[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
                    THE PRESIDENT'S FISCAL YEAR 2015 BUDGET 
                     PROPOSAL FOR THE POSTAL SERVICE

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


                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT

                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 8, 2014

                               __________

                           Serial No. 113-137

                               __________

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
JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland, 
MICHAEL R. TURNER, Ohio                  Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee       CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona               GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania         JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee          MATTHEW A. CARTWRIGHT, 
TREY GOWDY, South Carolina               Pennsylvania
BLAKE FARENTHOLD, Texas              TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington             ROBIN L. KELLY, Illinois
CYNTHIA M. LUMMIS, Wyoming           DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia                 PETER WELCH, Vermont
THOMAS MASSIE, Kentucky              TONY CARDENAS, California
DOUG COLLINS, Georgia                STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina         MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan        Vacancy
RON DeSANTIS, Florida

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


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 8, 2014....................................     1

                               WITNESSES

Mr. Brian Deese, Deputy Director, Office of Management and Budget
    Oral Statement...............................................     8
    Written Statement............................................    10


THE PRESIDENT'S FISCAL YEAR 2015 BUDGET PROPOSAL FOR THE POSTAL SERVICE

                              ----------                              


                        Tuesday, April 8, 2014,

                  House of Representatives,
      Committee on Oversight and Government Reform,
                                           Washington, D.C.
    The committee met, pursuant to notice, at 10:00 a.m. in 
room 2154, Rayburn House Office Building, the Honorable Darrell 
Issa [chairman of the committee], presiding.
    Present: Representatives Issa, Mica, Turner, Walberg. 
Lankford, Amash, DesJarlais, Gowdy, Farenthold, Woodall, 
Massie, Meadows, Cummings, Maloney, Norton, Tierney, Lynch, 
Connolly, Duckworth, Kelly, Welch, and Grisham.
    Staff Present: Ali Ahmad, Majority Professional Staff 
Member; Molly Boyl, Majority Deputy General Counsel and 
Parliamentarian; Lawrence J. Brady, Majority Staff Director; 
John Cuaderes, Majority Deputy Staff Director; Adam P. Fromm, 
Majority Director of Member Services and Committee Operations; 
Linda Good, Majority Chief Clerk; Mark D. Marin, Majority 
Deputy Staff Director for Oversight; Jeffrey Post; Majority 
Senior Professional Staff Member; Laura Rush, Majority Deputy 
Chief Clerk; Sarah Vance, Majority Assistant Clerk; Peter 
Warren, Majority Legislative Policy Director; Rebecca Watkins, 
Majority Communications Director; Meghan Berroya, Minority 
Counsel; Kevin Corbin, Minority Professional Staff Member; Adam 
Koshkin, Minority Research Assistant; Julia Krieger, Minority 
New Media Press Secretary; Elisa LaNier, Minority Director of 
Operations; Lucinda Lessley, Minority Policy Director; Juan 
McCullum, Minority Clerk; and Mark Stephenson, Minority 
Director of Legislation.
    Chairman Issa. The committee will come to order.
    The Oversight Committee exists to secure two fundamental 
principles. First, Americans have the right to know that the 
money Washington takes from them is well spent. Second, 
Americans deserve an efficient and 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 will get from their government.
    Our job is to 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 our mission 
statement.
    As I look around the room, I feel it is fairly safe to say 
everyone here supports the Postal Service. The real question is 
not whether but how to best reform postal delivery in order to 
bring fiscal stability to the Post Office.
    In two Congresses, the committee has led on postal reform, 
comprehensive reform that, from CBO, scoring would bring 
financial stability to the Post Office and, in fact, end the 
bleeding red ink.
    I still firmly believe the current bill, H.R. 2748, would 
be the best path to postal reform and to save the Post Office. 
H.R. 2748 will make difficult but common sense reforms that 
enable a troubled agency to right side itself. Any delay in 
necessary cost cutting reforms will only result in greater 
debt, greater burden that will limit flexibility for the Postal 
Service in the years to come.
    You can never glean the intent of colleagues to your left 
or right from this position. What you do know there has been a 
reluctance to make the reforms that need to be made. These are 
bipartisan. It seems that any reform that would reduce the size 
of the workforce, even through attrition, is opposed by my 
democratic colleagues.
    In the Senate, there seems to be a consistent pattern that 
postal reform is necessary along as it closes no post offices 
and no processing centers anywhere in the State of each and 
every Senator. This challenge is created by the necessary and, 
if you will, understandable legacy of the Post Office.
    This is a legacy that goes back to my youth in which the 
Post Office delivered seven days a week, twice a day on many 
days, and ultimately we relied on first class mail for 
virtually every business transaction. I might note that in my 
youth, the Postal Service was smaller than it is today and rose 
from the 1960s through today and has fallen only over the last 
decade as there has been a precipitous drop in first class mail 
and even in other mail.
    There is a bright future for the Post Office. Package 
delivery is likely to continue as e-commerce becomes the 
standard and the norm in greater amounts, but it brings a 
challenge and a challenge that I believe today we can discuss 
in light of the President's fiscal year 2015 budget proposal, 
which includes many of but not all of the most necessary 
changes.
    One of them, which will be discussed today, will be ending 
a very light Saturday delivery, something that is a legacy as 
was Sunday delivery of the past.
    Buried within the budget, I note without a score, that, in 
fact, the Administration recognizes that door delivery ceased 
in 1974 for further expansion needs to contract--two out of 
three homes in America do not receive delivery at the door 
while the cost of less than one out of three homes receiving 
delivery through a chute, or the door or the stoop in fact 
costs $6.5 billion in excess labor to the Post Office every 
year.
    Recently, I visited a home here in Washington, D.C. in a 
suburban area of D.C., with large lawns and more than 30 steps 
leading to the front door. Those steps were uphill from the 
streets in which virtually all the residents parked on the 
street, and few had garages. It reminded me of the fact that 
these homes built in the 1940's, if they were built today, 
would secure mailboxes or conventional mailboxes at their door. 
Yet the Post Office has done absolutely nothing to alleviate a 
postal worker walking up 30 steps times 30 homes every day.
    As you can imagine, these steps, this past winter were snow 
and ice filled day after day after day, an unnecessary risk to 
the postal delivery person and quite frankly, a complete waste 
of labor.
    Although that is not an element and it may not be a part of 
any compromise, I have continued to try to educate this 
committee that cluster boxes located in neighborhoods like that 
would be easy to install, more efficient for the Post Office, 
but most importantly, since the future of the Post Office is 
brightest in delivery of small packages, the ability to lock a 
small package so it does not disappear or become damaged on 
that stoop in neighborhoods like the one I visited clearly 
would be beneficial to the consumer and ultimately beneficial 
to the Post Office's product quality delivery.
    I could dwell on the many items on which we have come up 
short in the past. I choose not to. Today, we have a 
representative of the Office of Management and Budget on behalf 
of the President's proposal which includes a number of 
proposals postal labor unions have asked for and a few 
proposals that the Administration and I agree on that come from 
our side of the aisle.
    It is my goal to hear out in this hearing today our witness 
and to embrace, to the greatest extent possible, the entire 
proposal from the Administration. I would hope through that 
embracing we could get a vote here on a bipartisan basis on the 
House floor and get into conference where we could, in fact, 
make the President's budget proposal a reality.
    With that, I yield to the Ranking Member.
    Mr. Cummings. Thank you very much, Mr. Chairman. Thank you 
for convening this hearing today to enable us to review the 
President's fiscal year 2015 budget proposal for the Postal 
Service.
    The Postal Service remains the link that holds all corners 
of our Nation together and delivers mail to more than 150 
million addresses nationwide and maintains a network of 
approximately 32,000 post offices.
    However, as we well know, declining mail volume has reduced 
the Postal Service's revenue, even as it continues to be 
statutorily required to make multibillion dollar annual 
payments into a fund to cover future retiree health benefits, a 
requirement no other agency has. The Postal Service has now 
defaulted on nearly $17 billion in retiree health benefit 
payments and it will default on the payments due at the end of 
September of this year.
    The Postal Service's cash position has improved, however, 
due largely to increased parcel and package volume which grew 
by six percent during fiscal years 2012 and 2013. Parcels and 
packages now account for almost one-fifth of the Postal 
Service's revenue.
    The President's budget proposes several operational reforms 
that the Administration believes would provide significant 
relief to the Postal Service and place it on firmer financial 
footing over the long term. Many of these proposals echo 
provisions contained in legislation I and Congressman Lynch 
have previously offered.
    For example, H.R. 2690, which I introduced last year, would 
recalculate the Postal Service's liability to the Federal 
Employee Retiree System on the basis of demographic assumptions 
that better reflect the unique characteristics of the Postal 
Service's workforce. The President's budget endorses this 
proposal.
    The President's budget also would return to the Postal 
Service the overpayment it has made into the retirement system. 
The President's budget also supports the restructuring of the 
Postal Service's payments into the Retiree Health Benefits 
Fund. The Administration indicates that the plan it has offered 
would provide $9 billion in cost savings. The President's 
budget would make permanent the exigent rate increase recently 
approved by the Postal Regulatory Commission.
    The Postal Service already has the authority to convert 
addresses receiving door delivery to curbside or centralized 
delivery. I believe the Postal Service has continued to make 
such conversions where they make sense and where neighborhoods 
support this change. I agree with the Chairman that such moves 
would help hopefully to save our postal workers from injuries 
and difficult circumstances.
    New addresses should continue to be required to receive 
curbside or centralized delivery. Ultimately I believe the 
delivery frequency should be considered in the context of 
comprehensive postal reform legislation. Given the concerns of 
our colleagues on both sides of the aisle, any consideration of 
changes to the frequency of delivery should be the subject of a 
robust debate involving all stakeholders.
    As I close, I commend the Administration for supporting 
comprehensive postal reform and offering a thoughtful package 
of policy proposals for our consideration. As we proceed, I 
hope we will focus on measures we can all agree on rather than 
measures that drive us apart.
    It has been more than eight months since the committee 
marked up the Chairman's postal reform measure. Since then, the 
Senate Homeland Security and Government Affairs Committee 
advanced a bipartisan reform bill. Although I don't agree with 
everything in the Senate's bill, it offers a bipartisan 
starting point from which we could craft a measure that would 
ensure the Postal Service's position to succeed while serving 
the changing needs of its customers.
    With that, Mr. Chairman, I yield back.
    Chairman Issa. I thank the gentleman.
    We will now go to the subcommittee chairman from Texas, Mr. 
Farenthold.
    Mr. Farenthold. Thank you, Mr. Chairman.
    I am really glad we are having this hearing today. I think 
we will find today that the President and what we passed out of 
this committee eight months ago is very close. We are not that 
far off. We are in agreement on most of the major issues. We 
will need to take an overall look.
    While the Internet has been a boon for the Nation and the 
global economy, it has been a mixed blessing for the Postal 
Service. Package volume is growing rapidly thanks to e-commerce 
but that impressive growth has not been nearly enough to offset 
the decline in letters. Americans are rapidly changing how they 
communicate with one another and how they pay their bills. The 
Postal Service is struggling to adapt.
    This does not mean that we are not living in a non-postal 
world. The Postal Service is a vital link in our economy, 
connecting even the most remote parts of this country. That is 
why postal reform is so important. We cannot just move bits and 
bites around, we need to be moving atoms around. It is 
absolutely critical.
    As the President stated in the budget, there can be no 
doubt the Postal Service is in need of reform. Today the 
troubled agency stands in default to the Treasury for $16.7 
billion. Without substantial changes in current law, the agency 
now admits it will not be able to address its more than; $100 
billion in unfunded obligations over the long term.
    Last July, this committee passed the Postal Reform Act of 
2013. Unfortunately we did not get the bipartisan support we 
were looking for. I thought we worked pretty strongly with the 
minority but we were not able to get a bipartisan bill. 
Hopefully, finding the pieces we agree on from the President's 
budget today will allow us to get the bipartisan support that 
we need.
    I do want to take a second to correct the Ranking Member. I 
guess he has not reviewed the transcript from our subcommittee 
hearing of a couple weeks ago. The Postal Service is, in fact, 
not the only government agency required to accrue for future 
health benefits. The Department of Defense is also required to 
accrue for Tri-Care for Life so that management within the 
Pentagon would be aware of the cost of current day decisions on 
long term financial interest.
    Getting back to the other issues in postal reform, where 
the savings can be, the President agrees that door to door 
delivery is too expensive. Our legislation came up with a 
solution that would continue door to door service for the 
elderly and disabled and we could come up with a way to pay for 
that if you wanted to do it. You pay a fee and you continue to 
get the mail.
    There is no question it is more cost effective to do what 
we are doing in new subdivisions now, cluster boxes or curbside 
mail or typical boxes where the postal worker does not need to 
get out of his or her car to deliver those. It is safer and 
faster.
    I am also glad to see the President's continued support for 
five day delivery of mail, a change supported by the American 
people. I cannot believe we are still debating this. We came up 
with a great compromise where packages would be delivered on 
Saturday so we could get around the problem of people needing 
their medications delivered and still save lots of money.
    Unfortunately, the Postal Service was moving that way and 
they bowed to political pressure and backed off on it. That is 
not good. My fear as a government watchdog, a taxpayer and as a 
postal customer is without reform, the American people are 
going to be left footing the bill for taxpayer bail out of the 
Postal Service. That is the last thing we need right now.
    Maybe it is a policy debate we will need to have, but I 
think you will find consensus on both sides of the aisle. 
Within these tight budgetary times, we just don't need to be 
bailing out the Postal Service.
    As the chairman of the Subcommittee on Federal Workforce, 
U.S. Postal Service and Census, I am committed to continuing to 
work with the Postal Service and members of this committee to 
bring the necessary reforms needed to bring the Postal Service 
into the 21st Century. I truly believe it is the smart way for 
the Postal Service to lower its costs and improve its service.
    I hope we can bring them to light today and find a way we 
can work with the President, members of the other Party, the 
Postal Service, their customers and all stakeholders which 
basically includes all American people to find a solution that 
works to give us a 21st Century Postal Service that can carry 
its own financial weight, can be a boon to our economy, get 
those atoms delivered on time, give us the quality of service 
we need and deserve nationwide at an affordable cost.
    I yield back.
    Chairman Issa. I thank the gentleman.
    We now recognize the Ranking Member of the Subcommittee, 
Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman and the Ranking Member. 
Thank you for holding this hearing to examine the President's 
fiscal year 2015 budget proposal for the United States Postal 
Service.
    I would also like to welcome Mr. Deese and thank him for 
his willingness to help the committee with its work.
    While I don't agree with specific parts of the President's 
postal budget, especially with respect to the move to five day 
delivery, I do recognize it as a thoughtful and meaningful 
attempt to deal with our problem.
    According to its most recent quarterly financial report, 
the Postal Service ended fiscal year 2013 with a net loss of $5 
billion. The agency also endured a net loss of $354 million for 
the first quarter of fiscal year 2014, making it the 19th out 
of the last 21 quarters that it has sustained a loss. Moreover, 
the Postal Service has indicated that it will again default on 
its annual payments to pre-fund its future retiree health 
benefits when $5.7 billion becomes overdue after September 30.
    It is against this troubling financial backdrop that the 
President has submitted the fiscal year 2015 budget that 
contains a number of proposals to address the serious fiscal 
challenges facing the Postal Service.
    In examining the various recommendations issued by the 
Administration and as we continue to undertake the critical 
task of reforming the Postal Service, it is imperative that we 
bear in mind that the agency has recently demonstrated an 
ability to grow revenue while operating under very difficult 
financial conditions.
    According to Postal Service testimony before our committee 
last month, fiscal year 2013 witnessed the first revenue growth 
for the agency since 2008, including a $923 million increase in 
package business, about an eight percent increase, and a $487 
million increase in standard mail, about three per cent of 
volume.
    Executive Vice President Jeff Williamson noted that 
``Growth in our package business was fueled by our priority 
mail simplification and enhancement efforts. We also formed a 
strategic partnership with Amazon to test Sunday package 
delivery in select markets. We are exploring similar 
partnerships with other companies.''
    This indicates that the path to greater financial viability 
for the Postal Service does not lie in service reduction, the 
degradation of our existing mail network or arbitrary workforce 
cuts. Rather, we have seen that the Postal Service can 
experience profitability when it capitalizes on distinct 
business features that have long set the agency apart from its 
competitors.
    I am referring to an extensive and unparalleled mail 
network and a dedicated workforce that is ready, willing and 
able to provide personalized service to the American people six 
days a week, and now even on Sundays. That is what the customer 
wants.
    Meaningful postal reform must not degrade the exceptional 
service standards that have come to define the Postal Service, 
but instead afford the agency the operational and financial 
flexibility to build upon what it already does best. That is 
why I remain steadfast in my opposition to a transition to five 
day mail delivery, although I concede that where appropriate, 
it may be possible in some rural and suburban areas to convert 
from door delivery to curbside deliveries, again where 
appropriate.
    Rather, I think we should focus on commonsense reform that 
will only strengthen the Postal Service and I am encouraged 
that the President has again recommended that Congress to 
require the Office of Personnel Management to return to the 
Postal Service the surplus amount that it has overpaid for its 
share of federal employee retirement costs.
    As noted by the Administration, the Office of Personnel 
Management should be required to calculate the surplus using an 
actuarial formula based on the specific demographics of postal 
employees.
    I want to use my last minute to talk about the statement 
that the Ranking Member may have been wrong in singling out the 
Postal Service as the only agency required to pre-fund its 
employee health benefits going forward. The chairman of the 
subcommittee, a great friend of mine, indicates that DOD also 
is required to pre-fund their health benefits in advance.
    However, I want to point out a major distinction that 
clearly sets this apart. The Department of Defense provides 
advanced payment of their health care benefits for retirees 
because Congress issues an appropriation, we give them the 
money to do it, each and every year. That is why they provide 
their health benefits in advance.
    We do not provide an appropriation for the Postal Service. 
We let them sell stamps. That is quite different than the 
suggestion the Ranking Member was off base on that and is 
completely wrong. DOD gets an appropriation from the House and 
Senate and that is why they pay for their health benefits in 
advance.
    With that, Mr. Chairman, I appreciate your indulgence and I 
yield back the balance of my time.
    Chairman Issa. Never an indulgence.
    We now welcome our witness, the Honorable Brian Deese, 
Deputy Director, Office of Management and Budget. Please rise, 
pursuant to committee rules, to take the oath.
    Do you solemnly swear or affirm that the testimony you are 
about to give will be the truth, the whole truth, and nothing 
but the truth?
    [Witness responds in the affirmative.]
    Since you are the main show today, we will not gavel you at 
five minutes. Your entire opening statement is placed in the 
record without objection and you are free to use more or less 
the five minutes in any way you like.
    You are recognized.

STATEMENT OF BRIAN DEESE, DEPUTY DIRECTOR, OFFICE OF MANAGEMENT 
                           AND BUDGET

    Mr. Deese. Chairman Issa, Ranking Member Cummings and 
members of the committee, thank you for the opportunity to be 
here today to discuss the President's proposal for reform of 
the U.S. Postal Service.
    The Administration recognizes the value of the Postal 
Service to our Nation's commerce and communications and its 
essential role in connecting America with the global economy. 
We also recognize that for years, the Postal Service has ranked 
among the most trusted federal agencies and that is because 
they provide universal service to millions of Americans that is 
both reliable and affordable.
    Unfortunately, the great recession exacerbated financial 
pressures the Postal Service has been facing for many years. In 
recent years, the Postal Service has faced a significant 
financial gap and large unfunded liabilities. Given these 
challenges, the Administration believes there is both a need 
and an opportunity for legislation to provide near term 
financial relief and long term structural reform that would 
help ensure the future viability of the Postal Service.
    The proposals in the President's budget build on many of 
the proposals and business reforms that the Postal Service has 
been implementing in recent years. It focuses on four key 
principles that I would like to briefly touch on today.
    First, the proposal provides the Postal Service with 
sufficient near term financial relief to avoid destabilizing 
near term measures that could undermine the Postal Service's 
core strengths. The Administration proposal would improve the 
Post Service's near term cash position by more than $20 billion 
over the next three years, providing time for key legislative 
reforms and operating efficiencies to take effect.
    Second, the proposal provides the Postal Service with 
flexibility to adjust to a change demand environment. In 
addition to the Postal Service's ongoing administrative 
initiatives in this area, the Administration's proposal would 
provide the Postal Service with market-based authorities to 
realign its business and operational strategies.
    Third, the proposal gives the Postal Service flexibility to 
generate additional revenue as well. This would include the 
authority to leverage its national network through new 
partnerships with State and local government entities, as well 
as expanding promising and profitable new lines of business.
    Finally, the Administration's proposal would build on 
rather than undermine the Postal Service's core strengths. The 
Administration believes that the test for any comprehensive and 
balanced reform proposal must be that we improve the Postal 
Service's quality of service, including in rural America and 
responsiveness of its product offerings to build on the trust 
the Postal Service has with the American people.
    The Administration is gratified by the serious work of 
members of this committee, as well as in the Senate, to bring 
forward ideas and approaches to addressing the Postal Service's 
challenges and we look forward to working with Congress to 
strengthen the Postal Service over the long term so that as I 
said it can continue to provide the American people with 
trusted, reliable and affordable service.
    With that, I look forward to taking your questions on the 
Administration's Postal Service proposal.
    [Prepared statement of Mr. Deese follows:]

    [GRAPHIC] [TIFF OMITTED] 

    Chairman Issa. Thank you.
    I will recognize myself and without objection, the Chair is 
authorized to declare recesses of the committee at any time.
    First of all, looking at the President's budget, the CBO 
has scored about $6.5 billion, if we were to convert the 
remaining homes that have to the door, so-called chute, 
delivery to the curb. However, in the President's budget, which 
usually scores higher than the CBO score for a number of 
reasons, you scored only $500 million in savings.
    I note that it was a mandate on business while in fact no 
mandate on the private sector. In other words, if you will, 
residents would continue to be under the same 1974 
encouragement to convert that has not led to conversion. Did 
you get your $500 million all from a calculation of business 
and if so, why would business be appropriate for a mandate in 
almost all cases and no residential?
    Mr. Deese. I appreciate the question. This is an important 
component of the Administration's plan.
    The difference in scoring assumptions does derive from 
difference in the policy assumptions or the policy proposal 
itself. As you note, the Administration's proposal would do a 
couple things in this space.
    The first is it would provide the Postal Service the 
authority to move to cluster, curbside approaches with respect 
to businesses and with respect to new residences.
    Chairman Issa. I appreciate that except they already have 
that authority. The question is you scored $500 million. Assume 
CBO makes $250 million, about half of what you usually score, 
out of $6.5 billion, if we were to do them all--by the way, I 
am supportive. I think the Ranking Member has more and more 
recognized and supported at least the idea that cluster boxes 
were an asset and not a liability when they maintain your 
packages in a secure and water resistant environment.
    My question really was the mandate on business, which I 
support, it seems like it would score at least that amount and 
as a result, was there a calculation of any savings in 
residential because in order to score a savings, you have to 
beat the very small amount of residential reduction that is 
going on. That was the specific question. Did you get it all 
from business?
    Mr. Deese. The scoring assumption assumes that the majority 
of that savings comes from the conversion in the business space 
with a small amount coming from residential conversions. We did 
not include in the Administration's proposal a mandate or a 
target in the residential space.
    Chairman Issa. And why not? There has been a long history 
of people being very happy when they got conversion to cluster 
boxes and security and yet there has been very little of it 
under the law that has been around since before most people in 
this room's birth.
    Mr. Deese. Our rationale in that context was that while we 
agree there are opportunities for potential cost savings 
without undermining and in fact potentially enhancing customer 
service, that it is location dependent and situation dependent. 
There are promising strategies that the Postal Service is 
deploying but before mandating that on a wide scale at the 
residential level, we would want to understand better.
    Chairman Issa. Let me ask two quick questions before my 
time expires. There probably will be a second round.
    You did ask for five day. The Administration has had that 
year after year after year. You are solidly in favor of that 
and I presume have had many years of public comment since it 
has been in the budget year after year. Is that correct?
    Mr. Deese. The Administration's proposal includes the 
authority for the Postal Service to move to five day delivery.
    Chairman Issa. It scores an assumption they will do it.
    Mr. Deese. It includes the assumption. The only thing I 
would note there is that it is our belief that needs to be a 
part of a comprehensive and balanced plan and that taken in 
isolation, the move to five day delivery doesn't solve 
anything.
    Chairman Issa. We concur with that. Would you say the 
President's proposal in the budget would be considered 
comprehensive, in the President's opinion?
    Mr. Deese. Yes, sir.
    Chairman Issa. If we embrace the entire budget proposal, 
that would, in fact, be comprehensive according to the 
Administration?
    Mr. Deese. We believe the proposal we put forward is 
comprehensive and balanced.
    Chairman Issa. Let me ask one last question related to the 
cluster boxes. Would the Administration consider it reasonable 
to go from what is stated which is the mandatory for business, 
voluntary for residents to mandatory for business, mandatory 
for residents which are substantially the same or identical to 
existing post-1974 implementation?
    In other words, recognize that if your residence was 
designed substantially differently in the pre-1974 era right 
here in Washington these row homes with the kind of unique 
design that often does not easily facilitate a cluster box, but 
if you live in a classic residential or rural area that simply 
happens to have been built before 1974, would the 
Administration be prepared to negotiate and agree if it is the 
same as implementation post-1974 in large amounts, that pre-
1974 should be mandated--in other words, fairness between 
somebody that has an identical community except this street was 
built in 1975 and this one was built in 1972?
    Mr. Deese. That is a specific proposal that we haven't 
closely looked. We would be happy to do so. The broader policy 
concern we have that we would want to better understand is 
whether imposing a mandate in this context would create 
untenable situations in particular locations. We would be happy 
to look at that specific proposal.
    Chairman Issa. I would appreciate that.
    I will yield to the Ranking Member and give him the 
additional time.
    The reason I asked that is we consider, at some point, that 
is essentially voluntary where not the same as millions of 
Americans have now had for generations. If a home built in 
1975--a goose or gander kind of thing--since 1975 somebody has 
lived with it and it works, say a home on the same street but 
further down it was built in the 1960s, why wouldn't you 
convert it if it was substantially the same?
    In the language that I proposed that we enter into 
negotiation with the Administration would limit the mandate to 
those in which it was substantially similar so there would be 
no injustice but rather a bringing to justice what has 
obviously worked in the last almost 50 years since the law must 
already be considered to work if it is substantially identical 
or there was some language that would be agreed to.
    That would be what I would propose because I believe the 
proposal of the Administration could be enhanced in scoring 
substantially if we were to take those like residences and 
bring them in a ten year period to identical, if you could take 
that back.
    I thank the Ranking Member for his indulgence and yield 
seven minutes.
    Mr. Cummings. Mr. Deese, on Wednesday, April 2, Budget 
Committee Chairman Paul Ryan unveiled his fiscal year 2015 
budget. Included in the Chairman's budget was a proposal 
requiring postal employees to pay increased costs for health 
and life insurance. The budget would also subject postal 
employees to additional pension contribution rates that would 
be applied to all federal employees. Currently, postal employee 
contributions to health and life insurance is subject to 
collective bargaining.
    Has the Administration used the chairman's budget proposal 
and if so, could you provide any feedback on that proposal?
    Mr. Deese. We have not seen the full detail of the 
chairman's budget proposal, so we have not reviewed the 
specifics but would be happy to do so and get back to you.
    Mr. Cummings. How soon can you get that to me?
    Mr. Deese. I would be happy to work on it as quickly as we 
can and get back to you shortly.
    Mr. Cummings. One of my key priorities for postal reform is 
the creation of a Chief Innovation Officer position in the 
Postal Service. This individual would be tasked with leading 
development of innovative postal and non-postal products and 
services within the Postal Service to meet customer's changing 
needs and generate additional revenues. Would the 
Administration support creation of such a position?
    Mr. Deese. That provision isn't specifically in the 
Administration's plan but the objectives are quite consistent 
with a number of the proposals in the plan in encouraging 
innovation particularly in new product areas and creating 
potential new revenue opportunities is something we do support. 
That is something we would be open to and happy to work on with 
you and others of the committee.
    Mr. Cummings. One of the main operational reforms included 
in the Administration's proposal for the Postal Service was 
``allowing the Postal Service to leverage its resources by 
increasing collaboration with State and local governments.'' Is 
that right?
    Mr. Deese. Yes, that is correct.
    Mr. Cummings. How do you see them doing that?
    Mr. Deese. I think the Postal Service's network across the 
country is a vital asset and one that they have already found 
some ways to take advantage of. For example, the processing of 
passport applications in post offices has been something that 
has enhanced customer service and customer satisfaction.
    I think there are opportunities to build on that model and 
provide opportunities to provide other licenses or other State 
and local services and co-locate those in post offices that 
would both create customer efficiencies and also potentially 
create new revenue opportunities for the Postal Service as 
well.
    Mr. Cummings. Does the Administration believe that 
innovation or collaboration with other entities could yield 
additional revenue for the Postal Service? You talked about 
passports. I don't know how much revenue is there. The question 
becomes are some of these proposals revenue neutral?
    You well know that when the Postal Service comes up with 
new ideas a lot of times there are already entities in the 
private sector that become concerned because they see it as 
competing against what they are doing. In many instances, they 
feel the Postal Service has an advantage over them because of 
the very network you just talked about.
    I am wondering if you considered the types of entities 
other than passports, services that is?
    Mr. Deese. Yes. I think you raise an important point. I 
think it is an important question to ask for any potential 
expansion into a new product or service line given the unique 
position of the Postal Service, its monopoly position in some 
business segments, whether or not we would inadvertently create 
adverse competitive dynamics for private sector entities.
    Our focus on collaborating with State and local entities 
was principally driven by the fact that most all of those 
services are governmental in nature, so they are not things 
that would raise concerns about competitive dynamics.
    With respect to expanding beyond that into other services, 
that is a concern we share and one that we would look closely 
to make sure if they were expanding, that they weren't tripping 
up or undermining legitimate private sector business segments.
    Mr. Cummings. Recently, the Postal Service Inspector 
General released a white paper indicating that the Postal 
Service could potentially generate billions of dollars in 
additional revenue by providing non-bank financial services to 
underserved communities. I am very familiar with underserved 
communities because I am living in one and have been there for 
32 years where there are no banks. Did you review the IG 
report?
    Mr. Deese. I am familiar with the IG report. Generally 
speaking, the President is obviously very committed to that 
policy goal of trying to expand access to banking services, 
particularly in underserved areas where they are unable to 
access or only able to access at extremely high costs and high 
risk to individual consumers.
    With respect to leveraging the postal network, that is not 
something that is part of our proposal currently. I know there 
are proposals out there and we have been looking at them. I 
think that is a space we want to better understand the impact 
both in terms of potential competitive dynamics but also in 
terms of leveraging the strengths and assets of the Postal 
Service.
    We haven't incorporated that into the Administration's plan 
but we want to learn more from some of the proposals that are 
out there.
    Mr. Cummings. I yield to the gentlelady, Mrs. Maloney, as 
arranged, the remainder of my time.
    Chairman Issa. The gentleman yields.
    Mrs. Maloney. I thank the Ranking Member for yielding.
    There is a meeting with the President on his women's 
economic agenda today very shortly so a number of us will be 
going to that meeting. This is an incredibly important hearing. 
The Postal Service is so fundamental to this country.
    I believe the mail should be delivered on time very day, 
including Saturday. It is a critical part of our economy and a 
critical part of peoples' lives.
    The one area that I find completely troubling is the Postal 
Service is required to make fixed annual payments, between $5.4 
and $5.8 billion over ten years to pre-fund the cost of future 
retiree health benefits for current employees and retirees. No 
other agency in the whole government is required to do this. 
This is incredibly unfair.
    Not only do they have to and do they deliver mail to every 
corner of this country, on time every day including Saturday, 
they have to pre-fund their benefits. I just want to go on 
record on how terribly unfair this is and that it needs to be 
changed.
    I will be reading the reviews and meeting with the Chairman 
and Ranking Member on the outcome of this important hearing.
    I yield back to the Ranking Member.
    Chairman Issa. Are there any other women who will be 
attending and have to leave? With the indulgence of the 
Majority, you are now recognized.
    Ms. Kelly. Thank you very much, Mr. Chairman.
    Actually, with what my colleague just said, I can say, 
ditto, ditto, ditto. I do think it should stay six days a week 
and I do think we should relook at how pensions are paid. I 
agree with the statement just made.
    Thank you. I yield back.
    Chairman Issa. Thank you.
    Since I am getting a little indulgence from the Ranking 
Member, could I have one minute to follow upon what the Ranking 
Member said?
    The Ranking Member talked about the proposal on banking. 
Obviously it is not in the President's budget, but I wanted to 
ask a question on consistency. If the State of Maryland, in 
partnership with Maryland post offices in Baltimore and so on, 
chose to have a government-sponsored partnership that accessed 
those that would be, if I understand correctly, consistent with 
the President's proposal, working with State and local 
governments, if a government entity would have something and 
utilize postal workers as part of their plan, that would be a 
government to government plan and consistent with the 
President's proposal, is that right?
    Mr. Deese. The goal of expanding with say State and local 
entities was to create space for those types of partnerships. 
With respect to whether those partnerships go into the issue of 
financial services or the issue of licensing or otherwise, we 
are prescriptive on that in the proposal but the idea is to 
focus on areas where you could find intersection.
    Chairman Issa. If the Post Office was to run an 
unemployment office, for example, an annex to an unemployment 
office on behalf of the State, that would clearly be consistent 
with the President's proposal because that would be inherently 
governmental.
    Mr. Deese. Those are the types of services that were 
contemplated. Obviously with respect to the specifics, that is 
the kind of business judgment we would want to leave to the 
Postal Service.
    Chairman Issa. I thank you.
    We now go to the gentleman from Michigan, Mr. Walberg.
    Mr. Walberg. I thank the Chairman.
    Mr. Deese, thank you for being with us today.
    The President's budget calls for codification of the Postal 
Service's current plan to avoid closing many small rural post 
offices like the one that services my home by reducing their 
hours of operations to either two, four or six hours per day.
    As part of the additional efforts to protect rural access 
to postal services, the committee's bill includes an amendment 
crafted by Representative Adrian Smith that would limit the 
total number of rural post office closures to less than five 
percent of the total number of remaining rural post offices per 
year. The question I have is how strongly would the 
Administration support this proposal?
    Mr. Deese. I think you put your finger on a key part of the 
Administration's proposal which is to actually codify in law 
the Postal Service's post-plan they have developed. The 
Administration believes that strategy is financially sensible 
and supports one of the key principles we believe should be a 
part of any plan which is to strengthen the Postal Service's 
core assets. One of its core assets is its network including 
its network in rural America.
    The approach we would codify would seek to avoid post 
office closures in rural areas altogether by implementing 
alternative strategies, as you mentioned. We support that 
effort and believe from a financial viability perspective, it 
is not necessary or necessarily wise to go forward with 
substantial closures in the future.
    Mr. Walberg. In your written testimony, you state that 
under the Administration's proposal, ``the Postal Service is 
not being relieved of its retiree health care benefit 
responsibilities or the requirement to pay its liabilities.'' 
This approach appears to implicitly reject a push by some of my 
Democratic members and colleagues to ask the USPS to only 80 
percent of the cost of these benefits.
    Can you explain why the Administration believes that the 
Postal Service should fully fund its retiree health care costs 
and not only 80 percent?
    Mr. Deese. I think this dovetails back to the points by 
Congresswoman Maloney as well. We believe that the current 
structure of fixed retiree health benefit payments is 
unsustainable. At the same time, we think it is important, as 
part of a comprehensive reform, to put the Postal Service in a 
position where it is financially viable enough to meet its long 
term obligations.
    The approach we would take would be to restructure those 
payments in the near term, basically defer the full payment in 
2014 and half of the scheduled fixed payment in 2015 and 2016 
but build those into a 40 year amortization schedule. When you 
take that approach in the context of the other reforms in the 
President's plan, we believe that 40 year amortization schedule 
is sustainable for the Postal Service to meet.
    Our view is that we want to try to put the Postal Service 
in a position to meet its obligations over the long term but 
that needs to be balanced against the realities in the short 
term that without some near term relief, they will continue 
defaulting on their obligations.
    Mr. Walberg. Along with that, has the Administration taken 
a position on the Postal Service's proposal that all postal 
retirees be required to enroll in Medicare once they reach the 
eligibility age for Medicare?
    Mr. Deese. That is not a proposal on which we have taken a 
formal position. The focus of our proposal with respect to 
health care and health care liabilities has been trying to 
address the financial viability issue that we just discussed. 
That is a near term challenge because of the looming retiree 
health benefit payments.
    With respect to modifying the source of the health care 
itself or modifying the benefit structure itself, that is not 
something on which we have taken a position; it is something 
that we know others have raised and we are looking at.
    The one note I would make from the OMB perspective and from 
the Administration-wide perspective is as we look at proposals 
of that type, it is important to make an assessment on a whole 
of government, unified basis in terms of the fiscal impact they 
would have. We haven't taken a formal position but we are 
looking at those closely.
    Mr. Walberg. Thank you.
    I yield back.
    Chairman Issa. I thank the gentleman.
    We now go to the gentleman from Vermont, Mr. Welch.
    Mr. Welch. Thank you very much.
    The most important thing is that at the end of the day, we 
have to have a strong and vibrant Postal Service. The Postal 
Service has been here longer than the United States 
Constitution. There are enormous pressures on the Postal 
Service now. Obviously the Internet has really cut into first 
class mail but the telegraph cut into the Pony Express and a 
lot of adjustment had to be made over the years.
    Any approach that we take offered by the White House, 
offered by this committee, should have as the goal the 
strengthening of the Postal Service for the long term.
    My view is that while there are enormous price pressures, 
the recourse we have cannot be one that ultimately undercuts 
the capacity of the Postal Service to provide the unique 
service that it does. Six day delivery, in my view, is very 
important. I am from a rural area. Folks in rural Vermont, all 
over Vermont, really depend on that Saturday delivery. My hope 
is that at the end of the day, we are going to maintain that 
six day delivery.
    One of the questions I have of you, Mr. Deese, is whether 
the funding issue that some of my colleagues have brought up 
where we have situations in government and some State 
governments all around where sometimes pensions and medical 
expenses are under funded and that creates a huge problem and 
sometimes they are over funded and that creates a huge problem.
    The cash flow for the Postal Service, where do you all 
stand on the funding levels for these pensions and the 
obligations that the Postal Service has that are constricting 
their cash flow and their ability to operate?
    Mr. Deese. I would say at the outset, the Administration 
strongly agrees with your bottom line principle that we need to 
be focused on a stronger Postal Service.
    With respect to the pension and other outstanding 
liabilities, it is important to look liability by liability 
because it differs. With respect to the pension obligations in 
the FERS system, for example, that is a place where we believe 
that if calculated accurately based on postal specific 
characteristics, there is a surplus and the Postal Service has 
overpaid. Our proposal would rebate those resources.
    Mr. Welch. That is great. So we would right size the 
obligation, that would be actuarially sound but not bone 
crushing for the cash flow of the Postal Service. That is the 
goal, right?
    Mr. Deese. Yes, that is right. I think that you have to 
look at these pieces together because if a reform proposal 
doesn't achieve sufficient near term financial relief, then it 
is not going to allow time and space for reforms to take 
effect, nor allow for the Congress and Administration to 
actually solve this problem.
    Mr. Welch. We have to maintain the overnight delivery 
standards. One of the great things about any organization is 
when they can provide the service that customers need. 
Overnight delivery really is important to the Postal Service to 
be customer friendly. Number two is missed time where there is 
enormous pressure, loss of first class mail from the Internet, 
there has to be some freedom to innovate.
    The companies that do well are the ones that adapt. Where 
is the Administration with respect to maintaining overnight 
delivery standards and giving some flexibility and freedom to 
the Postal Service to innovate and find other ways to generate 
revenue to make that Postal Service strong?
    Mr. Deese. With respect to the second piece on innovation, 
we agree that it is important to provide additional flexibility 
and authorities for the Postal Service to innovate and to 
expand where they have identified promising new business lines, 
for example, in the delivery of beer and wine.
    With respect to the question of overnight delivery, we 
believe it is important to maintain the quality of service that 
customers have come to rely on and that has to be an integral 
part of making any of these reforms.
    Mr. Welch. Thank you very much, Mr. Deese.
    Mr. Chairman, I yield back.
    Chairman Issa. Would the gentleman yield?
    Mr. Welch. I will yield, yes.
    Chairman Issa. Thank you.
    I think the gentleman from Vermont made a good point, but 
earlier when the gentlelady from New York talked about pre-
funding, from the Administration's perspective, because your 
proposal as I understand it is to essentially reschedule that 
pre-funding but not eliminate it. Is that correct?
    Mr. Deese. That is correct.
    Chairman Issa. That is because ultimately, these expenses 
come due and the revenue of selling stamps is where those 
eventual bills are to be paid, is that correct?
    Mr. Deese. It is important that the Postal Service is in a 
financial position to meet those obligations because those are 
obligations that their workforce is expecting.
    Chairman Issa. Consistent with any other pension and 
retirement program in the private sector?
    Mr. Deese. Yes. On the question of pre-funding, obviously 
to the degree that pre-funding is financially viable, it is a 
wise financial decision. We have a situation in the short term 
where the current law pre-funding obligations are untenable, so 
the Administration's proposal is focused on the 40 year 
amortization schedule that would make it more tenable.
    Chairman Issa. Your proposal is based more on their ability 
to pay today but still trying to eventually get them 
actuarially sound, is that correct?
    Mr. Deese. That is correct.
    Chairman Issa. Thank you.
    We will now go to the gentleman from Texas, Mr. Farenthold.
    Mr. Farenthold. Thank you very much.
    As chairman of the subcommittee, I want to talk about where 
we agree and disagree and maybe do this on big picture items so 
we know where to focus.
    I assume you are familiar with the bill we passed out of 
this committee and the reforms in it?
    Mr. Deese. Yes, sir.
    Mr. Farenthold. What parts do you specifically disagree 
with that you think need additional work to be consistent with 
what the Administration is after?
    Mr. Deese. I think there are several provisions where there 
are ideas or proposals that are not incorporated in the 
Administration's plan. I think we have touched on a couple of 
them. One is the treatment of the cluster box and curbside 
delivery approach and the degree to which that is mandated into 
the existing residential customer base or not.
    I think there is a second question that has come up in this 
conversation about the question of governance and the idea from 
the Ranking Member's legislation of a Chief Innovation Officer 
and whether and to what degree we need to create a new or 
separate layer of oversight or governance in order to give the 
Postal Service the flexibility to build on the ideas and 
proposals that it has already committed to.
    I think there are also some disagreements or areas where 
the Administration proposal doesn't go in the space of 
collective bargaining and workplace protections where it is the 
Administration's view that if you look at what the Postal 
Service management has been able to do constructively with its 
workforce over the last couple of years, deploying creative 
tools, finding savings that it is not necessary in the current 
context to be prescriptive about future collective bargaining 
agreements.
    Those are a couple places I would note there are proposals 
that are not included in the Administration's plan.
    Mr. Farenthold. So we are generally in agreement. That does 
kind of go through the big picture. We are generally in 
agreement we don't want to close too many rural post offices if 
we can avoid it.
    Mr. Deese. Generally in agreement there.
    Mr. Farenthold. Generally in agreement with revenue 
enhancement. We can call it innovation or revenue enhancement 
in such a way that does not give the Postal Service an unfair 
competitive advantage over the private sector. I think your 
proposal is doing more with respect to partnering the State and 
local governments. We are in general agreement on that 
principle?
    Mr. Deese. Yes. The only thing I would note there, which we 
believe is financially important, is extending the exigent rate 
increase currently scheduled to expire which does generate 
savings.
    Mr. Farenthold. As far as the pre-funding, I think there 
may be some details on exact actuarial formulas and numbers but 
I think we can agree that if we can get the math to work, there 
needs to be some form of pre-funding that is affordable today 
but does meet the long term needs of the Post Office to keep 
its commitments to its employees.
    I like to tell postal workers who complain about this, 
don't you want to be sure there is money there for your health 
coverage.
    Mr. Deese. I think finding that balance is certainly a 
priority and one we tried to address in our bill.
    Mr. Farenthold. I think we are actually more generous in a 
modified six day than the President's proposal as far as days 
of delivery?
    Mr. Deese. With respect to the President's proposal, it 
would provide the authority for the Postal Service.
    Mr. Farenthold. To do nothing on Saturday if that was what 
they wanted to do?
    Mr. Deese. Our estimates there reflect what the Postal 
Service has stated it would intend to do which includes 
maintaining six day delivery for packages.
    Mr. Farenthold. The other big stumbling block would be 
cluster boxes. Our numbers show the modified six day cluster 
boxes get as close to 70 percent of the way to balance. Our 
proposal we would go to cluster boxes wherever possible and we 
added, addressing some concerns of the Minority, continuing 
home delivery for the elderly and disabled. We are looking at 
the potential of if you want to pay the Post Office a 
subscription fee, we will calculate what it cost to deliver to 
a home. Say it is $100 a year. You can pay that and continue to 
get that.
    That seems to me to be a middle ground. Do you think that 
is something you could take back to the Administration and say 
where can we find some middle ground?
    Mr. Deese. We are certainly happy to take back the proposal 
you just put forward as well as the proposal the Chairman put 
forward. Our concern there is not to destabilize existing 
delivery. We are happy to look at it.
    Mr. Farenthold. I think we are consistent with also not 
wanting to reduce the size of the Postal Service workforce 
beyond voluntary attrition as well, is that correct?
    Mr. Deese. Our view is that the Postal Service management, 
working with its workforce, has found constructive tools to 
right size its workforce and that we should not be prescriptive 
in that.
    Mr. Farenthold. It looks like we are awful close on this. I 
have gone over my time. I appreciate your testifying and look 
forward to working with you.
    I yield back.
    Chairman Issa. The gentleman yields back what he does not 
have.
    We now go to the gentleman from Massachusetts, Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman.
    Mr. Deese, the decision of the Administration to move away 
from six day delivery and go to five day delivery, you have to 
acknowledge that we are going to stop service on a day when 
most businesses in America and most families are operating on a 
six or seven day schedule, so we are moving away from the 
market. Do you get a sense of that at all?
    Mr. Deese. I appreciate the question and understand this is 
a challenging area. I think when the Administration has looked 
at this issue, it has been in the context of the overall plan 
and what we are doing on the revenue side of the equation as 
well as what we are doing on the financial relief side of the 
equation.
    Mr. Lynch. Let us talk about the operational side of the 
equation. If you are going to use less letter carriers, you are 
not going to be delivering on Saturday, I assume that is the 
day. That is pretty much what we have talked about here, going 
from six to five. Regardless of what we do, the mail has to get 
delivered, whatever mail is there. That is a physical 
challenge.
    We are going to have less letter carriers than we need to 
deliver, especially if these other changes--cluster boxes and 
going away from door-to-door delivery.
    Have you thought about an early retirement incentive to get 
letter carriers out the door? The letter carriers I am speaking 
of specifically have not an offer of early retirement because 
we need them. We cannot give the letter carriers an early 
retirement up to now because that is the only way we get the 
mail delivered.
    I am thinking especially about the $12.5 billion that would 
be a surplus from the over payment that these postal employees 
made to their retirement system. There is $12.5 billion sitting 
there. By my calculation, that would be less than $1 billion to 
do a serious early retirement incentive for members of the 
National Association of Letter Carriers and rural carriers as 
well.
    Mr. Deese. That is not a specific proposal we have looked 
at but we would be happy to look more closely at it going 
forward.
    One note on this is it is important and we believe 
consistent with what Congressman Welch raised about coming out 
with a stronger Postal Service, that we also need to look at 
places where there is expansion opportunity.
    Mr. Lynch. Let us talk about that because that is my next 
question. Right now we operate the Postal Service that goes to 
every American business and home six days a week and we have 
the census. The most expensive part of the United States Census 
is the last portion where we send census workers out to every 
American home separately and pursue the census.
    I am just wondering if the Administration had thought about 
using letter carriers who know these routes anyway to go to 
these homes the other six days of the week, to use them to 
actually take over that responsibility that the census is 
paying for separately right now. Maybe we could even pull in 
some of the retirees who also know these routes very 
effectively and reduce our cost both of the census and the 
Postal Service so we are saving money for the postal customer 
and saving money for the taxpayer as well. Have you thought 
about that?
    Mr. Deese. That is a creative idea. It is not one that we 
have looked closely at, but, again, one that we would be happy 
to look at.
    Mr. Lynch. Let me jump over to door delivery. You have 
acknowledged, I think rightfully, that there are probably ways 
we can more efficiently provide for delivery in rural areas 
that might be amenable and suit for cluster box delivery. I 
think that will happen.
    Have you looked at the Chairman's bill, H.R. 2748?
    Mr. Deese. Yes, sir.
    Mr. Lynch. He suggests that by 2022, we are going to 
convert over 75 percent of folks getting their mail delivered 
at the door. That is 38 million people. He is suggesting that 
30 million of those people by 2022 would go to a cluster box.
    Looking at the demographics in this country, urban areas 
will have to be converted. There is just not enough people in 
the rural areas--that is why they call them urban, there are 
lots of people there in places like south Boston, Dorchester, 
and like Baltimore, Maryland where the houses are attached and 
there is no place to put a cluster box.
    I am wondering if you think that is realistic in terms of 
trying to convert out of 38 million door delivery points that 
we are going to convert 30 million of those to cluster boxes?
    Chairman Issa. The gentleman's time has expired but you can 
answer.
    Mr. Deese. We do have a cluster box component to the 
proposal, to the Administration's proposal. That is a place 
where we do have concerns specifically about putting a hard 
target or mandate on conversion rates.
    As we discussed here, there are challenges where in some 
geographic locations you can enhance service and save money 
through these types of approaches. We are supportive of the 
postal service looking for additional areas, but mandating that 
on a broad scale could create unintended consequences which I 
think we would like to avoid.
    Mr. Lynch. I appreciate that and I yield back.
    Thank you, Mr. Chairman.
    Chairman Issa. I thank the gentleman.
    We now go to the gentleman from Florida, Mr. Mica.
    Mr. Mica. Thank you, Mr. Chairman.
    Mr. Deese, it appears more and more that the funding of the 
postal operations is turning into a big Ponzi scheme by not 
paying bills that are coming due and not actually meeting our 
obligations. That is unfortunate and I know you are trying to 
correct that.
    How are you keeping this afloat, I just asked that? They 
said we are not pre-funding the health care, I guess some 
retirement worker compensation pension, so it is all of the 
above. We are not meeting our obligations on. Tell me the 
losses. The current year, what is the projected loss?
    Mr. Deese. The loss in the prior fiscal year, fiscal year 
2013, the one we are in now, the projections are that the 
Postal Service will not make the $5.6 billion scheduled 
payment. I believe the net loss will be somewhat smaller than 
that.
    Mr. Mica. So $5 billion, last year was $5 billion?
    Mr. Deese. About $5 billion.
    Mr. Mica. In the budget you are presenting, what is your 
projected loss?
    Mr. Deese. In the Administration's plan, in the budget, by 
restructuring those retiree health benefit payments, our goal 
would be starting in fiscal year 2015 and going forward.
    Mr. Mica. I agree with just about everything. I go for the 
five day service. I saw your proposal. Let me ask, on the five 
day service, we are having trouble getting votes from the other 
side of the aisle and the other side of the Congress. Is the 
Administration prepared to help on the five day issue? Are you 
working it?
    Mr. Deese. From the Administration's perspective, we were 
discussing the issue of changing the delivery schedule.
    Mr. Mica. Again, we are going to need support to pass this 
stuff. When I look at all your points here, the biggest thing I 
would disagree with is refunding over two years' projected 
surplus of the Post Service Federal Retirement System. Talk 
about a Ponzi scheme. I chaired Civil Service for four years, 
probably the longest of any Republican and the first one in 40 
years and I saw the way that was treated as a big cookie jar.
    There is a projected surplus of about $500 million from 
FERS last year but there is a deficit of $19.8 billion at CSRS, 
right, a projected deficit, right?
    Mr. Deese. Yes.
    Mr. Mica. How can you balance something by taking money out 
of a retirement account or try to use it as a balance to take 
money out of an account that we need to keep every penny in 
that we possibly can?
    Mr. Deese. I think the challenge our proposal seeks to 
address is that without sufficient near term financial relief--
--
    Mr. Mica. You are taking money out of one account that 
actually should be shored up. If I were a postal union member 
or employee, I would be outraged. We need to get every penny we 
can into CSRS because you are running almost a $20 billion 
deficit there. This is again part of this Ponzi scheme.
    You have to cut losses. Where is the biggest loss? They 
said first class mail is down 25 percent, so that is continuing 
to lose money. I thought most of the money that was lost was in 
commercial mail, is that correct or incorrect?
    Mr. Deese. The first class mail continues to be profitable. 
The issue is declining volume.
    Mr. Mica. I have been in business. I looked at where my 
losses are and then I cut my losses. We may do it differently 
in government, we steal out of this pot to fund to a fund 
that's even more in hock. That is not the way it should happen. 
The biggest loss is still in commercial mailing? They are 
making money on packages and probably first class, right?
    Mr. Deese. That is right.
    Mr. Mica. You have to cut your losses in commercial, right? 
Somebody is paying for this, it is a huge debt--or the 
employees are paying for it. The employees are paying for it 
because they are going to get screwed in the end. There is not 
going to be money there and the taxpayer is going to get 
screwed in the second year because somebody is going to have to 
bail out the whole Ponzi scheme.
    Mr. Deese. The Administration believes strongly that one 
strong justification reform is avoiding liability that 
ultimately gets shifted to taxpayers down the road.
    Mr. Mica. We are willing to work with you. You need to work 
with the Democrats, the House and the Senate. We need to do 
this. We need to secure the postal system in the United States 
of America. It is still very important.
    You have thousands of people who have worked hard all their 
lives, great, great people and we have an obligation to them, 
not just to pay their salary but keep the system going and then 
also to meet their retirement obligations and benefits that we 
have incurred.
    I am over. I yield back.
    Chairman Issa. The gentleman's time has expired. I thank 
him for yielding back.
    We now go to the gentlelady from Illinois, Ms. Duckworth.
    Ms. Duckworth. Thank you, Mr. Chairman.
    I would like to yield one minute to Mr. Connolly from 
Virginia.
    Mr. Connolly. I thank my colleague from Illinois.
    I just want to correct the record for my friend from 
Florida. The idea that the problem is on the Democratic side of 
the aisle with respect to supporting six day delivery is simply 
not correct. I would point out that the Connolly-Graves 
resolution, Mr. Graves being a Republican, H.R. Resolution 30, 
has 210 co-sponsors, Republicans as well as Democrats, for the 
record.
    I thank my colleague and yield back to her.
    Ms. Duckworth. Thank you.
    Mr. Deese, thank you so much for being here. I do have a 
couple of questions of clarification based on the discussions 
we have had so far. Let's talk about the cluster boxes.
    With new construction and new housing complexes being 
built, you will be working with the developers to put these 
cluster boxes throughout the neighborhoods, is that correct?
    Mr. Deese. The Postal Service would be working with them.
    Ms. Duckworth. We got 55 inches of snow in Illinois this 
past winter. I still had two feet of snow on the ground when I 
left my house in a shady area in my backyard. There was no way 
that in my wheelchair I could possibly have made it to the 
corner cluster box.
    I just want to be sure the discussions we have had touched 
on the fact that there would be exemptions. Is there an actual 
move to make sure that is codified in some way, that persons 
with disabilities would be exempt from the cluster boxes, even 
in new developments?
    Mr. Deese. The Administration believes that making sure 
there are those types of accommodations in any proposal is 
important.
    Ms. Duckworth. Let's hope that it is more than just a 
philosophy and we actually do follow through with that because 
as I said, there is no way I could have made it through the 
sidewalk under five feet of snow. It was taller than how tall 
you are sitting there right now.
    The other question I have has to do with the philosophy of 
how we provide services. As you mentioned in your testimony, 
you believe that any postal reform must build on rather than 
undermine the Postal Service's core strengths. That is 
something on which we definitely agree.
    I would argue that the Postal Service's main core strength 
is its reliability and the unique mission to serve the American 
public regardless of profit considerations. Don't you think it 
is counter intuitive to lower service standards or just going 
to five day delivery at a time when the Post Office desperately 
cannot afford to lose anymore business to competitors such as 
to mail alternatives?
    Mr. Deese. I think we share the goal of trying to build on 
the core strengths including the trust the Postal Service has 
developed with its customer base and the universal service 
requirement which makes it unique as an institution.
    The challenge that the Postal Service faces is that we have 
a rapidly changing business environment. The rise of the 
Internet and electronic communications changes the equation for 
the Postal Service.
    The Administration's plan, while building in the authority 
to move toward five day delivery in some instances and some 
segments, also looks for ways for the Postal Service to 
leverage those core strengths to expand into areas where the 
overall market segments are expanding and where the Postal 
Service has an opportunity to strengthen its relationship with 
its customers.
    We are seeking to strike that balance along with giving the 
Postal Service the near term financial relief and flexibility 
that it needs so that it does not keep defaulting on its 
obligations and we are not back here in a couple of years 
because we haven't given it sufficient financial flexibility.
    Ms. Duckworth. I also wanted to mention one other thing in 
clarification based on the discussions we have had. That is 
specifically the difference between the DOD retiree health care 
program system and how that is funded in comparison to the 
Postal Service.
    Yes, Tri-Care for Life is a system that is pre-funded. It 
is appropriated for. The other component of this is that DOD 
retirees actually are paid from Medicare first and Tri-Care for 
Life is a secondary payor. That is not the case with the U.S. 
Postal Service retirees so there is a significant difference.
    Do you have any estimates on what the cost savings would be 
if the U.S. Postal Service were allowed to be the secondary 
payor behind Medicare?
    Mr. Deese. That is actually not something on which we have 
done a cost estimate at the Office of Management and Budget. I 
don't believe the Congressional Budget Office has either. It is 
an important issue and an important question. I know that was a 
component of a proposal that was introduced in the Senate. That 
is an area that we are looking at currently.
    Ms. Duckworth. Thank you. I am out of time.
    I yield back, Mr. Chairman.
    Mr. Mica. [Presiding] Pleased to yield to the gentleman 
from Virginia, Mr. Connolly.
    Mr. Connolly. Thank you, Mr. Chairman.
    Again, I thank my friend from Illinois for yielding to me.
    Welcome, Mr. Deese.
    It is said that Wayne Gretsky used to say, I skate to where 
the puck is going to be, not where it has been. One has the 
sense in talking about these postal issues that Mr. Donahoe and 
his management team are always skating to where the puck was.
    For example, in looking at new business opportunities, let 
us start with the Federal Government. There is an IG report 
that shows that in 2011, the federal agencies spent $342.6 
million in parcel delivery. Do you know what share of that 
federal market the Postal Service had?
    Mr. Deese. I do not.
    Mr. Connolly. $1.2 million. The next year, they did a 
little bit better, we spent $336.9 million as the Federal 
Government, and the USPS share was $4.8 million, about 1.5 
percent. Is there a growth opportunity, do you think?
    Mr. Deese. It is not an area at which we have looked 
closely but it does seem like on these types of spaces where 
you are looking at governmental functions, the Postal Service 
does have opportunities. Obviously, the question is how to 
leverage the network and the competencies that the Postal 
Service has.
    It may be, in some cases, that is more challenging, but 
certainly this is an area where we think the Postal Service has 
more opportunity.
    Mr. Connolly. Surely I think you would agree, given your 
hat, OMB, this federal business is low hanging fruit?
    Mr. Deese. We are absolutely in the business of looking for 
ways to reduce cost and reduce duplication.
    Mr. Connolly. The six day versus five day mail issue, as I 
pointed out we now have 210 sponsors saying six days. That is 8 
shy of an absolute majority here in the House. It is filled 
with Republicans as well as Democrats, so good luck in trying 
to persuade Democrats that we ought to accept the 
Administration proposal.
    I would like to know more about how you, OMB, the Executive 
Branch, accepted this proposal? From your earlier testimony, it 
sounded to me like you accepted whatever analysis there was 
from USPS and simply incorporated it into your initiative, is 
that correct? Did you do a separate analysis on the pros and 
cons of going from six to five?
    Mr. Deese. In the context of putting together a policy 
proposal, the Administration looked at the policy impact of 
that. With respect to the scoring assumptions that generated 
the savings estimate in the President's budget, those scoring 
assumptions are based on the plan or what the Postal Service 
has indicated it would intend to do.
    Mr. Connolly. Yes. You do understand that the Postal 
Service has failed to provide us with any analysis proving that 
as a matter of fact, outside of a static model, that this is a 
slam dunk decision, that it is a net saver always?
    Given the fact that, for example, parcel delivery, package 
delivery, technology creates business as well as decreases 
business. Yes, first class mail is declining but parcel 
delivery is actually growing very robustly, you would agree?
    Mr. Deese. That is right.
    Mr. Connolly. Giving up six days a week may be giving up a 
competitive advantage. Would you at least theoretically agree 
that is possible?
    Mr. Deese. Part of the Postal Service's plan would be to 
continue package delivery.
    Mr. Connolly. I am just citing parcels but there could be 
lots of other things as well. By the way, has the Postal 
Regulatory Commission looked at this new hybrid proposal, are 
you aware?
    Mr. Deese. I am not aware.
    Mr. Connolly. Don't you think OMB might want the PRC to 
look at it--that is their role--before you, in fact, embrace 
it?
    Mr. Deese. I think we are comfortable with the budget 
proposal as we have put forward. Certainly as we go forward, we 
would welcome input from various stakeholders.
    Mr. Connolly. You are the Office of Management and Budget. 
Have you done your own analysis to see whether there is a down 
side to going to six days, that the Postal Service might risk a 
whole line of business that drops because you are not 
delivering? For example, the greeting card industry has said 
that will happen to them. Have you looked at that to make sure 
the net savings is what they say it is?
    Mr. Deese. We have looked at this issue to try to 
understand it. I think one of the important things about the 
Administration's proposal is that it would----
    Mr. Connolly. Mr. Deese, forgive me for interrupting but I 
only have 17 seconds. Frankly, it does not look like you looked 
at it all. It looks like you accepted the Postal Service at its 
face value which is absent a PRC review. The last time they 
looked at it was 2011 but that was a different proposal.
    There is no analysis showing well, we are looking at a 
static model, not a dynamic model in terms of potential growth 
for the Postal Service and if we look at it in the context and 
at least ask ourselves are we giving up a competitive 
advantage, that question never got asked. It is just an 
absolute, let us lock that off and call it net savings.
    It troubles me to no end that this Administration has 
accepted that at face value absent any analysis.
    Mr. Deese. The one thing I would like to clarify is the 
Administration's proposal would provide the Postal Service with 
the authority to move to five day delivery in different 
business segments, but as circumstances change, as there are 
business opportunities, it does not mandate the conversion.
    Mr. Connolly. That sounds good, Mr. Deese. I know my time 
is up, Mr. Chairman, but we already have a Postmaster General 
who tried to assert the fact he had legal authority when he 
clearly did not and had to be reined in on this very subject by 
his own postal governors because he asserted a legal authority 
that most certainly did not exist and flew in the face of the 
will of Congress.
    It may or may not be a good public policy decision, but 
Congress has written into appropriations bills thou shall have 
six days a week. For the Postmaster General to defy that, which 
he did, absent any legal authority, frankly saying its 
authority is a nicety, but he has already clearly indicated he 
will use that authority.
    The fact of the matter is, were he to get it, were your 
proposal to be adopted, we would go from six to five, is that 
not the case?
    Mr. Deese. In certain business segments, I believe that is 
the case. In others, I think they would retain six days a week.
    Mr. Connolly. Mr. Chairman, my time is up. Thank you for 
your indulgence.
    Mr. Mica. I thank the gentleman.
    I am pleased the next gentleman I am about to recognize is 
not from Connecticut. He is from the State next door. I would 
recognize, Mr. Tierney.
    Mr. Tierney. Mr. Deese, thank you for being here today.
    In the fiscal year 2015 budget, the Postal Service 
requested $162 million for services rendered but revenue 
foregone but the President's budget request is only $70 
million. Can you explain the discrepancy there?
    Mr. Deese. I am sorry, can you clarify the question?
    Mr. Tierney. The Postal Service asked for $162 million for 
services rendered but revenue foregone. The President only 
asked for $70 million. Why not ask for the $162 million?
    Mr. Deese. I would have to get back to you on the specific 
discrepancy. I know we are continuing to provide appropriated 
funding for those purposes but I would have to get back to you 
on the specifics.
    Mr. Tierney. Would you do that, please.
    Also, the Postal Service in the most recent quarterly 
filing shows about $3.8 billion in unrestricted cash. Do you 
consider that enough of a liquidity cushion for an agency this 
size?
    Mr. Deese. That cash position is not sufficient to meet 
their current obligations including the retiree health benefit 
payments, no.
    Mr. Tierney. The Service also reached its $15 borrowing 
limit permitted under law. Do you think they ought to be 
extended additional borrowing power?
    Mr. Deese. Our view is that they need near term financial 
relief. We would not do it for additional borrowing authority, 
but instead by restructuring the fixed payments which are not 
tenable.
    Mr. Tierney. The President's budget also has a request in 
it for the Office of Personnel Management to return to the 
Postal Service the surplus amount it paid into the FERS 
account, correct?
    Mr. Deese. Correct.
    Mr. Tierney. The proposal also endorses the use of postal-
specific demographics to estimate the Postal Service FERS 
liability. Why did you use the postal-specific demographics?
    Mr. Deese. Given the size of the postal workforce and the 
unique demographic characteristics, we believe it is 
actuarially sound and appropriate to take into account those 
specific factors when measuring the liabilities in this 
instance that results in a surplus we would rebate back to the 
Postal Service.
    Mr. Tierney. The Administration's budget also proposes that 
$5 million be returned to the Postal Service over the next two 
years. Why two years instead of one?
    Mr. Deese. It is part of the overall plan to try to provide 
sufficient liquidity in the short term so that the Postal 
Service can restructure. The retiree health benefit payment 
adjustments happen over that same period, so our goal was to 
provide sufficient liquidity over a multiyear period so that we 
didn't end up with a situation where the Postal Service was 
flush in one year and stuck in the next.
    Mr. Tierney. Some of our colleagues have indicated a return 
of the FERS surplus is to be termed a bailout. Do you agree or 
disagree with that and why?
    Mr. Deese. We don't agree with that assessment. The 
calculation of the surplus based on postal-specific demographic 
factors is actuarially sound. If you look across the spectrum 
of the Postal Service's liabilities, there are places where 
they are adequately or over funded and other places where they 
are under funded.
    Our approach seeks to address those in kind rather than 
having a one size fits all approach.
    Mr. Tierney. Thank you very much.
    I yield back, Mr. Chairman.
    Mr. Mica. Thank you.
    We will start a second round and yield to members first who 
may have additional questions.
    First of all, when I left off, I talked about looking for 
areas where our losses are, where we could save money. I don't 
know if you have followed some of the things I have done. Most 
people in the Administration don't.
    Having come from a developer/private sector background, it 
drives me crazy to see the Federal Government sitting on 
valuable assets. It drives me crazy to see the Post Office 
sitting on valuable assets.
    I have not read all of the Administration's proposal about 
some alternatives for offices and locations. I know the Senate 
bill had a proposal that directed the Postal Service to examine 
the potential expansion of retail alternatives to post offices 
which have the potential to yield further operating savings.
    I know they are selling off some of these vacant properties 
or empty buildings. What brought this back to light on the post 
office is I think it was last week I was home and I was asking 
my property appraiser about surplus or vacant property in 
central Florida and he showed me this list. Most of the vacant 
property that he had was owned by the Postal Service.
    Tell me, first again, what you have in your proposal, I 
didn't see anything and secondly, where they should go and if 
it isn't in there, why was it ignored?
    Mr. Deese. To clarify, you are distinguishing between their 
property versus the post offices themselves or are you 
referencing both?
    Mr. Mica. Both.
    Mr. Deese. With respect to post offices, our proposal would 
seek to codify the Postal Service's current plan which looks at 
leveraging that network of physical locations by calibrating 
hours and by looking for co-location strategies rather than by 
down sizing the actual network itself. Our view is there are 
opportunities there.
    Mr. Mica. There are probably a thousand opportunities to 
reconfigure based on the business. I come from the State of 
Florida. Arizona and Texas, some of the growth States, we will 
have needs in the future. There are also vacant properties all 
over. I have worked on some of them and some of them take 
years. The old post office downtown which went to GSA sat there 
half of it vacant for 15 years, half of it empty. We finally 
got that moving.
    We are going from an $8 million loss to a $250,000 a year 
guarantee for the government plus a percentage of property. I 
can take you across my district and show you property that 
needs to be disposed or better utilized. I can show you my 
former district, St. Augustine, a huge building that Flagler 
College has been begging to get it. They don't need it, it has 
outlived its usefulness but there is nobody in the postal 
system who can think, they lack creativity.
    I would have hoped the Administration would have proposed 
they at least get some professionals to help them do some of 
these things that need to be done and it is not there, is it?
    Mr. Deese. With respect to the Postal Service, outside of 
the post offices and other vacant property, warehouses, they 
have been looking at consolidation strategies.
    We don't have a specific component in the President's plan 
on that. I would say analogously though there is a proposal in 
the President's budget to try to have a more aggressive 
strategy to dispose of federal property generally speaking.
    Mr. Mica. But again, the Post Office is probably one of the 
biggest property owners in the United States. We have thousands 
of properties. I am disappointed to see that you don't have a 
specific proposal. I think working with the Congress, that 
would be something--if we ever pass a bill--we should include 
to give them the ability.
    I am telling you, I have worked with the Post Office. I am 
probably one of the few members in Congress who has ever gone 
downtown and sat in the Postmaster General's office. When I 
went down there, he almost flipped out; they had never seen one 
before. He knew what I looked like, he knew descriptions of me 
but I actually appeared there and we could get some things 
done.
    My point being they don't have the ability, the ingenuity 
to put these packages together and move forward and maximize 
the assets and cut the losses. Again, we have to look at where 
the losses are, where you have assets sitting there and can be 
turned into cash.
    I took people up to Daytona Beach ten years ago and the 
second floor of the post office was vacant in downtown Daytona 
Beach for more than ten years--rent the thing. Again, I am 
disappointed. There is still an opportunity for redemption.
    In any event, we want you to work with us to look at how 
this can be done. The Administration carries a big stick and 
you can have positive things come from working with Congress. 
Get these guys to vote for the five days and we will be set.
    Do other members seek recognition?
    Mr. Lynch. Yes. Thank you, Mr. Chairman.
    Mr. Deese, I realize you have suffered enough but I have 
one other question for you. The suggestion was made earlier 
about the relationship between the surplus and FERS, the 
Federal Employment Retirement System, which is an obligation of 
the Federal Government and the prior CSRS, which is the 
obligation of the prior Postal Service. I believe the 
transition happened in late 1983 if I am not mistaken.
    I want to clarify something. Those are different sets of 
employees and different obligations, is that correct?
    Mr. Deese. That is correct.
    Mr. Lynch. The people who work under FERS, you cannot take 
their pension money and pay it over to another group of 
employees who worked under the postal department prior to 1983, 
is that correct?
    Mr. Deese. We certainly don't think that is a necessary or 
appropriate step to take.
    Mr. Lynch. I don't think it is possible. That is what I am 
getting at.
    Mr. Deese. They have that barrier as well.
    The one note on the CSRS obligations is that under current 
law, the Postal Service will begin making pre-funding payments 
on a 25-year amortization schedule. The real challenge is to 
put the Postal Service on a more sound financial footing rather 
than to move resources into that space.
    Mr. Lynch. That would happen under PIEA in 2017, is that 
correct?
    Mr. Deese. I believe it was 2018.
    Mr. Lynch. You may be right. I may be off by a year.
    PIEA does require them in 2017 to go back and look at their 
real obligations. Right now, we basically have this $19 billion 
hole that has been repeated for the past seven or eight years. 
In 2017, with all of these CSRS employees passing away, a lot 
of older employees, it is entirely likely in my estimate that 
is CSRS obligation will be much smaller than we believe it to 
be right now, is that your understanding?
    Mr. Deese. I don't have particular visibility into the 
actuarial dynamics in that pool. Obviously it is important to 
update those actuarial estimates as time goes on and as we know 
more about the demographic characteristics in those pools.
    Mr. Lynch. I don't have anything further. Thank you very 
much for your testimony.
    Chairman Issa. [presiding] Thank you.
    Let me go through sort of a closing. My Ranking Member has 
had to step away and may come back.
    The President's proposal is broadly consistent with many 
Democrats, obviously, and many Republicans. It is the intention 
of the Chair--and I have announced it to both sides--to embrace 
to the greatest extent possible the entire portion of the 
President's budget proposal.
    I have serious concerns with mandating the exigent increase 
be made permanent rather than allowing an entity that finally 
took the initiative to recognize and codify it to continue 
doing so. That does not mean I would totally oppose it; it 
means that kind of look and say the process has worked, they 
put that in, but sans that, the rest of the proposal I find to 
be a good starting point for legislation that hopefully the 
Administration would broadly push all parties to embrace.
    As you heard today, you had a lot of people on both sides 
of the dais talking about take-withs and take-backs. In 
closing, what I would like to do is ask for a process, a short 
process over the next two weeks and that is that members of 
this committee would send a series of letters to OMB on various 
aspects.
    The Ranking Member, for example, had the question on other 
enterprises and trying to define whether it is consistent with 
the Administration's proposal. Ms. Duckworth brought up a very 
good point which was the specifics of the disabled access if we 
go to clusters. I would recommend that our staff send excerpts 
from the earlier passed bill which specifically had some 
language for access to disabled to see whether that is 
consistent.
    In using this dialogue, I don't want to artificially extend 
the President's budget, but I want to make sure that each item 
which is supported by the Administration and requested to be 
considered by either side of the dais gets back a letter in 
prompt fashion, a week or so whenever possible, so that after 
the break, we could hold a markup and those comments would then 
be available as part of our markup in support of specific 
amendments or additions to the bill. Is that something you are 
prepared to take back?
    Mr. Deese. I am happy to take that back and work wherever 
we can.
    Chairman Issa. We introduced you as the Honorable, so the 
question is, can you make it happen?
    Mr. Deese. I am happy to take that back and we will work 
diligently on any request from this committee.
    Mr. Lynch. Mr. Chairman?
    Chairman Issa. Yes.
    Mr. Lynch. I just want to be clear that there are some 
members on our side of the aisle and I suspect there may be 
members on your side of the aisle nevertheless that disagree 
with both you and the President, so we would want to be a part 
of that dialogue as well.
    Chairman Issa. Reclaiming my time, that is the reason for 
this closing statement. The Ranking Member and I agree on some 
things and we disagree on some things. The Ranking Member has 
some additional initiatives and also Ms. Duckworth. The 
questions related to the pre-funding versus FERS recapture, I 
know some of my folks are going to further ask it.
    My goal is to only include in the markup, at least my vote 
would be to only include things in the markup in which the 
Administration has commented consistent with their view of the 
budget proposal.
    In other words, if something were to hurt the Postal 
Service's ability to survive, they would likely respond they 
couldn't support it in light of the budget. It doesn't mean 
they wouldn't necessarily like it, it just means that this is a 
proposal to pass a bill as part of the budget process that 
would support postal reform consistent with the President's 
budget proposal.
    In a sense, Mr. Lynch, what I am saying is if there are 
additional efficiencies, additional revenues or necessary 
changes such as Ms. Duckworth's, the whole question of the 
civil rights of the disabled, I want to make sure those are 
considered but my goal is to pass a net cost reduction piece of 
legislation out of this committee to help ensure the survival 
of the Postal Service.
    I will say on the record that I recognize and support the 
Administration's view that we need to find breathing room, 
dollars for these reforms to take hold which means that we do 
have to look at CSRS as a delayed recapture even though they 
are perhaps $20 billion in arrears.
    We do have to look at the FERS windfall--I shouldn't say 
windfall, but the excess payment that can be a windfall to the 
Post Office, as revenue they can use as part of the conversion 
because I think the Administration has said very clearly they 
think the fiscally responsible thing to do is to give them 
breathing room while also mandating that they make reforms that 
have been tough to make, tough for both parties.
    Do you have any further closing guidance?
    Mr. Lynch. I think what we are hitting on is that there are 
some things in your proposal and the President's proposal that 
I view and see as things that are indeed harmful to survival of 
the Post Office.
    Chairman Issa. I look forward to working with the gentleman 
on that. I think one thing you made very clear is the attrition 
rate and the incentives would hopefully be something on which 
we would come to an understanding with the Administration and 
needs to be in place, the ability to reduce the size of the 
workforce through voluntary programs should be part of any 
package to be sent forward. I think you made that point but I 
am sure there will be others.
    Mr. Deese, I want to thank you for being here for this 
short hearing. By this committee's standards, this was quick 
but you were very helpful in your answers and your willingness 
to take back and receive over the next week a series of letters 
and, if at all possible, to respond to them over the next two 
weeks so that when we come back from the Easter district work 
period, we can proceed with a markup consistent with the 
President's budget which is the intent of the committee.
    Mr. Deese. Thank you.
    Chairman Issa. Thank you.
    We stand adjourned.

    [Whereupon, at 11:48 a.m., the committee was adjourned.]

                                 

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