[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
  MAKING SENSE OF IT ALL: AN EXAMINATION OF USPS'S STATION AND BRANCH 
         OPTIMIZATION INITIATIVE AND DELIVERY ROUTE ADJUSTMENTS

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

                                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

                               __________

                             JULY 30, 2009

                               __________

                           Serial No. 111-17

                               __________

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


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
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              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              JOHN J. DUNCAN, Jr., Tennessee
DIANE E. WATSON, California          MICHAEL R. TURNER, Ohio
STEPHEN F. LYNCH, Massachusetts      LYNN A. WESTMORELAND, Georgia
JIM COOPER, Tennessee                PATRICK T. McHENRY, North Carolina
GERALD E. CONNOLLY, Virginia         BRIAN P. BILBRAY, California
MIKE QUIGLEY, Illinois               JIM JORDAN, Ohio
MARCY KAPTUR, Ohio                   JEFF FLAKE, Arizona
ELEANOR HOLMES NORTON, District of   JEFF FORTENBERRY, Nebraska
    Columbia                         JASON CHAFFETZ, Utah
PATRICK J. KENNEDY, Rhode Island     AARON SCHOCK, Illinois
DANNY K. DAVIS, Illinois             ------ ------
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
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, Chairman
ELEANOR HOLMES NORTON, District of   JASON CHAFFETZ, Utah
    Columbia                         JOHN M. McHUGH, New York
DANNY K. DAVIS, Illinois             MARK E. SOUDER, Indiana
ELIJAH E. CUMMINGS, Maryland         BRIAN P. BILBRAY, California
DENNIS J. KUCINICH, Ohio
WM. LACY CLAY, Missouri
GERALD E. CONNOLLY, Virginia
                     William Miles, Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 30, 2009....................................     1
Statement of:
    Burrus, William, president, American Postal Workers Union, 
      AFL-CIO; John Hegarty, president, National Postal Mail 
      Handlers Union; Louis Atkins, vice president, National 
      Association of Postal Supervisors; Fred Rolando, national 
      president, the National Association of Letter Carriers, 
      AFL-CIO; Don Cantriel, president, National Rural Letter 
      Carriers' Association; and Mark Strong, executive vice 
      president, National League of Postmasters of the United 
      States.....................................................   110
        Atkins, Louis............................................   121
        Burrus, William..........................................   110
        Cantriel, Don............................................   137
        Hegarty, John............................................   115
        Rolando, Fred............................................   129
        Strong, Mark.............................................   145
    Sires, Hon. Albio, a Representative in Congress from the 
      State of New Jersey........................................    28
    Small, Jordan, acting vice president, Office of 
      Accountability and Compliance, Postal Regulatory 
      Commission; John Waller, director, Office of Accountability 
      and Compliance, Postal Regulatory Commission; Phillip Herr, 
      Director, Physical Infrastructure Issues, U.S. Government 
      Accountability Office; Art Sackler, executive director, 
      National Postal Policy Council; Jerry Cerasale, senior vice 
      president, Direct Marketing Association; and Michael 
      Murphy, president, Japs-Olson Co...........................    38
        Cerasale, Jerry..........................................    84
        Herr, Phillip............................................    54
        Murphy, Michael..........................................    91
        Sackler, Art.............................................    73
        Small, Jordan............................................    38
        Waller, John.............................................    46
Letters, statements, etc., submitted for the record by:
    Atkins, Louis, vice president, National Association of Postal 
      Supervisors, prepared statement of.........................   123
    Burrus, William, president, American Postal Workers Union, 
      AFL-CIO, prepared statement of.............................   112
    Cantriel, Don, president, National Rural Letter Carriers' 
      Association, prepared statement of.........................   139
    Cerasale, Jerry, senior vice president, Direct Marketing 
      Association, prepared statement of.........................    86
    Chaffetz, Hon. Jason, a Representative in Congress from the 
      State of Utah, prepared statement of.......................    24
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............   165
    Hegarty, John, president, National Postal Mail Handlers 
      Union, prepared statement of...............................   117
    Herr, Phillip, Director, Physical Infrastructure Issues, U.S. 
      Government Accountability Office, prepared statement of....    56
    Murphy, Michael, president, Japs-Olson Co., prepared 
      statement of...............................................    92
    Norton, Hon. Eleanor Holmes, a Delegate in Congress from the 
      District of Columbia, Congressional Research Service's July 
      23, 2009 report............................................     2
    Rolando, Fred, national president, the National Association 
      of Letter Carriers, AFL-CIO, prepared statement of.........   131
    Sackler, Art, executive director, National Postal Policy 
      Council, prepared statement of.............................    75
    Sires, Hon. Albio, a Representative in Congress from the 
      State of New Jersey, prepared statement of.................    30
    Small, Jordan, acting vice president, Office of 
      Accountability and Compliance, Postal Regulatory 
      Commission, prepared statement of..........................    40
    Strong, Mark, executive vice president, National League of 
      Postmasters of the United States, prepared statement of....   147
    Waller, John, director, Office of Accountability and 
      Compliance, Postal Regulatory Commission, prepared 
      statement of...............................................    48


  MAKING SENSE OF IT ALL: AN EXAMINATION OF USPS'S STATION AND BRANCH 
         OPTIMIZATION INITIATIVE AND DELIVERY ROUTE ADJUSTMENTS

                              ----------                              


                        THURSDAY, JULY 30, 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 10:22 a.m., in 
room 2154, Rayburn House Office Building, Hon. Stephen F. Lynch 
(chairman of the subcommittee) presiding.
    Present: Representatives Lynch, Chaffetz, Norton, Davis, 
Cummings, Kucinich, Connolly, and Bilbray.
    Staff present: William Miles, staff director; Margaret 
McDavid, detailee; Daniel Zeidman and Christina Severin, 
interns; Dan Blankenburg, minority director of outreach and 
senior advisor; Adam Fromm, minority chief clerk and Member 
liaison; Howard Denis, minority senior counsel; and Alex 
Cooper, minority professional staff member.
    Ms. Norton [presiding]. The Subcommittee on Federal 
Workforce, Postal Service, and the District of Columbia will 
come to order.
    The chairman will return shortly. Meanwhile, I want to 
welcome the ranking member, Mr. Chaffetz, members of the 
subcommittee, hearing witnesses, and all of those attending 
today.
    Today's hearing is intended to discuss the Postal Service's 
recently proposed initiative to study the activities of nearly 
3,200 postal stations and branches across the country for 
consolidation purposes, as well as to examine the Postal 
Service's cost-cutting and consolidation related efforts, 
including mail delivery, route adjustments, and related 
impacts.
    The Chair, ranking member, and subcommittee members will 
each have 5 minutes to make opening statements and all Members 
will have 3 days to submit statements for the record.
    At this time, I would like to ask unanimous consent that 
the Congressional Research Service's July 23, 2009 report on 
postal retail facility closures be entered into the record. 
Hearing no objection, so ordered.
    [The information referred to follows:]

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    Ms. Norton. Ladies and gentlemen, today's hearing comes on 
the heels of the Postal Service, as you may have read, being 
placed on the Government Accountability Office's 2009 high-risk 
list, which is largely due to the Service's abysmal financial 
condition, an issue this subcommittee has followed closely.
    But even before the Postal Service returned to GAO's high-
risk list, alarms had already sounded regarding the Postal 
Service's revenue generating problems. For the first time in 
decades, the organization reported a net loss of over $2 
billion for fiscal year 2008. Losses for this year may exceed 
$7 billion, despite the Postal Service targeting of $6.1 
billion in cuts.
    While we may be unable to pinpoint whether the recent 
economic downturn, the steady diversion of mail to other 
mediums, or a combination of both is to blame for the current 
troubles, what we do know is that mail volume has dropped 
precipitously, from roughly 213 billion pieces in fiscal year 
2007 to a total of 203 billion pieces in 2008, and projections 
for this year indicate that the volume will continue to fall by 
possibly 28 billion pieces, to a total low of 175 billion 
pieces.
    The writing is on the wall and the Postal Service obviously 
has to make some tough decisions if it expects to weather this 
current storm. These decisions may involve more across-the-
board cuts and work hour reductions, as well as accelerated 
consolidations of facilities and operations, which brings us to 
the subject of today's proceeding, ``Making Sense of it All: An 
Examination of USPS's Recently Proposed Station and Branch 
Optimization Initiative.''
    Although at first glance the initiative seems to simply be 
the latest step in the Postal Service's multi-pronged effort to 
reduce its costs by removing excess network capacity, we all 
know that the devil is in the details, and that is what we are 
here to find out this morning. It is critically important that, 
even in the preliminary phases of studying the consolidation of 
nearly 3,200 station and branch locations, we all have some 
level of understanding about the potential impact such changes 
could have on costs.
    Perhaps more importantly, we need to understand what effect 
these proposed changes may have on postal customers, committed 
employees, and communities in general. To that end, today's 
oversight hearing has been convened. The subcommittee is 
interested in having the Postal Service fully articulate its 
recently proposed station and branch consolidation initiative. 
Today's hearing also is intended to take an in-depth look at 
the Postal Service's efforts to achieve greater delivery 
efficiency through the adjustment of letter carrier routes.
    This subcommittee looks forward to learning more about 
route adjustments, the impacts associated with these changes, 
and the savings achieved from these actions. It is my hope that 
the testimony and feedback we receive from today's witnesses 
will allow us to gain that knowledge.
    Again, I thank each of you for being with us this morning 
and I look forward to your participation.
    Ms. Norton. I am now happy to yield to the ranking member, 
Mr. Chaffetz, for 5 minutes to make his opening statement.
    Mr. Chaffetz. Thank you, Madam Chair. I appreciate it.
    On June 24th, the subcommittee amended and marked up H.R. 
22, allowing the Postal Service to adjust required payments to 
future retiree health benefits. The full committee adopted our 
approach by marking up the bill on July 10th. To this date, it 
is still very disappointing that the Democrats have chosen not 
to bring up this bill to the floor with such broad bipartisan 
support.
    The U.S. Postal Service correctly advised us at the time 
that the legislation, while substantial, would not completely 
resolve all of their financial issues. That has certainly 
turned out to be the case. Just this week, the GAO announced 
that the U.S. Postal Service would be designated as ``high 
risk.'' This is sobering news.
    In 2006, the Postal Accountability Enhancement Act was 
passed in part to help get the Postal Service off the high-risk 
list, which it did. Thus, GAO's renewed designation should 
serve as another powerful reason for Congress to act, and act 
quickly, in passing H.R. 22, and any other legislation which 
will help get the Postal Service out of the financial swamp it 
now finds itself in.
    Consolidating branches is important and complex. 
Consolidation can best take place on the merits for the system 
to work. A primary reason the Postal Service is in trouble 
right now is because it lacks some of the flexibility to adapt 
in a changing environment. The U.S. Postal Service has 
experienced the largest drop-off in mail volume in its 234-year 
history, greater than the declines during the Great Depression. 
A number of major mailers are in financial straits. Bulk mail 
volume and advertising mail is down. This is due in part to the 
poor state of the economy. Also, the postal monopoly does not 
extend to email and Internet advertising, which continues to 
grow.
    The forecast for the return of these volumes are not 
optimistic. The Postal Service must right-size itself to the 
market it serves. When looking to make cuts and finding long-
term solutions, one must evaluate the entire operation of the 
Postal Service. I look forward to discussing the rearranging of 
delivery routes and other potential structural changes. But 
even that is not a complete solution.
    One of the changes being pondered is an exigency rate 
increase of 2.4 percent to be established ``only when justified 
by exceptional or extraordinary circumstances.'' But raising 
the price of an item will only reduce sales, in my opinion, not 
increase them, especially when demand is clearly decreasing. 
Thus, the rate increases appear counter to any sound economic 
logic and will only serve to further complicate the U.S. Postal 
Service's woeful financial circumstances. I will not support, 
nor do I believe we need, a rate increase on postage stamps.
    There are those who suggest that the Postal Service is a 
dinosaur living in a modern world. It is certainly a paper-
based, labor-intensive service at a time when most Americans 
are more and more comfortable with email and Internet 
communication. However, the Postal Service remains essential, 
vital, in want of a constitutional imperative. In my own 
personal opinion, I think the Postal Service as a whole has 
done a very substantial amount of work to decrease the costs 
associated with it.
    Not only do we need to look at cutting the costs; we also 
need to look at how to make the Postal Service more relevant in 
the modern world. It is vital to our communities; it is vital 
to business interest, and I think we all support and want to 
see the Postal Service thrive. I know that is why the 
gentleman, representative is here today.
    One thing that I would hope that we would explore, Madam 
Chair, with the discussion today is the difference between the 
rural components and the urban components, because there are 
factors that are distinctly different in the rural areas, for 
instance, in my district, than some of the urban issues, and I 
want to make sure that we explore those in the discussions 
today.
    With that, I will yield back.
    [The prepared statement of Hon. Jason Chaffetz follows:]

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    Ms. Norton. I thank the ranking member.
    Are there other members of the committee who wish to make 
an opening statement? Mr. Connolly.
    Mr. Connolly. I thank the chairlady and I thank Chairman 
Lynch for holding this hearing.
    I am afraid the Postal Service leadership has leapt to the 
conclusion that the only way to keep the Postal Service 
solvent, in addition to passing H.R. 22, is to cut back on 
hours, and even days, of operation. I believe that any short-
term steps must be taken in the context of consideration of the 
long-term business model for the Postal Service. Short-term 
cuts and service will have long-term impacts on utilization of 
the Postal Service.
    We must learn how the Postal Service intends to remain 
solvent during future cycles of economic growth and 
contraction. Cuts in hours and service for post offices 
represent a major loss of service for northern Virginians, for 
example. Without operating in the evening, most residents are 
not able to use their post office due to the length of commutes 
in our region. Bristol, Prince William County, had the longest 
commute in the United States. Unfortunately, changes in hours 
have been executed in the past without coordination or even 
notification of elected officials. This examination is 
particularly important in light of GAO's recommendation that 
USPS consider restructuring to address its current and long-
term financial viability.
    Efficiencies that can be derived without loss of service or 
jobs should be considered first, before employees or consumers 
are asked to make those sacrifices. The Postal Service should 
identify all the savings that can be realized through area mail 
processing consolidations and network distribution center 
closures, and make every possible effort to avoid layoffs 
associated with those closures.
    I appreciate the opportunity, Madam Chairwoman, to explore 
these issues and look forward to hearing about the protections 
the Postal Service must employ to protect their consumers and 
their employees. In the final analysis, however, USPS must move 
to a new business model, one that takes cognizance of vigorous 
competition and the impacts of technology on the traditional 
rain, snow, sleet, or hail model that has provided exemplary 
service to the Republic for over two centuries.
    I thank you and yield back.
    Ms. Norton. Thank you, Mr. Connolly.
    Mr. Kucinich.
    Mr. Kucinich. I thank the gentlelady.
    I am a strong supporter of the Post Office and I am deeply 
concerned about the USPS's financial condition, and I 
appreciate the magnitude of the task that is ahead for the 
Postal Service to ensure that it continues to be a postal 
service.
    On July 16th, the Postal Service announced 16 Post Office 
branches in the Greater Cleveland area would be reviewed for 
possible consolidation. After reading the testimony and the GAO 
report for this hearing, and after hearing from my 
constituents, I have many concerns. I am concerned that final 
decisions regarding each branch under consideration for 
consolidation will be made without full community participation 
and input.
    I am concerned that people in my community and communities 
across the country will face a significant and unnecessary 
reduction in access to crucial services. I have concerns about 
the private sector taking over services that these facilities 
provide, because privatization of a public need like the Postal 
Service would be a disaster. And I think this committee ought 
to be very wary of privatization being an undercurrent in the 
Post Office. I can tell you, as chairman of the Domestic Policy 
Subcommittee, the general topic of privatization is something 
that we are looking into.
    I just want to say that this review process has to be done 
at the local level and must consider the unique demands on each 
individual facility to ensure that the concerns of the 
community, customers, postal workers, and the effects on the 
local economy are fully considered.
    Madam Chair, beyond the serious local concerns that I have 
about Cleveland, look what is happening in our country right 
now. Over the last few decades, we have seen a de-
industrialization, insurance redlining, mortgage redlining, the 
subprime loan fiascos, the foreclosures, bankruptcies, high 
unemployment, business closings, even churches and schools 
closing. And look at the communities that are affected the 
most, exactly the communities that have the highest need for 
postal service. Start closing some of these branches, you are 
talking about creating ghost towns.
    I have concern about the finance of the Post Office, but it 
is very interesting. When you talk about maintaining universal 
postal service, which is really a right in a democratic 
society, good people say, well, how are you going to pay for 
it? Where was that question when the TARP came out, how are you 
going to pay for it? Seven hundred billion dollars thrown away 
to Wall Street. Trillions of dollars given to big banks, banks 
parking money right now at the Fed; Fed paying banks not to 
loan money to businesses in our community. How are you going to 
pay for it? Three trillion dollars, at least. How are you going 
to pay for it? No one really asks that question.
    When it is the Postal Service, something that everyone 
uses, how are you going to pay for it? It is the same kind of 
crummy debate that is going on right now over universal health 
care, where the insurance companies are hovering over 
Washington like a flock of vultures, just waiting to see what 
they can pick up from the taxpayers. How are you going to pay 
for it?
    If we are committed on universality of service, then we are 
going to take a stand on behalf of the Post Office. If we are 
committed to university of service, then we are going to take a 
stand on behalf of postal retirees, who the U.S. Postal Service 
right now is looking at cutting into their retirement benefits. 
If we are going to take a stand on behalf of universal service, 
then we have to do it and challenge those who somehow believe 
that if the Government has to pick up an increased cost here, 
then somehow that is anathema.
    Well, we have to ask what is the Government for, is it just 
for war? Is it just for being a gas station for wealthy special 
interest groups? Or are we a Government of the people, as 
Lincoln prayed? We are about to find out.
    Mr. Lynch [presiding]. The Chair now recognizes the 
gentleman from Maryland, Mr. Cummings.
    Mr. Cummings. Mr. Chairman, I want to hear the witnesses, 
and I would associate myself with my colleagues' statements. 
With that, I yield back.
    Mr. Lynch. The Chair recognizes the gentleman from 
California, Mr. Bilbray.
    Mr. Bilbray. Yes, Mr. Chairman.
    In the spirit of transparency, I want to admit and announce 
that, yes, the James Bilbray on the Postal Commission is my 
first cousin, the former House Member, as the delegate knows. 
But I have to sort of reflect, again with my colleague from 
Cleveland, that there are a whole lot of things this town does 
and a whole lot of money that the Federal Government spends 
that has no nexus to the constitutional responsibilities.
    Postal Service is one that is specifically enumerated in 
the Constitution; it is specifically a responsibility solely of 
the Federal Government. It is not an incursion onto States' or 
local rights; it is not an expansion beyond the founding 
fathers' intention for us to maintain and enhance the Postal 
Service. So I think this is one place that Republicans and 
Democrats should finally find a middle ground we can cooperate 
and agree on.
    I yield back.
    Mr. Lynch. I thank the gentleman.
    In full disclosure as well, I have mentioned this on 
numerous occasions, but I think at last count I have 17 members 
in my family, extended family--cousins, in-laws, uncles, aunts, 
sisters, mom--who are either actively working for the Post 
Office or are retirees.
    So, that much being said, it gives me great pleasure to 
welcome Representative Albio Sires from New Jersey, who was the 
sponsor of a piece of legislation that is coming before the 
committee and I want to recognize him for 5 minutes.
    Actually, it is the custom of this committee to swear 
witnesses who are to provide testimony before it, so could I 
please ask you to stand and raise your right hand?
    [Witness sworn.]
    Mr. Lynch. Let the record reflect that the gentleman has 
answered in the affirmative. And the gentleman is recognized.

 STATEMENTS OF HON. ALBIO SIRES, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF NEW JERSEY

    Mr. Sires. Thank you, Mr. Chairman, ranking member, members 
of the subcommittee. Thank you for allowing me to testify 
before you today regarding my experience with a post office 
closing in my district and the need to properly inform and 
involve the public in the closing process.
    I am very concerned about the Postal Service's recent 
announcement to consider closing more than 3,000 retail post 
offices. I understand that the Postal Service's financial 
problems are daunting. I know they are having problems 
operating. But no amount of financial stress should relieve 
them from providing a transparent closing process with 
significant community involvement.
    Post offices are an important part of communities. I 
witnessed this firsthand. My experience with the closing of a 
Postal Service in the Lafayette Station in Jersey City, with 
almost no notification to the public or public officials, the 
reason given was that it was security reasons, that it was not 
safe.
    Well, the community became upset, very upset. They had a 
demonstration in front of the main post office in Jersey City. 
They responded by putting a mobile station where the post 
office was. A few weeks later, again, the mobile station was 
removed; no reason given other than security. And there was 
very little notification to the community. The closing of the 
post office was hard on seniors around this particular post 
office.
    I was able to involve the other two Members of Congress, 
plus the two Senators, in this post office closing. Very little 
information came forward from the Postal Service regarding the 
reason why this post office was closed. And when you think of 
two Senators and three Congressmen not getting information, to 
me, that is just not the way it is supposed to be. I don't 
think even the President could have saved this post office.
    To me, it showed a lack of compassion and a lack of 
sensitivity to communities, and we finally, after many, many 
months, find out why, the reason of the closing of this 
particular post office, and it was financial. This is the 
reason why I introduced my bill.
    Basically, the bill limits the effect of financial reason 
on closing of the post office. It doesn't eliminate it, but it 
is not the main reason for closing a post office. It eliminates 
the dual system and makes one unified closing process. Right 
now, if you have a main post office, there is a process 
established by Congress for the main post office, but the 
satellite post office they can close at any time, without any 
reason.
    I am not an expert on post office, but I know at least in 
the urban area--I don't know outside the urban areas and 
suburban areas, but usually there are one main post office with 
many satellite post offices. That this bill does, it increases 
the notification to the public and it extends the public 
comment from 60 to 90 days.
    It is my hope that to make the closing transparent and 
inform the people that are going to be affected by the closing 
of a post office. I have more than 80 Members that have signed 
on to this post office bill and I do hope that in the hearings 
that you have in the future, that you recognize that finances 
are important, but I think community, what it does to an area, 
access to people who do not have the ability to drive, seniors, 
that you take all those into consideration, because, like it 
was stated here before, in the Constitution, it does state that 
this is one of the services that we have to provide.
    So I thank you for allowing me to testify here today and I 
do hope that, in the end, we can make this Postal Service a 
little more responsive. Thank you very much.
    [The prepared statement of Hon. Albio Sires follows:]

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    Mr. Lynch. I thank the gentleman.
    Do any Members have any questions for Mr. Sires?
    Mr. Chaffetz. Thank you, I appreciate it.
    We were talking about this before. How can we distinguish 
the difference between the urban components and the rural 
components? I mean, this is a real concern. They both have 
issues, but they are both different issues. How do you see us 
addressing that?
    Mr. Sires. Congressman, I have to admit I am an urban 
person. [Laughter.]
    I live in a community that is 1 square mile. I have 50,000 
people in my community. I love to sit down with someone that is 
not an urban person and talk about these issues.
    Mr. Chaffetz. So just addressing the urban component, what 
are the issues? You talk about, in general, in the bill, about 
there are community issues, you have a large elderly component. 
Kind of list out off the top of your mind what those issues are 
that you have to deal with in the urban component.
    Mr. Sires. Well, access. Seniors do not have the ability to 
walk a mile away in Jersey City to deal with the post office. 
Seniors do not use computers. Seniors do not have computers. 
Seniors that I deal with can barely pay their electric bill. So 
basically it is access to the postal services, which I am sure 
that is also in your areas. This is the main concern of many of 
the people in the area, plus the fact that it was just closed 
from 1 day to the next. There was no plan other than say, well, 
there is a post office a mile away; deal with that post office.
    Mr. Chaffetz. How are we ultimately going to make these 
decisions? My guess is, if you were to ask all 435 Members of 
Congress, nobody wants to have a post office closed in their 
district. Yet, clearly, we have to do some sort of 
consolidation. Certainly, there are some criteria by which we 
need to consolidate some of the facilities. The number may or 
may not be right. What are those criteria? How are we 
ultimately going to come to that decision? Should it be a BRAC-
like process? How do you see this happening?
    Mr. Sires. I don't think that is such a bad idea, something 
like that, or in terms of what else can we do for the Post 
Office, whether we have to--I know you don't believe in giving 
them more money, but if this is a service that must be 
provided, I am not opposed to that.
    Mr. Chaffetz. Well, I actually think there is probably more 
justification for using Federal funds to help fund the Postal 
Service, given its constitutional designation, than probably 
most every other thing that we do in this Government. So I am 
not necessarily, out of hand, just opposed to supplementing 
what is happening there.
    Mr. Sires. I agree with you on that issue.
    Mr. Chaffetz. Specifically about that review process, that 
open comment process, how do you see that happening? Because 
the difference between 30 days or 60 days or 60 days to 90 
days, if the process itself doesn't allow for the dialog to 
happen and true consideration of maybe some of the other 
factors that go into how important that post office is in that 
community. Help me understand how that process should work, in 
your viewpoint.
    Mr. Sires. Well, in my viewpoint, there should be 
notification through the newspapers that this is taking place. 
The local elected officials should be informed that this is 
happening. I think that there should be some sort of 
announcement by the Post Office long before that. The reason I 
extended it to 90 days is to get more participation in this 
process.
    To me, it is just plain wrong to go in there and close the 
post office without giving any reason why. I mean, there has to 
be a better reason than just finances to close a post office, 
and that is what I tried to do with this bill.
    Mr. Chaffetz. Thank you, Mr. Chairman. I yield back. 
Thanks.
    Mr. Lynch. Thank you. Just claiming a few minutes of time.
    I do, as well, represent an urban district, mostly urban, 
although I have suburban. I have 19 towns that are more 
suburban in nature, but I represent a significant part of the 
city of Boston and the city of Brockton, which are clearly 
urban. I just want to say I agree with the gentleman's 
observation that these post offices and stations and branches 
are intensely local institutions. They are not only commercial 
centers; they are also social centers.
    And I think we remember that when we ask the general public 
to grade public employees, they consistently grade their postal 
workers, their mail handlers, their letter carriers, postal 
supervisors and postmasters the highest of any public employee. 
So those relationships between the communities and the Post 
Office at that local level is intensely personal.
    And when we see the disruption that is created by a 
closing, it has very real and dramatic impact on the people 
that we represent, so it creates a real dilemma for us, and we 
need to figure out a way to be able to guide the community when 
something like this has to happen.
    Someone once said there is nothing more disruptive to the 
human condition than the power of a new idea. People just hate 
change and, unfortunately, we have seen 9 billion pieces of 
mail taken out of the system last year; 23 billion projected 
out of the system this year because of the economy and people 
moving to electronic media like email and electronic payment 
systems. We clearly have to reconcile our revenues with the 
size of our system, so that is going to be a very delicate 
process.
    I do agree with the gentleman that whole process needs to 
be more inclusive with the community and with the 
representatives who are responsible for those areas, and that 
is our task, that is part of the responsibility of this 
hearing, and we really appreciate your bill.
    I do have to say that I don't know where the Post Office 
turns if they can't right-size their system based on cost. It 
leaves them with very little opportunity. They have very 
limited power right now, very limited flexibility. And this is 
a challenge not for the Post Office alone, it is for all of us; 
it is for the employees, for the unions.
    Our task is to preserve high quality, affordable, universal 
service through the Postal Service, and we need to bring the 
Post Office into the next century, the next iteration to 
compete with all of these new technologies. So we have a task 
here of preserving that. Otherwise, either we are going to have 
a big bailout, and I don't know if the Nation and the taxpayer 
are going to entertain another bailout, this time for the Post 
Office.
    I am just very leery about the changes that collapse, we 
are on the verge of somewhat of a collapse here in terms of the 
funding mechanism, and what that might bring. It might bring a 
lot of changes that none of us, the customer, the unions, the 
users, the mailers, none of us want. I just don't want to see 
us, by default, allow the economic forces to define what the 
Postal Service will look like in the future.
    The Chair recognizes the gentleman from northern Virginia, 
Mr. Connolly.
    Mr. Connolly. I thank the Chair.
    Mr. Sires, your bill, as I understand it, does not preclude 
the closing of branch post offices, it addresses the need for 
notification to the community and elected officials, is that 
correct?
    Mr. Sires. Yes, and financial reason is not the only reason 
for closing a post office.
    Mr. Connolly. So it requires some proffer of the rationale 
for why the consolidation?
    Mr. Sires. Yes.
    Mr. Connolly. But in and of itself, your bill does not 
preclude the contemplation of such consolidation?
    Mr. Sires. No.
    Mr. Connolly. Does your bill also address the issue of 
changing the hours of operation?
    Mr. Sires. No.
    Mr. Connolly. Let me just suggest to you that certainly in 
my urban area, that is as much an issue as how many branches 
there may or may not be. Particularly with long commutes, 
evening hours are very important for people to access postal 
services and to do their business, and I would just suggest to 
you that we may want to think about adding that to the 
notification procedures to local officials and the community. 
It may or may not be necessary, but to do it without any 
notification is terribly disruptive and has impacts that start 
to rival those of closure itself.
    Mr. Sires. Thank you, Congressman Connolly.
    Mr. Chairman, I certainly agree with all the comments that 
you said, and I would just end by saying that this is not my 
first encounter with the Post Office. I couldn't even get 
response from the Postal Service when they removed a mailbox in 
Elizabeth, NJ.
    Mr. Lynch. You need to call me, then. When you have 
problems like that, you need to call me. That is unacceptable.
    Mr. Sires. I am looking for responsiveness; I am looking 
for sensitivity. I am looking for some sort of compassion from 
the Postal Service.
    Mr. Lynch. Let me just say that I think what the gentleman 
is looking for here is notice so that he is able to represent 
the people who elected him, which is a very basic right and 
obligation, a right in terms of the people to be represented 
and an obligation on the gentleman to do his job. But, to do 
that, he needs notice and he needs to know what the rationale, 
the reasoning is for any proposed closing. He needs a fair 
opportunity to address that.
    He needs to know what the factors are that have been placed 
behind this decision and he needs to have and the people that 
he represents need to have a part in this process so that 
essential services are not eliminated and that the employees 
here, the letter carriers, the mail handlers, the clerks, the 
postal supervisors and postmasters are treated fairly during 
this process and they are not just blind-sided by this.
    I actually think if that type of conduct were to be the 
norm that you experienced, it would stop; it would basically 
stop any changes, because we can't have it done that way, and 
that simply cannot be tolerated.
    But I want to thank the gentleman for offering his 
thoughtful legislation.
    The Chair recognizes the gentleman from California, Mr. 
Bilbray.
    Mr. Bilbray. Thank you, Mr. Chairman. I know you want to 
move on, but I just have some questions for the author.
    When you talk about notification in the paper, you are not 
talking about legal advertisement, are you?
    Mr. Sires. Yes.
    Mr. Bilbray. Congressman, how many of your constituents--I 
know there are some that do that, but wouldn't a news release, 
a media communication that ends up somewhere on the front page 
or on one of the pages that people read be a so much better way 
of informing the public than putting it back and basically--
and, let's face it, it is a financial situation for papers to 
put it in the legal notifications, but I will tell you 
something, being a mayor, being a county worker, I just found 
that legal notifications were the worst way to notify the 
public of anything.
    Mr. Sires. Well, I was a mayor for 12 years; I know exactly 
what you are talking about. But I still say that is just not 
the only reason, through the news, to inform the public. There 
are some type of ads that are not as expensive, but I think it 
gets the message, at least from what I experience.
    Mr. Bilbray. Well, wouldn't you find out that in most 
communities where the media was directly notified that, look, 
we are considering closing the local post office, that would 
not carry enough of a story to be able to allow the public to 
know that the media would respond to that kind of notice?
    Mr. Sires. Sure, the media would respond, but that is a 1-
day story, maybe a 2-day story. But how do you follow it up?
    Mr. Bilbray. OK. I still say that I just think that it is 
fine if you want to do a legal notice, but the fact is the 
public doesn't read legal notices. That is a way we finance 
papers. And I know papers are the next crisis that we are all 
talking about.
    Mr. Sires. I don't necessarily mean the legal notice that 
you are talking about, the small section in the back, but there 
are other ways of noticing it.
    Mr. Bilbray. OK. And your issue of it shall not be solely 
for finance, what other conditions would be required to close a 
station? I think of Mr. Connolly's--in fact, I know he already 
has his memorial post office picked out there at Mt. Vernon, 
which is a trailer. I assume Mt. Vernon makes money for the 
Postal Service because it is right there at Mt. Vernon. But 
what are the other conditions that would be required under your 
bill before they can close it?
    Mr. Sires. Well, in my particular district--not other 
districts--I have four senior citizens' buildings around this 
post office, large senior citizen buildings. They need access 
to the post office. Basically, they come down, they walk a 
block or two, and they are at the post office. That could be a 
consideration, access to the most needy. Also, you have people 
doing business, small businesses, mom and pop shops that need 
some of this post office nearby. Time is money.
    Mr. Bilbray. But you haven't enumerated examples of what, 
in your bill, would also be required besides the financial; you 
just basically say financial cannot be the sole.
    Mr. Sires. There is a bill already in Congress that takes 
into consideration a number of issues before closing a post 
office. I just don't want, in my bill, the financial aspect to 
be the only aspect. The other ones that are in the bill are 
fine also.
    Mr. Bilbray. OK. Thank you.
    I yield back, Mr. Chairman.
    Mr. Lynch. I thank the gentleman.
    We thank you for your thoughtful testimony and coming 
forward and helping the committee with its work, and we 
appreciate it. There may be questions for you from other 
Members who aren't here right now, and we will just ask you to 
respond to those in writing.
    Mr. Sires. I want to thank you, Chairman. I want to thank 
all the Members. Thank you very much for your interest.
    Mr. Lynch. Thank you.
    The Chair will now welcome the second panel. Good morning. 
It is the customary practice of this committee to swear all 
witnesses who are to provide testimony. Can I please ask you to 
rise and raise your right hands?
    [Witnesses sworn.]
    Mr. Lynch. Let the record reflect that all of the witnesses 
have answered in the affirmative.
    As you may notice, there are two small boxes in front of 
you. The practice here is to allow each witness 5 minutes. It 
will show a green light while your testimony is being given. 
When that light turns yellow, it means you have 1 minute to 
wrap up, and when it shows red, it requires you to stop 
speaking.
    What I would like to do is just offer a brief introduction 
of our second panel of witnesses.
    Mr. Jordan Small is acting vice president, Network 
Operations for the U.S. Postal Service; Mr. John Waller is 
director of the Office of Accountability and Compliance at the 
Postal Regulatory Commission; Mr. Phillip Herr is Director of 
Physical Infrastructure Issues at the Government Accountability 
Office; Mr. Jerry Cerasale is senior vice president of the 
Government Affairs for the Direct Marketing Association; Mr. 
Arthur Sackler is the executive director of the National Postal 
Policy Council; and Mr. Michael Murphy is president of the 
Japs-Olson Co., a printing and logistics company in St. Louis 
Park, MN.
    Thank you all for your willingness to come forward and help 
the committee with its work. I now recognize Mr. Small for 5 
minute for an opening statement.

 STATEMENTS OF JORDAN SMALL, ACTING VICE PRESIDENT, OFFICE OF 
 ACCOUNTABILITY AND COMPLIANCE, POSTAL REGULATORY COMMISSION; 
JOHN WALLER, DIRECTOR, OFFICE OF ACCOUNTABILITY AND COMPLIANCE, 
POSTAL REGULATORY COMMISSION; PHILLIP HERR, DIRECTOR, PHYSICAL 
 INFRASTRUCTURE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; 
    ART SACKLER, EXECUTIVE DIRECTOR, NATIONAL POSTAL POLICY 
    COUNCIL; JERRY CERASALE, SENIOR VICE PRESIDENT, DIRECT 
  MARKETING ASSOCIATION; AND MICHAEL MURPHY, PRESIDENT, JAPS-
                           OLSON CO.

                   STATEMENT OF JORDAN SMALL

    Mr. Small. Good morning, Mr. Chairman and members of the 
subcommittee. I am here to talk to you about the steps the U.S. 
Postal Service has taken to make mail delivery as efficient as 
possible, our future operational plans to continue to improve 
delivery efficiency, and the station and branch optimization 
initiative.
    As you are well aware, the financial situation of the 
Postal Service is grave. It would be far worse were it not for 
the aggressive actions we have implemented. For example, since 
2002, we have reduced cost by more than $1 billion annually. 
These efforts are particularly impressive when you consider 
that our delivery network continues to grow at a rate of about 
1.2 new delivery points each year. In effect, we are delivering 
less mail to more addresses, which means we receive less 
revenue per address served.
    Cutting costs in deliveries is particularly challenging 
because a substantial portion of delivery costs are fixed. Our 
carriers must deliver to each address whether there is one 
piece of mail or several. Within these constraints, we have 
embarked upon several initiatives that have improved delivery 
efficiency. The first initiative is the historic interim 
alternate route adjustment process that we have agreed to with 
the National Association of Letter Carriers, NALC, in 2008.
    This agreement enabled us to jointly conduct evaluations on 
some 93,000 routes and rapidly eliminate approximately 2,500 
routes. Realizing that additional process improvements could be 
made, both parties jointly agreed to a new modified agreement 
in April 2009. The cost savings are estimated to eliminate 
approximately 25 million city delivery work hours, or some $1 
billion over fiscal years 2009 and 2010.
    One consolidation activity that is underway is the review 
of station and branch locations in larger cities where we have 
a number of offices in close proximity. We began the review 
with some 3,200 locations that handled the most retail 
transactions and the most deliveries. We anticipate that out of 
these 3,200 locations, less than 1,000 will be considered as 
viable candidates to study further.
    Changes in mail processing technology have reduced the 
amount of space needed for carrier operations at many stations 
and branches. As a consequence, opportunities exist to 
consolidate carrier operations into fewer locations without 
affecting service. Many stations and branches were established 
at a time when first class mail volume growth was robust. There 
were few means of alternate access to postal services and 
virtually all retail revenue came from window transactions. 
Today, about 29 percent of retail revenue is generated through 
alternate access channels, such as our Web site, USPS.com, and 
automated postal centers.
    As local management undertakes the station and branch 
review, they will consider factors such as customer access, 
service standards, cost savings, impact on employees, 
environmental impact, real estate values, and long-term postal 
needs. We are taking all of these actions to use our resources 
wisely and position the Postal Service to survive this 
financial crisis, while continuing top-quality service to the 
American public.
    Along this line, I ask Congress to support the Postal 
Service's efforts to operate in a business-like manner as we 
make necessary decisions. As you know, the Postal Service has 
alerted stakeholders that mail volume levels can no longer 
sustain 6-day-a-week delivery. In prior testimony, the 
Postmaster General asked Congress to consider allowing a change 
in delivery frequency. At the same time, the Postmaster General 
tasked postal management with undertaking an internal review of 
5-day delivery so we have sufficient information and data to 
share with stakeholders.
    We are in the process of finalizing our study and have 
targeted the next months to share the results with our 
stakeholders and to begin a series of community outreach 
meetings. We plan to share this study with employees, 
customers, mailers, and Members of Congress. Moreover, we will 
be asking the Postal Regulatory Commission for an advisory 
opinion.
    In closing, I would like to thank this subcommittee and the 
Oversight and Government Reform Committee for their action on 
H.R. 22. I hope in the near future the House will be able to 
quickly move retiree health benefit legislation. Finally, I 
would like to reiterate our commitment to continuing to make 
mail operations as efficient as possible while maintaining our 
excellent levels of service to the Nation.
    Thank you and I would be pleased to respond to your 
questions.
    [The prepared statement of Mr. Small follows:]

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    Mr. Lynch. Thank you, sir.
    Mr. Waller, you are now recognized for 5 minutes.

                    STATEMENT OF JOHN WALLER

    Mr. Waller. Thank you, Chairman Lynch, Ranking Member 
Chaffetz, and members of the subcommittee. Thank you for the 
opportunity to testify on plans to adjust the retail and 
delivery networks.
    On July 2nd, the Postal Service requested a Commission 
advisory opinion on Postal Service station and branch 
optimization and consolidation initiative, the subject of this 
hearing. Docket N2009-1 was quickly established and the public 
was notified through the Federal Register, the Internet, and 
press releases.
    This morning the Commission held a conference with persons 
interested in this consolidation to identify expectations for 
the docket and all procedural concerns. With this input, the 
Commission will shortly establish the agenda for examining the 
initiative and addressing all the issues. To ensure a wide 
range of public input, the Commission is considering holding 
hearings outside of the Washington, DC, area.
    What the Commission is being asked to do is determine if 
this consolidation initiative will generate changes in the 
nature of Postal Service on a nationwide basis and, if so, 
issue this advisory opinion that the consolidation process 
would result in closure decisions which will preserve levels of 
service consistent with the policies of postal legislation; in 
short, that the process will in fact achieve answers to a lot 
of the questions that members of the committee have raised that 
should be addressed. We are looking at that process to make 
sure that all these issues, community input, etc., are in fact 
applied.
    Now, the process has been around for several years and 
nearly 100 closures have occurred. Some of these have been 
addressed here. One will occur tomorrow in Washburn, IA. The 
new initiative will significantly accelerate that process. It 
began in May of this year with the prescreening for 
discontinuance of all stations and branches that reported to 
postmasters of 24 pay grade level or higher. This covers 
approximately 3,200 stations that are primarily located in 
urban and suburban areas.
    With this request, there was some certainty in the sense of 
the guidelines were given that were supposed to be followed by 
the Postal Service, but they did not specify the number of 
offices to be discontinued, did not quantify the potential 
changes in the nature of any affected postal service, and has 
not estimated the expected financial savings. Questions are 
being asked in the Commission's docket that hopefully will 
clarify these facts and other aspects and criteria that will be 
used in the decision process.
    The Commission recognizes that, under the PAA, the Postal 
Service has the flexibility and authority to make rational 
adjustments to its operations and networks to meet its business 
needs and create cost savings and efficiencies. This is 
especially important in these stressful financial times. But 
the Postal Service must be, by law, accountable and transparent 
to all postal customers, be sensitive to the needs of the 
community at the local level that it serves, and make changes 
in a strategic manner.
    In its most recent report on universal postal service and 
postal monopoly, the Commission found that access to postal 
service is a fundamental aspect of the universal service. A 
2008 Commission-sponsored study found that households tend to 
utilize their local post office extensively. Over half the 
respondents reported that a member of their household visited a 
post office in the last 7 days; an additional 25 percent 
reported visiting within the last 30 days.
    The Postal Service is obligated, under past and current 
statutes, to provide for thorough public notice and input into 
post office closure decision. The statute further gives the 
Commission authority to hear customer appeals on such 
decisions. The Commission has long held that a post office is 
any retail location staffed by Postal Service employees, which 
obviously includes stations and branches.
    Yet, notification of the public's right to appeal to the 
Commission is not part of the Postal Service closure process 
being examined. Questions are being submitted, have been 
submitted on this issue in the docket, and it is likely to 
receive a thorough review in the Commission docket.
    Now, the appeal process is simple, it is a letter submitted 
to the Commission by postal patrons in that area saying, we 
weren't notified, we weren't whatever it has to do with the 
procedures weren't followed. It is not a complex, go to court, 
procedure.
    I see I am out of time, so I will conclude my oral 
statement and welcome the opportunity to answer any questions.
    [The prepared statement of Mr. Waller follows:]

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    Mr. Lynch. Thank you, sir.
    Mr. Herr, you are now recognized for 5 minutes.

                   STATEMENT OF PHILLIP HERR

    Mr. Herr. Thank you. Chairman Lynch, Ranking Member 
Chaffetz, and members of the subcommittee, thank you for the 
opportunity to participate in this hearing. Today, I will first 
provide updated information on the Postal Service's financial 
condition and outlook; second, discuss GAO's decision to place 
the Postal Service's financial condition on our high-risk list 
this week; and, third, discuss the need to restructure postal 
mail processing, retail, and delivery networks.
    The Postal Service's financial condition has deteriorated 
sharply over the past year. Mail volume is projected to decline 
28 billion pieces this fiscal year, leading to some sobering 
statistics: a net loss of $7 billion, an increase in 
outstanding debt by the annual statutory limit of $3 billion, 
and an unprecedented $1 billion cash shortfall that will 
threaten the Service's ability to make its mandated annual 
payment of $5.4 billion for future retiree health benefits.
    The outlook for fiscal year 2010 is even more challenging, 
as the Service is projecting its outstanding debt to increase 
to $13.2 billion, just under its $15 billion statutory limit. 
The Postal Service urgency needs to restructure to address its 
current and long-term financial liability.
    This week, GAO added the Postal Service's financial 
condition to our list of high-risk areas needing attention by 
Congress and the executive branch. We have called for a broad 
restructuring plan that addresses key timeframes, and the plan 
should address both short and long-term challenges. These 
include realigning postal services to reflect changes in the 
use of mail; better aligning costs with revenues; optimizing 
its operations, networks, and work force; increasing mail 
volumes and revenues; and retaining earnings to finance needed 
investments and repay debt.
    The restructuring plan should also include a strategy for 
optimizing its networks to eliminate growing excess capacity, 
maintenance backlogs, and reduce costs. Stakeholders need to 
recognize that major changes are urgently needed. Such action 
would also set the stage to reduce its work force through 
attrition. In the next 4 years, a total of 300,000 employees 
are eligible or will be eligible for regular retirement, close 
to half of the career work force. The Postal Service has taken 
some actions toward realigning its network, and I would like to 
point out several of these.
    In the retail areas, as discussed today, the Service 
recently began a national initiative to consolidate some of its 
roughly 37,000 post offices branches and stations. 
Specifically, operations at over 3,200 retail stations and 
branches located in urban or suburban areas are looking at for 
opportunities for consolidation, and decisions are expected 
starting this October. In terms of mail processing, the Postal 
Service has taken actions to close smaller facilities and 
consolidate other mail processing and transportation 
operations. However, only one of approximately 400 major 
processing facilities has been closed.
    With regard to delivery operations and the report being 
released today to this subcommittee, the Postal Service has 
over 350,000 carriers, and delivery costs represent the Postal 
Service's largest cost segment. There are two efforts underway 
to enhance delivery efficiency. One, realigning city routes is 
expected to generate about $1 billion in savings annually 
through the elimination of work hours and routes, reduced space 
needs, and more consistent delivery.
    Through realignment, about 4,300 routes have been 
eliminated to date, so there is some good progress. A second 
delivery-related initiative focuses on the $1.5 billion flat 
sequencing system that will automatically sort large mail 
pieces such as catalogs and magazines into delivery order. On 
routes covered by the new machines, city carriers, on average, 
will manually sort nearly 500 fewer flat-sized pieces of mail 
each day, allowing them to spend more time delivering mail.
    In closing, while we recognize that the Postal Service will 
face resistance in realigning its networks on several fronts, 
we believe broad restructuring is imperative to help the Postal 
Service achieve sustainable financial viability. For 
realignment to succeed, the Postal Service must use a 
transparent process that is consistently applied; engage with 
unions, management associations, the mailing industry, and 
political leaders; and it must also demonstrate results.
    Mr. Chairman, this concludes my prepared statement, and I 
am pleased to answer any questions you have. Thank you.
    [The prepared statement of Mr. Herr follows:]

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    Mr. Lynch. Thank you, sir.
    Mr. Sackler, you are now recognized for 5 minutes.

                  STATEMENT OF ARTHUR SACKLER

    Mr. Sackler. Thank you, Mr. Chairman. Good morning to you, 
Ranking Member Chaffetz, and members of the subcommittee. The 
National Postal Policy Council greatly appreciates the 
opportunity to present its views on the station and branch 
initiative.
    In a nutshell, our members support this initiative to help 
address the current financial contraction facing USPS and, in 
the larger context, of providing the Postmaster General and his 
team true flexibility to manage.
    NPPC is the trade association for large business users of 
letter mail, primarily in first class. Before the downturn, our 
approximately 30 members collectively mailed about 39 billion 
pieces and contributed some $9.5 billion in postage every year.
    At the outset, let me say that the acceptance of the need 
for meaningful change in the postal system has been growing in 
recent days. Through no fault of its talented management team 
or its truly dedicated working men and women, the Postal 
Service is experiencing a catastrophic decline in volume, 
volume that won't come back robustly and for years. Grappling 
with the thorny issues of managing USPS to its actual volume 
has become essential for preserving a bedrock institution still 
essential to commerce and communications in the United States 
in the 21st century.
    So, as one aspect of change, we are pleased to be able to 
discuss this initiative, for it is necessary not only in the 
short-term, but in the longer term. NPPC has not undertaken a 
scientific survey of its members, but the consensus view is 
that, when the economy comes back, mail will not follow. There 
should be some recovery in standard, but first class, which is 
the most lucrative for the Postal Service, as you know, will 
continue its decline, albeit at a slower rate. We support the 
initiative because the current system of post offices and other 
facilities grew up haphazardly with population growth and 
shifts.
    An orderly rethinking of the system is long overdue and 
efficiencies in services are very likely to be obtained.
    Second, the initiative will help streamline a system built 
for far more mail volume than it has or is likely to have for 
the foreseeable future.
    Third, a carefully planned and thought-through effort to 
close or consolidate facilities should yield some cost savings.
    Fourth, the closings and consolidations will occur largely, 
if not exclusively, in metropolitan jurisdictions. This should 
lead, we hope, to a less emotional public reaction than in some 
smaller communities. And given that there are other post 
offices or facilities nearby, there should be continued easy 
access for the public.
    Fifth, and most importantly, NPPC believes that the 
Postmaster General and his team need to have as much 
flexibility to manage the system as possible, to run it like a 
business. Over this decade, Postmaster General Potter, Deputy 
PMG Donahoe and their management team have demonstrated 
tremendous ability to drive costs out of the system. They have 
done so while improving service and reducing the work force, 
without alienating the unions and management associations.
    In fact, it has been an intense cooperative effort. Because 
of that outstanding track record, the senior postal management 
team should be granted broad latitude to manage the system, 
including optimizing stations and branches.
    The urgency animating this plan and much else from USPS is 
the daunting financial challenge it confronts. You know very 
well that it is projecting 175 billion pieces of mail this 
year, off some 37 billion from its peak just 2 short years ago, 
with a $13 billion drop in revenue. So, Mr. Chairman, NPPC is 
grateful to you, Ranking Member Chaffetz, Chairman Towns, 
Ranking Member Issa, and the members of the full committee for 
rapidly reporting out H.R. 22. We are particularly appreciative 
of the prime sponsors, Messrs. McHugh and Davis. We urge H.R. 
22's passage by the entire House at the earliest opportunity.
    But, regrettably, USPS is going to need further financial 
attention to right itself. When H.R. 22 was introduced last 
winter, it seemed to give USPS enough relief. Unfortunately, 
the accelerating loss of volume since has simply overwhelmed 
the relief offered through H.R. 22.
    We don't pretend to have the solution. Many possibilities 
have been raised in this subcommittee and elsewhere. In 
general, we believe that any long-term solution should be 
balanced and call on all postal stakeholders to make equivalent 
sacrifices to maintain the system. However, we feel constrained 
to note that one possibility, an exigent rate increase, would 
be profoundly counterproductive. We know neither the Postal 
Service nor Members of Congress have called for such an 
increase, but others in the postal community have raised it.
    So let us be direct. Mailers simply cannot afford an 
increase. They are doing everything they can to restrain costs 
as their own businesses severely decline in recession. The 
number of layoffs in the postal-based industries is, at 
minimum, in the hundreds of thousands. There are also mergers 
and bankruptcies. Budgets for all items in these industries 
very much, including postal, are under tremendous pressure. 
Even a small increase may have a significant adverse reaction. 
But an increase large enough to address USPS losses would 
virtually guarantee a large volume drain. Postal budgets simply 
would not stretch to meet higher prices.
    Thank you once again for this opportunity to present our 
views. I would be pleased to answer any questions you may have.
    [The prepared statement of Mr. Sackler follows:]

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    Mr. Lynch. Thank you, sir.
    Mr. Cerasale, you are now recognized for 5 minutes.

                  STATEMENT OF JERRY CERASALE

    Mr. Cerasale. Thank you, Mr. Chairman, thank you, 
subcommittee, for giving us the opportunity to be here. DMA 
wants to thank you, Mr. Chairman, the subcommittee, and the 
entire committee for H.R. 22. We all need a postal service, a 
financially viable one, and the short-term--sadly, it is now 
short-term--help that H.R. 22 gives us imperative.
    The financial condition of the Postal Service is precarious 
and, sadly, it is not improving at this point in time. The 
Postal Service has to grow volume; it has to become more 
efficient. But, at the same time, mailers are facing the same 
financial conditions. The 22 percent drop in standard mail 
advertising reflects that fact.
    As the economy comes back, some of this mail will come 
back. But, sadly, we don't think all of it will come back. 
Mailers cannot shoulder another rate increase. As a matter of 
fact, that rate increase may in fact prove fatal, both for it 
and the Postal Service. We therefore support the summer sale 
the Postal Service has put together in trying to increase mail 
volume. We hope that this will be duplicated in the future with 
more advanced notice and will be taken greater advantage of to 
try and get mail back into the system.
    Looking on the cost side, everything has to be on the 
table. As our group, mailers, we are willing to talk about 
everything to try and reduce cost. The things you are looking 
at here today, looking at the delivery route adjustments, they 
have been going on for my entire lifetime. My time up here as 
an employee in the House, one of the complaints that I always 
had at the Committee on Post Office and Civil Service was my 
mail is not coming at the same times it used to; complaints 
from businesses as well as individuals, and that, in fact, has 
happened all the time as the demographics, the geographic 
distribution of the American population has changed.
    Right now we have to look at it from the point of view of 
decreased volume, decreased revenue to afford the route system 
that we currently have, and the good thing is that the Postal 
Service is working with the NALC on looking at these route 
adjustments. But these have been happening before. Sadly, the 
economic times are forcing this to happen more rapidly at this 
point in time.
    But I think, from our view, the Postal Service is doing the 
right thing and working with their employee groups to try to 
get this right. Now, it hurts some of our members, because they 
are not going to get the mail at the same time they received it 
before, but that is one of the things that we are all working 
together to try to keep the Postal Service strong and viable.
    Looking at the stations and branches, it is our 
understanding that the Postal Service is looking at not at 
rural offices. They are looking at the proximity of other 
stations and branches to the one that they are thinking about 
closing; looking at the retail trends at that branch; looking 
at the impact on the employees, the impact on the community, 
which is very important; they are looking at the savings, the 
net savings. If you close this facility and you have to move 
employees and carriers come out there, there is more time. The 
net savings has to be there. And then the ability of other 
stations and branches to handle the traffic that is being 
closed. So those are the things.
    I think the setup that the Postal Service has put together, 
they are looking at the right things; they are asking the 
correct questions. And there is always the point of a PRC, 
Postal Regulatory Commission, appeal. As the Postal Rate 
Commission in 2006, the PRC, in an opinion, did say that if 
this closed, the only postal retail service in a community, 
even if it wasn't specifically a post office with a postmaster, 
but a station and branch that they had jurisdiction. Not 
everyone agrees, but that ability stays and this effort by the 
Postal Service doesn't change that factor.
    We all need the Postal Service, and we all have to chip in. 
All of us have to chip in for its survival. We appreciate the 
fact that you are aware of that, you are looking at that, and 
we are here to try and help and do our part as well. Thank you.
    [The prepared statement of Mr. Cerasale follows:]

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    Mr. Lynch. Thank you, sir.

                  STATEMENT OF MICHAEL MURPHY

    Mr. Murphy. Mr. Chairman and members of the committee, 
thank you for allowing me an opportunity to appear before you 
today to discuss some of the challenges facing the mailing 
industry and the Postal Service.
    My name is Michael Murphy. I am the president of Japs-Olson 
Co., located in St. Louis Park, MN. We are a family business 
that has been in operation for more than 100 years. Our 
business is printing and mailing. We will produce more than 600 
million pieces of mail this year for all types of customers 
across the country.
    I am here today also as chairman of the Board of the 
Mailing and Fulfillment Service Association. MFSA is the only 
association solely representing the mailing industry. We have 
approximately 600 members, which are comprised of printers, 
mailing service providers, product fulfillment companies, as 
well as suppliers to the trade.
    Needless to say, the Postal Service is a vital partner in 
our businesses. Therefore, we believe it is important that the 
Postal Service have the complete support of Congress to manage 
its networks efficiently and to scale its infrastructure in 
proportion to its business needs. Our company and MFSA members 
urge the Congress to allow the leaders of the Postal Service to 
do their jobs and to manage their public institution with the 
same goal of efficiency as that of private industry.
    The Postal Service's Board of Governors, the Postmaster 
General, and the agency's senior executives must be given the 
latitude to make the decisions necessary to return the postal 
system to profitability. Those decisions include the necessary 
measures that are essential to control cost and, in turn, 
postal rate control.
    We hear some suggest that many of the messages carried by 
the Postal Service can be diverted to electronic distribution. 
To the extent that this is true, it could result in hundreds of 
thousands of jobs lost in the industries that depend on this 
distribution system. In just the current recession, thousands 
of jobs have already been lost in the supply chain that relies 
on the mail.
    Our association's experience over the past 18 months 
suggests that, from just those companies that have gone out of 
business, we have lost 1,500 jobs. Extrapolating that to the 
industry as a whole, we believe that the industry has lost no 
less than 15,000 permanent jobs during that same period.
    Even with the challenges we have been facing, there are 
still more than 8 million people whose employment is affected 
by the postal system. We owe it to these people to ensure that 
the postal system is on firm financial footing and will be a 
viable public service in the future.
    Thank you.
    [The prepared statement of Mr. Murphy follows:]

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    Mr. Lynch. Thank you, sir.
    I yield myself 5 minutes.
    May I start with Mr. Small? What I would like to avoid is 
the situation that we had with the AMPs, what is it, the mail--
area mail processing facilities. All these acronyms.
    We had a situation with the mail handlers out in Atlanta, I 
think it was, where they identified one of their stations for 
closure, one of these AMPs, and they gave the employees the 
opportunity to relocate to Oklahoma City as part of that 
closure. Obviously, that sent the employees through the roof, 
and I don't think it was a thoughtful process.
    While I admit that the finances here are very grave, as a 
number of you have pointed out, there is the need, 
nevertheless, to conduct ourselves with, I think, a thoughtful 
approach to this consolidation and do it in a way that causes 
the least bit of disruption and with all respect to these 
communities and to the employees that are affected; and I think 
it is possible. We have 37,000 post offices out there, and I am 
sure that there are some that are close to each other and that 
we can work this out.
    But I have to ask you what are the criteria? You are making 
these decisions. You have, what, 3,200 that you have 
identified?
    Mr. Small. Correct.
    Mr. Lynch. And there are, you think, probably 1,000 out 
there or a little less than 1,000 that might actually be 
eligible for closure?
    Mr. Small. Less than 1,000 that require further review.
    Mr. Lynch. OK. Well, I know that the rural post offices are 
off the list because, if you close one of those, you have 
somebody driving 200 miles to a post office; and I understand 
that. So we have a hold harmless provision for those post 
offices that says even though they are not making enough money 
to sustain themselves, we are going to leave them in there 
because we have to provide essential services. Yet, you have 
another post office in an urban area, maybe a poor minority 
area in an inner city that is not generating enough revenue to 
sustain itself either, and we are going to close that; and I 
think Mr. Sires's testimony was on that point.
    What are you using as the standard here? What are the 
criteria? Can we figure that out? Do you have that laid out 
somewhere? With 37,000 facilities here, we would like the 
opportunity to be able to explain to our constituents what the 
process was. It needs to be transparent, it needs to be fair, 
it needs to be consistent; and hopefully it will make sense, it 
will make sense economically, consistent with your goals, while 
at the same time providing adequate access.
    So what are the factors you look at in determining whether 
somebody is eligible on the 3,200 list? How are they 
determined?
    Mr. Small. Thank you, Mr. Chairman. As I stated and you 
stated, we are looking at, now, less than 1,000 offices, 
because, out of the 3,200, the 2,200 were immediately 
eliminated for consideration for various reasons, which I will 
go into as part of the criteria.
    Part of the criteria is what is the proximity of nearest 
services; what are the mailing habits and consuming habits of 
the American public with the Postal Service within those areas. 
We have found that we have seen close to 5 percent less 
activity at our retail units, while the percent of the American 
public going to our Web site at USPS.com has increased.
    Customers also go to various other means of alternate 
access. So we look at the proximity of the nearest services; we 
look at is there adequate parking at the nearest services; we 
look at the mailing habits of the public in that area where a 
station and branch is being served.
    Mr. Lynch. OK. Well, I think my time has just about 
expired, so I will do a followup later on, maybe in the second 
round.
    The Chair recognizes the gentleman from Utah.
    Mr. Chaffetz. Thank you.
    I appreciate you all for being here and sharing your 
comments and expertise. I would like to start with the GAO, if 
I could.
    How many agencies or government entities are currently on 
the high-risk list? I am just trying to get a perspective.
    Mr. Herr. Twenty-nine, sir.
    Mr. Chaffetz. Twenty-nine?
    Mr. Herr. Twenty-nine, yes.
    Mr. Chaffetz. At one point, the Postal Service was taken 
off the high-risk list.
    Mr. Herr. That is correct, yes.
    Mr. Chaffetz. Just to highlight again--I know you talked 
about this in your testimony, but the top reasons on why the 
urgency. I think I understand the financial needs, but is there 
something else above and beyond the financial peril that they 
are in?
    Mr. Herr. There are two different ways we look at the high-
risk list. In the one we used with regard to the Postal Service 
is areas or agencies that we think are in need of broad 
transformation. So, in this case, the Postal Service met that 
criteria. I think the other thing is we tracked the financial 
condition over the past year and we looked at those numbers 
deteriorating. That made the case more compelling. If you add 
in the mail volume drop, it suggests that a broad look at this 
was needed and we, therefore, made that decision.
    Mr. Chaffetz. I would like to hear about the 5-day 
delivery. Is that something, Mr. Small or Mr. Waller, that has 
definitively been decided? You are thinking about it. Is that 
something that you think would happen week in, week out?
    Mr. Small. We haven't concluded the study. We should be 
finished with the study in the next couple of months, but----
    Mr. Lynch. Mr. Small, is your mic on?
    Mr. Small. Yes, sir.
    Mr. Chaffetz. Maybe a little closer, just a little closer.
    Mr. Small. We have yet to complete the study. The study 
should be completed shortly, and we view it as the only viable 
option right now----
    Mr. Chaffetz. Can you give me a specific date?
    Mr. Small. I don't have a specific date, but I will provide 
one for the record.
    Mr. Chaffetz. That would be great.
    And who is participating in that study? We have a lot of 
organizations, unions, whatnot, that are here. Who is 
participating or, more importantly, not participating in the 
input that will go into that study?
    Mr. Small. We are working with the various stakeholders to 
get their feedback; our customers, the PRC, and also the 
unions. We have talked to the unions about these tough issues 
associated with 5 day delivery. Members of Congress. So we are 
making sure that we talk with all of our stakeholders to 
understand what potential issues they would have by going to 5 
day delivery.
    Mr. Chaffetz. And those of you that represent the use of 
the Postal Service from more of a customer standpoint, can you 
give me--maybe starting with Mr. Murphy--your perspective on 
what would happen with 5 day delivery, as opposed to 6?
    Mr. Murphy. Well, we would support 5 day delivery in the 
sense that it is a big area to control cost, and we feel that 
is very, very important, overall, for this system to be pegged 
to what is happening in the marketplace. So I would rather not 
have it, but it is one of those items that is on the table and 
will be valuable.
    Mr. Cerasale. Our membership is somewhat divided. Some of 
them----
    Mr. Chaffetz. Five and a half day delivery?
    Mr. Cerasale. Right. Some of them 5 day delivery would not 
be a major impact. The Postal Service is talking about 
Saturday. Saturday delivery is very important for them.
    But I think all of them are looking at what are the 
tradeoffs. The savings from 5 day delivery, what other things 
are going to happen to try and improve the Postal Service? One 
of the things we have to worry about is dramatic reduction in 
service and raising rates. That really doesn't come out to a 
very good solution. So those are the things that we are looking 
at. We are waiting to take a look at an entire plan and we are 
hoping to see what the study the Postal Service comes up with 
is.
    Mr. Chaffetz. Mr. Sackler.
    Mr. Sackler. Mr. Chaffetz, we are in a similar position to 
Jerry's members. We are not so much divided. I think the 
sentiment generally is we wouldn't want to do this. We need to 
have 6 days of delivery, but, again, what are the tradeoffs? 
How do you get to a position where you resolve the Postal 
Service's difficulties? So as part of a larger solution, I 
think it could be something that could be seriously 
entertained, and if it were done, it would be a sacrifice.
    Let me just give you one example. We have quite a few banks 
and financial institutions in our group, and for them 
remittances flowing 7 days a week are vital. But it is not just 
that. If there is a day of delivery that is taken out, then it 
takes longer for bills to get there in the first place; there 
are changes to float and, therefore, to business practices, to 
financial viability, to responsibilities to shareholders, and 
so forth. It is not an uncomplicated situation. So our view is, 
if it is done, it has to be part of a larger long-term 
solution.
    Mr. Chaffetz. Thank you. I see my time has expired.
    Thank you, Mr. Chairman.
    Mr. Lynch. I thank the gentleman.
    Who seeks recognition? The Chair recognizes the gentlelady 
from the District of Columbia, Ms. Holmes Norton, for 5 
minutes.
    Ms. Norton. Thank you very much, Mr. Chairman.
    First, let me go to get something clarified. Mr. Herr, the 
GAO report, with this title, could have been written, at least 
this title, any time in the last, I don't know, 10 years. 
Broader restructuring needed to address deteriorating finances. 
Why was the Postal Service taken off the high-risk list in 
2007, please?
    Mr. Herr. There are a couple of things factored into that. 
At that point, the Postal Service didn't have outstanding debt. 
The other thing is Congress had taken action to pass the PAEA 
Act and we thought that would lay some of the groundwork going 
forward.
    Ms. Norton. But it would still have needed across-the-board 
restructuring, would it not?
    Mr. Herr. Well, the other thing is mail volumes have 
dropped precipitously since that point. We have seen, just this 
year----
    Ms. Norton. But, of course, that was predictable in 2007 as 
well. I ask this question because the only thing I can think of 
that is worse than collapse of the constitutionally mandated 
Postal Service is for it to do what it is doing now, falling 
apart piecemeal before our very eyes; and when that happens, it 
is the element of surprise and clear absence of planning.
    My question really goes, I suppose, to Mr. Small initially. 
Here we are still talking about a 5-day week. Even though 
almost 70 percent of the American people say that they would 
favor a 5-day week, we are still talking about it. We have been 
talking about it now for a very long time. I noted in your 
testimony you talked about flat sequencing, indicating the 
Postal Service did understand that sometimes you have to invest 
in order to, if I may use the word, right-size. Only now are we 
talking about consolidation in any kind of meaningful way.
    Is there a plan for right-sizing the Postal Service so that 
we do not come to these hearings to hear of various economies 
and efficiencies that one would expect from a business that has 
to do what many have to do now, which is simply take some 
efficiencies pending something? I don't know what is pending 
here except collapse, and I don't hear that there is a right-
sizing plan of any kind that the Postal Service is engaged in, 
seeing all the handwriting on the wall that I think even the 
average American can see right now. What right-sizing plan do 
you have or do you intend?
    Mr. Small. Well, I think if you look at the cost-cutting 
and efficiency gains that we have employed this year, we are on 
track to save over $6.1 billion. The major components of future 
right-sizing of the network, the big issue to provide 
significant systemic response to the problem, and that would be 
5 day delivery. The second issue, we have undertaken the 
transformation of our BMC network----
    Ms. Norton. Are you moving toward erasing deficit, Mr. 
Small----
    Mr. Small. By cost-cutting----
    Ms. Norton [continuing]. So that you can operate the Postal 
Service without a deficit, inasmuch as the Treasury is not open 
to you?
    Mr. Small. The network change and the changes in 
improvements in efficiencies are working toward reducing the 
deficit.
    Ms. Norton. Could I ask if any of you know what your 
competitors, the private post offices, what kind of shape they 
are in, the FedExs, UPS? UPS might be a good example because it 
is a union company. You are competing with these various 
privatized version of much of what you do. They don't deliver 
the mail, but you have gotten into their business. Have you 
looked into those businesses to see how your competitors are 
faring and whether or not there is anything that they are doing 
that you could benefit from? Yes, sir.
    Mr. Small. Yes. We are in constant communication with our 
competitors. Matter of fact, we have ventures with our 
competitors, such as FedEx, using their air network to fly our 
product. Also, both FedEx and UPS use us as their last mile for 
many of their products.
    Ms. Norton. I think we need to hear more about that, in 
terms of right-sizing the post office.
    Now, look, I am going to ask you a question. This is not a 
NIMBY question; I will not object. And Members have to 
understand that if you are more transparent about it and if it 
is part of right-sizing, we have to be prepared to defend what 
you have to do with respect to postal services. Having said 
that, are there any post offices in the District of Columbia, 
or postal stations, under review for closing? See, that is 
something that any Member ought to be able to ask and get an 
answer to.
    Mr. Small. I believe that a list was submitted to this 
committee yesterday. Offhand, I couldn't personally tell you if 
there are or not stations in the District of Columbia, but I 
would be happy to provide you with a copy for the record.
    Ms. Norton. I would appreciate it. This is what I think 
needs to happen. The Postal Service is just too slow. You are 
going to have to reach out to communities. You are going to 
have to get feedback. You are going to have to hear all the 
protests. Transparency begets protests. You are moving so slow 
that I think that you are not ahead of the decline and, forgive 
me, fall of the Postal Service unless you can hasten this 
process with the kind of right-sizing that puts it all before 
us so we know what has to be done.
    Thank you very much, Mr. Chairman.
    Mr. Lynch. Thank you. Just to clarify, we did get the list 
yesterday. I notice there are six Washington, DC, post offices 
that have been identified for full study, and I notice in my 
district there are three suburban post offices that have been 
identified for full study as well.
    The Chair recognizes the gentleman from northern Virginia, 
Mr. Connolly.
    Mr. Connolly. I thank the Chair.
    Mr. Herr, is there some concern, should there be some 
concern that, with the best of intentions, some of the cost-
cutting measures being contemplated or undertaken could prove 
to be counterproductive? When I listen to some of the measures 
we are looking at, I am struck by the parallel with the 
newspaper industry.
    Declining advertising accelerated in the recession, some of 
which won't come back; advertising gravitating toward online 
newspapers that are free, but not enough to make it a viable 
business model, at least not yet; giving away newspapers free 
at Metro stations, further accelerating the loss of paid 
subscribers, because why would I pay for a newspaper I can now 
get for free; consolidating offices; closing bureaus, 
downsizing constantly, and, yet, it doesn't seem to have 
righted the ship of state, if you will.
    In the case of some of the actions being contemplated, we 
are looking at consolidation so there are fewer points of entry 
on the system, which may be a very prudent thing to do, but I 
am struck that the competition has points of entry all over the 
place. Not full offices, necessarily, but very convenient drop-
off points if I want to participate in their system.
    I think that the competition is available for 6 if I want 
to pay for it. Raising fees, as has been stated by Mr. Sackler, 
there is probably some upper limit to how much we can get away 
with that without making ourselves less viable and driving away 
even more customers.
    So I am just wondering. There is no implicit criticism, 
necessarily, of the steps, but have we looked at the risk of 
unintended consequences by way of counter-productivity like 
cost-cutting measures?
    Mr. Herr. Congressman Connolly, thanks for that question. 
It is an interesting point. In looking at this, one of the 
things we are suggesting is that the Postal Service needs to 
articulate the plan. It talks about how it can take action, but 
you mentioned, say, differing entry points for mail. That is 
why it would be important to coordinate with the folks in the 
mailing industry about how that would roll out, so it could be 
done in a way that people understand what that change would 
entail. The Postal Regulatory Commission may have a role in 
terms of reviewing some of those cases as well.
    There are a lot of different pieces that go into 
maintaining universal service throughout the country. I 
understand that some distribution centers from Maine to 
Arizona, from Florida to Alaska, to do that you would require a 
network of processing facilities. In terms of the retail side, 
one of the things that we noticed, there are 37,000 facilities, 
but 30 percent of the retail revenue is not coming through post 
offices, it is coming from alternatives; grocery store sales, 
things of that nature.
    In talking with folks at the Postal Service about this 
retail initiative, one of the things I was struck by is there 
is somewhat of a qualitative assessment at the community level, 
trying to ensure that if there is a senior citizen community or 
groups that are being served, that would be factored into that 
decisionmaking.
    So there are tradeoffs, but the other side of it is that 
there is also a great decline in the amount of mail going 
through the system. And one of the bedrock principles that the 
Postal Service has been operating under is being self-
sustaining. So factoring those things into consideration and 
these changes, we think a restructuring plan, Congress, the 
administration looking at that would be an important step.
    Mr. Waller. A couple of things I would like to say first in 
regards to the list of post office stations and branches under 
consideration, at the meeting I mentioned this morning that 
occurred at the Commission, the Postal Service promised to give 
a list of the 677 facilities that are going to be studied. When 
they file that, that will go up on the PRC.gov Web site 
immediately, and that will be available to all people in the 
country through that to look at whose and where, etc.
    This issue of looking at it as a whole thing is also of 
concern as we look at a process like this. Last time we did an 
advisory opinion, it was on the processing facilities and the 
Postal Service's plan for looking at that, and found quite a 
few problems that existed in the planning process at not 
looking at how many real savings were going to be achieved 
through that process and what backlashes might occur in 
productivity.
    Second, in the work the Commission has done so far looking 
at the route reduction from 6 day to 5 day, one of the things 
the Commission included in its analysis was an estimate of the 
drop-in volume that might occur, and that is about a $600 
million impact. So looking at all these issues and not looking 
at it too narrowly is extremely important.
    Mr. Connolly. Thank you.
    Mr. Chairman, I see my time is up. I would just say if Mr. 
Clay were still here, I know he would want to ask that going 
beyond short-term measures to return ourselves to solvency, 
what is the long-term business model we are confident is 
viable. But, of course, Mr. Clay is not here to ask that.
    Mr. Lynch. Maybe Mr. Davis wants to ask that question. The 
Chair recognizes the distinguished gentleman from Illinois, Mr. 
Davis, for 5 minutes.
    Mr. Davis. Thank you very much, Mr. Chairman. Let me thank 
you for calling the hearing. I also want to thank all of the 
witnesses for appearing.
    I think that some of us have known pretty much that we were 
going to be at this juncture probably for quite some time. I 
think we were hoping against hope that we would not really get 
to this point. So let me just say, first of all, Mr. Small, I 
don't envy Mr. Potter and yourself and other members of the 
staff and the Board of Governors as you try and wrestle with 
this problem and figure out what is the fairest, most 
effective, most efficient way of making sure that our Postal 
Service remains solvent, recognizing the economics and the 
status of our economy.
    I know that there is the study underway relative to 5 day 
delivery. What other cost-cutting proposals did you consider 
before reaching the point of sort of settling on the 
reorganization of facilities plan?
    Mr. Small. I think if you look at our cost-cutting efforts 
and what has been able to enable us to achieve $6.1 billion 
this year in cost savings, we have reduced overtime; we have 
minimized the use of the supplemental temporary work force; we 
have adjusted routes, both city and rural; we have currently 
implemented a network structure change transforming the bulk 
mail centers into network distribution centers, consolidating 
package and standard operations to realize economy's scale and 
efficiency in processing, and reduced redundancies in 
transportation.
    We have also embarked upon, as was referred to before, the 
AMP effort, where we have consolidated outgoing operations to 
better utilize equipment in certain plants, as well as 
compressed tours to, again, take advantage of the unprecedented 
drop-off in volume and being able to provide a more efficient 
means of utilizing our equipment within our plants.
    Mr. Davis. So one could really say that you are down to the 
point where you don't have many options left; you don't have 
many other places to go. Or I guess we would say you are 
between a rock and a hard place.
    Mr. Small. The last big option is, unfortunately, the need 
to go from 6 to 5 day delivery. That is the one big piece out 
there that would add to helping us maintain liquidity and be 
viable.
    Mr. Davis. Thank you very much.
    Mr. Herr, let me ask you. I know that GAO has taken the 
position, before now, time and time again, that there were some 
other cost savings, cost-cutting approaches that the Postal 
Service perhaps could have taken sometime before now. How do 
you feel in relationship to what they have done and the plan 
that they have put together?
    Mr. Herr. I think at this point we have been looking over 
the past year, at some of the low-hanging fruit in terms of 
overtime and things like that have been taken into 
consideration; the route adjustment process that Mr. Small 
referenced. We have a report that came out today that talks 
about that initiative. And I think if volumes continue to 
decline, there will be additional opportunities there.
    We still believe that there are opportunities in terms of 
the broader facilities. We talk about that in terms of the 
processing network. We know there are some consolidation 
studies that are still underway, but we think that this broader 
plan that is referenced in our high-risk report would be a next 
starting point to help achieve some consensus about where this 
might go going forward, sir.
    Mr. Davis. My time is about to expire, but let me ask you, 
Mr. Small, did the Postal Service apply for any of the economic 
stimulus money?
    Mr. Small. No.
    Mr. Davis. Is there a reason that you didn't?
    Mr. Small. I think that question would be better answered 
or is outside of my scope of being able to answer that 
question.
    Mr. Davis. All right, I understand that. Thank you, very 
much.
    And thank you, Mr. Chairman.
    Mr. Lynch. Thank you, sir.
    The Chair now recognizes the gentleman from Utah for 5 
minutes.
    Mr. Chaffetz. The gentleman brings up a great point about 
we are spending all these trillion dollars and here we have a 
constitutionally mandated service that truly does benefit and 
service every single American. It does seem that it would be 
appropriate that while I would have voted and have voted 
against the stimulus money, that some of those moneys should 
have been allocated to this service, which not only benefits 
individuals, but businesses alike. I think we should explore 
that a little bit more if there are opportunities moving 
forward.
    A question for you about the 3,200 or so post offices that 
are closed. What is the estimated savings by doing that?
    Mr. Small. This is a bottom-up approach, and since we have 
reduced and we are continuing to the next days beyond the 
preliminary study with the less than 1,000 offices that we are 
going to----
    Mr. Chaffetz. Do you have some sort of range of dollars?
    Mr. Small. No, we won't know until the beginning of October 
when we continue----
    Mr. Chaffetz. But the other 2,000 or so, you don't have any 
understanding what----
    Mr. Small. The whole cost center, if you look at the entire 
cost center of those 3,200 offices, that includes carrier 
operations, which, of course, would not be eliminated; rent; 
ownership of facilities; operations. That whole cost center is 
worth $16 billion.
    Mr. Chaffetz. So if you break out the labor component, 
certainly there has to be some estimation of what the number 
is, is there not?
    Mr. Small. Well, I think the reason why we cannot give you 
an estimate until October is because we have not taken a cookie 
cutter approach or set targets for how many would need to be 
eliminated. And only those that are in close proximity, provide 
ready access to the community would be under consideration, and 
we just don't know that number until the study is fully 
completed.
    Mr. Chaffetz. Have you all taken a position on the bill 
H.R. 658 that we heard testimony in panel one on?
    Mr. Small. Yes, and we don't agree with it.
    Mr. Chaffetz. Why not?
    Mr. Small. Due to our dire financial deteriorating 
situation, we have had this process in place for stations and 
branches for 40 years that seems to work. We have to be able to 
react quickly and rapidly to this financial situation.
    Mr. Chaffetz. So if you gave them an extra 30 days, you 
think that would be unacceptable?
    Mr. Small. I believe that the rules as they are currently 
applied are adequate.
    Mr. Chaffetz. Mr. Herr, is there anything that you could 
add to what I was asking about previously, about the 
elimination of some of these facilities? Are the any cost 
estimates? There are several proposals that are floating around 
the Postal Service; 5 day delivery, consolidation of routes, 
those types of things. Has the GAO looked at what is realistic 
in terms of actual cost savings?
    Mr. Herr. We have seen the two estimates that have been 
provided. The other thing that we have called for in prior 
testimony before this committee is that a study should be done 
and it should be made public so people can see and understand 
what those assumptions are. I know the PRC has one estimate for 
what 5 day delivery would result in, about $2 billion, John, is 
that correct, or $1.9, and the estimate from the Postal Service 
was significantly higher, about $3.5 billion. So once that 
comes out, we are very interested in taking a hard look at that 
and we would be happy to work with the committee on that if 
that would be of help.
    Mr. Chaffetz. OK.
    Mr. Herr. Your other question, we also asked about and one 
thing that has been a bit of a source of frustration is getting 
estimates about what savings might be achieved. We have noted 
in prior reports on the retail network that there are a lot of 
places that are in disrepair, so there is real maintenance 
backlog. So we think there could be cost savings there as well. 
It is not just moving folks, but some of these places have 
really fallen in derelict.
    Mr. Chaffetz. Mr. Waller, it looked like you wanted to 
comment on that.
    Mr. Waller. Yes. This issue is one that already we are 
starting to push on in the docket, is what are the exact 
savings and can you bound it in some way. If you look at the 
way costs are accounted for in the Postal Service, retail 
clerks, which is what we are talking about here, and then if 
you add on all the extra costs, the space they take up and 
stuff like that, you are talking about $4.1 billion for all 
post offices, all stations and branches.
    This is not a big cost item. So if you narrow it down just 
to station and branches, which I think is very important to 
come out in this hearing that the Commission has underway, to 
narrow it down, what is really the even potential savings.
    Mr. Chaffetz. Thank you, Mr. Chairman. My time is up. I 
would just say that while we continue to talk about cuts and 
elimination, we also obviously need to look at relevancy and 
marketing and how we make the Post Office more relevant in the 
services; and I think one of the things that we need to spend 
more time on is the cross functionality that can happen. I was 
very pleased that you co-signed with me the potential of the 
Postal Service helping to conduct and do the enumeration 
portion of the census.
    I think there are other creative ideas that we can do that 
can inject some cash sooner, rather than later, and make the 
Postal Service, again, increasingly relevant in people's lives. 
We have such great real estate facilities, people, all these 
assets are in place, and yet I don't believe our other elements 
within our own Federal Government are paying attention to 
those. It is so frustrating when you have the Federal 
Government utilizing services outside when we have these 
services internally. So I think we need to continue to explore 
that, and particularly the timing with the census, which I 
think would be a great asset.
    I will yield back the remainder of my excess time. Thank 
you.
    Mr. Lynch. I recognize myself for 5 minutes.
    Let me ask Mr. Small a hypothetical situation. We talked 
earlier about this desire to look at going from 6 to 5 day 
delivery. As you know, the Appropriations Committee, the 
subcommittee has again mandated that we retain 6 day delivery, 
but let's just entertain it hypothetically. Suppose I had a 
brother-in-law that delivered mail on Saturdays right now, a 
letter carrier. What happens to the letter carrier, he and 
others, when we shift to a 5-day delivery cycle?
    Mr. Small. We certainly understand that change is difficult 
and are aware of changes that would occur with our employees. 
That assignment would basically be eliminated. The way carriers 
are structured, we deliver for 6 days a week. You have a 
regular carrier on a route for 5 of the 6-days and then you 
have a carrier who performs the regular carrier's duties on 
their day off.
    We have a negotiated agreement with the National 
Association of Letter Carriers for a supplemental work force of 
15,000 transitional employees, plus an annual attrition rate of 
approximately 11,000 carriers a year. We are very proud of the 
fact that we have never had to lay employees off and that we 
will continue to try to place any employee that is affected. 
But there is cushion available through the temporary work force 
and attrition to try to ensure that there is not a dramatic 
effect on our employees.
    Mr. Lynch. So you are saying that there are no layoffs or 
what are you saying here?
    Mr. Small. I can't say or guarantee that there wouldn't be 
layoffs. If we look at it or the timeframe by which we would 
have to get this done, there is a possibility that we will be 
able to assume some of the affected employees through the 
attrition of 11,000 carriers and also the 15,000 that are 
temporary employees.
    Mr. Lynch. Is there a hiring freeze right now?
    Mr. Small. Yes.
    Mr. Lynch. OK, let me ask you, going back to the 
consolidation of facilities. I know that the Postal Service 
owns some buildings and then, in other cases, we actually rent 
or we have long-term leases and options and what-not.
    When you are looking at a potential closure--and I know, 
representing a city with fairly high rental space downtown, 
those expenses, to maintain facilities like that of any 
considerable size, it is a pretty expensive option. Do you have 
a way of balancing whether or not you close a facility based 
upon whether it is Post Office owned or leased?
    Mr. Small. I think it would be determined by which facility 
can absorb the gaining facility. We have to weigh the balance 
of customer input and affect assets and services provided. I 
could think about--and I know you mentioned it on Fox News 
yesterday--offices that are close, a block away from each 
other.
    In my former district, I can think of three examples right 
now where we had stations, three groupings of stations within a 
block of each other. Those are the types of facilities we would 
look at, and we would have to determine, if two facilities were 
consolidated into one, which facility had the adequate space, 
which facility had the adequate parking, and then make the 
determination based on whether it is a leased or an owned 
facility.
    Mr. Lynch. OK. Looking ahead, I think there is a system in 
Finland or Sweden. It is actually being replicated here in the 
United States. I think they call them Zumboxes or something 
like that, where a person can go online and see their mail, and 
they see what potentially could be delivered, and if they want 
to toss it, they can--if they want it delivered, they can click 
on it, and if they don't want it, if it is junk mail, they can 
get rid of it by clicking on it and putting it in the trash 
can. That will greatly reduce the volume of mail because people 
won't have to get their junk mail.
    I know it doesn't make the mailers happy, but have you 
looked at anything like that for the Postal Service going 
forward? Is that the new model? Should we be preparing for 
that?
    Mr. Small. I particularly do not have much knowledge of 
Zumbox, but I know there are folks who are studying it within 
the Postal Service. We are always looking for new products to 
bring out to the market. I think on the panel we heard earlier 
about the summer sale. We have also introduced the flat rate 
box and an advertising campaign around the flat rate box, which 
has been a huge success so far this summer. So we are always 
looking at new products to be able to go to market with to 
enhance our situation.
    Mr. Lynch. Thank you. My time has expired.
    I am going to recognize the gentleman from Illinois, Mr. 
Davis.
    Mr. Davis. Thank you very much, Mr. Chairman. I only have 
two brief questions.
    Let me ask you, Mr. Small, does this plan, that is, the 
facilities postal station reorganization, will it necessitate 
or cause any layoffs?
    Mr. Small. This effort by itself, no.
    Mr. Davis. So attrition would basically take care of those 
individuals who would have to go, and then there would be an 
opportunity to shift other employees to other facilities?
    Mr. Small. The employees would be moved in compliance with 
our collective bargaining agreements.
    Mr. Davis. The other question that I have is actually for 
Mr. Cerasale. Mr. Cerasale, I know that we are always trying to 
make sure that we take into consideration the needs of as many 
stakeholders as we possibly can, and it seems as though, if we 
get backed up against the wall, you don't have any choice, you 
have to decide something. If your members and associates were 
to decide what hurt them the most, would it be 5 day delivery 
or would it be reorganization of stations?
    Mr. Cerasale. Five day delivery. Of those two, 5 day 
delivery would hurt more of my members than the reorganization 
of the stations.
    Mr. Davis. All right. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Lynch. Thank you, Mr. Davis.
    The Chair recognizes the gentleman from Ohio, Mr. Kucinich, 
for 5 minutes.
    Mr. Kucinich. To Mr. Small, welcome. We have had the 
opportunity to work together in Cleveland years ago, and I 
appreciated that and I appreciate your commitment to the Postal 
Service. So don't take personally any questions I am about to 
ask you. [Laughter.]
    How does the Postal Service ensure community participation 
in the decisionmaking process?
    Mr. Small. For the station and branch consolidation effort, 
we have basically three different means with which we 
communicate with the public, depending on the size of the 
community. We either send a questionnaire seeking their input 
to their residence or we post at the local office, local 
station for a period of time seeking their input. All P.O. box 
holders get a hard copy form within their P.O. box soliciting 
their feedback. And we also will post community notices within 
newspapers for 5 days to seek the community input. Part of the 
process that we encourage is community meetings.
    Mr. Kucinich. Well, let's talk about the community 
meetings. Do you have any knowledge of how many community 
meetings you may have held in, let's say, 44111?
    Mr. Small. No, I don't have that information. I can surely 
provide it to you.
    Mr. Kucinich. I haven't heard of any, and I know there is 
talk of consolidation there. So I think it is important to have 
community meetings. Would you be able to let this committee 
know what kind of community meetings you are talking about? I 
mean, do you actually send a letter to everybody in a certain 
zip code saying we are going to have a meeting at the Gallagher 
Post Office to talk about postal consolidation, and here is 
what it could mean to the community and we want your input; 
here is the time and the place? I am not aware of meetings like 
that. And I think that considering the gravity of this, you owe 
it to your customers to do something that would be no less than 
that.
    Mr. Small. Again, I would be happy to provide the committee 
with a copy of the template that we send to the local districts 
for dissemination to the community. Of course, each community 
is different and the makeup is different, so we ask the local 
offices to just use that as a template and tailor the feedback, 
the surveys, and the way they conduct the community meetings to 
their own community's needs.
    Mr. Kucinich. Thank you, Mr. Small, but that is 
theoretical. You haven't really given me a practical 
explication or explanation of how this works in reality. I 
would like to have that with respect to Cleveland Cuyahoga 
County so we can get into the nitty gritty about what you have 
sought in terms of public input.
    I look at this. Mr. Chairman and members of the committee, 
here is my concern. My concern is that you are actually 
dismantling a service infrastructure, thousands and thousands 
of mailboxes out. No one asked me about that. I am a member of 
this committee. I don't know how many other Members were asked 
about that. Just take mailboxes out of communities; gone.
    Now, if you are in marketing, it seems like you want to 
show the flag somewhere. How does taking mailboxes out help a 
service delivery? And then you are talking about closing 
branches. So how does that help with service delivery if we are 
talking about universal service? And even in main post offices 
there are services that are being switched off.
    So what I see happening here--make your economic 
justification, fine. But what I see happening is the 
dismantling, a slow and steady dismantling of the 
infrastructure of the U.S. Postal Service, starting with 
mailboxes in neighborhoods, postal branches, changes at branch 
offices, changes at airport post offices, post offices across 
this country.
    And you are actually doing that piecemeal and right under 
the nose of Congress because you wave the dollar bill, we don't 
have enough money. Oh, is that right? That passed for anything 
over here; that is a shortcut to debate here.
    I don't think you are going to be able to answer this 
question, but I will just conclude, Mr. Chairman, by saying 
that there is a stench of privatization about this whole thing, 
and I am not going to diminish the service of you, Mr. Small, 
or anybody else in the U.S. Postal Service, but there is 
another game going on here that really is about taking this 
public wealth of universal Postal Service and carving it up and 
handing it out to special interest, and I see the slow and 
steady dismantling of the postal infrastructure as being an 
inexorable move in that direction.
    That's all I have to say. Thank you.
    Mr. Lynch. I thank the gentleman.
    The Chair now recognizes the gentlelady from the District 
of Columbia for 5 minutes.
    Ms. Norton. Mr. Chairman, I have just one more question, 
and I thank you for getting this list to me. And I am not 
objecting to the list, as I said before. Indeed, I think I have 
some understanding, but I am not sure I do. Remember, my 
concern is the slow walk to collapse.
    I certainly appreciate the need for study. I do think one 
has to be careful to look at all the factors. I am having a 
hard time understanding why we are just studying some of these 
matters, such as the station branches identified ``for full 
study.''
    Going back to what I said to Mr. Herr, they got taken off 
the high-risk list, I don't think that was of service to them, 
frankly. I think they need to see the handwriting on the wall 
before their eyes as much as possible, and as tough as the GAO 
normally is, I can't imagine the fact that there have been some 
tiny baby steps taken here that should have removed them.
    But, Mr. Small, I need to know now--I know from your 
testimony at page 5 what you will be looking at considering 
such factors as customer access, service standards, cost 
savings, impact on employees, environmental impact, real estate 
values. All of this makes sense. What I don't know from your 
testimony is how you chose the particular stations or branches 
to look at for those factors in the first place.
    Mr. Small. OK, I would be happy to explain. As mentioned in 
Mr. Waller's testimony, he talked about EAS-24 and above 
offices, so let me explain what an EAS-24 and above office is.
    An EAS-24 is the lowest level potential office we are 
looking at. Typically, EAS-24 has a post office where a 
postmaster is resident and the chief administrator for postal 
services, as well as subordinate stations, generally at 24 
there may be three or four stations. As you get larger, through 
26 and then to PCs, what we call PC post offices, such as 
Miami, where you have 50 stations.
    So we are looking at large groups of stations where you 
have offices that are in close proximity to each other that 
mailers' habits and consumers' habits have told us that they no 
longer go to the retail unit, that there has been a decline in 
retail activity, and that there has been an increase----
    Ms. Norton. So will these tend to be smaller stations or 
branches?
    Mr. Small. I am sorry?
    Ms. Norton. Will these tend to be smaller stations or 
branches?
    Mr. Small. They could be larger, depending on whether they 
have adequate space to absorb a neighboring station which is in 
close proximity. They could be two smaller stations, where one 
has adequate workroom floor space to consolidate. We won't know 
until a complete and thorough review is performed on all those 
offices on the list we provided.
    Ms. Norton. Now, you say, again on page 5, we do not 
anticipate this review process to generate any changes this 
fiscal year, which ends September 30th. When did this begin, 
this study begin?
    Mr. Small. It began in approximately May.
    Ms. Norton. Well, Mr. Chairman, this is what I mean. I 
really don't think this is rocket science. And the notion that 
we are beginning in May to look at what offices are too close 
to one another or may have to consolidate is what I mean by 
slow walking the Postal Service to collapse and what I mean 
about facing the right-sizing model earlier rather than later.
    And, Mr. Herr, that is what I mean when I say you can take 
them off the list all you want to, but I can't imagine why they 
haven't been on the high-risk list for 10 years. To say that 
something in the extreme position of the Postal Service that we 
have seen now for years has not been at high risk makes me 
wonder what in the world is at a high risk. I can think of no 
major entity in the United States at higher risk than the U.S. 
Postal Service.
    Thank you, Mr. Chairman.
    Mr. Lynch. Thank you.
    Well, I think this panel has suffered enough. [Laughter.]
    I want to thank you. Seriously, I want to thank you for 
your willingness to come before the committee to help us with 
our work. There are, as always, several hearings going on at 
the same time, so I would just caution you that there may be 
Members who would like to submit questions in writing, and, if 
that is the case, I would ask you to respond within 7 days, if 
you could. Thank you very much. Have a good day.
    At this time, I would like to welcome our third panel. I 
know we are expecting votes around 12:30, so we might be able 
to get everyone seated and begin with introductions, at least. 
Thank you.
    Good afternoon. It is the custom of this committee to swear 
all witnesses who are to offer testimony. Would you please rise 
and raise your right hands?
    [Witnesses sworn.]
    Mr. Lynch. Let the record show that all the witnesses have 
answered in the affirmative.
    I think all of you are aware of the lighting system here. 
Green means you are free to give your 5 minute address; yellow 
light indicates you have to wrap up, you have about a minute 
left; and then a red light indicates you should cease offering 
testimony.
    Let me offer some brief introductions, although many of the 
members on this panel have been frequent witnesses. Let me 
begin.
    Mr. William Burrus is the president of the American Postal 
Workers Union; Mr. John Hegarty is president of the National 
Postal Mail Handlers Union; Mr. Louis Atkins is executive vice 
president of the National Association of Postal Supervisors; 
Mr. Fred Rolando is the new president of the National 
Association of Letter Carriers. Welcome. Mr. Don Cantriel is 
the president of the National Rural Letter Carriers' 
Association; and Mr. Mark Strong is executive vice president of 
the National League of Postmasters of the United States. 
Welcome all.
    Mr. Burrus, I welcome you to make an opening statement. You 
have 5 minutes.

   STATEMENTS OF WILLIAM BURRUS, PRESIDENT, AMERICAN POSTAL 
   WORKERS UNION, AFL-CIO; JOHN HEGARTY, PRESIDENT, NATIONAL 
   POSTAL MAIL HANDLERS UNION; LOUIS ATKINS, VICE PRESIDENT, 
   NATIONAL ASSOCIATION OF POSTAL SUPERVISORS; FRED ROLANDO, 
    NATIONAL PRESIDENT, THE NATIONAL ASSOCIATION OF LETTER 
  CARRIERS, AFL-CIO; DON CANTRIEL, PRESIDENT, NATIONAL RURAL 
 LETTER CARRIERS' ASSOCIATION; AND MARK STRONG, EXECUTIVE VICE 
 PRESIDENT, NATIONAL LEAGUE OF POSTMASTERS OF THE UNITED STATES

                  STATEMENT OF WILLIAM BURRUS

    Mr. Burrus. Thank you, Mr. Chairman. Mr. Chairman and 
members of the subcommittee, thank you for convening this 
hearing and providing me the opportunity to testify on behalf 
of the dedicated employees that the American Postal Workers 
Union is privileged to represent.
    In response to the dramatic reduction in mail volume, the 
Postal Service has initiated many programs intended to reduce 
costs. The station and branch initiative is the most recently 
announced service reduction. Others include the elimination of 
Saturday delivery, consolidation of mail processing facilities, 
delivery route adjustments, and realignment of the bulk mail 
network. These programs are based on a twofold management 
analysis: that savings must be achieved and that mail volume 
will never return to previous heights.
    Until very recently, postal executives have asserted that 
the decline in volume was caused by the conversion of hard copy 
mail to electronic communications. I have long been skeptical 
of that claim that individual consumers' increased use of email 
and the Internet has placed the Postal Service in jeopardy.
    It is imperative that postal decisionmakers correctly 
identify the cause of the reduction in volume and the trends 
that will drive future communications. Precious time has been 
lost as attention was focused on an illusory cause. Even now 
decisions are being made with scant appreciation of what will 
cause volume to increase or decrease.
    I have concluded that the decline in hard copy and 
communications has been less affected by electronic conversion 
than by the Nation's economic downturn.
    The facts are it is important to note that our Nation's 
mail volume was highest in 2006, when the use of electronic 
communication was already widespread. We must also keep in mind 
that the mail stream is and will continue to be dominated by 
business-related communications, which is especially sensitive 
to the economic environment.
    Analysts generally separate mail into household mail and 
non-household mail, and review the interactions between these 
groups. In 2006, of the 213 billion mail pieces, 190 billion 
involved non-household communications. Only 2.9 percent, or 
19.4 billion pieces, constituted household-to-household mail.
    The business community has explored other means of 
communications and will continue to do so. But these marketing 
decisions go far beyond the evolution of personal 
communications.
    To date, there is no general agreement among analysts about 
the future of commercial messages. Television, radio, 
newspaper, email, and online advertising are all receiving 
mixed analyses of the prospect for growth; and there is no 
conclusive evidence that the Postal Service will fail to be as 
competitive in the future as it was in 2006. One respected 
analyst, Magna, predicts that between now and 2014 mail will 
grow 2 percent annually. Yet, postal management is betting that 
mail will cease to be relevant. I disagree.
    Mail has unique advantages over other commercial messaging, 
including targeting, attention and retention. I predict that 
hard copy mail will be competitive far into the future. I admit 
I have no crystal ball, but neither does the Postmaster General 
or the Board of Governors. If they are wrong and I am right, 
the initiative presently underway will leave the Postal Service 
ill equipped when mail volume does return.
    Station and branch closings and 5 day delivery schemes will 
unquestionably have a negative effect on the postal monopoly 
and will impede the Postal Service's ability to compete. These 
are acts of surrender, when the outcome of the battle is still 
in doubt.
    Nonetheless, the Postal Service must respond to the recent 
declines in mail volume, and I commit the cooperation of my 
union in sensible and effective efforts.
    Regrettably, the alleged state of reform in 2006 has been a 
major contributor to the Postal Service's current financial 
predicament. Major mailer associations, management 
associations, the Postmaster General, the Board of Governors, 
some labor organizations, and some Members of Congress have, 
through their support of the PAEA, forced the Postal Service to 
make payments of $14 billion over the last 2 years for future 
retiree health care liabilities. Those who supported the 
legislation share in the responsibility for the Postal 
Service's current financial debacle and the drastic actions 
undertaken in response.
    I have been consulted by postal management on the subject 
affecting service and the impact on my members. On the closing 
of stations and branches, I reminded postal management that the 
APW-USPS collective bargaining agreement, which remains in 
force through November 20th of next year, includes the 
following: ``The parties agree that all existing retail 
operations will remain within the installation of which they 
are a part and all future retail operations established within 
the jurisdiction of an installation shall become a part of that 
installation.'' I personally negotiated that language and know 
what its intent was at the time of negotiations.
    I expect that postal management will fully comply with this 
contractual agreement, and I thank you, Mr. Chairman. I would 
be pleased to answer any questions you may have.
    [The prepared statement of Mr. Burrus follows:]

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    Mr. Lynch. Thank you very much, Mr. Burrus.
    Mr. Hegarty, you are now recognized for 5 minutes.

                   STATEMENT OF JOHN HEGARTY

    Mr. Hegarty. Good morning, and thank you, Chairman Lynch, 
Ranking Member Chaffetz, and the other members of the 
subcommittee, for inviting me to testify here today.
    Let me take this opportunity to thank you and all members 
of the subcommittee for your diligent efforts on H.R. 22. We 
look forward to working with you as that legislation and the 
recently introduced Senate bill S. 1507 work their way through 
the legislative process.
    As requested, my testimony today will focus on the current 
realignment efforts of the Postal Service dealing with the 
closing and consolidation of facilities and the realigning of 
stations and branches. I will also discuss the impact of such 
decisions on the flow of current and future mail, and the 
resulting impact on mail handlers, postal customers, and 
communities.
    As you know, mail handlers work primarily at the large 
processing facilities. At the same time, however, we represent 
approximately 1,000 mail handlers who are situated at the 
larger stations and branches. While they may be employed at 
smaller facilities, some of these mail handlers actually are 
assigned to a larger facility as part of their postal 
installation.
    As we have previously discussed, the Postal Service is 
proceeding to realign its network of mail processing plants by 
conducting Area Mail Processing studies. I will not repeat 
prior testimony here, but I think I should note that, as I have 
said in prior testimony, our concern is, a, that the process is 
accomplished uniformly and within the established guidelines; 
and, b, that the future postal network is not cut too severely 
such that the Postal Service will not be prepared to provide 
universal service and low cost service when mail volumes 
recover.
    Our solution to a rational closing and consolidation 
approach is to review such changes on a case-by-case basis, 
following a careful analysis of the facts presented in each 
situation. Where the proposal makes economic and logistical 
sense, where service standards will not be negatively affected, 
where major mailers in the area will not be inconvenienced. 
Where all negotiated requirements with the unions have been 
complied with, then the Mail Handlers Union will not simply 
oppose a closing or consolidation simply for the sake of 
opposition. Conversely, the Postal Service should not be 
closing and consolidating facilities just so the agency can say 
that it is closing and consolidating.
    The impact on mail handlers is varied, depending on the 
circumstances, but some of the affected employees have had 
their hours of work or work location drastically altered, 
thereby severely disrupting their family life. Employees have 
had to scramble to make alternate child care arrangements, to 
get their kids to school, or their spouses have had to adjust 
their work schedules to juggle the various responsibilities.
    Many employees have been faced with the almost impossible 
task of either moving their families hundreds of miles away to 
remain employed by the Postal Service or to give up their 
postal careers altogether, and I think you highlighted that in 
your opening statement, Mr. Chairman, outlining the situation 
that we talked about at the last hearing, where employees were 
offered jobs, some of them, 400 miles away from their current 
duty station.
    The impact on the customers will also vary, depending on 
the circumstances. Our concern is that we may end up losing 
business because a major customer decides it is just as easy to 
use a competitor, and they abandon the Postal Service 
altogether. We also need to factor in the individual customers 
who need and deserve access to postal services.
    The impact on communities should also be factored into any 
final decisions on consolidation. What will be the impact if a 
large plant is closed and the employees then are moved to 
another plant to work in some other community? How about local 
businesses like restaurants and other retail establishments, 
who used to cater to this large factory that employed so many 
people?
    Many of the other topics on which the subcommittee is 
seeking input really need to be answered by the Postal Service 
before we can weigh in on them, but, as always, I would be 
happy to answer any questions that you might have, and, again, 
thank you for inviting me to testify.
    [The prepared statement of Mr. Hegarty follows:]

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    Mr. Lynch. Thank you, President Hegarty.
    Mr. Atkins, you are now recognized for 5 minutes.

                   STATEMENT OF LOUIS ATKINS

    Mr. Atkins. Good morning, Chairman Lynch, Ranking Member 
Chaffetz, and other distinguished members of the subcommittee. 
My name is Louis M. Atkins. I serve as executive vice president 
of the National Association of Postal Supervisors. We are 
recognized by the U.S. Postal Service as representing over 
35,000 current and retired management employees of the Postal 
Service.
    I am honored by your invitation to appear before you and to 
provide our organization's feedback on the Postal Service's 
plan to examine the potential closure or consolidation of many 
postal stations and branches that comprise the national retail 
network.
    Over the years, the Postal Service has continually made 
minor adjustments in the location of its retail operations to 
improve the efficiency of the mail service and its service to 
the American public. The scale of these changes have been 
relatively small in comparison to what lies before us. But now 
the efforts of consolidating up to 3,100 facilities across the 
country, some in your own congressional districts, will 
significantly impact our customers and your constituents.
    We have concerns and reservations about the underlying 
review process and its likely resulting consequences. I wish to 
share those concerns with you right now.
    The Postal Service's review of approximately 3,100 customer 
service operations is focused on areas located primarily in 
urban centers, large cities, or in highly developed suburban 
communities. No matter where you go across the country, Postal 
Service retail operations are a business anchored to the 
communities they serve. Businesses that share the general 
location with the Postal Service benefit from the Postal 
Service retail presence in the community.
    My organization's fundamental aim is to support the 
efficient operation of the Postal Service. But the scope of the 
Postal Service's review and potential consolidation could 
impact nearly 10 percent of the facilities that serve urban and 
highly developed communities. The repercussions of a move that 
large could be modest in terms of dollar savings and 
considerably negative from a customer service standpoint. Let 
me explain why.
    Since the targeted facilities and operations are in urban 
areas and developed suburban communities, many residents rely 
on their local post office as being within walking distance, 
especially those who are elderly or without a car. Today, many 
of our customers in urban areas enjoy the convenience of 
walking to their local post office to conduct their postal-
related business. If the Postal Service's plans are 
implemented, these customers will face a distance to the 
nearest post office that will be greater than the current one, 
a distance the would not likely be able to walk.
    The elderly, who are less likely to connect to the 
Internet, rely more heavily on their local post office retail 
unit and will feel a greater loss of convenience and connection 
to their post office. When packages cannot be delivered by the 
letter carriers and the customers need to go to their local 
post office, customers will have a further distance to travel 
to retrieve their mail.
    These are some of the impacts that will be felt by 
customers who lose their local post office.
    In addition, the financial savings from consolidation may 
not be as large as first appears. In a facility that serves 
both delivery and retail, the relocation of a carrier unit to 
another facility will mean that the portion of the building 
devoted to carrier floor space will become vacant and only the 
curbside potion of the building devoted to retail operations 
will continue to be used.
    Should the post office determine that it is best to 
separate the retail and carrier operations in their present 
location, keeping only the retail operation in place will not 
necessarily present savings if the post office is leasing the 
facility and obliged to continue to pay a long-term lease for 
the entire space.
    Due to the requirements of Postal Service operations, the 
empty space may not lend itself to subleasing to another 
business entity. In facilities owned by the Postal Service, the 
same problem will occur in attempting to lease out the empty 
space resulting from movement of the carrier operations to 
another location. This dilemma will ultimately result in a move 
by the Postal Service to eliminate the retail operation in the 
location, and this would negatively impact customers, as I 
explained earlier.
    The Postal Service leases nearly 85 percent of the 
facilities that house processing, delivery, and retail 
operations, so the cost of leasing facilities presents a 
tremendous burden on the Postal Service. Considering the high 
percentage of the leased facilities operated by the Postal 
Service, and the underlying and substantial long-term financial 
obligations they represent, it would be difficult for the 
Postal Service to achieve significant savings through the 
consolidation or closing of its leased properties.
    Where the Postal Service owns the real estate that houses 
its carriers and retail operations, the consolidation or 
closure of delivery or retail operations at those properties 
may also be problematic when the sale of that property is 
attempted, given today's depressed commercial real estate 
values. The closing of a local post office will also result in 
an additional vacant storefront in an already depressed local 
economy.
    Our organization supports the efforts of the Postal Service 
to maintain its viability in these trying times. The Postmaster 
General deserves credit for his efforts to reduce costs and 
improve efficiency. Our greatest concern is that, in a rush to 
consolidate and close as many as 3,100 retail or delivery 
units, significant savings may turn out to be a mirage and that 
customers may suffer. We cannot continue to disenfranchise 
customers of the Postal Service who live in urban areas and not 
burden those who are least able to bear the cost.
    This concludes my testimony, and I am prepared to respond 
to any questions you may have.
    [The prepared statement of Mr. Atkins follows:]

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    Mr. Lynch. Thank you, Mr. Atkins.
    Mr. Rolando, you are now recognized for 5 minutes.

                   STATEMENT OF FRED ROLANDO

    Mr. Rolando. Thank you. Good morning, Chairman Lynch, 
Ranking Member Chaffetz, and other distinguished members of the 
subcommittee, Ms. Norton. My name is Fred Rolando. I am the 
president of the National Association of Letter Carriers, which 
represents more than 300,000 active and retired letter carriers 
nationwide. Thank you for inviting me to testify.
    I have seen the Postal Service thrive and I have seen it 
struggle through some very difficult times, but I have never 
seen a crisis like the one we are facing now. Volume is 
expected to drop by 30 billion pieces this year, the worst 
decline since the 1930's. When you couple the economic crisis 
with the grossly unfair policy advanced by the previous 
administration to require the Postal Service to pre-fund a 
massive 75-year liability for future retiree health benefits 
over just a 10-year period, it should come as no surprise that 
the Postal Service faces a crisis of its own.
    The Postal Service is responding with service cuts and 
downsizing. Its branch and station optimization program and the 
5-day delivery study are part of that response. As Congress 
reviews these developments, it should ensure that the Postal 
Service does not make structural decisions that will do more 
harm than good over the long run. Downsizing to meet 
depression-level demand without considering the long-term 
impacts on the ability of the Postal Service to meet new 
demands when the economy recovers would be shortsighted. Short-
term savings that undermine the Postal Service's capacity to 
offer new services and to take advantage of future growth 
opportunities would be self-defeating.
    NALC has a long history of working with the Postal Service 
to improve efficiency and to adjust to change, and we have 
continued that tradition in this crisis. We developed a special 
expedited route adjustment process to help the Postal Service 
adjust to the fluctuating mail volume. These adjustments, along 
with the initiatives for flat sequencing systems, have reduced 
the number of city carriers by more than 11,000 during the past 
year and will save the Postal Service billions of dollars over 
time.
    Looking ahead, it will be just as important to boost postal 
revenues as it will be to reduce costs. We believe the uses of 
our unmatched delivery network could be expanded to provide a 
whole range of valuable services, like the one proposed by the 
leaders on this subcommittee to use letter carriers to conduct 
the next census. That is why we must be careful with branch and 
station consolidations and reject drastic proposals like the 
elimination of Saturday delivery. The cost of lost 
opportunities from service cuts and other operational changes 
must be recognized.
    The Postal Service and its employees are doing all that 
they can to respond to this crisis, but Congress can also help 
to both minimize the short-term pain of the recession for the 
Postal Service, its employees, and customers, and to maximize 
the long-term potential of the Postal Service. It can do so by 
reforming the retiree health pre-funding provisions in the law. 
The current schedule of pre-funding payments is unaffordable 
and unreasonable. Moreover, the actuarial methods adopted by 
OPM to implement the pre-funding policy discriminate against 
the Postal Service and significantly increase its costs.
    While both H.R. 22 and the legislation developed by the 
Office of Management and Budget offer similar short-term relief 
for the Postal Service, and while we have given our support to 
both proposals, they simply do not provide a long-term 
solution. Comprehensive reform is needed to address the Postal 
Service's financial situation and future viability. Overhauling 
the pre-funding policy and reforming OPM's policies with 
respect to the Postal Service must be a part of this reform if 
the Postal Service is to continue to provide affordable, 
universal postal service.
    The Postal Service is the Nation's oldest and most trusted 
government agency. It would be a tragedy to sacrifice its 
future viability because of unfair and questionable policy 
decisions made by OPM that are fossilized into current law 
because CBO scoring rules prevent their reconsideration. My 
members hope that this subcommittee and the full House of 
Representatives will not let this happen.
    I want to thank you for this opportunity to testify--it is 
my first time; I hope it is not my last time--and I would be 
happy to answer any questions.
    [The prepared statement of Mr. Rolando follows:]

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    Mr. Lynch. I don't think you have to worry about this being 
your last time testifying. [Laughter.]
    You will be a frequent flyer here. Thank you, Mr. Rolando.
    Mr. Cantriel, would you please take 5 minutes for an 
opening statement?

                   STATEMENT OF DON CANTRIEL

    Mr. Cantriel. Thank you. I would like to ask that my full 
testimony be submitted for the record.
    Mr. Lynch. Without objection.
    Mr. Cantriel. Chairman Lynch, Ranking Member Chaffetz, 
members of the subcommittee, my name is Dan Cantriel, and I am 
president of the National Rural Letter Carriers Association, 
which represents 123,000 bargaining unit letter carriers. Our 
members work in rural, suburban, and urban areas throughout the 
United States and function as a post office on wheels because 
rural letter carriers offer postal customers all of the 
services performed over the counter at a post office.
    Mr. Chairman, first and foremost, I would like to thank you 
and Representatives John McHugh and Danny Davis for your 
leadership on H.R. 22. I would also like to thank the chairman 
of the full committee, Representative Ed Towns, for his 
dedication in getting this important legislation passed at the 
full committee level. While H.R. 22 will not solve all the 
Postal Service's problems during this financial crisis, it is a 
step in the right direction.
    We are living in a challenging time. Our country is in a 
deep recession and the Postal Service is a bellwether of the 
Nation's economic well-being. Mail volume is down 11.9 percent 
in the first half of this year and the Postal Service is 
expecting to lose approximately $7 billion.
    The decline in mail volume has hit the rural carrier craft 
extremely hard. Rural carrier pay is based on the evaluated 
compensation system, which is unique not just to the Postal 
Service, but to American industry in general. In our evaluated 
compensation system, each rural carrier is paid an annual 
salary based upon the estimated amount of time it will take to 
deliver the mail on his or her individual route. This 
evaluation of the individual route is based upon an annual mail 
count whereby over 30 separate elements are counted, timed, or 
measured.
    The most recent mail count earlier this year was 
devastating to our members. For the second straight year, our 
members have been hit hard in the pocketbook. The average rural 
route lost just over 2 hours of valuation per route, which 
equates to more than $3,400 a year in annual salary.
    As a result of this year's mail count, rural routes were 
reevaluated and adjusted. Prior to the 2009 mail count, over 
42,000 rural carriers delivered on routes 10 out of the 12 days 
each pay period. After the mail count, the number of rural 
carriers who delivered this kind of route dropped to just over 
27,000.
    Meanwhile, the number of carriers who delivered 11 out of 
the 12 days each pay period and still others who delivered 12 
out of the 12 days each pay period increased significantly. In 
order to avoid significant salary reductions, thousands of 
rural carriers opted to work an extra day just to keep the same 
salary they were making prior to the mail count.
    The annual mail count directly affects rural carrier 
salaries and schedules, but there are other concerns we have 
about our very livelihood. If the Postal Service were to 
consolidate the operation of retail stations and branches into 
nearby postal facilities, that would only compound what has, 
for rural carriers over the last several years, become a 
serious problem.
    If post offices begin to disappear, our carriers will have 
to travel greater distances to work and our customers will 
increasingly feel isolated from the Postal Service. During 
these economic times, paying close attention to customer 
service is a key, and we would expect a public outcry if post 
office stations and branches across the country are closed.
    Customers, especially in rural areas, will be particularly 
inconvenienced and some will unfortunately decide it is simply 
not worth doing business with the Postal Service. We will be 
sending the wrong message if offices across the country begin 
to close their doors. Our customers and communities need to 
know that the Postal Service is here to stay.
    I would like to say a few words about the Postal Service's 
interest in reducing Postal Service delivery days. Instituting 
5 day delivery would likely mean further salary decreases for 
thousands of carriers, not to mention massive job losses. It 
could mean salary cuts and layoffs for workers employed by 
businesses in the mailing community. If 5 day delivery were 
implemented, our evaluated compensation system, which is often 
praised by the Postal Service for its efficiencies, would need 
to be re-engineered and the rural craft could lose 50,000 rural 
carrier associate jobs.
    Mr. Chairman, that is 50,000 jobs added to the national 
unemployment rate of almost 10 percent, and that is just from 
one of the four postal unions.
    Mr. Chairman, I know that times and finances are tough 
right now, but, in my opinion, moving from 6 to 5 day delivery 
would not save the Postal Service, it would only hurt the 
business model and make other delivery operations more 
attractive to our customers it so desperately needs to attract 
and retain. This would be a terrible course to chart and, as 
many observers have noted, could very well do much more harm 
than good.
    Thank you for allowing me the opportunity to testify before 
the subcommittee today. I would be happy to answer any 
questions you or your fellow Members may have.
    [The prepared statement of Mr. Cantriel follows:]

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    Mr. Lynch. Thank you, Mr. Cantriel.
    Mr. Strong, you are now recognized for 5 minutes.

                    STATEMENT OF MARK STRONG

    Mr. Strong. Thank you. Chairman Lynch, Ranking Member 
Chaffetz, members of the subcommittee, thank you for inviting 
the National League of Postmasters to testify before you today.
    Founded in 1887, the League is a management association 
representing the interests of tens of thousands of postmasters 
throughout the United States. My name is Mark Strong and I am 
the executive vice president of the League. More importantly, I 
am a level 24 postmaster in Sun City, AZ, an unincorporated 
area in the Phoenix metropolitan area. I have served in that 
capacity since 1992.
    The League would like to thank the subcommittee and the 
full committee for reporting H.R. 22 without amendment. The 
action has operated as a catalyst and started the legislative 
ball rolling.
    With your permission, Mr. Chairman, I would like to request 
that my written testimony be entered into the record and 
proceed to briefly summarize my testimony.
    Mr. Lynch. Without objection.
    Mr. Strong. A post office, and its station and branches, 
has a primary responsibility in a given geographic area for 
collection, delivery, and some processing. In addition, post 
offices and their stations, branches, and finance units serve a 
vital function as a network to access points, retail sales 
points, and final delivery points for post office box holders, 
a key element of our customer base.
    The League strongly supports consolidation of collection, 
delivery, and processing functions where appropriate. We are 
quite concerned, however, that panicked consolidations could 
lead to consolidating functions in a way that would cost, 
rather than save, the Postal Service money, or negatively 
affect service. There is often a good reason why carriers are 
disbursed throughout a community at stations and branches, and 
this reason has to do with urban congestion and traffic, rather 
than mail volume.
    Looking at my communities, if the carriers from one of my 
branches were consolidated to another branch or my main post 
office, the heavy traffic in the Phoenix metropolitan area 
would add almost an hour additional time per day to each 
carrier route. I would have to compensate for that time or 
service would suffer; and to compensate for that is expensive. 
This has to be taken into account.
    There are also questions of sufficient space in a given 
facility to take new carriers into that facility. In my case, I 
don't have any to spare. In terms of space, I have been adding 
in my post office almost 800 deliveries per month for years, 
which means I have been adding carriers. That number has 
decreased significantly over the past few years and it is now 
at about 80 new delivery points per month. However, last month 
there were more building permits issued in my area than were 
issued in the prior 12 months put together. Thus, I anticipate 
that my 80 new delivery points per month will start to grow 
quite rapidly in the not too distant future. I have to start 
thinking about that now, which puts me in an expansion mode, 
not a contraction mode.
    While the League supports the notion of consolidating 
carrier function, it has more fundamental concerns about 
consolidating retail functions. Service has to be our prime 
consideration when looking to the future. Without good service, 
we have nothing to offer. Having many retail outlets in the 
communities allows us to provide better service, and closing 
any significant number of them will hurt service, and we can't 
do that.
    The strongest argument for caution in consolidating retail 
facilities lies in the area of post office boxes. Today, the 
reality of carrier delivery is that businesses tend to get 
their mail very late in the day, far too late to process and 
deposit checks the day they are received. As businesses have 
complained about this for years, we have told them that the 
answer to their problem is to rent post office boxes, where 
mail is available no later than 11 a.m. By renting a post 
office box, small businesses can pick up their mail, process 
their checks, and deposit them the very same day at the local 
bank with a minimum of hassle.
    This is a widespread practice and the quick access to 
checks that post office boxes provide plays a central role in 
the financial health to hundreds of thousands of small 
businesses across the country. Removing quick access could have 
a devastating effect on our business customers and their float. 
Time means money for our customers and it is up to us to serve 
them, not to have them serve us.
    There are also a fundamental question of how we can 
consolidate one set of boxes from one post office into another. 
Generally, there simply isn't sufficient room in the second 
post office to accept the boxes from the first, unless more 
boxes are built in the second office. Building more boxes would 
tend to create traffic problems in the second post office, 
since most of these post offices were constructed with a 
formula for parking that took into account the number of 
existing boxes. We are the Postal Service, and service does not 
mean forcing a customer to drive 5 miles in urban traffic to 
pick up one piece of mail, to encounter a 5-minute wait to 
park, and then a 20 minute wait inside.
    In conclusion, I do not want to suggest that no 
consolidation of carrier and retail functions could occur. 
Intelligent consolidation is also a good idea. However, 
efficiency, service, and the needs of the local small business 
and our customers must come first, and that determination 
should be a local one.
    Thank you for considering our views, and I would be pleased 
to answer any questions that you may have.
    [The prepared statement of Mr. Strong follows:]

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    Mr. Lynch. Thank you very much.
    By way of a procedural announcement, they have just 
informed us that there will be votes beginning now, basically, 
on the House floor. There are 15 votes, and it could involve 
about an hour and half, at least of delay. The problem is that 
what will happen is that our 2 o'clock hearings begin shortly 
after that series of votes.
    So what I am going to suggest is while the ranking member 
and I have more than a few questions to ask you, what I would 
suggest is that I could, rather than have you stay here for 
several hours waiting for us to come back and get in another 
hearing room, I could submit these questions to you in writing, 
but I would have to have them back in 10 days in order to get 
the questions and answers on the record. If there is not an 
objection from you, then I would like to handle it that way.
    The other opportunity would be to bifurcate the hearing and 
call you in on another date and ask you questions orally on the 
record. So I can do either way. The problem is that we are 
running into the August recess, so any oral hearing would have 
to wait until September. If it is all right with you, I could 
submit the questions to you in writing. There are some 
questions we would like to ask right now. Since no one seems to 
be objecting, I am going to take that as a yes.
    You want to get something on the record?
    Mr. Chaffetz. Yes.
    Thank you for your patience, and our apologies for this 
schedule; I wish it wasn't the case, but we appreciate your 
testimony and being here.
    I just wanted to make sure, Mr. Chairman, that the 
Congressional Research Service [CRS] Report, Post Office and 
Retail Postal Facility Closures Overview and Issues for 
Congress, dated July 23, 2009, was in the record. If it has not 
already been included, I would ask unanimous consent to have it 
included in the record.
    Mr. Lynch. Without objection.
    Let me ask, and I will try to leave enough time for the 
ranking member to ask as well.
    Mr. Rolando and Mr. Cantriel, you are presidents of letter 
carrier unions, and what we are looking at right here is not 
only the consolidation of postal facilities, stations and 
branches, we are also trying to get a sense of what is involved 
and what the impact of route consolidation is. I have less of a 
grasp of that. I think everybody understands when a post office 
is closed, what impact that has.
    But I would like to ask you each just to take a minute and 
describe, I guess in the urban sense and then in the rural 
sense, what it means and how the route consolidation process 
has gone, whether or not you have been actively approached by 
the Postal Service to participate and to have your input. How 
has that all gone? Mr. Rolando.
    Mr. Rolando. Thank you. With respect to the consolidation, 
we haven't been approached regarding the adjustment of routes, 
but we have been involved in the joint process of adjusting the 
routes, anyway, due to the fluctuating volume. We have been 
working with the Postal Service for a couple of years to find a 
more efficient way to jointly adjust our routes, which, of 
course, has been necessitated by the drop in volume.
    Traditionally, we have had volume growth. As we started our 
studies from our collective bargaining agreement, we had to 
pretty much stop in our tracks and find a way to adjust to the 
falling volume. The idea, of course, is the efficiency and 
having 8 hours work for 8 hours pay. So we have been working 
together. We are in our second of third rounds to do that. To 
adjust to the volume we are doing two this year.
    I can tell you, with any consolidations that do occur, it 
would just be an extension of what we are doing to adjust the 
routes. Obviously, it would affect travel time to get to and 
from the route if you are going from a different station, but 
the idea would be to jointly get on top of it as it happens and 
keep everything adjusted to the volume and the location and any 
adjustments that have to be made.
    Mr. Lynch. Let me ask you. I know there are, I think, about 
350,000 letter carriers? That is probably both unions, is that 
right? No?
    Mr. Rolando. Between us.
    Mr. Cantriel. Well, 400 and something. You have 300? We 
have 123.
    Mr. Rolando. We have just over 200,000 active letter 
carriers.
    Mr. Lynch. OK. And there is a hiring freeze on right now, 
right?
    Mr. Cantriel. Not for us.
    Mr. Lynch. Not for the rural?
    Mr. Rolando. How come they let you hire?
    Mr. Cantriel. Because we have a contractual provision that 
calls for one leave replacement for each route. Although we 
made some concessions in the last contract that allowed for 
TRCs, there is still the provision there, and we have some 
others, carriers that sub for more than one route and had 
career status, and that reduced the number. But, contractually, 
we are entitled to a leave replacement for each route, which 
makes it a little more difficult for them to put a freeze on 
hiring.
    Mr. Lynch. Well, let me ask you basically the same 
question. I know, Mr. Cantriel, the rural post offices are 
exempt, I think, from this closure process.
    Mr. Cantriel. That is not entirely true, because we are 
experiencing, especially in the Wisconsin-Minnesota areas and 
up through Michigan, that we have seen carriers move from one 
office to another, because we had several calls complaining. I 
don't know if the office was necessarily closed, but the 
delivery function was consolidated and they are driving 
considerably longer just to get to work, and then to go back, 
drive that same distance to go out and deliver their route. So 
we are not completely immune to it, although we haven't seen, 
or even been asked about, some of the more urban offices that 
we have and what kind of effect we would have.
    As far as adjustment, I want to address that just a little 
bit.
    Mr. Lynch. Sure.
    Mr. Cantriel. We have been in that process since our 
existence because we are evaluated, and when we are evaluated 
each year, depending on the volume of mail, whether it is going 
up or down, our routes are adjusted accordingly. We actually 
have a cap on how large the routes can grow, which, when they 
exceed that, they would be adjusted.
    We don't have much of a bottom end, and that is why, in my 
testimony, we have a lot of carriers now working all 12 days 
during a pay period because their routes have dropped below 40 
hours. We don't have a guarantee, it is by the actual volume 
and what the count shows that the route would be, so we will 
have some 36, 37 hour routes. And we have gone through those 
adjustments for years and years, so it is really not anything 
new for us.
    What is new is, because of the drop in volume, we are 
seeing more consolidation of routes even in the more rural 
areas, where the routes have gone so small that it just makes, 
when someone retires, to consolidate.
    Mr. Lynch. OK. I think my time has expired.
    Madam Chair, you are more than welcome.
    Ms. Norton. I have to go too, because there are Committee 
of the Whole votes, but if I could just ask a few questions 
before I go.
    Mr. Lynch. That will be fine.
    Ms. Norton. I do get to vote on the floor on some things, 
so you can imagine that I take those opportunities.
    I want to take this opportunity to commend the employee 
representatives of the unions before us, because it is clear 
that you have done what you could and what you can to pitch in, 
and I think it is a perfect example of why unionization is a 
benefit to the public as well as to management; you have 
orderly process going on here.
    Could I ask if any of you have experienced layoffs, 
straight out layoffs so far? So far this downsizing, or 
whatever you want to call it, has occurred without notices of 
layoff in the traditional sense.
    Mr. Burrus. All of our contracts contain provisions 
governing layoff of employees. In 1978, a national arbitrator, 
when all the parties were negotiating jointly at the time, 
imposed conditions that we all share equally regarding layoffs. 
In our bargaining units, an employee that achieves 6 years of 
continuous service is protected for a lifetime against layoff. 
The only employees that are exposed to the possibility of 
layoffs are employees that have less than 6 years of continuous 
service.
    Ms. Norton. Have any of those been----
    Mr. Burrus. No. There are also other legal impediments to 
layoff, because you must merge the RIF procedures with the 
layoff procedures, because the employees with less than 6 years 
of service who are veterans have a special process that must be 
used in order to effectuate layoffs. So it would be a very 
complicated process.
    Ms. Norton. Well, that is very important to have on the 
record. I am going to have to go in a moment.
    Mr. Hegarty. I would like to jump in on that one, too, if I 
could. We haven't had any mail handlers laid off, but we have 
had de facto layoffs. What I mentioned earlier was a mail 
handler in Memphis, TN who is offered a job in, say, Oklahoma 
City, 400 miles away.
    Ms. Norton. Oh, yes, we have heard about those. And that is 
a de facto.
    Mr. Hegarty. They have a choice, either quit their job with 
the Postal Service or move, so in effect they may be laid off. 
The second instance is with our part-time flexible employees 
who have no fixed schedules and no guarantee of work hours. In 
many areas of the country now, they are only working 4 hours a 
pay period, which is 2 hours a week, so they are, in effect, 
laid off.
    Ms. Norton. See, the reason I am glad to have this on the 
record is because I am most concerned about some kind of 
orderly process. I expressed earlier the kind of surprise 
notion, precipitous layoffs or, for that matter, precipitous 
transfers. Same difference, as far as I am concerned. I have 
looked closely at this 5 day week largely because it is one of 
the few things I think the public is not going to throw their 
hands up at.
    You can bet if some of those post offices or branches in 
the District of Columbia have to be closed, I am going to be 
besieged with people saying, ``oh, please, whatever you do, 
don't close that postal service.'' So I was interested that 
people have already acclimated themselves to the possibility of 
5 day week, which, after all, they are on as well, and they 
have looked at what has happened to the post office.
    But, Mr. Burrus, Mr. Rolando, Mr. Cantriel, you are pretty 
clear you did not want to see that happen. I agree with Mr. 
Burrus that watch out for calling the decline and fall 
altogether of the Post Office. Constitutional Post Office, 
nobody up here. The Post Office has an allegiance up here that 
nothing else I know has. Nevertheless, just as you warn about 
structural changes, there are structural changes occurring to 
you and, yet, very little of what we have heard, at least until 
today, involved structural responses right back.
    Mr. Hegarty went through a list that interested me, because 
he said case-by-case basis, facts in each situation, economic 
and logistical sense, negatively affects employees, negotiated 
requirements complied with. Now, remember, that is going to 
take time, and should take time, and I just think the unions' 
involvement in whatever happens early is going to be necessary.
    And I have to ask you once again, the 5-day week, given the 
fact that it is going to be hard just to lay people off. Some 
of these people are leaving because they are aging out, because 
they can retire, and the rest, and given Mr. Hegarty's list, or 
a similar list, would you really think the 5-day week should be 
off the table, when it is not off the table for the general 
public?
    Mr. Rolando. I would like to say that obviously it has an 
effect on my members, but this isn't about my members or 
anybody else's members; it is about the institution. It is 
about the Public Service.
    Ms. Norton. The public is going to be hurt one way or the 
other, and the question is can there be some kind of a sense of 
how to get hurt the least, Mr. Rolando. I am going to be 
looking for advice from people on the ground. Those are the 
people I respect most. When service went down in the District, 
I then traveled with my postman, as he was. I saw amazing 
things like people who saw no one everyday except the postman. 
I saw the great allegiance they had. I saw how hard the work 
was.
    And when you have some hard choices here, I would rather 
have employee buy-in than to have what we are seeing the post 
office do now; they come each time with, ``oops, we have to do 
this,'' as if they couldn't have seen that 3 years ago or 4 or 
5 years ago. So that is what I am putting to you. If that one 
is not something we can agree upon, it is going to be hard for 
me to understand what it is that we can get some kind of 
consensus on to happen in time to save what is the core and 
route of the service.
    Mr. Rolando. I believe, again, that is a shortsighted 
response, the 5-day delivery. I think they are going down a 
totally dark road to respond to the crisis. What we need to do 
is expand the business. You can look at going from 6 to 5 days, 
and if you need some money next year, you can go to 4 days to 3 
days to 2 days. It is just dismantling the company is what it 
is doing.
    Ms. Norton. And I think that might happen, Mr. Rolando. I 
think that could happen.
    Just let me say this, as somebody who saw a whole city go 
down, the longer you wait, the greater the damage and the more 
management is empowered to make the decisions. I would like to 
see the kind of collaboration that you have already begun to 
try to save the Postal Service. I don't think it can be saved 
except with employee collaboration. You have in place such a 
strong collective bargaining system, they are going to have to 
come to you. You can delay the thing, and the question is how 
to preserve what you think is in the best interest of all of 
you and of the Postal Service.
    I have to go vote. Thank you very much for hearing me out.
    The Service is now--I mean the hearing. Not the Service, 
for God's sake. [Laughter.]
    The hearing is now adjourned. Thank you all for attending.
    [Whereupon, at 1:20 p.m., the subcommittee was adjourned.]
    [The prepared statement of Hon. Elijah E. Cummings and 
additional information submitted for the hearing record 
follow:]

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