitored, and then the responsibilities of a number of the 
managers were not being fulfilled.
    We also found a culture there that was seriously 
problematic in that it didn't emphasize rapid and high-quality 
work. A number of changes occurred as a result of that. As 
Chicago was growing stronger, we began doing exactly what you 
just said, looking more broadly.
    Today, senior postal officials have daily and weekly 
reports that come to them that is much richer in data with 
regard to the full network and the delivery systems. And there 
is also a new system report called the Area Mail Review 
Analysis that feeds and informs biweekly teleconference calls 
that detect problems and move toward resolution.
    My office has worked with the vice president of operations 
also to develop an indicator which rank-orders the district's 
performance in those areas, and we learned a great deal from 
Chicago. And that allows the Postal Service, who uses a much 
more sensitive instrument for corrective action, and our office 
to move to those areas where we see trouble. We are not seeing 
anything on the level of Chicago, but we are certainly trying 
to move against problems as they appear at the horizon.
    I think in the case of Chicago, we would also be remiss if 
we didn't mention Gloria Tyson. She did a terrific job of 
turning that around and was a very talented, hard-working 
person there.
    Mr. Davis. Well, thank you very much. And what it is that 
you did and whatever it is that you and the Postmaster General 
and others were able to do with Chicago, we certainly 
appreciate it.
    It sort of reminds me of a story about Abraham Lincoln and 
Grant. When Grant was supposedly drinking a lot of whiskey, 
people were complaining to the President about it and said, 
well, you know, this guy is really drinking a lot. But he was 
winning battles. And the President said, well, whatever it is 
that he is drinking, let me know.
    So whatever it is that you did in Chicago, we want you to 
be able to do the same thing in other places throughout the 
country.
    I know that Delegate Christensen from the Virgin Islands 
has expressed some concerns, and I would certainly appreciate 
it, Mr. Postmaster General, if you all would look into that 
situation for her.
    I see that we have been joined by Representative Cummings. 
Let me ask if he has some questions.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    I know you have done this already, but I would be more than 
remiss if I did not recognize one of the giants of the 
Congress, Congressman Clay. I want to thank you for all you 
have done for us and being a true role model in so many, many 
ways. I thank you for being here.
    Mr. Potter, let me ask you just a question or two about the 
semipostal stamps. It is my understanding that there is a 
certain limitation with regard to those stamps.
    Mr. Potter. Well, we would prefer to do one stamp at a 
time. I think originally it was planned that every 2 years 
there would be a turnover, and we would have a new cause that 
would be achieved, receive the benefits from a semipostal.
    Mr. Cummings. Right now, is that the breast cancer stamp?
    Mr. Potter. Yes, it is.
    Mr. Cummings. I have been thinking about introducing 
legislation to make it so that we can do more than one at one 
time. Let me be real clear on this, because I realize that 
people will come and say, well, Cummings, you know, breast 
cancer is very significant and this may open up the floodgates 
to others. I know that is probably the argument.
    I have a tremendous sensitivity with regard to breast 
cancer, but I also have a sensitivity with regard to a number 
of other diseases. And when you consider, for example, 
Alzheimer's, just as an example, with the many people who are 
coming down with that and suffering--and there are others--I am 
just wondering, is there a door open for anything other than, 
or in addition to, breast cancer?
    Do you follow what I am saying?
    Mr. Potter. I know what you are saying.
    Mr. Cummings. Because I just think that it is just--and I 
don't know, we have been--I think we are kind of limited to 
that now. But it seems like--if you were worried about the 
floodgates, it seems like we would have at least some type of 
rotating situation where other causes might be brought up, so 
we might be able to raise funds for them. So I am just 
wondering where we stand on that.
    Mr. Potter. We have had experience with that, Congressman. 
At one point we had two, we had the breast cancer and the 
family violence. And then we had the hero stamp, which was 
funds generated for the victims of 9/11, the heroes.
    What we found is, when you get to three, they really start 
to compete with one another and they are not effective. Two, I 
think we were doing all right.
    Again, I think there is flexibility. But what you don't 
want to have is what you described, your terminology, 
``floodgates,'' because then, you know, you lose your ability 
to promote it; and our cost to keep them, you know, stocked 
goes up.
    And the one thing we are very concerned about is the 
administrative costs of this, not because it affects us, but 
because we get--those funds get taken away from the charities. 
Anything above and beyond the price of a stamp that it costs us 
to administer the program is lost to the charity.
    Certainly, I would support going beyond the one, but I 
would hesitate--I would encourage you to put a cap on it. Two 
or three would be something that I think we could work with. 
Again, from a promotion standpoint and administrative cost, we 
don't want it to become too burdensome, and we don't want it to 
lose its effect.
    Mr. Cummings. I don't either. I know sometimes you can 
spread things so thin that there is no true beneficiary because 
it's spread so thin.
    Mr. Potter. Exactly.
    Mr. Cummings. I was curious. If you don't have these 
numbers, if you would be kind enough to get them to me, exactly 
how much money has the breast cancer stamp raised. I would love 
to see that information.
    Mr. Potter. For the purpose of accuracy, we will give you 
that and the other two as well. We will give you as much 
information as we have.
    Mr. Cummings. That will be good.
    The other thing, when you think about something like 
Alzheimer's--and I know the other two types of stamps you 
mentioned are very, very serious issues; I don't want to take 
away from that, but I know there may be some other issues on 
the level of, say, breast cancer, that people may look at them 
in the same kind of light--that may very well cause people to 
come out and be very supportive.
    Mr. Potter. Well, we also have a series of stamps that 
don't generate funds, but generate awareness. So we have done a 
diabetes stamp. We have an Alzheimer's stamp in the works. They 
don't create the funds, though, to help support it, but they do 
create awareness. We have had numerous stamps over the years to 
do that as well. But we will provide the information to you so 
that you can use that when you are considering where you go 
with the law.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. Davis. Thank you very much, Mr. Cummings.
    Mr. Marchant, do you have any other questions?
    If not, gentlemen, thank you very much. We appreciate your 
being with us and we appreciate your testimony.
    As we begin to set up for our second panel, I will go ahead 
and introduce them.
    For panel 2, we have Mr. William Young, who is the 17th 
national president of the National Association of Letter 
Carriers, the 300,000-member union representing city letter 
carriers employed by the U.S. Postal Service.
    We also have Mr. John Hegarty, who was sworn into office as 
National Postal Mail Handlers Union's national president, July 
1, 2002. For the 10 years prior to becoming national president, 
Mr. Hegarty served as president of Local 301 in New England, 
the second largest local union affiliated with the National 
Postal Mail Handlers Union.
    We also have Mr. Don Cantriel. He was elected vice 
president of the National Rural Letter Carriers Association at 
the 101st Annual Convention in Minneapolis, MN. Mr. Cantriel 
has served at all levels of the association, beginning with 
president of his local union.
    And we have Mr. Myke Reid, who is the legislative and 
political director of the American Postal Workers Union, the 
largest postal union in the world, with over 300,000 members. 
Mr. Reid works as a lobbyist for the American Postal Workers 
Union, as well as a member of the union's Political Action 
Committee.
    Gentleman, we thank you all very much for being here with 
us to participate.
    You know what they say, Myke. The first shall be last and 
the last shall be first.
    Gentleman, if you would stand and raise your right hands to 
be sworn in.
    [Witnesses sworn.]
    Mr. Davis. The record will show that the witnesses have 
answered in the affirmative.
    Gentleman, we again thank you very much for being here. You 
know the process. If you would take 5 minutes to make an 
opening statement, the lights will indicate--green means that 
you have the entire 5. You get down to the yellow light, it 
means that you have 1 minute left. Of course, the red light 
means that it is time to stop.
    And your full testimony, written testimony, is in the 
record.
    We will begin with you, Mr. Young.

STATEMENTS OF WILLIAM YOUNG, PRESIDENT, NATIONAL ASSOCIATION OF 
  LETTER CARRIERS; JOHN HEGARTY, NATIONAL PRESIDENT, NATIONAL 
   POSTAL MAIL HANDLERS UNION; DON CANTRIEL, VICE PRESIDENT, 
  NATIONAL RURAL LETTER CARRIERS ASSOCIATION; AND MYKE REID, 
  LEGISLATIVE AND POLITICAL DIRECTOR, AMERICAN POSTAL WORKERS 
                         UNION, AFL-CIO

                   STATEMENT OF WILLIAM YOUNG

    Mr. Young. Thank you very much. Good morning, Chairman 
Davis and Ranking Member Marchant. I am proud to be here as a 
representative of nearly 300,000 active and retired members of 
the National Association of Letter Carriers.
    I am especially proud this week as we prepare for the 
NALC's annual Stamp Out Hunger Food Drive this Saturday. All 
across the country, tens of thousands of letter carriers will 
collect donated food for the Nation's food banks to help feed 
the poor and hungry in more than 10,000 communities. I hope you 
will spread the word to your constituents to help out families 
by donating what they can.
    A year ago, we all appeared before you at a similar 
hearing. A lot has changed since then, both good and bad. Let 
me start with the positive.
    Last year, I came to sound the alarm about the Postal 
Service's growing use of contractors to deliver the mail. I 
said then, and I believe today, that the use of low-wage, no-
benefit contractors to perform the final delivery of mail is 
both wrong and a fundamentally flawed business strategy.
    Fortunately, we have made a lot of progress on this issue 
of contracting out. We averted the need to submit the issue to 
a neutral arbitrator by reaching a new 5-year collective 
bargaining agreement last July. We established firm limits on 
outsourcing and set up a special committee to hammer out 
solutions with regard to subcontracting.
    While that committee does its work, a moratorium on any new 
contracting out has been extended to at least July 31st. We 
have a long ways to go, but we are moving forward and I am 
hoping that we can reach a long-term understanding.
    I want to thank Postmaster General Potter and Vice 
President Doug Tulino for working with us in such a 
constructive manner. I also want to thank Alan Kessler, the new 
chairman of the Board of Governors, for seeking to maintain 
positive labor relations. Indeed, he has even agreed to address 
our union's convention in Boston this summer.
    So there has been progress in the area of labor relations. 
That is the good news.
    The bad news is the economy. The recession has now taken 
hold in the economy, and it hit the postal business several 
months ago. Declining mail volumes due to the meltdown in the 
mail-intensive housing and finance sectors, coupled with major 
cutbacks in advertising, has placed an extreme pressure on the 
U.S. Postal Service. These economic challenges mean it is more 
important than ever to maintain constructive labor relations, 
and the NALC is committed to finding win-win solutions.
    We are working with management on implementing the flat 
sequencing system, automation that will cost us jobs in the 
short run, but will help the Postal Service thrive in the long 
run. We are exploring ways to more efficiently evaluate and 
adjust routes both to cut costs and to improve the atmosphere 
in the Nation's delivery units. And we are working together to 
generate new revenues by deploying letter carriers as sales 
agents for competitive postal products, an effort that I am 
proud to say has resulted in nearly half a billion dollars in 
new annual revenue so far.
    But we believe there are ways Congress can contribute to 
preserving the Postal Service. Innovative uses of our universal 
service network should be promoted. Vote by mail is a perfect 
example. In States that employ postal elections and allow no-
excuse absentee ballots, voter turnout has skyrocketed. This is 
why the NALC urges Congress to pass H.R. 1667, the Vote By Mail 
Act, and H.R. 281, the Universal Right to Vote By Mail Act 
sponsored by Congresswoman Susan Davis. These bills would 
provide grants to the States to develop vote by mail procedures 
and guarantee every voter the right to cast a ballot in Federal 
elections.
    On the flip side, Congress can also help by addressing the 
threat of so-called Do Not Mail initiatives at the State level. 
These misguided proposals have popped up all over. Fortunately, 
none has been enacted, but they pose a real danger by 
wrongfully equating direct mail with unsolicited phone calls 
that prompted the FTC's Do Not Call Registry.
    But direct mail advertising is an unobtrusive medium that 
encourages economic growth. It helps both large and small 
businesses find new customers and cultivate existing ones. It 
is also a vital avenue for political and social advocacy. And 
direct mail is crucial to underwriting the cost of the 
universal postal service, just as advertising underwrites the 
cost of radio, television and newspaper communications.
    Congress could bolster the Postal Service's financial 
stability by taking up a number of matters that did not receive 
priority attention during our long debate over postal reform. I 
would like to mention just three of them.
    First, the Postal Accountability Enforcement Act: The 
Postal Service is required to prefund the cost of health 
benefits for postal retirees after receiving a down payment on 
this cost from the transferred surplus to the postal portion of 
the CSRS fund. The amount of the surplus was calculated by the 
Office of Personnel Management's Board of Actuaries.
    The annual cost of this prefunding, some $5 billion per 
year, is excessive, because OPM significantly underestimated 
the true size of the postal pension surplus. The smaller-than-
expected transfer means higher-than-expected annual payments 
from the Postal Service.
    Although a law allows for review of the OPM calculation by 
the Postal Regulatory Commission, it provides no remedy. We 
urge Congress to take decisive action to correct this error in 
order to save the Postal Service and the stamp-buying public 
hundreds of millions, if not billions, of dollars per year.
    Second, Congress correctly transferred from the Postal 
Service to the U.S. Treasury the cost of CSRS benefits 
associated with military service by postal employees before 
they were hired by the Post Office. Military costs are 
rightfully the responsibility of all taxpayers, not ratepayers. 
This same logic applies to the cost of military pensions earned 
by employees under the FERS program. We urge you to consider 
that.
    Third, we ask that Congress investigate and reverse the 
decision by the Department of Health and Human Resources to 
deny the Postal Service the employer subsidies provided for in 
the Medicare Modernization Act. The Postal Service helps 
underwrite the cost of prescription drug benefits for tens of 
thousands of Medicare-eligible retirees, but when it applied 
for the employer subsidies, its application was rejected. HHS 
did this largely because the Office of Personnel Management 
decided not to seek the subsidies for the FEMA program as a 
whole. OPM concluded that using taxpayer funds to support 
another tax-funded program made little sense. That may be, but 
in the Postal Service it is different because we are not funded 
by the taxpayers. We believe the Postal Service is entitled to 
Part B subsidies and hope that Congress will act to overturn 
this decision.
    Before I conclude, I would like to raise one last issue 
that came out of postal reform. As you know, postal reform 
included a provision that imposes a 3-day waiting period of 
injured postal employees before they can begin receiving 
benefits under Worker's Comp. I was adamantly opposed to that 
provision because it is discriminatory. No other group of 
Federal workers is required to wait 3 days. No one has given me 
a good reason why injured postal employees should be singled 
out in this way. I urge the Congress to reverse this unfair 
provision as soon as possible.
    Thank you very much.
    Mr. Davis. Thank you very much.
    [The prepared statement of Mr. Young follows:]
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    Mr. Davis. We will go to Mr. Hegarty.

                  STATEMENT OF JOHN F. HEGARTY

    Mr. Hegarty. Good afternoon. Thank you Chairman Davis and 
the other members of the subcommittee for inviting me to 
testify.
    My name is John Hegarty. I am national president of the 
National Postal Mail Handlers Union, which serves as the 
exclusive bargaining representative for more than 57,000 mail 
handlers employed by the U.S. Postal Service. In the interest 
of time and to accommodate your panel's practice of creating a 
dialog through questions, I will be brief. Please enter my 
entire testimony into the record.
    It has been more than a year since I testified at your 2007 
oversight hearing. In that year, the country has fallen deeper 
and deeper into an economic downturn, perhaps even a recession, 
which, when combined with the increasing use of electronic and 
other means of processing and delivering the mail, has created 
a potential economic crisis for the Postal Service.
    In 2007, I stated that it was inappropriate, unwise, unsafe 
and wholly unjustified for the Postal Service to outsource its 
core functions, including the processing of mail normally 
handled at air mail centers or the processing of military mail 
headed to our troops in Iraq and Afghanistan. That was my 
position then, it is my position now, and it will be my 
position tomorrow.
    Yet the Postal Service continues to pursue a fool's gold 
solution. I call it fool's gold, because the Postal Service 
continues to make plans to replace long-term career employees, 
who are dedicated to the mission of the Postal Service, with 
low-paid, no-benefit, noncareer and often transient workers. 
Not only are the financial savings an illusion, but the 
American people should not have their postal system subsidize 
the profits of privateers, whether in the processing or the 
delivery of mail.
    I want to highlight one point that has not received much 
attention, that the privatizing of mail has had an unfortunate 
corollary effect of reducing the number of opportunities for 
veterans returning from combat and noncombat situations. The 
mail handler craft welcomes veterans, as does the entire Postal 
Service.
    Some of our brothers and sisters are serving overseas in 
the war zones today. We are proud of that fact and have managed 
to partner with the Postal Service in preserving their job 
opportunities and hiring preferences. Unfortunately, private 
contractors are not held to the same requirements as the Postal 
Service when it comes to hiring vets; and even if a private 
contractor were to hire a veteran and asked that veteran to 
perform some of the same tasks as our members, that veteran 
would not have the same appeal rights and the same job security 
as a career mail handler hired by the Postal Service. The 
private gain of contractors is at the expense of our veterans 
and, ultimately, at the expense of the American people.
    We are fortunate to have H.R. 4236, the Mail Network 
Protection Act, which has been introduced by Representative 
Stephen Lynch. This bill attempts to give career postal 
employers a fair shot at work slotted for privateers.
    Mr. Chairman, you have been a postal employee. You know our 
members. We can compete with anyone, but we must have a level 
playing field with a chance to bargain about any subcontracting 
before it occurs.
    We live in a century that will see vast changes in postal 
processing. In 1970, who could envision today's machinery, some 
of which is comparable in size to a football field. It does the 
work of many employees. We monitor the integration of this 
machinery to ensure that it performs work efficiently and 
securely without endangering the safety of its operators.
    My union works closely with the Postmaster General and his 
staff to make sure those employees are properly trained, to 
ensure that they perform their labor in a safe work 
environment, and to minimize the personal inconvenience and 
dislocation that employees might otherwise suffering.
    The installation and integration of machinery has been 
implemented relatively smoothly for several decades now because 
management and union representatives are required to bargain 
about these issues, and therefore, we are able to work jointly 
to resolve any disputes. The same should be true for proposals 
to outsource or subcontract the work of career employees. But 
if the Postal Service continues to outsource work on a 
unilateral basis without bargaining with its unions, it will 
continue to drive a wedge between postal management and the 
hundreds of thousands of loyal and dedicated postal employees.
    Another feature of the 21st century will be the realignment 
of the postal network to meet modern business and population 
trends. I must be honest. Our members nervously await the 
upcoming report on network realignment. We have had differences 
with the Postal Service on aspects of this ongoing realignment.
    Often those differences arise from the secrecy within the 
Postal Service. If the Postal Service simply would share its 
draft plans with us ahead of time, we could work to minimize 
the dislocation and inconvenience to our members, as is 
required by our collective bargaining agreement; and also to 
minimize the service disruptions that may occur to your 
constituents.
    In the end, if the service deteriorates unnecessarily, then 
no network realignment, no matter how attractive on paper, is 
justified. And who knows better than the union members who 
collect, process and deliver the mail? We must take advantage 
of the work force's knowledge, skills and abilities, and try to 
preserve the qualified and productive work force currently 
employed.
    I would like to take some time to commend the Board of 
Governors and the Postmaster General for their vision of a new 
post-postal reform world. In changing to a more traditional 
business model, they have rolled out new products to enhance 
our competitiveness. While the Mail Handlers Union 
enthusiastically supports new products and new pricing models, 
and we welcome volume discounts when appropriate, such 
discounts must be priced appropriately and not be set to lose 
overall revenue. Where volume discounts can be accomplished to 
the benefit of the Postal Service and the customer, we have a 
win-win situation that all can and should support.
    That concludes my statement. Again, thank you for this 
opportunity to testify. If you have any questions, I would be 
glad to answer them.
    Mr. Davis. Thank you very much, Mr. Hegarty.
    [The prepared statement of Mr. Hegarty follows:]
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    Mr. Davis. We will go to Mr. Cantriel.

                   STATEMENT OF DON CANTRIEL

    Mr. Cantriel. Chairman Davis, members of the Federal 
Workforce, Postal Service, and the District of Columbia 
Subcommittee, as vice president of the National Rural Letter 
Carriers Association representing 123,000 bargaining unit 
members, I would like to extend my thanks for scheduling a 
hearing on the oversight of the Postal Service.
    While we were given a wide range of freedom on what to 
focus our testimony on, I would like to talk briefly about the 
recent economic trends our union experienced firsthand.
    The Postal Service Accountability and Enhancement Act gives 
the Postal Service more flexibility to act like a business than 
had previously been allowed. Mr. Chairman, as you are well 
aware, the Postal Service can now bank a percentage of their 
profits, use a modern system of ratemaking to adjust rates, and 
it has the ability to create new programs to increase revenue.
    For example, in our recent national agreement with the 
Postal Service, a new revenue-generating program called Rural 
Reach was created to attract new customers and customers who 
are using our competitors. In addition, rural carriers can also 
target customers who would benefit from using additional Postal 
Service products and services. What the Rural Reach program 
does is to allow rural carriers to serve our customers better. 
By merely initiating conservation with customers about the 
products and services rural carriers offer, we can grow more 
revenue in the small-to-mid-sized customer base.
    Mr. Chairman, despite all the flexibility the Postal 
Accountability and Enhancement Act allows and the new programs 
we offer to generate revenue, the Postal Service is still not 
immune from the recent economic slump. Experts are still 
debating if what we are experiencing right now is an economic 
recession or not, the first since 2001, but there is little 
doubt we are in an economic downturn. Even before the Postal 
Accountability and Enhancement Act was signed into law on 
December 20, 2006, first-class mail volume was declining. More 
recently, total mail volume has also been declining. This 
economic downturn has caused normally heavy users of the mail--
the financial industry, the mortgage industry, etc.--to limit 
or stop mailings altogether.
    No one has felt this decline in total mail volume more than 
the NRLCA membership, who, in the last mail count, lost 
anywhere from 2 to 12 hours of their route evaluations. To put 
that into perspective, each hour of evaluation is worth 
approximately $1,500.
    The NLRCA membership has taken a second blow to their 
pocketbooks with the rising costs of gasoline. Currently, rural 
carriers serve on approximately 77,000 rural routes, traveling 
3.4 million miles a day, averaging 45 miles per route. On 67 
percent, or roughly 51,000, of those routes, rural carriers 
provide and deliver mail with their own personal vehicle.
    Even though our members receive a vehicle maintenance 
reimbursement for providing their own vehicles, with the 
average price of a barrel of oil setting new records almost 
daily, which, in turn, increases the price of gasoline, and 
with gasoline averaging around $3.60 per gallon, our vehicle 
reimbursement has not kept pace with the rising cost of 
delivering the mail.
    Along with the rising cost of gas, the cost of providing 
the route vehicle and the declining mail volume, our craft 
faces another challenge, the introduction of automated flat 
mail which has the potential of reducing route evaluations even 
further. We continue to work with the Postal Service to find 
ways to lessen the impact on the lives of our members.
    Mail volume is cyclical. First-class mail volume has 
declined and standard mail volume has also declined. I am 
hopeful that total mail volume will bounce back once our 
economy begins to recover.
    I was somewhat concerned when I saw the title of this 
hearing and I saw you wanted me to talk about the economics of 
the Postal Service, post the Postal Accountability and 
Enhancement Act: What Is Next.
    I believe it is too early to fairly evaluate the effects of 
this new law. As I have said before, the Postal Service and the 
mailers are economically sensitive industries, and right now 
both are going through some very challenging periods. We need 
to give this new law a chance to work. Let's look at the 
effects of the Postal Accountability Enhancement Act after 
there has been an economic recovery and economic expansion. The 
law itself provides for an evaluation of the act in 10 years. 
Most likely that will allow for a full economic cycle and a 
better reflection of how the act is performed.
    According to the Postal Regulatory Commission's Quarter 2 
reports for fiscal year 2008, revenue is up despite first-class 
mail volume being down. The Postal Service constantly claims 
that to continue functioning under the Postal Accountability 
and Enhancement Act with a declining mail volume, cost-
reduction procedures must be implemented, which to the rural 
craft usually means contracting out rural jobs.
    Contracting out is still a very critical issue for our 
union. We continue to support Representative Sires' House 
Resolution 282 and urge Congress to become involved with this 
issue. I firmly believe that contracting out is not solely a 
collective bargaining issue. Although we have some protection 
in our national contract with the Postal Service that somewhat 
limits the Postal Service's ability to contract out, the 
current provisions do not fully address contract delivery 
service.
    CDS is definitely a change of policy for the Postal 
Service. Because CDS is a policy issue, I urge Members to 
become involved and support legislation to address this issue.
    We have been invited and have agreed to participate in a 
joint committee with the National Association of Letter 
Carriers and the Postal Service to discuss the issue of 
contracting out. I hope through this joint committee our two 
letter carrier unions and the Postal Service can find some 
common ground to solve this controversial issue. However, if 
the joint committee fails to produce any significant or 
meaningful agreement and if the GAO report due out in late July 
is favorable to our position, I pray Congress will finally 
become proactive on this issue and advance legislation to 
protect the sanctity of the mail.
    Mr. Chairman and members of the subcommittee, I thank you 
for allowing me to testify before you today. I would be happy 
to answer any additional questions you may have.
    Mr. Davis. Thank you very much, Mr. Cantriel.
    [The prepared statement of Mr. Cantriel follows:]
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    Mr. Davis. Mr. Reid.

                     STATEMENT OF MYKE REID

    Mr. Reid. Mr. Chairman, Mr. Marchant, Ms. Norton, Mr. 
Lynch, my name is Myke Reid. I am the legislative director of 
the American Postal Workers Union.
    President William Burrus of the APWU could not be here this 
afternoon, so he asked that I present this testimony on his 
behalf and on behalf of the APWU. Thank you for providing us an 
opportunity to testify on behalf of more than 300,000 members 
of our union.
    The recent enactment of the Postal Accountability and 
Enhancement Act [PAEA], was intended by Congress to preserve 
and protect the Postal Service for the American people. Whether 
the act will have its intended effect remains in doubt. Much 
depends on the dedication and commitment of the public 
servants, from rank-and-file postal workers to the Postmaster 
General, who are proud to provide the best postal services in 
the world to this country.
    Much also depends on you, Mr. Chairman, and on this 
subcommittee. The Postal Service needs your support.
    As we meet here today, there is an active and ongoing 
effort to dismantle the Postal Service as we know it, to 
privatize it and to turn its work over to for-profit companies. 
When Congress enacted the Postal Reorganization Act of 1970, 
Federal law had required for more than 100 years that letter 
mail be delivered anywhere in the country at a uniform rate.
    According to the U.S. Postal Service and American history, 
1785-2002, uniform rates for letter mail within the United 
States were established by 1855. The act of March 3, 1963, 
based postage for a letter on its weight and eliminated all 
differences based on distance, thus providing universal service 
to customers no matter where they lived in the country.
    Section 101 of the Postal Reorganization Act, as amended by 
the PAEA, provides, ``The United States Postal Service shall be 
operated as a basic and fundamental service provided to the 
people by the Government of the United States, authorized by 
the Constitution, created by act of Congress, and supported by 
the people. The Postal Service shall have as its basic function 
the obligation to provide postal services to bind the Nation 
together through the personal, educational, literary and 
business correspondence of the people. It shall provide prompt, 
reliable and efficient services to patrons in all areas and 
shall render postal services to all communities. The cost of 
establishing and maintaining the Postal Service shall not be 
apportioned to impair the overall value of such service to the 
people.''
    I mentioned a few minutes ago that there was an ongoing 
effort to privatize the U.S. Postal Service. One of the forms 
those efforts are taking is a purported study of the Universal 
Service Obligation of the Postal Service. Regrettably, it seems 
that the study of the Universal Service Obligation is being 
treated as an exercise in economics rather than an examination 
of public policy.
    There are segments of our population for whom universal 
postal services at uniform rates remain critically important. 
Public policy, not economics, dictates that these people must 
be served. It is still the specific intent of Congress stated 
in the law that effective postal services be ensured to 
residents of both urban and rural areas.
    I am very concerned about the direction being taken by the 
Postal Regulatory Commission, which has undertaken through 
private contractors to study the Postal Service's Universal 
Service Obligation. My concern is that the PRC has selected as 
its contractors people who are on record as favoring 
privatization and as believing that the postal monopoly is 
needed to participate in this study.
    One of these individuals is someone who has written 
extensively on postal topics, including presenting testimony 
before the Presidential Commission. He also prepared a 
controversial analysis of the PAEA that has been widely 
criticized. In his testimony before the Presidential 
Commission, he characterized the postal monopoly as having 
insidious effects, stating that the postal monopoly makes the 
Postal Service a victim, corrodes labor relations, intimidates 
customers, excuses endless political interference from Members 
of Congress, and is the chain that binds the Postal Service 
hand and foot.
    These views are wrong and extreme. My reason for restating 
them here is that I want to make sure that the subcommittee is 
aware that these are the views of one of the two principal 
contractors selected by the PRC to help prepare its report on 
the Universal Service Obligation. Another principal of the 
contract selected by the PRC is also on record as in favor of 
dismantling the postal monopoly.
    Unfortunately, it seems clear to us that the PRC, instead 
of selecting reputable and unbiased experts to present a well-
rounded analysis of the Universal Service Obligation, has 
chosen individuals who are already on record as hostile to the 
postal monopoly and hostile to uniform rates.
    Any fair analysis of the universal service would have to 
include pros and cons for the consideration of congressional 
policymakers. There are certainly credible differing views 
among economists and other postal analysts on the issues 
surrounding universal service.
    Surveying the situation reminds of Harry Truman's famous 
attitude toward economists. He quipped that if you laid all the 
economists in Washington end to end, they would still point in 
all directions. The issue of the Universal Service Obligation 
is a public policy issue. It cannot and should not be driven 
solely by economists of any political stripe or of all 
political stripes.
    The Postal Service belongs to the American people. It is a 
fundamental and valued service provided to the people of this 
country. The Universal Service Obligation is a public policy, 
not an economic analysis. I am confident that this subcommittee 
and this Congress will demand that it remain so.
    In closing, I want to thank the subcommittee for providing 
APWU this opportunity to testify about important issues arising 
under the PAEA.
    Mr. Chairman, I would be happy to respond to any questions 
that you or your subcommittee members may have.
    Mr. Davis. Thank you very much, Mr. Reid.
    [The prepared statement of Mr. Reid follows:]
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    Mr. Davis. We will go right into some questions. I have one 
question I would just like to ask each of you, if you would 
respond to it.
    Could you describe for us ways that the Postal Service has 
used the provisions of the new act to ensure the viability of 
the service, especially as it relates to the work that you do?
    Mr. Hegarty. I am not sure we know yet how it is going to 
relate to the work that we do, but I think the portions of the 
law that they are using to their advantage, that we have seen 
so far. And I think it is quite early yet--is the pricing 
flexibility that was discussed earlier and the volume discounts 
now, how that is going to affect us. Obviously, if it brings 
more customers into the Postal Service and we have more volume, 
our employees will be gainfully employed and possibly even 
increase the members of our craft.
    One other thing that I think they need to look at down the 
road is the flexibility in rolling out new products. I think 
there is a new international product that they are looking at 
or have rolled out.
    So, as I said, I think it is quite early in the game. But 
we are hoping that the Postal Service will use their 
flexibility to continue to bring mail into the buildings where 
we all work and the mail that we all deliver, depending on our 
craft, so that we can all work together for a viable Postal 
Service.
    Mr. Young. Just this morning I met with a group of letter 
carriers down here to lobby Congress, from Connecticut; and 
they were talking to me about one of the things that Jack 
Potter mentioned during his testimony, the fact they have now 
put a surcharge on Express Mail for Sunday delivery. My members 
are very concerned about this. One guy in Connecticut told me 
they got 19 special deliveries every Sunday. They now had one 
in the last three Sundays. Only one Express Mail in the last 
three Sundays.
    I caution my members that part of the problem is the 
economic downturn and the fact that people that may have been 
willing to pay an extra penalty to get that mail on Sunday 
maybe don't have the money now and can't make that extra 
payment. So I agree with John in his statement that it is a 
little early to tell.
    But, clearly, as the Postal Service starts to experiment in 
an area that they are not familiar with--and that is this new 
pricing flexibility that you all gave them in the law--they are 
going to struggle a little bit; and I think we have all got to 
look behind those decisions and make sure. And I have 
confidence that they will do that, but I am just saying, let's 
give them some credit here now. They are brand new at this, and 
they are going to have experience growing pains as they learn 
what they can and can't do and what the results of certain 
actions they are planning on taking are.
    Mr. Cantriel. In our craft we are very hopeful that the 
flexibility you have given the Postal Service will allow them 
to bring in new customers and more volume. As a rural craft, we 
are pretty unique in the fact that our salaries are volume-
driven, along with the number of deliveries and miles that we 
travel each day; and we are hoping that by giving the Postal 
Service the flexibility to go to those customers and offer them 
ways to get discounts and bring in bigger mailers, thus 
increasing the volume of mail that our rural craft handles, 
that we will see some stability built back into the Postal 
Service.
    And as John mentioned earlier, as long as the Postal 
Service is stable, our jobs become more stable and it benefits 
all of us, and especially our customers out there, so we can 
take good care of them.
    Mr. Reid. Mr. Chairman, one of the examples that APWU would 
offer is sort of the carefully crafted language in the PAEA 
concerning work-sharing discounts with our--the language is 
designed to protect revenue and provide fairness in rate-
setting. We are concerned that in recent rate filings since the 
law was passed, the Postal Service seems to be willing to 
circumvent the provisions of the law.
    We certainly have a number of other examples that we would 
like to share with the subcommittee. If you would be 
interested, Mr. Chairman, we would like to put those examples 
together and provide them to the Chair.
    Mr. Davis. Let me just ask you, we all know the importance 
of workplace culture--that is, the more harmonious 
relationships are that exist between labor, management--pretty 
much across-the-board, it increases, improves, creates levels 
of efficiency that become very helpful.
    Are there any ways that any of you can think of that 
workplace culture might be improved that would also help 
increase productivity?
    Mr. Young. I would love to go first on that one.
    I think the NALC has found one way, and that is through our 
alternate dispute resolution process. Grievances that used to 
linger for years and years, which left employees wondering 
whether they had been treated fairly or unfairly for 4, 5, 6 
years, that is an employee that is not usually one willing to 
give a lot of discretionary effort, especially if their 
perception is they haven't been treated fairly.
    We are now able to resolve our cases. In 1994, we had 
almost 30,000 cases pending regional arbitration. We did 2,000 
a year. So figure it up, that is 15 years.
    Now a person that gets, for instance, a removal in the 
Postal Service today, next month there will be in arbitration. 
So I think that is one way we found.
    We are working very hard, our union. My executive vice 
president, Fred Rolando, is working on an alternate route 
inspection process. The process that we use right now, 
Congressman, is confrontational: It is like, the manager goes 
out with you and you use a minute--maybe a dog is tugging at 
the pantleg of your pants, he says, Well, that doesn't happen 
every day, so he deducts a minute from your time on the route; 
and then you get into a little debate over whether that is the 
appropriate thing to do or not.
    It is just a very confrontational, acrimonious system. We 
don't see any reason for that.
    We think we can devise a system. It is a very simple one. 
The one we are testing, you would laugh probably if I told you. 
But basically it is just, average the office time used by the 
carrier, average the street time used by the regular carrier, 
and give them what they use and go about your business. It 
looks very promising.
    We are also cooperating, as I mentioned in my testimony, 
with the implementation of the flat sorter equipment. It is 
going to cost my union some jobs, there is no question about 
that. The Postal Service thinks that number is 8,540. We will 
see; it is what it is. But nonetheless, we have always believed 
that the American public is entitled to the most efficient 
postal service we can give them, and if we don't do it, 
somebody else can, and we don't want that to happen.
    So those are three ways that I think--that at least we 
believe--have potential, and I think the Postal Service would 
agree, have some potential at increasing that efficiency.
    Let me also mention what Potter mentioned, so you don't 
forget. We have achieved more productivity increases in the 
last 5 years than the last 30 before that. So, clearly, we are 
working a lot harder and a lot more efficiently today than we 
were just 5 years ago.
    Mr. Davis. Anyone else?
    Mr. Hegarty. I would like to highlight a couple of things, 
Mr. Chairman. One thing you may not be aware of is that we were 
asked, the four union presidents, a few months ago, to make a 
videotape with the chief human resources Officer and the 
executive vice president, Tony Veliante. And it was basically a 
roundtable discussion on how we could work to ensure the long-
term viability of the Postal Service.
    We talked about a lot of things--Do Not Mail, Vote By Mail, 
the Universal Service Obligation. And I think by making that 
tape from the headquarters level, it shows the commitment that 
it is not always an adversarial relationship.
    You will notice in my testimony--there may have been a 
couple of digs in there about the way things are and things I 
would like to see changed, but it is not all bad. We have a 
good working relationship at the headquarters level, and that 
videotape shows that. Now, we were told that would be rolled 
out to the field and that our members would all have an 
opportunity to see that videotape at some point, either in the 
break rooms or on Postal Vision, which is a TV program that 
they show in the lobbies of the Postal Service, etc. So we 
wanted to get that message to our members, that, yes, we can 
work together on those things that we need to work together on.
    Three programs that we have had some long-term success with 
in my craft, one is the quality of work life. And I mentioned 
that in prior testimony, where we work together within a 
facility. Both management and the union have to buy into that. 
It is not an adversarial relationship by any means; it is a 
cooperative relationship. That has worked very well for us.
    Two fairly recent programs that we partner with the 
American Postal Workers Union and OSHA on, one is the VPP 
program, the Volunteer Protection Program, where a facility has 
to achieve almost a stellar safety record to qualify for star 
status. It is a very prestigious award, and we have had a lot 
of plants that actually do that, reduce their injuries.
    Also the ergonomic risk reduction program. That is another 
headquarters-level initiative with the American Postal Workers 
Union and the Mail Handlers and postal headquarters, where we 
go into facilities and give the employees ownership of that 
process; where they tell the people who are evaluating the jobs 
what they think would make their job easier to do, less 
stressful, and eliminate repetitive motion injuries.
    All of those programs have been very successful.
    Mr. Davis. All right.
    Let me ask Mr. Marchant if he has questions.
    Mr. Marchant. Thank you, Mr. Chairman.
    Postmaster Potter and others have said that operating under 
the CPI-based rate cap poses some serious challenges to the 
Postal Service.
    Do you agree, and would you make a comment on that comment?
    Mr. Young. Well, I will start off again.
    Yes, I do agree. It poses significant challenges. But I 
point to this fact, Congressman: For the last 38 years, the 
Postal Service has been able to keep wages under the rate of 
inflation. So it is not an insurmountable challenge.
    It is getting tougher and tougher every day. I think the 
questions that Congressman Clay asked about the gasoline prices 
are illustrative of that. I have every reason to believe, as we 
go into the future, it is going to be even more difficult than 
it was in the past. But I just believe that by finding win-win 
solutions--and this is all predicated, all predicated on our 
ability to work together.
    I don't want to bang a dead horse here, but that is another 
reason why I caution so strongly against contracting out, 
because I can't get the men and women that I represent to give 
their all to the Postal Service when they think they are 
looking for ways to eliminate their jobs and give it to private 
contractors who don't get the benefits of annual leave, sick 
leave, vacation and health benefits that they do. That is a 
hard sell.
    When I can show the members that I represent that the 
Postal Service is not going in that direction, like I can now 
with the moratoriums, it is a lot easier for me to get that 
kind of buy-in. And what I am suggesting is--and I say this not 
only to you, sir, but to my own members and to the Postal 
Service--if we don't find a way to work together, the employees 
and the employer, this institution will not survive, because 
there are those significant challenges in front of them.
    Mr. Marchant. Thank you.
    Mr. Hegarty.
    Mr. Hegarty. I agree with President Young. I think it is a 
challenge for the Postal Service, but I think the unions have 
cooperated with the Postal Service.
    If you look at our collective bargaining agreements, most 
of them reached within the last year-and-a-half, it is modest 
raises. It is nothing out of the ordinary; as Postmaster 
General Potter stated, it is not a full COLA.
    Many times people point and say you have cost-of-living and 
you have wage increases. I am not sure if the exact figure is 
66 percent, but that is what Postmaster General Potter said. So 
we are actually under the rate of inflation with our wage 
increases, with our COLA. I would say in calendar year 2007 for 
the Mail Handlers, it was about 2.8 percent, which is almost 
exactly where the rate increases of 2.9 percent is going.
    The other thing that our members stepped up to the plate 
and agreed to--because we vote on our contracts; I can't just 
sign a contract with the Postmaster General; we send it out for 
a vote of our members--is, they have agreed to pay more for 
their health insurance every year during the 5 years of the 
contract, recognizing that the Postal Service needs some 
flexibility and recognizing that costs for health care are 
increasing.
    So I think the unions have stepped up to the plate and 
recognized that fact as well.
    Mr. Marchant. Thank you.
    Mr. Cantriel. I agree with John and Bill both. The thing--
there are some real challenges in the Postal Service. The thing 
that I think concerns our leadership and our membership is that 
the Postal Service will take Band-Aid steps to try to save 
money and not look at the long run.
    And I think contracting out is one of the things that 
concerns us the most. Yes, it will save you some money maybe 
initially, but any good businessman will tell you, if you 
deliver a very good product and give a very good service, 
people are willing to pay for that, and if you deliver an 
inferior product, even though it is a little bit cheaper, it 
will hurt you in the long run.
    That is one of our biggest fears with contracting out, that 
if it is allowed to just bring anyone in to do the jobs that 
our members are doing now, and both the Letter Carriers and our 
union are doing--and doing a very splendid job doing--we are 
afraid it will give the Postal Service a reputation of not 
delivering the type of service down the road that we feel is 
necessary to keep us a viable organization.
    Mr. Reid. Mr. Marchant, let me suggest this is a question 
better for President Burrus, who is not here today. During the 
shuffle, I lost my counsel and advisors over here. They are on 
the other side of the room. So I think if you could provide the 
question or if you would like that question addressed, we would 
certainly put it to Mr. Burrus and I will provide a response.
    Mr. Marchant. Thank you, Mr. Chairman.
    Mr. Davis. Thank you very much.
    Mr. Lynch, we have about 10 minutes.
    Mr. Linder. I have a very brief comment and question.
    I am particularly concerned about the Universal Service 
Obligation study, if you want to call it that, just to 
basically give voice or amplify the concerns that have been 
raised here already today about the objectivity of some of the 
contractors that have been chosen to conduct this study, this 
assessment on behalf of the Postal Regulatory Commission.
    I would be willing to--and I am speaking just for myself at 
this point, but I would be willing to send a letter just 
questioning that whole process and the selection of those 
individuals. What I am looking for is, and again I am just 
speaking for myself, is objective information, a clear, just 
fact-based assessment. And the fact that these contractors have 
already, you know, exhibited very strong bias against certain 
aspects of the way the Post Office works right now, that is not 
helpful to me. I need something that is more objective and 
clean. So, I would probably not find that study very helpful.
    So I am going to recommend that they go back, that they 
pick some objective, very intelligent and well-informed people, 
but people who will give us a good, objective assessment of the 
situation right now. Again, I am speaking for myself.
    Mr. Chairman, I thank you for your courtesy. I appreciate 
the shortness of time, and I am going to yield back my time.
    Mr. Davis. Thank you very much.
    Delegate Norton will handle the meeting until we get back.
    Ms. Norton [presiding]. Thank you, Mr. Chairman. I vote in 
this committee, thank goodness, though not yet on the House 
floor--any day now if the Senate version of democracy, which is 
60 rather than 51, is finally understood; and we think we are 
very close.
    So it is important that Members who do have to go are able 
to go. I vote in the Committee of the Whole, but I am told this 
is in the full House.
    As some of you may know from my past interventions in these 
hearings, I am fascinated by what it is the Postal Service and 
its employees are being asked to do.
    One of you mentioned the word ``monopoly.'' I think it may 
have been you, Mr. Reid. That is exactly how you are treated, 
except, of course, you are not a monopoly. There are all kinds 
of new postal services, if you will, who have cropped up since 
1971, when you were a monopoly and we said, Oh, well, you just 
do what the private sector does.
    There wasn't no private sector, to speak of. There was no 
IT, there was no--essentially, of course, Congress was not 
clairvoyant, did not foresee that there would be, essentially, 
competitors that were in the self-same business in every aspect 
of the word.
    I just find this a fascinating problem. This is the 
academic in me still coming out, that I can't believe that this 
can't work, and yet I can't believe that it can. And the only 
way to do this is to approach it with the straitjacket that is 
there, and then, because of the incremental way in which the 
Congress works, to go step by step to see whether or not there 
is anything to be done.
    You notice we weren't very incremental when we decided to 
essentially paste onto a universal service, without subsidy, a 
market system, a rate system and market system practice, while 
saying, We double-dare you not to act like a public service, 
because you remain a public service.
    Well, OK, let's see if that can work.
    Well, we have gone through a lot in this committee. The 
Postal Service is up and standing. I sometimes marvel at that.
    Let me take a tough issue, the issue that troubles me 
greatly, the outsourcing issue, because we know that the 
Federal Government is sometimes the prime target. And you are 
sitting here with a subcommittee of a committee that has, since 
we have been in the majority, just laid out the limitations of 
essentially contracting out the government, where the 
government, frankly, would need to have a government just to 
keep track of the contractors, which means, essentially they 
are on their own.
    So we say, you know, you can contract out only things that 
shouldn't necessarily be done by the government. Well, is mail 
service one of those? I would have thought so, or else we would 
have privatized the mail service ourselves. So we give no 
subsidy.
    I am on another committee and always look for an analogy. 
The closest analogy I can come up with is Amtrak, but we 
subsidize Amtrak. It is falling apart, it is not much of a 
subsidy, but it is money that comes out of here annually for 
Amtrak.
    So I don't really have an analogy. I don't really have a 
similar paradigm. So I use these hearings to think through 
whether or not market practices can work. And if they can't, to 
what extent does Congress have an obligation to alter them in 
any way?
    Well, if we contract out, the Federal Government has been 
contracting out, and we have contracted out a whole war. There 
are more contractors in Iraq than there are military. You see 
what that got us, Blackwater and the rest. That wasn't even 
known until we got in the majority and began to have hearings.
    Some of those abuses, some of the reasons why we can't keep 
track, can't possibly keep track without having a work force 
almost equal in number to the work force out there, keep track 
of dollars--in your case, dollars that come from the public; in 
our case, taxpayer dollars--is really the challenge.
    All right. One of the things is, do we do it? Are we stuck 
with, we do it with the consequences that we have seen, albeit 
we have just gotten into the majority. But it was done under 
Democratic Presidents too. So I am fascinated by how long the 
Postal Service can resist, particularly since you use 
collective bargaining, you have to bargain these things out. 
And my congratulations, how you have done so on outsourcing, 
but that is what you have done.
    You have a moratorium on any new contracting. It really 
distressed me to see that the contracting had moved from the 
way Postal Service had always done it and that, apparently, the 
unions had taken no exception to it; and that is way-out places 
where there was some contracting done in apparently very rural 
areas and the rest.
    And then we had testimony that in suburban areas and areas, 
we even had testimony of parts of cities where contracting out 
had occurred. So there was clearly creeping contracting.
    We weren't sure that was being thought through, except in 
the usual way. You know, it must cost less if the private 
sector does it.
    Of course, our own hearings have shown that not to be the 
case. And if you want it to be the case, you had better have 
some folks in fact monitoring it to see it is the case.
    And we have passed 876, we have done a lot of things, and 
still haven't been able to hold the private sector to that 
standard. We know we don't hold them to a quality standard.
    You've got this moratorium on new contracting. Currently--
is it your testimony, Mr. Young--where it's been extended. It 
shows the strength of collective bargaining.
    I have two questions on that. What are the prospects that 
you will be able to continue that? And what are the 
ramifications of continuing it, given the problems, some of 
which have been outlined here, of the Postal Service?
    Particularly today in a downturned economy, you are very 
market-sensitive, in that sense. I mean, are there real 
alternatives to going the, really, cheap and dirty way without 
recognizing or caring about the consequences that the Federal 
Government to a great extent has done and that apparently some 
private-sector employers do?
    Are there alternatives that the Postal Service ought to be 
looking at?
    Look, the whole thing is an innovation. Well, is there a 
way to look at this public service, to look at its employees, 
the quality we get out of them, while relying on you, because 
that's all we have and this is a bargainable issue, to somehow 
keep outsourcing out? If not outsourcing, given what they think 
is savings, what should they do?
    And the other thing, in answering that question whether you 
have any better ideas, whether prospects of extending it, at 
the bargaining table, do they have to show and are they able to 
show savings?
    Mr. Young. Let me try to start out with that, if you would, 
Congresslady.
    First of all, I think you understand that the danger or one 
of the dangers of contracting out is, if you do too much of it 
and the contractors are as bad as some of them have been, it 
won't be long until the public loses faith in the ability of 
the mail system to privately, efficiently deliver their mail.
    Congressman Hayes mentioned this in his opening statement. 
Just last week, the Ponemon Institute, for the 4th straight 
year, recognized the Postal Service as the most trusted 
Government agency of all 74 agencies. And it just keeps 
happening. We've earned the trust of the American public, and 
we've done it by efficiently and privately delivering their 
mail. And any attempt to interfere with that is going to hurt 
that.
    I also want to alert you to something, and I would be happy 
to provide your office with this, if you're interested. Just 
this week--I couldn't have timed it better if I'd have wrote 
the thing myself--there is a report from the International 
Postal Services about the privatization effort in Europe. And 
the bottom line of that report is, it has produced no tangible 
benefit at all and it's destroyed universal service in Europe. 
I think that is something that the Congress would be very 
interested, at least I hope it is, something that the Congress 
would be very interested in doing.
    It bothers me, Congresswoman Norton, that the Government 
would play a role in destroying the middle class. Postal 
Service jobs are not high-paying jobs. They are good, middle-
class jobs. I don't say no, but why would the Government 
encourage the Postal Service to contract out jobs?
    Potter said they saved 50 percent. There is no magic here. 
Seventeen percent is your annuity. Private contractors don't 
have an annuity; that's a retirement plan. A certain percentage 
of that, probably 10 percent or more, is to health benefits. 
Private contractors don't have health benefits. They don't have 
sick leave, they don't have annual leave, they don't have 
family medical leave.
    If this is what the Government wants to do, it's going to 
produce a result and some unintended consequences, I believe. 
And it's something that we ought to walk very slowly on.
    But more important, probably, to you is what you asked me: 
If they can't do that, they've got to do something else; what 
is it? And I think you're right-on again. We have to learn to 
work together.
    Look, just a few years ago, the Postal Service spent $900 
million in 1 year fighting over grievances with their unions. 
If that's not total insanity, I don't know what is. I talk to 
people in the auto workers industry, they tell me, yeah, we go 
to arbitration maybe five times a year. And my little union is 
going 2,000 times a year? That doesn't make sense.
    Now, we have taken the steps----
    Ms. Norton. Why is it? Why do you believe you go so often?
    Mr. Young. Well, we don't now. This was before. This was 
before we changed our grievance procedure. We did because we 
couldn't resolve any issues. At the third step of the grievance 
procedure, which is the regional level, 40 percent of the cases 
were being resolved; 60 percent had to be appealed. Today, with 
the new system we put in, 88 percent of the cases are being 
resolved at that level, and of the 12 percent that go forward, 
60 percent of them are settled before the arbitration date.
    So I think we're on to the cusp of some things. Working 
more efficiently, supporting the Postal Service's automation 
programs, encouraging discretionary effort from the members 
that we represent, that's something that all of us at this 
table can and do do almost daily. But that has to be in the 
right environment.
    And I strongly suggest to you that it's very difficult for 
any elected union representative to try to get discretionary 
effort out of employees when they believe that the boss is 
plotting to eliminate them with lower-paid, nonbenefit workers. 
That's a hard sell.
    So I think that, allow us to do--Potter was talking about 
these increases in productivity. Allow us to continue to do 
that. Allow us to work on efficiencies.
    John should be congratulated about the efforts they've made 
with the ergonomics program and reducing injuries. Our craft is 
also involved in that. I just saw a report from the Office of 
Department of Labor where injuries are down significantly in 
the Postal Service in the last 3 years, and that's a credit to 
what these folks are doing. That's an expensive thing. That's a 
way of saving money.
    My bottom line is this, and I'm sorry it took me so long to 
get to it: Allow us to work together.
    And then just one last thing, and after this I'll be quiet. 
I want to ask that you seriously don't tumble. I just got word 
that FedEx came up here and told you all that they would 
deliver the Nation's mail ballots for nothing. I'm telling you, 
they haven't earned the trust that the members that I represent 
have earned for the last 200 years.
    If anybody is going to deliver the Nation's mail ballots, 
it ought to be the dedicated postal employees. America trusts 
us because we have proven ourselves. We shouldn't be giving 
this work. And it bothers me that the Government uses our 
competitor services instead of us. This is a quasi-Government 
agency.
    Ms. Norton. Did we say we would do it? Have we already said 
we would do that?
    Mr. Young. No. No. Thank God, bless you, no. I hope you 
never say you do it. It was told to me that it might be 
reported out of a committee, and that didn't even happen, thank 
God.
    And, look, I congratulate Fred Smith; he's trying to get 
his foot in the door. Congratulations to him. But the fact of 
the matter is that if that's going to happen, that's sacrosanct 
in this country. And we should very careful who we turn the 
trust of the election and the election of the public officials 
over to.
    And I'd just say, my members have already proved it. We've 
done it in Oregon for a number of years now. There's been no 
issues, no claims of fraud, none of that. We've proven our 
ability to do it.
    And if you want to do it through the mail, and I strongly 
recommend you do, there's a win-win. It's good for the bottom 
line on the Postal Service; it's good for the American public.
    This Government was founded on everybody voting. 87 percent 
of the citizens in Oregon voted in the last election. That 
tells me what I need to know, that's the best way for people to 
vote in this country, and I hope you all support it.
    Thank you.
    Mr. Cantriel. Ms. Norton, I'd like to make a little 
clarification. I'm afraid you're under the misconception that 
the moratorium on the contracting out has been offered to all 
the unions. And even though we've been, thanks to Bill Young, 
asked to join on that committee to look at ways to work out a 
compromise on contracting out, the rural carriers have not been 
offered that same moratorium.
    I think you need to realize, and I think Bill will admit, 
that the lion's share of the growth is going to be out in the 
more rural areas, and that the potential for contracting out is 
much greater in the areas that we serve versus the areas that 
the NALC serves.
    And the Postal Service has been very reluctant to even have 
very meaningful talks with us about putting any moratorium on 
contracting out. The willingness has been with Bill and his 
group. And I want to thank Bill publicly for bringing us into 
that committee and allowing us to be part of that, because I 
really think he was probably the one responsible for that. And 
we certainly appreciate that.
    And we look forward to working with him on that committee, 
and we try to convince the Postal Service to offer us the same 
benefit of that moratorium until we can work some of these 
things out.
    Ms. Norton. The difference is that they already had their 
foot in the door, didn't they, with rural areas? And they are 
expanding into areas they've never been to before with 
contracting out in Mr. Young's areas?
    Mr. Cantriel. The expansion is also in our area, too, 
because the only contracting we had before required that it be 
in very sparsely populated areas. And they purposely deleted 
that language from the manuals, which allowed them to move into 
areas where there are more than 12 deliveries per about one 
family per mile. And they have been more aggressive.
    And I think you've heard over the testimony, the last 
couple of times that we've been here, that the percentage of 
contracting out on the rural areas continues to go up and up in 
the Postal Service.
    Mr. Reid. Madam Chairman, I'd just like to say--and I'm 
sorry I brought it up so late after Mr. Lynch had left--but 
like President Hegarty of the Mail Handlers, we support H.R. 
4236, a bill by Congressman Lynch to restrict contracting out 
in the Postal Service.
    In recent months, there certainly have been horror stories 
about contracting in Federal jobs. There's Blackwater, there's 
Walter Reed, you know, any number of instances where 
contracting out Federal jobs has been a terrible idea. 
Legislation has just been passed to stop the contracting out of 
collection in the Internal Revenue Service. I understand 
Congresswoman Schakowsky is introducing legislation to cut back 
on contracting in the intelligence industry. So there are any 
number of cases where contracting has just turned out to be a 
horrible thing.
    It seems that the Postal Service is interested in joining 
the race to the bottom, the lowest-paid employees, the least 
efficient service, and somehow being tagged as the Wal-Mart of 
Federal agencies. And we're certainly opposed to this.
    We would hope this Congress would, at some point, pass a 
total ban on contracting out of Federal and postal jobs.
    Ms. Norton. And, you know, they should pass one against 
contracting out their own jobs, as well. I say that to let you 
know just how widespread it is.
    I think part of the difficulty--I think we would have to 
find something to hook it to that is a Federal interest, 
because the reason is that this is a bargainable issue, 
apparently. In fact, you've been bargaining over, and so there 
is the issue of whether or not the Government would be 
interfering with collective bargaining.
    I'm just putting the issues that will come up on the table, 
not to indicate that I don't think it can be done, but the only 
way to get through hard issues is to think, well, if not that, 
how do you get through the fact that this is a bargainable 
issue? How do you get through the fact that the Government 
itself is doing it?
    Well, for one thing, security--the mail, for goodness 
sakes. One would have to make the case about security, about 
their employees, about the nature of mail and privacy, in order 
to overcome what is also an iron-clad notion of the market 
system, which is, if it's bargainable, the Government doesn't 
intervene. So I'm looking for things like that.
    And let me just say, you know the way in which America 
operates, not just the Congress: You have to have a catastrophe 
before somebody says, ``Oh, my God, let's do something about 
that.''
    Now, that's how we got the TSA, the people who look at your 
luggage that have been contracted out to all the airlines, and 
they contracted them. And so now all of those are Federal 
employees. But look what happened before we decided that. And 
we were in a minority then. We were able to get the Republicans 
to go along with this.
    So I'm hearing you. And I know there will be a terrible and 
serious breach, at some point. I would love to deal with this 
on a preventative basis. And I think you say there's a member 
who's filed on the basis of security for at least some matters. 
Maybe we should go from there.
    I don't know if any of the rest of you have something to 
say about this. I do want to compliment--I mean, I think you're 
right on the money with what you've done with grievances. I 
remember that came up at one of the hearings before.
    This kind of parallels my own experience at the EOC when I 
came, and everybody felt they had to file a complaint, had to 
take the complaint for 2 years. Except we found that, after 2 
years, almost everybody got nothing. So when I came in, I said 
I'm going to settle cases early so that only those cases that 
need and deserve the attention of the Government--``Oh, Eleanor 
is going to let the employer sell us out.''
    And what we found out was that the remedy rate escalated to 
three times what it was. People who wouldn't have gotten any 
remedy got one because it was in the employee's best interest 
not to go through the whole system. Obviously, employers liked 
it, but they liked it largely because of the amount of money it 
cost them to go 2 years in a system where they were going to 
come out on top but having spent a lot of money.
    So you all do have some control over that, because you can 
make employees understand. The way we made them understand was 
to use the investigator at the beginning to bring in, before 
there was any formal procedure, let the employer put his best 
case forward, give you 5 minutes, give you 5 minutes. Then 
another investigator would take them to the side and say, do 
you want to go forward? You have some chance of winning, some 
chance of losing; tell them what the chances are. They began to 
settle cases. That's a very smart thing to do.
    And I must say, I saw all kinds of smart things that the 
unions are doing and, for that matter, the Postal Service is 
doing with its products, with its discounts. It really is 
acting like private sector, to the extent that it can.
    I asked staff, no one can tell me this yet, but I need to 
find out something that bothered me in the Federal sector, 
something that is in Mr. Keating's testimony. You know, we 
don't subsidize, the employers don't get any subsidy with the 
new pharmaceutical, because we are the employer. And he says 
that doesn't happen, either, here.
    Mr. Young. That was in my testimony.
    Ms. Norton. Oh, that was in your testimony?
    Mr. Young. Yes, Congresslady. See, when the Government 
passed it, if you read the law, it says anybody that provides 
the level of benefits that's superior to Medicare is eligible. 
It doesn't exclude anybody. But all of a sudden, when the 
Postal Service applied for those benefits, they were told no, 
because they're part of the FEHB program. And somebody in the 
administration----
    Ms. Norton. Part of what program?
    Mr. Young. The FEHB, the Federal Employees Health 
Benefits--I'm sorry, we use these acronyms--Federal Employees 
Health Benefits Program.
    Ms. Norton. Yes, but for us, it really is an exchange of 
one pocket to another pocket.
    Mr. Young. I understand that. I don't disagree. But the 
Postal Service, because they were off-budget--and that was done 
a number of years ago--it's not the same.
    Let me show you the irony of it. My union, for the 
employers that we hire to work at my union, we give them a 
FEHB-like program. It's not FEHB, they're not part of it, but 
the benefits are exactly the same. We just administer it 
ourselves. We got the subsidy. I got a check for X amount of 
money. I don't know what the--it wasn't insignificant.
    Ms. Norton. The union did?
    Mr. Young. The union, yes, for providing the same exact 
benefits that Postal Service provides to their employees.
    So if they're not on-budget, what would be the rationale 
for keeping that money away from them? And my economist tells 
me that could be $8 million a year.
    Ms. Norton. We, the Federal Government, picks up something 
like 70 percent--of course, we've been stuck on that forever--
of FEHBP, or whatever program we're in.
    Mr. Young. But not for the Postal Service. The Postal 
Service has to pay that themselves.
    Ms. Norton. So you have the same kind of 70/30, but you pay 
it?
    Mr. Young. Ours is 85/15 at the end of this contract.
    Ms. Norton. You probably get it.
    Mr. Young. I don't know how we got it. It was more. We 
negotiated a better deal. And now, like one of these 
representatives said, we had to step back and take a little 
decrease this time.
    The point I am making, though, is simply this. The Federal 
Government doesn't pay a nickel for anybody's health benefits 
in the Postal Service. They do for other Government workers, 
but the Postal Service is off-budget now. And the Postal 
Service and the employee have to pay 100 percent of those 
costs.
    So my thought is, as long as they're paying for it, it 
isn't the Government paying the Government, and they ought to 
be eligible for those subsidies. And I think the law will 
support me on that, but I leave it to you.
    Ms. Norton. I'm looking for where money can be found on an 
equitable basis. Here, let's talk equality. You've got to pass 
it somewhere. You can pass it to the postal customer. At some 
point, somebody's got to pay. And these are huge costs.
    You're private sector--the union's private sector, but so 
is FedEx. They qualify for subsidies for their retirees, and 
you do not, for this new benefit?
    Mr. Young. Exactly.
    Ms. Norton. Now, you know, I always try to think, ``Think, 
Eleanor, what is the argument on the other side?'' I'm coming 
up dry on this one. I don't understand the argument on the 
other side for not, in fact, subsidizing the Postal Service. I 
understand that the Postal Service has tried to get it; the 
Bush administration has resisted it.
    Look, it is very expensive, but it is expensive no matter 
what we do.
    Now, we don't subsidize you for anything.
    Mr. Young. That's right.
    Ms. Norton. So cutting you off from a subsidy we give to 
every other employer in the private sector while treating you 
as an employer in the private sector, I'm not quite sure I get 
it.
    I have to think of the best argument from their--or, have 
they given you an argument? Have they given you a reason? Do 
you know of a reason that the Postal Service has gotten--I 
think the Postal Service has tried.
    Mr. Hegarty. The only the reason I've heard is OPM said 
that taking the money from one account and putting it into 
another account within the Government doesn't make any sense, 
and they didn't want to do it.
    But I agree with Brother Young; it's not taking it from a 
taxpayer account and putting it into a taxpayer account. It's 
taking it from the taxpayer or OPM and giving it back to the 
Postal Service, just like any other non-Government entity would 
have. And, for those purposes, we are a non-Government entity.
    Ms. Norton. I don't find any--we subsidize Amtrak. I asked 
staff, give me an example of anything like that. And the best 
they could come up with, not subsidy but revenue foregone, for 
example, blind. That's not a subsidy. A subsidy means, here's 
some money, not because you're doing something we would do. But 
Amtrak would say, here's some money, because the private sector 
can't run a train without some money. And this essentially is 
what a subsidy is.
    When the chairman comes back, it does seem to me that one 
thing this committee can do is look very seriously at the 
denial of a private-sector employer benefit for retirees to the 
Postal Service, which is treated in every other way as a 
private-sector employer.
    You've got to tell me the argument on the other side. I'm 
sure that the Bush administration doesn't need one, but I think 
that we've got to find one. It's going to cost some money.
    What bothers me about what you said from one pocket to the 
other, it's pockets of customers who are going to ultimately--
nobody is going to pay this every year without, at some point, 
going to the Rate Commission and saying, we need some more 
money, and we need it because the Government says, among other 
things, that we've got to pay for this new service voted by the 
Congress.
    I will call a recess until those who can vote finish 
voting. They'll be back.
    [Recess.]
    Mr. Davis [presiding]. Let me welcome our third panel.
    And they consist of Mr. Dale Goff, who is in his 36th year 
with the Postal Service. He began as a postal assistant in New 
Orleans and has been a National Association of Postmasters of 
the United States [NAPUS], member and a postmaster for 26 
years.
    Thank you, Mr. Goff, and welcome.
    Charlie Mapa has been postmaster at Gold Run for 21 years 
and is currently on leave from that position to serve with the 
League.
    Mr. Mapa, thank you.
    Ted Keating is the president of the National Association of 
Postal Supervisors, which represents the interests of 35,000 
postal managers, supervisors and postmasters employed by the 
U.S. Postal Service. Mr. Keating assumed the presidency of the 
Association in 2004 and was elected to continue serving NAPS in 
that capacity in 2006.
    Gentlemen, if you would stand and raise your right hand to 
be sworn in.
    [Witnesses sworn.]
    Mr. Davis. The record will show that the witnesses answered 
in the affirmative.
    Gentlemen, we thank you very much.
    Of course, you know that your entire statement will be 
included in the record. And if you would take 5 minutes and 
summarize. One minute is indicated by the yellow signal, and of 
course red means that the time is up.
    And we thank you very much.
    And we will begin with Mr. Goff.

    STATEMENTS OF OSCAR DALE GOFF, JR., NATIONAL PRESIDENT, 
   NATIONAL ASSOCIATION OF POSTMASTERS OF THE UNITED STATES; 
CHARLES W. MAPA, PRESIDENT, NATIONAL LEAGUE OF POSTMASTERS; AND 
    TED KEATING, PRESIDENT, NATIONAL ASSOCIATION OF POSTAL 
                          SUPERVISORS

                     STATEMENT OF DALE GOFF

    Mr. Goff. Thank you, Mr. Chairman. And I do intend to 
summarize my prepared remarks.
    I am Dale Goff, president of the 40,000-member National 
Association of Postmasters of the United States. It is an honor 
to once again present to Congress the views of our country's 
postmasters regarding the implementation of the Postal 
Accountability and Enhancement Act.
    Mr. Chairman, with your permission, I would like to begin 
by stressing the importance of a universal postal service. Next 
year, Congress will have the opportunity to review 
recommendations made by the PRC relating to universal service. 
Postmasters believe that Congress, the President and the PRC 
must view universal service in a broad social and political 
context.
    Understandably, universal service has evolved over the 
over-200-year history of our national postal system. However, 
postal policymakers have consistently strived to improve the 
quality of postal products, make these products more affordable 
and more accessible.
    Indeed, accessibility and consistency are the key hallmarks 
of the U.S. Postal Service. These characteristics afford postal 
products tremendous value to our customers, a value that would 
be dealt a devastating blow should universal service be 
undermined or the quality of postal services be compromised.
    Moreover, balkanization of the Postal Service through 
subcontracting intrinsic and historic governmental functions 
would undercut customer trust in our postal network. In fact, 
just 1 month ago, the Ponemon Institute revealed that the U.S. 
Postal Service retained its status as the most trusted Federal 
organization, with a privacy trust score of 86 percent. This 
represents a 3 percent increase over the previous year.
    Post offices are the bedrock of a universal postal system. 
They serve as outposts of commerce and connectivity to 
countless communities across the American landscape. Towns in 
rural and isolated regions and residential urban communities 
and economically challenged quarters would be underserved 
without a strong and governmental universal service obligation.
    Service uniformity and accessibility are essential to this 
obligation. Class-based postal services, where different 
locales are provided different levels of service from different 
postal providers, would be contrary to universal service and 
undermines confidence in our postal system.
    Mr. Chairman, as postmaster of Covington, LA, I can 
appreciate the importance of the Postal Service. As a survivor 
of Hurricane Katrina, many, many of our communities back at 
home would be left awash without postal services. 
Liberalization of the postal monopoly would irreparably 
undercut Government engagement during times of crisis.
    For example, Mr. Chairman, when nongovernmental privateers 
arrived, allegedly to provide aid, they exploited and profited 
at the expense of many Gulf Coast communities. This kind of 
motivation is not what America needs within our postal network. 
A universal postal service continues to bind devastated 
Louisiana communities together to the rest of the country and 
to the world.
    I believe that Congress appreciates the necessity to 
protect universal service, even in the economically challenging 
times in which we now find ourselves.
    Public Law 109-435 provides the Postal Service with a 
greater degree of flexibility in pricing and products. NAPUS 
has pledged to work with the postal headquarters to expand 
offered services at rural post offices. There is untapped 
postal revenue to be realized in the hills and byways of 
America. The new law enables the Postal Service to establish 
and expand these revenue-producing activities. With appropriate 
resources, postmasters would welcome these opportunities.
    Congress has a pivotal role in assuring postal quality and 
steadfast accountability. Unfortunately, staffing shortages 
continue to plague post offices across the country. Rank-and-
file postal positions, including those dedicated to window 
service and carrier routes, remain unfilled or triaged with 
subpar bandages. Deficient staffing weakens our service by 
slashing window hours and inconsistent or late mail deliveries.
    Moreover, postmasters are forced to put aside their 
managerial functions to offset staffing deficiencies. This 
phenomenon devastates postmaster morale, diminishes product 
quality and undermines compliance with a variety of management 
directives. Overburdening postmasters compromises their 
administrative functions, reflects poorly on USPS 
accountability, and makes it difficult to live up to the 
Sarbanes-Oxley Act.
    Moreover, the USPS will have great difficulty meeting 
service standards consistent with the postal legislation 
without the necessary and appropriately trained complement of 
employees.
    Mr. Chairman, quality and accountability are what our 
customers care about. Consequently, NAPUS is attentive to the 
Consolidated Appropriation Act of 2008, which directs the 
Postal Service to convey to Congress in writing by June 23rd 
its efforts to solicit and take into consideration the views of 
local postal management in the development of appropriate 
staffing levels to ensure that postal customers receive the 
quality mail service that they expect and deserve.
    Finally, NAPUS cautions Congress against looking favorably 
on State efforts to establish Do Not Mail registries. So far, 
these initiatives have failed to garner enough support to reach 
a vote in any of the 15 States that considered the concept in 
2007 or the 9 States that began this year with such 
legislation.
    Currently, there is no Federal legislation restricting 
advertising or nonprofit solicitation mail. Nonetheless, NAPUS 
is vigilant against attempts to place a legislative chokehold 
on mail commerce.
    These types of postal products are vital to the future of 
the American economy and the Postal Service. In 2007, 
advertising mail contributed more than $686 million in 
increased sales to the U.S. economy, and 300,683 small 
businesses generated more than 20.8 billion pieces of mail. 
This volume helps to buttress the Postal Service against the 
decline in first-class postage revenue, revenue essential for 
postal jobs and universal mail service.
    Mr. Chairman, I would conclude my testimony with where I 
began: The full potential and success of our national treasure, 
the Postal Service, relies on its continued ability to provide 
universal mail service to America, to use its available tools 
to weather economic squalls, to be granted access to the fiscal 
opportunities as other employees, and not to be strangled by 
ill-advised legislation.
    Thank you for the opportunity for NAPUS to present its 
views, and I will entertain any questions.
    [The prepared statement of Mr. Goff follows:]
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    Mr. Davis. Thank you very much.
    And we will go to Mr. Mapa.

                   STATEMENT OF CHARLES MAPA

    Mr. Mapa. Chairman Davis, Ranking Member Marchant, and 
members of the subcommittee, wherever you are, good afternoon, 
still. My name is Charlie Mapa, and I am president of the 
National League of Postmasters. Thank you for inviting us to 
testify.
    With your permission, I would like to briefly summarize my 
testimony, and ask that my full statement be accepted and 
entered into the record.
    Founded in 1887, the National League of Postmasters is a 
management association representing the interests of tens of 
thousands of postmasters across the United States. Postmasters 
are a sizable portion of our membership, as are retired 
postmasters.
    This afternoon, I would like to address three topics: the 
overall state of the Postal Service; the overall state of 
postmasters today; and the importance of rural post offices, 
including the critical obligation to provide universal service.
    The Postal Service has been working for some time now to 
increase its efficiencies and trim costs. We fully support 
these efforts.
    Managing costs, however, is not, by itself, going to be a 
sufficient means to ensure the financial viability of the 
Postal Service over the long term. If we are to continue to 
enjoy the wages and benefits that we all currently enjoy, the 
Postal Service is going to need to do things a bit differently 
in the future.
    We have seen a few new developments on the competitive side 
of the house. We applaud these efforts and hope they expand. 
However, we have seen no attempts to innovate on the market-
dominant side of the house, and we've seen no new NSAs. This is 
not good. It is good, however, that the Postmaster General 
mentioned in his testimony that is part of stage two.
    Besides being one of the best ways to increase our profits 
and become a more sophisticated company, NSAs are the perfect 
vehicles to test-drive the new and creative products that the 
Postal Service needs to develop in order to prosper. New and 
creative ideas are wonderful things, but they are a dime a 
dozen until they are actually tried. That is, until they are 
actually tested. Testing, going out and actually trying new 
ideas, instead of just talking about them, is the key to the 
development of new and innovative products.
    The Postal Service needs to go out and actually try new 
ideas without worrying whether they are going to work perfectly 
or not. That means making mistakes just to try new ideas. They 
usually don't work right the first time. Having new ideas not 
work the first time is part of being innovative.
    A critical part of this effort will be the Postal 
Regulatory Commission having the breadth and depth of vision 
necessary to understand that the Postal Service must make 
mistakes in order to learn. Companies that take no risks and 
never make mistakes never innovate. We can't be afraid to take 
risks. We can't be afraid to make a mistake. We can't be afraid 
to learn.
    Mr. Chairman, I would like to turn to the state of 
postmasters. We have previously come before this committee to 
express our concern about the workload that is being thrust 
upon postmasters, that workload alluded to by my friend, Dale.
    We understand that postmasters often need to put in more 
than 40 hours a week. But there comes a point, and we appear to 
have reached it, where often putting in more than 40 hours a 
week turns into a 6-day workweek and then some. If this doesn't 
stop, there is going to be massive burnout among postmasters, 
and the price that will be paid will be enormous.
    We are now even being told that the new postal law requires 
that the Postal Service turn a profit, and that the only way to 
do so is to turn the job of postmaster into a 6-day, 48-hour-
plus workweek.
    Tellingly, this is an issue that was very important to 
postmasters during the 1950's and 1960's, and made it to 
legislation when Congress finally acted upon the matter and 
passed Public Law 89-116, which legally established a 5-day 
workweek for postmasters. That was more than 4 decades ago. 
That bill, as then-President Lyndon Baines Johnson said, 
``culminated''--and this is a quote from President Johnson--
``15 years of efforts by the Nation's postmasters to secure 
what most people have enjoyed all along, a 5-day workweek.''
    I know of no other industry where top management is trying 
to turn back the clock on the 5-day workweek, and we wish the 
Postal Service would quit trying to do so. It's not good for 
postmasters, it's not good for the Postal Service, and it's not 
good for our country.
    Finally, Mr. Chairman, I would like to address rural post 
offices and the universal service obligation. The glue that 
binds rural America together is our postal system and the local 
post offices.
    However, the importance of rural post offices in rural 
America goes far beyond the mere delivery of mail. As I have 
described in my testimony, the importance of rural post offices 
goes to the essence of rural cohesion and to what makes up the 
notion of community. You can see this in the fact that once a 
town's post office disappears, the town often shrivels up and 
dies, for the cultural, political and economic function of a 
post office cannot be filled by having the rural carriers sell 
stamps from his or her car.
    Finally, Mr. Chairman, the defining public policy that has 
guided the Postal Service from the early years has been the 
vision of a universal mail service. Equity demanded that the 
Government provide postal services to everyone, not just the 
privileged and well-to-do, including rural and urban areas that 
some perceive as being unprofitable.
    The League strongly believes that we in the Postal Service 
should never lose that orientation. Universal mail service to 
every spot in the country every day is the right of every 
American citizen.
    That concludes my remarks. I would be pleased to answer any 
questions that you might have.
    [The prepared statement of Mr. Mapa follows:]
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    Mr. Davis. Thank you very much.
    And we will go to Mr. Keating.

                    STATEMENT OF TED KEATING

    Mr. Keating. Chairman Davis, Congressman McHugh, I'm 
grateful for the opportunity to appear before you today.
    This year marks the 100th anniversary of the founding of 
the National Association of Postal Supervisors. My written 
testimony will detail some of the challenges faced over those 
100 years and the obstacles that were overcome with the help of 
Congress. But in the interest of time, I will move directly to 
the issues we face today, because those challenges continue.
    While we have made great strides in improving the service 
and efficiency of the Nation's mail system over the past 
century, new and unprecedented challenges remain before us. As 
the economic focus of this hearing suggests, the preservation 
of the financial strength is the paramount challenge to the 
future of the Postal Service.
    The triple threat of declining mail volume, increased 
service demands and delivery points, and a weakened economy 
have not provided a healthy base for the launch of the postal 
reform law over the past year.
    Weakened economic conditions have disproportionately 
affected postal revenues. The financial, credit and housing 
industries, key users of the mail, have slackened in their mail 
usage. And retailers have reduced their mailings of catalogs 
and advertising mail.
    These conditions underscore my belief, as I noted in my 
testimony to the subcommittee last year, that the sweeping 
reforms of the new postal reform law and the pressures of the 
inflation-adjusted cap upon price increases in the market-
dominant products will require the Postal Service to become 
more entrepreneurial, accountable and transparent in the 
conduct of its business operations.
    The Postal Regulatory Commission similarly needs to assure 
that the Postal Service retains the flexibility to operate in a 
manner that preserves affordable and universal service. And the 
Congress needs to exercise oversight to monitor and assess 
whether the objectives of the postal reform law are being 
achieved while remaining ready to modify the terms of the law 
as developments may require.
    The new law affords the Postal Service tremendous 
opportunities to benefit current users of the mail and to 
attract new customers. The Postal Service needs to explore 
every opportunity to pursue additional revenue through new 
products and services. This includes not only the introduction 
of new and innovative mail products, but also provide greater 
accessibility to commercial services within the network of more 
than 30,000 post offices.
    For example, post office lobbies are underutilized. They 
should afford access to bank ATM services and other commercial 
products. The availability of ATM in a small post office in 
rural areas will be well-received in many communities.
    Similarly, the last mile of a USPS delivery provides 
untested opportunities for expanded courier and delivery 
services by USPS carriers.
    The Postal Regulatory Commission has embarked upon and 
completed an impressive schedule of regulatory initiatives over 
the past year, including rules for the rate-setting process for 
market-dominant products and service standards for the most 
postal products.
    It is now engaged in a study, mandated by the Postal 
Accountability Enhancement Act, to report to the President and 
Congress by December 2008 on universal postal service and the 
postal monopoly in the United States, including the monopoly on 
the delivery of mail and access to mailboxes.
    Universal service encompasses postal services and costs 
that would not necessarily be provided with the private sector 
controlling and administering the American postal system. That 
unacceptable outcome, the deprivation of reasonable access in 
the collection and delivery of the mail to some Americans, is 
why universal service obligation has become a core component 
underlying the mission of the Postal Service.
    That is also why the mailbox monopoly, the unrestricted 
right to facilitate the collection and delivery of letters 
through exclusive use of the customer's mailbox, has become a 
twin policy requirement to assure economic viability of the 
universal service.
    The PRC's responsibility to study the future of universal 
service obligation in a report to the President and Congress 
comes at a time when declining mail volume and increased 
service demands for new households and businesses may strain 
the economic viability of the universal service as we have come 
to know it.
    This prompted the PRC to declare last month its intent, in 
preparing the report, to focus on the universal service 
obligation as characterized by its geographic scope: product 
offerings, access to postal facilities, delivery frequency 
rates and affordability, and the quality of service.
    The identification of these study areas means that the PRC 
study will likely involve examination of a number of 
controversial proposals: determination of unprofitable delivery 
routes, the closing of small post offices, abandonment of the 
Alaska Air subsidy, the realignment of producing and 
distribution networks, and the reduction in the number of stops 
in delivery networks. These initiatives arguably would reduce 
Postal Service capital and labor costs, but also threaten the 
ubiquity and accessibility of America's postal system.
    To prepare its report, the PRC has contracted with a 
consultant team from George Mason University to receive 
significant assistance in acquiring the underlying research, 
distilling public input, and drafting the report due to the 
President and Congress.
    The PRC's scheme for the consultant's drafting of this 
report envisions the GMU team playing a dominant role in the 
drafting of the report. The PRC's request for proposals even 
envisions the PRC's possible adoption of much of the 
consultant's draft report as the final report of the PRC.
    Given the significant role of the consultant team and its 
draft report in shaping the ultimate views of the PRC on the 
universal service obligation, we are concerned that the PRC has 
not provided for adequate transparency and the opportunity for 
meaningful public review and comment. We believe the failure to 
provide for public comment on the consultant's draft report 
represents a serious and perhaps fatal flaw in the PRC's study.
    And my time is running out. Because this has been touched 
upon already, let me go right to something else that I wanted 
to finish my report with. And I'll be very quick.
    Last year, I brought to your attention the existence of new 
Postal Service rules that deny employment protections to 
military veterans in the management or supervisory positions in 
the course of downsizing action. Since then, these rules have 
remained in place, and the situation has remained unchanged.
    These rules allow the Postal Service to involuntarily 
transfer supervisors to locations far from their homes without 
the right of appeal, despite their veterans preference status, 
in the course of downsizing or consolidation of a post office. 
This is clearly contrary to the spirit of Government-wide 
personnel law and rules and repugnant to the sacrifices that 
veterans have made to this country.
    In response to the Postal Service's actions, Representative 
Stephanie Herseth Sandlin has introduced the Veterans 
Reassignment Protections Act, H.R. 728, which prohibits Federal 
departments and agencies, including the Postal Service, from 
involuntary transferring of a federally employed military 
veteran to another geographic location without the benefit of 
veterans protection and reduction-in-force rules which 
guarantee the right of appeal.
    This legislation has been referred to the Committee on 
Oversight and Government Reform, and I urge the members of this 
subcommittee to support the consideration in approval of this 
measure.
    While no veterans in supervisory positions have yet been 
involuntary reassigned, as the Postmaster General testified to 
earlier, this is only because of the delay in the Postal 
Service's plans to undertake what could potentially become 
significant realignments in processing and distribution 
networks. When the time comes and those realignment initiatives 
do in fact begin, veterans preference-eligible employees 
clearly will suffer harm if the Postal Service repositioning 
rules are allowed to stand.
    There is no reason for Congress to wait for that harm to 
occur. The rights and protections of our Nation's veterans, in 
light of their continuing sacrifice in Iraq, Afghanistan and 
other dangerous lands, should never be compromised.
    Thank you for the opportunity to present these views on 
behalf of the National Association of Postal Supervisors, and 
I'll take any questions you may ask.
    And I apologize if I ran over.
    [The prepared statement of Mr. Keating follows:]
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    Mr. Davis. Let me thank all of you for your testimony.
    Let me ask each one of you, if you would, to respond. There 
is obviously a great deal of conversation continuing to take 
place about the economic viability of the Postal Service and 
making projections for perhaps even a decade.
    My question is, what do you see the Postal Service doing 
now, or what can it do, to enhance economic viability, making 
use of the Postal Reform Act?
    Mr. Goff. I guess I will start first, Mr. Chairman. I think 
we have seen that in some of the testimony, or heard that today 
in some of the testimony, that the Postal Service, on the 
competitive products, we have gone out and started doing some 
things to raise different revenue.
    I know in meetings with the Postmaster General and other 
members of the postal headquarters that they have kept us 
involved in what is happening with the status of the Postal 
Service as far as volume and revenue, and I can tell you, and I 
think I know these two gentlemen next to me as well, that we 
are out there telling our employees that because of the law and 
because of the situation that we are in, the economic times, is 
that we have to go out and generate revenue.
    As I said in my testimony, in the small towns and rural 
areas, there is plenty out there that we can go to, the mom-
and-pop grocery stores, the people that depend on the Postal 
Service to bond their families together and to grow their 
businesses in the small towns; that we can go out and help 
those people with some type of mail service, with discounts or 
whatever, to grow the revenue for the Postal Service.
    Mr. Mapa. I agree with Dale on all of those issues, and I 
think what the Postal Service really needs to do beyond that, 
is to look at what we have. We have the largest network, the 
largest infrastructure in the country, and the Postal Service 
has to sit back and ask itself, are we making the best use of 
that? I would venture to say that we are not. I think there are 
a lot of things we could do.
    I know that Dale and I both, and probably Ted, when we go 
out to talk to our members, we tell them, look; look for 
opportunities. The opportunities are there. Find a way to make 
use of that infrastructure now as much as you can.
    But I think the Postal Service really has to sit back and 
take a look at the value that it has, something that nobody 
else has, and try to figure out ways to maximize that 
infrastructure.
    Mr. Keating. While I don't disagree with my two colleagues, 
I take a look at the long-term picture of the Postal Service. I 
spent my postal career mainly, 40 years, in finance, and from a 
financial perspective I just see that we are on a collision 
course; that the revenue, even generating new avenues of 
revenue, is not going to be enough to sustain the Postal 
Service as we know it. And I think ultimately this is going to 
end up back in Congress in the years ahead, whether it is 2 
years, 5 years or 10 years, as an issue, what do we do with the 
Postal Service once again.
    I just don't think that to sustain the Postal Service, as 
we know, I don't think we have the financial means to do it.
    Mr. Davis. Well, let me ask you. How important do we think 
that the concept of universal service is to the Postal Service 
and its operations?
    Mr. Goff. Mr. Chairman, just as the Postmaster General 
said, that is our trademark, universal service. As I said in my 
testimony, I was a witness to that during Hurricane Katrina, 
and being a survivor of that, just what the Postal Service did 
to get the communities back together and divine them with the 
rest of the country after that catastrophe happened.
    Without the universal service, and I don't want to forget 
about Chicago and places like that, but we have a vast area of 
this country that is very rural, and I know Congressman McHugh 
comes from a small town there in New York. You know, the Postal 
Service, to have that universal service, whether they are 
making a profit or not, is very important to those communities. 
Without the universal service, we will see many of these 
communities possibly go on to eBay and sell their town because 
they are not going to survive anymore, and people are going to 
move. So, it is very important that we keep that universal 
service; not only that, but the monopoly that the Postal 
Service has.
    Mr. Mapa. If we don't maintain universal services as the 
U.S. Postal Service, then we will become what we have been 
talking against for years, and that would be the privatizers. 
We will do the things that we were afraid they would do. We 
would go to the markets that we think made the most money and 
where we can be profitable. We would concentrate on those 
markets and cut the rest out. If that is what we want to do, 
then we might be smart just to turn it over to the people that 
really know how to do it.
    I would rather see that we maintain the private express 
statutes. I would rather see that we maintain universal 
service. A post office to a town means much more than having a 
place to go pick up a letter or buy a stamp. It helps to form 
the fabric of our country.
    I don't have the answer on how to get it done, but if we 
want to give up on it now, then we will never find a solution.
    Mr. Keating. I agree completely. The concept of--despite 
what the postal reform says, the concept of the Postal Service 
making money, quite frankly, and in my personal opinion, is not 
realistic. I get a question from my membership often as to what 
is our future? What is going to happen when the money runs out? 
And my usual response is, well, it has been quite a while since 
Amtrak made money, but the trains are still running, and I 
think that is a comparable future that we see down the road.
    Mr. Davis. Well, before I go to Mr. McHugh, let me just ask 
you, where is Covington, LA?
    Mr. Goff. Where is it? It is 30 miles north of New Orleans, 
across that big pond, Lake Pontchartrain.
    Mr. Davis. That is a great lake, I will tell you. The most 
frightening experience I ever had in my life, I was there 1 
year when the water was up. I went across that lake with the 
water up on the lake and with sandbags, and I was so delighted 
to get to the other side.
    Mr. McHugh.
    Mr. McHugh. We are delighted you made it, too, Mr. 
Chairman.
    Let me apologize to everybody for not being here earlier. 
They had me and 20 of my colleagues locked up as part of the 
Intelligence Committee markup, and it precluded my being here 
for the other two panels. It is good to be here even at this 
late hour and see so many familiar faces who have really been 
so instrumental in making the Postal Service the great success 
that it has been and remains to this day.
    I want to commend you, Mr. Chairman, as always, for 
devoting this subcommittee's attention to the oversight and to 
the hopefully tender mercies of the House of Representatives in 
trying to be more supportive in what I happen to believe is an 
invaluable national mission, and that is the preservation of 
the Postal Service. That means in my part of the world, as Dale 
said, universal service to places like Pierpont Manor, NY, and 
all points in between.
    I listened to all of your comments very carefully. The 
concern that has been expressed about the study on universal 
service is understandable. I was flipping through Myke Reid's 
testimony, and he is pretty explicit about some of the specific 
concerns that he has as to the process.
    I can only speak for myself at this point. Certainly it was 
always our intention that the PRC be the author of the report, 
and the underlying intent is to better define and, in my 
judgment, hopefully better preserve the guarantee of universal 
service. But there is always uncertainty. I listened to 
President Keating's comments about his concern in lack of 
input.
    Ted, I just want to ask you, is that pertaining to the 
George Mason piece of it, or are you concerned about public 
input across the board? I know the PRC is having a variety of 
public hearings.
    Mr. Keating. I think those public hearings, quite frankly, 
are premature at this point. I think the hearings should take 
place after the consultants come back with their 
recommendations.
    Mr. McHugh. To provide--and I am going to state the 
obvious--to provide folks like yourselves with the opportunity 
to comment on the study piece of that?
    Mr. Keating. That is correct.
    Mr. McHugh. That is an interesting perspective.
    Any other specific concerns about the actual PRC process, 
including the George Mason study, that you can share with us? I 
think it is important for the PRC to hear about these so that 
where it is at least possible, some adjustments in the way 
ahead can be made.
    Mr. Keating. You refer to Myke Reid's testimony. I had a 
chance to read that testimony earlier, and I agree completely 
with everything he said.
    Mr. Goff. Congressman, if I could answer that, the PRC, 
since it has been in existence under the new law, I know so far 
they have involved many of us in working with them and giving 
input to their committee. And I would hope, and I have that 
confidence in them, even with this, irregardless of the study 
being done, that they will continue to come to us.
    They have done a great job as far as what they have put 
out, as far as their reports. They have been ahead of schedule. 
But I hope that they take their time on a universal service 
study and go to everybody, all of the stakeholders that are 
involved, and get their opinion input. And I have that 
confidence in the committee, watching what they have done so 
far with their work.
    Mr. Mapa. I would have to agree with Dale. I know that the 
National League of Postmasters has a very good working 
relationship with the PRC; however, I guess maybe I will have 
to voice the same concern. A lot is going on over there 
regarding universal service, but I think an effort should be 
made to invite each of our groups to at least provide some 
input to that process so that our concerns are going to be 
heard.
    Who else would be more qualified to talk about post offices 
in small towns than the two presidents of the postmaster 
organizations? If we are not included in that somehow, then the 
process is missing a very important piece. And if you don't 
invite the president of the supervisors to come talk, then the 
process isn't going to be as all-encompassing as it needs to 
be.
    Mr. McHugh. Well, I thank you all for that. We have folks 
from the PRC who are monitoring this hearing, and perhaps they 
will take your comments back, and we will see some increased 
opportunities for input. I would certainly hope that happens.
    Mr. Chairman, I see we are under the 5-minute rule, and my 
time is up. I can ask another question, if I can.
    Mr. Davis. Go ahead.
    Mr. McHugh. All right. I had a lot of folks come who are 
concerned about the Postal Service's future, as all of you are, 
who have come and met with me on a number of occasions about 
their focus on and concern with the potential for so-called 
``do not mail'' legislation, particularly at the State level. 
Based on your presence throughout all of those thousands of 
post offices across the country, I am just curious if you would 
have any comment on how you feel ``do-not-mail'' legislation 
would affect the ability of the Postal Service to maintain its 
revenue streams, and also if you have heard anything that we 
should be aware of here at the Federal level about movement in 
that regard?
    I know this came up in the Postmaster General's comments, 
but you folks, as you know, are out on the ground. I am just 
curious of your perspective.
    Mr. Goff. Congressman, we are not aware of anything at the 
Federal level at this time; however, there has been that 
legislation in several States last year, and it has already 
been proposed this year.
    I can tell you, we have been very aggressive. We have had 
postmasters from those individual States go before the 
committees that were having hearings on that issue to give 
testimony, and I am proud to say that each time somebody has 
gone to testify, that legislation has been pulled.
    So, it would be devastating, as I said earlier. It is a big 
industry out there of people that are involved, $680 million in 
sales, 300,000 small businesses that generate 20 billion pieces 
of mail. If that happens, what would happen to us for sure? 
Amtrak--you wouldn't have enough money to support the Postal 
Service if those people would go away.
    Back when the Postal Service was first formed back in the 
1970's, for those who have been around a long time, we survived 
that, and we became stronger as a Postal Service. And I am 
confident that even with the new law that was passed in 2006, 
that we will become stronger as a Postal Service, too. But ``do 
not mail'' would just devastate us.
    Mr. Mapa. I agree with Dale. ``Do not mail'' is a horrible 
thing. I have actually been to eight branch conventions so far, 
and I talk to postmasters at every one of them, and some of 
them tell me they have had decreases as much as 30 percent in 
their volumes. I had one postmaster tell me that his volumes 
had gone down 60 percent. I would say, OK, that is a bad thing. 
Take a look at what ``do not mail'' will do to your mail 
volumes. If you think your tubs are half full now, they will be 
a quarter full. And if we are losing money the way we are now 
with a bad economy, throw in a little bit of ``do not mail,'' 
and the Postal Service will likely go under.
    We need to be able to communicate to the American public 
that mail is not invasive. You go to the post office and you 
pick up your mail. Before you leave the post office, you can 
already do what all good Americans do, and that is recycle. 
Compare that to telephoning somebody at dinnertime to sell them 
a windshield. There are two big differences between those.
    The other thing is we need to let people know why people do 
advertising like that. We watch 10 or 15 minutes of television, 
5 minutes of it is punctuated by commercials. So there is a 
reason for it, and we need to be able to convince people that 
mail is a good thing, and it is not an invasive thing that is 
going to bother America.
    Mr. Keating. Like my two colleagues, we have been very 
active at the State level. We have legislative representatives 
in every State in the country. There has been a lot of State 
activity. But when we sent people to those hearings and they 
hear the full story from us, we have been able to beat back 
that legislation. So it is something we have to keep our eye 
on, and we certainly will.
    Mr. McHugh. Well, I had a strong suspicion you were 
actively involved. Let me commend you for that grassroots 
approach. I spent four terms in the State legislature back in 
New York, and I know when representatives from communities 
throughout the State used to come and talk to me about any 
piece of legislation, in this case, of course, ``do not mail,'' 
it holds tremendous weight. And our ability to bring a sense of 
reason and the postal perspective to these deliberations as 
they occur are greatly enhanced by your direct efforts. So, 
thank you for that on behalf of every American who receives 
mail, because do-not-mail legislation could take us a long way 
down the path to, in fact, of no mail, or at least no viable 
Postal Service. I am deeply concerned about that. So thank you.
    Mr. Chairman, again, with words of thanks to you and the 
subcommittee for your efforts here this day and every day on 
behalf of the U.S. Postal Service, I want to yield back.
    Mr. Davis. Thank you very much, Mr. McHugh.
    We certainly want all of you to know, and especially you, 
Mr. Goff, that we are concerned about those small communities 
like Covington and the town that Mr. McHugh lives in and all of 
rural America, as well as urban America. I want to thank you 
gentleman for being here and for your testimony.
    Also, it gives me a chance to mention that one of the long-
time members of the National Association of Postal Supervisors, 
who was president of the group in Chicago, Elizabeth Fleming, 
her funeral was today. So I will just kind of gavel this 
meeting adjourned in memory of her, because she was the person 
who always kept me abreast of what was happening.
    Mr. Keating. Mr. Chairman, thank you very much for that. I 
appreciate it.
    Mr. Davis. All right. Well, thank you all so much. This 
meeting is adjourned.
    [Whereupon, at 5:36 p.m., the subcommittee was adjourned.]
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