[Senate Hearing 112-538]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 112-538

 
  NOMINATIONS OF HON. JAMES C. MILLER III AND HON. KATHERINE C. TOBIN

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

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE



                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

NOMINATIONS OF HON. JAMES C. MILLER III AND HON. KATHERINE C. TOBIN TO 
                   BE GOVERNORS, U.S. POSTAL SERVICE

                               __________

                             June 21, 2012


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

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        Committee on Homeland Security and Governmental Affairs



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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware           SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  JERRY MORAN, Kansas

                  Michael L. Alexander, Staff Director
   Lawrence B. Novey, Associate Staff Director and Chief Counsel for 
                          Governmental Affairs
                        Kenya N. Wiley, Counsel
               Kristine V. Lam, Professional Staff Member
 John P. Kilvington, Staff Director, Subcommittee on Federal Financial 
                              Management,
  Government Information, Federal Services, and International Security
               Nicholas A. Rossi, Minority Staff Director
                   Jennifer L. Tarr, Minority Counsel
            John A. Kane, Minority Professional Staff Member
                  Trina Driessnack Tyrer, Chief Clerk
                 Patricia R. Hogan, Publications Clerk
                    Laura W. Kilbride, Hearing Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Carper...............................................     1
    Senator Collins..............................................     4
    Senator Begich...............................................    17
Prepared statements:
    Senator Carper...............................................    23
    Senator Collins..............................................    26
    Senator Brown................................................    29

                               WITNESSES
                        Thursday, June 21, 2012

Hon. Harry Reid, a U.S. Senator from the State of Nevada:
    Testimony....................................................     1
    Prepared statement...........................................    31
Hon. James C. Miller III to be a Governor, U.S. Postal Service:
    Testimony....................................................     7
    Prepared statement with an attachment........................    32
    Biographical and financial information.......................    44
    Responses to pre-hearing questions...........................    51
    Letter from the Office of Government Ethics..................    64
    Responses to post-hearing questions for the Record...........    66
Hon. Katherine C. Tobin to be a Governor, U.S. Postal Service:
    Testimony....................................................     8
    Prepared statement...........................................    71
    Biographical and financial information.......................    72
    Responses to pre-hearing questions...........................    83
    Letter from the Office of Government Ethics..................    99
    Responses to post-hearing questions for the Record...........   100


  NOMINATIONS OF HON. JAMES C. MILLER III AND HON. KATHERINE C. TOBIN

                              ----------                              


                        THURSDAY, JUNE 21, 2012

                                     U.S. Senate,  
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:03 a.m., in 
room SD-342, Dirksen Senate Office Building, Senator Thomas R. 
Carper, presiding.
    Present: Senators Carper, Begich, and Collins.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Welcome. Senator Reid, even though you have 
a lot on your plate today and every day, I think it is great 
that you could come by and introduce Ms. Tobin.

TESTIMONY OF THE HON. HARRY REID, A U.S. SENATOR FROM THE STATE 
                           OF NEVADA

    Senator Reid. Thank you very much. I am here to talk about 
Ms. Tobin, but, of course, Mr. Miller has an outstanding 
resume, and I think that is the caliber of people that we are 
going to see going to the Postal Board of Governors. If there 
was ever a time we needed people with good qualifications, this 
is it.
    The Postal Service, as we know, is going through a lot of 
turmoil and problems. Ms. Tobin has served there before. I am 
here totally prejudiced, understand that. Ms. Tobin's husband 
and I have been friends for 30 years. He was on the Court of 
International Trade for a long time. He is now in the Federal 
Circuit as a judge.
    They have been friends of my wife, Landra, and mine. We 
have traveled together. So I am totally prejudiced. But she is 
a wonderful woman. Her educational background--she has a Ph.D. 
from Stanford University--and she is such a determined person, 
and we all know these are not full-time jobs, but they are 
important jobs.
    The things that we have to deal with here with the Postal 
Service are going to be more complex all the time, and even 
though I have a close personal relationship with her husband 
and her, no one could ever question her qualifications and her 
experience. So I appreciate very much your letting me introduce 
Katherine Tobin to this Committee and also say a nice word 
about Jim Miller.
    Senator Carper. Thank you so much, Senator Reid. And I know 
you have a lot to do today. When do you think we will start 
voting, 11 or so?
    Senator Reid. We are going to come in at 10:30. We should 
start voting around 11. We should be finished by 2 o'clock. We 
have a cloture vote that we have received permission to move up 
on flood insurance. We do not have that worked out yet, but we 
are going to finish it next week, one way or the other.
    Senator Carper. Great.
    Senator Reid. I hope that we can do it sooner rather than 
later because it is important legislation, and I think we have 
a path forward to do the student loans. I think that is 95 
percent worked out. It should be.
    Senator Carper. Great.
    Senator Reid. We just have to figure out a way to do it. We 
have to have some vehicle to do it. And also I am telling you a 
lot more than your question.
    Senator Carper. Oh, this is good.
    Senator Reid. But I had a really good meeting with the 
Speaker on Tuesday, with Chairman John Mica, Chairman Barbara 
Boxer, and Senator James Inhofe. It was a wonderful meeting. If 
someone had asked me on Tuesday morning about the chance of the 
highway bill, I would have said pretty negligible. But I think 
we have at least a 50-50 chance of passing that bill.
    Senator Carper. Good.
    Senator Reid. Last night, the House overwhelmingly voted to 
instruct the conferees to report back with a completed bill by 
tomorrow, and that was 385 votes, and you can only get there if 
you have a lot of bipartisanship. So maybe things are turning a 
little bit. Maybe we can start doing some things. I think the 
farm bill, together with the highway bill and what we did with 
postal reform, as difficult as it has been, I think it has been 
good for the Senate to be able to vote. We voted on those three 
things, on over 200 measures, but we survived, and I think it 
has been good for the country and the Senate.
    Senator Carper. There was a good spirit on the floor 
yesterday, I thought. All right, Senator Reid, thanks so much. 
Thanks for coming.
    Today, we will be considering the nominations of James 
Miller and Katherine Tobin to be members of the Postal Service 
Board of Governors. We are delighted that their families could 
be with us here today as we celebrate an anniversary, an 
important birthday, and a couple of important nominations as 
well.
    Both of our nominees know as well as anyone that the Postal 
Service has been in dire financial trouble for some time. This 
trouble will come to a head in the coming months. The Postal 
Service is reporting record losses each quarter and 
hemorrhages, I am told, about $25 million a day. By the end of 
this fiscal year, it may not have enough money to meet its 
health and workers' compensation obligations. By some time in 
2013, it may not have enough money to continue operations at 
all.
    The Postal Service operates, as we know, at the center of a 
$1 trillion mailing industry that puts as many 8 million men 
and women to work each day. It is a key cog in our economy. Its 
continued vitality is an important part of our efforts to get 
our economy moving again. And at a time of so much economic 
uncertainty, we cannot afford to let the Postal Service 
collapse or to let this uncertainty prevail.
    The Senate, as you know, passed legislation in April that 
attempts to address the Postal Service's near-term financial 
crisis and to give it some of the tools it will need to address 
its long-term challenges.
    Our bill, for example, would clean up the Postal Service's 
books by refunding the more than $10 billion it has over-paid 
into the Federal Employees Retirement System and setting up a 
less aggressive schedule for funding postal retiree health 
obligations. A portion of the pension refund should be used to 
encourage about 100,000 eligible postal employees to retire, an 
effort that could save as much as, we are told, $8 billion per 
year.
    Our bill would also push the Postal Service to streamline 
its processing, delivery, and retail networks, albeit at a more 
gradual pace than postal management would have liked. These 
provisions would allow the Postal Service to achieve billions 
of dollars in savings while preserving levels of service that 
many customers rely upon.
    If these cost-cutting efforts do not prove sufficient in 
the coming years, the Postal Service would be permitted to move 
forward with more aggressive efforts. But our bill does not 
just focus on cuts. It also attempts to free the Postal Service 
to be more entrepreneurial and pushes it to find innovative 
ways to bring in more mail volume and make the best use of the 
valuable system that it maintains in order to deliver the mail 
to every home and business 6 days a week.
    Our legislation is not perfect. It does not solve all the 
Postal Service's problems. But it gets us most of the way 
there, and depending on how serious the Postmaster General and 
his team are about continuing to cut costs in a smart way and 
to make effective use of the tools that we seek to give them, 
it has the potential to get us to our goal of a financial 
stable, even thriving, Postal Service.
    I know that the current members of the Board of Governors 
disagree with this assessment. They put out a statement after 
the Senate passage of our bill stating that it was not enough, 
and I agree it was not enough. I am told that both of our 
nominees have stated in policy questionnaires filled out in 
preparation for today's hearing that they agree with the 
Board's statement.
    If that is the case, I would hope to learn some more today 
about what they would suggest to postal management and to 
Congress as we work to get the Postal Service back on track.
    I also look forward to hearing from Mr. Miller and Ms. 
Tobin about what they have learned from their previous work, 
both inside and outside of government, including their previous 
service on the Board, that will help them, if confirmed, to 
tackle the Postal Service's real and mounting financial 
challenges.
    The last thing I would say before turning it over to 
Senator Collins is how much I appreciated the opportunity to 
work with her and her staff again this year, and with Senator 
Lieberman, Senator Brown, and their staffs as well, to fashion 
a bipartisan bill.
    It is hard, as you know, to get much of anything done 
around here, and to be able to get a bipartisan bill 
introduced, through Committee, on the floor with all kinds of 
bipartisan amendments, and actually off the floor into 
conference, if we could have a conference, is no small 
undertaking.
    And we need for the House to act. We need the House to pass 
a bill. It is not enough for them just to carp about our 
legislation. They need to pass it so it can go to conference, 
take input from a lot of folks including you, and pass the kind 
of legislation that will really help set the stage for the 
Postal Service to do the work that it needs to do and to not be 
a burden on the taxpayers. Senator Collins.

              OPENING STATEMENT OF SENATOR COLLINS

    Senator Collins. Thank you very much, Mr. Chairman. It has 
been a pleasure to join you in this effort. You and I have 
worked together on postal issues for many years now. We keep 
thinking we are finished with postal issues and then they keep 
popping up.
    But the fact is that throughout our history, the U.S. 
Postal Service has served as a vital part of our national 
communications network and of our economy. As the Chairman has 
mentioned, I do not think most Americans appreciate just how 
critical the Postal Service is to our economy.
    It is the lynchpin of a trillion-dollar mailing industry 
that employs more than 8 million people in fields as diverse as 
direct mail printing, catalog companies, paper manufacturing, 
and financial services. The list goes on and on.
    Unfortunately, the Postal Service's financial status is 
abysmal and this great American institution is teetering on the 
brink of collapse. It lost $3.2 billion in the first quarter of 
this fiscal year alone. I believe that we have begun to right 
the ship with the passage of the 21st Century Postal Service 
Act of 2012 that Senator Carper and I, along with Chairman 
Lieberman and Senator Scott Brown, authored.
    But there is still much more work to be done, including, as 
Senator Carper indicated, working with our colleagues on the 
House side. We have implored them to act sooner rather than 
later. It is important that we get into conference and work out 
the differences and send legislation to the President.
    Good legislation, however, while absolutely necessary, is 
not sufficient to solve the Postal Service's problems. Good 
management is also essential. And today, we are here to discuss 
the qualifications of the two nominees to the Postal Board of 
Governors, James Miller and Katherine Tobin, neither of whom 
are strangers to this Committee or to these issues.
    An effective Postal Board of Governors is essential to 
provide direction to the management of the second largest non-
governmental employer in the country. With more than half a 
million employees and more retail sites than Wal-Mart and 
Starbucks combined, the job of governing the Postal Service is 
not for the faint of heart.
    This was true in 2006 when Senator Carper and I authored 
the Postal Accountability and Enhancement Act, which 
established specific qualifications to ensure that future 
governors had suitable business and management experience, and 
it is even more true today.
    In the 2006 law, we required that governors be selected 
based solely on their experience in management, accounting, or 
other relevant fields. Meeting these basic qualifications has 
never been more important as the Postal Service faces the 
perfect storm of rising labor costs, shrinking volume, and 
declining revenue.
    The 2006 law required that within 9 years of enactment, a 
date that we obviously have not yet reached, at least four 
members of the Board must be selected solely for having managed 
a large organization of 50,000 or more employees. Now, looking 
back at that number, I personally have concluded that it is too 
high. It would, for example, preclude the extremely capable 
chief executive officers of the very largest companies in my 
State--Bath Iron Works, Cianbro Corporation, L.L. Bean, and 
others--from serving on the Board.
    But even if we set the number too high, the principle is a 
sound one and it is time for the Administration to start taking 
active steps to meet this requirement. I am concerned that we 
have yet to receive a single nominee who even comes close to 
having that kind of extensive managerial experience.
    The nominees before us today are grandfathered, in many 
senses. They have served previously on the Board, and they were 
nominated originally before the 2006 law was even enacted. They 
both possess valuable experience, and I do welcome the 
opportunity to consider their nominations.
    I also respect the current Board as well as these nominees 
for their public service and their willingness to take on an 
enormous and often thankless job. But I do want to mention that 
as a concern. Let me also briefly turn to two other concerns 
that I have. The first is whether the Postal Board of Governors 
truly is serving as a check on the decisions made by postal 
management.
    I am concerned that the Postal Board of Governors may not 
be aggressive enough in questioning decisions that are being 
made, whether it is signing labor contracts that seem unwise 
given the need to reduce the workforce in a compassionate way 
through buy-outs and other incentives that we have included in 
our bill, or whether it is asking tough questions about whether 
service cuts are going to lead to revenue declines that cause a 
spiral of the Postal Service losing more and more customers. 
Are those questions being asked by the Board? They are 
certainly being asked by Members of this Committee and the 
Congress at large.
    And second, I am extremely disappointed in the intemperate 
and unhelpful reaction of the Board to our legislation. The 
fact is, this was a bipartisan bill that passed with 
overwhelming support, 62 votes. Hardly anything gets 62 votes 
in the Senate.
    It is not the bill that I would have written. I dare say, 
it is not the bill that Senator Carper would have written on 
his own. But it reflects a carefully balanced compromise and 
attention to all the stakeholders' concerns, and it is a bill 
that passed and that would make a big difference, as is evident 
by the fact that it had been scored by the Postal Service to 
save some $19 billion, not an insignificant amount.
    Now, some of those provisions adopted on the floor lower 
those savings, but they still are significant. And the Board's 
intemperate and unhelpful comments do not help to advance it. 
Therefore, I am very disappointed that our two nominees, I am 
told, have expressed agreement with the Board's comments, if 
not in tone, at least in substance, and that gives me great 
concern about whether they are truly willing to work with this 
Committee to accomplish the goal of getting postal reform 
legislation that is absolutely vital to the survival of the 
Postal Service passed and signed into law this year.
    The Postmaster General has told us over and over again that 
the Postal Service is in danger of not being able to meet its 
obligations, and whether that occurs in the fall or at the end 
of the year or early next year, in some ways, is irrelevant. If 
they cannot meet its obligations, we must act.
    And it is not helpful to have nominees criticizing the one 
postal bill that has made it through the Senate. So Mr. 
Chairman, I wanted to put that on the record, and I look 
forward to hearing the responses of our witnesses. Thank you.
    Senator Carper. And I would say, Senator Collins really 
spoke for both of us when she said that. I am reminded of the 
old saying, Who are editorial writers? They have been described 
as people who come onto the battlefield when the shooting is 
over and shoot the wounded. That is probably an exaggeration 
here, but I think that captures the way that some of us felt a 
little bit.
    Now, I will have some questions, and I am going to have a 
chance to drill down on some particular provisions that we 
thought we were being asked to include in legislation, we 
thought we were told would be helpful, and we will go through 
each of those provisions and give you all a chance to say which 
ones you agreed with and maybe did not agree with.
    Both Mr. Miller and Ms. Tobin have filed responses to 
biographical and financial questionnaires, answered pre-hearing 
questions submitted by the Committee, and had their financial 
statements reviewed by the Office of Government Ethics. Without 
objection, the information will be made part of the hearing 
record, with the exception of the financial data, which are on 
file and available for public inspection in the Committee's 
offices.
    Our Committee rules require that all witnesses at a 
nomination hearing give their testimony under oath, so I am 
going to ask you to stand and raise your right hand, if you 
would, please. You have done this before.
    Do you swear the testimony you will give before this 
Committee will be the truth, the whole truth, and nothing but 
the truth, so help you, God?
    Ms. Tobin. I do.
    Mr. Miller. I do.
    Senator Carper. Please be seated. Mr. Miller, welcome. It 
is nice to see you again, and it was very nice to see your 
patient wife of 50 years, and your family, including your 8-
year-old grandson. You may now proceed with your opening 
statement. And feel free to introduce anyone in your family 
individually. Thank you.

  TESTIMONY OF HON. JAMES C. MILLER III \1\ TO BE A GOVERNOR, 
                      U.S. POSTAL SERVICE

    Mr. Miller. Mr. Chairman, Senator Collins, and Members of 
the Committee, thank you for holding this hearing and inviting 
me to appear. I want to thank President Obama for nominating me 
for this post, Senator Mitch McConnell for recommending me, 
Senator Reid for his kind remarks, and others who have 
supported me over the years.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Miller appears in the Appendix on 
page 32.
---------------------------------------------------------------------------
    Today I am joined by my wife, Dr. Demaris Miller, our son-
in-law, Fernando Pagkalinawan, our daughter, Sabrina, and our 
grandsons, Tristan and Rommel.
    Now, I know your time is quite valuable so my statement 
will be short. I have provided the Committee, as you noted, 
with answers to the questionnaires, and you have put these in 
the record. I am particularly honored today to appear with 
Governor Katherine Tobin.
    I served on the Board of Governors with Ms. Tobin for 
several years, and I found her a person of great integrity, an 
independent and innovative thinker, and a person of remarkable 
talent and industry. She commanded the respect not only of her 
fellow governors, but of U.S. Postal Service employees 
generally. Accordingly, I urge you to confirm her as soon as 
possible.
    The U.S. Postal Service, as both of you have noted, faces a 
crisis unlike any in history. It has weathered great storms in 
the past, such as during the Great Depression, but this storm 
is different. There is no recovery in sight. Restoration of our 
economy will not resurrect the U.S. Postal Service.
    The old business model, where profits on monopoly letter 
mail are used to cross-subsidize other losing classes of mail 
and an inefficiently large network, simply does not work 
anymore. The reason is that the profits on monopoly mail have 
all but disappeared. The reason is partly the economy, but 
mostly it is the steady erosion of first-class mail to 
electronic communications. There is every reason to believe 
this erosion will continue.
    To survive, the U.S. Postal Service must be given freedom 
to restructure itself and become a truly competitive business 
enterprise. This means freedom to move quickly to take 
advantage of changing customer demands, freedom to adjust to 
changing cost levels and structure, and most especially, 
freedom to rationalize its logistical system and deal with its 
current employment situation.
    I will not go into that in any detail here, as I have 
responded to the questionnaires and have addressed those and 
other matters in materials I have provided to the Committee.
    In particular, I want to draw your attention to an invited 
lecture I gave in November 2010 at a session of the Southern 
Economic Association that was given in honor of the late 
Professor Roger Sherman, my dissertation advisor. I have 
appended a copy of that paper to my statement, and I ask, Mr. 
Chairman, that it be included in the record.\2\
---------------------------------------------------------------------------
    \2\ The lecture referenced by Mr. Miller appears in the Appendix on 
page 33.
---------------------------------------------------------------------------
    Senator Carper. Without objection.
    Mr. Miller. Mr. Chairman, Senator Collins, and Members of 
the Committee, that concludes my opening statement. I will be 
happy to address any questions you may have, including the 
issues raised by Senator Collins.
    Senator Carper. I thank you so much, Mr. Miller. Ms. Tobin, 
please proceed.

TESTIMONY OF HON. KATHERINE C. TOBIN \1\ TO BE A GOVERNOR, U.S. 
                         POSTAL SERVICE

    Ms. Tobin. Chairman Carper and Senator Collins, it is an 
honor and a pleasure to be here today as a nominee for the 
position of Governor of the U.S. Postal Service. I am delighted 
to be paired in this confirmation hearing with my colleague and 
friend, Jim Miller.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Tobin appears in the Appendix on 
page 71.
---------------------------------------------------------------------------
    Thank you, Senators, for your consideration of our interest 
in continuing our service. I am joined by my husband, Judge 
Evan Wallach, my sister, Alice Zaff, and several dear friends.
    I am here today for one reason, which is the U.S. Postal 
Service is an outstanding American institution. It is neither, 
as we all know, a business nor a classic government agency, and 
yet, we expect it to be both at the same time. We can do better 
to help it transform. It needs to transform, but its mission 
has not changed. It is still of vital importance for this 
country to have this amazing network and infrastructure that 
ties people, products, and services together.
    The U.S. Postal Service provides national communications. 
It is a catalyst for commerce. It plays key roles in terms of 
security and law enforcement. As was noted in your opening 
remarks, it is a large national employer, providing jobs to 
more veterans than any other institution.
    I look forward to answering your questions and to working 
again with this wonderful, essential, and evolving 
organization, the U.S. Postal Service. Thank you.
    Senator Carper. Thank you, Ms. Tobin. As you may recall, we 
are required to open with several questions. We ask these 
questions of all nominees, and I ask you to respond 
individually. Is there anything you are aware of in your 
background that might present a conflict of interest with the 
duties of the office to which you have been nominated?
    Ms. Tobin. No.
    Mr. Miller. No.
    Senator Carper. Do you know of anything personal or 
otherwise that would in any way prevent you from fully and 
honorably discharging the responsibilities of the office to 
which you have been nominated?
    Ms. Tobin. No.
    Mr. Miller. No.
    Senator Carper. Do you agree without reservation to respond 
to any reasonable summons to appear and testify before any duly 
constituted committee of Congress if you are confirmed?
    Ms. Tobin. Yes.
    Mr. Miller. Yes.
    Senator Carper. Ms. Tobin, my last question is, what do you 
think the secret is to being married 20 years to the same guy? 
The anniversary you celebrate today, what is the key there?
    Ms. Tobin. Having fun.
    Senator Carper. That is good. Mr. Miller has been married 
for 50 years to his wife, sitting right behind him. She said 
the key was patience. What do you think the secret is for being 
married 50 years?
    Mr. Miller. To roll out of the bed every morning excited 
about the day with your spouse.
    Senator Carper. As Senator Collins knows, I love to ask 
questions of people who have been married a long time. Two 
weeks ago, I talked to a couple who have been married 57 years, 
and I asked the wife, ``What is the secret to being married 57 
years?'' And she said, ``Just give and take.'' And I turned to 
the husband, and I said, ``What do you think, sir?'' He said, 
``Just give.'' [Laughter.]
    Let us get into the questions. Senator Collins and I worked 
on a number of provisions with Senators Lieberman and Brown, in 
concert with postal management and the Postmaster General, 
provisions that we thought made sense to be able to rein in the 
growth of costs and to increase the likelihood of generating 
some additional revenues.
    And the first major issue dealt with the over-payment of 
the Postal Service to the Federal Employees Retirement System. 
Everybody agrees it is about $11 billion, and it should be 
refunded, and we provided for that in our legislation.
    May we presume that you are OK with that?
    Ms. Tobin. I am.
    Mr. Miller. Yes.
    Senator Carper. Second, we authorized the use of some of 
that money to pay retirement bonuses to incentivize some of the 
125,000 eligible postal employees to retire. Are you OK with 
that?
    Ms. Tobin. Yes.
    Mr. Miller. Yes, as a practical expedient, I think.
    Senator Carper. Third, we added language with respect to 
arbitration. When there are contract negotiations between the 
bargaining units and the Postal Service, there is no 
requirement for the arbitrators to consider the financial 
condition of the Postal Service. We require that it has to be 
considered. Is that something that you are supportive of?
    Ms. Tobin. It is absolutely essential, and I strongly 
support that.
    Mr. Miller. In the short run, it is important. The problem 
has arisen that, in determining comparable pay, the arbitrators 
have typically chosen a subset of people who are really not 
representative of the pool to which the Postal Service goes for 
its employees. And consequently, by econometric studies, there 
is a delta, there is some over-payment.
    For the arbitrator to be given the direction you have 
included in the bill will be very helpful. I am hopeful that at 
some time the Postal Service will be much better off and that 
provision could come back and hurt the Postal Service.
    Senator Carper. Thank you. Senator Collins has worked for 
many years on the issue of workers' compensation, principally 
for postal employees, but more broadly for Federal employees.
    Mr. Miller. Right.
    Senator Carper. And we included in the legislation a 
version, I think a good version, of her recommendations with 
respect to workers' compensation. So we do not end up with 
people 60, 70, 80, or 90 years old still drawing workers' 
compensation. Are you comfortable with those changes?
    Mr. Miller. Absolutely. Good point.
    Senator Carper. Most employers in the country pay into 
Medicare. My wife is retired from DuPont. When folks who work 
for DuPont retire and then reach the age of 65, their primary 
source of health care is Medicare. The company provides a 
Medigap or wrap-around plan to supplement that. A lot of 
companies, large companies especially, do that.
    And what we tried to do in our legislation is to allow the 
Postal Service to do that. Is that something that you are 
comfortable with?
    Ms. Tobin. I am not fully familiar with it, but it sounds 
very smart.
    Senator Carper. Mr. Miller.
    Mr. Miller. Yes.
    Senator Carper. Another provision in our bill is, we leave 
the door open if the Postal Service wants to try to negotiate, 
much as the United Auto Workers (UAW) did with the big three 
auto companies, an arrangement where the UAW basically runs a 
single employer system for health care for their employees.
    They think they get better accounting rules, better 
financial treatment, and the postal management asked us to 
allow in our bill for the Postal Service to explore doing a 
similar kind of system with the unions that represent your 
employees. Is that something you are comfortable with?
    Mr. Miller. Yes. Whether it works out depends on the 
outcome of negotiations, but I think having that authority is 
valuable.
    Senator Carper. Good.
    Ms. Tobin. Yes, but with careful study to make certain that 
the level of health care remains top.
    Senator Carper. Good. The issue of post office closings, as 
Senator Collins well knows, was a difficult issue to wrestle 
with. Out of 33,000 post offices around the country, there are, 
I do not know, maybe 3,000 or 4,000 that were really under 
close scrutiny to determine whether or not some of them should 
be closed.
    What we ended up with, and there was a projected savings of 
maybe $300 million a year, was a different idea espoused by, I 
think, the Postmaster General that said, rather than just 
looking at 3,000-4,000 post offices, why do we not look more 
broadly at as many as 13,000 post offices and offer the 
communities where we are paying a postmaster $50,000-$70,000 a 
year to run a post office that generates $15,000-$20,000 worth 
of business a menu of options.
    One, keep your post office. It is not going to be run by a 
postmaster earning that kind of money and it may not be open 8 
hours a day, but it will remain open, 2 hours a day, 4 hours a 
day, or 6 hours a day. That postmaster may come back as a 
retiree, as a contract employee, retain his pension, retain his 
benefits, and make $15 an hour and run the post office.
    Or maybe they would like to have rural delivery so people 
would not have to come to the post office to pick up their 
mail. They will have rural delivery. Maybe the community would 
say, we would like to co-locate our post office in a 
supermarket or a convenience store or some of the local 
government offices there.
    But given that menu of options, and to offer that for as 
many as 13,000 post offices, over a third of the post offices 
in the country, and instead of saving $300 million a year, 
maybe saving as much as a half-billion dollars a year, is that 
an approach that you are comfortable with?
    Ms. Tobin. I am.
    Senator Carper. Mr. Miller.
    Mr. Miller. I think it definitely should be explored. We 
are in a situation where we need to explore every margin for 
cost savings. Senator Collins has articulated her concerns 
about deterioration of quality of service might drive away 
customers, and we need to be very cognizant of that, very 
careful about that.
    But any large enterprise, whether it is a Wal-Mart or a 
Home Depot or some place like that, has had to make decisions 
on closing retail establishments from time to time. There is 
just no way of keeping them going. And so, I think it is 
important for the Postal Service to have that kind of freedom.
    I think it is the Board's responsibility to make the policy 
within the four corners of the established law, and I think it 
is important for the Postal Service to oversee the carrying out 
of those policies.
    But I think each area needs to be addressed, each 
opportunity for saving money without losing revenue, putting 
together options to closing post offices so that people can get 
their mail or, just as you were describing, have it delivered 
at their home, rural delivery, etc. All those need to be 
explored.
    Senator Carper. Those are just some of the provisions that 
we included in the legislation that the Board was highly 
critical of. There are others, 40-year amortization for the 
prepayment of health benefits for retirees, any number of 
others. But I need to yield to Senator Collins, so I will just 
ask you to hold your comment for now.
    But those are just some of the provisions that we included 
in the legislation that are designed to help on the cost side. 
There are also a number of provisions on the revenue side 
because it is not enough just to cut, cut, cut. The Postal 
Service has to find ways to grow some revenues.
    And in the second round of questions, what I would like to 
do is to come back and ask you to help us on the revenue side 
with the ideas that you are aware of and would be supportive 
of. Thank you very much. Senator Collins.
    Senator Collins. Thank you, Mr. Chairman. The Postal 
Service is about to reach its $15 billion credit limit on how 
much it can borrow from the Treasury. It is part of the Federal 
employees health programs, life insurance programs, workers' 
compensation programs. On the workers' compensation program, it 
pays $1 billion a year into that program.
    It has lost billions of dollars during the past 2 years. In 
fact, the losses go beyond that. And those losses would have 
been billions more had we not waived a required payment of $5.5 
billion into the fund that is set aside for future retirees' 
health benefits, very real liabilities.
    In view of all of that, Ms. Tobin, how can you say that the 
Postal Service has ``too much oversight,'' which was your 
statement in a staff briefing, and you particularly pointed to 
the oversight by Congress, among others?
    Ms. Tobin. I come, Senator, from the business world, 
Hewlett-Packard, and I worked with the IBM executive team for a 
good number of years. I think oversight and accountability is 
absolutely essential, but the speed with which we can make 
decisions, the bureaucracy that has to be faced, slows down the 
Postal Service.
    So you spoke in the first part of your question about the 
tremendous losses that the Postal Service has had in recent 
years. One thing that I remind people is, this was never a 
profit-making entity. So it tried to match revenue and 
expenses, and as it was growing and as expenses were also 
growing, it did well. I mean, it could meet it.
    But in 2006 and 2007, we had major constraints coming from 
three different angles, which I believe very strongly the 
Postal Service has tried to face with tremendous 
responsibility. Those forces, you know them well. We have the 
prepayment of the retirees' health care benefit. We have 
changing mail patterns--the degree, as Mr. Miller mentioned in 
his opening remarks, about first-class mail. And we have a 
dramatic change in our country's financial system.
    So I see us, Senator, as having been an expanding 
institution that is constraining. I think it has worked hard to 
try to stay. It is constrained within its revenue. It has not 
met it.
    In terms of oversight, we have an Inspector General who 
does an outstanding job, I think, of overseeing. We have Ernst 
& Young doing auditing. We have the Postal Regulatory 
Commission. I think there are many overlaps to those oversights 
that might be useful. I will just lay that out. It could be 
useful to look at streamlining.
    Senator Collins. The Postal Service has a $15 billion line 
of credit to the U.S. Treasury and is a participant in the 
Federal employee programs--and Senator Carper and I are totally 
open to the idea of a new health program for the Postal Service 
that takes them out of the Federal employee program.
    I would suggest to you that as long as those links are 
there and as long as the Postal Service is as critical to the 
economy as I hope it always will be, you are going to be 
subject to oversight, and I think appropriately so.
    Ms. Tobin. I do believe in oversight. I chaired the Audit 
and Finance Committee, and I saw us, through oversight, become 
smarter. So it is not that I want to get rid of oversight. We 
cannot; you are right.
    And by the way, I am not happy with the debt ceiling. We 
are up against that debt ceiling. There was not a time when I 
was on the Board--I am certain it continued--that any one of 
the governors was comfortable in taking out more debt.
    Mr. Miller. Senator, could I add that the question of 
oversight, to me, will come up anytime. You are the 
stockholders or represent the stockholders of the Postal 
Service, of which we would sit on the Board. That is not a 
problem.
    The problem is the degree to which the Postal Service can 
meet the requirement that Congress has identified for it, and 
that is to cover its costs with the market that we face and the 
constraints that Congress has placed on our ability to get out 
there and compete, and that is the concern that I had, and I 
may have had similar answers in my responses to the 
questionnaire.
    With regard to the question you raised about your concerns, 
and also the Chairman's concerns, about the tone of the Board 
of Governors' response to the legislation, my reading of their 
statement is that all they say is, it is not sufficient. And I 
am here to tell you right now that my best business judgment is 
that it is not sufficient. Senator Carper has said that, and I 
think you have said that, too.
    Senator Collins. Well, I would suggest to you, Mr. Miller, 
that it is not helpful, and the tone of that statement was not 
helpful at all when we are trying to encourage the House to 
move on a bill, which may be more to your liking based on what 
I have read in your responses. But it was not helpful in trying 
to advance legislation, which everybody agrees is necessary.
    It is not sufficient and you may not like the bill, but to 
have the bill blasted is not helpful. My time has virtually 
expired, so I want to ask you two more quick questions, if I 
may, before I have to leave.
    Mr. Miller, at one point several years ago, you advocated 
privatization of the Postal Service. Is that still your 
position?
    Mr. Miller. I think it would be best for the world, for the 
economy, and for the American people if the Postal Service was 
demonopolized and privatized, which is a position that I held 
when I worked for President Reagan and that is based on years 
of experience at the Postal Service that enlightened me to 
various things and problems, etc. It would not be easy to 
transition. In fact, right now, it would be impossible to 
transition.
    But having said that, I detect no interest whatsoever on 
the Hill to make such a move, and I have expended no personal 
resources trying to persuade people of that view. Senator, I am 
going to be honest and straightforward with you and all the 
other Members of Congress about what I see, and that is what I 
see.
    Senator Collins. So if I can just paraphrase what you have 
said, it remains your personal view that privatization 
ultimately would be your goal, but it is not a view that you 
are currently advocating because you do not see political 
support for it. Is that a fair assessment of what you said?
    Mr. Miller. That is fair, and the corollary of that view is 
that my goal has been to restore the Postal Service to 
financial health and to make it operate as an efficient 
business enterprise.
    Senator Collins. Well, I would just comment that I 
appreciate your candor. I believe that privatization would 
result in rural America being left behind. I have no doubt that 
urban areas would do fine. There would be lots of competition 
for delivery, but I think rural America would be completely 
left behind. And thus, that troubles me.
    Finally, and I know my time is gone, so let me just make a 
comment. I know that several of our colleagues are very 
concerned about the remaining $800,000 in the deferred 
compensation package that was approved for the previous 
Postmaster General. I believe you were both on the Board at the 
time, so I think we should have a question for the record on 
that.
    My final question has to do with looking at the impact of 
service reductions on revenue and the loss of customers. And if 
you have not already done so, I would encourage you to look at 
a study that the Postal Service itself filed with the Postal 
Regulatory Commission that indicated that if it proceeded with 
all the service reductions that you both seem to be very 
favorably inclined toward, it would lead to a dramatic decline 
in revenue and in mail volume, and that is the last thing that 
the Postal Service needs.
    Now, to be fair, the Postal Service has been trying to walk 
back from that study, but that is, in fact, what their 
independent study showed and it is, in fact, what they filed. 
So I would just ask, for my final question, are you familiar 
with this study?
    Ms. Tobin. No.
    Mr. Miller. No. I would just ask that you identify it for 
us, please.
    Ms. Tobin. And I recall that they were about to begin that 
when I was leaving.
    Senator Collins. Well, we will follow-up with questions for 
the record on that as well. Thank you, Mr. Chairman, and you 
are very generous with your time.
    Ms. Tobin. Thank you.
    Senator Carper. I mentioned in my first round of questions 
that I wanted to come back and revisit the notion that it is 
not enough just to cut, cut, cut, we have to find ways to raise 
some revenues as well. And our legislation attempts to open 
more doors than we close with that in mind.
    As you may know, our friends at UPS and FedEx are allowed 
to deliver wine and beer; the Postal Service is not. And we 
change that. We give the Postal Service that flexibility as 
long as States are OK with that. If they are not, then the 
Postal Service could not do that.
    I am told by the Postmaster General that the Postal Service 
believes that there are some opportunities for making money for 
the Postal Service in something called electronic mailboxes. If 
you have anything you would like to share with us on that 
front, that would be good.
    We believe that particularly in a number of smaller towns, 
but maybe not so small towns, there is the opportunity for the 
Postal Service to say to State and local government entities, 
come on in. We have the space, come and share it with us, and 
that could have the potential of generating some revenues for 
the Postal Service.
    The Postmaster General mentioned to me last month that 
there is value added, we will say, to L.L. Bean or to Macy's if 
they know the actual date that a catalog is hitting a 
customer's mailbox. There is value added to that. And we would 
welcome hearing from you on that.
    I understand from the Postmaster General that as people do 
more of their shopping online instead of going to traditional 
brick-and-mortar shopping centers and stores, obviously, the 
orders have to be delivered by somebody. It could be FedEx, 
could be UPS, could be the Postal Service, and there appears to 
be a fair amount of upside potential there. Those are just some 
of the ideas.
    One thing that I have mentioned before and I will mention 
it again today is that I think by the end of this decade, we 
will see windmill farms off the east coast of the United 
States. There is a lot of that in Europe and there is interest 
from Maryland all the way up to Maine to deploy offshore wind.
    Senator Collins, her colleague from Maine, and I know that 
the wind does not always blow, the sun does not always shine, 
but when it does, sometimes it generates more electricity than 
can be used and it has to be stored somehow. And one of the 
ways to store that is being explored by a number of entities, 
including the University of Delaware's College of Marine 
Studies.
    One idea would be the ability to use large fleets of 
vehicles to store electricity as it is generated and then put 
it back onto the grid when the market needs it. Those are just 
some ideas that I would welcome your comments on, and frankly, 
I would welcome some other ideas, better ideas than those.
    Ms. Tobin, do you want to go first, and then Mr. Miller?
    Ms. Tobin. Sure. I want to add that as one looks at the 
recent financial statements, if you look closely, you see some 
good news in there, which I was pleased to see, and I think 
part of it has come about through what you have created in the 
Postal Act of 2006. The shipping and package industry has 
gained by double digit growth, and we all saw the marvelous 
marketing programs for ``if it fits, it ships.''
    Thank you for the tool of that piece of the legislation. We 
have just begun to deal with the packaging and service 
opportunity. That is not a new idea, but it really has been 
taking hold in recent years.
    The Postal Service has a new marketing executive brought 
aboard whom I have not yet met, but she comes from the consumer 
industry. I think she will help us think more from a business, 
imaginative viewpoint. I have, in my career, just seen so much 
work being done, not only in small communities, but in IBM 
years, Hewlett-Packard years, by people working from their 
homes, and you cannot do that without having the structure of 
good service from the post office for receipt of packages and 
the like.
    I was reminded by someone in recent months, and I think it 
was Chairman Thurgood Marshall, that when Vice President Al 
Gore was leading the Re-Inventing Government Act, one of the 
ideas that was put forth then, many years ago, was to use post 
offices as centers for what you were just saying, Senator, 
various government activities.
    He did not mention State and local governments, but we have 
seen passport services come in, but is there more that could be 
done through these Federal Government centers of village post 
offices throughout our country? I do not have a list of silver 
bullet ideas at all, but I think it is wonderful that your 
staff, with whom I have talked, Congress, all of us have to be 
looking at that revenue side.
    I have to underline, I am hopeful, but we have to get 
through this legislative process now, and I think you will see 
the Postmaster General and the Board, and the staff and the 
business mailers, so relieved that we can unleash some creative 
energy. I really look forward to that.
    Senator Carper. Thank you. Mr. Miller, I laid out a couple 
of options for raising revenues. If you want to react to any of 
them, I especially would ask you to react to the idea of 
electronic mailboxes if you have any thoughts there, plus other 
ideas that maybe I did not mention.
    Mr. Miller. Mr. Chairman, the Postal Service does the 
sorting and distribution of mail well. That is what its people 
are trained for. It can pick up some ancillary kinds of 
activities that I think, at very low training cost, would be 
very useful. Carrying beer and wine is a no-brainer. That would 
be one.
    On the other hand, I have heard some people say, ``Well, 
what the Postal Service should do is to get in the banking 
business like the postal offices of many of the European 
countries.'' I think that would be a disaster. The notion that 
somehow the Postal Service is going to become competitive with 
banks overnight is just to me pretty far-fetched.
    But I think there are some other things we can do. On the 
information technology (IT) matter--I have been gone 6 months, 
as you know--the Postal Service has brought on board a new IT 
person, and they are going to be looking at the sort of things 
that you have suggested.
    And there are other ideas. I mean, from selling Postal 
Service buttons to stamps to whatever. By the way, just as an 
aside, I think the notion of having the Postal Service issue 
stamps with live people's pictures on them--other than doing it 
privately, with stamps.com, or something like that--would be a 
very bad idea. I can imagine the demands from every direction 
for that. For every friend you make, you would make thousands 
of enemies.
    The real problem here, and I cannot stress it enough, is 
the restraints under which the Postal Service operates whenever 
it wants to take an initiative in the business. Ordinary 
businesses will think of things that they want to do, new 
products or services, and they will launch them. They do not 
tell everybody about them in advance, in part because they do 
not want their competitors to know about it.
    The Postal Service cannot do that. It has to go to the 
Postal Regulatory Commission, wait for a long time, and so 
forth--the list of steps that the Postal Service has to take in 
order to launch a new product deadens the nerves. It deadens 
the brain. And so, do not be surprised if the Postal Service 
has not taken a number of these kinds of initiatives.
    So if you were to give the Postal Service more freedom, I 
think it would be possible for the Postal Service to move in 
these many new directions.
    Senator Carper. Before I recognize Senator Begich--I do not 
know why a Senator from Alaska would be interested in a hearing 
of this nature, but he is here, so I will give him the 
opportunity to say his piece and ask some questions.
    But before he does, let me just say that there is a real 
interest on the part of a number of us in this body, Democrats 
and Republicans, to try to promote a nurturing environment for 
more of an entrepreneurial spirit----
    Mr. Miller. Right.
    Senator Carper [continuing]. To grow in the Postal Service. 
I am encouraged by the filling of the two positions you have 
each mentioned. And we expect to try to do our part and maybe 
have a summit where we invite smart people, younger people who 
might just think of some very clever ways to use a distribution 
network that goes to every home and every business in the 
country six times a week.
    What else could we do with that, and how do we unleash that 
entrepreneurial spirit?
    Mr. Miller. Can I just say for the record, you mentioned 
vehicles. Because I serve on the Board of Clean Energy Fuels, 
the nation's largest distributor of natural gas for vehicles, I 
recuse myself from anything having to do with vehicles. I just 
want to put that on the record.
    Senator Carper. Thank you. Senator Begich, welcome. Good to 
see you.

              OPENING STATEMENT OF SENATOR BEGICH

    Senator Begich. Thank you very much, Mr. Chairman. Alaska 
cares about their post offices. They are a critical lifeline to 
many of our communities. You know it probably well. First, I 
want to say thank you for your willingness to serve. I have a 
couple questions and then I will leave it at that. I know we 
have votes coming up pretty quickly here, so let me first give 
you a couple examples.
    Skagway, Alaska, is a small community of about 1,000 year-
round residents, but on any single day in the summer, it can 
swell to 12,000 people because of the tourist season and the 
activities of the cruise ship industry and so forth.
    We have at times three seasonal positions, but they are 
hard to fill and keep them filled in a timely manner for the 
season. And what happens is, as you can imagine, the small 
store owners cannot get their product because it comes in 
through the mail, so it is piling up. I mean, not just a few 
boxes. It is literally piling up, and they cannot get products 
to their stores because they do not have enough people in the 
facility.
    We have some temporary employees who have been sent from 
Juneau in order to help with this situation, but Juneau also 
has cruise ships that come in. So it is like dominoes falling 
very rapidly. And I do not know if you have any comments, not 
specifically on that, but on customizing the hiring practices 
and the ability to staff based on these unique community needs.
    Not just for us. There are other States that have similar 
spikes. But we anticipate, just in the southeast region this 
year alone, 50,000 more visitors in a 90-day period. So you can 
imagine the flow that happens. And it is huge. So again, 1,000-
person facility goes to 12,000 in one day, and it will be like 
that daily for 90 days or so. So any comments you would like to 
give, either one?
    Ms. Tobin. This speaks not directly to your concern, but I 
think close to it. One of the things I mentioned in my answer 
to the policy questions was that I would like to see much more 
flexibility--and I would hope the unions would begin to work 
more on this in terms of moving people from one ``craft'' to 
another, such that if you had people in one part of Alaska, you 
would have more flexibility on ``work rules.''
    Senator Begich. Cross training.
    Ms. Tobin. Yes. So I think that it would help if we did get 
those labor rule flexibilities for the Postal Service. As Mr. 
Miller has said earlier, they are so good with delivery. I 
mean, this is an organization that executes well. It just needs 
to have that second area of flexibility.
    I know Alaska well. I think we need to figure out how we 
can get that delivery working more efficiently.
    Senator Begich. Very good.
    Mr. Miller. Senator, you have identified a very important 
peaking problem. We have those kinds of problems in the Postal 
Service. The Board of Governors went out to visit the UPS 
center in Kentucky and the FedEx center in Memphis.
    And what we observed is remarkable. Basically, the planes 
come in about midnight.
    Senator Begich. Yes, I have been there. I have seen it.
    Mr. Miller. You have seen the same thing.
    Senator Begich. Absolutely. We are the international hub 
for FedEx and UPS.
    Mr. Miller. Well, those companies hire people to work 4-
hour shifts.
    Senator Begich. Right.
    Mr. Miller. And they deal with the peak. They have another 
smaller peak in the morning, so they hire a lot of college 
students, but we do not have the flexibility to do that under 
our craft contracts.
    Ms. Tobin. We used to years ago. Thirty years ago or so, I 
understand, for Christmas mail.
    Mr. Miller. Yes. But we need to have the flexibility to 
address those peaks. And from the standpoint of a company, it 
makes no sense to have mail piled up that we cannot process.
    Senator Begich. Right.
    Mr. Miller. I mean, we drive away revenue when we do that.
    Senator Begich. Right. So you recognize that is an 
important piece of the equation?
    Mr. Miller. Yes.
    Senator Begich. Well, first I want to say thank you, and 
also, I will mention, as I said, for UPS, FedEx, Anchorage 
International Airport, to which you also have a 24-hour, 7-
days-a-week operation right next door, Anchorage is the 
international hub. Anything west of the Mississippi that is 
going international is coming through Anchorage.
    Mr. Miller. Right. Over the top.
    Senator Begich. Over the top. So it is big business. We 
have 700 wide-body cargo planes come in there every week from 
26 different countries, serving the global economy. So we think 
it is important. So I am glad you are willing to do that.
    I have been in Memphis at 10:30 or 11 o'clock at night when 
the planes start rolling in. It is an unbelievable sight. I 
think people who have not seen that should see it because it 
gives you an understanding of the uniqueness.
    We have a unique situation also in Alaska. There is a 
certain period of time when they come in and they move. And so, 
I would first thank you for your recognition of the flexibility 
there. That is necessary.
    If I can go to another comment, and I will do one quick 
comment after that. We do have a growing problem and that is 
drug trafficking that is starting to occur through Postal 
Service product moving through. We have only one inspection 
office in the State. It is based in Anchorage.
    Now, you have to put in perspective the size of the State.
    Mr. Miller. Bigger than Texas.
    Senator Begich. That is right. We would acknowledge that. I 
have a Texas joke, but I will not say it, but I will just say 
that you are correct. And it is important because what happens 
when drug trafficking occurs and gets into a rural village, it 
is like a plague, and it happens very quickly because these are 
roadless villages. In other words, 80 percent of our 
communities are not accessible, other than by boat or plane.
    So once the trafficker figures out that the access point is 
the postal system and they can get it in there, then it is a 
very quick plague that starts to occur in those villages. So I 
would ask you, if you could, to think about that as you are 
looking at Postal Service reform, which we are big supporters 
of here. We think it is important.
    I would also ask you to think about the inspection 
component of drug trafficking that is starting to occur in the 
system. It is a hard one because you cannot look at every 
package. But maybe there are some best practices from UPS, 
FedEx, and others. Maybe there is something we can do on a 
unified basis because, as you all know, the postal system is 
also the last mile for some of those guys.
    And so the more we can figure this out together, the more 
we can grab this drug trafficking and squeeze it hard because 
it is an economic issue, and if it is hard for them to move the 
product, then they will not move it.
    Ms. Tobin. Are there connections that you know of with 
Homeland Security?
    Senator Begich. There are. We have actually talked to the 
Drug Enforcement Administration, the Federal Bureau of 
Investigation, and others, and we would be happy to share this 
with you. We think it is really devastating to our rural 
communities because once it is in, it is in, and it does not 
take a lot of product to move through a system. And the problem 
is we have one inspection office in Anchorage, and that is it.
    And that is great, that is where a lot of volume goes, but 
they have figured out the systems and the routes. And so, I 
just want to bring that to your attention if I could.
    I have one last comment, and then I will end on this. I 
thank the Chairman for allowing me to make a few comments. 
Obviously, I would love to invite you all up to Alaska. I know 
some of you have probably been there, but I always like to have 
folks come up and see how this system works from not only the 
hub, Anchorage, but the rural hub, and then the village itself.
    The other thing is, we are waiting. I know the Postal 
Service released a plan to protect rural post offices, which 
was great. Unfortunately, it did not talk about postal 
branches. And so, I want to put on the record that we would 
like to get the Postal Service to release that plan with regard 
to the future of postal branches. They did it with postal 
offices, which was great, and I think we all appreciated that 
effort, but what has happened is that some communities are kind 
of wondering how they fit in this mix.
    We did not realize that when the report came out until we 
started getting calls, and then we realized the branches were a 
piece that was missing in the equation. I will leave it at 
that.
    Thank you, Mr. Chairman.
    Senator Carper. You are welcome. Thanks for joining us 
today, and I would note that the language in arbitration, which 
I mentioned earlier to our witnesses, Senator Begich, was 
language that you spent a lot of time working on, and we are 
very grateful for that.
    I have maybe one other question. We just started voting, I 
think.
    In the coming months, if the Congress and the 
Administration are not able to come to agreement on postal 
reform--and let me just say, we are going to work very hard, 
but we need the House to act so we can go to conference--the 
Postal Service is going to need to make some more tough 
decisions about how to preserve operations with a dwindling 
amount of cash.
    If you are confirmed, how would you direct postal 
management as it seeks to keep the business running through 
that kind of crisis that it would face?
    Mr. Miller. Well, what you have to do is, I think, first 
talk with the lawyers about what is legally required. Then you 
have to look at the priorities, and you have to pay what keeps 
the organization running and going. That would probably be our 
employees rather than some of our vendors. We may have to 
postpone payment to some of our vendors. It really would not be 
a pretty sight.
    But what you will have to do is try to preserve the 
integrity of the enterprise until some solution is worked out.
    Senator Carper. All right.
    Mr. Miller. But I am hopeful that you will do that. Could I 
just say one final thing, Mr. Chairman?
    Senator Carper. Sure.
    Mr. Miller. The Board of Governors worked very hard on this 
restructuring. The Board of Governors drove the restructuring, 
not management. It was the Board of Governors. And in talking 
with some staff a couple of days ago, I had the impression that 
you were disappointed that the Board of Governors did not play 
a more important role in drafting the legislation.
    I think if that is the case, and I have no reason to doubt 
that, this is something you ought to communicate to the Board 
of Governors because the Board of Governors was under the 
impression that you really preferred dealing with the 
Postmaster General.
    Senator Carper. Actually, I am pleased to know several of 
you, and I respect you and welcome the opportunity to talk to 
you. You all are free to call me any time, certainly the 
Chairman, but also the other Members.
    A former Chairman of the Board of Governors from Delaware 
just passed away last month, whom you served with.
    Mr. Miller. Yes, I know, Rob Rider.
    Senator Carper. We remember him in gratitude for his 
service today.
    Ms. Tobin. Two things that I want to say to your point, 
Senator.
    Senator Carper. Please.
    Ms. Tobin. First of all, I am aware, because we are being 
increasingly briefed on the current situation at the post 
office, that the Board of Governors is actively, in getting 
their Monday through Friday news, looking at the upcoming 
deadlines and discussing among each other how they are going to 
handle August, September, and October. And frankly, I suspect 
they have been doing that for the last year--kind of scenario 
planning.
    The second thing I want to say--and I understand the 
frustration Senator Collins voiced, and I know how hard this 
staff worked on the Senate legislation--I think that letter 
comes from the highest priority of the Board of Governors, 
being that fiduciary responsibility, and I believe that they 
could not, in good conscience, not speak because the 
legislation was not yet done.
    So I hope that there is some sense of trust or faith that 
the Board is very active, earnest, and bipartisan and takes its 
role very seriously.
    Senator Carper. Senator Begich, do you want to say anything 
else?
    Senator Begich. No, thank you.
    Senator Carper. Members have until noon tomorrow to provide 
any additional questions that they might have for you. We 
appreciate your previous service on the Board of Governors and 
look forward to having the opportunity to vote on the 
nominations to serve again.
    I would just conclude on this note. The situation that the 
Postal Service faces is dire. It is not hopeless. This is 
something we can fix.
    Ms. Tobin. Yes.
    Senator Carper. And we need the best ideas from the Board 
of Governors. We need the best ideas from postal management, 
from the unions that represent the postal employees, from our 
colleagues, and from your customers across the country. And all 
of us need to focus on how to be more entrepreneurial and to 
figure out how to grow the pie again as first-class mail 
revenues have dropped. We look forward to working with you in 
that regard.
    The other thing is that we need the House to act. It is all 
well and good that we work hard. And I will say personally that 
I very much enjoyed working with your Postmaster General and 
your Deputy Postmaster General. They work hard.
    Mr. Miller. They are both good people.
    Senator Carper. Yes. They work hard for the money, and they 
work hard for the postal employees, for the customers, and I 
think for the taxpayers as well. And so, we commend them in 
absentia. All right. With that having been said, this hearing 
is adjourned.
    Mr. Miller. Thank you, Mr. Chairman.
    Ms. Tobin. Thank you.
    Senator Carper. Happy Anniversary, Happy Birthday.
    Ms. Tobin. Thank you.
    [Whereupon, at 11:17 a.m., the hearing was adjourned.]


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