[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]





             POSTAL INFRASTRUCTURE: HOW MUCH CAN WE AFFORD?

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

                                HEARING

                               before the

                   SUBCOMMITTEE ON FEDERAL WORKFORCE,
                  U.S. POSTAL SERVICE AND LABOR POLICY

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 15, 2011

                               __________

                           Serial No. 112-65

                               __________

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









         Available via the World Wide Web: http://www.fdsys.gov
                      http://www.house.gov/reform


                                _____

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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana                  ELIJAH E. CUMMINGS, Maryland, 
JOHN L. MICA, Florida                    Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania    EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio              CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York          GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho              DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania         BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee          PETER WELCH, Vermont
JOE WALSH, Illinois                  JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina           CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida              JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                     Robert Borden, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director

Subcommittee on Federal Workforce, U.S. Postal Service and Labor Policy

                   DENNIS A. ROSS, Florida, Chairman
JUSTIN AMASH, Michigan, Vice         STEPHEN F. LYNCH, Massachusetts, 
    Chairman                             Ranking Minority Member
JIM JORDAN, Ohio                     ELEANOR HOLMES NORTON, District of 
JASON CHAFFETZ, Utah                     Columbia
CONNIE MACK, Florida                 GERALD E. CONNOLLY, Virginia
TIM WALBERG, Michigan                DANNY K. DAVIS, Illinois
TREY GOWDY, South Carolina













                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 15, 2011....................................     1
Statement of:
    Williams, David, vice president, Network Operations 
      Management, U.S. Postal Service, accompanied by Dean 
      Granholm, vice president, Delivery and Post Office 
      Operations, U.S. Postal Service; and Phillip Herr, 
      Director, Physical Infrastructure Issues, U.S. Government 
      Accountability Office......................................    13
        Herr, Phillip............................................    25
        Williams, David..........................................    13
    Winn, Michael, president, Greylock Associates, LLC; Joe Hete, 
      president and CEO, ATSG, Inc.; and Cliff Guffey, president, 
      American Postal Workers Union, AFL-CIO.....................    50
        Guffey, Cliff............................................    62
        Hete, Joe................................................    55
        Winn, Michael............................................    50
Letters, statements, etc., submitted for the record by:
    Connolly, Hon. Gerald E., a Representative in Congress from 
      the State of Virginia, prepared statement of...............    84
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............    81
    Guffey, Cliff, president, American Postal Workers Union, AFL-
      CIO, prepared statement of.................................    64
    Herr, Phillip, Director, Physical Infrastructure Issues, U.S. 
      Government Accountability Office, prepared statement of....    27
    Hete, Joe, president and CEO, ATSG, Inc., prepared statement 
      of.........................................................    58
    Lynch, Hon. Stephen F., a Representative in Congress from the 
      State of Massachusetts:
        Prepared statement of....................................     6
        Prepared statements of Hon. Judy Chu and Hon. Adam B. 
          Schiff.................................................     8
    Williams, David, vice president, Network Operations 
      Management, U.S. Postal Service, prepared statement of.....    15
    Winn, Michael, president, Greylock Associates, LLC, prepared 
      statement of...............................................    53

 
             POSTAL INFRASTRUCTURE: HOW MUCH CAN WE AFFORD?

                              ----------                              


                        WEDNESDAY, JUNE 15, 2011

                  House of Representatives,
    Subcommittee on Federal Workforce, U.S. Postal 
                          Service and Labor Policy,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:24 p.m., in 
room 2154, Rayburn House Office Building, Hon. Dennis A. Ross 
(chairman of the subcommittee) presiding.
    Present: Representatives Ross, Amash, Lynch, Connolly, and 
Davis.
    Also present: Representative Napolitano.
    Staff present: Robert Borden, general counsel; Adam Bordes, 
senior policy analyst; Molly Boyl, parliamentarian; Drew 
Colliatie, staff assistant; Howard A. Denis, senior counsel; 
Ronald Allen and Kevin Corbin, minority staff assistants; and 
William Miles, minority professional staff member.
    Mr. Ross. Good afternoon. I will now call the Subcommittee 
on the Federal Workforce, U.S. Postal Service and Labor Policy 
to order.
    And before we begin, as is customary with the full 
committee and our subcommittees, I will read the Oversight 
Committee mission statement.
    We exist to secure two fundamental principles: First, 
Americans have a right to know that the money Washington takes 
from them is well spent; and, second, Americans deserve an 
efficient, effective government that works for them.
    Our duty on the Oversight and Government Reform Committee 
is to protect these rights. Our solemn responsibility is to 
hold government accountable to taxpayers, because taxpayers 
have a right to know what they get from their government. We 
will work tirelessly, in partnership with citizen watchdogs, to 
deliver the facts to the American people and bring genuine 
reform to the Federal bureaucracy.
    This is the mission of the Oversight and Government Reform 
Committee.
    I believe that there is a unanimous consent request for 
Representative Napolitano to participate in the hearing. 
Without objection, so ordered.
    We have votes that may start in about an hour, so we are 
going to try to wrap this up as best we can.
    With that, I will yield 5 minutes to myself for my opening 
statement.
    Today's hearing marks the fourth this year held by this 
committee to hear testimony relating to the fiscal standing of 
the U.S. Postal Service. Unfortunately, today's Postal Service 
is on a pathway toward insolvency and the current postal 
infrastructure is bloated.
    In fiscal year 2010, the Postal Service operated 
approximately 32,000 postal facilities and 528 mail processing 
facilities. Unfortunately, 59.2 million fewer customers visited 
post offices in 2010, continuing a 3-year trend in declining 
customer visits. Moreover, annual mail volume, predominantly 
first-class mail, has declined by more than 42 billion pieces 
since fiscal year 2006. This year, first-class mail has fallen 
by an astonishing rate of nearly 7 percent. The handwriting is 
on the wall. We either make the necessary systemic changes to 
the postal infrastructure or we continue to watch it become 
more outdated and accelerate the demise of the Postal Service.
    When the Postal Service was confronted with the advent of 
universal home delivery at the beginning of the 20th century, 
it made adjustments. From 1901 to 1970, the Postal Service 
closed more than 30,000 retail facilities from its peak of 
76,945, because universal home delivery demanded changes to 
their business model.
    The Postal Service must acknowledge the economic realities 
it faces today. The fact is that the Postal Service operated at 
an $8.5 billion loss in 2010 and is projected to lose $8.3 
billion this year and another $8.5 billion next year.
    Today, postal customers are finding it more convenient to 
purchase postal services away from the traditional brick-and-
mortar facilities. Revenue from postal alternatives such as 
Click N' Ship, PC Postage, and USPS.com continue to grow. 
Unfortunately, the Postal Service has not responded to these 
challenges with the same vigor that it has done so in the past. 
For example, despite the trend of postal customers utilizing 
alternative locations to purchase stamps and mail packages, the 
Postal Service has closed only 6,000 retail facilities since 
1971.
    According to a Postal Service estimate, retail service cost 
the USPS an estimated $4.2 billion in fiscal year 2010. With 
the continuing growth of alternative postal services and the 
decline in mail volume, the Postal Service can realize 
tremendous savings by right-sizing retail service locations and 
consolidating mail processing facilities, while still improving 
customer access to postal services.
    I have to applaud Postmaster General Donahoe's vision to 
return the Postal Service to profitability. The Postmaster 
General has begun to reduce costs by consolidating facilities 
and implementing other cost-saving measures. Unfortunately, 
cost-cutting is not occurring fast enough to keep pace with the 
Postal Service's decline in revenue. Given the decline, the 
Postal Service will need to reduce its annual expenses by more 
than $10 billion just to break even in 2020.
    Regrettably, labor costs continue to constitute 80 percent 
of Postal Service expenses, despite the elimination of 230,000 
workers over the last decade. More troubling is the fact that 
the new contract negotiated with the American Postal Worker 
Union expands layoff protections for workers, guarantees wage 
and COLA increases, and in-sources at least 4,000 positions.
    As we all know, the Postal Service has announced its 
intention to default on a $5.5 billion retiree health benefit 
pre-funding payment due to the Treasury on September 30, 2011. 
However, even missing the large payment will not be enough to 
stave off further insolvency as the USPS now projects to fall 
short on a mandatory workers compensation payment due on 
October 15, 2011. Therefore, to save the Postal Service, the 
time to act is now. As Mr. Herr's testimony states, status quo 
for the Postal Service is no longer sustainable, and reform is 
urgently needed to ensure postal services are available to all 
Americans. The Postal infrastructure is antiquated and must be 
transformed to accommodate 21st century customer service 
preferences.
    I do thank the witnesses that will be appearing today on 
both panels, and I look forward to their testimony.
    I would like to recognize the distinguished gentleman from 
Massachusetts and the ranking member, Mr. Lynch, for his 
opening statement.
    Mr. Lynch. Thank you, Mr. Chairman.
    First of all, I want to thank our witnesses for coming 
before the committee to help us with our work.
    Today's hearing will examine the current state of our 
postal infrastructure, including the range of retail and mail 
processing networks operated by the U.S. Postal Service. In 
light of the worsening financial challenges faced by the Postal 
Service, coupled with the steady decreasing mail volume, we 
will be focusing our attention in this hearing on the Postal 
Service's efforts to generate significant cost savings through 
network consolidation.
    As we all know, the Postal Service has reached a financial 
breaking point. Last month, we received word from the Postal 
Service that the agency had compiled its second quarterly 
report for fiscal year 2011. Regrettably, the results were once 
again deeply troubling. In addition to what the chairman has 
noted, the Postal Service ended the second quarter with a net 
loss of $2.2 billion, as compared to a net loss of $1.6 billion 
during the same reporting period for fiscal year 2010. This 
compares with the $1.9 billion and $770 million losses in the 
second quarter of 2009 and 2008 respectively. So it is clear 
that, despite prior cost-cutting efforts, the situation 
continues to worsen.
    In addition, the Postal Service continues to see decreases 
in total mail volume, which dropped from 42.3 billion to 41 
billion pieces. Mailing services revenue also declined by $568 
million, and total operating revenue also fell by $500 million. 
As a result, the Postal Service projects that it will have 
reached its statutory debt limit of $15 billion by the end of 
this fiscal year.
    Were it not for all the other crises we have in this 
country and the problem with the national debt limit, I think 
this would be a major, major issue. But it is being overlooked 
I think by some because of all the other priorities that we are 
concerned with.
    Moreover, absent legislative changes, the Postal Service 
expects that it will be forced to default on its mandatory 
payment to the Federal Government, including a $5.5 billion 
retiree health benefit fund payment due on September 30th of 
this year.
    Against this extraordinary financial backdrop, the Postal 
Service has undertaken action to review its extensive network 
of retail and mail processing facilities and begin to 
consolidate its operational infrastructure. Notably, this 
consolidation initiative falls in line with the advisory 
recommendations issued in July 2009 by the Government 
Accountability Office, which conducted a comprehensive audit of 
the Postal Service's financial condition and determined that 
the Postal Service should consider network realignment due to 
its costly excess capacity.
    There should be no remaining doubt that the Postal 
Service's financial situation will require us to make some very 
difficult choices, including consolidating excess postal 
infrastructure. However, in doing so, we must be sure to 
exercise due diligence so as to make certain that any effort to 
realign the Postal Service retail and mail processing 
infrastructure does not compromise customer service or delivery 
standards or cause unnecessary impacts on our dedicated, 
hardworking postal employees and retirees.
    The potential realignment of more than 500 mail processing 
plants merits particular oversight, given their critical 
connection to universal service and the central role they play 
as hubs of economic and employment activity. To this end, I 
strongly urge the Postal Service to adopt a network realignment 
process that is fair, it is transparent, and it is accountable, 
and allows for all of the stakeholders, including Members of 
Congress and the communities that are affected, to have input 
into the process.
    As is the case with most businesses, communication is 
critical. So I feel strongly that the Postal Service must be 
held accountable in terms of making sure communities are fully 
informed and involved at every juncture of consolidation study, 
notwithstanding whether it is the closing of a small postal 
branch in a rural area that has three staffers or relocating a 
large-scale processing and distribution center in an urban area 
that employs hundreds of workers.
    In addition, we need to look at other reasonable steps that 
the Postal Service may take to improve its long-term financial 
viability. In particular, while the Postal Service has already 
undertaken a series of revenue-generating and marketing 
initiatives, we must continue to examine the feasibility of the 
Postal Service plans to diversify its retail portfolio to 
include the sale of some nonconventional items as well as 
expand its marketing strategies and digital platform.
    Most notably, we can immediately address the significant 
overpayment by the Postal Service of both its Civil Service 
Retirement System and the Federal Employees Retirement System 
liabilities through legislative action. For example, 
immediately repaying the Postal Service the near $7 billion 
owed them for their overpayment of their Federal Employee 
Retirement System obligations will at least place the Postal 
Service on a better financial footing for this fiscal year, 
thereby affording us additional time to examine other important 
alternatives and reforms for the long term.
    In order to address this matter, I have introduced 
legislation, H.R. 1351, to rectify these overpayments and allow 
the Postal Service to use the resulting surplus to cover 
various on-budget obligations which will help to improve its 
current liquidity position.
    Mr. Chairman, I look forward to our witnesses' testimony 
this afternoon and hope that we will all be able to work in a 
bipartisan manner to get our trusted government institution 
back on the right track.
    I want to thank you for yielding the time.
    I also want to thank you for the unanimous consent 
agreement that you announced to allow Ms. Grace Napolitano of 
California to weigh in, in contravention of the rules of the 
committee.
    I also ask you to please consider a unanimous consent 
request to enter into the record the statements of 
Representative Judy Chu of California and Representative Adam 
Schiff of California, which I will present for entry into the 
record.
    Mr. Ross. Without objection, they are entered into the 
record. And thank you.
    [The prepared statements of Hon. Stephen F. Lynch, Hon. 
Judy Chu, and Hon. Adam B. Schiff follow:]



    Mr. Lynch. Thank you, and I yield back.
    Mr. Ross. Thank you, Mr. Lynch.
    The Members may have 7 days to submit opening statements 
and extraneous materials for the record.
    At this point, I would like now to introduce our first 
panel.
    Mr. David E. Williams is vice president of Network 
Operations Management for the U.S. Postal Service; Mr. Dean 
Granholm is vice president, Delivery and Post Office 
Operations, for the U.S. Postal Service; and Mr. Phillip Herr 
is a Director on the Physical Infrastructure Issues team at the 
U.S. Government Accountability Office.
    Pursuant to committee rules, all witnesses must be sworn. 
So if you would please stand and raise your right hands.
    [Witnesses sworn.]
    Mr. Lynch. Thank you.
    Let the record reflect that all of the witnesses answered 
in the affirmative.
    We will now allow each panel member to have 5 minutes to 
present their opening testimony. Please also note that your 
written testimony has already been entered into the record 
here.
    With that, I will I will recognize Mr. Williams for 5 
minutes.

     STATEMENTS OF DAVID WILLIAMS, VICE PRESIDENT, NETWORK 
OPERATIONS MANAGEMENT, U.S. POSTAL SERVICE, ACCOMPANIED BY DEAN 
GRANHOLM, VICE PRESIDENT, DELIVERY AND POST OFFICE OPERATIONS, 
   U.S. POSTAL SERVICE; AND PHILLIP HERR, DIRECTOR, PHYSICAL 
  INFRASTRUCTURE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

                  STATEMENT OF DAVID WILLIAMS

    Mr. Williams. Good afternoon, Mr. Chairman, Ranking Member 
Lynch, and members of the subcommittee.
    My name is Dave Williams, and I serve as the vice president 
of Network Operations for the Postal Service. I am responsible 
for the management of a national network of 512 mail processing 
facilities, as well as coordination of automation initiatives.
    I am accompanied today by Dean Granholm, vice president of 
Delivery and Post Office Operations. Mr. Granholm is 
responsible for all aspects of mail delivery, as well as 
operations at nearly 32,000 post offices, stations, and 
branches.
    The Postal Service is the cornerstone of a vital industry 
which impacts every community in America. This year, we will 
process and deliver over 168 billion pieces of mail. The 
mailing industry pumps over $1 trillion into the economy every 
year and employs over seven million Americans. Over 90 percent 
of mail-related jobs are in private companies of all sizes, 
like mailing and fulfillment services, envelope manufacturers, 
printers, consolidators, to name a few. The success of these 
firms depend on a healthy and thriving Postal Service.
    Today, however, the Postal Service is poised on the brink 
of a financial crisis, and we need your help to get back on the 
path of profitability. The Postal Service does not relish being 
in this position. A little over 5 years ago, in 2005, our debt 
stood at zero. However, at the end of this fiscal year, we will 
reach our $15 billion statutory debt limit, and we will not 
have the cash to make a $5.5 billion retiree health benefit 
pre-funding payment due September 30th. This payment, mandated 
by the Postal Act of 2006, is one of the primary drivers of our 
precarious financial situation.
    The focus of this hearing is the Postal Service's mail 
processing and retail infrastructure and our efforts to right-
size our overall network. The decline of first-class mail and 
the increased use of electronic means of communication is 
something the Postal Service predicted and planned for. We have 
been closing all types of postal facilities on a continual 
basis since the early 1970's, when we became the self-
supporting U.S. Postal Service. Using area mail processing 
studies and other consolidation activities, we have reduced a 
sprawling network that once consisted of over 2,000 facilities. 
Today, our primary outgoing mail processing facilities number 
less than 300.
    We are taking a similar approach to reducing the size of 
our retail infrastructure, which currently consists of roughly 
32,000 postal-operated retail locations.
    Right-sizing our network is one of many strategies the 
Postal Service has employed to cut costs and improve 
efficiency. In the past 4 years, the Postal Service has cut 
costs by $12 billion, including a reduction of career 
employment of 110,000.
    Our achievements notwithstanding, a gap still exists 
between revenue and costs mainly because of a series of events 
outside our control.
    There are three critical areas which need to be addressed 
this year. They are resolving the retiree health benefit pre-
funding requirement, finding a solution to the overfunding of 
FERS and CSRS pension benefits, and giving the Postal Service 
authority to adjust delivery frequency.
    There are a number of bills already introduced in both 
Chambers which address some or all of these issues. We 
appreciate the hard work and interest of the subcommittee, 
especially those Members who have proposed legislation or plan 
to introduce bills in the coming weeks.
    The Postal Service knows how to cut costs, streamline our 
excess retail and processing network, and make the necessary 
changes to bring our organization further into the 21st 
century. But we cannot do it alone.
    Absent congressional action this year, the Postal Service 
will face a liquidity crisis. The Postmaster General's stated 
goal is to reduce our work force to 400,000 employees and cut 
costs to $60 billion annually as quickly as possible. How 
quickly we reach this goal depends largely on the enactment of 
legislation that will free the Postal Service to pursue even 
greater levels of efficiency and cost savings. Working 
together, we can continue the evolution of the Nation's postal 
system into a more stable and viable organization. We look 
forward to working with all of you.
    Thank you again, Mr. Chairman, and we will be happy to 
answer your questions.
    [The prepared statement of Mr. Williams follows:]



    Mr. Ross. Thank you, Mr. Williams.
    Mr. Granholm, you are recognized.
    You are here for technical response. Thank you very much.
    Mr. Herr, you are recognized for 5 minutes for an opening 
statement.

                   STATEMENT OF PHILLIP HERR

    Mr. Herr. Thank you.
    Chairman Ross, Ranking Member Lynch, and members of the 
subcommittee, I am pleased to participate in this hearing.
    There is broad agreement that the Postal Service is in a 
serious financial crisis, linked in part to the 20 percent 
decline in mail volume since 2006 and its difficulty aligning 
revenue with costs. Today, I will first discuss the urgent need 
to right-size postal operations and networks, followed by GAO's 
analysis of changes needed to facilitate progress in 
restructuring.
    A few key financial facts make clear why action is needed. 
As discussed today, the Postal Service has experienced a 
cumulative net loss of nearly $20 billion over the last 5 
fiscal years. By September 30th, it projects it will reach its 
$15 billion borrowing limit and also not make its mandated 
retiree health payment to the Federal Government. For this 
reason, the Postal Service's financial condition and outlook is 
on GAO's 2011 list of high-risk programs and agencies.
    I will discuss three areas where realignment is needed.
    While there are 32,500 postal retail facilities, how 
customers purchase postal products has changed. In fiscal year 
2010, about one-third of postal retail revenue came from 
purchases made outside of post offices, a figure estimated to 
reach 60 percent by 2020.
    Over the past 10 years, visits to post offices have 
declined by 21 percent, and revenue from sales at post offices 
has dropped by 16 percent, but the number of post offices has 
remained relatively unchanged. Statutory requirements prohibit 
closing small post offices solely for operating at a deficit. 
Yet 80 percent, about 26,000 postal retail facilities, do not 
cover their costs. This is simply unaffordable.
    Postal officials say the time required to close facilities 
has hindered realignment efforts. The current process can take 
270 days once the decision to pursue an individual closure has 
been reached.
    Foreign posts we reviewed address stakeholder resistance 
through regular outreach. When modernizing its retail network, 
one European postal operator launched a national campaign to 
proactively inform customers about how and where they could 
access postal services in alternate locations.
    Turning to the processing network of 500 facilities used to 
sort mail, which has also not been significantly adjusted in 
response to recent mail volume declines. To its credit, the 
Postal Service reports it is evaluating 90 proposals to 
consolidate processing operations.
    Excess mail processing capacity remains for several 
reasons. Single-piece first-class mail has dropped by about 23 
billion pieces over the past decade, leaving less mail to be 
processed end to end through the network. In 2009, a senior 
postal official testified before this subcommittee that there 
was 50 percent excess capacity in first-class mail processing 
operations at that time.
    Increased automation enables faster and more efficient 
sorting, and 83 percent of standard mail now bypasses most of 
the processing network through a process called drop shipping.
    Turning to mail delivery, there are ongoing efforts to 
improve what is the Postal Service's most costly activity, 
involving delivery to about 150 million points 6 days a week, 
employing 310,00 carriers. Key efforts to improve delivery 
operations include realigning city routes and introducing new 
systems to sort large mail pieces.
    Congress and the Postal Service urgently need to reach 
agreement on how to accelerate progress on network 
restructuring, particularly since many processes for closing 
facilities have not changed since the 1970's.
    Some key topics to consider include: What aspects of 
universal service are appropriate in light of fundamental 
changes in the use of mail? Should delivery standards be 
modified? How can access to retail services be enhanced while 
maximizing savings? What statutory or regulatory changes are 
needed as a catalyst for network-wide restructuring while 
assuring appropriate oversight and accountability? What role 
should Congress, the Board of Governors, and the PRC have in 
modernizing and realigning postal operations? How and when 
should the Postal Service get public input and provide notice 
about decisions to close facilities?
    Additional considerations that could facilitate 
restructuring include revising legal requirements to facilitate 
shifting the focus from individual closures to network-wide 
restructuring similar to the BRAC approach used by DOD. 
Improving outreach and transparency through strategic 
communication with key groups is also important and simplifying 
rules, terms, and requirements so that they are easily 
understood.
    In closing, right-sizing the Postal Service will require 
congressional support and senior postal leadership, because 
past attempts at even modest restructuring have faced 
formidable resistance. Going forward, stakeholders, the unions, 
management associations, the mailing industry, and political 
leaders need to recognize that a major realignment of postal 
networks is imperative for the Postal Service to be financially 
viable in the 21st century. The status quo is no longer 
sustainable if the Postal Service is to be self-supporting.
    This concludes my prepared statement, and I am pleased to 
answer questions.
    [The prepared statement of Mr. Herr follows:]



    Mr. Ross. Thank you, Mr. Herr.
    I will now recognize myself for 5 minutes for questions.
    And I do want to recognize also and agree with the ranking 
member, Mr. Lynch, that if it weren't for other crises that are 
going on right now in addition to the debt ceiling crisis, this 
would be the major crisis and most likely will be the major 
crisis as time progresses. Because where we are today as a 
country with the U.S. Postal Service is, after 230 years, it is 
still one of the most well-established, best infrastructures, 
going to 150 million homes a day.
    But we also know--and I want to address this to Mr. 
Williams--that there are issues out there that we must 
confront. And I want to hit this one head on with regard to the 
overfunding issue, which is an issue. I recognize that. There 
is no question that that is something we have to address. But 
even assuming we address it to the satisfaction of everybody 
involved, it still doesn't solve the future problems that the 
U.S. Postal Service will have, will it?
    Mr. Williams. No, it will not.
    Mr. Ross. In fact, we have to make some systemic changes.
    Mr. Williams. We do.
    Mr. Ross. As you pointed out, reduce the work force to at 
least 400,000. We have to consolidate certain processing 
centers.
    Let me ask you this. What options does the Postal Service 
have to create a modern processing network? I toured one 
facility. There was still a lot of labor-intensive involvement 
there. Where I tour a facility in the private sector where the 
labor involvement is not near what is done in the U.S. Postal 
Service. Do you have any suggestions?
    Mr. Williams. The Postal Service operates one of the most 
technology advanced systems in the world. We have a tremendous 
infrastructure in place that provides our ability to be very, 
very efficient in processing mail in our network facilities. 
But what I would like to add is our financial situation is such 
at a critical point right now that having capital programs to 
even further enhance our infrastructure, we simply can't 
afford.
    Mr. Ross. I agree with you. You have to have the business 
plan on one side, and then you have to have the capital 
investment in order to implement that business plan. I think 
that is where these crossroads are going to have a severe train 
wreck if we are not careful over the next couple of months.
    With regard to drop ship, it seems to be that private 
carriers are doing more drop shipping, which is becoming more 
economically feasible. For example, I toured a facility where 
they would drop ship to an SFC, I think is what it is.
    Mr. Williams. SCF?
    Mr. Ross. SCF. Thank you.
    Is that something that we ought to look at in terms of 
transitioning the private sector to providing that as a cost-
saving service to the Postal Service?
    Mr. Williams. Our drop ship program, our work share program 
has been one of the cornerstones in our ability to shrink our 
infrastructure. Because mail gets dropped further into our 
network, and it bypasses many of the processing steps. So, yes, 
work sharing, pre-sorting, drop shipping volumes deeper into 
our network allows us to further contract our infrastructure, 
our operational footprint, and allows us to be a lot more 
efficient.
    Mr. Ross. Mr. Herr, you talked about the retail facilities 
and, in fact, some of the processing facilities, but I want to 
talk about the retail facilities. Because we have to agree that 
the Postal Service is a business.
    Mr. Herr. That is correct.
    Mr. Ross. And it operates on the revenues gained by the 
rate payers, the people that buy the service and do that and so 
forth. So if we are going to assess it based on it being a 
business, then we have to look at the facilities that are out 
there that provide the service. And if they are not providing 
the service at a rate that is at least profitable or break 
even, then we should get rid of them.
    Mr. Herr. We need to take a hard look.
    Mr. Ross. Not necessarily get rid of them, but wouldn't it 
be in the best interests of not only the consumers but also the 
U.S. Postal Service to look at partnering with established 
retail outlets?
    Mr. Herr. Yes, it would. That is what we found in our 
review of foreign posts. That is exactly what we have seen 
other industrialized countries doing.
    Mr. Ross. In fact, you wouldn't have the investment of the 
bricks and mortar. You would have probably better hours, 
because it would be utilizing the hours of the retail 
establishment. Let's say it was a 7-11 or a Starbucks or 
whatever--a grocery store, maybe. You could provide the 
services there. But it would still provide the consumer that 
which they are desiring from the U.S. Postal Service, and that 
is the day-to-day contact that they want to have.
    Mr. Herr. Right. That is certainly one alternative to do 
that.
    Mr. Ross. Let me ask you, at the rate the Postal Service is 
going now, how many years do you think it would take to 
eliminate the redundant retail facilities?
    Mr. Herr. Given the rate of change over the past 10 years, 
I don't--at the rate over the last 10 years, they have closed 
about a thousand facilities, more or less. And mainly that has 
only been where there has been an opportunity, say a vacancy. 
If they continue at that rate, it won't get done nearly in 
time, given the gravity of the financial situation we are 
discussing today.
    Mr. Ross. So we need--as a Congress, we need to empower the 
Postmaster General to be able to make those decisions based on 
economic factors in order to reduce the size or the obligations 
of the Postal Service to stay in those.
    Mr. Herr. I believe so.
    Mr. Ross. Okay. I see my time is up; and I will now 
recognize the ranking member, Mr. Lynch, for 5 minutes.
    Mr. Lynch. Thank you, Mr. Chairman.
    Mr. Herr, you are a frequent flyer to this committee.
    Mr. Herr. It feels like it.
    Mr. Lynch. And a pretty bright guy, in my opinion.
    I think we have 38,000 post offices in the United States 
today. How many do you think we really need?
    Mr. Herr. You know, actually, we have a job that we are 
just getting under way now taking a look at the postal network. 
I have heard different figures. I think one of the things that 
I would hope that comes out of that review that we are doing 
now is a better sense of what the core might look like and then 
how that might be complemented by alternate retail facilities.
    But in terms of venturing a guess, I don't have a figure. 
Mr. Granholm has probably thought about this to some degree in 
his capacity working with postal retail.
    Mr. Lynch. All right. Mr. Granholm, you want to take a look 
at that?
    Mr. Granholm. It is a difficult question. We need to build 
a model that reviews our infrastructure not only today but in 
10 years.
    Mr. Lynch. Yeah.
    Mr. Granholm. When our alternate access grows to the 60 
percent level, it definitely puts a huge strain during that 
period of time----
    Mr. Lynch. Alternate access. What do you mean?
    Mr. Granholm. That means where we sell our products in 
grocery stores, in contract stations. Online definitely is a 
huge growth area for our alternate access. We currently have 
over 63,000 retail locations that are not our traditional brick 
and mortar. Those will continue to grow.
    Mr. Lynch. Yeah, but just to push back on that, a lot of 
the stuff we closed was stuff that you expanded. You expanded 
to airports and malls and places like that. Those are the 
places we closed. Nobody was using them.
    Mr. Granholm. You are absolutely right. And we need to 
close more.
    Mr. Lynch. I don't want to burn my time on this one 
question.
    Here is the problem. Mail volume keeps dropping. And from 
what I see in Europe and these online services, where you can 
actually go online and click your mail, if you don't want it 
delivered, you can just click on it. So I don't know, what term 
do they use? They don't use junk mail. But what is the term 
they use?
    Mr. Granholm. Electronic mail, hybrid mail.
    Mr. Lynch. No. No. No. Stuff that just--advertisements that 
come in the mail.
    Mr. Granholm. Bulk business mail.
    Mr. Lynch. Right. If you don't want that delivered, you can 
just click on it. And a lot of that stuff is going to get 
clicked on. So, as that comes online, less and less and less 
mail is going to get delivered. And, you know, I talked to the 
Postmaster General last week, and volume dropped off a cliff 
again----
    Mr. Granholm. Yep.
    Mr. Lynch [continuing]. In this last quarter. And we 
haven't seen that happen since the economy went in the toilet 
around--you know, 2008 we saw a big drop. And you know, I know 
we are not talking about--we are not supposed to talk about a 
double dip, but, you know, if you just take mail volume as an 
indicator of economic activity, it looks pretty bad. It looks 
pretty bad. So we got to figure out a way to get this ship back 
on course.
    And change is painful. People hate change. I understand 
that. But if we don't get ahold of this thing and straighten it 
out, you know, then it is going to further damage the system; 
and we are going to continue this downward spiral. So we have 
to make a good, hard look at this.
    Look, I come from a postal family. My mom was a postal 
clerk of 30 years. I have told people before these hearings, I 
probably have 17 people in my family--my cousins, in-laws, 
everybody--who worked for the Post Office. And you know, a lot 
of them are retirees. I worry about their benefits going away 
and what they worked for and what they were promised.
    So we've got to get serious about this. And if there are 
postal facilities--you know, I was an ironworker for 18 years; 
and all I did for 18 years, just about, was build bridges and 
high rises. And every time we built a high rise, whether I was 
in New York or Boston or Chicago, we would stick a post office 
in the bottom floor. And, you know, the volume of mail would 
justify the location of that post office.
    But we would pay top dollar for that location, and we are 
paying top dollar now. In every major city in America, we are 
paying top-dollar, class-A office space for a post office to be 
located there. And there is a high rise across the street; and 
we are paying that rent, too.
    So what I am saying is, okay, let's look at some of these 
urban areas where you have facilities across the street from 
each other that are both paying enormous rent, and let's close 
one of them and make them walk their mail across the street to 
the next one. We could save a lot of money that way.
    You know, the plain fact of the matter is that this labor-
intensive activity that we see at the post office, we call that 
work. That is work. And it takes work to sort the mail, and it 
takes work to deliver the mail. Until we come up with a robot 
letter carrier, we are going to have to pay these folks to go 
out and deliver the mail. And we are adding a million addresses 
a year. So there is more and more work as people are moving to 
the suburbs, and we are still servicing those groups. So, you 
know, getting rid of people is not going to maintain the 
quality of service.
    I know I am way over my time, and you are being extremely 
gracious. I will save the rest for the rest of the hearing.
    But we have to really look at the expense side of this 
thing. We are spending a lot of money on facilities that we are 
underutilizing, and I think that is one of the areas that we 
are neglecting to address.
    Thank you. I yield back.
    Mr. Ross. Thank the ranking member.
    I now recognize the gentleman from Michigan, Mr. Amash, for 
5 minutes.
    Mr. Amash. Thank you, Mr. Chairman, and thank you to our 
panel.
    Mr. Williams, with mail volume declining significantly over 
the past several years, why does the Postal Service continue to 
maintain significant excess mail capacity?
    Mr. Williams. The Postal Service has been very aggressive 
in eliminating excess capacity. And we define capacity in a 
couple of ways. We have capacity with staffing, we have 
capacity with machines, and we have capacity with facilities. 
And over the last 4 or 5 years we have been dealing with that 
capacity. We have pulled out thousands of machines out of our 
mail processing network. We have pulled out--over the last 4 
years, one out of every three work hours in our mail processing 
operations have been extracted from the system.
    So we are looking at every opportunity. Because of our dire 
financial situation, we have been looking at every opportunity 
to cut costs and to take out capacity, staffing, machines, and 
now we are in a position right now where we haven't been, in my 
career, we have been dealing with more area mail processing and 
other mail processing consolidations than we ever have that I 
know of in the past. We are up to 138 consolidation 
opportunities right now on the mail processing side. So we are 
being very aggressive with cost cutting.
    Mr. Amash. You mentioned staffing. If the Postal Service 
has reduced its number of employees by 230,000 since 2001, then 
why does labor still make up 80 percent of the cost?
    Mr. Williams. Our entire operational footprint is 
continuing to shrink. So we are shrinking not only our labor 
costs, we are shrinking the facilities, we are shrinking 
overhead. We have pulled out this year alone, year to date, 
about 2 million square feet of space out of our operations. So 
as we continue to contract the entire operating costs of the 
Postal Service, we are doing it not only on the labor side but 
also on the other components of costs outside of labor.
    Mr. Amash. Now--and you want Congress to get involved. Why 
should Congress be involved here? Isn't it more important for 
the Postal Service to address its business model and make some 
changes internally?
    Mr. Williams. We are doing everything that we can do, but 
we need help from Congress. We need to address the retiree 
health benefit pre-funding, we need to address the overfunding 
of CSRS and FERS pension, and we need the ability to determine 
the delivery frequency for the Postal Service that will allow 
us to continue to shrink our infrastructure.
    Mr. Amash. Isn't it just kicking the can down the road?
    Mr. Williams. No. We believe with our plan that we put in 
place on March 2nd, our comprehensive plan, our initiatives 
around cost cutting that we have control over, we believe that 
if we get the retiree health benefit, if we get the overfunding 
issues around FERS and CSRS and have the ability to determine 
the delivery frequency, we believe that that will address the 
issues and improve the viability of the Postal Service.
    Mr. Amash. If workers compensation costs are ignored, are 
the Postal Service costs up this year? Is that correct?
    Mr. Williams. If the workers compensation are ignored--I 
don't understand the question.
    Mr. Amash. If you ignore the payment, the adjusted payment 
for the year. I am sorry.
    Mr. Williams. I don't have that information. I would be 
happy to respond for the record.
    [The information referred to follows:]
    [Note.--The information referred to was not provided to the 
subcommittee.]
    Mr. Amash. Okay. Mr. Herr, I have a few seconds here still, 
is the Postal Service moving fast enough to right-size its work 
force?
    Mr. Herr. Given the gap between the revenues and the 
expenses, not--in our judgment they are not.
    Mr. Amash. And what fundamental weaknesses in their 
business model would you say they have?
    Mr. Herr. Right now, the profitable mail, first-class mail 
is dropping, as acknowledged earlier today in the hearing by 
Mr. Lynch and Mr. Ross. It is dropping considerably, with no 
end in sight. And what I think ultimately what will be left 
will be the standard mail, which doesn't bring in that much 
revenue.
    Mr. Amash. Would you attribute the Postal Service's 
problems to Congress or to--or should the Postal Service take 
more responsibility here, in your opinion?
    Mr. Herr. Well, I think the Postal Service needs to 
articulate what its vision would look like. One area we talked 
a little bit about earlier would be on the retail side. The 
Postal Service laid out with a vision for what 5-day delivery, 
what potential savings would come with that. I think an 
alternate study relative to what might happen with the retail 
network would be a nice complement to that to give Congress a 
sense of what potential cost savings there might be.
    Mr. Amash. Thank you. Thanks to both of you.
    Mr. Ross. Thank you.
    The gentleman from Illinois, Mr. Davis, is recognized for 5 
minutes.
    Mr. Davis. Thank you very much, Mr. Chairman; and let me 
thank the witnesses for being here.
    Mr. Williams, according to some of your post-implementation 
reviews, what is the largest areas of savings usually generated 
from processing and consolidations?
    Mr. Williams. The largest savings component typically in an 
area mail processing study, and validated in our post-
implementation review, are, typically, labor costs.
    Mr. Davis. And in considering a move to 5-day delivery, has 
the Postal Service evaluated what impact such a move would have 
on processing and distribution centers? And, without Saturday 
mail, I would assume that these facilities would experience 
increased workload on Monday or possibly Tuesday if a holiday 
fell on a Monday.
    Mr. Williams. The Postal Service has a very robust modeling 
process where we model every single plant across the network. 
And in that modeling process, which is where we identify 
candidates for consolidation opportunities based on matching 
demand with excess capacity and determining which facilities 
are candidates for closure, in that process we have included 
the scenario of 5-day delivery and the impact that added volume 
into Monday's processing into that scenario. So we have 
included the 5-day delivery scenario in our modeling, and we 
have completed that effort last year.
    Mr. Davis. Mr. Williams and Mr. Herr, can I ask you, in 
light of recent increases in the price of fuel, transportation 
obviously continues to be a key cost driver in the postal 
system. So as the Postal Service moves to downsize or right-
size the number of mail processing facilities in the network, 
is it logical to assume that these trucks are going to have to 
travel further in terms of their routes and the mail that they 
will deliver?
    Mr. Williams. I will take that first.
    As we shrink the infrastructure of mail processing and have 
fewer network buildings in our network, what we are actually 
seeing is the opportunity to consolidate not only workload into 
a building but to consolidate mail onto our trucks and our 
vehicles. So we are able to build bigger loads and actually 
have fewer trucks. In fact, year to date through March, we have 
taken out, compared to prior year March, we have taken out 
approximately 56 million miles out of our network. So 
consolidating facilities, having fewer nodes in our network is 
actually driving bigger loads for transportation and therefore 
allowing us to have less miles and less consumption in terms of 
transportation.
    Mr. Davis. Would the cost of fuel, as it continues to 
fluctuate--but I guess it goes up more than it goes down, 
unfortunately--but would the cost of fuel negate perhaps some 
of those savings or----
    Mr. Williams. The cost of fuel, all things being equal, as 
long as we are taking miles out of the system and taking 
consumption out of the system, all things being equal, we are 
saving.
    If we had those miles still in the system, those 56 million 
miles that we pulled out year over year in March would have 
just exacerbated our fuel spend, because prices continue to 
rise. And, from our standpoint, it is taking consumption out, 
taking miles out, and balancing this whole demand equation with 
capacity. And that includes staffing, includes facility 
footprint, and it includes transportation.
    Mr. Davis. What would either one of you say to those 
individuals who continue to suggest that there might be some 
additional cost-cutting, cost-saving opportunities for the 
system?
    Mr. Williams. We are in a serious financial situation. We 
have to act with speed. We have to make good, sound business 
decisions; and we are looking at every opportunity to cut 
costs. There will be further cost-cutting initiatives down the 
road. We can't afford not to question every cost in our system 
and look for opportunities to reduce costs and to reduce our 
operating footprint to make sure that we are matching our 
capacity with the changing customer behavior that we are seeing 
with our volume declines.
    Mr. Davis. Thank you very much.
    Thank you, Mr. Chairman. I yield back.
    Mr. Ross. Thank you.
    The chair now recognizes the gentlelady from California, 
Mrs. Napolitano, for 5 minutes.
    Mrs. Napolitano. Thank you, Mr. Chairman; and thank you for 
allowing me to sit on the dais.
    I have a ton of questions, plus a lot of information to 
submit for the record, and I have been listening with great 
interest.
    We have in my area a distribution center that is 
scheduled--I am sure you already have been briefed--for 
transition over to another area, which is roughly 30 miles away 
in one of the most heavily trafficked areas of southeast L.A. 
County, from Industry to Santa Ana, California.
    We started working since January 2009, and according to 
what I am reading from the staff report is that by law you have 
to notify the area that you will be closing. There was no 
notification--or at least none that I found out. I found out 
from the employees who called my office to give us the 
information, and so we started delving into.
    Since then, I have asked for verbally, in writing, you name 
it, to try to get information from any of the postal 
authorities, local, Washington; and I have been given what I 
would call the runaround. The report that was given to me is 
blank. The second report I received, it is--they called it 
redacted, which is blacked out. So, essentially, we can't make 
any comparison.
    You say this is information that is proprietary. Well, how 
are we to be able to understand what you are trying to do and 
how you are trying to do it?
    Now, the report indicates there is 26 employees that will 
be either transferred or manned up, moving along in their 
retirement, whatever. Yet there is no real way for me to 
understand what is going to happen. There is no plan B. What 
happens if Santa Ana can't afford them, cannot accept that 
amount of traffic? Now, understanding that in December you 
moved some of it to Industry, Christmas mail, because Santa Ana 
couldn't handle it. So that tells me there is an issue.
    I have asked for capacity. What is the capacity of one 
versus the other? The footprint. I can't get any information 
from you guys. It is proprietary. Why can't we get some 
information so that I can tell my cities?
    And, by the way, I have letters and city council 
resolutions in the packet telling you and this committee of 
their opposition without information. So I am very frustrated 
by all this.
    And then when I hear--and, by the way, into the record I am 
introducing a Postal Reporter News Blog on significant 
degradations in service, Lima consolidation. And they state 
very openly, report delayed, lost, damaged bills, payments, 
packages, and medicine.
    Now, in my corridor I have the city of Industry, which is 
95 percent industrial. These are people that ship in and out 
that are constantly doing package mailing or mail; and we are 
saying, sorry, guys, you don't matter. This industrial area, 
which is one of the hubs of the L.A. County, it doesn't matter. 
We are sending it to Santa Ana, which is mostly residential--
well, not residential, it has a mixture of everything.
    So there has been no way for me to be able to gauge what is 
being based on. When you talk about the junk mail, are you 
studying, are you increasing those rates? Because two-thirds of 
my mail at home is junk. Who is paying for that? Is it being at 
the expense of regular mail or other services?
    Are you studying anything that is going to tell us are you 
retiring people? Are you allowing them to retire? And you say 
that you have done some review to be able to make up for that 
loss in USPS income. There is a million questions that I have.
    And I would like to, Mr. Chairman, introduce into the 
record several files that I have on this. And I would like to 
just show off for you guys' edification, this is what I 
received. Thank you very much. Isn't that nice? Blanks. Black. 
So, to me, it is not the way you treat a request from Members 
of Congress.
    Thank you, Mr. Chair.
    Mr. Ross. Without objection, so entered into the record.
    [The information referred to follows:]
    [Note.--The information referred to was not provided to the 
subcommittee.]
    Mr. Ross. Thank you. That being the last of our panelists, 
I want to thank--or our questions, I want to thank the 
panelists for being here. We are going to take just a brief 
break--just seconds, minutes--break to get our next panel going 
and hopefully have a chance to get done before they call us for 
votes.
    Thank you all very much for being here.
    [Recess.]
    Mr. Ross. We will reconvene.
    I appreciate everybody's patience here. I want to again 
thank the second panel for their patience as well and thank you 
for being here.
    I will introduce our second panel.
    We have Mr. Michael Winn, who is president of Greylock 
Associates; Mr. Hete, who is president and CEO of Air Transport 
Services Group; and Mr. Cliff Guffey is president of the 
American Postal Workers Union.
    As you all know, know pursuant to committee rules we swear 
in our witnesses. I ask you to please stand and raise your 
right hands.
    [Witnesses sworn.]
    Mr. Lynch. Thank you.
    And let the record reflect that all witnesses answered in 
the affirmative.
    Please be seated. I am going to now recognize each of you 
for 5 minutes for your opening statements, and please note that 
your written opening has been entered into the record.
    With that, I will recognize Mr. Winn for 5 minutes.

  STATEMENTS OF MICHAEL WINN, PRESIDENT, GREYLOCK ASSOCIATES, 
LLC; JOE HETE, PRESIDENT AND CEO, ATSG, INC.; AND CLIFF GUFFEY, 
       PRESIDENT, AMERICAN POSTAL WORKERS UNION, AFL-CIO

                   STATEMENT OF MICHAEL WINN

    Mr. Winn. Thank you, Mr. Chairman; and thank you to the 
entire subcommittee for allowing me to testify today.
    First, may I introduce RR Donnelley. RR Donnelley is a 
Fortune 250 company and is the largest printer in North 
America. We employ nearly 35,000 people across 45 States. 
Printing is one of the largest domestic manufacturing 
industries; and RR Donnelley has production facilities in 26 
States, coast to coast, border to border.
    Anybody have a Verizon wireless phone? We print the 
statements and put them in the mail for you. And magazines such 
as The Economist, very timely, very critical with delivery of 
content to their customers. And do you receive an Ikea 
catalogue or brochure? We have been recognized as an award-
winning provider for Ikea. And what about Williams Sonoma from 
California? We produce many of their catalogues and promotional 
material and perform mailing and logistic services for them. 
And then, for the U.S. Government, we are proud to have printed 
160 million first-class mail pieces for the 2010 census, as 
well as about 40 million Medicare & You booklets.
    RR Donnelley doesn't just print material and deliver it 
back to our customers. We print material and deliver it for our 
customers, collaborating with the U.S. Postal Service, 
deploying a sophisticated logistics network nationwide. The 
health and viability of the Postal Service is critical to our 
business.
    And may I introduce myself? I was an employee of RR 
Donnelley for over 35 years. Currently, I am retired. That is 
open to interpretation. But I still represent RR Donnelley on 
postal matters in Washington. My positions over my career have 
ranged from introducing new technologies and managing 
operations, running some of the largest plants in the RR 
Donnelley network.
    I was invited to testify today because of my experience 
with facility and capacity management; and that is what this 
testimony is all about, facility and capacity management to 
meet the demands of customers. That reflects the need to manage 
equipment, buildings, locations, and employees.
    In the private sector, we answer to stockholders, 
stakeholders, our communities, and employees. They all examine 
what we are doing, executing our responsibilities as caretakers 
of the organization. There is very little room for forgiveness.
    In my career, there were many difficult decisions. Laying 
off groups of people, shutting down pieces of equipment, and 
closing plants, all of which affected people's lives, 
customers, and communities.
    Please let me relate just one story about this 
responsibility of management.
    In 1976, I began my career with RR Donnelley as an engineer 
in a plant located in Old Saybrook, Connecticut. The plant was 
started in 1960 to serve customers in the Northeast part of the 
United States. Many great people taught me the trade and helped 
me become a member of management.
    In 2003, I was responsible for the operation of three 
plants, two in Lancaster, Pennsylvania, and the Old Saybrook 
plant. It became painfully obvious that I needed to shrink 
capacity to meet the demand of my customers and to serve them 
in the best way possible. Customers would benefit from the 
closure of Old Saybrook and the combination of operations into 
Lancaster.
    I closed Old Saybrook. There were 484 employees in the 
plant, and all were retrained, relocated to other positions 
within RR Donnelley or other employers. The plant was closed 
and sold. All of the equipment was relocated or sold. All of 
the community obligations were met, including things like our 
commitment to the United Way. There were three employees that 
helped start the plant up in 1960 that were relocated as a 
result of this closure.
    Painful? Yeah, you bet. But it was absolutely necessary to 
meet my responsibilities and obligations to shareholders, 
customers, and stakeholders of RR Donnelley. That is what 
responsible management does in the private sector.
    Why do I tell this story and how does it relate to the U.S. 
Postal Service? Well, the USPS has the same issues that I 
faced, capacity management of processing and management of 
employees. That all means expense to the USPS' operation and 
all that needs to be absorbed by someone. Usually, that is the 
rate payer. That is why they are all seeking alternate ways of 
delivering their message to the customer. Electronic 
substitution and alternate delivery will not go away and may be 
sought by more of the USPS' customers if rates go up.
    As a Nation, we need a strong and viable postal delivery 
service. That means the USPS management must step up to the 
responsibility of managing capacity of processing and the 
retail system to manage demand. There is no need for 30,000 or 
more retail stores. By the way, that is more than McDonald's 
has worldwide. There is no need for 400 processing facilities. 
The demand was for 206 billion mail pieces in 2006. Now it is 
down to 167 billion. Projections are for 150 billion in 2020.
    The USPS has many strong advantages to help it compete. 
They are masters at delivering the last mile. They should 
concentrate on that. Outsource the retail operations to 
supermarkets and other existing establishments to save 
employees and facility expense. Reduce the number, size, and 
complex nature of the processing network. Make the USPS user 
friendly and control the costs. That is what we do in the 
private sector.
    [The prepared statement of Mr. Winn follows:]



    
    Mr. Ross. Thank you, Mr. Winn.
    Mr. Hete, you are recognized for 5 minutes.

                     STATEMENT OF JOE HETE

    Mr. Hete. Good afternoon, Chairman Ross and members of the 
committee. I appreciate the opportunity to testify today and 
assist with identifying real solutions for the U.S. Postal 
Service. This hearing is a vital step toward averting the 
looming business liquidity crisis as the USPS is on the brink 
of insolvency due to continued losses in both mail volume and 
revenue.
    My name is Joe Hete, and I am Chief Executive Officer for 
Air Transport Services Group, which is the parent company of 
ABX Air and four other wholly owned subsidiaries. It was only 2 
short years ago that I testified before the Transportation and 
Infrastructure Committee about the devastating impact of DHL 
opting to pull out of the domestic market and its potential 
impact on our company, its employees, and our community.
    ABX Air, headquartered in Wilmington, Ohio, was part of a 
Fortune 1,000 organization, with annual revenues exceeding $1.6 
billion, with over 12,000 employees. On May 28, 2008, ABX Air 
was notified by DHL that it currently was in negotiations with 
UPS to take over DHL's air uplift for DHL Express U.S. domestic 
and international shipments within North America. This news 
devastated the company and community.
    On November 10th, with still no UPS deal and many people 
uncertain what was next, DHL again would make an announcement 
that would accelerate the decline of what was ABX Air's 
business model. It announced it would pull out of the domestic 
market completely, effective January 30, 2009. All 15 hub 
locations across the United States would be closed, and ABX Air 
would be forced to make a quick business model transition, 
including a mass reduction in force. What was ABX Air declined 
to just under 1,000 employees.
    While the USPS is not exactly in a similar situation, there 
are many parallels between the business challenges and threats 
of its current business environment and the last 36 months for 
ABX Air and its sister companies.
    The USPS is an iconic institution that the American people 
have grown to trust and respect when it comes to service and 
reliability. In its own right, it would be considered the first 
social network.
    Regrettably, the USPS has seen its market share decrease 
over a long period of time, and volume has continued on a sharp 
decline.
    Several factors are outside the control of USPS and are 
driving the decline, specifically technology that is 
continually evolving. In fiscal year 2010, 170.6 billion pieces 
of mail were delivered, a drop of 6 billion pieces from the 
previous year. It is estimated that volume will continue to 
decline at the rate of 7 percent every year.
    Not unlike ABX Air, the USPS is now forced into an 
unfortunate position that will demand that it restructure its 
business model to ensure its long-term viability. The USPS has 
offered solutions that include an exigent rate increase of 5.6 
percent, which was denied by the Postal Regulatory Commission; 
reduced mail delivery from 6 days to 5 days per week; to refund 
overpayments to the Civil Service Retirement fund of $5.5 
billion to pre-fund retiree health benefits and $1.2 billion to 
Federal Government workers' compensation insurance fund; and 
flexibility to close postal and sorting locations that are 
underutilized.
    While helpful, these solutions do not address one major 
factor that has a potential to significantly contribute to the 
long-term financial stability, which is to restructure its 
labor costs to match its current level of operations.
    Beginning immediately after the May 2008, announcement, ABX 
Air began to explore plans for restructuring its work force 
based on what it then believed to be the go-forward plan for 
support for DHL. It engaged its employees, being transparent on 
what the changes in the business model would mean for all those 
involved. ABX Air was able to make changes to much of its work 
force, free from the encumbrances of an employee base 
predominantly represented by a union.
    Wages were reduced, pension plans were frozen and replaced 
with defined contribution plans, and paid time off was reduced. 
It was a sobering experience when it appeared all 12,000 ABX 
Air jobs would be eliminated because of DHL's announcement. 
However, ABX Air's flexible work force relationships allowed us 
to go back to our customers and offer solutions to retain parts 
of their business.
    USPS has made attempts to restructure its work force to 
match diminishing mail volumes. Using attrition and early 
retirement buyout options as its primary attempt to right-size 
its organization, a 16 percent reduction in upper-level 
management, and minimal closings of underutilized post offices 
and operations, it has yet to achieve the efficiencies it needs 
to survive.
    The USPS' inability to reduce its work force to match its 
operational needs due to legacy union contracts and no-layoff 
clauses restricts its potential to continue to be the most 
trusted government agency. It has a reputation that has been 
earned over hundreds of years of hard work and reliable 
service. Unmistakably, the USPS business model needs to change.
    ATSG developed a comprehensive business strategy that 
segmented specific functions from ABX Air and created sister 
companies to align its work force and core lines of business 
with current market needs.
    Through these initiatives, we are able to position our 
company for job growth; and we are growing. By identifying our 
strengths, we developed business lines that offered us the 
strongest chances of success. That success resulted in a 25 
percent job growth. We succeeded. We are the anchor for 
redevelopment and growth in our community.
    USPS needs the authority to redevelop and implement its 
business strategy. The USPS has offered solutions. However, 
none of these solutions fix the cost and productivity 
constraints that are imposed by the union contracts. The USPS 
is hindered in acting in the best interest of its 
``shareholders,'' every American household that receives mail.
    Though the USPS does not use taxpayer funding, it is here 
today because it is in financial distress. The current union 
contracts are cost prohibitive and contribute to the severe 
financial losses. This should not go unaddressed.
    We had a union contract with our pilots, but the financial 
viability of our company won out over perpetuating 
noncompetitive labor agreements.
    Restructuring is required when what you have been doing is 
no longer a viable plan, and for the USPS it will take many 
forms. We need to give them every opportunity to achieve their 
core business objective.
    There are dire consequences that have been identified by 
the USPS as its teeters on insolvency, and one is that in 
fiscal year 2012 the USPS may not be able to make its payroll.
    I have watched the USPS from afar, and they mirror many of 
our struggles over the last few years. However, unlike the 
USPS, we had a nimble work force that we could maneuver to 
build a better business model after a devastating loss of 
business. When the industry thought we were going to fail, our 
stock price was at its lowest price of 12 cents per share. 
Stakeholder confidence was at an all-time low, and our 
employees were down but not broken. Today, we are a thriving 
and growing company, and our stock has increased more than 50-
fold.
    I look forward to working with you to address these issues 
and find solutions that will keep the Postal Service as a 
viable part of our economy.
    I will be happy to answer any questions you might have.
    [The prepared statement of Mr. Hete follows:]



    
    Mr. Ross. Thank you.
    Mr. Guffey, you are recognized for 5 minutes.

                   STATEMENT OF CLIFF GUFFEY

    Mr. Guffey. Good afternoon, Mr. Chairman and members of the 
committee. I am Cliff Guffey, president of the American Postal 
Workers Union. I am here today to address the modification of 
the retail and mail processing networks of the Postal Service 
in response to diminishing mail volume.
    First, I want to respond to the title of this hearing, 
Postal infrastructure: How can we afford it? ``We'' in this 
question is postal customers, not taxpayers. After the passage 
of the Postal Reorganization Act of 1970, the Postal Service 
progressively phased out its reliance on Federal 
appropriations. Beginning in the 1980's, in a series of omnibus 
budget resolutions aimed at balancing the Federal budget, many 
billions of dollars in costs were shifted from the Federal 
Government to postal rate payers. Today, the Postal Service 
receives no subsidy from the Federal Government, only 
compensation for services rendered.
    If the Postal Service is to act in a businesslike manner, 
as its critics have often implored it to do, it should be 
permitted to change and charge businesslike rates as other 
national posts are permitted to do.
    I do not say this lightly. We see the mailing community as 
customers and Postal Service supporters not as adversaries. We 
know that the suggestion that rates should be permitted to 
increase more than inflation is not welcome to them, 
particularly in difficult financial times. We are not presuming 
to set postage rates. We are saying that, on a rate-by-rate 
basis, the Postal Service needs to have the flexibility to 
increase rates in order to find a way to cover its costs.
    This has been and continues to be a time of rapid change in 
the Postal Service. Between 1999 and 2010, the postal work 
force has been reduced by 458 million work hours. This is the 
equivalent of removing 259,000 full-time employees from the 
employment rolls. People represented by the APW made up 67 
percent of that total reduction. That is the equivalent of 
eliminating 174,000 full-time jobs in APW bargaining units.
    Postal workers have been directly affected by these 
changes. Normal attrition among bargaining unit employees has 
reduced the complement of bargaining unit employees as fast as 
the need for workers has been reduced by facility closures and 
consolidations and by other steps taken to increase efficiency. 
This will continue to be the case for the foreseeable future. 
Approximately 37 percent of the workers in the APW bargaining 
units will be eligible for retirement by 2014.
    The APW has actively resisted some consolidations of mail 
processing operations where we have reason to question the 
accuracy of the Postal Service's projected cost savings and 
service impacts. In many cases, we have found that cost savings 
have been overestimated and the actual potential cost savings 
cannot justify the adverse service impacts of the changes under 
consideration.
    An example of these problems was recently documented by the 
OIG in its report on the area mail processing study and 
consolidation of operations from Lima, Ohio, to Toledo, Ohio. 
After the usual AMP study, management consolidated mail 
processing operations from Lima to Toledo in 2010. The OIG 
found that postal customers in Lima experienced ``significant 
degradation in service, and management did not project these 
degradations in the AMP proposal.'' After these service 
problems arose, management addressed them in part by increasing 
employees in Toledo and by implementing two additional Lima hub 
facilities. But at the time of the OIG report on this AMP, the 
problems had not been solved.
    Similar points need to be considered concerning the closing 
or consolidation of retail operations. The APWU has been a 
vocal critical of the Postal Service's plan to close or 
consolidate some of its retail operations. As we showed in 
proceedings before the Postal Regulatory Commission, these 
closures adversely affect individual postal customers who are 
least able to afford alternative services and small businesses 
that continue to rely heavily on the Postal Service. In many 
cases, postal customers, both individuals and small businesses, 
community leaders, and elected representatives have strongly 
opposed post office closures because of the negative impacts 
they have on affected communities.
    We strongly urge postal policymakers to think creatively 
about how the Postal Service should be adapting its retail 
services to meet society's current needs. Senator Carper has 
introduced legislation that would permit the Postal Service to 
partner with other government agencies at the Federal, State, 
and local levels to more efficiently deliver government 
services and to provide sufficient economic justification to 
maintain a postal presence in rural or economically 
disadvantaged communities.
    We strongly support these ideas and observe that the time 
to pursue them actively is now. It would be tragic to dismantle 
the postal retail infrastructure and lose an opportunity to 
maintain it and improve the delivery of government services.
    In closing, I want to particularly emphasize the importance 
of maintaining a postal presence in small communities. The Post 
Office provides a unique public service that is still necessary 
for many people. Being from Oklahoma, which has many small 
towns and rural Post Offices, I can tell you from firsthand 
experience that the post office is the focal point of many 
small communities. It is where the flag flies. It is where the 
government can provide support for the community.
    In all that we do during this time of change and economic 
challenge, consideration must be given to the availability of 
postal services and other necessary services that may be 
offered through the Postal Service.
    I would be happy to answer any questions.
    [The prepared statement of Mr. Guffey follows:]



    
    Mr. Ross. Thank you, Mr. Guffey.
    They have called us for votes. Hopefully, we can get this 
done in time. With that, I recognize myself for 5 minutes for 
questions.
    Mr. Winn, your testimony is very poignant in the sense that 
I think it tries to finely show how significant the Postal 
Service is to so many walks of life and to this economy. I am 
reminded that because of RR Donnelley's need for the Postal 
Service and its infrastructure to deliver its product of a 
trucker who has all these products to deliver or ship by way of 
his truck but then has the interstate system closed off and 
can't accomplish that.
    But I also see from what you have done that you have made 
changes over the years to adapt to market trends and to adapt 
to technology. My question to you is: What would you recommend 
that the U.S. Postal Service do to try to adapt as well?
    Mr. Winn. With considerable respect to Mr. Williams, who 
testified before me and who is a wonderful associate at the 
Postal Service, the AMP process that he spoke about, the mail 
processing consolidation and elimination of facilities, is 
extremely cumbersome. Where I closed a plant in Connecticut, it 
was done in 10 months. Everything was done. The plant was 
closed, people were retrained and relocated, and the equipment 
was all moved, and all the customers were moved.
    I would say that the best thing we could do for the Postal 
Service and for Mr. Williams would be to help him shorten the 
AMP process. Make it less, quite frankly, less than the painful 
process it is today.
    Mr. Ross. Thank you.
    Mr. Hete, you have great testimony as well. You have 
adapted to a major client removing itself from the market, and 
yet you adapted significantly well, in fact, keeping the jobs 
you did and re-establishing yourself in the market. Are you 
satisfied with what the Postal Service is doing to realign its 
processing and retail networks at this point?
    Mr. Hete. We do some current work with the Postal Service. 
We operate through their STC facilities for them in Memphis, 
Dallas, and Indianapolis; and we are involved in a pilot 
project for consolidating and deconsolidating truckloads. So 
they are doing some of the right things. I think it is the 
speed at which they do it.
    The one piece, as I touched on in my testimony that doesn't 
seem to get much attention, is the cost of the labor that it 
takes to provide the services of the U.S. Postal Service. If 
you compare the Postal Service wage and benefit packages to 
those of the private sector, for years, we were a subsidiary of 
Airborne Inc. before we sold to DHL. We did all the sorting for 
Airborne and DHL both, and the wage and benefit differentials 
between the private sector and the Postal Service are 
significant. It is as much as 50 percent higher on the wage 
piece than what we are paying in the private sector.
    Mr. Ross. Mr. Guffey, I think there are some things you and 
I agree on, and I think it is good common ground. For example, 
in your testimony when you talk about how it is not the 
taxpayers, it is the customers, it is the rate payers that are 
more affected by this, I think you and I will agree that for 
years the U.S. Postal Service has been self-sustaining, self-
sufficient. And it is a business, and I admire that, and I 
think that it is a business and can operate and should operate 
well into the future on its own with the rates that it takes 
in.
    The second thing I think I agree with you, you stated in an 
article on January 24, 2011, that USPS can only remain relevant 
and resolve its financial difficulties if it improves and 
expands its service. I think service is important. I assume you 
are suggesting service to the customers need to be improved?
    Mr. Guffey. Correct.
    Mr. Ross. If that service also includes the closing of Post 
Offices or retail facilities or mail processing centers because 
of a lack of capacity, would you not agree that is something 
that ought to be done?
    Mr. Guffey. There are opportunities and places where the 
Postal Services, post offices should be closed.
    As I said, I am from rural Oklahoma. Many towns used to 
have 4,000 or 5,000 people. Now they may be down to 400 or 500 
people. Those services should be transferred over to something 
like a community post office.
    But in our contract this time in the larger cities, we have 
given reduced prices and also provided 20 percent of the work 
force without legacy costs to the Postal Service so that they 
could keep offices open longer without paying overtime so that 
the community could come when it is relevant to the community. 
In other words, many post offices in this country close at 5 
p.m. Well, that is when the businesses empty and people need to 
come and use the services, and so we provided them without 
overtime an opportunity to keep the post offices open so they 
would be more relevant to the business community.
    Mr. Ross. And you are open to innovation.
    One of the things that I would draw your attention to and 
those of the U.S. Postal Service, as my time runs out here, is 
that 20-some years ago I read a book called ``In Search of 
Excellence'' by Thomas Peters and Robert Waterman. It talked 
about Fortune 500 companies who were successful because of 
certain things they did.
    They had eight themes. One of those was close to the 
customer; learning from people served by the business; autonomy 
and entrepreneurship; fostering innovation; nurturing 
champions; simple form; lean staff; some of the best companies 
have minimal HQ staff.
    I just offer that as I close here. My time is up. I hope 
that those not only with the APWU but also the U.S. Postal 
Service have a chance to look at it.
    With that, I yield to the ranking member, Mr. Lynch, for 5 
minutes.
    Mr. Lynch. Thank you, Mr. Chairman. We have 17 votes 
scheduled, and I want my colleagues to get a chance to ask 
questions.
    First of all, Mr. Winn, thank you for your attendance here.
    Mr. Hete, thank you as well for your involvement.
    President Guffey, in the previous panel there was a group 
that--well, there were some witnesses talking about reducing 
the frequency of delivery. They are talking about 5-day 
delivery. I have some concerns that the projections of savings, 
as in other cases, aren't quite what they--well, I think they 
are overstated, going to 5-day delivery.
    Now, I understand this affects the letter carriers more 
than it affects your folks, because post offices will still be 
open on Saturday, but they won't deliver on Saturday. But I am 
just concerned that taking the Postal Service delivery out of 
the picture for Saturdays--and that is how it appears it will 
be implemented. There will be no mail delivery on Saturday or 
Sunday. I am just concerned that would cause customers to look 
at the situation of mailing something on Thursday and saying, 
well, should I call FedEx or, you know, UPS instead of the Post 
Office since I know it is not going to be delivered Saturday or 
Sunday, and I might to have to wait until Monday to have a 
certain piece of mail delivered.
    I am worried that it takes the Post Office out of that 
space and will not only not save money but by driving mail 
volume to your competitors on the weekends it will actually 
accelerate the decline in mail volume handled by the Postal 
Service.
    You are a pretty smart guy. You know this business pretty 
well. Am I reading this wrong?
    Mr. Guffey. I dislike any opportunity that is taken to 
reduce the service to the American public. I would hope that, 
if this does come about, that the Postal Service will reinstate 
its ability to deliver special deliveries so that medicines and 
necessary packages and parcels and priority mail and that type 
of thing will be delivered on Saturday.
    But, again, I would not like to see any service 
deteriorate, but the necessities of the company will probably 
be taken into consideration in the overall bills that are 
passed--or ultimate bills that are passed in Congress.
    Mr. Lynch. The other thing, President Guffey, I know that 
you just concluded negotiations on a labor contract. I have 
seen over the years the willingness of the labor unions at the 
Postal Service to bring in technology, to create efficiencies 
there, and I know that the contract that you agreed to was a 
pretty tough contract to bring back to your members. The 
increases are modest.
    Mr. Guffey. We froze wages for 3 years.
    Mr. Lynch. Yes. Why don't you talk about that, about what 
your contract negotiations involved? I know your co-witnesses 
have talked about the need to reduce labor costs, and I thought 
it was a pretty tough contract and one that recognized the 
realities of the situation.
    Mr. Guffey. Well, we realize that we are no longer in an 8-
to-5 world, because we work 24 hours a day. But the shifts no 
longer can be necessarily 8 straight hours. So we gave the 
Postal Service the ability to post positions that are--it could 
be four 10's, various configurations on different days, 
different hours, and we gave them the ability to have a lower-
wage work force to come in and to supplement.
    We recognize that in the long term the Postal Service is 
going to look a lot different over the next 15-20 years. We 
could not project what it would look like 35 years ago when I 
came to work for the Postal Service what it looks like now. And 
our membership cannot project what it will look like 25 years 
from now.
    The tragedies and mistakes that have been made--the Post 
Office tried to enter the electronic communications world many 
years ago, and Congress kind of barred that from happening. But 
I read in the papers now where they are saying why don't they 
change their business model to do this or that, and they 
basically were prevented from doing some of that. But I think 
electronic communications is the future. Whether or not the 
Postal Service will have a piece of that, we don't know.
    Mr. Lynch. I yield back.
    Mr. Ross. Thank you.
    The gentleman from Illinois, Mr. Davis, is recognized.
    Mr. Davis. Thank you very much.
    Mr. Hete, in your testimony you make the suggestion that 
the Postal Service should restructure its labor costs to match 
its current level of operations. You are aware that the 
recently negotiated contract between the Postal Service and the 
postal workers union contains a number of new work force and 
labor flexibilities for management to use. Do you think any of 
these changes are the kind that you are talking about in your 
testimony?
    Mr. Hete. Well, certainly any flexibility you get with the 
work force, as Mr. Guffey testified to. They have changes where 
they can vary shifts according to demand flows, etc., are all 
going to be helpful. The question always is whether what you 
have done is enough to bring the entity to solvency.
    I mean, in the private sector the difficulty is, if you are 
not making money, you are not going to be in business very 
long, and you don't have anybody else to look to. Banks are not 
going to lend you money if you are not making a profit. Then it 
is at what point do you need to tweak the labor costs in terms 
of either increased efficiency, lower benefits, or more 
contributions by employees for benefits.
    I am not familiar enough with the details, but I do know 
that in comparison to the private sector postal costs are 
significantly greater.
    Mr. Davis. All of us are aware of the fact that the Postal 
Service is the only government entity required to pre-fund its 
retiree health benefits at an accelerated rate over a truncated 
10-year period. To date, the Postal Service has set aside over 
$40 billion in their retiree health benefits account to meet 
this mandate and are required to deposit an additional $5.5 
billion by the end of September. Given its current financial 
situation, do you think it might be reasonable that they not 
have to meet that requirement?
    Mr. Hete. You are asking me that question?
    Mr. Davis. Yes.
    Mr. Hete. Yes, in the private sector for retiree health 
benefits, as a general rule, you do not have to pre-fund those. 
It is kind of a pay-as-you-go system. But, again, that doesn't 
change the systemic cost structure. That is more or less a one-
time give-back.
    Mr. Davis. I guess my last question would be, would either 
one of you be prepared for the Postal Service to raise its debt 
limit? Do you see that as any kind of possibility that would be 
beneficial to the operation of the postal system?
    Mr. Guffey. I do not.
    Mr. Hete. I would agree.
    Mr. Winn. I would agree.
    Mr. Davis. Thank you, very much, Mr. Chairman. I think we 
can still make the vote.
    Mr. Ross. Thank you, Mr. Davis, for your brevity.
    I want the thank the panel as well for being here and 
taking the time out of your schedule.
    With that, this subcommittee stands adjourned. Thank you.
    [Whereupon, at 3:50 p.m., the subcommittee was adjourned.]
    [The prepared statements of Hon. Elijah E. Cummings and 
Hon. Gerald E. Connolly, and additional information submitted 
for the hearing record follow:]




                                 
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