[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
THE FINANCIAL STATE OF THE U.S. POSTAL SERVICE
=======================================================================
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 ELEVENTH CONGRESS
FIRST SESSION
__________
MARCH 25, 2009
__________
Serial No. 111-1
__________
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
THE FINANCIAL STATE OF THE U.S. POSTAL SERVICE
THE FINANCIAL STATE OF THE U.S. POSTAL SERVICE
=======================================================================
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 ELEVENTH CONGRESS
FIRST SESSION
__________
MARCH 25, 2009
__________
Serial No. 111-1
__________
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
----------
U.S. GOVERNMENT PRINTING OFFICE
50-649 PDF WASHINGTON : 2009
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
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Washington, DC 20402-0001
COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland JOHN M. McHUGH, New York
DENNIS J. KUCINICH, Ohio JOHN L. MICA, Florida
JOHN F. TIERNEY, Massachusetts MARK E. SOUDER, Indiana
WM. LACY CLAY, Missouri TODD RUSSELL PLATTS, Pennsylvania
DIANE E. WATSON, California JOHN J. DUNCAN, Jr., Tennessee
STEPHEN F. LYNCH, Massachusetts MICHAEL R. TURNER, Ohio
JIM COOPER, Tennessee LYNN A. WESTMORELAND, Georgia
GERRY E. CONNOLLY, Virginia PATRICK T. McHENRY, North Carolina
ELEANOR HOLMES NORTON, District of BRIAN P. BILBRAY, California
Columbia JIM JORDAN, Ohio
PATRICK J. KENNEDY, Rhode Island JEFF FLAKE, Arizona
DANNY K. DAVIS, Illinois JEFF FORTENBERRY, Nebraska
CHRIS VAN HOLLEN, Maryland JASON CHAFFETZ, Utah
HENRY CUELLAR, Texas AARON SCHOCK, Illinois
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
------ ------
------ ------
------ ------
Ron Stroman, Staff Director
Michael McCarthy, Deputy Staff Director
Carla Hultberg, Chief Clerk
Larry Brady, Minority Staff Director
Subcommittee on Federal Workforce, Postal Service, and the District of
Columbia
STEPHEN F. LYNCH, Massachusetts
ELEANOR HOLMES NORTON, District of JASON CHAFFETZ, Utah
Columbia JOHN M. McHUGH, New York
DANNY K. DAVIS, Illinois JOHN L. MICA, Florida
ELIJAH E. CUMMINGS, Maryland MARK E. SOUDER, Indiana
DENNIS J. KUCINICH, Ohio, Chairman BRIAN P. BILBRAY, California
WM. LACY CLAY, Missouri
GERRY CONNOLLY, Virginia
William Miles, Staff Director
C O N T E N T S
----------
Page
Hearing held on March 25, 2009................................... 1
Statement of:
Burrus, William, president, American Postal Workers Union,
AFL-CIO; William H. Young, president, National Association
of Letter Carriers, AFL-CIO; John F. Hegarty, National
president, National Postal Mail Handlers Union; and Don
Cantriel, president, National Rural Letter Carriers'
Association................................................ 144
Burrus, William.......................................... 144
Cantriel, Don............................................ 190
Hegarty, John F.......................................... 162
Young, William H......................................... 154
Gallagher, Carolyn, chairman, Board of Governors, U.S. Postal
Service; and Dan G. Blair, chairman, Postal Regulatory
Commission................................................. 44
Blair, Dan G............................................. 52
Gallagher, Carolyn....................................... 44
Goff, Dale, president, National Association of Postmasters of
the United States and Postmaster of Covington, LA; Charles
W. Mapa, president, National League of Postmasters; and Ted
Keating, president, National Association of Postal
Supervisors................................................ 108
Goff, Dale............................................... 108
Keating, Ted............................................. 133
Mapa, Charles W.......................................... 116
Potter, John E., Postmaster General and CEO, U.S. Postal
Service.................................................... 9
Williams, David C., Inspector General, U.S. Postal Service;
and Phillip Herr, Director, Physical Infrastructure Issues,
U.S. Government Accountability Office...................... 71
Herr, Phillip............................................ 79
Williams, David C........................................ 71
Letters, statements, etc., submitted for the record by:
Blair, Dan G., chairman, Postal Regulatory Commission,
prepared statement of...................................... 54
Burrus, William, president, American Postal Workers Union,
AFL-CIO, prepared statement of............................. 147
Cantriel, Don, president, National Rural Letter Carriers'
Association, prepared statement of......................... 192
Gallagher, Carolyn, chairman, Board of Governors, U.S. Postal
Service, prepared statement of............................. 47
Goff, Dale, president, National Association of Postmasters of
the United States and Postmaster of Covington, LA, prepared
statement of............................................... 111
Hegarty, John F., National president, National Postal Mail
Handlers Union, prepared statement of...................... 164
Herr, Phillip, Director, Physical Infrastructure Issues, U.S.
Government Accountability Office, prepared statement of.... 81
Keating, Ted, president, National Association of Postal
Supervisors, prepared statement of......................... 135
Lynch, Hon. Stephen F., a Representative in Congress from the
State of Massachusetts:
Prepared statement of.................................... 3
Questions for the record................................. 24
Mapa, Charles W., president, National League of Postmasters,
prepared statement of...................................... 118
McHugh, Hon. John M., a Representative in Congress from the
State of New York, prepared statement of................... 206
Potter, John E., Postmaster General and CEO, U.S. Postal
Service, prepared statement of............................. 12
Williams, David C., Inspector General, U.S. Postal Service,
prepared statement of...................................... 74
Young, William H., president, National Association of Letter
Carriers, AFL-CIO, prepared statement of................... 157
THE FINANCIAL STATE OF THE U.S. POSTAL SERVICE
----------
WEDNESDAY, MARCH 25, 2009
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 10:17 a.m., in
room 2154, Rayburn House Office Building, Hon. Stephen F. Lynch
(chairman of the subcommittee) presiding.
Present: Representatives Lynch, Chaffetz, Norton, Davis,
Souder, Cummings, Bilbray, Kucinich, Turner, Clay, Connolly,
Towns, and Maloney.
Staff present: Tania Shand, staff director; Marcus A.
Williams, clerk/press secretary; Margaret McDavid and Jill
Henderson, detailees; Tyler Pride, intern; Lawrence Brady,
minority staff director; Charles Phillips, chief counsel for
policy; Dan Blankenburg, minority director of outreach and
senior advisor; Adam Fromm, minority chief clerk and Member
liaison; Howard Denis, minority senior counsel; Jonathan
Skladany, minority counsel; and Alex Cooper, minority
professional staff member.
Mr. Lynch. Good morning. The Subcommittee on Federal
Workforce, Postal Service, and the District of Columbia's first
hearing in the 111th Congress will now come to order.
I want to welcome Ranking Member Chaffetz, and members of
the subcommittee, hearing witnesses and all those in
attendance. Today's hearing will examine the financial
stability of the U.S. Postal Service. The Chair and the ranking
member and the subcommittee members will each have 5 minutes to
make an opening statement, and all Members will have 3 days to
submit statements for the record.
Hearing no objection, so ordered.
I also want to note that Mr. Turner, not a member of the
subcommittee, without objection and with unanimous consent, it
will be agreed that he will participate fully in the hearing,
without objection.
Mr. Connolly, you had a point of order?
Mr. Connolly. Not a point of order, Mr. Chairman, I just
want to make sure that on the previous vote, although it was
not a recorded vote, that my statement was entered into the
record.
Mr. Lynch. Yes, you had submitted your statement and I made
a motion to enter your submission into the record.
Mr. Connolly. I am happy to support the previous motion.
Thank you, Mr. Chairman.
Mr. Lynch. OK, thank you, Mr. Connolly.
Welcome, Ranking Member Chaffetz and members and staff of
the subcommittee and today's witnesses, as we hold the first
subcommittee hearing of the 111th Congress. I would like to
give a special welcome to the Oversight Committee chairman, Mr.
Towns, who is with us this morning, and the ranking member, Mr.
Issa, for joining us this morning.
This hearing on the financial stability of the U.S. Postal
Service is not only timely but critical to the American
expectation of affordable 6-day mail delivery. The subcommittee
will now examine the nationwide economic downturn and
technological advancements have produced declining volumes and
revenues for the Postal Service.
With the Postal Service facing unprecedented budget
shortfalls, the subcommittee will consider a number of options
to restore financial stability to the Postal Service. We will
also examine ways for the Postal Service to continue to operate
without cutting services.
On March 20, 2009, the Postal Service announced new efforts
to cut costs. Among these plans are, to close 6 of its 80
district offices; eliminate 15 percent of administrative staff
positions across all districts; eliminate more than 1,400 mail
processing supervisor and management positions; and offer
voluntary early retirement opportunities to nearly 150,000
employees. These recent announcements and new reports of the
Postal Service's dire financial condition are of concern to
myself, the members of this committee and the American public.
I expect that today's witnesses will offer effective short
and long term strategies to reduce costs and improve efficiency
in order to help ensure financial viability of the Postal
Service. In addition, to better understand compensation at the
Postal Service, I will question the Board of Governors on
executives' compensation packages.
Thank you and I look forward to a very informative hearing
this morning.
At this point, I will yield to our ranking member, Mr.
Chaffetz of Utah.
[The prepared statement of Hon. Stephen F. Lynch follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Chaffetz. Thank you, Mr. Chairman and thank you for
holding this hearing. It is critical in this time.
This is the first of our oversight hearings on the Postal
Service and our first hearing overall. We are hear today to
review the life blood issues involving the U.S. Postal Service.
The U.S. Postal Service touches everyone. There are hundreds of
thousands of employees and the postal industry generates
hundreds of billions of dollars as the postal system and
personnel process literally hundreds of billions of letters and
packages. We all need the postal system to thrive. The task at
hand is enormous.
In 2006, the Congress passed the Postal Accountability
Enhancement Act marked up in this committee as H.R. 22. There
is now another H.R. 22 before us which would change the way the
Postal Service pre-funds retiree health care. The requirement
that U.S. Postal Service pre-fund the employer's portion of its
future retirees' health benefits while paying premiums for
current retirees is seen as an unnecessary cost burden.
One thing is for sure: the U.S. Postal Service is in
serious financial trouble. On January 28, 2009, the Government
Accountability Office issued a significant study regarding the
deteriorating postal finances requiring aggressive actions to
reduce costs. We must continue to do our utmost to ensure that
the Postal Service is managed responsibly, effectively and with
the greatest integrity and that we are constantly looking for
savings and other ways to be creative within the Postal Service
to provide maximum service to the American people as it is
articulated within the U.S. Constitution and making sure that
we are providing a service that will allow our businesses, our
friendships, the personal notes that will go through the Postal
Service, and that system continues to thrive.
With that in mind, we must also inquire into the Postmaster
General's compensation package, possible consolidation policies
within the system itself and the relocation policy in force and
other issues that will come before us.
With that, I look forward to the testimony, Mr. Chairman,
and appreciate being able to participate today.
Mr. Lynch. Thank you.
At this point, the Chair would like to recognize the full
committee chairman, the gentleman from Brooklyn, Mr. Towns, for
5 minutes.
Chairman Towns. Thank you very much, Chairman Lynch.
Before starting my opening statement, I would like to
congratulate you on becoming chairman of this important
subcommittee, and thank you for your leadership and insight in
holding today's hearing on the Postal Service.
I also would like to congratulate the gentleman from Utah,
Mr. Chaffetz, who as a freshman has already taken on an
important leadership role in the House by serving as ranking
member of this subcommittee. Congratulations.
Today's hearing is fittingly entitled, ``The Financial
State of the U.S. Postal Service.'' What needs to be done?
Charged with the awesome task of providing prompt, reliable and
efficient universal mailing service to all communities,
businesses and households throughout the United States in
territorial areas. The U.S. Postal Service has certainly
withstood the test of time. But the massive operational and
financial challenges confronting the Postal Service are unlike
any we have ever seen before. Having ended the last fiscal year
with a net loss of nearly $3 billion, and that is B as in boy,
the deteriorating economic condition of the U.S. Postal Service
can no longer be ignored or deferred.
With electronic communications taking more and more
customers out of the lobby of the post office, coupled with the
enormous contraction of the U.S. economy, the Postal Service is
struggling to remain a financially solvent and viable entity
for both now as well as in the future.
Yet the question remains how exactly will such stability be
regained and more importantly maintained in the new and
evolving 21st century economy. As mail volume declines and
costs from labor, energy and expansion in the delivery network
continues to increase, the Postal Service, its union
affiliates, the Congress and the country must make some
difficult decisions to get us through difficult times.
So Mr. Chairman, it is my hope that today's witnesses will
allow us to get at some of those answers and to help us
determine what may have already been done to curtail costs,
what innovations are currently in the works to reinvent and
revive the Postal Service, and last what we in Congress may
need to do to restore the Postal Service's financial standings
and to ensure the Postal Service's extraordinary reliability
and service.
Again, I thank you, Mr. Chairman, for holding such a timely
hearing and I look forward to hearing from the witnesses. Thank
you and I yield back.
Mr. Lynch. Thank you, Mr. Chairman. It is an honor to have
you here with us.
The Chair now recognizes the gentleman from Indiana, Mr.
Souder, for 5 minutes.
Mr. Souder. I pass, thank you, Mr. Chairman.
Mr. Lynch. The gentleman passes.
The Chair recognizes the gentleman from Ohio, Mr. Turner,
for 5 minutes.
Mr. Turner. Thank you, Mr. Chairman.
I would like to thank Chairman Lynch and the Ranking Member
Chaffetz for allowing me to participate in today's hearing on
the financial state of the U.S. Postal Service. I look forward
to reviewing the testimony from all of today's witnesses.
General Potter, I want to thank you for participating in
today's hearing.
In the materials we have received in preparation for
today's hearing, the Postal Service has increased their long-
term debt from zero dollars in fiscal year 2005 to over $7
billion in fiscal year 2008. I, along with other members of
this committee, am concerned about these figures and want to
work with the Postal Service to find cost savings and measures
that will help maintain the viability of the Post Office in the
future.
With that said, as some of you know, DHL, which operated
their North American operations within my congressional
district, recently ceased their domestic express shipping
business, leaving essentially UPS and Federal Express as
private shippers in the U.S. domestic shipping market. I am
concerned that this market consolidation will have an impact on
costs in domestic shipping. I was hoping that during this
hearing you could comment on how this development in the
private shipping markets could impact the Postal Service's
ability to remain competitive.
Given that the U.S. Postal Service actually contracts with
private shippers for some of its delivery services, how might
this consolidation in the market affect these contracts and how
might these costs result in increases overall to the Postal
Service?
Again, I look forward to working with you to find effective
ways to helping the Postal Service remain competitive and am
interested in your comments concerning the consolidations in
the market. Thank you.
Mr. Lynch. The chairman neglected to note at the beginning
of the hearing that because we have five panels today in this
committee, we will be here very late unless we adhere very
strictly to the 5-minute rule. So Members will have 5 minutes
to ask a question and have it answered. And when the time runs
out at the end of the 5-minutes, when that light turns red,
whoever is speaking may have the opportunity to complete their
thought, but we are going to maintain a fairly strict 5-minute
limit, otherwise we would be here, again, very, very late.
At this point, the Chair recognizes the gentleman from
Illinois, Mr. Davis, for 5 minutes.
Mr. Davis. Thank you very much, Mr. Chairman. I want to
commend you on your leadership and also thank you for this very
timely hearing.
Last week, the Postal Service announced that it was closing
offices and offering early retirement to nearly 150,000
employees, almost a quarter of its work force. The agency
indicated this action was necessary because of sharply lower
mail volumes due to the recession. Supported solely by mailing
and shipping revenues, not taxpayers, the Postal Service is
experiencing a short-term financial crisis. I believe that
Congress can act to provide some immediate breathing room at no
cost to taxpayers by supporting the bill that I have co-
sponsored with Representative John McHugh of New York. Our
bill, H.R. 22, removes an outdated retiree health benefit
mandate designed for much happier times.
When we passed the PAEA, the Postal Accountability and
Enhancement Act, the climate was a bit different then than what
it is now. Times have changed. The national economy is in a
recession and there is no place more reflective of that than
the economic reality of the Postal Service, which has seen a
steep decline in mail volume and revenue since December 2007.
Despite declines in mail volume and revenue, the Postal
Service, nevertheless, is obligated to cover the cost of
operating an extensive network of facilities, delivery vehicles
and personnel necessary to serve the Nation 6 days a week. Even
with continuing extraordinary steps to cut costs, the enormous
fixed cost of operating the national mail service threatens to
overwhelm the ability of the Postal Service to operate.
The aggressive approach to pre-funding future retiree
health benefits that appeared doable 2 short years ago is now
untenable, in my estimation. I hope that this hearing will give
us an opportunity to thoroughly explore the problems and
difficulties being faced by what I considered to be one of our
great national treasures, that is the Postal Service.
Actually, this time has been coming for quite some time. We
have been putting off, delaying, deferring, not dealing with
it, hoping that somehow or another the inevitable we would not
have to face up to. But I think the time has now come. There is
unequivocally no doubt in my mind that some serious
reevaluation of our Postal Service must take place. I believe
that evaluation will begin this morning. So I want to thank you
for this hearing and certainly welcome Mr. Potter.
Mr. Lynch. Thank you.
The Chair recognizes the gentleman from Maryland, Mr.
Cummings, for 5 minutes for an opening statement.
Mr. Cummings. Thank you very much, Mr. Chairman. I thank
you too, I join my colleagues in expressing our appreciation
for this hearing.
We hold this hearing today at a time when our national
economy is struggling and the U.S. Postal Service is not immune
to that trend. Postmaster General John Potter, who will testify
before us today, recently testified before the Senate Committee
on Homeland Security and Governmental Affairs that the Postal
Service operated at a $2.8 billion loss for fiscal year 2008.
He said the loss can be attributed largely to two factors: the
unprecedented decline in mail volume due to increased use of
electronic communications and others factors; and the economic
recession that is affecting all sectors.
Mr. Potter further outlined his plan for action to achieve
fiscal solvency. In addition to raising postal rates, the
Postal Service has been able to identify over $2 billion in
cost reductions ranging from consolidation and modernization of
plant operations and cuts in the city delivery options. Many
tough decisions have had to be made, not the least of which is
a cutback of 15 million work hours in the first 2 months of
this year, in addition to the 50 million work hours saved in
2008 and the 36 million work hours saved in 2007.
The Postal Service's 600,000 career employees have had to
face serious cutbacks to ensure the agency's viability and we
commend them for their sacrifice. Still, this may not be
enough. Mr. Potter indicated in his testimony before the Senate
panel that the Postal Service may have to reduce delivery
service to 5 days a week, rather than the current 6-day
schedule. The headline-grabbing reality served as a wakeup call
to the American public and to those of us in Congress who
represent them.
The U.S. Postal Service is currently the most dependable,
expansive mail delivery system in the world. Ours is the only
system that guarantees timely delivery to every address in the
country 6 days a week without fail. That is why we must do all
in our power to ensure that it continues to thrive.
Some tough choices will have to be made, including both
short-term solutions like that proposed by H.R. 22, which would
allow the Postal Service to use its reserve to pay employee
health benefits to more long-term decisions such as cutting
back work hours and service delivery. I expect that the
leadership of the Postal Service will have to make some
sacrifices as well, including Mr. Potter himself.
I want to thank you, Mr. Chairman, and I yield back.
Mr. Lynch. Thank you.
The Chair now recognizes the gentlelady from the District
of Columbia, Ms. Norton, for 5 minutes.
Ms. Norton. I thank you, Mr. Chairman.
This is perhaps the real moment of truth for the Postal
Service and for the Congress of the United States. We have sat
with you, Mr. Chairman, before you became Chair, in hearing
after hearing where we noted the decline of the Postal Service
through, frankly, no fault of its own. Even if it were the most
efficient corporation in the United States, it could not have
been the same Postal Service it was when all of us were
children, given competition from private carriers, and
particularly, and perhaps most importantly, competition from
other forms of communication.
The decline in the so-called volume of postal volume now
during what we are politely calling a recession which has taken
out jobs in 50 States, has to be seen on top of what the Postal
Service was already experiencing. The Postal Service had been
driven into many economic efficiency moves by the factors I
have named. Today, I will be interested in what further can be
done in efficiency. It is very hard to believe that the Postal
Service, given what it was already up against, hadn't exhausted
efficiencies.
I do note that the Postal Service is like other large
American corporations, having to deal with health care. And I
also note that health care was a major element in the take-down
of the American industry that literally created the American
middle class, the automobile industry. I think that somehow
everybody has to look at that when it comes to this particular
corporation. There is no question in my mind it could take it
down. The question becomes what do we do to keep that from
happening. There may be some temporary things we can do. We
have to watch out for what we do. Something has to give.
I don't blame the Postmaster for talking about 5 days a
week service. I know he doesn't want to do more layoffs. But if
something has to give, we have to find out what it is if we
want to remain a country that has a national postal service.
I thank you, Mr. Chairman.
Mr. Lynch. I thank the gentlelady. The Chair now recognizes
the gentleman from Virginia, Mr. Connolly, for 5 minutes for an
opening statement.
Mr. Connolly. Thank you, Mr. Chairman. I am delighted to be
here today, and welcome, Mr. Potter.
I just want to note that obviously the Postal Service is
struggling in this economy like everybody else and is
struggling to try to make itself a more solvent organization. I
am pleased to be a co-sponsor of H.R. 22, which if enacted we
believe would save as much as $2 billion in retirement payments
this year for the Postal Service.
I do want to stress, however, Mr. Chairman, that just as we
have seen concern about issues like bonuses in non-performing
companies or companies that can't meet their financial goals, I
think the Postal Service has to look to itself in that regard
as well. I would hope this hearing will examine that.
I also, as somebody who until 9 weeks ago was the head of a
very large local government, I think about my own jurisdiction.
The Merrifield Post Office, which serves all of northern
Virginia, or most of northern Virginia, hours got changed with
almost no communication to local governments. So I would hope
that as we explore in this hearing the operations of the Postal
Service we can also talk about improving communication with our
local officials, so that if there are changes contemplated,
there is an advance notification and the opportunity for some
kind of dialog before those changes are effectuated and having
to be absorbed and explained by local officials who had nothing
to do with those changes.
So I look forward to this hearing, Mr. Chairman. I may be
in and out because we are marking up the budget today in the
Budget Committee. But I want to thank you, Mr. Chairman, for
hosting this hearing.
Mr. Lynch. Thank you. The Chair now recognizes the
gentlelady from New York, Mrs. Maloney, for 5 minutes for an
opening statement.
Mrs. Maloney. Thank you. I just want to welcome the
Postmaster General and express my support for the Postal
Service and H.R. 22. Likewise I am in a markup in another
committee, but I wanted to note their bravery through the
anthrax attacks and their efforts to get the job done in rural
areas and all across our country, and my support for working
with you in this hearing and for more solutions to make the
Postal Service more efficient and to be supportive of the
workers and their important contribution to our country.
Thank you.
Mr. Lynch. Thank you.
The committee will now hear testimony from today's
witnesses. It is the committee policy that all witnesses are
sworn in. I invite Mr. Potter to please rise and raise your
right hand.
[Witness sworn.]
Mr. Lynch. Let the record show that the witness has
responded in the affirmative.
Welcome, Mr. Potter. Mr. John E. Potter, Postmaster General
and CEO of the U.S. Postal Service was named 72nd Postmaster
General of the United States of America on June 1, 2001. He
currently sits on the Postal Service Board of Governors and is
vice chairman of the International Post Corp., an association
of 23 national posts in Europe, North America and the Asian
Pacific.
Welcome, Mr. Potter.
STATEMENT OF JOHN E. POTTER, POSTMASTER GENERAL AND CEO, U.S.
POSTAL SERVICE
Mr. Potter. Thank you, Mr. Chairman, and good morning,
Congressman Chaffetz and members of the committee.
It is an honor to be here representing the hard-working men
and women of the U.S. Postal Service to discuss the financial
challenges facing our great institution. We are working hard to
serve America and we are proud of our accomplishments.
For example, in 2008, service and customer satisfaction
reached record levels. Employee satisfaction hit an all-time
high, as workplace accidents were at an all-time low. For the
5th straight year, the Postal Service was rated the most
trusted Federal agency and 1 of the 10 most trusted
organizations in America. We reduced our costs by over $2
billion.
Let me assure you that we are concerned about the future
and we are investing in the future. We are modernizing our Web
site, adding new automated equipment, introducing next
generation bar codes to improve efficiency. And we are using
the pricing flexibility from the Postal Act of 2006 to grow
mail volume.
But despite these positive efforts, a diversion of mail to
electronic communications and a severe contraction of the
economy have left the Postal Service in a very precarious
position. Over the years, first class mail volume has declined
due to the diversion to the Internet. This has been somewhat
offset by the growth in advertising and other mail. However, ad
mail produces less revenue per piece than first class mail.
This, combined with a growing number of delivery addresses, has
caused our entire organization to focus on productivity to
close the revenue gap. We have taken billions in dollars of
costs out of our base and we have done that for the past 8
years.
None of us, though, anticipated the dramatic downturn in
the economy. By the end of this fiscal year, mail volume is
projected to fall by more than 30 billion pieces from 2007
levels, the equivalent of $12 billion of lost revenue. Our
people have responded heroically. We are working together with
our unions and management associations. We plan to reduce costs
by $5.9 billion this year alone.
To make this happen, we have instituted a nationwide hiring
freeze. We are consolidating operations, using fewer machines
on fewer work shifts and fewer facilities with fewer mail
carriers. We are eliminating thousands of administrative and
supervisor positions and we are offering voluntary early
retirement to 150,000 employees.
Despite these unprecedented efforts and based on current
volume projections, we will come up approximately $6 billion
short of breaking even this year. Even with a cash carryover of
$1.4 billion, and an ability to borrow $3 billion from the
Treasury, we will still run out of cash with approximately $1.6
billion in obligations that we cannot meet this year.
I know that the House cares very much about the Postal
Service. That is why I am urgently requesting that you enact
H.R. 22, introduced by Representatives John McHugh and Danny
Davis of this subcommittee, and co-sponsored by over 200
Members of Congress.
H.R. 22 would permit the Postal Service to pay its share of
health benefit costs for current retirees from our retiree
health benefit trust fund, which today has a balance of $32
billion. The Postal Service contributes more than $5 billion to
that fund each year. H.R. 22 addresses our critical cash-flow.
But we also need to be prudent and look ahead. Mail has
helped build this great Nation, but even with the decline in
mail volume, we remain a conduit for a trillion dollars in
commerce. And a strong Postal Service, we cannot put our Postal
Service at risk. But our law limits our ability to act and
adjust to changes in mail use when it comes to pricing,
delivery frequency, the number of post offices and the types of
products we can offer. These restrictions will put our post at
risk if we don't step up and change them.
The time for change is now. That is why I am engaging all
our stakeholders, consumers, mailers, industry and employee
groups, the Congress, the PRC and others, in a dialog about how
we can keep the Postal Service strong. It will require
structural changes to match our service levels with the
changing demand. The demand for mail delivery reached a peak of
5.9 pieces of mail delivered to each address in 2000. Today we
are delivering 4.7 pieces of mail.
Given this trend, I believe the Postal Service Board of
Governors needs the flexibility to change delivery frequency
from 6 to 5 days. This would help us reconfigure our operation
in line with today's demand, keeping rates affordable. We
cannot lose sight of the fact that our customers pay the costs
of our services. We are not funded by congressional
appropriations. We have to find the right balance between
service and affordability and we have to do all we can to avoid
having the burden of long-term retiree costs fall on taxpayers.
By taking the necessary actions today, I believe we can
accomplish both. There is a path to success. I remain bullish
on the mail. I am convinced that mail volume will grow as the
economy grows. The mail is important to America. I am convinced
it is a key to helping the economy grow. A viable Postal
Service requires change. We are pushing the boundaries of
change within the Postal Service and with your support, we can
modify the law to assure a strong and bright future.
Thank you, Mr. Chairman. That concludes my remarks.
[The prepared statement of Mr. Potter follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Lynch. Thank you, Mr. Potter.
Let me begin the questioning. Before I do, we have invited
Members to submit their questions in writing, for those who are
unable to attend. I would like to enter into the record the
questions for the record on behalf of Representative Jose
Serrano before this committee. With unanimous consent, I will
enter those into the record.
[The information referred to follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Lynch. Mr. Potter, let me get right to one issue that
is probably uncomfortable for you and for myself as well, and
that is the matter of your salary and compensation, let me
broaden that out. There have been some reports in the press
that when you dig into the facts, that there is not necessarily
reflective of an accurate assessment of your compensation. But
we in our districts, myself with a heavy postal population in
my district, have been confronted with this, well, I will tell
you exactly.
I was at the Stop and Shop the other night and an older
gentleman, a retiree of the Post Office, confronted me, as my
constituents are sometimes known to do, and said, let me get
this straight, Congressman. You paid CEO Potter $800,000 to
lose $3 billion last year. Couldn't we get somebody to do that
job for less? That was basically how they laid it on me.
I tried to explain our position and yours, but I want to
give you a full opportunity to do that. Given today's
environment, and I am sure you are aware of the whole situation
with AIG and bonuses and going to Merrill Lynch. In this
environment, in these difficult financial times, can we
justify, can the Postal Service justify your compensation
package, which I would like you to clarify? I am sure it has
been exaggerated, I have already looked at the numbers here.
But I want you to basically tell us what your compensation
package represents and how it is broken down. I want you to
inform the committee of at least your side of the story.
Mr. Potter. Thank you, Mr. Chairman.
First, let me talk about elements of this $800,000 plus
number. The first element that I believe probably shouldn't be
there in terms of compensation is the fact that I have a
security detail, which is attributed as a revenue to me, or a
pay to me, of some $66,000. That service is performed by the
U.S. Postal Inspection Service. So that is an element of my
pay.
My base pay as prescribed by law is up to 120 percent of
the Vice President's salary. Prior to the Postal Accountability
and Enhancement Act, it was much less.
Mr. Lynch. Postmaster General, is there an historic reason
why your pay was tied to the Vice President of the United
States. I don't see any similarity in responsibilities. Not to
reflect poorly on either one of you.
Mr. Potter. I am just describing what it is. The rationale
was the Congress's, not mine. I was not imploring people for a
pay raise. The Board of Governors had asked the Congress for
additional flexibility to hire and retain talent in the Postal
Service. So again, by law my pay is $263,575.
Since, and as a result of me being a career employee at my
age, every year that I stay I get 2 percent additional credit
in the Civil Service Retirement System.
Mr. Lynch. How long have you been in that system?
Mr. Potter. I have been in that system since 1978. So
almost 31 years. So each year that I stay, I get an extra 2
percent in my pay. In addition to that, since I am not 55 yet,
every year I stay that is 2 percent of a penalty that would
incur if I were to leave early. So automatically every year
that I stay, there is a 4 percent growth in terms of my
pension.
And the other thing that drives the pension is a 3-year
high for employees. They take an average of your top 3 years'
pay. And since I got such a steep increase in pay as a result
of the law, it produces in terms of pension over the course of
my life a value of some $300,000 plus.
Mr. Lynch. I only have about 30 seconds left, and I have to
hold myself to the same rule. The bonus. You have a statute
that I reviewed that says your pay is basically equal to, your
salary is equal to the Vice President's, $263,000 or something
like that, and then I see you get $130,000 something in a
bonus. Quite frankly, last year, the Post Office lost $3
billion.
Mr. Potter. That was an incentive payment. It was tied to
goals agreed to between myself and the Board of Governors. The
things that drove the incentive pay were service performance
was a major element. And obviously we set record levels.
Employee satisfaction, accidents at record low, employee
satisfaction at record high, customer satisfaction at record
levels. And I think there was a recognition by the Board of
Governors that I wasn't in control of the economy and that we
did eliminate 50 million work hours.
Mr. Lynch. All right. I am going hold myself to the same
rule and I am going to yield and recognize the ranking member,
Mr. Chaffetz, for 5 minutes for questioning.
Mr. Chaffetz. Thank you, Mr. Chairman, and thank you, Mr.
Potter, for being here. My congratulations and hats off to the
entire postal community for the great savings and efficiency
that were accomplished under your watch and with the great work
of literally thousands and thousand of others. So
congratulations for that.
Obviously this Committee is Oversight and Government
Reform. While we need to talk about some of the huge massive
changes that need to happen in order to put the Postal Service
back into the black, I do feel compelled to ask you about a
report that was brought to my attention just a very short time
ago. I need to ask you about this. On March 19, 2009, there was
a report done by the Republican committee here that said,
Friends of Angelo is the name of this report, ``Friends of
Angelo, Countrywide's Systemic and Successful Effort to Buy
Influence and Block Reform.'' On page 38, paragraph 3 it says,
``Fees were also waived for Postmaster General John Potter.
Potter benefited from an encounter with Mozilo in 2003. Potter
was in the process of arranging a `complicated' bridge loan
when he `coincidentally' ran into Mozilo. Mozilo instructed
Countrywide's Kay Gerfen to `let Potter know that we/CW,' which
I take to be Countrywide, `will take care of it.' Mozilo
instructed Perry to `take one point off' Potter's rate and to
charge `no extra fees.' Potter was referred to Mozilo and/or
the VIP program by former Fannie Mae Chief Executive Jim
Johnson.''
In an email that was written on May 21, 2003, sent by Kay
Gerfen of Countrywide, it says ``Coincidentally, Angelo just
into Mr. Jack Potter (Postmaster General) and Mr. Potter will
be calling on Friday. Angelo wanted to make sure you were given
a heads-up to `let Mr. Potter know we/CW will take care of it.'
Also per Angelo, `take one point and no extra fees, deal a
little complicated, bridge loan . . .' Please let Angelo know
as soon as you hear from Mr. Potter. Thank you.''
In light of this, I need to ask if you knew about this, did
you accept the loan and do you feel like you were given favor
by Countrywide through this encounter?
Mr. Potter. First, I do have a loan from Countrywide. I
believe that the terms of my loan were the result of a good
credit history and of my financial position and the fact that I
was buying and purchasing a home and putting over half of the
money down in cash. And the discussions were strictly between
myself and Countrywide, they were all about the loan. There was
no linkage to any expectations of official acts or anything to
do with a relationship with any elected officials.
Mr. Chaffetz. My understanding is the Inspector General has
started an investigation. Are you willing to cooperate with the
investigation as completely as possible by turning over all
documents, consent to an interview or deposition with the
Inspector General's investigators, and are you willing to help
and assist with making other people with knowledge of the terms
of the loan available to the Inspector General's office?
Mr. Potter. Yes.
Mr. Chaffetz. How much did you save by taking a discounted
loan?
Mr. Potter. Again, I think the terms of my loan were
consistent with my credit history.
Mr. Chaffetz. What was the nature of your actually coming
in contact, in fact, you were referred to Countrywide's VIP
program by former Fannie Mae CEO Jim Johnson, correct? How did
that come about?
Mr. Potter. Well, at the time, Jim Johnson was the co-chair
of the President's Commission on the U.S. Postal Service. So
Jim Johnson was working with us as chairman of that committee
during that period of time.
Mr. Chaffetz. And did Johnson indicate to you that you
should expected preferential treatment and discounts from
Countrywide?
Mr. Potter. No. Johnson indicated to me that because I had,
he and I had a discussion, he had overheard me having a
discussion with somebody and he basically came up to me and
said, congratulations, you are buying a house. I had told him
at the time of the discussion that I hadn't closed yet, that I
had made an offer. He told me that, we had a long discussion
about how long I was going to work as Postmaster General, how
long I anticipated being in the home. He suggested to me that I
consider a 7/23 loan. He also suggested to me that I consider
using Countrywide, which is a group that provided him with a
loan.
Mr. Chaffetz. And you will cooperate fully, then, with the
Inspector General's investigation?
Mr. Potter. Yes.
Mr. Chaffetz. Thanks, Mr. Chairman.
Mr. Lynch. The Chair now recognizes the gentleman from
Illinois, Mr. Davis, for 5 minutes.
Mr. Davis. Thank you very much, Mr. Chairman.
While I appreciate your purchasing a new house, let me try
to get down to the Post Office and what we might be able to do
about it. We know that we have serious problems. And we have
gone over and over those. I appreciate the cost cutting
approaches that you have developed within the system. I
appreciate the proposals that have been made. I appreciate the
approaches to streamlining the operations.
Of course, I still get people who complain that they don't
get what they would hope that they could get, which leads me to
the point of recognizing that whatever it is that we get, we
have to pay for it one way or another. I am reminded of
Frederick Douglass, who said he knew one thing if he didn't
know anything else, and that is that in this world, we may not
get everything that we pay for, but we most certainly will pay
for everything that we get.
I am trying to, some of us believe that H.R. 22 is one way
of effectuating some short-term fix for some of the problems
that currently exist. Let's say if we for some reason were not
as successful in passing this legislation, within the next 2
years what would you predict the Postal Service would be forced
into or would have to do to try and make ends meet?
Mr. Potter. Congressman, that is a very difficult question.
The key for us right now is volume. I believe that we have to
pull out all the stops when it comes to growing volume. I think
that we have lost, for example, 20 percent of our advertising
now in each of the last 2 months. I believe that is going to
come back, because if you look at advertising in general, it is
down.
So what we need to do is we need to get past this downturn
in the economy, we need to understand how much of mail volume
will come back. There is no doubt that some of the mail lost
will not come back. We will have to step up our efforts to save
money. We plan to save $5.9 billion this year. We have a plan
to save another almost $4 billion next year. The reason that we
can't do it all at once is because of the fact that it does
take time to make adjustments in staffing.
I do think that we face, the most critical thing we face
this year is we are going to run out of money. So we are going
to have to decide which bill not to pay. I intend to pay the
salaries of our employees. We may have to forego paying the
Treasury part of what we owe for the retiree health benefit
trust fund. We would then be faced with, again, the thing that
we have put on the table is the notion that we can only cost
cut but so much. Moving from 6-day to 5-day delivery is because
our costs are, there is a variability in costs that we can
manage. Fixed costs we cannot.
So this year we have volume that is down some 12 percent
year to date. We have taken out 15 percent in our mail
processing costs because of the variability in that operation.
We have taken out 12 percent in our post office costs to match
the decline in volume. But we cannot and have not been able to
take it out of delivery costs. Because if you have the cost of
going to every door every day, it is in a sense fixed. The only
variable is how much time the carrier spends casing mail.
So that is the dilemma. And that is why we proposed and
think we need to explore how do you take and make structural
changes that will have minimal impact on the American public
and the users of the mail but at the same time, enable us to
lower our costs.
Mr. Davis. Let me just say that I appreciate your optimism,
relative to the ability to grow volume. I just don't see how
you are going to be able to do it. As a matter of fact, we are
increasing the use of electronic communication as opposed to
decreasing it. I wish you well.
Mr. Lynch. I am sorry, the gentleman's time is expired.
The Chair now recognizes the gentleman from Indiana, Mr.
Souder, for 5 minutes.
Mr. Souder. Thank you, Mr. Chairman.
Let me first ask a quick question on the, separate from the
structural problems, isn't it, as far as the deficit that you
are running in the relationship to income and so one, hasn't it
always been true in the Post Office that the money is made
right after a postal rate increase and you show profits and
then toward the point where you are going to do a next postal
rate increase you tend to show losses? Isn't that the historic
pattern?
Mr. Potter. That was the historic pattern. It was addressed
in the Postal Act of 2006. The change that was made was we went
to annual price increases, smaller annual price increases
versus we were on a 3-year cycle of very large increases. So
the law addressed that. A lot of customers are very concerned
about what you just described, the fact that we had these peaks
and valleys and there was major impact on the use of the mail
in a year when we had double-digit price increases.
Mr. Souder. So, you are saying that the loss that you
currently have is predominantly somewhat structural, but also
the reason it is more severe is because you couldn't annually
adjust because business dropped so fast?
Mr. Potter. Well, exactly. And if you think about us as a
service institution, versus manufacturing, in manufacturing,
when demand goes down, what you end up with is a lot more
inventory, a lot of cars in lots that were produced in the same
productivity. In the service sector, you can't adjust service
because the demand changes on any given day. And so we have
been trying to chase the decline and demand and adjust service
to those lower levels of demand. And so it created a gap. It is
a productivity gap. We are constantly trying to bring that in
line.
Where we have not been able to do it, as I said, is
delivery.
Mr. Souder. I just wanted to make sure that the record
understands that the correlation between income and loss is not
exactly the same as it is in the financial institutions or in
others because of what you just described, which is somewhat of
a change. Right?
But there is a structural problem that Mr. Davis just
referred to, and that is the whole change in the way people
communicate and so on. I have two specific things I want to
quickly run by you. One, probably the most, other than limiting
a day of delivery, closing smaller post offices. It seems to
me, which is also a jobs question, window access, but also a
prestige question, coming from a small town myself. It seems to
me, in the age of computer technology, as we look at the
centers like in Fort Wayne, IN, where I am from, they are very
automated, that we ought to be able to program to keep people's
identity. Small towns are losing their schools, they are losing
everything else. And this is just unbelievably political
pressure, at least for the identity of smaller communities who
get absorbed. I just would like your comment on that.
The second question is that as we watch daily newspapers
collapse at an amazing rate right now, and as a former retailer
myself, if you pull Saturday delivery and we lose daily
newspapers, for example, R.R. Donnelly has a huge facility in
my district. How do they get things to people in a timely
fashion when weekends are the biggest sales period? It seems to
me that as you structurally look at this, somehow merging some
delivery systems, communications systems, if that means you
have to deliver in the morning rather than later in the day, do
newspapers have to adjust from a Sunday to a Saturday? Habits
are nice and patterns are nice, but the technology is changing
so much we could watch you getting hammered and restricted
tremendously at the same time newspapers are going out. How we
communicate and keep our structure moving is how we move goods
in the United States.
Mr. Potter. First let me address the question of community.
Our systems, our zip code based code systems are strictly
geography based. It is usually a five-digit zip code, geography
based. But we have changed our systems to allow numerous names
for cities, towns or geography within zip codes. So there is
flexibility within our system to allow that. It is more rigid
when it comes to zip codes, because of, we don't have an
infinite amount of zip codes. We have to be careful when it
comes to that.
Mr. Souder. Seven-digit wouldn't allow you to expand that?
Mr. Potter. Well, there is the discussion. Right now we
have nine-digit zip codes.
Mr. Souder. That is what I was thinking about.
Mr. Potter. We could literally carve pieces of that out. As
a result of that, we have enabled communities to use their
community name as an alternate to what might be the name of the
formal town. So we allow multiple names within a geographic
area. But there are segments of the country where we are out of
zip codes.
Now, regarding delivery, as I said earlier, we are reaching
out to everybody, all the stakeholders. It is not a fact that
we would eliminate Saturday. But we do need to have
flexibility.
Mr. Lynch. The gentleman's time is expired. The Chair
recognizes the gentleman from Maryland, Mr. Cummings, for 5
minutes.
Mr. Cummings. Thank you very much, Mr. Chairman.
Mr. Potter, we recognized that there were certain delivery
routes, such as those in more rural areas, we realize those
apparently had to be contracted out. We are concerned with the
more widespread implementation of that practice. Has the Postal
Service expanded its contracting out of letter carriers, and if
so, can you prove that it has resulted in cost savings?
Mr. Potter. Congressman, we can prove that contracting out
of delivery is less expensive than using Postal employees. We
do have and have stopped contracting out delivery in city areas
and in most rural areas. The reason is not because it is less
expensive, but because of this downturn in the economy and the
lack of volume. The bottom line is, right now we are in a
position where we have too many folks.
Mr. Cummings. In other words, you had too many folks that
you were contracting out to?
Mr. Potter. No, we have too many Postal employees. So
today, we still have, despite the fact that we have a downturn
in the economy, we have a growth of about a million addresses a
year, over a million addresses a year. Those new addresses are
largely being delivered to by career employees. We have an
excess number of employees that we are downsizing. So it would
make no sense in this time to begin contract out or expand
contracting out.
Mr. Cummings. Talk to me about this whole doing away of, we
have talked about this before, doing away with delivering on
Saturday. Is that something that is real? I have heard it
before. Then it seems like everybody gets upset, and then you
are going to hear about it for a while. Talk to me about that.
I know before the Senate you again advocated for that change.
To be frank with you, and you know this, the public wants
Saturday delivery, and what can we do to maintain it?
Mr. Potter. First of all, let me assure you that being a
career employee and coming from a Postal family, I did not make
that request lightly. I took it very seriously. I am very
concerned about the future health of the Postal Service. We are
working very hard with our unions and management associations
to try and streamline our operations. The real key here going
forward is, do we have enough source of revenue to support the
post. And we are looking at all options. We have been looking
around the world to see how they are doing it.
Some places, posts are banks, and that is how posts are
earning money to help pay for the services that are provided in
terms of hard copy delivery. But we are precluded by law from
exploring other forms of revenue. So I think if we put
everything on the table, everything there is, including product
choices, how we run our plants, that we might find a way to get
there.
But the key, the overall key is that there is a decline in
mail volume. If that continues, whether it is next year or 5
years from now, we are going to have to face the need to
structurally change something. And the most obvious place,
unfortunately, is in delivery.
Mr. Cummings. What have you done to try to increase
revenue? Anything?
Mr. Potter. We have a number of things. One is, we have
offered rates, and we have opened up our system to others to
use our system for delivery. So our biggest, believe it or not,
package customers are UPS and FedEx. Basically we will give
them access to our system. We have click and ship, where people
can get online at home, pay for postage, print out a label, put
it on their package, we pick it up. We are offering pickup now
service with FedEx, we have an experiment to do that.
In the ad category, ad mail area, we are offering and
working with customers to come up with new pricing schemes to
incent volume growth. Bottom line is we are making our products
much more effective than they have been. We are adding a bar
code, we are introducing a new bar code on mail.
Mr. Cummings. Let me ask you this last question, because I
want to obey the chairman's orders. This H.R. 22, do you
consider that to be a solution? Is it a long-term solution? And
what do you like so much about it?
Mr. Potter. It is a short-term solution.
Mr. Cummings. H.R. 22?
Mr. Potter. H.R. 22. It is a short-term solution for us. It
won't overcome the longer term issue that I just described. I
like the fact that it is an 8-year bill and that we can plan
for 8 years what our costs are going to be for retiree health
benefits.
Mr. Cummings. Thank you, Mr. Chairman.
Mr. Lynch. The Chair recognizes the gentlelady from the
District of Columbia, Ms. Norton, for 5 minutes.
Ms. Norton. Thank you, Mr. Chairman.
Mr. Potter, the GAO, and I am going to read to you what it
said, noted that you had made, you and the Postal Service had
made unprecedented cost cuts over the years. But then it went
on to say, given the growing gap between revenues and expenses,
the USPS's business model and its ability to remain self-
financing may be in jeopardy. I want to ask you now rather than
later, because this creeping problem could creep the Postal
Service out of existence, do you believe that the Postal
Service should totally rethink its business model? Have you
given any thought to that and the form it would take? And do
you believe the Postal Service can sustain itself as a self-
financing entity as the 1970 statute made the Service?
Mr. Potter. Congresswoman, I believe that we can do that,
that we can be a self-sustaining organization for a long time
to come.
Ms. Norton. On the present business model?
Mr. Potter. Not on the present business model. I believe
that we are going to have to make changes, whether that is the
frequency of delivery, whether that is the type of products
that we can offer. I think that everything has to be on the
table, including the mix of our work force. We are not in a
position today looking forward where we can sit still. The
sooner we act, the better off we will be and the more viable we
will be.
The biggest trap I think we have is that we don't act
quickly enough and we create a financial burden----
Ms. Norton. If I might ask, Mr. Potter, that is my problem
about quickly enough. So you suggested we may have to go from 6
days to 5 days. It sounds like an incremental approach rather
than a business model approach. If one looked at the entire
business model, it might be that you came out not with, for
example, going from 6 to 5 days. Who knows. But if everything
is on the table, my question is, is it on the table, who is
doing the rethinking of the business model? When can this
subcommittee expect to get some evidence of thinking on a new
business model?
Mr. Potter. If that is an invitation we will gladly fill
it.
Ms. Norton. If not you, you surely wouldn't want people who
are not ensconced in the business of the Postal Service like
ourselves to be the first to come forward and take a hack at
it. I use the word hack very advisedly. Because the moment
anything gets cut, every Member of Congress, including those
who most don't want to spend money on anything, will say, you
sure can't do that in my community.
I looked at your press release. I asked you about 6 to 5
days, because again, that seems to me to be more of the same.
Thinking it through in that way it seems to me dismembers parts
of the body piece by piece rather than looking at the body and
its core and seeing what can be left standing. In your press
release of March 20th, you talk about aggressive steps to cut
costs. You talked about offering another round of early
retirement.
And then you spoke about positions that you expect to save
funds from. Now, staff positions at the district level
nationwide, 1,400 processing supervisor and management
positions. Are these positions, are these layoffs? Will layoffs
occur? Have they occurred?
Mr. Potter. There will be a reduction in force, according
to OPM.
Ms. Norton. So there will be layoffs?
Mr. Potter. At the end, there could be. But we hope to be
able to offer everyone a job.
Ms. Norton. Let me ask you about early retirement. Have
Postal employees been quick to take early retirement when they
see the condition of the Postal Service?
Mr. Potter. We have had, I believe, some 9,000 people take
advantage of the early retirement.
Ms. Norton. How many were offered or expected to take early
retirement?
Mr. Potter. That was a little bit above what was expected.
It was well over 100,000 people who were offered.
Ms. Norton. It does seem to me if one is talking about big
reductions that could come given the business model, let me
just ask you, is there another round of early retirement that
might be offered? If so, what kind of cost does that entail
relative to keeping these people onboard?
Mr. Potter. We have just opened up voluntary early
retirement to all Postal employees through the end of this
year. So when people are being told that their positions are
eliminated, they have an opportunity to either seek a different
position and/or they have the option of retiring if they are
eligible.
Ms. Norton. I think that is a very important thing you are
doing in that way. I do think people know how to take care of
themselves and they can see the business model just like we can
and they know that you have been trying. If it is not done one
way, it may do another way that really hurts the Postal
Service. We have to keep as many people employed as we must
have in order to deliver the mail.
Thank you, Mr. Chairman.
Mr. Lynch. Thank you.
The Chair now recognizes the gentleman from Missouri, Mr.
Clay, for 5 minutes.
Mr. Clay. Thank you, Mr. Chairman, and thank you for
conducting this hearing.
Mr. Potter, thank you for being here today. I understand
that you are looking at a huge deficit within the Postal
Service in the coming years. I understand the proposal to
reduce service from 6 days to 5. What would be the savings to
go from 6 days to 5? How much would that save?
Mr. Potter. $3.5 billion.
Mr. Clay. Annually?
Mr. Potter. Annually.
Mr. Clay. Annually. Is that right? OK.
How have your, in industries like the auto industry, labor
and management have found a new-found friendship or
relationship. How is that relationship with the management and
labor in the Postal Service? Does everybody, has everyone come
to the table and said, OK, we know we are going to have to do
some belt-tightening? Is that a pretty healthy relationship?
Mr. Potter. I have always had a healthy relationship with
our unions and management associations. We have been meeting on
a regular basis now that we face this crisis. Everything is
being discussed. It is on the table. We have made a number of
changes. Probably the most prominent example is in delivery. We
worked with the NALC to expedite changes in routes with the
rural carriers. We have a count that is going on right now.
We have talked, at our last meeting, which was last Friday,
we had a discussion and we were talking about enabling people
to move from job to job more easily, because we have some
pockets of need and some places were over-staffed. So we are
working through to try and get at both efficiency as well as
making sure we are accommodating employees.
Mr. Clay. So the labor community understands what the
Postal Service is confronted with and they are willing to work
with you?
Mr. Potter. Without a doubt.
Mr. Clay. Wonderful. Are there any advances in technology
on the horizon for the Postal Service to help reduce costs, and
are there any new ideas to grow the business?
Mr. Potter. We are deploying, as we speak, the next
generation of flat-sorting equipment, which will enable us to
put mail into walk sequence, flat mail, catalogs, magazines and
over-sized envelopes into walk sequence for delivery. That will
make that operation much more efficient. We are also
introducing a next generation of bar code, which will enable us
to actually count mail as it is sorted as opposed to accepting
it. And again, it eliminates some steps and makes the mail more
efficient for us to handle. And it will be more transparent to
customers, so they will have a window into how we are
processing the mail.
So there are a lot of innovations in terms of, that are on
the table that are being implemented to get the Postal Service
into the 21st century.
Mr. Clay. Let me hear what you, if you could, is your wish
list for a long-term fix to the retiree health benefit? What
would that be?
Mr. Potter. Well, if it was my wish list, I would like to
just revisit this whole notion of the pace at which we pay into
the retiree health benefit trust fund. There is no other
organization I am aware of in America that has the requirement
that we have. If we were under GAAP principles we would not be
paying into this trust fund.
I understand the need to do it. But at a time when we are
financially strapped, if this was the private sector, we would
not make that contribution this year, we would pass on it. The
payments that we are making on that fund are not tied into an
actuarial kind of analysis. It was really kind of a holdover
from payments that we were making into the Civil Service
Retirement Fund.
So I would much prefer, I love H.R. 22, and I want it to
pass. But if you had to step back, I think we should re-think
the way we are paying into this and there would be more of a
benefit for the Postal Service in the short run if we did.
Mr. Clay. And your costs are higher than other Federal
employees, about 10 percent higher?
Mr. Potter. No, they are about the same, but we are the
only ones that have that pre-funding mechanism.
Mr. Clay. I see. Now, just as an informal survey that I
conducted among Postal Service employees, they indicate to me
that they would prefer to have the day that you eliminate the
service would be Saturday and not Monday. I have to share that
with you.
Mr. Potter. I like my weekends off, too. [Laughter.]
Mr. Clay. Thank you, Mr. Chairman.
Mr. Lynch. I thank the gentleman.
Mr. Potter, because of the interest in all of the issues
here, we are going to ask you to stay for one more round of
questioning. Let me begin that by asking you, we are hearing
your plan, which is, we are going to slash service possibly
from 6 to 5 days at a significant burden to the customer. We
are going to close post offices, we have already closed six
administrative facilities. We are going to get rid of 150,000
employees. And then after all that, you are projecting we are
going to lose $6 billion.
If that is the future here, if that is the future next
year, do you think you deserve a bonus for that performance?
Mr. Potter. My incentive is based on performance parameters
that are agreed to with the Board of Governors at the beginning
of the year. Based on where I stand year to date in terms of
our financial position, I would not get a performance bonus
this year or incentive payment this year.
Mr. Lynch. OK.
Mr. Potter. And I am working very hard, because I would
just like to mention that all of our administrative employees,
our managers, our supervisors, are tied into a national
performance assessment program. Their pay, whether they get a
raise or any kind of an incentive pay in any year is tied to
the bottom line of the Postal Service. So I don't want to be
cavalier about this, it is extremely important that we work
hard to do well so that not that I can earn a performance
incentive, but that those folks on the front line actually get
a pay increase. I think that is a great motivating tool for our
institution.
Mr. Lynch. I understand. Just wanted to be clear on that.
Mr. Potter. Thank you.
Mr. Lynch. H.R. 22, I mean, the fact that it is sponsored
by Mr. Davis of Illinois and Mr. McHugh of New York, two guys
who I admire greatly and respect their opinion, I am inclined
to be receptive of that. But I also looked at numbers that said
if we do that, if we pay the premiums out of the trust fund
rather than putting $5 billion a year into the trust fund, that
down the line, not very long, 2017, we end up with $75 billion
in unfunded liability for health benefits for my postal
employees. I don't want to face that.
So are we on the same impression, that is what is going to
happen under this scenario?
Mr. Potter. H.R. 22 will have us continue to pay $5.4
billion to $5.4 billion into the trust fund each of the next 8
years. It relieves us of the burden of paying for retiree
health benefits directly in each of those 8 years. The moneys
come out of the trust fund. The trust fund will grow in each of
those years.
After that point in time, there will be a determination
around the requirements, the future requirements of the fund
are. And those costs will be amortized, I believe, over a 40-
year period of time. So I believe that the mechanism that is
laid out in the current law and the proposal that is put forth
by H.R. 22 has the double benefit of protecting our people as
well as giving us short-term relief.
Mr. Lynch. All right. Let me just say for the record, I am
not there yet. I am open to it. I have seen some numbers that
concern me about what is going to happen to my postal employees
in 2017. And I don't want to be holding the bag to the tune of
$75 billion for the health benefits stone cold, in 2017,
looking at that problem.
Mr. Potter. I would appreciate the opportunity to come back
and talk about that.
Mr. Lynch. Let's do that. The last thing is, I do have some
familiarity with the Postal Service. I recognize that in your
last early retirement incentive, it had no incentive, it was
just an early out, voluntary early retirement. And you are
looking to get rid of 150,000 people. That is not going to
happen if you have the same plan you had the last time. You
almost added employees in your early retirement program with no
incentive.
Is there going to be any incentive for--look a the economy.
Look at the economy. Do you think people are going to go out
the door when everything is so precarious? I am just wondering,
are you going to offer any type of incentive to any of these
employees? I realize you have some employees who would not be
eligible because of the importance of their positions. But will
there be any attempt to offer any incentive to get people out
the door?
Mr. Potter. It is under consideration. But we have over
120,000 people who are currently eligible to retire. We also
have 150,000 who will be offered voluntary early retirement.
When we say that we are going to reduce 150,000 people, it is
the equivalent of 150,000 people. That includes overtime. We
have employees, non-career employees who we can let go. Today,
as we speak, we are 30,000 fewer career employees than we were
this time last year, 10,000 non-career. So we have the
flexibility to do that. We have the flexibility to take our
part-time flexible employees and only work them 4 hours every 2
weeks.
Believe me, there is enough flexibility in our system to
accomplish what you describe. But that is not to say that every
option isn't on the table and we wouldn't consider bonuses,
incentives to go some time in the future. But we don't know
that today.
Mr. Lynch. OK, I am violating my own rule. The Chair
recognizes the gentleman, Mr. Chaffetz, for 5 minutes.
Mr. Chaffetz. Thank you, Mr. Chairman.
A few years ago, the President's Commission on the U.S.
Postal Service made a number of recommendations. One of those
recommendations was to a postal network optimization
commission, somewhat similar to a sort of a BRAC commission
that was done on military bases. Is this something you are
supportive of, something you want to see done? Why wasn't it
done? With 34,000 postal facilities, is this something we
should be doing and where is it on your list of priorities?
Mr. Potter. The BRAC commission concept, as I understood it
back then, was focused on our mail processing plant network.
And it also probably could apply to our post office network.
The thing that makes us a little different than the
approach in the BRAC Commission is that we have to serve every
community in America. So we have to be in every location. Our
plants have to be within a reasonable reach of each of our post
offices. So there is, by its very nature, a network that
exists. And it doesn't lend itself, in my opinion at the time,
did not lend itself to some analysis at a national level.
So in effect, you could have it at the State and local
level with State and local politicians. But not necessarily
something that really made sense to me at the time.
Mr. Chaffetz. So do you think we are at the optimal level
now or do you see----
Mr. Potter. I think we are going to continue to evolve. I
think there are a number of discussions that were talked about
here today when it comes to the future of delivery. Well, to
me, delivery is tied to demand. So if the demand today means
that we go to every house 6 days a week, fine. Or if it is
lowered, it goes to 5, at some point it might go to 3. I do
think we need to evolve. I think our plant network has evolved
and will continue to evolve. And we do and have been
consolidating operations.
I am open to, if it is a BRAC commission or some other
group coming in, taking a look at the data and making
recommendations. We would look at them.
Mr. Chaffetz. So you are not doing anything internally
right now to look at the consolidation?
Mr. Potter. We are constantly looking at that.
Mr. Chaffetz. Constantly looking at that?
Mr. Potter. Constantly looking at that. We are constantly
closing facilities. As I said earlier, we are consolidating,
moving mail from one facility to another facility where it
makes sense. For example, less mail is put into mail boxes
every day. So we have fewer facilities today that cancel mail
and sort mail for the world than we did 10 years ago.
Mr. Chaffetz. Time is short here. You mentioned there are
150,000 employees nationwide that were given the opportunity to
take early retirement. How many do you expect would actually
take advantage of that opportunity?
Mr. Potter. I would expect maybe in the neighborhood of
10,000 to 15,000.
Mr. Chaffetz. 10,000 to 15,000.
Mr. Potter. But you also have 120,000 people who are
eligible to retire and who will retire over time.
Mr. Chaffetz. Are you suggesting, are you taking a firm
commitment to say, we are making a recommendation to move to 5-
day service or are you just saying that is on the table at this
point?
Mr. Potter. What I am saying is that given what I know
today that we have to make a structural change. The one that
makes the most sense to me is to give the Board of Governors
the flexibility to move from 6-day to 5-day delivery. I think
that they will exercise their judgment on whether or not we
need to move to that in its entirety, whether we would do
that--as I said at the Senate, I had proposed to do that during
our light volume periods. And that is where this whole thing
began. One of the Senators asked me, does that mean that you
are only asking for the summer period? I said, no, we want to
have the flexibility given to the Board of Governors, people
who are Presidentially appointed, Senate-approved, to make that
change as necessary to assure the financial stability of the
Postal Service.
Mr. Chaffetz. Do you believe that will be a permanent
change?
Mr. Potter. I think once made it would be, yes.
Mr. Chaffetz. Thank you, Mr. Chairman.
Mr. Lynch. Thank you.
The Chair recognizes the gentleman from Illinois, Mr.
Davis, for 5 minutes.
Mr. Davis. Thank you, Mr. Chairman. I won't take 5 minutes,
because I don't believe that you can actually get blood out of
a turnip.
Mr. Potter. Am I a turnip? [Laughter.]
Mr. Davis. I think that you can slice it, you can dice it,
you can puree it, you can saute it, you can squeeze it and you
can tease it and you still end up with turnip juice.
But we were about to explore for a moment your optimism
relative to the ability to grow volume. And I was saying that
it was difficult for me to see any room or any possibility.
Mr. Potter. Let me just say that the Postal Service is in a
number of markets. One of the products that we have is an
advertising product. When I say grow, I am talking about
growing from where we are today. If 20 percent of advertising
mail went away, which it has, and by the way, it is reflective
of what is going on in the marketplace for advertising, if
people now want to make investments in advertising, I think
that mail is going to be a channel that they are going to
consider. Prior to this downturn in the economy, our market
share of advertising dollars, total advertising dollars that
was spent on mail, had been growing. Why? Because people were
looking to have the ability to target different customers. And
they wanted measurability. And mail is very measurable.
So my belief is that as the economy comes back, advertising
mail will grow again. Will it get back to the levels it was
before the economy went down? I hope so. But I know it is going
to grow beyond where it is today.
Likewise packages. Our package business is down. When I do
a comparison of where we are versus the competition and look at
the impact of the downturn in the economy on their revenues, we
are very comparable. I don't think there is anyone in this room
who doesn't think that as the economy comes back, our
competition's packages and their volume won't grow. So I have
faith that our market share will be maintained as volume grows.
The one area that we have a real problem is first class
mail. It is transactional in nature, it is bill presentment,
bill payment. Once someone goes online and begins to pay bills
online, they are not going to come back to the Postal Service,
because of the very nature of, once you have that happen, you
are not going to do it. So when I talk about growth, that is
what I am talking about, I am talking about those categories of
mail where we have a natural strength in the marketplace. I
believe that we will bounce back in those areas. Even first
class mail, we were declining in first class mail about 3 to 5
percent per year in terms of volume. But we are down over 10
percent. And I believe that the difference between 3 and 5 and
10 is largely driven by the economy. When the economy comes
back, we may seen an uptick in first class mail. So that is
what I am talking about, growth. And I am talking about
competing in certain sectors and growing our market share.
Mr. Cummings. Well, let me thank you very much, because I,
like Chairman Lynch, don't want to be left holding the bag in
2017, even if it is a mail bag. So I hope that we are indeed
able to make these ideas work. I thank you very much, Mr.
Potter, for your testimony.
Mr. Lynch. I thank the gentleman.
The Chair recognizes the gentleman from Maryland, Mr.
Cummings, for 5 minutes.
Mr. Cummings. I am sitting here, I am thinking, I am just
listening to you. And I am trying to make sure I am making
heads or tails of this. Let's go to your salary. I am not going
to beat you up on your salary, you don't have to worry about
that. But the 66, you are telling me that $66,000 of your, what
they say is your compensation, it is security, is that right?
Mr. Potter. Yes.
Mr. Cummings. What are they securing you from? Do they
worry about you? Is that mandated?
Mr. Potter. I can tell you when it started. It started when
we were, after we came under attack from anthrax. And I was
somewhere and my chief inspector got a call from someone and I
think it might have been the Secret Service.
Mr. Cummings. But certainly you don't pay taxes on that?
Mr. Potter. No, but it is considered, for some reason,
compensation.
Mr. Cummings. And give me the other pieces of your
compensation.
Mr. Potter. The other piece is the salary, and then the
other piece is I am a 31-year postal employee, and my 3-year
high is going up because I got a salary increase. That is
almost half of the money they are talking about, because they
are projecting at my age I will live to 80 something, and here
is how much money you will get over those years.
Mr. Cummings. Let me go back to this. When we look at all
the methods of communicating today, over the Internet and what
have you, clearly, and you testified to this, that has cut a
substantial amount of your business. Are we using, Mr. Potter,
are we taking full advantage of our advances in technology
within the Postal System? Are there things that we could do to
cut our costs further? That is No. 1.
And No. 2, when we look at the whole idea of this Saturday
service, and I can tell you, I would bet everything I have that
is not going to happen, this cutting the Saturday service. So
you might want to take that off the table.
But let me ask you this. Have we figured out which part of
that is, I mean, how do you figure out your savings? In other
words, is most of your savings from people actually going, our
delivery people delivering the mail? I am thinking if the
volume is still the same, I am trying to figure out, while they
may be delivering Monday through Friday, if the volume is still
the same, there is certain manpower that goes into preparing
the mail to be delivered. I am just trying to figure out, how
do you make that divide? What percentage? Do you follow my
question?
Mr. Potter. I understand exactly what you are saying.
Today, over 90 percent of the mail that a carrier brings on the
street, letter mail, is sorted by a machine into walk sequence.
So they don't come into the office any more and case every
letter. So we are down to the point where less than 2 hours of
a carrier's day is spent in the office preparing mail to go out
on the street. So that is the letter side.
We are automating the flat side. That is coming next. So
when you look at the savings associated with not delivering
mail on any day of the week, it is having over 200,000 people
leave an office and go out on the street, driving to their
delivery and then spending the day on their route.
We do recognize that some sorting that would have gone on
the morning of the day that we eliminate will have to move to
the next day. So we account for the fact that occurs. We also
account for the fact in our cost savings that rural carriers,
on the 6th day, the rural routes, excuse me, are covered by
rural carrier relief folks, who make less money than our career
people. So we recognize that the career people are the ones
working 5 days a week.
Now, part of what drives us is what does the American
public think. And there have been a number of surveys of the
American public. When it comes to the future in mail, really we
should be responding to the American public. What they are
saying by the Rasmussen Poll and the Gallup Poll is that they
would much prefer to have lesser frequency of delivery than
they would pay additional postage, pay for the fact that our
costs are going up because we are so labor-intensive.
Ultimately, that is who I think we have to respond to. So
believe me, I don't take that step lightly at all. Again, I
grew up in a postal family. I am not popular these days because
I am out there talking about it. But if the choice is mail
delivery in the future or no mail delivery, I think you have to
say, let's make the changes so we can assure that we reach
every home in America.
Mr. Cummings. Thank you, Mr. Chairman.
Mr. Lynch. The gentleman's time is expired. The Chair now
recognizes the gentlelady from the District of Columbia, Ms.
Eleanor Holmes Norton.
Ms. Norton. Mr. Potter, I am particularly interested in the
health care costs. I note again that you have proposed that
over an 8-year period the statutory mandate that we imposed a
few years back to pre-fund annuitants' health care should be
relieved. Now, the GAO says that it would prefer 2 years but
that either option, neither option may do much for the Postal
Service. In what way do you think this would fix the problem,
the overall problem of the Postal Service? And if not pre-fund
it, how would you make up for the funding of the annuitants?
Mr. Potter. Let me clarify again. This year, right now we
are prepared to pay $7.4 billion into retiree health benefits.
That is well over 10 percent of the revenue that we take in. So
the relief that we are seeking is the $2 billion. We will
continue to pay, according to that, and that is more money
going into the trust fund that would come out to pay for the $2
billion that would come out.
Ms. Norton. So you don't think it would have any effect
then?
Mr. Potter. I think the effect would be that the obligation
for the Postal Service in future years, beyond 2016, will be
greater for contributory retiree health benefits, than it is
today. But I would say that we are paying too much today, that
we are not paying a fair share, that we are paying much too
much. So I think what is offered is----
Ms. Norton. The GAO says 2 years so that we can rethink
this notion. This goes back to my business model question. Do
you think that we all need to sit down and think the entire
model before jumping to one big cut like that, one big change
like that?
Mr. Potter. Personally, I believe that H.R. 22 has the
short-term benefit of getting us through the year and enabling
us to pay our bills. And it helps us in subsequent years to do
that. I do think that you are on a parallel path, though, that
we need that as well as the discussion that you just described
about, we need to look at all our options, we need to come up
with a plan and we need to execute it. Again, I think in
timing, the timing of when we execute it is based on the
anticipated demand for postal services.
Ms. Norton. And I know we can't predict the future, and
incremental death is a pretty terrible death. So again, I am
looking for a way to deal with the problem, that is to say,
short-term, yes. But then to look at its consequences. I hear
what you are saying and understand it.
How green is the Postal Service? You do a lot of, perhaps
as much as anyone in the country, traveling by motor. Would you
tell us how you are conserving, if you are conserving fuel and
how you are conserving it?
Mr. Potter. First, when it comes to fuel, right-hand drive,
we have changed our delivery routes to make sure that we have
as many right-hand turns in there as possible.
Ms. Norton. How often do you buy new vehicles?
Mr. Potter. Well, we haven't bought vehicles in some 17
years.
Ms. Norton. You haven't what?
Mr. Potter. We haven't bought, we have a fleet, our fleet
of vehicles is some 17 years old. We are very anxious to take
that fleet, modernize that fleet and----
Ms. Norton. So if one goes down, it is just down and you
don't replace it?
Mr. Potter. We have aluminum-body vehicles. We have added
some vans to that fleet as deliveries have grown. But we bought
a special vehicle----
Ms. Norton. What fuel are those?
Mr. Potter. Right now they are gasoline?
Ms. Norton. Why?
Mr. Potter. Because of the fact that, well, there are a
number of reasons. But one of the reasons is that up until last
year, we were limited in terms of alternate fuel vehicles that
we could consider. Hybrids and the like we were not given
credit for from the Federal Government. That law has since been
changed.
Ms. Norton. We are not giving credit for--what do you mean
by not giving credit for?
Mr. Potter. We were required to have a certain percentage
of our fleet be alternate fuel vehicles. The definition of what
is an alternate fuel vehicle was very narrow. We worked with
the Department of Energy and with the folks up here on the
Hill, Congressman Davis and others, to get that definition
expanded so that we could consider other types of vehicles.
Right now we are testing, as we speak, hydrogen-fueled
vehicles, gas-powered vehicles, natural gas vehicles. We are
testing a number of different alternatives.
Ms. Norton. Mr. Chairman, could I ask you if you would
allow this witness to submit to you an inventory of the
complement of vehicles they have now, based on precisely what
form of fuel they use, so we can get a sense of that?
Mr. Potter. I would also be proud to submit with that,
Congresswoman, all of our activities in terms of going green.
Because we have a very good racket, and I would like to do it
justice by submitting that as well.
Ms. Norton. Thank you very much.
Mr. Lynch. I think we can work that out. I know that you
did present a vehicle count inventory, but I don't think it was
broken down as Ms. Norton would like. So perhaps you can jus
look through that and get the information to the committee as
soon as possible.
Mr. Potter. We will be happy to do that.
Mr. Lynch. OK, Mr. Potter, I have no further questions. I
want to thank you for your attendance here and I wish you good
day.
Mr. Potter. Thank you.
Mr. Lynch. As you probably heard, we have some votes
currently on the floor. I understand there are at least three
in this series. Which probably means we will not be back for
about, at a minimum, a half hour, probably a little bit longer.
Everybody is welcome to stretch your legs, and we will be back
in about 30 to 40 minutes.
[Recess.]
Mr. Lynch. This subcommittee hearing will now come to
order. I want to welcome Ms. Gallagher and the Honorable Dan
Blair as witnesses. It is the committee policy that all
witnesses are to be sworn in. Could you please rise and raise
your right hands?
[Witnesses sworn.]
Mr. Lynch. Let the record show that the witnesses have
responded in the affirmative.
The committee is pleased to welcome Ms. Carolyn Gallagher,
chairman of the Board of Governors for the U.S. Postal Service.
Carolyn Gallagher was named Governor of the U.S. Postal Service
by President George W. Bush in November 2004. She currently
serves as chairman of the Compensation and Management Resources
Committee, and is vice chair of the Audit and Finance
Committee.
The Honorable Dan Blair is chairman of the Postal
Regulatory Commission. Mr. Blair serves as the first chairman
of the Postal Regulatory Commission, the successor agency to
the former Postal Rate Commission. He was unanimously confirmed
as a Commissioner of the former Postal Rate Commission in
December 2006 by the U.S. Senate and was designated chairman by
President George W. Bush during the same year.
The committee would now welcome opening statements. Ms.
Gallagher.
STATEMENTS OF CAROLYN GALLAGHER, CHAIRMAN, BOARD OF GOVERNORS,
U.S. POSTAL SERVICE; AND DAN G. BLAIR, CHAIRMAN, POSTAL
REGULATORY COMMISSION
STATEMENT OF CAROLYN GALLAGHER
Ms. Gallagher. Good afternoon, Chairman Lynch, Ranking
Member Chaffetz and members of the subcommittee. Thank you for
inviting me. It is an honor to be here.
The current economic downturn has hit our country with a
speed and a depth that the Postal Service, like most other
businesses, could not anticipate. The dramatic decline in mail
volume over the past 18 months is simply outpacing the rate at
which we can reduce our costs, given the tools available to us.
Adding to this unprecedented financial challenge is the
requirement passed in the Postal Law of 2006 that the Postal
Service make payments of $5.4 billion or more per year to fund
future retiree health care obligations. If not for this
payment, the Postal Service would have earned a profit of $2.8
billion in 2008, an exceptionally challenging year.
The Postmaster General and his team are responding quickly
and decisively to these challenges. They are undertaking a
range of efforts, including the elimination of work hours,
major reductions in administrative overhead, and aggressive
network consolidations that will eliminate almost $10 billion
in the next 2 fiscal years.
Yet even with our best efforts, we will still come up
short. Under current law, we cannot close the widening gap
between revenue and costs and still finance today's service
levels for this fiscal year. Despite our aggressive plan to
reduce costs over the next 2 years, our projections show that
we will still lose another $13 billion over that period.
The Postal Service has been a self-funded Government entity
for more than 30 years, and we plan to remain so. Today, we
respectfully request your urgent attention in providing the
Postal Service, not with financial assistance, but with the
flexibility needed to better align our resources and our
responsibilities. Our first request is for a change to fund our
retiree health benefit premiums from the retirement health
benefits fund rather than from operating revenue. The Postal
Act of 2006 requires an extraordinary obligation that no other
Federal agency or private sector company has to meet.
Maintaining the current accelerated payment schedule for future
obligations and having to borrow money to do so when we cannot
make ends meet today puts the Postal Service in an
unnecessarily perilous position. It is like planning to add a
new room to your home when the house is on fire.
We greatly appreciate the efforts of Representatives John
McHugh and Danny Davis, who introduced H.R. 22, which would
allow this funding change and save at least $2 billion per year
for 8 years. We ask all members of this subcommittee to support
this legislation. But even if H.R. 22 is enacted, we still
forecast a loss of $9 billion over the next 2 fiscal years.
Therefore, additional and immediate action is needed. The
Board agrees with management and believes that going to 5 day
per week delivery is the best option for restoring our
financial health and ensuring our long-term future. The volume
of mail we are delivering no longer produces enough revenue to
cover the costs of 6-day delivery to 150 million households and
businesses. We need to adapt our network to reflect the
changing demand for our products and services. Going to 5-day
delivery, once fully implemented, could reduce costs by $3.5
billion per year and can be achieved without substantial impact
on our customers and our employees. In fact, two recent public
opinion polls show that the American people prefer the option
of 5-day delivery over a significant increase in stamp prices.
Another critical element ensuring the long-term financial
health of the Postal Service is strong and effective
leadership. On this matter, the Governors are certain that the
Postal Service has the right leader in Jack Potter. I welcome
your request to address the issue of the Postmaster General's
compensation package.
Our board formed a compensation and management resources
committee 3 years ago, because we know how important it is to
attract, retain and develop outstanding leadership for the
Postal Service. Congress recognized this when it enacted a law
requiring that executive pay at the Postal Service be
comparable to jobs with similar responsibilities in the private
sector.
In 2008, the Postmaster General's salary was $263,575, the
amount permitted by Congress. In addition, based on his
outstanding leadership in a very difficult time, the Governors
awarded Mr. Potter a performance incentive of $135,041, which
is deferred and will be paid in 10 annual installments after he
leaves Postal Service employment. The balance of his
compensation package includes the cost of Mr. Potter's security
detail provided by the Postal Inspection Service and the
estimated change in the future value of his Federal pension
through the Civil Service Retirement System, based on his 31
years of service.
Mr. Potter has earned the compensation he received. The
Governors believe his achievements in 2008 were both remarkable
and unprecedented. Last year, the Postmaster General and his
team reduced costs by over $2 billion, more than double what
was planned, while still providing record levels of service to
the American people.
The Governors have complete confidence in Mr. Potter. We
need his leadership now more than ever to lead us through the
crisis we face.
In conclusion, Mr. Chairman, I want to emphasize that our
current financial situation is dire. The legislative changes we
are requesting will not cost the Federal Government anything or
require an appropriation by Congress. But they will allow us
much-needed flexibility to meet our obligations and to adapt
the Postal Service to a changing business environment.
Thank you, Mr. Chairman and members of the subcommittee. I
would be happy to answer any questions.
[The prepared statement of Ms. Gallagher follows:]
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Mr. Lynch. Mr. Blair, please proceed.
STATEMENT OF DAN G. BLAIR
Mr. Blair. Chairman Lynch, Ranking Member Chaffetz, Mr.
Davis, thank you for this chance to testify this afternoon.
Today the Postal Service is facing dire financial
difficulties. They are likely to worsen before they improve.
The current economic crisis has substantially impacted Postal
Service volumes and revenues.
The first quarter of fiscal year 2009 showed volume
declines for all classes. First class mail declined an
additional 7.3 percent and standard mail declined 11 percent.
In all, total volume in the first quarter declined 9.3 percent.
This trend is continuing in to calendar year 2009 at an
accelerated rate. Total mail volume in January 2009 is 16
percent below levels reported in January 2008. The Service
reported it lost almost three quarters of a billion dollars in
January as well.
We expect it to report a further deteriorating condition
for February, with continued dramatic volume decreases as well
as a significant decrease in revenues. Should double digit
volume and revenue declines continue, Commission analysis shows
a cash shortfall could be expected by the end of the fiscal
year. Based on information given the Commission, the Postal
Service projects a $12.4 billion net operating deficit for the
fiscal year.
To address this situation, the Postal Service has
identified internal cost savings, reductions of $5.9 billion
for fiscal year 2009. However, further reductions are needed if
the Service is to meet its payroll and other expenses.
To address this, the Postal Service has asked Congress for
authority to reduce delivery days from 6 days a week to 5.
Based on the Commission's universal service study, we estimate
potential annual savings of almost $2 billion. However, this
action carries the risk that customers may be harmed and some
mailers may choose to mail loess or leave the mail stream
altogether.
The Service has also sought relief in seeking suspension of
its retiree health premium payments. This is the approach taken
in H.R. 22. For fiscal year 2009, those payments would be
almost $2 billion. However, more relief may be required to meet
the Service's cash-flow needs this year, should current trends
continue.
Determining the amount of needed relief begins in viewing
the Service's debt ceiling and borrowing authority. Over the
last 3 years, the Postal Service has increased its long-term
debt from zero dollars in fiscal year 2005 to $6.5 billion
through the first quarter of fiscal year 2009. The Postal
Service has a $15 billion debt ceiling and may increase their
debt load no more than $3 billion in any 1 year.
Borrowing against its debt ceiling and suspension of the
retiree health benefit premium will likely prove insufficient
to make up for the cash shortfall. Congress should review the
required $5.4 billion payment required to pre-fund retiree
health benefits. This payment could be suspended in part or
adjusted in an effort to the Service remains financially
viable.
The Postal Service can raise additional revenues from rate
adjustments. Last week the Commission approved the Service's
rate increase request to adjust postal rates by 3.8 percent.
These adjustments will take effect May 11th. This amount is an
inflation-based increase as intended by the Postal
Accountability and Enhancement Act. Should current inflation
trends continue, the price adjustment for 2010 will likely be
less than 1 percent.
Other cost reduction measures must be considered as well,
but these impact difficult policy areas where Congress has
expressed, at least in years past, a desire for the maintenance
of the status quo.
The Commission's role is to provide transparency in the
postal financial operations. I hope today's testimony sheds
some light on the tough choices in helping the subcommittee
evaluate the Service's financial situation.
[The prepared statement of Mr. Blair follows:]
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Mr. Lynch. Thank you very much for your testimony.
Let me begin, I am going to recognize myself for 5 minutes.
Ms. Gallagher, let's start off with Mr. Potter's
compensation. I understand you are the chair of the
compensation committee, is that correct?
Ms. Gallagher. I was chair of that committee until I became
chair of the board.
Mr. Lynch. When did that happen?
Ms. Gallagher. In February, early February.
Mr. Lynch. OK, so with respect to Mr. Potter's previous
salary, the 2008 salary, you were?
Ms. Gallagher. I was chair of the compensation and
management resources.
Mr. Lynch. I have been reviewing Mr. Potter's record. He
has had some good years. I just want to point out, in 2007, the
Post Office lost $5 billion. In 2008, they lost $2.8 billion.
And now, based on testimony here, in 2009, we should expect
losses somewhere in the range of $9 billion to $10 billion
unless we do something drastic and bite into those losses with
significant cuts in service.
Now, there are a couple of statutes that bear on the
compensation of the Postmaster General. One is an earlier
statute that ties his compensation to the salary of the Vice
President of the United States. He is to earn no more than 120
percent of what Joe Biden earns.
There is another statute that you referred to passed in
2006 that indicates that the salary should be comparable in
some way with those in the private sector. Can you tell me how
we ended up paying all this money to Mr. Potter in 2008 when,
what was the thinking of the compensation committee when we
lost $3 billion and we gave Mr. Potter an entire package, now,
I understand some of that is his pension, of about $800,000?
Ms. Gallagher. I would be happy to, Mr. Chairman. First,
Mr. Potter's salary, the amount that he actually was paid in
2008, was $263,000. That was the limit that was set by Congress
in the Postal Accountability Act of 2006.
In addition, the board did award Mr. Potter a performance
incentive award of $135,000, based on what we believed was
remarkable and unprecedented achievement. In the face of a very
difficult year, falling volumes because of the recession, Mr.
Potter reacted quickly and decisively. He and his team reduced
work hours by 50 million work hours. They saved the Postal
Service over $2 billion, more than double what was originally
planned.
While doing those changes, they also were able to provide
record levels of service to the American people. We believe
that is a remarkable accomplishment.
I also believe that when you look at Mr. Potter's
compensation, you have to consider the size of the job. The
Postmaster General is running one of the largest organizations
in the country; indeed, the world. The Postal Service has
650,000 employees, about the amount of Federal Express and UPS
combined, with $75 billion in revenues. We would be in the top
tier of Fortune 100 companies if we were on that list. We have
37,000 facilities and retail outlets.
We do have a statute that says we should pay the executives
comparable to their peers in the private sector. Yet based on
an outside consultant, who specializes in executive
compensation, Mr. Potter and his team make a small fraction,
only 15 percent, of what people running similarly sized
organizations are making. We believe we are lucky to have a
Postmaster General the caliber of Mr. Potter. And we believe
that he earned every penny that he was paid.
Mr. Lynch. Understand the frustration in the public,
though, when they take the whole picture here. They are looking
at the prospect of 5-day delivery, they are looking at the
prospect of the post office closing, they are looking at the
prospect of 150,000 employees retiring or going away from the
post office, regional centers closing down and their rates
going up, I might add. And we are giving the gentleman a
$135,000 bonus. And I understand the idea of comparable salary.
However, I don't agree with the premise that just because
AIG or Merrill Lynch is giving people bonuses for driving the
company into the ground that we should emulate that. That is
certainly not the idea here, right? We are trying to reward
positive performance. Like I said, 2007, we lose $5 billion,
2008, $2.8 billion we lose. Then now we have the prospect of
losing somewhere in the area of $10 billion in 2009 with all of
this pain. It just defies logic to me.
And we are not talking about a 10 percent or 20 percent
bonus. We are talking about 50 percent of the gentleman's
salary. I know it is not taxpayer-funded, this is from revenues
generated by the Postal Service. But still, given the need in
the system, I question the wisdom of this. I don't know, when
exactly did you determine his salary?
Ms. Gallagher. Well, first, Mr. Chairman, I have to take
exception at the comparison of the U.S. Postal Service to AIG.
The Postal Service is the most trusted Government agency and
has been for the past 5 years. It is one of the most trusted
organizations in the country. Mr. Potter and his team saved
billions of dollars, $8 billion over the last 7 years, $2
billion last year for the Postal Service. He has been a
dedicated public servant for 31 years. He has been one of the
most successful Postmaster Generals in the history of the
Postal Service.
Mr. Lynch. Well, you know, what I would say is this, I
compared the practice of giving bonuses in the financial
services industry to people who were losing money to the
practice of giving bonuses to executives at the Post Office at
a time when they are losing money. I think that is the
comparison. I am not comparing the U.S. Postal Service to AIG.
However, there is this comparability language in the statute,
and I just want to make sure that we are comparing apples to
apples and that the practice that we are trying to emulate in
the private sector is, when they do a good job and get a bonus,
we will use that example at the Post Office and not reward
performance that is less than satisfactory.
I am violating my own rule here, so I am going to allow Mr.
Chaffetz from Utah, the ranking member, to ask questions for 5
minutes.
Mr. Chaffetz. Thank you, Mr. Chairman, and thank you both
for being here. I appreciate your dedication and commitment to
public service.
I also appreciate what Mr. Potter and the whole
organization. I wouldn't give Mr. Potter all the credit,
certainly he has a talented team and men and women at all
levels who are performing great work and have accomplished many
things, the reduction in overtime hours and such. It really is,
no doubt, a team effort.
Nevertheless, I have some deep concerns. You may have a
football team that is fighting and doing everything they can
and you want to pat some people on the back, but if you are
losing the game and you come up in the red, I just don't see
any room to at some point say, we just can't be handing out
bonuses to the coach. And so my question is, and I also hear
you talk and express a concern that he is under-compensated, in
your view, in many ways, for his base salary. To try to compare
it to a $10 million salary for a comparable private sector job,
and maybe we should revisit that whole scenario.
But is this $135,000 bonus just a way to run around the
statute and give him extra compensation that you feel is
deserved? At what point do you actually cut it off and say, we
lost money? And we are either going to have to go to the
taxpayers or we are going to have to continue to suck it up
until we get into the black.
Ms. Gallagher. Congressman Chaffetz, I think there is a
very important distinction here, and that is that the Postal
Service would have made a profit of $2.8 billion in 2008 if it
were not for the requirement passed by Congress that we pre-
fund our retiree health care obligation. We had to make a
payment of $5.6 billion in 2008. If not for that payment, the
Postal Service would have made a profit of $2.6 billion,
despite the fact that our volume had the biggest loss in the
history of the Postal Service.
The fact that Mr. Potter and his team were able to offset
that volume loss and reduce head count or work force by 50
million work hours and save the Postal Service $2 billion while
maintaining the best service levels we have ever had is truly
remarkable. And I do believe that he earned more than we are
able to pay him as a public servant.
Mr. Chaffetz. So you would have actually compensated him
more than what you did?
Ms. Gallagher. No, I believe that he was paid fairly as a
public servant. But I think the work that he did and the
accomplishments that he made for the Postal Service were worth
more.
Mr. Chaffetz. Just my own personal belief, I do think there
is a difference in the rank and file and them accomplishing the
goals set forward by executive management. But in this case, I
am so concerned that we are taking a special effect on somebody
who has to deal with everything by the ifs. You can't just say
if, if. The reality is it lost money. And now we are coming to
the point where we have to make some dramatic changes. Dramatic
changes. And this is somewhat symbolic of the challenges that
we face.
If we adjust Mr. Potter's compensation package, that is not
going to have a material effect on the overall. But he is the
leadership. He is the CEO. He is the leader there. Do you have
any plans or inclination or anything in the works to actually
change the way executives are bonused out?
Ms. Gallagher. Absolutely not. We believe that the
achievements of the Postmaster General and his team have been
remarkable, given the challenges they are facing, that we are
lucky to have a team the caliber that we have who are willing
to work at a small fraction, only 15 percent of what their
peers or what they could make in the private sector.
We believe that they have saved billions of dollars while
providing record levels of service and that they are earning
every penny that they are paid.
Mr. Chaffetz. He certainly wasn't the only person to get a
bonus, correct? What is the total amount, the total dollars
that were paid out in bonuses to the executive level in the
Postal Service overall?
Ms. Gallagher. Congressman Chaffetz, that was fully
disclosed in our 10K.
Mr. Chaffetz. I just don't know what the answer is, then.
Ms. Gallagher. I don't have those facts and figures but I
certainly will get them to you.
Mr. Chaffetz. Is it in the millions of dollars?
Ms. Gallagher. No, sir. The incentive payment for Mr.
Potter was $135,000.
Mr. Chaffetz. No, I meant for the executive level Postal
Service employees, what is the total?
Ms. Gallagher. I am sorry, I jus don't have that. But I
would be happy to get it to you. It was fully disclosed, I just
don't have the facts and figures in my hands.
Mr. Chaffetz. Yes, I would appreciate it if you would
submit that in a somewhat timely fashion.
Last question in this round here, you expressed ``complete
confidence'' in Mr. Potter. In light of this investigation that
is now going to move forward, does that taint or have any
bearing on how your concerns about Mr. Potter?
Ms. Gallagher. No, sir, not at all. Jack Potter is one of
the most successful Postmaster Generals in the history of the
Postal Service. Soon after taking office in 2001, he was hit
with the events of 9/11 and then the anthrax tragedies that
followed soon after. He restored the public's confidence in the
U.S. mail, returned us to financial health. He has saved the
Postal Service billions of dollars, he and his team, while
providing record levels of service. We are very lucky to have a
Postmaster General the caliber of Mr. Potter. And the board has
complete confidence in him. He is uniquely and singularly
qualified to lead us forward through the situations we face
today.
Mr. Chaffetz. Thank you, Mr. Chairman.
Mr. Lynch. Thank you.
The Chair recognizes the gentleman from Illinois, Mr.
Davis, for 5 minutes.
Mr. Davis. Thank you very much, Mr. Chairman, and Ms.
Gallagher, Mr. Blair, it is good to see you both.
Let me begin with you, Mr. Blair, and ask you, the Postal
Service is not a private corporation, or is it? It is not a
Government agency. Or is it? What is it?
Mr. Blair. It is an independent establishment within the
executive branch. It is wholly owned by the Federal Government.
Employees of the Postal Service receive benefits just like any
other Federal employee does. So in many respects it is treated
like a Federal agency.
I think the two overriding distinctions is its governance
structure. The Postmaster General is appointed by the Governors
as opposed to being a Cabinet level member, such as he was in
1970. And the revenues that pay their operating expenses are
generated through the sale of goods and services, unlike most
Federal agencies.
Mr. Davis. So it is not exactly a Government agency but it
functions in many ways like a Government agency?
Mr. Blair. I think generally, yes.
Mr. Davis. It is not exactly a private corporation but it
functions in many ways like a private corporation. So I guess I
am wondering whether or not there is any possibility that
sometimes there could be mixed signals, for example, if
Congress directs the Board of Governors to compensate postal
executives in a comparable way similar to what takes place in
private corporations or private industry, would that appear to
be what the Board of Governors may have been intending?
Mr. Blair. I think oftentimes legislation sends some mixed
signals. I think that is just part of the balancing factor that
public servants have to undergo and evaluation. It is told to
operate and act like a business, but it has substantial public
service mandates. We outlined a number of those mandates in our
universal service study. One of the most significant of those
mandates is providing 6-day a week delivery.
Mr. Davis. There is a culture in corporate America in
relationship to executive compensation that many people now are
taking a hard look at, and not just the Postal Service, not
just pseudo-governmental agencies. But people are taking a real
hard look at the culture that has developed relative to
executive compensation in corporate America. And Ms. Gallagher,
my question is, given this look that is taking place, has the
Postal Board of Governors had discussions reviewing any of its
policies in relationship to response to the public outcry that
we are currently experiencing relative to this issue?
Ms. Gallagher. Well, first, let me say, Congressman Davis,
that the board did struggle greatly to try to balance two
competing statutes and come up with a compensation that we felt
like was the best balance between the two. However, we still
believe firmly that the compensation for Postmaster General and
his team is more than fair, given the achievements and the
challenges that they are facing and the actions they are taking
to try to keep the Postal Service financially sound in this
crisis.
So we have full confidence in what they are doing and we
believe they are paid fairly.
Mr. Davis. So the Board of Governors is in fact cognizant
and displays sensitivity to the increasing concern about the
issue?
Ms. Gallagher. Of course.
Mr. Davis. We have heard Mr. Potter talk about his optimism
in relationship to the ability of the Postal Service to grow
volume. And of course, I am trying to rationalize in my own
mind the ability to do that. How does the Board of Governors
feel in relationship to that?
Ms. Gallagher. We certainly share the Postmaster General's
confidence in the future viability of the Postal Service, with
help, obviously, from Congress as we have requested. There are
opportunities for us to grow this business. We do have new
flexibility that was given to us under the Postal
Accountability Act, especially in terms of pricing our shipping
products. And we want to take full advantage of it. We are
trying to take full advantage of it, and in fact, we are
growing market share in our expedited mail products. And we are
very proud of that.
As the Postmaster General discussed this morning, we are
making technological investments that we think will add value
to the mail, intelligent mail bar code being the best example
of that.
So we think there are opportunities. That being said, there
is a structural change in the way Americans are communicating,
and the Postal Service needs to change with it. We need to make
sure we match our resources and adjust our resources with the
changing demand for our products and services.
Mr. Davis. Thank you very much. Thank you, Mr. Chairman.
Mr. Lynch. Thank you.
Ms. Gallagher, we have sort of a parade of horribles that
are rolling out here in 2009. We are looking at the possibility
of losing $10 billion unless we do something drastic. We are
looking at post office closings and cuts in service, perhaps,
major cuts in service. Not only that, but we are looking at the
possibility of bumping up against the debt limit, the statutory
debt limit for the post office as well, depending on how things
go.
In that environment, looking at 2009, when I asked
Postmaster General Potter about the possibility of him getting
a bonus in 2009, he said, based on where we are, I am
paraphrasing here, this is not a quote, but words to the
effect, I don't expect a bonus in 2009. I am just asking you,
is that in line, as someone who sat at one point on the
compensation committee, what are your views on that in 2009?
Ms. Gallagher. Mr. Chairman, it is too early to know what
his compensation will be. It is a decision for the full board.
Mr. Potter was right, it is a very difficult year for us and he
has very difficult and challenging goals. But the full board
has not discussed that yet. And it is a decision for the full
board.
Mr. Lynch. Well, I think something you should chew on is
that if you do end up bumping up against your statutory debt
limit, you are going to have to come to Congress to have that
increased. And it would be very difficult for Members of
Congress to approve a system or provide support to a system
that they thought was not being fair in terms of leading by
example. If you are going to ask the American people to absorb
pain and closings and increased debt, there needs to be some
type of reflection in the management team that acknowledges we
are in some tough times. It cannot be business as usual or
business as we hoped it to be. We need to be in this together.
Ms. Gallagher. Mr. Chairman, I would like to say that I
believe increasing our debt limit was the last thing we should
do. By the end of this year, we will have $10 billion in debt.
Any additional debt will just put further financial pressure on
the Postal Service. It will increase our current costs, because
we will have more interest costs.
I think it will make it very difficult for the Postal
Service to return to financial health, perhaps even impossible
for the Postal Service to return to financial health. We have
laid out a plan, a very aggressive action plan, that we are
taking to reduce costs while maintaining service. We have asked
for your assistance in two areas, one to help us restructure
our retiree health care payment and one to give us the
flexibility to go to 5-day delivery, which we believe will help
us match our resources to our changing demand for our products.
With those two changes, we are firmly in belief that the Postal
Service will return to financial health and be viable for the
future.
Mr. Lynch. I understand the prospects of H.R. 22, and
again, I have great respect for both of the sponsors, both Mr.
Davis who is here and Mr. McHugh, who is not. I regard them
very, very highly on this as well as other matters. We are
going to have to look at that. In the out years, I have already
expressed, about 2017, about having $75 billion in unfunded
liability. That is problematic. But let's go forward. I am open
to it, I am just not completely convinced at this point.
Ms. Gallagher. And we are happy to share more information,
because we don't believe that will happen. And we are happy to
share that.
Mr. Lynch. The other concern I have with respect to going
to a 5-day delivery is that you are in a competitive work out
there. If you are saying now we are going to have a 2-day
market for your competitors, people are going to rely less on
the Post Office, I think there is a downside as well as an
upside. I think there is a certain loss of market share when
you become a 5-day delivery post office instead of a 7-day
delivery post office. I recognize that might be the reality of
the situation, that may be what we have to do.
It is not my first option, though, and I frankly think that
we have some other things we have to look at. That might
involve looking at some of these areas that have high density
placement for our post offices. I am not talking about our
rural areas, but we have some of our big cities in America who
have a post office in every high rise. They had the volume at
one time to justify all those, but we may have to look at some
of those things.
I would like to look at the least disruptive measures to
reduce costs than simply leaping to 5-day delivery. But you are
right, I think time is growing short, we have to fish or cut
bait. We are going to be limited in our options with the
passage of time. So I certainly agree with you that we are at a
critical point here.
Again, obviously we have gone to a second round of
questioning. I yield 5 minutes to the gentleman from Utah, Mr.
Chaffetz, for 5 minutes.
Mr. Chaffetz. Thank you, Mr. Chairman, I appreciate it. And
Governor, I guess I am still mystified, and perhaps we will
have to clarify this later, but I recognize the series of
indicators along the way of the remarkable progress that has
been made within the Postal Service. But to try to categorize
as one of those goals the financial health, that was the quote
that I wrote down, financial health, while it may be better, I
don't think it is healthy. I think it is very difficult, when
you have a reduction in overtime, when you have the good men
and women, rank and file, the person who is out there
delivering the mail, brunting the bulk of what has to happen in
order to make these adjustments, to see somebody at the very
top take a bonus.
In my opinion, it gets strikingly close, if not over the
line, of just trying to run around the basic compensation
package and trying to say, we are going to subvert this because
we think it is too low, we are going to get a performance bonus
and that is how we are going to get it. You can make the case,
I think, to say that the overall compensation for someone who
is running the second largest employer in the United States of
America, $260,000 some odd dollars is too low. I think that is
another discussion that perhaps we have to have.
But I worry that bonus is so striking and so offensive to a
lot of people that I would hope and encourage you to revisit
that. Because at the end of the day, it was in the red. And we
are going to have to make some much more dramatic challenges,
and we are asking people to potentially go back to 5-day
service as opposed to 6, and yet we are handing out bonuses. It
just doesn't add up. That is my concern.
My question to you, Governor, and then I actually do have
one for Mr. Blair, if we can get to it, the relocation
assistance policy is something I have seen some reports on that
seems to be troubling. The huge, massive dollars and numbers of
homes that are going through this process, what kind of
trajectory, what kind of numbers are behind this? What is your
sense of where this program is?
Ms. Gallagher. Well, first of all, the Board of Governors
was concerned when we heard the same stories that you did.
Management is reviewing the policy. We will look at it, the
board will look at it when he has completed that review, or
they have completed that review.
Mr. Chaffetz. When do you think we will have that back?
Ms. Gallagher. I know they are in consultation with the
management associations. I am not sure how long that process
is. But we don't just buy these homes, we also sell these
homes.
Mr. Chaffetz. Do you know how much money the Government or
the Postal Service put in? There was a real cost to this, was
there not? It wasn't something operating in the black.
Ms. Gallagher. Congressman, I actually don't know.
Mr. Chaffetz. I guess I would ask that at some point, that
the report be given back to us specific to that program, how
much it costs to actually execute on that program. And in the
essence o time, Mr. Blair, I do have just a quick question. It
is more of a clarification.
I thought I heard, and maybe I am wrong here, I thought I
heard Mr. Potter talk about a $3.5 billion savings by going to
a 5-day week. You had talked about a $2 billion savings. What
is the actual number? Maybe I just heard something wrong here,
so my apologies.
Mr. Blair. Our projections at the Commission would be that
there would be a $2 billion savings. I believe the Service's
projections did not take into account any volume declines that
would result from reducing 1 day a week of delivery. Ours
projected a 2 percent volume decline. So that is how we
determined our cost savings.
Mr. Chaffetz. OK, so I did hear Mr. Potter correctly at
$3.5 billion, but you are saying you think it will actually be
close to $2 billion?
Mr. Blair. We projected it at $2 billion. The Service did
acknowledge that there would be volume reductions, it just
didn't factor them in because they didn't know what they would
be at that point.
Mr. Chaffetz. Is there any sort of blended analysis? There
was some discussion about maybe limiting service on some of the
days in the summer when it is the middle of July and there is
not much mail delivered, as opposed to, say, the end of
December when you have huge surges in the amount of mail that
has to be dealt with?
Mr. Blair. I think that is a good point and that is a
question I wanted to raise as well, is that I would strongly
recommend that Congress, should it grant the Postal Service
that ability to reduce 1 day a week delivery that it ask the
Service for a more detailed plan on what this exactly looks
like. We heard today from the Postmaster General that it would
likely be Saturday but I have heard other days being touted
like possibly Tuesday or Wednesday. I think a more concrete
plan, is this going to be nationwide or is it just going to be
for selected areas of the country or even selected zip codes? I
am under the impression it would be nationwide, but again, I
don't want to presume anything.
There are just a lot of unanswered questions. Given the
reduction of the scope has such an impact on the brand of the
U.S. Postal Service, I would hope that Congress would ask the
Service for a more detailed plan along these lines.
I think one missing question is what is going to be the
impact on volume, what is going to be the impact on major
mailers. We would hope the Postal Service could produce for us
what would be seen as a, what their best estimate would be on
the reduction in volume and the impact on mailers.
Mr. Chaffetz. Thank you.
Mr. Chairman, I hope this is something that we continue to
explore, that we look at the differences between urban areas
and rural areas, that we look at potentially a sliding scale
where there are certain times of the year. And as you said,
look at the reduction in volume as well, because obviously that
will play a major impact. The number between $2 billion and
$3.5 billion is a big enough number that it meets that
threshold. Usually a billion dollars is just a rounding error
in this body, but it meets that threshold. So let's dive into
it, and thank you, Mr. Chairman.
Mr. Lynch. Thank you.
The Chair recognizes the gentleman from Illinois, Mr.
Davis, for 5 minutes.
Mr. Davis. Thank you very much, Mr. Chairman.
Mr. Blair, let me ask you, let's assume that we do all of
the things that Mr. Potter talked about earlier in terms of
streamlining, staff reductions, but let's also assume that we
do not pass H.R. 22. How long do you think it would be before
we would be back talking about another rate increase?
Mr. Blair. Well, the Postal Service, the Commission last
week gave its approval of the Postal Service's request for an
inflation-based adjustments. Those rates are going to come into
effect in May, provide annually, from what we understand,
probably about a billion and a half dollars in additional
revenue.
The other option open to them at this point would be an
exigency rate case, in which the Postal Service would propose
to go above the inflation-based cap based on extraordinary and
exceptional circumstances. That proposal lies in the hands of
the Postal Service. Whether or not that would generate
sufficient revenues to offset the potential cash-flow problem
is a good question. But I think that this committee would be
back, we would be convened back before this committee before
that would happen, because Postal Service's finances would
continue to go south.
Mr. Davis. Do you think there is ever any danger that we
could price ourselves out of the market?
Mr. Blair. I think in some marketplaces you definitely
could. I think that was the intention behind the Postal Act of
2006, that keeping generally within the class, or generally
inflation-based rates would be a good thing, it would add to
the predictability and stability for mailers to stay in the
system.
Mr. Davis. Ms. Gallagher, let me ask you, one of the
criticisms that I have heard of the Postal Service in
relationship to its efforts to grow volume has been sort of an
internal isolation relative to the community of ideas that the
Postal Service sort of does its thinking internally, and that
external entities that come with ideas that these generally are
not received too well or viewed too positively.
How open do you think the Postal Service is to listening to
other market experts and individuals who think they have ideas?
As elected officials, everybody comes to us with everything.
And sometimes these things can get vetted, sometimes they
don't. Sometimes they get looked at sometimes they are given
short shrift. How open is the Board of Governors in
relationship, and the Postal Service to looking at these kinds
of options and ideas that people come with?
Ms. Gallagher. Congressman Davis, I don't think we can
afford not to listen to any option, given the situation that we
are in. I think the Postal Service has a long history of
communicating with stakeholders, all our stakeholders. The
board is of course very open to hearing ideas. In fact, we are
having lunch with the mailing community next week.
So we are very open to hearing ideas. And certainly given
the situation we are in, any ideas would be helpful.
Mr. Davis. Well, let me just say, I don't envy the position
that you are in, in actuality, because I do realize that there
are no simple solutions to very complex problems and very
complex issues. I do appreciate the efforts that the Postal
Service is making. I appreciate the leadership that Mr. Potter
has been providing and the efforts of the Board of Governors.
I thank you very much and I yield back, Mr. Chairman.
Mr. Lynch. Thank you.
Let me ask, I want to go over the area of housing
relocation within the Postal Service. There was a story a few
weeks back, I think it was CNN, that ran a story about the
excessive costs that were being incurred by the Postal Service
for relocating their employees. There were some homes there
that were excessive, well, the employees were excessively
reimbursed for relocation expenses. I know I have some
information that the Post Office provided to the committee that
indicated that the relocation program costs at the U.S. Postal
Service in 2007 was $72 million for the relocation and then
expenditures specific to homeowners were $34 million. So it was
a total of $106 million in 2007. And then similarly, in 2008,
it was $71 million for the relocation program in 2008, with a
reimbursement to the homeowners of $108 million.
So these are sizable programs. Ms. Gallagher, I know you
mentioned that there is a Board of Governors review going on
here. Has the Inspector General for either the Post Office or
the Postal Regulatory Commission, have they been invited in or
asked to conduct an investigation yet?
Ms. Gallagher. Mr. Chairman, the board is not reviewing the
policy, management is reviewing the policy.
Mr. Lynch. Just management?
Ms. Gallagher. Yes. The board is waiting to see how the
policy is revised. We have full confidence in Mr. Potter that
he will address it appropriately.
I do think the fact that we have a relocation assistance
policy is standard among Federal agencies and certainly the
private sector. We do have a policy that you hire the best
person for every job, so that is going to require moving people
around. And with 650,000 employees, sometimes those are going
to be big numbers.
So we have confidence that Mr. Potter is reviewing the
policy, that he and his team will show the board a policy that
is appropriate.
Mr. Lynch. Yes, well, there are a lot of opportunities, and
sometimes the differentiation between employees, when you are
talking about a pool of 650,000 people, sometimes all things
being equal, they can be very similar. Very talented employees
at the Post Office. So I am just concerned about this. It is a
pretty large expense, over $100 million.
I am aware that management is considering adopting a new
rule where they don't reimburse for a house over $1 million.
Which leads me to believe the policy before allowed them to go
above $1 million. I am not sure how much above. And even though
CNN has pointed out some, I would call them egregious examples,
I want to know, is this the rule or what have we here? I have a
bulk number of $71 million for housing relocation in 2007 and
then a little bit more than that in 2008. I really need the
numbers. I need the breakdown on home by home what region they
were moved from and to. I need all that information. Could you
make sure that is available to the committee?
Ms. Gallagher. We will certainly supply that. The policy
that we are reviewing is looking at taking it down to $800,000,
not $1 million. But management is reviewing it and we will get
you that information for the record.
Mr. Lynch. That would be great. And I do intend to ask, we
have the Inspectors General coming up and I will ask them about
that as well.
I am told that we are about to have votes on the floor. Why
don't we swap out? I want to thank you both for your
willingness to come before the committee and to testify. You
have been very helpful and we thank you for your testimony, we
wish you a good day.
And why don't we, if we have the next panel, please take
their seats, that would be great.
Mr. Williams and Mr. Herr, we appreciate your appearing
before the committee. It is the committee policy that all
witnesses are sworn in. Could I ask you to please rise and
raise your right hands?
[Witnesses sworn.]
Mr. Lynch. Let the record show that the witnesses answered
in the affirmative.
Welcome, gentlemen. Mr. David Williams, Inspector General,
the Office of the Inspector General for the U.S. Postal
Service, was sworn in as the second independent Inspector
General for the U.S. Postal Service in August 2003. Mr.
Williams has served as IG for five Federal agencies. He was
first appointed by President George H.W. Bush to serve as IG
for the U.S. Nuclear Regulatory Commission from 1989 to 1996.
President William Clinton next appointed Mr. Williams Inspector
General for the Social Security Administration from 1996 to
1998 and then as Inspector General for the Department of the
Treasury in 1998.
Mr. Phillip Herr is Director of Physical Infrastructure
Issues, U.S. Government Accountability Office. He is the
Director of the Physical Infrastructure team at the Government
Accountability Office. Since joining GAO in 1989, Mr. Herr has
managed reviews of a broad range of domestic and international
programs. His current portfolio focuses on programs at the
Department of Transportation and the U.S. Postal Service.
Welcome, gentlemen, and the committee invites opening
statements. Mr. Williams.
STATEMENTS OF DAVID C. WILLIAMS, INSPECTOR GENERAL, U.S. POSTAL
SERVICE; AND PHILLIP HERR, DIRECTOR, PHYSICAL INFRASTRUCTURE
ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
STATEMENT OF DAVID C. WILLIAMS
Mr. Williams. Thank you. Mr. Chairman, Mr. Chaffetz and Mr.
Davis, the Postal Service's current financial condition is
fragile and the future is uncertain. The Postal Service lost
$2.8 billion in 2008 and may lose $6 billion this year. Yet
these losses should be placed in context. Without payments to
pre-fund retiree health benefits, the Postal Service would have
earned $2.8 billion in 2008, and its anticipated net loss for
2009 would have been $1 billion.
Mail volume has declined for the last eight quarters and
the rate of the decline is accelerating. Single piece first
class mail volume continues to give way to the Internet, as
expected. New declines in business and advertising mail are
closely connected to the condition of the hardest hit sectors
in this historic economic crisis. The Postal Service must make
eight more annual payments, averaging $5.6 billion each to pre-
fund retiree health benefits. The Postal Service's annual
borrowing of $3 billion may not be enough to cover the gap
between revenue declines and cost-cutting measures. This could
cause the Postal Service to run short of cash to pay all of its
bills.
As a near-term strategy, the Postal Service is chasing
revenue declines with cost costs to limit losses. For example,
even before the recent volume losses, the Postal Service had
reduced its work force through attrition by more than 134,000
career employees since 1999. This year, the Postal Service has
set a challenge of reducing the equivalent of 48,000 full-time
employees. The Postal Service has streamlined its network
operations, closing airport centers, annexes and remote
encoding centers. It is increasing its effort to consolidate
processing facilities. However, if staff reductions are not
coordinated with facility reductions, the Postal Service runs
the risk of having protracted anemic staffing within an
oversized network.
Working with city and rural carriers, the Postal Service
has started restructuring the delivery routes to reflect
declining mail volume. The Postal Service has reduced
authorized staffing at headquarters and at area and district
administrative offices. Through a new rapid negotiation
program, the Postal Service plans to work with its contractors
to cut $1 billion from its existing contracts.
But cost reductions must be done carefully. One concern is
that the Postal Service may cut costs so rapidly and broadly
that it will be difficult to monitor the changes and guard
against unintended consequences. Aggressive cost reduction in
the short term could adversely affect service, productivity and
the Postal Service's ability to offer innovative products, and,
paradoxically, reduce its profits in the long term.
Even if the Postal Service achieves its desired cuts, there
will still be a gap between costs and revenues of as much as $6
billion if the current estimates hold. Action beyond the Postal
Service's authority may be needed. The Postal Service has
requested limited pre-funding relief. I support its requests.
Moreover, in this current economic climate, it may be
appropriate to skip the mandated pre-funding payment for 1 year
or to restructure the payments. The large pre-payments greater
than the Postal Service's annual net income in its very best
years.
The Postal Service is forced to borrow to meet this
aggressive payment schedule and borrowing today to set aside
money for a debt that will not be due until the future is an
unusual practice. Removing the annual $3 billion debt limit
should be considered. The current limit of $3 billion per year
may encourage unnecessary borrowing to retain cash as a hedge
against future needs.
Beyond the current crisis, the larger issue that must be
explored from an elevated vantage point is the unfolding
information revolution. New social dynamics and technological
innovations such as the Internet are bringing great changes to
the use of shipping and mailing services. Other sectors, such
as newspapers and periodicals and telecommunications are also
being transformed. Close monitoring and in-depth analysis are
needed to ensure that the essential roles of these industries
are fulfilled, and that the needs of all Americans, including
those in rural and poor urban areas continue to be met.
The Postal Service, along with its stakeholders, must focus
strategically on its future to discover viable options and find
its place with other information age industries. Change,
however, beneficial, is disruptive, and my office is very
cognizant of the fact that more than 700,000 families directly
depend on the Postal Service for their livelihoods. However,
these families are at risk of becoming the first casualties if
the Postal Service is unable to adapt rapidly to this new and
changing environment.
Thank you, sir.
[The prepared statement of Mr. Williams follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Lynch. Thank you.
Mr. Herr.
STATEMENT OF PHILLIP HERR
Mr. Herr. Thank you, Chairman Lynch, Ranking Member
Chaffetz, Congressman Davis.
I am pleased to be here today to participate in this
oversight hearing on the financial condition of the U.S. Postal
Service. As requested, my statement addresses the Postal
Service's financial condition and outlook and options to help
it remain financially viable in the short and long term.
First, regarding the Postal Service's financial condition.
Updated projections for this fiscal year suggest the magnitude
of the challenges ahead. Mail volume could decline by 22
billion pieces, a record 11 percent over fiscal year 2008.
While much of this decline is related to the housing market
downturn, the credit crisis and lower retail sales, mail volume
is expected to decrease for the foreseeable future as
businesses, non-profits, governments and households continue to
move to electronic alternatives. Its net loss is projected to
be $6.4 billion, if it cuts almost $6 billion in costs, which
would be unprecedented. Further, it faces a cash shortage of
about a billion and a half dollars.
Mr. Chairman, turning now to short and long-term options,
no single action will assure the Postal Service's short and
long-term financial viability. The Service has high overhead
costs that cannot be changed quickly, including 6-day delivery
and retail services at 37,000 facilities. Compensation and
benefits for almost 650,000 employees and about 100,000 non-
career employees generate close to 80 percent of its costs.
Several options have been discussed to assist the Postal
Service through its short-term difficulties, some of which
would require congressional action. The Postal Service has
proposed that Congress give it an immediate financial relief by
reducing payments to the Postal Service retiree health benefits
fund by an estimated $25 billion over the next 8 years. This
would decrease the available balance in the fund by
approximately $32 billion, including interest charges, in 2017.
Another option would be for Congress to provide the Postal
Service with 2-year relief for its fund payments, totaling $4.3
billion, which would provide immediate financial relief and
have much less long-term impact on the fund. We believe this
option is preferable. This would allow Congress to revisit the
Postal Service's financial condition in 2 years, while
assessing actions taken in the interim to improve its financial
viability. In other words, this approach would keep pressure on
the Postal Service to make needed changes. However, it is no
clear that either of these options will be sufficient to
prevent a cash shortfall from developing this year or next.
Looking to the longer term, progress will be needed in many
areas to reverse the growing gap between Postal Service
revenues and expenses. In January 2009, the Postal Service
asked Congress to eliminate the longstanding statutory
provision mandating 6-day delivery. In doing so, it provided
little information on where it would reduce delivery frequency
and the potential impact on costs, mail volumes, revenues,
mailers and the public. Stakeholder input could be provided
through an advisory input from the Postal Regulatory
Commission. Major changes in universal service should also be
done in close consultation with and approval from congressional
stakeholders.
Controlling wage and benefit costs will also be critical.
One option will be for the Service and its unions to agree on
changes during upcoming negotiations in 2010 and 2011. The
Postal Service has alternatives to provide lower cost retail
services at places other than traditional post offices, such as
selling stamps at supermarkets, drug stores, by telephone and
over the Internet. In the mail processing area, the Postal
Service has closed most of its airport mail centers in recent
years, but only one of over 400 major mail processing
facilities. Closing facilities would be controversial, but it
is necessary to streamline costs. Options also exist to reduce
postal transportation and delivery costs.
In closing, Mr. Chairman, accelerating declines in mail
volume means that the Postal Service could run out of cash this
fiscal year, thus short-term relief is urgently needed as well
as comprehensive action to maintain the service's financial
viability.
This concludes my prepared statement. I would be pleased to
answer any questions you or other Members have.
[The prepared statement of Mr. Herr follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Lynch. Thank you very much, both of you.
As you may have heard, we have a couple of votes, just two
votes on the floor. I expect we should be back here in about 25
minutes. Again, I apologize to all of you. Thank you.
[Recess.]
Mr. Lynch. Again, I apologize for the slight delay there
and being called there for votes. That is the nature of the
best, I guess. And again, thank you for your testimony, Mr.
Williams and Mr. Herr.
Let me ask, you touched on earlier on, Mr. Williams, an
issue that we have been discussing with previous panels
regarding the request in H.R. 22 for relief from the current
contribution plan into the trust. And I am interested in this
idea that you have proposed about, instead of going with the 8-
year plan as had been envisioned by Mr. Potter and others,
looking at a 2-year window and then I believe reassessing at
that point.
Could you expand on that a little bit? I think it has some
value. I haven't heard the other argument about why we
shouldn't do that, but if you could.
Mr. Williams. Actually, we are fortunate enough to have
GAO, and that was their proposal, that it either stopped or
paused after the 2-years. So I am going to ask Mr. Herr to----
Mr. Lynch. Mr. Williams, you did mention it though, right?
Mr. Williams. We did not.
Mr. Lynch. No, you did not. OK, Mr. Herr, I am sorry.
Mr. Herr. That is fine, no problem.
Mr. Lynch. I give you great credit, then, I am sorry.
[Laughter.]
Mr. Herr. The reason that we think that it is important to
do the 2-years is one, we recognize that immediate financial
relief is warranted. We think given the financial situation the
Postal Service is in, the amount that would be covered would be
$2 billion and $2.3 billion next year. So we think that would
help them overcome the cash shortfall that they are
anticipating for this year.
But we also think over the longer term it is important to
ensure the sustainability of the fund, to ensure that those
retirees and their families are covered, to have some certainty
that benefit will be there for them.
The thought behind the 2-year idea that we are sympathetic
to is that it provides also the Congress with the opportunity
to come back, take a look at this in 2 years, to see whether or
not the Postal Service has made the kinds of changes that are
needed to help it become, really thinking about its business
model, becoming more financially sustainable. So that keeps
your option open to come back, see whether or not you would
want to do this again, to provide two more or you would go
after the additional 8. It doesn't forego that, it just simply
gives you more options in terms of policy.
Mr. Lynch. OK. Well, I am going to go back and forth a
couple of times with that idea, back to the proponents and see
where we come out here.
Let me jump to another issue which is the housing
relocations. Mr. Williams, we did have a couple of stories in
the press, I know one by CNN, about somewhat exorbitant prices
being paid for relocation of Postal Service employees. A fairly
large amount, it looked like over $100 million in 2007, 2008
for relocation purposes and for employee reimbursements, I
guess. Have you looked at this issue in particular?
Mr. Williams. We have just received, actually, when CNN
first broke the story, we began, Senator Grassley called us and
we worked out a request for an audit of the area. We have
commenced the audit. Then Senator Collins joined the request
and expanded on its parameters a bit. So we have just begun
looking at that specific issue. We were very pleased to work
with your staff as well and have at least had discussions about
it.
We are trying to look at the instant case and we are trying
to find other cases like it, and then we are trying to look at
best practices employed by others. We hope to in a timely
fashion provide light on it in time for this look that Chairman
Gallagher referred to in hopes that we can affect its outcome
and make sure that we have informed the debate on both sides
and allowed enough information to be present to alter the
policies.
Mr. Lynch. OK. If it helps, we would make a formal request
to join with Senators Grassley and Collins as a House entity
interested in that issue. So whatever is required of us to get
involved and included in that loop on information, the
committee would greatly appreciate it.
At this point, I would like to yield to my colleague, Mr.
Chaffetz, of Utah for 5 minutes.
Mr. Chaffetz. Thank you, Mr. Chairman. I too had questions
about the relocation assistance policy, so it is good to know
that you are moving forward on that.
Mr. Williams, can you give us any insight and confirmation
that there is indeed an investigation regarding Mr. Potter
specifically as it relates to this possible sweetheart deal
that he got from Countrywide?
Mr. Williams. There is a very broad-based investigation
going on involving Countrywide being conducted by the U.S.
Attorneys Office. It is in early stages and we are cooperating
because of the incident that you explored and reported on
earlier.
We have done as much work as we can until records begin to
arrive in response to a subpoena that was issued by the
Department of Justice. They are mostly concerned with instances
where there was a clear quid pro quo on their end. But there
are going to be, there are other loans, including the one that
you brought up and discussed with the Postmaster General, that
also need to be examined. A light needs to be shed on those.
Mr. Chaffetz. Is that something you will specifically be
looking into?
Mr. Williams. We are. It is under the direction of the
larger investigation and that also is going to dictate a bit of
the pace of it. But knowing of your interest, of course, we are
going to make you aware of that.
Mr. Chaffetz. Thank you. I appreciate that.
My understanding is, and I want to see if you are aware of
the two postal employees in Elkridge that were recently
arrested for stealing more than $600,000 in stamps and selling
them on eBay. Do you have any reason to believe that this is a
widespread problem and do you have an other light on this
specific instance?
Mr. Williams. That is a very large instance. There have
been other instances of both the theft and diversion of
postage. It is postage and cash are of course are commonly
dealt with. They can also be concealed. They can be moved from
machine to machine and the Postal Service has a very good
policy of how to keep track of that and close out timely. But
policies aren't always followed. And in this instance, that is
precisely what happened. It had been a long time since those
had been audited. When they were audited we confirmed that the
losses were quite large.
Mr. Chaffetz. Are there mechanisms being put in place to
deal with it so that it doesn't happen even on a small scale?
Mr. Williams. They are doing their best to assure that the
policies that are in place for accountability and rapid
closeouts are being conformed with.
Mr. Chaffetz. Thank you.
Mr. Herr, this idea of 2 years versus 8 years, I just want
to explore that. Would that give them sufficient time in order
to maybe develop a more long-term plan?
Mr. Herr. I think that would be one of the benefits you
could see. As I mentioned in my oral statement, we think that
would also allow Congress to keep an eye on how things are
evolving in terms of the financial situation. One thing I would
like to point out about how the payments are structured over
the 8 years, they start off at $2 billion, but then by 2016
they actually go up to $4.2 billion. So much of the relief is
front-loaded, if you will. So that 2-year period would allow
Congress to look for a plan, look for what some of the options
would be going forward. We outline some of those in my
testimony as well.
Mr. Chaffetz. Very good. Last thing, Mr. Chairman.
Again, going back to the President's Commission that was
executed a couple of years ago, this idea of a postal network
optimization committee to look at the closing of facilities, is
that something you have taken an opinion on or want to state an
opinion on?
Mr. Herr. It is something I think in the past that has come
up previously . I think part of it would be a question of how
something like that were to be structured. Obviously, closing
postal facilities anywhere is an issue that is difficult for
the Service, I think partly because of interest from a number
of different parties. So it may be important to provide----
Mr. Chaffetz. Do you see anything formally underway at all?
Mr. Herr. Not that I am aware of, no, sir.
Mr. Williams. There is a great deal of activity with regard
to examining the possible combinations and reduction of this
oversized network that we have. But it is not a national
effort. There is a great deal happening at the local level. And
then the job of the national effort is to make sure that big
highways that the mail moves on and so forth are not disrupted
by local decisions.
But there have been a lot of closures already. There have
been 60 air mail centers and 52 annexes, 10 remote encoding
centers. There have been 10 of these successful local efforts,
there are 16 on the horizon now and deeper into the process
there are the beginnings of as many as 40 more. That is another
way of engaging in this without a BRAC-type of effort. But the
BRAC-type of effort does have merit.
Mr. Chaffetz. Thank you, Mr. Chairman.
Mr. Lynch. Thank you.
Mr. Williams, I don't know if you were here for the
testimony of Postmaster General Potter and Ms. Gallagher, who
was formerly on the compensation committee. In looking at the
framework that the compensation committee uses to determine the
CEO's salary here for the Postmaster General, there seem to be
a couple of balancing statutes. One is a statute that I believe
in 2006 requires the salary to sort of be pegged to the Vice
President's salary, 120 percent of that as a maximum.
Then there is another part of the statute I believe, it
might have been PAEA, that says the salaries to the degree
possible, should be comparable to private sector. Those seem to
be, at least in this case, at odds. In terms of the process
they used in arriving at the salary and then applying the bonus
and the whole package, did the compensation committee operate
within the legitimate framework? I know they had the same
struggle in terms of the testimony of Ms. Gallagher, she said
they sort of struggled with the two statutes and perhaps it is
Congress' fault for entering into an area of considerable
ambiguity in the statute, trying to get people to follow two
directions that are not necessarily going in the same
direction.
But your own opinion of the job they did?
Mr. Williams. Some clarity with regard to the two
references and the two directions would be useful. I know that
what we tried to do when we became aware that deferred
compensation had been paid, we tried to work with both your
staff and then we also worked on the Senate side to try to draw
together all of the legal references and assure that there was
a legal basis for both the bonuses and then for the usage of
deferred compensation, which I was not familiar with.
We worked with OPM as well, and they are telling us that
this situation that occurred here was the one for which their
opinions had been formulated, that if a salary and a bonus goes
over the cap, whatever that cap is, that it may be paid in
deferred payments. Then we asked them had it ever been done. In
my knowledge, we had driven off the map at that point. They
said 23 departments had done it and there were 81 individuals
that had been given deferred payments for this.
There does seem to be a legal basis for both of those, for
the bonuses and you gave some of the citations. They are a bit
fragmented and there are a number of them. And then for the
deferred payment, we rely upon Title V in OPM. Actually, GAO
has done some legal opinions with regard to abuses of deferred
compensation, and it does not appear that what happened here--
--
Mr. Lynch. Let me just sort of refine my question a little
bit, then. The deferred compensation aspect of this, you have a
current year cap and it seems to me that they exceeded that cap
by putting the money into the next year, or not necessarily the
next year, but future years. It looked to me, as someone who
worked for 20 years for a fixed wage, per hour, it seemed to be
a way of getting around the cap by putting the money in other
years, which I thought at least at first blush contravened the
intent of Congress in putting in a yearly cap. Am I wrong on
this, or how usual is this? Is it a function of, Mr. Potter,
using his example, has been an employee for 31 years. And so
obviously, over those years, and these are his latest years,
going into year 31, obviously he has built up some value in his
pension fund.
I guess what I am asking, is it a function of that, that he
is in the latter years of a long, long length of service in the
post office and now what he has there, the corpus of his
retirement is compounding rapidly now because he is at the end
of his career, is that it or was there a conscious decision by
the compensation committee to inject something, make a
contribution into something that actually exceeded the
statutory cap?
Mr. Williams. The deferred payments were not a result of
the accrual and increasing in value of his pension, as far as
we could determine. It looked as though that they arrived at
his salary and they did use consultants to do that, as Chairman
Gallagher said, and then they had the two bonuses, the one for
the PFP and the one for the contract that Governor Gallagher
was describing. Those went over the cap and so it defaulted to
this OPM decision and process for when that happens, then that
is to pay it in the next year for which you are eligible and
have not reached the cap.
So in most instances what that means is after retirement,
and in all likelihood, that is what is going to occur with
regard to the Postmaster General. So it was the bonus.
Mr. Lynch. Yes, a windfall, then.
Mr. Williams. I am sorry, sir?
Mr. Lynch. It was a windfall.
Mr. Williams. I am not sure if that is precisely the word I
would have used. They knew that they had gone over the cap. And
then they defaulted to the direction of OPM and that was the
applicable statute.
Mr. Lynch. All right, I am sure I have exceeded my time
limit. Are you OK?
Well, let me ask you, what would you suggest as a remedy?
We can't have this situation where you have a cap, I mean, do
you think it would be worthwhile for Congress to consider
clarification of the statute and then cap everything, plug
these holes and address that whole year to year deferment
situation?
Mr. Williams. Because my jurisdiction sort of ends at the
Postal boundary, I have not found out what caused OPM to
develop this system of deferred payments. That would be a good
thing to learn and to discover. We have some idea, but I would
like to have a much better understanding of that. The only
reason that we are having this committee examine this is
because it was disclosed by the Postal Service. Apparently it
has happened in 81 instances in 23 departments. This is a very
large issue and I don't understand why it was created. It could
have some merit, but I just don't know its origins.
Mr. Lynch. All right, that is a fair answer. If you are the
Inspector General and you don't know, then we all have a
problem. And I am sure you are being very diligent on the
issue. Maybe it is something the committee needs to look at
separately and apart from this one instance that might be
clouded because we keep referring to Mr. Potter. Maybe it is
better to look at it as sort of a statutory issue, take the
personal politics out of it.
Mr. Potter indicated that he thought the only way back to
viability is really through mail volume, increase in mail
volume. Technology does not support that trend, however, with
the use of emails and folks paying their bills online. It is
becoming, as the computer-savvy generation gets a little bit
older, it is usually old folks like me that use the mail for
paying their bills. So I don't see that situation getting any
better.
Do you think the facts out there and the trends support Mr.
Potter's assumption that things could get better on that end
and that we can balance, we can get this system back into
viability on volume?
Mr. Williams. I am not sure all the mail is going to come
back when the good times return. I do believe that the end of
this crisis is going to come and that some of the mail will
return. I think a better option are the ones that Mr. Davis and
Ms. Norton were talking about, a new model and a new plan.
There are a lot of options for viability out there for us. I
think it is going to be a very different type of Postal Service
when we come out of this.
Actually, shipping probably has a brighter future, and
certain kinds of mail are going to be become very important.
And we can probably migrate into things such as saturation or
neighborhood mail in a way that we have not in the past. As I
imagine the future, very powerful, sort of first mile, last
mile alliances with the competition would have all kinds of
benefits. It would be financially rewarding.
And then at the same time, it would allow a single large
truck to go through a neighborhood instead of all of these
trucks bumping into one another and moving through all these
crowded neighborhoods, from UPS and FedEx and no longer DHL but
the Postal Service. I think coming together would be a very
green solution and it would be financially very viable, too.
I think we can incentivize employees in a better way and we
can deploy them against the operational model in a more
flexible, agile fashion. I like what we are doing with seamless
acceptance and the intelligent mail bar code that is going to
allow all kinds of benefits for the customers and for internal
operations. The Postal Service has gotten much better in the
last few years on using information and gathering information.
Bill Galligan is sort of a national treasure with regard to the
development and understanding of operations that helped us
immensely tighten the efficiency of the operation.
I am pretty hopeful. Maybe not for the same reason. But we
have a lot of options. The other thing I loved about
Congressman Davis' comment is we do need to listen more. Our
customers are very, very bright, and sometimes I think we are
very guilty of not having listened to them. The people who make
the equipment are smart as they can be. They live by their wits
and I think a lot of times we turn them away with wonderful
ideas.
Mr. Lynch. OK. Mr. Herr, in your testimony, you suggested
that beyond the Postal Service's aggressive plan here that they
say is urgently needed for viability, you suggest that may not
indeed be enough, what they have on the table right now. What
action do you think is needed here if that is not enough?
Mr. Herr. Well, at this point they are looking to take $5.9
billion out in costs and as I mentioned earlier that would be
unprecedented. They have made good progress on it so far this
year. But to make sure that happens without any additional
shocks that could come, say, from a fuel increase or something
like that, so as we mentioned in the statement, they need to be
sure to think about that. Looking at retail facilities, if
there are opportunities to do that, and we specifically
mentioned facilities in urban areas rather than small rural
post offices, we think that may be an area, places that have
multiple options.
Other things, work with the unions to find ways to, there
have been some real efforts to reduce costs for delivery
services. That has been a real breakthrough agreement that they
had with one of their unions on that. So there are ways there
to move forward, too.
And I think more broadly, because 80 percent of their costs
are compensation and benefits, they need to take a look at what
options are there. That is certainly the largest cost center.
Mr. Lynch. Yes. And given the transportation costs
associated with the post office, we have caught a real break
here in the past 8 months with the price of fuel. That has been
somewhat of a stimulus. We have dodged that bullet while we are
facing some others.
I am not sure if the gentleman from Illinois has any
questions.
Mr. Davis. Mr. Chairman, I do.
Mr. Lynch. The Chair recognizes the gentleman from
Illinois, Mr. Davis, for 5 minutes.
Mr. Davis. Thank you very much, Mr. Chairman.
Mr. Williams, Mr. Herr, it is good to see you both.
Mr. Herr, let me ask you, the Postal Service is required to
pre-fund 80 percent of its future liability for retiree health
benefits by 2016. Do you know of any company in the country
that is required or chooses to pre-fund on such an accelerated
schedule?
Mr. Herr. I am not familiar with companies, but I do know
in the Federal Government, other agencies, including GAO, pre-
fund retiree health care benefits. My understanding from
talking with our financial folks at GAO is that the Postal
Service was behind in terms of making these payments. So in a
sense, this represents an effort to catch up. That is why,
well, one, their number of employees is large, and for that
reason the size of the payment is large as well, sir.
Mr. Davis. Also under H.R. 22, the Postal Service would
still be pre-funding on the order of some $2 billion a year by
2016, a little more than 4 percent of the unfunded liability
per year. Although most private companies do not pre-fund at
all, do you know any percentage of companies or what percentage
of companies in the private sector that might fund at that
level?
Mr. Herr. I am not aware, we did not look specifically at
the private sector. We took a hard look at the numbers the
Postal Service had provided to us.
Mr. Davis. Thank you very much.
Mr. Williams, let me ask you, we are obviously looking for
all the cost savings possibilities that we can possibly find,
hope to find, look to find, if there is anything to find. When
you look at the Postal Service's utilization of fuel, do you
have any comments that you could make relative to what their
utilization seems to be?
Mr. Williams. We have recommended to them in the past that
they engage in the purchase of futures of fuel. And of course,
that definitely faded into the background when the price of
gasoline spiked. As it lowers again, it might be tempting to
reconsider the purchase of that. I think as the network is
right-sized, there will be fewer places to drive between and
among. And that is going to result in some conservation. The
possibilities for alternative fuel is very exciting. I would
love to get more involved in it and I believe we are going to
be meeting with Congressman Serrano on exploring some of those
possibilities. Those would be great solutions if the technology
is mature enough.
We have taken a false step in the past with ethanol. We
bought ethanol, 1,300 trucks and we don't use ethanol fuel in
them, we use regular gasoline because of the availability. So
it does pay to look before we leap. But there are some exciting
possibilities out there on that front.
Mr. Davis. We have all been excited and delighted recently,
at least in the last 3, 4 months, but we never quite know what
might happen in the future. And just as we have experienced
some price reductions, it is also possible that we might be in
a situation again where the prices escalate. That is a
possibility.
Mr. Williams. I agree.
Mr. Davis. Thank you very much. I have no further
questions, Mr. Chairman.
Mr. Lynch. Thank you.
I want to thank both of you for your great testimony here.
Thank you for helping the committee with its work. We will
continue to work on a couple of these issues outside of
committee, outside of hearing. But we really appreciate your
willingness to come here and testify today. You are free to go
and have a good day.
I would like to invite the next panel up, just to get you
seated.
Welcome, gentlemen, Mr. Goff, Mr. Mapa, Mr. Keating. We
appreciate your willingness to come before the committee to
help us with its work.
It is the committee policy that all witnesses are sworn in,
so I would like to ask you to rise and please raise your right
hands.
[Witnesses sworn.]
Mr. Lynch. Let the record reflect that the witnesses have
answered in the affirmative.
Mr. Dale Goff is the president of the National Association
of Postmasters of the United States. Dale Goff is in his 39th
year with the U.S. Postal Service, and began as a postal
assistant in New Orleans. He has been a member of the National
Association of Postmasters for 29 years. His NAPUS positions
have included State president, national vice president,
national president, among others. He was also postmaster of the
year in 1994.
Mr. Charles Mapa is president of the National League of
Postmasters of the United States. Charles Mapa is a postal and
military veteran with 35 years of service. Mr. Mapa has been a
member of the National League of Postmasters for 24 years. He
has also served as the California branch vice president,
executive vice president and president. Mr. Mapa was elected
national president in 2006 and re-elected in 2008.
Mr. Ted Keating is president of the National Association of
Postal Supervisors. Mr. Keating worked for the U.S. Postal
Service for 40 years, following 4 years with the Air Force. Mr.
Keating began his membership in the National Association of
Postal Supervisors as a member of the Northeastern Branch 498.
For 15 years, Mr. Keating served on the Massachusetts State
Executive Board, including 9 years in which he held the
position of secretary-treasurer. Mr. Keating was elected to the
position of executive vice president of the National
Association of Postal Supervisors in August 1998. Mr. Keating
retired from the Postal Service in October 2004, and has
assumed the presidency of the Association in December 2004.
Welcome, gentlemen and Mr. Goff, if you could, we will
welcome your opening statement.
STATEMENTS OF DALE GOFF, PRESIDENT, NATIONAL ASSOCIATION OF
POSTMASTERS OF THE UNITED STATES AND POSTMASTER OF COVINGTON,
LA; CHARLES W. MAPA, PRESIDENT, NATIONAL LEAGUE OF POSTMASTERS;
AND TED KEATING, PRESIDENT, NATIONAL ASSOCIATION OF POSTAL
SUPERVISORS
STATEMENT OF DALE GOFF
Mr. Goff. Mr. Chairman, my name is Dale Goff. I am
president of the 40,000-member National Association of
Postmasters of the United States [NAPUS]. I am also postmaster
of Covington, LA.
I represent the managers in charge of the 27,000
independent post offices in this Nation. These post offices
serve urban, suburban and rural communities. Some of these post
offices support a network of postal stations, community postal
units and contracted postal stations. Other offices are so
small that they define the community, employ just the
postmaster and have limited hours of operation.
For customers living in isolated towns, the post office is
their lifeline to the outside world. During this past summer, a
New England postmaster illustrated this point at a PRC hearing
on the universal service obligation. The postmaster serves a
remote offshore town and is the commercial hub of the island.
The post office is the town's pharmacy, since mail order drug
companies are the primary means of dispensing medications, and
the town's bank, since money orders are used for commerce.
The picture being painted today is not very pretty. Mail
volume is crashing and so is its associated revenue. Service
cuts and work hour reductions are deep and wide. Residential
and business customers feel the squeeze as postmasters are
being directed to cut window hours, close on Saturdays,
consolidate delivery routes, defer necessary repairs and
restrict access to mail supplies. Service and safety are being
compromised. These actions are the result of factors that are
beyond the control of the agency. The economic contraction has
swallowed up mail volume and revenue.
My fear is that too short a financial lifeline is fools
gold. As front line managers, postmasters are highly qualified
to offer input with regard to the financial instability of the
Postal Service and long-term strategies for streamlining its
operations. First and foremost, it is crucial that the
committee report favorably H.R. 22, bipartisan legislation to
provide the Postal Service and its customers a temporary
financial lifeline. This measure permits the Postal Service to
accelerate the effective date of using the Postal Retirees
Health Benefit Trust Fund to pay current retiree premiums. It
amortizes the remaining fund liability to a more attainable
period of time. This proposal is neither a bailout, nor does it
cost U.S. taxpayers a dime. H.R. 22 is fair, responsible and
helps protect the universal postal service.
It is imperative to note that the crisis plaguing the
Postal Service is beyond its control and a fiscal climate
exists that Congress did not envision when the postal reform
law was enacted. Now the tools with which Congress equipped the
Postal Service and the associated fiscal requirements are
problematic. Postmasters are troubled by budget analysis which
theorizes that temporary postal relief would undermine
efficient business practices and aggressive cost-cutting.
Mr. Chairman, extinction of universal postal service would
be the product without passage of postal relief legislation. In
the absence of such legislation, postal doomsday falls on
Wednesday September 30, 2009. On that date, the Postal Service
will no longer be able to perform its constitutional duties on
behalf of our country. Eight percent of this Nation's gross
domestic product is tied to the Postal Service. So failing to
respond to this crisis is not an option.
The administration can help to alleviate this crisis. The
Office of Personnel Management has the authority to more
accurately recompute the 2002 estimate of the USPS projected
overpayment into the Civil Service Retirement Trust Fund. The
calculation made by the previous administration significantly
understated the overpayment.
The Postal Service can help itself. Clearly, the immense
postal bureaucracy contributes to inefficiencies in costs. In
2003, NAPUS testified before the President's Commission on the
U.S. Postal Service about the necessity to de-layer the
bureaucracy. Last Friday, the Postal Service took a step in the
right direction but fell short of this mark.
Fortuitously, last week I glanced through the manuscript of
a 1951 hearing before the House Post Office and Civil Service
Committee. The hearing record relates that the Hoover Report on
Government Reorganization provided for the decentralization of
the Postal Service into 15 regions, enabling closer supervision
of the more than 40,000 post offices. Mr. Chairman, today we
have 13,000 fewer offices than in 1951. Yet the Postal Service
finances about six times as many districts as proposed in the
Hoover report.
Mr. Lynch. Mr. Goff, you have exceeded the time limit. What
I am going to do is this. I am going to let you finish your
statement when I come back. I know you have a few more pages
there, I am reading along with you. But I have a vote on the
floor and I cannot miss it. Actually, I have two or three
votes. These will be the last votes for the day so we will be
able to finish up when I come back. Thank you, and again I
apologize.
[Recess.]
Mr. Lynch. Again, my apologies for the delay.
Mr. Goff, If you could just sum up that would be great, and
then we will continue with the testimony.
Mr. Goff. I will be glad to, Mr. Chairman.
Mr. Lynch. Thank you, sir.
Mr. Goff. The recommendation that was made back in 1951
said that instead of saving money and bringing about more
efficient operations, the cost for money for the post office
and the amount of bureaucracy that would be there that would
have little districts out there where we would have just all
different types of postmaster generals. What we are asking for,
Mr. Chairman, is that the future of the Postal Service is in
the hands of this committee and H.R. 22 is the only means right
now for the salvation that we could get.
Mr. Chairman, I do apologize, I am from the south so I talk
a little slow.
[The prepared statement of Mr. Goff follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Lynch. You talk just fine. Thank you, sir.
Mr. Mapa.
STATEMENT OF CHARLES W. MAPA
Mr. Mapa. Chairman Lynch, Ranking Member Chaffetz, members
of the subcommittee, good afternoon, wherever you are. With
your permission I would like to briefly summarize my testimony
and ask that my full statement be accepted and entered into the
record.
Mr. Lynch. Without objection.
Mr. Mapa. My name is Charlie Mapa and I am president of the
National League of Postmasters. We have been representing
postmasters since the late 1800's. I am pleased to appear
before you here today. Thank you for inviting all of us to
testify.
Before summarizing my statement, I would like to
congratulate Chairman Lynch on being named chairman of this
subcommittee. It is comforting to the League to know that the
Chair comes with a very strong postal background.
In my written testimony I address three topics: No. 1, the
overall state of the Postal Service and the need to allow the
Postal Service to refinance its obligation to fund our
retirees' health benefits as H.R. 22 would do. No. 2, the
importance of small post offices to rural America and the
minuscule amount of money that closing substantial numbers of
them would save. No. 3, the manner in which the Postal Service
has controlled costs over the last several years, the
diminishing returns of that approach and the means to better
increase efficiency and reduce costs.
Clearly, the Nation is in extremely troubled times. The
economy is at its lowest point since the Great Depression. The
Postal Service is in trouble and needs relief. H.R. 22 would
give some relief. The consequences of not acting are
disastrous. There are $8.4 million postal-related jobs and more
than $1 trillion in revenue attributed to the mailing industry.
That I believe is even larger than the auto industry.
If the mailing sector were to crash, it would shake the
American economy to the core and given its fragile condition,
it could bring the entire economy to a standstill. That must be
avoided at all costs.
Let me also emphasize that relief must exist beyond 2
years. Anything else would create a system that will appear to
be on the edge of disaster, held together by spit, glue and
rubber bands. That is exactly the image that will drive mailers
to aggressively seek alternatives to the Postal Service,
electronic and otherwise, that will result in a loss of volume
that otherwise should not have been lost and otherwise would
not have been lost.
H.R. 22 will save the Postal Service and it will do so
without spending a dime of the taxpayers' money. My written
testimony goes into much greater detail about how H.R. 22
works.
In terms of small post offices, when one comes to the world
of postal and public policy concerns, one often assumes that
many small offices could be closed, resulting in little harm
and significant savings. Usually that point of view is
predicated upon a misunderstanding of the role of the small
post office in rural America, and the mistaken belief that the
cost of maintaining these post offices is much greater than it
actually is.
My testimony shows that small post offices are vital to the
continued existence of rural America and that they truly bind
rural America together. When a small, rural post office closes
in a rural community, often the community ends up becoming a
ghost town.
Mr. Chairman, closing small post offices savings no
significant money. If one were to close the smallest 10,000
post offices, more than one-third of all post offices in the
country, the savings to the Postal Service would be minimal,
less than 1 percent of the Postal Service's budget. The bottom
line is that if the Postal Service wants to close a small,
rural post office and the community doesn't care, so be it. But
if the Postal Service wants to close a small, rural post office
and the community does care because it doesn't want to
disappear, then the Postal Service shouldn't close that office.
Finally, my testimony looks at the way the Postal Service
has reduced costs over the last decade and argues that a better
way to gain efficiency is to flatten the management structure
and eliminate unnecessary bureaucracy. One way the Postal
Service has saved costs is by reducing carrier and clerk hours
and shifting these hours onto the postmaster for the postmaster
to work instead of the clerk or carrier. Today, many
postmasters are working 60 and 70 hours a week, some even more.
Mr. Chairman, massive burnout is close. A disaster is looming
on the horizon and I would be remiss in my duties if I did not
make that perfectly clear.
Finally, instead of becoming more efficient, we are
becoming more and more bureaucratic, more telecons, more forms,
more reports. It needs to stop. One way is to eliminate
management layers. The Postal Service recently cut the number
of districts down to 74. It needs to do more and reduce these
down to something more like 40. The idea is not that cost
savings come from the positions cut, but from the streamlining
and removal of layers of management making decisions easier and
cheaper to make and easier and cheaper to implement. The thing
to do in these challenging times is to flatten the bureaucracy
and trust that postmasters will rise to meet the challenge. We
would do that if the Postal Service would let us.
Thank you for considering our views.
[The prepared statement of Mr. Mapa follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Lynch. Thank you.
Mr. Keating.
STATEMENT OF TED KEATING
Mr. Keating. Good afternoon, Chairman Lynch. It is
comforting to NAPS, as Charlie indicated, that my Boston accent
will not be a problem for this committee. [Laughter.]
Mr. Lynch. No, you will not need a translator with me.
[Laughter.]
Mr. Keating. The Postal Service continues to suffer from
the steady erosion of mail volume. Last month USPS reported the
eighth consecutive quarter of lower mail volume, volume down
more than 15 percent from where it was this time last year.
Even greater losses are predicted through the remainder of this
year. The last time mail volume fell by this much was in 1937,
in the midst of the Depression.
The Postal Service has not been passive in response to the
worsening financial condition. Over the past year, as mail
volume has continued to steadily decline, the Postal Service
has initiated aggressive cost-cutting actions that have reduced
the financial loss. The Postal Service has cut 50 million work
hours, stopped construction of new post offices and facilities,
instituted a nationwide hiring freeze, consolidated mail
processing operations, and reduced hours in many post offices.
Last Friday, it announced the closure of 6 of its 80
districts, the elimination of more than 1,400 mail processing
supervisor and management positions at nearly 400 facilities
around the country and the offering of another early retirement
opportunity to nearly 150,000 postal employees. These actions
are expected to save the Postal Service more than $100 million
annually. More job cuts are likely to come as downsizing
continues, operations are streamlined and processing and
delivery networks are made more efficient.
Indeed, much more remains to be done to restore the
financial health of the Postal Service. Congress needs to do
its part, Mr. Chairman. We urge the committee to move ahead and
promptly report out H.R. 22.
Even when H.R. 22 passes, however, we will not be out of
the swamp. Additional steps will be necessary. Let me take a
moment to comment on these additional steps the post office
should take. First and foremost, the Postal Service needs to
rethink its organizational structure and reorganize itself. Its
nationwide management framework, currently built around 10
geographic areas, is far too large and bureaucratic and costly
to be allowed to continue. The Postal Service should return to
an organizational structure based on five geographic regions.
It is time that the Postal Service applies the same cost-
cutting scrutiny to the members of its executive ranks as it is
applying to middle and lower management. Let me repeat that: it
is time the Postal Service applies the same cost-cutting
scrutiny to its executive ranks as it applies to middle and
lower management.
Second, the Postal Service should promptly withdraw from
the practice of buying homes for its employees ostensibly in
support of relocation needs. This policy has caused the Postal
Service to rack up significant losses. The downsides of this
policy are now becoming more and more evident as the Postal
Service faces an inventory of homes it must continue to pay to
maintain until it can sell them.
Third, the Postal Service should stop tolerating the
practice of detailing supervisors and managers to positions
that don't officially exist in the organizational structure.
Currently there are hundreds of supervisors detailed to these
ad hoc positions, created at the discretion of district
managers to address issues that personally concern them.
It is unfortunate, Mr. Chairman, that I need to raise an
internal management matter like this to your attention. It is
only one of the numerous problems that NAPS and the postmaster
organizations have raised with the Postal Service. Like so many
of the recommendations, they have been ignored by top USPS
management.
In conclusion, Mr. Chairman, the Postal Service faces grave
challenges brought about by the deep recession and aggravated
further by continuing electronic diversion. These challenges,
however, are not unconquerable. Through the three initiatives I
touched upon, including the swift passage of H.R. 22, the
finances of the Postal Service could eventually be stabilized.
Postal supervisors look forward to working with you and the
Congress to make sure that happens.
Thank you for the consideration of my testimony. I look
forward to continuing the dialog with you as time allows.
[The prepared statement of Mr. Keating follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Lynch. Thank you.
Let me begin by asking each of you, in terms of the
proposal by the post office presently to reduce delivery days
from 6 to 5, it seems from your own testimony that there is
more that can be gained from getting rid of some of the
bureaucracy here and perhaps even consolidating some of the
post offices and areas, other than the rural areas. I
understand the situation where the post office is the only game
in town. As Mr. Goff indicated in New England, you have post
offices that operate as a pharmacy, a bank, and in a lot of
small towns, the post office and the health center and a gas
station, that is pretty much your hub of some of these towns.
But in areas where you have a high density of post offices,
have we leapt over that phase instead and are looking to cut a
delivery day already? Are we going too quickly in this
suggested solution? Or should we be dropping back to look at
some of these ways of reducing costs?
Mr. Goff. Mr. Chairman, I know the 6 to 5-day delivery
thing, I can tell you as an organization, as the president of
NAPUS, that I am totally against reducing down to 5-day
delivery. And I say that for several reasons. Coming from one
of the largest cities and the operational side of this, just
think of the holidays that we have now, the 10 or 12 that we
have during the year. That day after the holiday, we are
constantly making up for the day that we just missed. So if we
had a savings on that 1 day of reducing down to 5 days, my idea
is that we are going to just play holiday every time after that
5th day, that we are going to catch up.
So, if there is a savings on that 1 day, we are going to
lose it on that following day.
Now, as far as the amount that would be saved from that, I
am not sure if the figures are all totally accurate. We have
heard three or four different figures today on just what that
savings would be. But from an operational side, how do we keep
the mail flowing? We flow it now. Are the retail areas still
going to work? Are the clerks still going to work to process
mail? So I am not sure that the big savings is there.
And when you talk about the consolidation of the postal
network or the stores that we have out there, I think there is
some room that we can do it as far as stations within the big
cities, the big urban areas. As you said, the rural areas, that
cannot be done. That is the life line of those communities. But
I would think that we could look at some type of area there
where we could take a station in downtown New York City and
maybe put some consolidation there. As was said earlier, do we
need to have one in every high rise building. I don't think we
do, because the volume is not there any more.
I still say that even though, and you heard Mr. Mapa say
that, we went down to 74 districts, there is still a lot of
room. Mr. Chairman, we have 50 States. We could go with 50
districts. Or better yet, we could eliminate all of the
districts and just stay with our areas we have out there. As
Mr. Davis said this morning about the communication age that we
are in now, and believe me, there are postmasters sitting in
this room right now that will tell you, Big Brother is there.
Big Brother watches us on the computer all the time. They know
everything that we are doing. I think that can still streamline
that way.
And it is incumbent upon us, whether it is management or
union or the upper executives in the Postal Service, that we
have to work together to change this structure.
Mr. Lynch. My time is just about expired. I would like to
give 5 minutes to the ranking member, Mr. Chaffetz.
Mr. Chaffetz. Thank you, Mr. Chairman. I would like to
further explore this idea of 5-day delivery, I would like to
get the other gentlemens' input on that. Is there some sort of
sliding scale or maybe it is not for every single week, or 10
days a year? Is there somewhere in between that you find
acceptable?
Mr. Mapa. Five-day delivery, it sounds good, on the outset.
But then if you examine it like Mr. Goff has done, he is there
in the post office on a Tuesday after 3 days off. The mail
accumulates. You are delivering Saturday, Sunday and Monday
mail. And that holiday mail. So if we are going to take another
delivery day out of the week, then that means you are going to,
every week, be delivering 3 days of mail on, let's say, a
Monday. It is a real challenge. Your carriers have to carry a
lot more mail. You have a lot more mail to put in the boxes.
You have up times that you are punished for if you don't make
it in time for that. So that is one aspect that we have to
examine.
The other aspect is even though they say that 85 percent of
Americans don't care if we deliver mail to them on Saturday,
what about the 15 percent that do? Who are those 15 percent?
Are those the businesses out there that actually pay a lot of
money into the postal system that help keep us going? I don't
think we need to be too cavalier when we say we want to go to
5-day delivery. I think there are a lot of aspects that we
really have to examine before we jump on that.
Mr. Chaffetz. Do you have other suggestions? I don't think
anybody necessarily wants to do this. The question is, what are
we are going to have to do and what is most palatable, what is
not? So in its place, I guess a challenge to all three of you
is, in its place, what other options are there to come up with
literally a couple billion dollars?
Mr. Mapa. Before we came here today, we did not sit down
and compare notes about what kind of testimony we would do. But
I saw in all three of our testimonies we called to attention
the immense bureaucracy in the Postal Service and the need to
reduce that. I know that Ted would love to have his supervisors
be able to supervise, Dale and I would love to have our
postmasters be able to run their post offices. We are
responsible people, we have been trained to manage. If you gave
us half a chance, I think the Postal Service would be
surprised. But we are so into micromanaging every breath, I
just think it is unhealthy the way we do things in the Postal
Service.
Mr. Chaffetz. I want to give a little time to Mr. Keating,
please.
Mr. Keating. Sure. I too have previously testified against
the 5-day delivery. I think that it would be the beginning of
the end of the Postal Service as we know it as a service to the
American people. I think that the layers of management are one
thing, but there is a lot of, the Postal Service came to us
last year, the three organizations, probably the unions too,
and asked for givebacks because of the financial situation. We
thought about it, and in the end we eventually said no, because
we see daily the waste that goes on in the Postal Service. We
give them ideas about how they can save money and they totally
ignore it.
So until we see postal headquarters addressing some of the
issues that we have given to them, we are not going to be
thinking about giving givebacks to the Postal Service. There
are a lot of things we can do internally still to get the
Postal Service back in shape. I believe we can do that.
Mr. Chaffetz. Mr. Goff.
Mr. Goff. I agree with Mr. Keating. That was my thought,
when you asked that question. There are so many things that we
have brought forward, and just to be told no, that we are not
going to do that. We heard several times today that you are
consulting with the management associations on some issues. And
I think you saw me a couple of times just go like that, and I
am going, well, I don't remember talking about that. Maybe they
are going to consult with us in the future on it.
But there are some issues that we have brought forward, the
details that are out there, the money that we spent on people
per diem staying in hotels as they work on the details
somewhere. And some of these districts, and I can speak back
for home, you may have 15, 20, 30, 50 people working on
details. There is cost involved there. We have other areas we
can tighten up with.
Mr. Chaffetz. I guess one of the challenges that I would
ask you all long-term and short-term as well to work toward and
to think about that I would be particularly interested in
seeing is, the idea of consolidating distribution facilities,
post offices, I think there is a distinct difference between a
rural post office, which could be the center of town, I can
think of several in my district. I have a very urban component,
I have a very rural component. I think of Oak City. Oak City in
my district is a very, very small town, but the post office is
the center of town. It is where people gather, they do a lot
more than just pick up the mail.
I think it is a very different equation than how you deal
with maybe an urban center or downtown where there may be post
offices that are literally two or three blocks apart from each
other. How to tackle that issue I think is something that needs
to be addressed long term. My time is out now, the light is
red, but maybe we can explore this more in the future.
Thank you, all three of you, for being here. Thanks, Mr.
Chairman.
Mr. Lynch. Thank you.
Also, I would like to point out that we are going through a
process right now about how to deal with the instability in the
Postal Service right now. We do have your testimony. Some of
these parts of solutions are loosely developed and others are
more detailed, such as H.R. 22. But we would want to hear from
you. I think it is very important that the postmasters, folks
that are on the front lines and trying to manage this system,
have an opportunity to try to contribute to the solution. I
think that is a very important piece there.
So just as the Chair of the committee, and I am sure I
speak for the other Members on both sides, we welcome your
input. I think you have pointed out some things that we haven't
heard from the other panels. And I think they are well-founded.
Let me ask you, Mr. Goff, you also mentioned in your
testimony about the possible projected over-payment by the U.S.
Postal Service into the Civil Service Retirement Trust Fund and
the fact that OPM could go back and more accurately calculate
that. That is something that interests me, because this H.R. 22
issue and how we solve that or provide some relief to that
funding requirement is a very important piece here. Everybody
has talked about that. If we don't have accurate numbers in
terms of what is required in the first place, we need to have a
solid base that we are operating from. I need that number to be
as hard as possible, the number that we need and the amount of
relief, obviously, that is required.
Could you expand on that a little bit, amplify that point?
Mr. Goff. Just as we have been talking, we are trying to
look at ways that we can go back in and help the Postal
Service. Just as you were saying, too, we feel under the
previous administration that when we got this situation taken
care of, the figure that came about, it was one that was OK for
everybody, yes, we were overpaying. But we still feel after
looking at it for a while now that the overpayments, we are
still overpaying into that fund. I think that needs to be
looked at. It is just another area that we think we can go in
and find some additional funds that the Postal Service would
have.
Mr. Lynch. OK. Just so you know, I have asked my staff,
committee staff to send a letter to John Barry, who is the new
Director of OPM, and ask him to give me a good hard number,
look at these numbers again and obviously, in this environment,
we can't have the Postal Service overpaying. Then we have to
figure out a way to provide some relief that there that doesn't
put the whole health benefit system in jeopardy. We are trying
to find a way forward here on that point, much as H.R. 22 has
suggested.
But I want to have, you sort of, you need to have the right
numbers to work from before you throw a projection out there,
otherwise we are acting on bad information. We can't have that,
because there is so much at risk here. But just so you know, I
understand what you said, and we are going to try to get a
better number on that going forward.
We appreciate your coming before us. We appreciate the
testimony that you have rendered here. This is an ongoing
process. So we want you to be involved here. We think you have
a lot that you can contribute in your years of service and your
perspective. And you are welcome partners in this, I just want
you to know that. Your insight has been very valuable to the
committee. Thank you very much.
We have the final panel, welcome, gentlemen. It is the
committee policy that all witnesses are sworn in. May I ask you
to rise, please, and raise your right hands.
[Witnesses sworn.]
Mr. Lynch. Let the record show that the witnesses have
responded in the affirmative.
I will give a brief introduction and then we will have your
testimony. Mr. William Burrus, president of the American Postal
Workers Union, AFL-CIO, represents the largest single
bargaining unit in the United States, which consists of more
than 330,000 clerk, maintenance and motor vehicle employees
working in 38,000 facilities in the U.S. Postal Service.
Mr. William Young is president of the National Association
of Letter Carriers. He is the 17th president of that
association. Its 300,000-member union represents city letter
carriers employed in the U.S. Postal Service.
Mr. John Hegarty is president of the National Postal Mail
Handlers Union. Mr. Hegarty was sworn into office as National
Postal Mail Handlers Union president effective July 1, 2002.
For the 10-years prior to becoming the national president, Mr.
Hegarty served as the president of Local 301 in New England,
the second largest local union affiliated with the Mail
Handlers Union.
Mr. Don Cantriel is president of the National Rural Letter
Carriers' Association. He began his postal career in Bland, MO,
where he was a member of the National Rural Letter Carriers'
Association. Mr. Cantriel has served at all levels of the
association, beginning with the president of his local unit.
Welcome, gentlemen, and if I could, I would invite Mr.
Burrus for his opening statement.
STATEMENTS OF WILLIAM BURRUS, PRESIDENT, AMERICAN POSTAL
WORKERS UNION, AFL-CIO; WILLIAM H. YOUNG, PRESIDENT, NATIONAL
ASSOCIATION OF LETTER CARRIERS, AFL-CIO; JOHN F. HEGARTY,
NATIONAL PRESIDENT, NATIONAL POSTAL MAIL HANDLERS UNION; AND
DON CANTRIEL, PRESIDENT, NATIONAL RURAL LETTER CARRIERS'
ASSOCIATION
STATEMENT OF WILLIAM BURRUS
Mr. Burrus. Mr. Chairman and members of the subcommittee,
thank you for convening this hearing on the financial stability
of the U.S. Postal Service and for providing me the opportunity
to testify on behalf of the dedicated employees that our union
represents.
I commend the committee through your leadership, Mr.
Chairman, for convening today's hearing on this critical topic
at a pivotal time in the history of the U.S. Postal Service.
Mr. Chairman, I will summarize my remarks, but I ask that the
complete written testimony be admitted into the record. It has
been a long day and I will try to be as brief as I can.
The Nation and the world are experiencing a financial
collapse that is unparalleled in modern history and the Postal
Service, like most institutions in our society, has been
adversely affected. Mail volume has declined, leading to
deficits that threaten the very foundation of the Postal
Service.
The Postal Service can take steps on its own to respond to
the crisis, but Congress must also play its part. The most
important thing that Congress can do is to pass H.R. 22, which
will provide temporary relief from the crippling obligation to
pre-fund future retiree health care costs. Absent this relief,
it is unlikely that the Postal Service can survive in its
present form.
Over the past 10 years, as the mailing industry engaged in
debate over postal reform, the overriding focus was the impact
of email, the Internet, and the cost burden associated with
serving an additional 1.8 million delivery addresses each year.
With all the emphasis on a new form of communication, there was
no focus on the real driving factor of hard copy
communications, the economy. And as the country slid toward the
recession that now engulfs us, no attention was paid to
declining mail volume due to economic stagnation.
Advocates of postal reform ignored the burden that pre-
funding retiree health care liabilities would pose on a service
that would soon suffer double digit volume reductions as a
result of the Nation's economic decline. The postal community
identified the wrong threats and was totally unprepared for the
challenges we now face. Email, the Internet and other forms of
instant communications are viewed as direct challenges to hard
copy communications. But we have known about them for years.
And looking backward is of little value when we need a vision
for the future.
The numbers speak for themselves. Annual deficits are
expected far into the future. Yet the only solutions postal
management has offered are reductions in work hours,
consolidation of facilities and 5-day delivery. It is expected
at some point management will suggest modifications to
employees' wages and benefits in order to stem the tide of red
ink. But I defer to that time any public comment on that
possibility.
I would like to inform Congress that of the group
representing postal employees, the crafts represented by the
APWU have been reduced disproportionately, 110,000 employees
over a 10-year period. We would expect that reductions and
other sacrifices would be shared equally among the entire
postal community. But no business can exist for long with a
strategy based on cost reduction alone. Eventually it will
become impossible to maintain an acceptable level of service
and there will be nothing left to cut.
However, there are steps management can initiate to address
the issue of financial stability. They could begin with a
fundamental shift in the relationship between the Postal
Service and commercial mailers. And I quote an observation by
Joy Leong, a contributor to the newsletter Mailing Systems
Technology, ``Mailers are customers of the Postal Service, not
shareholders. Printers, mail fulfillment services and other
vendors are contractors of the Postal Service, not
shareholders.'' In recent years, these lines have been blurred
and major mailers have assumed the role of shareholders. They
have formed organizations that have been granted unfettered
access to the inner working of the Postal Service and to the
decisionmaking process.
One umbrella organization has even been afforded office
space in postal headquarters. This cozy relationship between
postal executives and major business mailers is unhealthy and
counter-productive. One of the byproducts of this relationship
is the preservation of work share discounts that benefit the
mailers at the expense of Postal Service stability. I have
repeatedly shared with Members of Congress the views of my
Union on excessive work share discounts and their corrosive
effect on postal finances. Because over time, work share
discounts have morphed into a disgraceful policy that rewards
large mailers with rate reductions so extreme as to be absurd.
Mr. Lynch. [Remarks off microphone.]
Mr. Burrus. Yes. Let me make this one point, Mr. Chairman.
After investing $20 billion in automation designed to affix bar
codes on handwritten and other non-bar coded mail, the Postal
Service has converted a 1 cent per piece cost into what amounts
to a 10.5 cent bonus to work shares. This practice, policy and
ratemaking process is detrimental to the health of the U.S.
Postal Service.
But I have sung this song before, Mr. Chairman. Throughout
the debate on postal reform, I have said that postal management
has chosen a path that would lead to insolvency, and let me
close with this, Mr. Chairman. The USPS' current predicament is
the result of a flawed business strategy and a lack of vision
of how hard copy communications can be relevant into the
future. Management has failed to find a meaningful role for the
world's best delivery force, a system that reaches every
American home 6 days per week, has a network of 40,000
facilities, enjoys stellar name recognition and boasts a
dedicated work force. Until the Postal Service finds a way to
morph that proud tradition and work force into a meaningful
role, far into the future of the Nation's communications
systems, even with H.R. 22, the Postal Service will not be long
for the future.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Burrus follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Lynch. Thank you, President Burrus.
President Young.
STATEMENT OF WILLIAM H. YOUNG
Mr. Young. Good afternoon, Chairman Lynch and Ranking
Member Chaffetz.
My written submission describes in some detail how and why
we have come to this critical point in history of this
extraordinary institution. It provides background on the
retiree health issue, its funding, and it outlines specific
recommendations. Primary among them is H.R. 22. I am pleased to
note that 9 of the 11 members of this subcommittee are now co-
sponsors. You join the 208 other co-sponsors in the House of
Representatives. That is very encouraging to all of us here.
When the American public reacts with outrage and disgust at
the travesty of AIG, and when they fume about bailouts for
banks, brokers and insurance companies that often reward
wheeler dealers who got us into these unprecedented financial
messes, you listen and you act. And you should. But I hope the
innocent victims of this greed, the corruption and incompetence
of Wall Street, don't get lost in the midst of all this anger.
And believe me, my members are angry too. The financial elite
of this country, aided and abetted by misguided deregulation,
have trashed our economy. And the historic recession we face
threatens the jobs and well-being of 700,000 postal families
across the country.
Nothing we did, nothing the Postal Service did and nothing
the postal industry did caused this crisis. So we hope that
Congress will listen and act to help us overcome it. I want you
to know that all of us are doing everything that we can do. The
Postmaster General outlined that in his testimony, I won't
repeat it here.
I would suggest to you that letter carriers know a little
something about helping out in a crisis, about steadiness when
there is panic in the air, about sharing and about sacrifice.
When anthrax appeared in the mail stream, the chances of public
panic were significant. Letter carriers didn't panic. They
continued to do their jobs in a very frightening environment.
There was no public panic, and eventually things returned to
normalcy.
When Katrina devastated the Gulf Coast, many letter
carriers lost their homes and all of their possessions. It was
not until letter carriers appeared on the streets of New
Orleans that the public panic began to subside and that
normalcy returned.
When officials from the Homeland Security Department needed
a way to distribute vaccinations in our country if it came
under a biological attack, the Nation's letter carriers stepped
up to the plate and volunteered to make those distributions
under the City Readiness Initiative. Every year we volunteer
our services, we conduct the Nation's largest food drive on the
second Saturday in May. We replenish all the local food banks
across America, delivering over 70 million pounds of food.
We do these things because we accept our role in society.
We are the men and women trusted by America to deliver their
mail. We come to you now because the Postal Service is in
trouble, and we need your help.
We contend that before you consider any drastic and
counter-productive measures, such as the move to 5-day
delivery, or redefining universal service, Congress can and
should take several other steps to strengthen the Postal
Service, starting with the passage of H.R. 22. I outlined those
other things, by the way, in my testimony, and I won't bore you
with it here this afternoon.
With all due respect to Chairman Gallagher and Postmaster
General Potter, this is not the time to undercut public and
mailer respect for and reliance on the Postal Service by
reducing postal services drastically and counterproductively to
5 days a week. The Nation's mailers have diverse needs and
business is conducted 6 days week in America. In general, they
want 6-day delivery, need 6-day delivery and expect 6-day
delivery. If the Postal Service doesn't provide it, some one
else will demand the right to do it, and that will only add to
the woes of the Postal Service.
Now, we are here not to ask for a bailout. We are simply
asking to use money that we have already put aside, our own
money, the Postal Service's own money, to get us through this
crisis. I am not going to get into a debate with you all about
scoring rules, which we all know can mean what we want them to
mean when it suits our political purposes. But I am confident
that the same American public that is quite sure something is
very wrong about bailing out AIG believes very strongly that
something is right about the Postal Service. They may not
appreciate AIG's traders scurrying off with multi-million
dollar bonuses, using taxpayers' hard-earned dollars, but they
do appreciate their letter carrier earning his middle class
salary, paying their taxes, raising their children in the
community and faithfully delivering their mail each day.
And they will thank you for helping the Postal Service to
use its own rainy day fund to do that with a binding obligation
to restore that rainy day fund when this crisis is past. Not a
bailout, not a subsidy, not a loan. Our own money. How do you
score that? Well, I will tell you how I score it, I score it a
home run for everyone, the Postal Service, postal employees,
mailers, postal customers, and oh, by the way, the Congress of
the United States.
Before I conclude, I would like to address one further last
issue. Earlier today, Chairman Lynch, you said that your
concern about H.R. 22 was that it would leave a $75 billion
unfunded liability in 2016 for future retiree health benefits.
First, I share your concern. These benefits are my members'
benefits, and I would never support legislation that would
endanger their payment.
Second, you should note, sir, that the $75 billion estimate
is highly uncertain, if not suspect. It assumes that retiree
health benefit premiums will increase 7 percent a year forever.
If there is anybody in that country who can survive that, I
would like to know who it is. Seven percent a year, every
single year, forever. I am going to submit a report from Watson
Wyatt that shows that Medicare and Medicaid don't even believe
that. Their more realistic, long-term trend rate is 5 percent
annually. That ought to be instructive.
Third, I would like you to know, sir, that under H.R. 22,
the balance in the retiree health fund will continue to grow
from $32 billion today to $71.5 billion in 2016. Do you know
how much the typical private sector company has pre-funded for
its employees today? Zero. Do you know how much the Treasury,
the Commerce, the Labor Departments have pre-funded? Zero. Do
you know how much the Congress of the United States has pre-
funded for you and your employees? Zero.
So please, let's not kill the Postal Service out of an
understandable yet tenuous concern about unfunded liabilities
in 2016. The reality is, we need to re-examine the whole issue.
I am delighted to hear you said that you were going to look
into that, sir. The current funding schedule was set by the
prior administration to meet short-term budget scoring rules.
It wasn't set on the basis of any sound public policy or any
sound accounting principles. In fact, and this is the part I
think you would be most interested in, sir, in fact, a fair
accounting of the Postal Service----
Mr. Lynch. You really have to wrap up, sir.
Mr. Young. This is it.
Mr. Lynch. I appreciate that you have been here all day and
I am cutting you some slack. I get your message.
Mr. Young. Can I finish one sentence?
Mr. Lynch. Please do, yes.
Mr. Young. In fact, a fair accounting of the Postal
Service's surplus and Civil Service Retirement Fund, which the
OPM calculated and the PAEA allocated to the retiree health
benefit fund, would most likely offset any unfunded liability.
Zero. Thank you, sir.
[The prepared statement of Mr. Young follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Lynch. I thank you.
President Hegarty.
STATEMENT OF JOHN F. HEGARTY
Mr. Hegarty. Good afternoon, and thank you, Chairman Lynch,
Ranking Member Chaffetz. I appreciate the opportunity to
testify and I would ask that my entire written testimony be
submitted for the record.
Mr. Lynch. Without objection, so ordered.
Mr. Hegarty. As with your predecessor, it is an honor to
have someone as Chair of this subcommittee who has such a rich
background in labor and postal issues, Mr. Chairman. I wish to
focus my comments today on what Congress and the executive
branch can do, as well as what we, the Mail Handlers Union, are
doing to help the Postal Service through its current financial
crisis. The first step is to simply enact H.R. 22.
How often does Congress see a bill that would rectify a
multi-billion dollar debt situation, keep a vital function of
Government alive, yet cost the taxpayer not 1 cent? That is
what H.R. 22 does.
How often are the Postal Service, the mailers, the unions,
the management associations and the $900 billion industry
associated with the mail all on the same page? This is it, and
it has bipartisan support.
Aside from not costing the public the public a penny, H.R.
22 has the added benefit of continuing to increase the amount
of money in the trust fund for future retirees' health care,
and it does not reduce any health care benefits. Furthermore,
it gives the Postal Service some flexibility for the
foreseeable future. And I fully support keeping the trust fund
healthy.
All of us at this table are in agreement. There is one
aspect of this process, however, that I would like to address,
the imposition of the CBO scoring on this bill. If CBO scores
an obstacle, then Congress needs to take a close look at the
problem created by the rules under which CBO operates. The
scoring issue may be singular to the Postal Service. It is a
quasi-governmental agency, which receives no Federal
appropriation for its operations. It is off budget for some
purposes and on budget for others. Why should an
intergovernmental transfer of U.S. Postal Service funds that in
the long term will not change the finances of the Treasury by 1
cent and will not change the Postal Service's total obligation
or the total amount of their retiree health care benefit fund,
be construed as adding to the deficit? Why should a fix that
does not cost the taxpayers or the users of the Postal Service
one penny be scored? While it may make some sense in an
academic accounting ledger world, it does not make common sense
in the real world.
If legislation similar to H.R. 22 is not passed, the Postal
Service may not be able to meet all its financial obligations
as soon as September 30th of this year. That inaction would
lead to a much bigger debt, the debt incurred by American
society if we allow the Postal Service and the $900 billion
industry which depends on it to fail. I obviously think
Congress should figure out a way to pass H.R. 22. It is, in the
words of President Obama's Reinvestment Act, temporary,
targeted and job-saving. It is similar to the stimulus aid sent
to the States to prevent layoffs and cuts in services. I hope
the subcommittee will look closely at this issue.
I am often asked, what are we, the Mail Handlers Union,
doing to help the Postal Service cut costs. There is a complex
story to be told here. First, during the past 10 years,
thousands of mail handler jobs and more than 100,000 total
postal jobs have been eliminated, mostly through attrition,
while the mail continues to be processed and delivered
professionally and on time. That is why postal employee
productivity is at an all-time high.
We have also aggressively pursued labor management programs
to reduce overhead. Let me give you just a few examples. The
ergonomic risk reduction process has succeeded in reducing
repetitive motion injuries by as much as 35 percent. Because of
the forceful backing of the Postmaster General and his
headquarters staff, plant managers have embraced this effort.
It has been estimated that the ergonomic risk reduction process
saves on average 20 injuries per facility per year where the
process is used, about a fivefold return on the dollar. These
reductions account for approximately $77.8 million in cost
avoidance.
Then there is the voluntary protection program which is
driven by employees and is OSHA-related. It looks at the cause
of a specific, often traumatic injury, and seeks to prevent a
recurrence. There are measurable differences in the injury
rates in facilities that use this program versus those that do
not.
Starting in 1999, the Postal Service and our union
developed a joint contract interpretation manual to encourage
union and management representatives at all levels to resolve
and reach consistent results on pending issues. It has saved
many millions of dollars and added a level of predictability
and responsibility to our craft.
The parties also have a quality of working life program,
which provides opportunities for mail handlers and supervisors
working together to identify and resolve work problems in the
work place. The Postal Service reports that the savings are
substantial, in the millions of dollars.
Finally, as a former labor leader, Mr. Chairman, you know
how complicated a give and take process collective bargaining
can be. Yet in our current contract, which was negotiated in
2006, ratified by our members and expires in 2011, we are
reducing by 1 percent each year the amount the Postal Service
pays toward our health care. The other unions and management
associations are also on board with these reductions. The
Postal Service's cost eventually will be reduced by more than
$250 million per year when all unions and postal employees are
taken into account. In these 5 years alone, the Postal Service
is saving over $800 million, just from this one contract
provision.
So in my view, the unions have stepped up to the plate. We
ask that Congress do the same by passing H.R. 22.
Thank you for your time and attention. I will be happy to
answer any questions you may have.
[The prepared statement of Mr. Hegarty follows:]
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Mr. Lynch. Thank you, sir.
President Cantriel.
STATEMENT OF DON CANTRIEL
Mr. Cantriel. Thank you, Chairman Lynch, members of the
subcommittee. I would like to extend my thanks to the committee
for scheduling a hearing on restoring the financial stability
of the Postal Service.
I would ask that my full testimony be submitted for the
record.
Mr. Lynch. Without objection.
Mr. Cantriel. I will give a brief summary of my statement.
Mr. Chairman, as the NRLCA's national president, it is in
our members' best interest to work toward the creation of a
financially stable Postal Service. Toward this end, our union
has been working together with the Postal Service to establish
revenue-generating programs along with ways to reduce costs for
the Postal Service.
One revenue-generating program we use is called Rural
Reach. To date, the rural carrier craft has generated $26
million for the Postal Service and we fully expect by the end
of the first full year of existence to exceed $30 million in
revenue for the Postal Service.
Our union is the only union that can claim that actual
employee wages, what our employees take home in his or her
paycheck every 2 weeks, is in large measure based on mail
volume. Every year, rural routes are evaluated and rural
carrier salaries are established based on the work performed
each day during the evaluation. Mail volume is a critical
factor in the salary-setting process. During boom times for the
Postal Service, rural carriers can see an increase in the route
evaluations. Until recently route evaluations generally went up
due to increased mail volume and an expanding customer base.
Unfortunately, our last two mail counts resulted in
significant reduction in rural route evaluation, impacting tens
of thousands of rural letter carriers and causing their
salaries to be lower. Last year, in a 2-week mail count, rural
routes served by our members lost anywhere from 2 to 12 hours
of pay each week. Each evaluated hour is worth more than $1,500
per year. So you can see how declining mail volume dramatically
affects the men and women we represent.
This year, the NRLCA had a 4-week mail count during the
last 2 weeks in February, the first 2 weeks in March. Official
results from this recently completed mail count are not
available. We are once again expecting rural route evaluations
to go down, not up.
The point I am making is quite simple: our people are
hurting. They are making less money or in some cases opting to
work an additional day to make the same amount of money. It is
pretty simple: reduction in rural route evaluations translates
into direct savings to the Postal Service. If mail volumes
decline, chances are very good that the Postal Service will be
paying our members less because there will be less mail to
deliver and collect each day.
Never let it be said that rural carriers are not doing
their part to help the company. We have been doing it for
decades with our evaluated compensation system. If the business
falters, labor costs, at least rural letter carriers' labor
costs are adjusted downward. Every postal employee we represent
knows in the pocketbook what it means for the company to be
challenged by declining mail volume.
The Postal Service can save literally hundreds of millions
of dollars if routes are evaluated when mail volume is low. But
this annual adjustment mechanism does not stop with salaries.
Most rural letter carriers still provide their own delivery
vehicles, from which they are paid an equipment maintenance
allowance. EMA is adjusted quarterly by measuring fluctuations
in CPI-W, transportation index. In other words, EMA payments to
rural carriers go down when costs, including the costs of fuel,
go down. These regular adjustments have recently resulted in
significant cost savings for the Postal Service, as gasoline
and automobile prices have dropped sharply.
Our union, like the other postal unions during the last
contract negotiations cycle, lost some ground on health benefit
costs and now pays a large percentage of health insurance
premiums. Our members now pay more while the employer
contribution to Federal employee health benefit premiums, as a
percentage of total cost, is lower. As health care costs for
businesses and corporations continue to rise, our union members
will pay an additional 4 percent of the Federal employees
health benefit programs over the life of the current collective
bargaining agreement. It is another example of how our
bargaining unit has provided additional savings to the Postal
Service.
The most important piece of legislation Congress should
enact is H.R. 22, introduced by Representatives John McHugh and
Danny Davis. The Postal Service is saddled with an ambitious
payment schedule to pre-fund its retirees' health benefits.
This is an obligation no other corporation or Government agency
is required to pre-fund. The last administration required this
provision to be included for one simple purpose, to make the
PAEA budget neutral.
There are several other savings opportunities that the
Postal Service would have based on the actions of Congress,
including helping them with the Medicare Part D, recalculation,
looking at the way that the FERS retirement system is set up,
and the payment that is made for military retirees.
Mr. Chairman, members of the subcommittee, thank you for
allowing me to testify before you today. I would be happy to
answer any additional questions you may have.
[The prepared statement of Mr. Cantriel follows:]
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Mr. Lynch. Thank you. Thank you all. We appreciate your
testimony.
Let me ask, there has been a menu of options that the
Postmaster General laid out and reinforced by the Board of
Governors, Ms. Gallagher. They talked about a voluntary
separation program, voluntary retirement program. To my
knowledge, at least the way they described it, it was not
incentivized in any manner. I can't remember the last time they
did an incentivized retirement program. It might have been
1982, I think, when my mom retired. That is the last one I
remember.
But there hasn't been a great groundswell, they are not
beating the door down to get out of there. I question the
efficacy of a program like that when the economy is so weak. Do
you actually think people are going to go into retirement when
they see their 401(k) and their investments cut in half? What
are your thoughts on this effort to get 150,000 postal
employees to take an early retirement?
Mr. Burrus. Speaking for the members of the American Postal
Workers Union, they are not fools, they are not going to
relinquish a job paying in excess of $50,000 a year to the
uncertainty of a bad economic situation. It is an act of
desperation. They are not going to have many takers, I predict.
Our union maintains that our collective bargaining agreement
requires an incentive. We will resolve that through the
grievance arbitration process.
But it is similar to the threat of 5-day delivery. It is a
diversion. There is no intent, there is no desire, and it is
certainly over Congress' congressional dead body that they will
get a 5-day delivery.
Mentioning those things sucks all the oxygen out of the
discussion, while we are collectively fighting as hard as we
can to get H.R. 22 passed. We really don't need these
sideshows. So I am very critical of them even bringing these
things up. They are not the answer to the USPS problem.
There are some long-term solutions, but the initial hurdle
is the avoidance of that $5-plus billion obligation they have
to the future retiree health benefits.
Mr. Lynch. Understood. That is loud and clear.
Mr. Young, on the early retirement piece here, if I am
missing something.
Mr. Young. Excuse me, I couldn't hear you, sir.
Mr. Lynch. On the early retirement piece here, do you think
that is going to be successful the way they have it framed
right now?
Mr. Young. No, sir, I don't. In the last early retirement
that was just offered to my members, less than 3,000 of them
took it. It is the uncertainty. You said it exactly right. When
people lost all their retirement savings, when the stock market
plunged, they don't know what they are facing, what the future
is going to look like. There is a lot of people out there that
are scared.
I want to get back to this idea of these things that Potter
and Gallagher brought to you this morning, and I just want to
question in a general way, Mr. Lynch, whether it makes sense to
try to make these kinds of decisions when the Postal Service is
at the bottom. This would be like restructuring the Postal
Service during the Great Depression. Nobody that I have talked
to in this country believes we are going to be mired forever in
the current economic state that we are. At least we all pray to
God we are not.
So I think it makes a lot more sense to look at this when
normalcy returns. I would just say one thing, a lot of people
are starting to believe now that all of a sudden the Internet
and these other alternatives jumped into this. During the last
6 years, the Postal Service made all the right moves to protect
themselves from that. And as one of the earlier panels
testified, we would have actually made $2.8 billion last year
if it hadn't been for this future retiree health benefit
payment. So I think the real key is what you said, let's find
out what that real number is. What is the real number, what is
that obligation, and then let's go from there in trying to
decide how we make this the best Postal Service with the funds
that we have available.
Mr. Lynch. Mr. Hegarty.
Mr. Hegarty. On the voluntary early retirement, I have a
couple of concerns. Something for the committee to consider too
is, employees hired since 1984 under the Federal Employees
Retirement System, if they take an early retirement, they lose
the ability to contribute to the thrift savings plan, they lose
the matching contributions, they don't qualify for social
security right away, they really can't live on it. A typical
voluntary early retirement offer in the last round for an
employee hired in mid-1984 is $900 a month. So I don't know any
postal employee who, as President Burrus said, would go from a
good-paying middle class job could live on $900 a month.
For the Civil Service Retirement employees, the picture is
a little bit better for them. They were all hired in 1983 or
before, some of them are approaching normal retirement age. But
I would love to see incentives, I just don't know where the
money would come from for that, either.
Mr. Lynch. Right.
Mr. Hegarty. And the last time they did an incentive was
1992, and they lost so many employees in so many wrong places
they had to hire to replace a lot of the employees that they
took the voluntary retirement.
Mr. Lynch. I know I am over my time. But I am going to ask,
President Cantriel, could you also hit that same question?
Mr. Cantriel. Because we are the last mile of delivery,
this is the first time we have ever been offered the voluntary
early retirement. Like the NALC, we had 606 carriers who took
advantage of voluntary early retirement. The comments that I
heard throughout the country was, if I am going to have to
work, I would just as well work for the Postal Service, because
I cannot live on what I would be getting from my retirement
without some sort of an incentive to do it. That was the
general feeling from ours.
I don't expect a large portion of our membership to take
advantage of it this time. And in positions other than the
declining mail volume, which may result in the loss of some
routes, if one of our people retires, someone has to replace
them, because we are that last mile, similar to the NALC.
Someone is going to have to actually deliver that mail.
Mr. Lynch. Yes. Thank you.
Mr. Chaffetz for 5 minutes.
Mr. Chaffetz. Thank you, Mr. Chairman, and thanks to those
of you who have been here since 9:30 a.m. The chairman slipped
me a note and said, don't worry, we are halfway there. So hang
in there with us. [Laughter.]
We have heard various testimony and the chorus has been
fairly united on the idea for support of H.R. 22. I personally
support H.R. 22, now that I have been able to dive in and look
at it. Obviously I think it has the numbers and the support, in
a broad way, bipartisan way, and hopefully we can get to that
sooner rather than later.
We need revenues to go up, we need expenses to go down to
get to that magical point. We have to deal with the fact, the
realities of where things are today. So I guess I would like to
lead with a sense of what are the top three things we could do
to affect either revenues going up and/or expenses going down?
H.R. 22 plays a critical and important role and gets us a long
way toward that direction.
Taking maybe 30 seconds each, knowing that you will each
take a minute--[laughter]--maybe we could start with President
Cantriel there and give me a sense of what you would add to
that list. We need big things that are going to make big
differences. What are No.s 2 and 3 on that list that you would
add?
Mr. Cantriel. I guess I would have to piggyback a little
bit on what you heard from the managers. We see so many levels
out there. I am going to use my postmaster I just talked to
within the last week when he told me what my evaluation was. He
said, I am so tired of filling out a report verifying that I
filled out the reports that had to be reported, and not given
the opportunity to run my office. One of his comments was, I
know less about running my office now than I did 15 years ago
when I got the position.
So I think there has to be some streamlining in middle
management and put some responsibility back on those
postmasters to make those decisions. I think Charlie and Dale
both said it very well, they are very capable of making the
decisions that need to be made there. They don't need three
levels of middle management to tell them what they need to do.
I think we are top heavy in a lot of areas. I don't see
that we need 80 or 74 districts. I don't think we need 10 areas
to tell our members how to deliver the mail. We have too many
people that are not actually handling the mail telling people
that are handling the mail what they need to do and how they
need to do it.
Mr. Chaffetz. Thank you.
President Hegarty.
Mr. Hegarty. Thank you. The first thing I think we need to
do is continue the revenue generation that the unions are
participating in. The carriers and rural carriers have done it
for a number of years. We just started last year talking to
vendors, people we do business with, that don't use the U.S.
mail. We now have the opportunity to fill out a form or go on
the computer and a professional Postal Service sales associate
will call on that business and explain to them the benefits of
the mail, how they can get better service, how they can save
money.
So that is just taking off from my craft's perspective. But
as I said, the letter carriers and the rurals have been doing
it for quite a while.
One thing I would caution that you should do is not go to
5-day delivery. That would be in the top three for me. One of
the reasons, we have talked about driving people to our
competitors. The other thing I think that would do is drive
people to the Internet. Because the first time their bank
statement doesn't come on time or the first time their credit
card bill goes late, they are going to say the heck with this,
I can go online, do all that stuff and save myself some
postage.
Mr. Chaffetz. Thank you.
President Young.
Mr. Young. Yes, I am just going to give you the list. First
and foremost, restore the economy. When that is done, the
Postal Service is fine.
Mr. Chaffetz. If you can give me until Thursday--
[laughter.]
Mr. Young. That is what I was just going to say, you are
from Utah, you can do that by Thursday. [Laughter.]
Second, the Medicare subsidy Part D, that was designed for
companies to provide a drug benefit equal to Medicare. We do
and just with the stroke of a pen the previous President said,
we are not going to give it to you, notwithstanding the fact
that is about $8 billion right there, $8 billion is what I am
told the number is there.
Management restructuring would be No. 3. And here is No. 4
for you. We are still paying for FERS employees for the time
they spent in military service. In the Postal Reorganization
Act that we just passed in 2006, we took care of the CSRS
employees, their previous military service. That was $17
billion, that was the cost of that. We are still asking mailers
and the people who pay postage to pay for the time that anybody
who is a FERS employee after 1984, any time they spent in the
military. That would be significant as well.
Mr. Chaffetz. Thank you. Great, I appreciate it, thank you.
Mr. Burrus. No. 1 is H.R. 22, No. 2 is restoring the
economy, No. 3, to infinity, is similar to jumping off a five-
story building and flapping your arms. It doesn't cushion the
fall, but it gives you something to do on the way down.
[Laughter.]
Mr. Chaffetz. Thank you.
Thank you, Mr. Chairman.
Mr. Lynch. Let me ask, one of the other legs of the stool
that Postmaster General Potter had thrown out there was
consolidation of some of these post offices. They have already
gone with six facilities, six area facilities which I guess are
largely for administrative purposes. But there is a sense that
there could be some consolidation of more of the urban post
offices and while that might not necessarily affect the number
of people out there in terms of your workers, we may gain some
efficiencies by discontinuing the leases that we have out there
or closing down some facilities out there that are obsolete or
not being utilized to full extent.
What are your thoughts on that idea about closing those
facilities?
Mr. Burrus. In general, we oppose consolidations. We
support efficiencies, if the Postal Service can prove to the
community that a consolidation is in the interest of saving the
Postal Service money while providing the same level of service
to the citizens of that community, then we stand aside and will
support such an effort.
But what we see in the current plan is deny the single
user, my grandmother, my cousin, the student in college, to
deny them the level of service they provide for the major
mailers. Major mailers follow the Postal Service, and it is
actually beneficial to them, because it reduces the number of
drop points where they take their mail to. So consolidation
saves money for your major printers and major mailers.
But it is creating a two-tier U.S. Postal Service, one
system for the major mailers, a totally different system for
the person who drops the letter in the collection box at the
end of the corner. That is the danger of this consolidation
plan. It is not just efficiency. It is separating the Postal
Service into one Postal Service for the haves, another Postal
Service for the have-nots. And we oppose that.
Mr. Lynch. OK. Mr. Young.
Mr. Young. I think it is worth a look, but I caution, and I
think you know this, so I know you do, sir, because of your
background, but it is going to be real heavy on all of you.
Every time we try to close any facility in your areas, you are
going to hear from all of the people that live in that area the
millions of reasons as to why it shouldn't happen.
I would just make this one remark, and you just take it for
what it is worth. I believe this is the right number, if it is
not, I apologize, but it is close. Long Island has 80
postmasters. Ask yourself the question, do you think that is
necessary? It is not that big of an island.
Mr. Lynch. President Hegarty.
Mr. Hegarty. Well, again, if it makes sense, if it is going
to save the Postal Service money. But the key is, if it is not
going to hurt service, then we are not opposed to it, provided
it is done in accordance with our collective bargaining
agreement and the Postal Service's own handbooks and manuals.
They have a handbook called the Handbook PO 408, it governs
their area mail processing service, where they are supposed to
do a survey. And under the PAEA, they have to have community
input, stakeholder input and hold a public hearing.
One quick example, they are doing an A and P study right
now in my home facility of Springfield, MA, and they want to
truck all of the cancellation mail, the letters that come in
that need to be run on the cancellation machines, down to
Hartford, CT, to be canceled, and then truck them back up to
Springfield to be delivered. I know you are familiar with the
State of Massachusetts, Springfield to Hartford is about 35
miles, it is down I-91. They would be going down there in rush
hour traffic, all kinds of weather. It doesn't make a lot of
sense to me.
So those are the types of consolidations that we are
opposed to.
Mr. Lynch. Mr. Cantriel, I know that you represent the
rural carriers. So you are probably outside of the possibility
of consolidation in many cases. But your thoughts?
Mr. Cantriel. Well, we do have some in urban areas, but
yes, I do deal mostly with the rural areas. There is a real
identity problem there. They do not like losing that. There are
solutions that can be there, there are things that can be done
to look at to make sure that the communities are provided the
same service that they have. In my area, there are three or
four small offices, in one post office, three or four clerks
could provide the same amount of hours at the window and do the
same amount of service without having a manager there all day
long and still provide the service that we need in those rural
communities.
I don't look much toward closing a lot of those down
because of the identity for that community and what goes on
there. So it is a little more difficult for me to jump on board
with closing down very many offices.
Mr. Lynch. OK, thank you.
I don't believe we have any more questions, but I do have a
comment, and that is that the Postal Service is one of the most
respected Government institutions in this country because of
what the people you represent every day do in our communities,
whether they are rural communities, folks have a great deal of
respect for their local letter carrier in the cities as well as
the suburbs. Their local clerk is a very familiar face around
town.
But it is really, that reputation of reliability and of
great service is largely due to the people that you represent.
So we thank you for that.
Just as I spoke earlier with the supervisor and postmasters
that we have an open process here on how to proceed, I do want
to caution that time is wasting and we don't have a lot of
options here. We don't have a lot of time, let me put it that
way. So we are going to have to decide on a course of action
and we are going to have to get to it. Sounds like H.R. 22 in
some iteration will be part of that approach and that response.
But we would like to do more than just that, and we would
welcome your input and your ideas. You see it at a ground
level, and you have seen it for a good while. And so we would
be enriched by having your input in this whole process. We
welcome it.
I thank you for your testimony here, and have a good day.
[Whereupon, at 4:52 p.m., the subcommittee was adjourned.]
[The prepared statement of Hon. John M. McHugh and
additional information submitted for the hearing record
follow:]
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