what will be series of hearings to examine the status of the postal services cuts in operations and services as well as short and long term plans to reduce network costs and improve efficiency but the ranking member recognize myself five minutes less than two months ago the subcommittee held a hearing on the financial condition of the postal service and the new that time was less than the news at that time was less than  fiscal year two thousand two thousand and eight the postal service lost two point eight billion dollars as it confronted record drops in mail volume and demand for service since our last sharing the postal service is financial picture has gone from bad to worse just halfway through this current fiscal year the postal service has already experienced a loss of two point three billion dollars which is just shy of its total losses from last year despite plans to cut costs by five point nine billion dollars which is the postal service officials still anticipate losing a total of six point four billion dollars  primarily due to the current economic recession and its negative impact on mail volume electronic diversion of the mail has also contributed greatly to mail volume declines as well with more and more folks paying bills online and using and sending letters the contraction of economic activity particularly in the housing and financial sector has resulted in a sizable reduction in the volume of standard mail and is even caused some of our nation's foremost newspapers to move entirely to an online format to help close the gap between cost and revenue we all realize that the postal service will have to make some very very difficult decisions in order to improve the organization is financial condition with the reduction in mail volume is no longer much of his existing infrastructure and is therefore in the process of examining its network of facilities as well as other processing and delivery capacity or in the postal service recently announced facility consolidations district office closure and realignment of letter carrier as part of an ongoing effort to reduce costs and  the postal service have impacted overall operations as well as customer service in the future viability of the postal service the subcommittee is also interested in hearing from eyewitnesses any additional opportunities or ideas they financial solvency the postmaster general has discussed the possibility of moving to a five day mail delivery schedule and we may be at a point where we need to seriously consider what that option would require by researching possible associated savings making sure we have the right assessment as to what that move might involve we also need to consider the service impacts by such a decision and i understand that many of the members of this committee members of the public do not believe that this is a decision that should be lightly as we look toward the future after the possible enactment of some measure of financial relief for the postal service and beyond the current economic recession the postal service finds itself having to evolve and realign its business model in order to meet the needs and service requirements of the twenty first century service men and women of the postal service as well as postal costumers are being asked to sacrifice in these tough economic times i'm looking forward to a fruitful fruitful discussion on this timely topic once again i want to thank all of our witnesses for their disintegrate before our very eyes and this may happen last thing the postal service needed was even a model recession this is a structural event and i believe we have to all wake up and realize it institutions will not be as they were when this recession is over some institutions will not exist i doubt  language of course but it does drive home what the proposal service has been forced into and everybody is doing it but not every institution was nearly experiencing the winds from our society but the the the current recession did occur and once again i think calls into question the very business model that we have for us the only analogy i can think of that is experiencing this kind of disintegration before our very eyes is newspapers nobody thinks that they're going to survive in the form that they exist everybody knows they are essential imagine getting your news from blogs and the internet and kind of taking it all up and trying to put it together they serve an important function well they've got to find another way to do it because the economy long before the recession was bidding them goodbye no institution has had a deep or long term decline no institution that i can think of at a deeper long term declined in the in the postal service so mr chairman i would like to hear from the postal service this this morning something other than nips and tucks i would like to know whether there is any new thinking going on at the postal service for example i don't even think this is a huge  but it is a real i'm willing to look at something that i would not have i have thought about when i first came to congress a five day delivery i don't think we can say to the postal service hey not the fault of the postal service but the postal service has got to find a new way to do the business of guaranteeing the delivery of mail essential mail to the people of this country hand where the testimony you're about to give to the subcommittee the truth the whole truth and nothing but the truth let the record indicate that all of the witnesses have signal signals are answered in the affirmative and as always your entire written statement will be entered into the record just as a matter of protocol the green light on that little box before you will indicate the beginning of a five  minute period to summarize your statement it will turn yellow with about a minute to go and then the red light in the case your time for state has expired and i will do a brief introduction of the first panel before we before we hear testimony on our first panel mr william galligan is the senior vice president for operations for the united states postal service is responsible for the organization's engineering facilities delivery network operations management and post office operations earlier in his career mr galligan served as vice president of the retail and delivery operations and oversaw the retail and delivery function of the nation's post office mr john waller is director of the office of count of accountability in compliance out the postal regulatory commission mr waller leads the commission's analysis of postal service price proposals and oversees technical support for studies including measurement of the postal services performance and impact assessments of major postal service network of domestic and international concerns his current portfolio focuses on programs at the postal service and the department of transportation i welcome gentleman mr gallagher and you may begin with an opening five minutes statement thank you good morning chairman lynch ranking member chafes and members of the subcommittee as you know the postal service is experiencing one of the most severe economic challenges in two hundred thirty four year history due primarily to the downturn in the economy we have seen mail volume fall by thirty two billion pieces or fifteen percent since two thousand and seven that represents a revenue decline of twelve billion dollars at the same time we've experienced a continuing expansion of our delivery network which will have grown to serve two million new addresses by the end of two thousand and nine our projections call for a loss of six point five billion dollars this the school year with a likely cash shortfall of one point five billion dollars and we do not expect any improvement next year as a total mail volume falls we are also experiencing a long term shift in male use patterns over the last decade mailers have been reducing their use of higher revenue first class mail and as more mail has entered closer to its delivery point the demand for end to end service has decreased the combination of these factors have a profound effect on our business model in two thousand we have delivered an average of five point nine pieces of mail to every address today that has fallen to four point seven pieces a decline of twenty percent revenue per delivery obviously tracks this trend we have been extremely focused on narrowing the gap by cutting costs without affecting service and at the midpoint of our fiscal year we are on track to achieve our goal of eliminating five point nine billion dollars in base costs however we face limits on  ability to reduce some costs the enactment of the two thousand and six post a lot requires us to prefund retiree health benefits increasing our annual costs by more than five billion dollars only new legislation can reduce this obligation which is unsustainable in today's economy that is why we strongly support the passage of h r two thousand and two which would result in annual savings of about two billion dollars but the fact remains that all of these steps would be insufficient to return us to it solvent they will not fully close our budget gap of twelve billion dollars we are experiencing a long term economic problem that requires a structural solution over the past several years we have taken significant steps in this direction streamlining our network to accommodate changing needs a new technology consistent with the expectations of the law throughout each of these efforts service has continued to improve today's high level of performance we have closed fifty eight airport mail centers in fifty remoting coding centers we've begun initiative to transform our twenty one bulk mail centers into more efficient network distribution centers while we have made some progress in consolidating operations to reduce excess capacity at our central mail processing plant plants this is generally been met by strong local resistance one of the chief barriers we face in the critical rightsizing of our network your understanding and support of our efforts would help to reduce these barriers we are also expect jamming the operational needs at many retail and delivery facilities delivery volumes continue to decline sales and revenue are down  almost thirty percent of our retail transactions have moved from our lobbies to our website or to alternate access locations there is the potential for substantial savings through consolidation at some of our over thirty one hundred stations and branches in cities of all sizes beyond the actions we have taken and those we plan to take there's a need to make additional hard choices in trade offs to adjust to sharply declining mail volume so that we can finance universal service in the long term in considering our options everything should be on the table with the diminished demand for mail services today's network requirements are beyond our financial means but the law does not permit us change the frequency of mail delivery providing the postal service with the ability to reduce delivery from six days to five days is an appropriate response to the sobering reality of our fiscal challenges and one we only consider reluctant we have engaged our customers on this issue because this change would have an effect on service is important to understand the needs as we analyze operating in a different delivery and looking ahead the postal service will continue to implement the cost reduction and efficiency programs have highlighted while we stay focused on improving service mr chairman members of the subcommittee i appreciate your interest in creating a stronger leaner postal service i look forward to working with you to achieve this there we go better thank you in response the postal service is continuing to make unprecedented work our reductions and systemic changes solvency is contention on the postal service achieving nearly six billion dollars in cost savings this year and utilizing its maximum three billion borrowing authority even then the postal service is likely to run out of cash by year end unless it receives legislative leaf that would amount to two billion dollars this year now the postal service is trying to find new revenue to offset its volume losses for example since the passage of the commission has approved forty nine negotiated service agreements between the service and its customers aimed at increasing revenue also the commission has recently received two postal proposals for innovative marketing efforts one of which is commonly known as the summer sale while the commission continues encourage the agency to use the pricing flexibility granted under the postal service must rely on cost cutting and efficiency measures to deal with this current financial difficulties to this and the service has significant changes reducing the number of neighborhood collection boxes it is once again consolidating processing facilities and begun making significant changes in how mail flows between its network of some four hundred plants as part of the long promised surface transportation and bulk mail center reorganization at the same time it is launching new technologies to expand automation for sorting plastic carrier delivery and to revolutionize management of the mail stream from collection to delivery through the use of intelligent mail barcode as i testified last year before the subcommittee about postal service efforts to realign mail processing network the commission is concerned about the lack of a dealing with considerable uncertainty while implementing significant changes this place is a premium on the need for timely reporting on finances and service performance the commission is committed to enhancing the quality and utility of such reports the commission is once again now receiving monthly financial statements for the postal service from the postal service to provide quick financial transparency also the commission expects a robust service measurement system come to fruition this year based on the intelligent mail barcode which will extend measurement to nearly ninety five percent of the mail for example starting this the commission  requested an adjustment in the method of current retiree health benefits and has endorsed h r twenty two as a means of accomplishing this now to clarify my written statement the commission has not taken a formal position on h r twenty two but commission chairman blair did in his march appearance before the subcommittee his support of relief on health benefits the postal service has also requested the removal of legislative restrictions on the frequency of mail delivery and its study of universal postal service than the postal monopoly the commission found the net savings from switching to five day delivery to be about one point nine billion but before implementing any  thirty three thousand positions versus last year which about nine thousand of those positions came through employees opting to take an early out with our voluntary authority from existing facilities an extensive compression exercise opportunity to to react to the fact that ad mail has declined so precipitous just last quarter for instance our standard flat catalog volume dropped twenty nine percent last year so that mail historically has been worked on what we call to our to our day shift because that volume is no longer there we have compressed and change work shifts so that our critical operating times are met outgoing mail completed by midnight destiny mail that reaches our delivery units is completed by six seven a m so that compression of people is constituted significant savings in the delivery arena to two major initiatives the l c r national association of letter carriers has been very supportive and proactive working with us on adjusting our work rules around route inspections and have really had a breakthrough earlier this year in a more recent breakthrough whereby we use passive data we work with our local unions and we actually are able to quickly adjust routes due to this we have taken out over twenty five hundred routes related to that agreement and starting up many thousands of additional routes ongoing as the volume  slide any worse than the projections at this point we would absolutely twenty two relief we would run out of cash to the tune of one point five billion by the end of this fiscal year so that's the need for the short term immediate relief around in terms of the longer aspect mr chairman i think we would have to i would have to go back to our finance folks and look at the actuarial tables because certainly the pool of one hundred fifty thousand eligible people is a good news story from our ability to adjust things like our network our downsizing our delivery frequency and that would give us to move more painless environment to an attrition model  to cost cuts five point nine billion on track to do that but there are perceptions in that based on the cost of any what is your biggest worry my biggest worry right now is the gas pumps in the last couple weeks of ratcheted up and we know it i believe the cost is about nine million dollars a year per penny of increase so you know our ability to cost cut in the calculations on that saving includes some presumptions on how fuel prices will run for the remainder of the year and we have some significant savings that we believe are occurring based on the same period last year but it is fuel prices causes a problem that could put a little imbalance there if it's volume falls greater than the hundred eighty billion pieces level we forecasted that puts more pressure on that that break even even even with the two billion dollars if we miss those cost cuts and or revenue falls below the general potter has restructured our our marketing organization to a products group we have a president products and he is working on all opportunities of where we can grow in rebound and i think if you step back and look at the megatrend as was highlighted in the opening comments there is a megatrend in first class mail away from mail correspondence and mail transactions that has moved will continue to move to electronic diversion future in mail is a rebound in advertising dollars one of the curious things is we have actually seen a glimmer of hope that despite the fact that ad dollars has declined probably thirty percent mpacted by the state increases that are being considered on the gas tax yes mr chairman the we are impacted at the state level because much of our  purchases are from local fueling stations so there are implications around the total cost of gasoline we strategically have not in the past and we have shied away from that we have  have you engaged in any layoffs or have you mabel to do all of your downsizing in personnel by early retirements reassignment and the like do you anticipate that there will be a need to layoff in the future well in terms of layoffs we have not resorted to layoffs in terms of any of our network changes or consolidation efforts they've all been done through attrition and employee repositioning supplemental workforce is a it is a huge change from what people expect i'm not sure it is as large a change in what people expect given the plethora of ways we get information today but it is a change i don't know the effect it would have all on that's been the case before the number of households grows and therefore you've got six day is it even more households if it was reduced to a five day delivery what would be the dollar effect what would be the savings effect of back kind of change this on the table for discussion because we believe it is a one multi billion dollar annual savings opportunity that it's alleged or multibillion dollar but you don't know how much we have ranges internally around without loss of revenue approximately three point five billion depending on the scope i think it could go as high as four billion dollars savings now what needs to be estimated is what negative impact that might have on top line revenue  i'd just like to say that i really feel that you guys are going to going to have to be given the benefit of doubt a lot of things and i think the challenge here is that we have a constitutional obligation i'm not so sure that our constitutional obligation requires that a government employee who delivers mail but it does require that we provide some kind of service a good example that we don't talk about is that the same section that requires we hold a postal system also requires postal roads we don't physically the postal system the federal government and physically own those roads we make sure the service is there and i think that those one of those things we've got to be open minded about that maybe we can raise through this committee that when you look at the postal system this is not just something that affects other people it's affecting us and our obligations on the constitution and when you get around to hopefully someday industry would be willing to take a double digit price increase to preserve it i don't believe our unions would take a double digit wage concession reduction to the payroll to preserve it and i think in terms of you and the other piece of that is we have about fifty thousand part time flexible schedule that would have reduced hours until such time that attrition caught up in the carrier world in those hours could come back  regulatory commission i mean we are modeled somewhat as a regulated monopoly that we have a postal regulatory commission that really governs what we can do in our retail space what products can we put on  workforce by one half that's the amount of attrition with technology volume declines in that same time we need to play catch up around how many supervisors are needed for that lesser workforce i mentioned earlier  we desperately need and support that bill from an operations from my jurisdictional point of view i think understanding from congress around our need to pull back this support and understanding on that for most there is one big lever that is around the five services around understanding what what we would not do on saturday how that would change the service and how much would come out of that effort with also some very reasonable estimates as to what that might do in terms of mail and i think that kind of summarizes my and what it would do to the revenue or the volume reduction maybe because people stop using the mail the commission and its estimate of the one point nine billion dollars annual savings going models can do whatever analysis to do more that accounted for about six hundred billion dollars a million dollars of the difference between the postal service is larger estimate because they didn't include that  e other point i think that around the carrier issue that is very important is that mail processing is about the cost there the labor costs at least vary with  almost one hundred percent up and down it can be done that way in the postal service has been very remarkable in maintaining that the carriers on the other hand it's about fifty percent variable so that you as volume drops you can't automatically lose as much mail by being more efficient in your delivery because you have that great fixed cost of going around the route every day whether there is a lot of volume or a little volume and that's why it makes it so attractive to do a reduction in a day of delivery because you eliminate that fixed cost the other issue that was raised by committee members here is finding new forms of revenue initiatives not related to postal and the commission has had to go through all the related services and they are as a postal and on postal as a grandfather but we've really been working very hard the commissioners with the  postal service to make sure as they come up with new initiatives and the new initiatives are like the summer sale or the the new logistics thing that was just approved to allow special loading of less than full trucks a new type of service and all these negotiated service agreements things that we do is turn it around very quickly do not make it a long lengthy hearing  your entire statements have been entered into the record and i'll just do a brief introduction of our second panel mr william viruses president of the american postal workers is also a member of the executive committee of the union network international which is gets his on the next airing ok thank you mr chairman and members of the subcommittee thank you for forging our union the opportunity to express our views on the important topics of this hearing especially at this time of reduced now by human revenue the postal community is unanimous in our conclusion that immediate relief from the obligation to fund retiree health care benefits from the post operating budget is paramount we need your help in navigating the legislative process to ensure that the posters receive this desperately needed change in policy without it the posters will be unable to adapt and to survive but adjusting the payment method of retiree health care benefits is just one option the posters is pursuing and it is only a short term fix the stave off imminent collapse it will not address the long term challenges the poster has also engaged in many other efforts to reduce costs even as it overlooks the fundamental continuing cause of its financial difficulties these actions are having a detrimental effect on service and often generate little or no savings post attempts at network realignment are case in point place today the service has refused to provide specifics of this plant or the criteria relies upon when selecting facilities for consolidation many of the early announcements of consolidated generated strenuous for the lack of transparency in its planning efforts and for failing to allow for sufficient input from workers citizens and public officials and affected communities the posters the postal regulatory commission also disapproved of the service consolidation efforts and to make matters worse worse there is no conclusive evidence to support postal claims that practice holidays will lead to greater efficiencies for savings and despite management's assurance to the contrary citizens community leaders small business owners and poke the workers are concerned that a realign mail processing the network were reduced service and that lay the delivery of ma the dangerous clear is service to small businesses and individual citizens is permitted to decline it could lead to the demise of the institution regretfully the poster as has consistently failed to share an overview overview advisory committee an organization representing the interests of major mailer's management has finally scheduled a union briefing that is scheduled to take place next week however even if we overlook the falls the services cost cutting efforts are subverted by his posts a great strategy which dramatically reduces revenue from major mailers without a corresponding reduction in service and i know of the testimony that preceded this  there was not a mention about the rates the poster's business model is based on the erroneous premise that discounts for large numbers increase by you hogger review of the effects of three debates three decades of rate manipulation volume has been unaffected this fraud rate policies subsidize large mailers at the expense of american citizens and jeopardizes the viability of the united states postal service rate for major been manipulated to the extent that they pay as little as seventy six percent of the official first class rate with the same level of service a two tier rate structure has evolved and with the  pressing the discrepancy letter number one is the typical first class business letter that qualifies for the work share discount because the mail know if it's the barcode that appears at the bottom of the letter the post surgery dues the first first class rate from forty four cents to thirty three point five cents a discount of twenty four percent number two is also prepared by the business mailer with the barco place of the top of the address with window however the peace and requires a same amount of work by the postal service the efforts to reduce cost planets but salivation massive employer reassignment reduced return hours and the reduction of neighborhood collection boxes will have a devastating effect on service and faulty rate strategy has drained much needed revenue threatened the bible of the of the institution passing h r twenty two will provide the post service immediate release but the long term solution to the crisis is to in the policy of subsidizing large members at the expense of the american citizens and the postal service without congressional intervention the noble mission of the postal service and i quote to bind the nation together to the personal educational literary and business correspondent to the people and to provide proper reliable and efficient services to patrons in all communities and will be no subcommittee for calling this hearing you've asked for testimony today focusing on the impact that the postal service has cost cutting is having on postal operations in the postal network responses from the postal service to the current economic crisis include a blanket hiring freeze for virtually all career positions a reduction in overtime hours and a drastic reduction in total career positions indeed in just the last eighteen months the postal service has reduced career positions by more than forty thousand employees another aspect of the postal services cost cutting program and one in which mail handlers are more familiar our efforts to reduce the number of facilities and or to shift operations in the postal network through its area mail processing guidelines it has and i cited my written statement been a rough road with many starts and stops along the way the postal service has received much criticism from many stakeholders recently the postal service has sent to this point at least thirty five notices in which it announced that it intends to perform a feasibility study to determine if the movement of certain mail processing would help to eliminate excess capacity and or would allow the postal service to make more efficient use of existing facilities mr chairman there is a need to ensure the short term financial viability of the postal service and the long term financial viability it may require the closing in consolidation of certain postal facilities but there  also the need to ensure that service does not decline and that the future postal network is not quite severely such that the postal service will not be prepared to provide universal and low cost service when mail volumes recover our suggested solution is to approach these issues on a case by case basis for example suppose there are two mail processing facilities only a few miles apart and both of those facilities are underutilized and the work at the smaller silica simply could be consolidated the larger installation without disruption or perhaps one facility is much more the lap of dated than the other or perhaps one facility is governed by an expensive lease whereas the other building is actually owned by the postal service where the proposal makes economic and logistical sense where service standards will not be negatively affected where major mailers in the area will not be inconvenienced and were all negotiated requirements with the unions have been complied with then the mail handlers union will not simply oppose for the sake of opposition conversely the postal service should not be conducting an a m p study just to show that they are doing something in those cases where it makes sense to mail handlers union focuses on minimizing the dislocation and inconvenience that might be suffered to our employees we have negotiated contractual provisions which require the postal service to give its unions and its employees advance notice of any proposed closings or consolidation we also have negotiated provisions which obligate the postal service to ensure that dislocation and inconvenience to its employees in the regular workforce shall be kept to a minimum and that's a quote right out of our collective bargaining agreement if each of these provisions were properly implemented we would not have as many problems as we are currently facing unfortunately the rational and realistic approach does not always control the day first the postal service often announces proposals that have no realistic chance of being approved thereby causing panic among postal employees and customers and political upheaval that is sometimes worse than the proposal itself second even when the proposed closing or consolidation is eventually proof approved and implemented the postal service does not always follow it contractual obligations to its employees the best way to minimize hardships is to discuss the matter with the unions and management associations even before the proposal is announced publicly the postal service consults with its major mailers or other customers and considers the views of the community leadership but it also must consult with its unions at the local and national levels the parties would be well served to discuss these proposals before a feasibility study is publicly announced and the same message should get out to local union representatives and local management this hearing will certainly help us to reach that goal turning back to the financial situation outpacing the postal service i would like to reiterate my organizations whole hearted support for r twenty two which would provide the postal service with some much needed relief by slowing down but not eliminating the u s p s prefunding requirement for retiree health care benefits without endangering the health care benefits of current or future legislation will cost what the cost associated with that would be rational budget office they have a lot on their plate right now and they thought it would take a bit more time maybe a week  we should note however that there will be benchmarks in that bill there is relief in that bill as you've requested but also within that bill there are benchmarks about cost savings for the current year i think the postal service has already accomplished what they need to do if their numbers are valid and i believe that in a large degree they are but there are also cost reduction requirements going forward your cooperation in working with the post office in accomplishing that none of it could have been done without your help however we are getting to where the cuts go closer to the bone in some cases where post offices are located very close to each other happen to be in the major cities i was a former iron worker and it seemed like every time we threw up a high rise of thirty stories or more there was a post office that went right in that building and the volume  today they would be looking for some type of bailout they have a statutory limit as to what they can borrow and if they could not make that obligated payment on september thirtieth into the fund the e services how do we get there and obviously with accommodations to your employees without layoffs we're talking about voluntary attrition meeting the goals of reduction in force how do we work together to get there on some of these facilities that need to be closed i'll go first that have been under way in the past and those cuts that have been made seventy percent of all those cuts have been in my bargaining unit my bargain unit has been cut in half over one hundred thousand employees but the the the basic flaw of the posters efforts in their system see efforts is that they have view the network as the postal network the four hundred plants four hundred plus plants the thirty seven thousand some of these those are those facilities under the direct control of the united states post or a postal employees are employed they view that as the universe we're savings can be achieved the network consist of much broader facilities than just the post service all these and they're funded through the rate schedule we provide funding for over one hundred percent of these cattle throughout the country they provide the same services that we provide within the post service processing and transportation they are not being reviewed those are machines machines that the employees that i represent  function on they their efficiency rate is thirty seven thousand pieces per hour now there's eighty percent discounts on every letter that goes through there that's the wage rate a role in the poster's processing transpiration collection and delivery network into the pot and say where can all of us work when we find efficiencies and we're willing partner we want to participate in that but don't just look at part of that network and impose a disproportionate share of the savings on that segment that's what's happening there are enough yes i think hard choices have to be made but i think the key is going to be communications and input and have the postal service have some meaningful dialogue with the unions management associations i think we started doing that i'll give the postmaster general potter credit for for calling much more frequent meetings with the organizations we met probably six or seven times in the last eight months which is much more frequently than we had been meeting but the postal service also needs to be realistic as i said in my testimony if a consolidation or closing makes sense willing to work with the postal service we need to reduce the impact on our employees we signed a memorandum of understanding back in two thousand and three that requires the postal service and the union to meet at the headquarters level to discuss article twelve impacts and discuss workforce repositioning issues we've started those meetings once this came to the forefront of the m p studies we're going forward and we're making some progress with that but there are still these the horror stories out there we were recently notified that they were going to in voluntarily excess employees from memphis tennessee to tulsa oklahoma that's four hundred miles away a postal employee who has a career or made a career decision to work for the postal service now a very hard choice do they leave the place they grew up where their kids are going to school where their spouse may have a good job to follow their postal job four hundred miles away uproot their family try to sell their house in this terrible real estate market or do they just give up their job with the postal service so those are the choices that some of our employees are facing and we're really trying to minimize those types of choices other ways that we've tried to save the postal service money i mentioned at the last hearing that all the unions and management associations of agreed to voluntary voluntarily increased the health care contributions that totaled it i made it last time over five years with all employees together saving the postal service eight hundred million dollars over the five years we've also agreed to very reasonable contracts in our contract negotiations with the postal service in our collective bargaining agreements for instance postal employees most postal employees specifically will receive a one point two percent raise this year while government employees are in line for a two point nine percent rate not only are we accepted a smaller wage increases and increased health care contributions so we're working with the postal service one other thing i'd like to point out in this particular segment is the fact that the postal service still has some operations out subcontract they are paying other people to perform work that career postal employees could be performing and in fact should be performing in fact you have clerks mail handlers and other postal employees around the country sometimes clock on the standby time which means clock onto a specific operation number and go sit in the break room until we need you and they'll spend hours in there doing nothing getting paid by the postal that's going on there at the table that's great if you could each maybe take a moment and just from your perspective your thoughts on five day delivery and let's just mix things up and start with m may cause people to pay their bills online to do their banking online and i still think that's the case i'm a little bit worried especially i think we discussed it at the last hearing about when there's a holiday weekend you have saturday saturday delivery no sunday delivery no monday delivery now the first they are going to get your mail between friday and over the weekend is going to be tuesday so if i'm a consumer and my you know electric bill is late and i get a system penalty or my mastercard bill is late or my bank statement doesn't arrive on time and i'm unable to reconcile how much i have in the bank and i overdraw check i'm just going to go online and start paying my bills online and so i'm concerned with that and that's that's business that will never come back  have a competitive advantage in that we deliver on saturdays with no extra cost to the consumers we don't have fuel charges some other competitors do so i'm very concerned that five day delivery will cause a big drop in volume with our big mailers but what the true savings and costs are and let me also say as we go to mr bursar i really do appreciate the getting the very strong impression the unions are doing everything they can to work with all aspects and i appreciate the  approach there have been a significant number and read people through various reductions and whatnot and i applaud you all for your your proactive and positive approach to it and start mr burris your comments on a five day  i think it's an act of desperation perhaps we're at the point where the only things left are x rays from but i think it would be it would be good at the beginning of the end i think once you legally permit another carrier to assume the responsibility of the post service on any of the six days of the week let's assume it's saturday i think that will add to the diversion of mail to electronic means the economic the shift from a debt driven society to one that engages in savings and not our volume does not follow the request for credit cards and the other thing to drive the commercial  somebody is going to fill that void and i think in a diversion of five percent ten percent fifteen percent of the bar you where another carrier moves into that i think we'll just six hour rate the demise of the poster so i think i don't think congress will approve begin with and i think discussing it sucks the oxygen out of everything else because it's such an issue that resonates with the american public the public that they may not get delivery one day of the week they're not paying attention to the h r twenty two and the impact of that and other requests for relief the posters made those go from the front page to the back page and everything the media focuses on is their plans in isolation they've gone forward with them we had applied the provisions of our contract and where appropriate would oppose them but there are no joint efforts present we are certainly involved in some of the efforts to build volume  and those are collective efforts in that regard but in terms of this the the efforts to downsize consolidations are they just give us notices when they think of it there are often times that we don't get the notice timely and we find out from the news reports in the location where the consolidation taking place but there are no collective efforts with my union we are the largest post here and there are no joint efforts with us to initiate efficiencies and come up with a rational plan as i included in my testimony this consolidation plan that's been driven by the mailing in the large mailing industry we had a contract l language in two thousand and one that said we would set down and develop a consolidation plan jointly they have not given us a consolidation plan and we're years into that process so there of those collective bargaining agreements we believe there's a lot of room for us to have some joint efforts we are on the cusp of getting it to a serious issue they have trained we have thirty seven thousand post op of seventeen thousand of employees and there is no union representation even though they're covered by the my collective bargaining agreement there's no stewards or officers in those facilities and what management is done is systematically taken and we are also willing to work with the postal service at the headquarters level to do whatever we need to do to cause them to save money there are a couple of things i highlighted in my testimony a month ago that we are currently engaged in one is the risk reduction process where we evaluate a facility with specific specifically trained people on how to improve the operations make them more ergonomically friendly so that employees aren't risking repetitive motion injuries and  sustaining injuries that would cause the boat cost the postal service a lot of money down the road in workers compensation costs the same thing with the voluntary protection program which we partner with the a p w and osha and the postal service to reduce injuries in a building to evaluate a building and to make that facility qualify they have to meet some stringent guidelines established by osha to reduce injuries and again save the postal service money we also continue to participate in the quality of working life process which is a cooperative working process where postal employees from the work will floor meet with their supervisor and what's called quality circles and they brainstorm on ways to do the job better do the job more efficiently so that we don't president office pointed out find out something after it's already been rolled out or a program when it's ninety nine point nine percent completed and they do you think of this program we're thinking of rolling it out well our input that point is really meaningless  think communications is the key and as i highlighted earlier the the situation of the folks in memphis tennessee being offered almost an impossible choice i think we need to find a way around that we need to work whether that's  with local management regional having our regional people sit down with their regional people there has to be a better way be a better way that thank you mr vice chairman thank you i've been a postal employee within the post for fifty five years now long time and i've seen the changes have occurred over that extended period of time from manual mechanize automated and electronic  facing significant challenges at the present time there is no guarantee that ten years from now representatives or my union postal officials will follow on a panel representing the united states postal service in its present form it's a real danger that if they run out of money they can't pay their bills there's no justification for their continued existence so i have that as a serious concern and i am concerned about postal management's effort to make their plans and develop all of their strategies with the large mailers there is no input by the average citizens the  cards christmas cards it's only four percent of volume today so it's not a sizeable number but they are the purpose for the united states postal service and the posers really has no program that to improve conditions for those employees and with the workers as i testified at my bargaining unit has suffered significant erosions a number of employees over one hundred thousand fewer jobs exist today than did ten years ago last year as testified some thirty thousand fewer jobs that's understandable in the context of the entire system when it's isolated i've had several meetings with the postmaster and are pointed out to him it's got to be spread more  evenly we are not the only bargaining unit in the post service let's see it spreading to other elements within the post system to date there's no indication that they're moving in that direction as i said there are people doing the same work workers doing the same work that my members are performing and the post service compensates not the individual but the company over three hundred dollars an hour now if you're willing to pay three hundred thousand hour to have the same work before and buy the employees i represent and you say you have too many of those you've got to reduce their numbers there's something wrong there and my members will reject react thank you in conclusion i just want to say and i know we have some of the postal service managers still still in the audience and watching no one people hate change that goes for the american  male customer as well as employees and when there's big change you've got to bring them along and explain it and you know we congress we hate surprises and if  to make the changes necessary at the post office in a way that maintains respect for our employees and maintains a superior service to our customers of the post office then it needs to be a process that is collaborative  a message to the post office i hate these stories where the post office just marches a lot on its own direction without talking to its employee representatives that cannot happen if there is any obstruction to this whole deal on h r twenty two and going forward it will be a lack of consultation with the employees who are affected and the mailing customers who are affected as well as the relevant members of congress who are dealing at the front lines with this issue that needs to happen and i hope mr potter is listening we need to work with folks especially when there's relocations involved like the memphis situation that is a  disaster and they need to take a good second look at that as well as some other stories that i'm hearing around the country i want to thank you for your testimony i appreciate you coming here and helping us with our work and i'm going to run over a vote hopefully and i'll be back but this panel is dismissed thank you have a good day welcome again good afternoon thank you very much for your patience while we attended those votes as always i want to welcome our third panel and as is the custom at this committee alliance includes over three hundred nonprofit organizations and commercial service providers with an interest in nonprofit mailing issues our members and closed many of the nation's best known charitable religious educational scientific and other nonprofit organizations these members rely heavily on nonprofit standard mail and nonprofit periodicals mail to generate necessary support from and communicate with existing and potential members beneficiaries and other stakeholders the causes of the postal service crisis are well known the decline in mail volume caused by the current economic downturn has merely accelerated the long term decline in hard copy correspondence and the diversion of bill payments and other transactions to electric electronic media when the economy stabilizes some mail volume will return to the system but not enough to fund the postal service network cost structure the result is that even close aggressive cost cutting efforts have not enabled the postal services shrinks its costs fast enough to keep pace with the declining mail volume the postal service the stakeholders are proposed a number of solutions to these problems and perhaps the most or additionally urgent urgently needed is the short run remedy is passage of and two other worthwhile short term and medium term remedies include first increasing work sharing to allow mailers and third party vendors perform functions when they can do so at a lower cost to expanding the use of automation when this is cost effective and three more innovative pricing such as the current summer sale discount proposal and mr chairman it's time to seriously consider the end of saturday mail delivery should you decide such a move is necessary nonprofit mailers will work with you to ensure it's successful adoption one option that would be devastatingly counterproductive would be an emergency right increase as a postal services recognize this strategy would accelerate the flight of mail volume from the postal service and hurt society as a whole it certainly would hurt the beneficiaries of nonprofit organizations the current economic crisis has forced layoffs and program cuts throughout the nonprofit community revenues have dried up just when society needs most urgently the good work of nonprofit organizations further postal rate increases would only mean further reductions and mission related programs and greater burdens on national state and local governments none of the remedies discussed above however is likely to see it succeed without a thorough pruning of the postal services massive cost structure the postal service infrastructure and capacity built over many years with the assumption of ever increasing mail volume far exceed the needs of today's postal customers comprehensive streamlining of this excess capacity is desperately needed unless this painful course is taken the remedies suggested above will only offer a brief detour from the road to insolvency the united states postal service is the greatest postal system in the world it handles over forty percent of the world's mail and maintains a delivery network that is second to non it has been the cadillac of postal systems for many years but unfortunately the nation's needs have changed instead of the big v eight the nation now needs of midsize model with greater efficiency if it cannot attain such an affordable size the postal service could end up like some of the automakers in detroit we don't want that to happen and we hope that necessary change comes quickly for an organization that means so much to american society thank you q mr mclean for five minutes thank you mr chairman we appreciate this opportunity to present views of the mailers council a coalition of mailers and mailing associations my members collectively represent seventy percent of all mail in the united states and we specially appreciative of you focusing on the post service financial problems which are of great concern to our members who rely on a and affordable consistent and high quality postal service some right now the post services operations are operating quite well but the word crisis seems very appropriate here it's often overused hearings like this but when the postal service says that it may not be able to pay its employees its retirees or its bills on october first the word crisis seems very appropriate we think there are two reasons why the post service is short terms problems exist in terms of their finances one is the recession which is responsible for the decline of billions of pieces of mail the other is the grass is scheduled at the post services had to hew to under the p e a concerning the prefunding of retiree health care costs and therefore we greatly appreciate the support that you and the subcommittee will offer to ensure the passage of h r twenty two that is a important first step to offering the post service some short term relief but clearly the system needs more long term measures mailer's firmly understand this agree with the need to it but i have had some difficulty coming to agreement on what terms should be appropriate and when it comes to five day delivery my members are open to this possibility recognizing that it will create problems for many of them with a posted officially at this point because the postal service has yet to offer the level of detail that we would like which day of the week will it be will this be only a summer program as initially proposed or will this be permanent will it be offered as a pilot program first and how much will mailers be involved in the establishment of a pilot program all questions to which we would like to have answers quickly so that we can determine whether or not this is an idea we can fully support there are other ways that the post service can reduce expenses and you've asked us to focus on one which is right sizing in the livery network it's clear to us that the postal service has excess capacity in the system it simply does not need the number of mail processing facilities that it has nor can it afford the size of the network that it has today given the amount of mail volume that has left the system one of the measures that we hope the post service will however is something that mr connelly mentioned and that is an exit rate case  any additional increase in postage rates at this point would be incredibly counterproductive and wouldn't discourage the return of mail volume to the system which we hope will occur as the economic situation in this country rebounds congress has given the postal service a mandate to deliver excellent service to every american in every state without government financial support which it has done for the past several decades right now my members report that service is very good in the postal service is meeting its delivery standards which we believe is chairman would like to thank you for this opportunity to provide testimony on the pole services cost cutting efforts all post come member companies need a healthy postal service to ensure the viability of our businesses in two thousand and eight the postal service delivered two hundred  billion pieces of mail approximately the same volume that was delivered in one nine hundred ninety nine however in two thousand and eight the postal service delivered fifteen million more delivery points than it did in one thousand nine hundred ninety the sobering facts indicate that the full service cannot remain financially self sustaining for much longer under its current model unless it is given the freedom to make changes in other areas the postal service is much too important to the economy and the american public to be allowed to  saving the whole service will require the commitment of u s p s management the postal unions the mailing industry the postal regulatory commission and congress some of the choices choice facing us will not be without pain we're all going to have to make some sacrifices to that end post com has several recommendations beginning with network adjustments mailer's feel very strongly that the postal service must adjust its network to match today's volume and service requirements such a network adjustment could have a negative impact on service postcard members are willing to accept service adjustments if the net result is an overall reduction in u s p s costs and increase consistency as long as service remains predictable and reliable mailers can adjust their printing and mailing schedules to compensate for any network changes given the post service is perilous financial condition we hope that service will not be thwarted in its efforts to streamline the network and reduce costs the frequency of mail delivery is another issue where the mailing industry is willing to put skin in the game post com understands that the poll service does not have many opportunities that could result in a savings of three and a half billion dollars and i know you think that that number is a little bit fuzzy  and we would agree we also accept the fact that volume is declining and may never return to prior levels many post the mayors have business plans that depend on six day delivery however given the dire straits that full service is now in post com is willing to work with the post service on developing a delivery day solution the end result will damage the mailers businesses but may be required to ensure the survival of the postal service we also realize that reducing delivery by one day per week is a decision that cannot be made by the mailing industry or the postal service but requires the approval of congress we urge you to give the the need for this measure serious consideration work sharing is another very important tool for making appropriate adjustments t scope and scale of the post services mail processing system this process is based upon the concept of operating at the lowest combined cost between the mailer and the postal service in work sharing rates are set at level that reflects improve post seas and marketplace realities this type of sensible business like behavior is needed now more than ever in post strongly recommends the continuation and expansion of work sharing incentives to pull services also pursuing an automation strategy to improve the processing of flat shape mail post com applauds these efforts so long as they are and achieving the lowest combined cost across the entire male supply chain and are not merely shifting costs upstream to mailers  and or mail service providers on may seventh two thousand and nine the postal regulatory commission granted the postal service permission to sell a new lies capacity on its trucks the commission is also open to docket on summer sale prices that are designed to generate more mail volume during the u s p s is lowest volume period comes both these concepts and notes that these creative ideas represent fresh thinking that has long been absent in the pole services revenue generation efforts full service must not be afraid to fail in these tests and the postal regulatory commission congress and the mailing industry must provide the latitude that allows either success or failure post com would be remiss if we did not mention the need for a restructuring of retiree to take immediate action in summary post time members depend on a reliable and affordable postal service given the perilous state of u s p s finances neither congress the postal service the postal unions nor mailers can avoid these issues any longer substantive changes must happen very quickly or the postal service as we know it may not survive thank you thank you the cost as i said in my written statement that the infrastructure the postal service was built for a massive mail volume no longer exists at its peak in two thousand there's a whole lot more creativity within the postal service can't come fast enough and i also think the congress might want to consider absolute restrictions that now exist on what kinds of things the postal service is well suited for that it could provide the american people that perhaps or not is not being provided by the private sector or perhaps could be done more efficiently by the postal service than is being done now by other government table from operations to compensation mailers recognize that and we're willing to make concessions that would ensure the future vitality of the postal service and once the recession begins to subside and the economy rebounds issues such as work will become much more important it's very important that we try to find more ways to bring more mail into the system the postal service has required to spend a certain amount of money making a delivery to your home whether they deliver one piece of mail or work can ensure that more mail is delivered every household that will help reduce the cost of delivering per piece and that will help ensure that the postal service can return to a more positive financial situation and third i was that we find ways of making postal products more available to folks in mr galligan the fact that you can now buy postage stamps in thousands of supermarkets around the country stands for one thing postal products or another and if you go into most post offices today there's no longer a vending post and would involve the salary of a single postal employee greater use of technology and other ideas that would help make it more accessible to the postal service reducing lines on saturday which are very long at the post office where i live in arlington virginia would be a positive way of ensuring that people can post office perhaps with increasing revenue in ways that are unavailable today survey done by the nonprofit times which is one of the leading nonprofit publications in the country about mail delivery the question posed to nonprofits if there had to be design such a program and i don't think that because they're looking for a lead from you mr chairman in terms of what congress has approached this is going to be because without your support this discussion doesn't it doesn't go anywhere i think that as long as we are part of the discussion in terms of planning it as long as there are in the design of it i think a lot of members would eventually get behind it but we'd like to know more details that's only going to happen if we can get a sign from you that this is something that that you would seriously consider  like talk about my brother my brother ran a restaurant for a number of years my brother did not need and could not afford television advertising radio advertising internet advertising because it reached the wrong people too many people and it was too service in the association that i manage the mailers council we have once again return to sending invoices for membership by mail one of the reasons why is because many people look at emails they don't necessarily read them intently they don't necessarily act on them and for a number of businesses not just my association mail continues to be the device that ensures that people act the way you want them to buying your product buying your service voting whatever it might be continues to be an incredibly effective communication tool if we can keep it affordable we will keep the mail in there that will help ensure that there's sufficient volume to keep the cost spread out over enough pieces of mail that the postal service can continue to operate but without keeping postage affordable and that means reducing the fixed cost which is operations the size of the network and what we pay to employees the postal service will no longer be an effective and affordable communications tool it will go by the wayside mail started long before this economic downturn first class mail has funded the basic growth of the postal service infrastructure forever makes the most contribution to the overhead costs  which are extensive it has basically paid the bills for the last couple hundred years that mail volume without mail volume declining i don't see coming back i think that the decline that has started gradually in the last five or so years will continue some say it will it may taper off but i think it will continue and that leaves you with how do you grow the necessary volume to make up for that loss the rule of thumb for many years has been that standard mail which is the highest growth volume product now in the postal service you need almost three pieces of standard mail to make up for the loss of one piece of first class mail standard mail is not growing that fast i doubt it can grow that fast in the future the financial dilemma once the economy does stabilise mail volume most certainly will come back to a certain degree but it's the mix of mail volume that is the real critical problem how do you replace that very lucrative product  revenue that has lost there and i don't know that that anyone in the community has found an answer that unless someone does then you have to deal with we just can't afford to fund this massive structure anymore as we going to hell when they hear because i don't think many of them have heard yet what we're considering at this hearing today but what they need to understand what we need your help explaining is that the postal service is essential tool not an optional one but for those people who live in those communities in the future the postal service has to be allowed to change and h r twenty two is a great first step in that direction but additional legislation is going to be necessary so if we're going to keep the postal service in these communities where they are the only way of doing hardcopy communication