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ADDRESSING THE U.S. POSTAL SERVICE’S 

FINANCIAL CRISIS 

HEARING 

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MAY 17, 2011 

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

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 

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(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

MARK BEGICH, Alaska 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JERRY MORAN, Kansas 

MICHAEL L. ALEXANDER, Staff Director 

NICHOLAS A. ROSSI, Minority Staff Director 

TRINA DRIESSNACK TYRER, Chief Clerk 

JOYCE WARD, Publications Clerk and GPO Detailee 

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY 

THOMAS R. CARPER, Delaware, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

MARK L. PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

MARK BEGICH, Alaska 

SCOTT P. BROWN, Massachusetts 

TOM COBURN, Oklahoma 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

JOHN KILVINGTON, Staff Director 

WILLIAM WRIGHT, Minority Staff Director 

DEIRDRE G. ARMSTRONG, Chief Clerk 

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(III) 

C O N T E N T S 

Opening statements: Page 

Senator Carper ................................................................................................. 1 

Senator Brown .................................................................................................. 4 

Senator Akaka .................................................................................................. 5 

Prepared statements: 

Senator Carper ................................................................................................. 41 

Senator Brown .................................................................................................. 45 

Senator Akaka .................................................................................................. 47 

WITNESSES 

TUESDAY, MAY 17, 2011 

Patrick Donahoe, Postmaster General and Chief Executive Officer, U.S. Postal Service .............................................................................................................. 6 

Phillip R. Herr, Director, Physical Infrastructure Issues, U.S. Government 

Accountability Office ............................................................................................ 8 

Margaret Cigno, Director of Accountability and Compliance, U.S. Postal Regulatory Commission ............................................................................................... 28 

David Williams, Inspector General, U.S. Postal Service ...................................... 29 

Cliff Guffey, President, American Postal Workers Union .................................... 31 

Mark Strong, President, National League of Postmasters ................................... 33 

Jerry Cerasale, Senior Vice President, Government Affairs, Direct Marketing 

Association ............................................................................................................ 34 

ALPHABETICAL LIST OF WITNESSES

Cerasale, Jerry: 

Testimony .......................................................................................................... 34 

Prepared statement .......................................................................................... 117 

Cigno, Margaret: 

Testimony .......................................................................................................... 28 

Prepared statement .......................................................................................... 81 

Donahoe, Patrick: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 48 

Guffey, Cliff: 

Testimony .......................................................................................................... 31 

Prepared statement .......................................................................................... 90 

Herr, Phillip R.: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 62 

Strong, Mark: 

Testimony .......................................................................................................... 33 

Prepared statement .......................................................................................... 103 

Williams, David: 

Testimony .......................................................................................................... 29 

Prepared statement .......................................................................................... 85 

APPENDIX 

The statement of Ms. Goldway referenced by Ms. Cigno ..................................... 76 

The chart referenced by Mr. Guffey ....................................................................... 92 

Questions and responses for the Record from: 

Mr. Donahoe ...................................................................................................... 125 

Mr. Herr ............................................................................................................ 145 

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IV 

Questions and responses for the Record from—Continued 

Ms. Cigno .......................................................................................................... 155 

Mr. Williams ..................................................................................................... 162 

Mr. Strong ......................................................................................................... 169 

Mr. Cerasale ...................................................................................................... 176 

Prepared statement submitted by Robert Rapoza, National Association of 

Postmasters of the United States ....................................................................... 179 

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(1) 

ADDRESSING THE U.S POSTAL SERVICE’S 

FINANCIAL CRISIS 

TUESDAY, MAY 17, 2011 

U.S. SENATE, SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY, OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:35 a.m., in 

room 342, Dirksen Senate Office Building, Hon. Thomas R. Carper, 

Chairman of the Subcommittee, presiding. 

Present: Senators Carper, Akaka, Pryor, McCaskill, Begich, and 

Brown. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. The hearing will come to order. 

Welcome. We welcome our guests, our witnesses, the first panel 

as well as our second panel. I especially want to welcome back Senator Danny Akaka, who has been on the DL for a week or two, but 

he is back, tan, fit, and rested. We need him at his best and that 

is what we are going to get. We are happy to be here with Senator 

Akaka, and with Senator Scott Brown, and with all of you. 

This is not the first hearing that we have held with regard to the 

Postal Service’s financial challenge, but it is an important one. It 

is an important one. And while the witness list at this hearing is 

full of familiar names and organizations, the hearing today is likely 

to be somewhat different from those we have held in the past. It 

needs to be different because the crisis the Postal Service faces is 

more urgent now than it has been in the past. 

Absent prompt and dramatic action on the part of Congress, our 

next Postal hearing may well be about how we pick up the pieces 

from a shutdown in operations. It is my hope that this hearing will 

jump-start the process of developing a bipartisan, bicameral consensus around the changes needed to restructure the Postal Service’s finances and transform its operations to reflect the uncertain 

future that it now faces. 

Just last week, the Postal Service Board of Governors released 

some sobering data on the Postal Service’s financial performance in 

the second quarter of this fiscal year, which ended on March 31. 

The Board also released numbers summarizing mail volume and 

revenues for the fiscal year to date. These data show that, as those 

of us who follow Postal issues feared may happen, the Postal ServH605-41331-79W7 with DISTILLER

2 

ice is not recovering along with the economy as a whole. Rather, 

the continued electronic diversion of the mail has likely permanently reduced mail volume, despite the Postal Service’s best efforts to bring in new customers and preserve those that it has 

today. 

In the period between the beginning of January and the end of 

this March, mail volume declined by just more than 2 percent 

versus the same period last year. This follows two quarters of modest growth. At the same time, the Postal Service’s most important 

product, first class mail, actually lost 6 percent of its volume, continuing its pattern of years of steady decline. 

These developments are contributing to losses by the Postal 

Service. Midway through the current fiscal year, the Postal Service 

booked losses totaling some $2.8 billion. Its projected losses for the 

year now stand at $8.3 billion, nearly matching the record $8.5 billion in losses experienced last year. These volume and revenue 

numbers are all worse than the Postal Service initially projected, 

and if the losses at the end of the year are truly as bad as we are 

now being told they will be, I understand that the Postal Service 

will have exhausted all of its $15 billion line of credit from the 

Treasury by the end of September and will limp into Fiscal Year 

2012 with just enough cash on hand to get by. 

And it does not get a lot better from there. Getting by in 2012 

will likely mean that the Postal Service will not be able to make 

its $5.6 billion retiree health prefunding payment and could even 

have difficulty making other normally routine pension and workers’ 

compensation related payments. 

On top of that, a major crisis that occurs over the next year or 

so, such as further economic slowdown or a terrorist attack, could 

well push the Postal Service over the edge into insolvency and result in a shutdown of its operations, something that none of us 

want or need. 

If the Postal Service were to shut down, the impact on our economy would be dramatic. As Postmaster General Donahoe will testify to us today, the Postal Service operates at the center of an industry that employs some seven million people and generates more 

than $1 trillion in sales and revenue each year. At such a difficult 

time for our country, we cannot afford to put those jobs and that 

kind of productivity in jeopardy. 

In recent years, the Postal Service has done its share to respond 

to the declining demand for hard copy mail and to better align its 

costs with its revenues. Total costs have been reduced by $12 billion in recent years. A big contributor to that success has been the 

elimination of more than 113,000 Postal Service jobs since 2007 

through attrition and more than 200,000 over the past decade. I 

think that represents a reduction in the workforce by a little bit 

over 25 percent. These savings are continuing with the Postal Service’s new contract with the American Postal Workers Union 

(APWU), which includes wage and benefit concessions and significant new workforce flexibilities. 

In addition, the Postal Service has introduced and successfully 

promoted a number of new products—a number of them. One of 

those, maybe the best known, is the flat rate Priority Mailbox. 

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3 

We are rapidly reaching the point, however, at which the Postal 

Service will no longer have the authority under current law to do 

what it needs to do in order to survive and prosper. That is why 

I am introducing today legislation that aims to clean up the Postal 

Service’s finances and help it implement the ambitious reorganization plan that it announced last spring. The main provision in my 

bill, the Postal Operations Sustainability and Transformation Act 

(POST Act), aims to permanently address the various pension and 

retiree health-related issues that have plagued the Postal Service 

for years now. 

The Postal Service, the Postal Service’s Inspector General, the 

Postal Regulatory Commission (PRC), and two independent actuaries have all come to the conclusion that the Postal Service has 

overfunded its obligation to the Civil Service Retirement System 

(CSRS) by between $50 billion and $75 billion. In addition, numerous observers and even the Office of Personnel Management (OPM) 

have pointed out that the Postal Service has paid $7 billion more 

than it owes into the Federal Employees Retirement System 

(FERS). 

My bill would give the Postal Service access to the funds it has 

overpaid. It would be able to use them to make its required retiree 

health prefunding payments, taking upwards of $5 billion off its 

books each year for the next several years. Once those payments 

are satisfied, the funds that this bill would free up could be used 

to pay workers’ compensation obligations and to retire debt owed 

to the Treasury. These changes, or something very similar to them, 

will need to be a vital part of any effort to improve the Postal Service’s financial condition in both the short and the long term. 

But stopping with these reforms and avoiding further potentially 

more difficult changes simply will not be enough. The Postal Service is projecting cumulative losses of more than $230 billion between now and 2020—$230 billion. The savings generated by the 

pension and retiree health reforms in my bill and in others that 

have been introduced, including a bill introduced by Senator Collins and bills introduced in the House, would only address about 

a third of these losses. In addition, the Postal Service’s latest financial data shows that even if the retiree health prefunding payment 

is not made this year, the Postal Service would still face the risk 

of insolvency and shutdown in 2012. And even if the 2012 retiree 

health payment is also not made, the Postal Service would enter 

2013 with no cash and no borrowing room at all. 

More will clearly need to be done. That is why my bill takes important steps toward truly giving the Postal Service the flexibility 

that those of us in Congress always say we want to give them to 

adapt to new realities and operate more like a business. No business facing the kind of difficulties and challenges that the Postal 

Service faces today would survive for very long if it were told how 

many retail outlets it should have and where they should be located, or if it were prevented from making operational changes or 

taking full advantage of the resources and expertise that it has at 

its disposal. Yet that is what the Congress does to the Postal Service. 

My bill aims to address these problems and to take Congress out 

of the day-to-day management of the Postal Service. Assuming that 

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4 

the Postal Service can continue to build on its recent cost cutting 

efforts—and I commend them and the labor unions that represent 

most of the workers for those efforts—these changes could help set 

the Postal Service on more solid footing in the years to come. 

The report that the Government Accountability Office (GAO) is 

releasing today on the state of the Postal Service’s vehicle fleet provides, I believe, a valuable case study. The report clearly details 

the negative impact that financial uncertainty and well-meaning 

but sometimes harmful dictates from Congress have on Postal operations. GAO found, for example, that due at least in part to the 

Postal Service’s dire financial situation, Postal management currently has no plan in place to replace its very large fleet of delivery 

vehicles, some of which were first put on the streets a generation 

ago or more. The cost of operating and maintaining these vehicles 

are increasing, and in at least some cases, it is having a negative 

impact on operations. 

I believe it is unacceptable that the Postal Service has no plans 

to date to begin replacing its aging fleet, perhaps with more fuelefficient vehicles, the purchase of which in large numbers could 

help commercialize important new technologies. But it is also unacceptable that the Postal Service has been placed in this position financially, in part due to the acts of Congress, or to the inaction of 

Congress. 

I look forward to hearing from our witnesses today about these 

and other pressing issues facing the Postal Service. 

I would also note that Senator Collins, with whom I have worked 

on a lot of issues in the past, including Postal issues, has introduced her own bill, and there is a fair amount of overlap between 

what she has proposed and what you will find in the legislation I 

am introducing today. My hope at the end of the day is that Senator Collins and I, who have worked on these issues and others in 

the past, will find common ground. That is what we need. And we 

need to, as I said earlier, we need to develop a bipartisan, bicameral approach to address these challenges, and my hope is that 

many of the Members, Democrat and Republican, of the Subcommittee and this Committee will be a part of that solution. 

With that having been said, let me recognize Senator Brown for 

any comments that he would like to make, and then we will turn 

to Senator Akaka. Senator Brown. 

OPENING STATEMENT OF SENATOR BROWN 

Senator BROWN. Thank you, Mr. Chairman. I am not going to repeat a lot of what you said, but I do want to point out that I agree 

with you and that we need to allow, or give the Postal Service the 

tools and resources they will need to move forward. We need to remove some of the roadblocks so they can provide the universal 

service and have it be guaranteed so the communities are not adversely affected. 

You have already addressed, obviously, the pension fund overpayment. I think there is general agreement with that. It is just 

a question of giving them the flexibility to work in a responsible 

manner to solve their own problems, because, clearly, the path that 

they are going down is not sustainable, as you pointed out, and I 

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5 

look forward to working, obviously, with you and Senator Collins, 

in working on these very real issues. 

So I appreciate the opportunity and look forward to the testimony. I will submit my balance for the record. 

Senator CARPER. All right. Thanks so much, and your entire 

statement will be made part of the record. 

Senator Akaka, welcome. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Thank you very much, Chairman Carper. I want 

to thank you very much for holding this important hearing about 

the future of the U.S. Postal Service (USPS). 

I also want to welcome our Postmaster General and Chief Executive Officer (CEO) of our U.S. Postal Service and also Phil Herr 

from GAO to our hearing. 

As we have heard time and again over the last 3 years, the Postal Service faces a devastating financial crisis. By the end of this fiscal year, the Postal Service may not be able to fully pay its $5 billion retiree health benefits prefunding obligation. The Government 

Accountability Office report released last year examines several options to help the Postal Service. 

So I want to commend Senator Carper and Senator Collins, who 

have both introduced legislation that aims to help the Postal Service meet its obligations by addressing overpayments to the retirement funds. Additionally, Senator Carper’s POST Act offers several 

provisions which would allow the Postal Service to innovate and expand its business. However, both of these bills still contain a provision introduced in the last Congress which would bias the collective 

bargaining process to favor the Postal Service during arbitration. 

The fact that the Postal Service and the APWU ratified a new 4- 

year contract just last week demonstrates that the Postal Service 

and employees can work together to reach an agreement that 

meets everyone’s needs. Congress does not need to inject itself in 

the collective bargaining process. 

I also want to mention the issue of 5-day delivery. As I expected, 

the Postal Regulatory Commission’s estimated savings for cutting 

a day of service is lower than the Postal Service’s. The PRC also 

points out that the Postal Service did not examine thoroughly the 

impact on rural areas. I am concerned about the impact of cutting 

service on Hawaii, which already has slower mail delivery due to 

its location and challenges moving mail between islands. Ultimately, I do not believe this change would help the Postal Service 

attract new business or revenue. Instead, it could harm those who 

rely on the Postal Service. 

Again, I want to thank my colleagues for their hard work on 

these issues and thank all of our witnesses for their contributions 

to the entire process. These hearings will help us to move forward 

with legislation to finally ensure a long-term fix for the Postal 

Service. 

Thank you very much, Mr. Chairman. 

Senator CARPER. Senator Akaka, thanks. It is great to have you 

back again. 

Our first witness today is our Postmaster General, Pat Donahoe. 

Oh, Senator Begich, you slipped in on me. Thanks for joining us. 

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6 

1The prepared statement of Mr. Donahoe appears in the appendix on page 48. 

Good to see you. Again, we start our day together and we will 

spend most of our day together, I suspect. 

Senator BEGICH. It is looking that way. 

Senator CARPER. Our first witness today is the Postmaster General, Pat Donahoe. This is Mr. Donahoe’s first time testifying before this Subcommittee as Postmaster. Is that true? Is this your 

first time? 

Mr. DONAHOE. It is true. 

Senator CARPER. First time as Postmaster General. Before assuming that position last year, Mr. Donahoe served as Deputy 

Postmaster General and Chief Operating Officer (COO) at the Postal Service. Mr. Donahoe has spent his entire career at the Postal 

Service, beginning as a clerk in his home town of Pittsburgh. 

Next, we have Phillip Herr, Director for Physical Infrastructure 

Issues at the Government Accountability Office. Mr. Herr has been 

with GAO since 1980 and manages a broad range of issues there, 

including Postal issues. We appreciate his previous help and we 

look forward to your testimony here today. 

Both of your statements will be admitted in their entirety for the 

record and you are free to summarize as you see fit. If you exceed 

5 minutes, I will not say much. But if you exceed 7 or 8 minutes, 

I will say something. 

So please proceed, Mr. Postmaster General. 

STATEMENT OF PATRICK DONAHOE,1 POSTMASTER GENERAL 

AND CHIEF EXECUTIVE OFFICER, U.S. POSTAL SERVICE 

Mr. DONAHOE. Thank you, Mr. Chairman. Do not worry. I will 

not exceed that 5 minutes. 

Good morning, Mr. Chairman and Members of the Subcommittee. I appreciate the opportunity to testify today on behalf 

of the U.S. Postal Service. Thank you for the invitation, and thank 

you, Mr. Chairman, for calling this hearing. 

The Postal Service plays a vital role in American society and the 

American economy. The Postal Service will deliver more than 165 

billion pieces of mail this year and ship more than two billion packages. We are the backbone of a $1 trillion mailing industry. The 

Postal Service is a self-funding entity that innovates and competes 

for customers. We provide a reliable, secure, and affordable delivery platform for American business. Therefore, it is in the national 

interest to keep the Postal Service financially strong. 

Like any business, the Postal Service is subject to marketplace 

trends, and unfortunately, we have seen a significant long-term decline in our most profitable product category, first class mail, which 

accounts for approximately 50 percent of our revenue. People and 

businesses are electing to send and receive statements and pay 

bills electronically. This reduces mail volume. 

We have aggressively cut costs in response to economic conditions and customer trends and reduced the size of our workforce by 

more than 113,000 employees over the last 4 years, and we are consolidating both mail processing and retail facilities. Our total cost 

reduction during this 4-year period is in excess of $12 billion. We 

have responded to volume declines by working with corporate partH605-41331-79W7 with DISTILLER

7 

ners, improving our customer experience, and creating innovative 

products to spur demand. 

It is important to recognize that our employees have done an outstanding job during some turbulent times in the marketplace. In 

fact, absent the retiree health benefit prepayment mandate, the 

Postal Service would have recorded a cumulative profit over the 

last 4 years. 

Mr. Chairman, despite our significant role in the American economy and our aggressive cost cutting and revenue generating efforts, I regret to say that we are in a serious financial predicament 

today. As things stand, we do not have the cash to make the $5.5 

billion prepayment for future retiree health benefits due on September 30, and we may be forced to default on other payments. 

This could extend to operational expenses. 

The costs of potential delivery disruptions to the economy and to 

the country cannot be overestimated. Even the threat of such disruption would have a significant impact on America’s business and 

do irreparable harm to America’s faith in the mail. 

Mr. Chairman, we need legislation this fiscal year, and I am 

grateful, indeed, that both you and Senator Collins have introduced 

bills that address some of our most serious constraints. We especially support provisions that would eliminate the retiree health 

benefit prepayments by reallocating our Civil Service Retirement 

overpayments, that would return the Federal Employees’ Retirement System overpayments to the Postal Service, and provide the 

Postal Service with the flexibility to determine its own delivery 

schedule. 

I would also urge the Subcommittee to start the legislative process with a long-term approach to our business model. We have sustained financial losses over the past several years that have created negative perceptions about the mail and Postal Service, and 

to some extent has had a negative impact on our business. The fact 

is, with the right legislation, the Postal Service can return to profitability. If given the flexibility to do so, the Postal Service can continue to serve the American public very effectively and continue to 

sustain and propel American commerce. 

Mr. Chairman and Members of the Subcommittee, I look forward 

to working with you in support of these goals and thank you for 

your leadership on these important issues. Thank you, and this 

concludes my remarks. 

Senator CARPER. Thanks very much. You are a lot shorter than 

Jack Potter. [Laughter.] 

Mr. DONAHOE. We have a motto, 5 minutes or less, so I wanted 

to make sure we did that. 

Senator CARPER. He was always good, too. Thanks. 

Mr. Herr, please proceed. 

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8 

1The prepared statement of Mr. Herr appears in the appendix on page 62. 

STATEMENT OF PHILLIP R. HERR,1 DIRECTOR, PHYSICAL INFRASTRUCTURE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. HERR. Chairman Carper, Senator Brown, and Members of 

the Subcommittee, I am pleased to be here to discuss GAO’s work 

on the Postal Service. I will briefly discuss the Postal Service’s financial condition, key issues in our report on the Postal delivery 

fleet that is being released today, and options for addressing its 

fleet and broader challenges. 

The Postal Service is on GAO’s list of high-risk agencies because 

it needs to realign its business model in the face of declining mail 

volume. Total mail volume decreased 3 percent in the second quarter of this fiscal year, with first class mail declining by 7.6 percent 

compared with the same period last year. Halfway through this fiscal year, the Postal Service is reporting a net loss of $2.6 billion. 

As acknowledged today, the Postal Service projects it will reach its 

$15 billion debt limit this year and default on a $5.5 billion 

prefunding payment for retiree health benefits. 

Against this decidedly grim backdrop, the Postal Service needs to 

modernize its operations, including preparing to upgrade its delivery fleet. The Postal delivery fleet has about 192,000 vehicles, most 

of which are custom-built right-hand-drive vehicles about 16 to 23 

years old that are approaching the end of their expected 24-year 

operational lives. The fleet includes about 22,000 commercially 

available minivans, ranging in age from 2 to 13 years, with an expected operational life of 10 years. 

Maintaining and fueling the delivery fleet cost about a billion 

dollars in Fiscal Year 2010, or about $18 per day per vehicle. Our 

analysis of repair data found that direct maintenance costs averaged about $2,600 per vehicle, which is a bit understated because 

some contractor costs were not included. About 5,300 vehicles required more than $7,000 in direct costs, and 700 vehicles required 

more than $10,500 in direct costs, over one-third the estimated replacement cost of the vehicle. And at least 31 percent of delivery 

maintenance costs were for unscheduled maintenance, 11 percentage points over the Postal Service’s goal. 

While Postal employees we interviewed believe the delivery vehicles can continue to operate without major interruptions for at 

least several more years, we identified maintenance problems during our site visits. In Minnesota, agency requirements for replacing 

rusted frames were not being followed at the Postal maintenance 

facility we visited. Frames were only replaced when one or more 

holes perforated the metal. We also found frames with severe rust 

problems in New York State. Each frame replacement costs about 

$5,000, and private fleet managers we interviewed said that replacing frames is a key indication that it is time to replace, not repair, 

vehicles. 

However, upgrading the fleet will be costly. Purchasing 185,000 

delivery vehicles is estimated to cost about $5.8 billion, about 

$31,000 for vehicles with a gasoline engine. Fully refurbishing the 

fleet would cost less, about $3.5 billion, or about $20,000 per vehiH605-41331-79W7 with DISTILLER

9 

cle, although the current course of replacing frames, motors, and 

transmissions is effectively refurbishment at a slower pace. 

EPACT acquisition requirements will need to be factored into replacing delivery vehicles, as well, namely that 75 percent of its acquisitions be capable of using alternative fuel. Another complicating factor in considering alternative fuel vehicles is that higher 

acquisition costs may not be recouped over the vehicles’ operating 

lives, given that delivery vehicles currently travel about 17 miles 

a day and use about two gallons of gasoline. 

While the Postal Service has been able to maintain its current 

fleet, the time will soon come when the cost of this approach will 

not allow further delays. We have recommended the Postal Service 

develop a strategy and time line for addressing this need. More 

broadly, agreement is needed on a package of actions to stabilize 

the Postal Service and align its costs with revenues and generate 

sufficient funding for capital investments. 

As we previously reported, Congress should consider modifying 

the funding requirements for retiree health payments in a fiscally 

responsible manner to provide short-term relief, and addressing 

constraints and legal restrictions that hamper closing facilities so 

that more aggressive action can be taken to control costs. Proposed 

legislation discussed today provides an important starting point for 

action. 

Chairman Carper, Senator Brown, and Members of the Subcommittee, this concludes my prepared statement and I am pleased 

to answer any questions. 

Senator CARPER. Thanks. Our thanks to both of you for that testimony. 

I want to just drill down, if you will, on the GAO’s report released today, dealing with the vehicles. As I understand it, the 

number of vehicles that the Postal Service has is roughly 185,000, 

close to 200,000. It sounds like the average age is about 20 years. 

They do not go very far on a day, an average of about 17 miles. 

And the cost of fuel—would you just go back and clarify it for me, 

Mr. Herr. What are we talking about, the cost of fuel for these vehicles? 

At a billion dollars, is that what I heard? 

Mr. HERR. We said a billion dollars, but that was for maintenance and fuel, so the direct maintenance costs were about $750 

million and then fuel costs last fiscal year were about $300 million, 

although with prices going up, it would have increased this year, 

obviously. 

Senator CARPER. Yes. One of the things I have encouraged the 

previous Postmaster General, the Board of Governors, the labor 

unions that represent many of the Postal employees, is to just be 

as creative as possible and think outside the box. And I have even 

suggested, as the Postmaster General may recall, I almost suggested that you create, if you do not have it already, within the 

Postal Service an entity whose job is to think outside the box and 

to come up with clever ways to create revenues and equally clever 

ways to reduce costs. 

I want us to just think about energy costs and just talk with you 

about what you are doing already to bring down energy costs within buildings—there are a lot of Postal buildings—and whether or 

H605-41331-79W7 with DISTILLER

10 

not there is any potential for a similar approach with reducing the 

energy costs, maybe the maintenance costs that flow from 185,000 

vehicles. Can you just start with that, please? 

Mr. DONAHOE. Sure. Well, first of all, let me thank you for your 

positive comments about our energy program. We are very proud 

of that. We embarked on an energy program probably about 4 or 

5 years ago now to look at anything and everything we do, mainly 

focused on buildings, and a lot of the costs or a lot of the focus was 

on electrical costs. And when you look at electricity, it comes down 

basically to how much it costs to keep the lights on in a facility. 

So we have done a lot of investment around special systems that 

help us in our large facilities to manage that, but we have done a 

lot of simple things, just like replacing light bulbs for a more costefficient bulb, fixtures, and very simple things like keeping the 

lights off. So we have been able to cut electric usage by about 30 

percent over the last 4 years and that is something we are very 

proud of. 

We have also looked at a number of other facility innovations 

and upgrades. We have invested in things like green roofs to help 

us not only sustain buildings for a long time, but that helps from 

an energy conservation standpoint, too. 

From a vehicle standpoint, we are looking at all the options right 

now. We have been experimenting with hydrogen vehicles, natural 

gas, diesel, electric, and hybrid. We are trying to make sure that 

we look at everything and anything out there, and we have two 

considerations. No. 1, the daily cost to operate the vehicle, but 

more importantly, the long-term costs, and that is why as we look 

at electric we have to maintain in mind, at least, the idea that you 

have to replace batteries and that has to be considered as part of 

the long-term investment, too. 

Right now, we are at a place where we will have to buy some 

vehicles in the next few years, but in order to do that, we have to 

get our finances in order. So, again, I appreciate your bill, because 

that is going to help us get the short-term finances in order so that 

we can address some of these long-term investments. 

Senator CARPER. All right. Mr. Herr, do you want to make any 

comments just in response to that, please? 

Mr. HERR. We did ask a few folks in the industry about the idea 

of the energy sharing contracts, and one of the points that they 

made to us is because the vehicles travel relatively short routes 

and use relatively small amounts of fuel, that configuration may 

not—it may work very well in buildings, but it may be a tougher 

thing to use in terms of the vehicles. 

Senator CARPER. And under the energy sharing contracts, as I 

understand it, what you have, folks will come in and will actually 

do work to reduce energy consumption for buildings and their payment stream will flow from the energy savings that are created by 

the retrofit. And that just does not work, though, for vehicles, does 

it? 

Mr. HERR. Well, it is apparently a more—it would be a new idea 

for that field, but I think given the configuration of the fleet and 

also, I think, the long—they are hoping to do another buy for another 25-year vehicle—that would raise some other questions, I 

guess, in terms of the long-term commitment for the industry. 

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Senator CARPER. Yes. One other thing I would ask you to keep 

in mind is this huge reliance we have on oil in this country. Most 

of it is from foreign sources. A lot of it is from places that are undemocratic, frankly, unreliable, and we need to reduce that. We all 

know we need to reduce that. 

Among the initiatives that we are pushing in my State is offshore wind. We hope within a couple of years to have deployed 

maybe the first offshore windmill farm off of Rehoboth Beach, 

about 12 miles out, and to be able to fuel vital electricity for at 

least 100,000 homes a day. 

But we know the wind does not always blow and the sun does 

not always shine. One of the things I would like for us to keep in 

mind, and I do not expect you to comment on this today, but as 

we think outside the box and we are looking at trying to reduce not 

just our building costs for energy but also our vehicle costs for energy, to see if there is some other way we can use that as an opportunity to make money or to save money, and I will just throw out 

an idea. 

We are moving toward hybrid vehicles. Chevrolet Volt, initially, 

they were going to build 10,000. This year, they are going to build 

50,000. Next year, they were originally going to build 50,000 and 

they are going to build 200,000. We are going to launch the Fisker, 

which will get about 80 miles per gallon, in the old GM plant in 

Delaware at the end of next year—80 miles per gallon. They have 

to be fueled someplace, and we are going to be looking for fueling 

stations for electricity. And to the extent that the Postal Service 

were in the business of using electricity to power its vehicles, there 

might be the opportunity to also sell electricity to customers, or if 

we are looking at compressed natural gas, we are looking for fueling stations there. The Postal Service could be literally a go-to 

place for that energy. 

One of the thing is if you have a fleet of—one of the things we 

have a hard time doing is storing electricity that is generated from 

unpredictable sources of electricity, wind and solar, because they 

are not always there. But if we had somehow a fleet of vehicles, 

maybe 185,000 vehicles, that could almost be a reservoir, if you 

will, of electricity, so that when the sun is shining, the wind is 

blowing, we actually charge the batteries of those vehicles and then 

sell it back onto the grid, that might be the opportunity to make 

some money for the Postal Service. 

I do not know if any of those ideas in the end will actually work 

out but this is the way we have to be thinking. We just have to 

be thinking outside of the box, being more entrepreneurial than we 

have ever been in the past, and part of that responsibility is for us 

on this side. Part is yours. And the other is maybe working with 

the folks in the auto industry, the folks in the auto industry on 

what might be possible. 

Let me just stop there. I have another round of questions and I 

will come back to that. Let me go to Senator Brown. Thanks. 

Senator BROWN. Thank you, Mr. Chairman. 

So, Mr. Donahoe, so what do you need Congress to do so you can 

get your fiscal and financial house in order? I mean, what recommendations do you want to give us so we can solve the problems? I mean, it is great—I appreciate the hearing, certainly. It is 

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a great opportunity. So I would like to hear exactly, specifically 

what you need from us in order to become financially viable. 

Mr. DONAHOE. Well, we need this bill passed this year. That is 

critical. 

Senator BROWN. Well, OK. What bill? There are two competing 

bills. What bill do you recommend be passed? 

Mr. DONAHOE. I think that the POST bill as recommended by 

Senator Carper answers the needs for the Postal Service, both in 

the short term and the long term. There are some very good portions of the bill that has been introduced by Senator Collins, and 

hopefully everybody can get together and get those parts into the 

POST bill. What the POST bill does for us is it provides immediate 

resolution on the retiree health benefits. That has to be—— 

Senator BROWN. So that is the No. 1 thing, is—— 

Mr. DONAHOE. That is the No. 1 thing. But here—— 

Senator BROWN. So you need the ability to shift that over and 

then you—— 

Mr. DONAHOE. That has to be addressed. But the critical thing, 

and that is the reason I say the entire bill, is because that only 

gets us to break even now. It does not help us in the future in 

terms of paying off debt, and even when you get out 2, 3 years 

down the line, we will be back in the same boat. 

Senator BROWN. Right. So if we allow for that shifting, it will basically bring you even and give you, what, about a year window to 

kind of—— 

Mr. DONAHOE. That gives us a year window. That is why it is 

critical we have that—— 

Senator BROWN. That is No. 1. What is No. 2? 

Mr. DONAHOE. No. 2 is to resolve and return our FERS overpayment, Federal Employees’ Retirement System. We are overpaid 

$6.9 billion into that system. Using the provisions of the POST bill 

to use that to pay against the retiree health benefits would be 

great, and also to pay debt going forward, that—— 

Senator BROWN. So assume that happens. What does that get 

you? How far out does that get you? 

Mr. DONAHOE. It is worth—it is worth, we think, $6.9 billion, 

that would pay half of our debt off. 

Senator BROWN. OK, and then what? No. 3? 

Mr. DONAHOE. And then delivery flexibility. One of the big issues 

that we are faced with going forward is the problem of declining 

First-Class revenue. I mentioned, First-Class mail is half of our 

revenue. It is two-thirds of our contribution in terms of paying for 

the overhead, so it pays for keeping the routes fully staffed on a 

daily basis, 200,000 routes, plus 35,000 Post Offices. That is all 

paid by First-Class mail. 

Senator BROWN. Well, and if the price of the first class keeps 

going up, I mean, the biggest complaint I have is that I will just 

get online and work it out. Why would I spend another 44, 50 

cents, whatever the number ultimately is going to be—— 

Mr. DONAHOE. Right. 

Senator BROWN. So what if the volume goes down to—— 

Mr. DONAHOE. That is what we are facing. This year, we are 

going to face a 7-percent loss—— 

Senator BROWN. OK—— 

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13 

Mr. DONAHOE [continuing]. In First-Class. In the last 4 years, 

first class mail has dropped 25 percent. It puts unreasonable pressure on the organization. So what we are proposing is flexibility for 

delivery, which would be the elimination—— 

Senator BROWN. So you are talking about routes and elimination 

of potential services and just the ability to get in there and kind 

of get right at it and figure out what is cost effective and what is 

not—— 

Mr. DONAHOE. Well, here is the thing. There are two things. We 

have worked very well with the unions, the Letter Carriers Union, 

Rural Carriers Union, to consolidate routes. We have taken 15,000 

routes out in the last 4 years, which is well over a billion dollars 

in cost there alone. What we need is the flexibility to eliminate Saturday delivery as required and mandated by Congress. So we need 

that bill to—— 

Senator BROWN. Just Saturday everywhere, or just Saturday 

somewhere? 

Mr. DONAHOE. What we are proposing is this. Keep the Post Offices open. Allow customers to receive mail through Post Office 

boxes on Saturday. But we would eliminate regular delivery on 

Saturday and regular collections. We would deliver Express Mail 

on Saturday. So there would still be service—— 

Senator BROWN. Yes. 

Mr. DONAHOE [continuing]. But we would take $3 billion in costs 

out of our network. 

Senator BROWN. OK. And then what is next? 

Mr. DONAHOE. What is next after that is continue to be able to 

be very flexible as far as what we do with product offerings and 

additional revenues generated in the organization. Senator Carper 

mentioned innovation. We are very pleased with a lot of the innovation that we have taken on, listening to our customers. You have 

heard about Flat Rate Boxes. I have brought one along. 

Senator BROWN. Yes. 

Mr. DONAHOE. If it fits, it ships. This is great, because customers 

can use this, many different sizes, different prices. All you do is put 

what you want in. You can even ship it from your home with a free 

carrier pick-up. We have some other products. We have a new sample box coming out. This is great, samples in there. We think there 

is a lot of growth in there. 

Here is something that is really interesting. We have been talking to the mailers about this. It is called QR codes. This ties in 

some of the latest technology with hard copy mail, and here is how 

it works. You as a mailer would send this to somebody’s house. 

They take this out of their mailbox and the message says, for more 

information, take your phone and scan this little bar code. What 

that does is that hooks you up to a Web site, and you could not 

only find out more about the product, you can actually buy the 

product online. So you can conduct the whole transaction within 

about 5 minutes. 

Senator BROWN. And you are going to get a piece of that? 

Mr. DONAHOE. What is that? 

Senator BROWN. You are going to start using QR codes? 

Mr. DONAHOE. Oh, yes. We get the postage, and we have even 

talked to people about click charges going with that. So freedom to 

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do those things, and continue working with the Postal Regulatory 

Commission. We think there are a lot of options in there, too. 

Senator BROWN. And, Mr. Herr, thank you. When you were talking about the fleet vehicles and updating, obviously, whereas they 

travel such a short amount, I have a hybrid conversion bill that 

will allow conversion, a pretty simple process, and save 25 percent 

of fuel consumed. I am interested in kind of dissecting your report 

a little bit and understanding it. So if there is a mandate to do X 

amount, does it come into play that it may not be cost effective to 

do that? 

Mr. HERR. In terms of the alternative fuels? 

Senator BROWN. Yes. 

Mr. HERR. Right now, there is a price differential of $8,000 to 

$10,000 for a hybrid vehicle compared to a non-hybrid version of 

the same vehicle. 

Senator BROWN. A substantial price difference. 

Mr. HERR [continuing]. Over a fleet of that size, this would raise 

some challenges. Now, there have also been improvements in technology. There are more fuel-efficient gas engines that are being developed, as well. Some of those have been certified by EPA as low 

emission. So, the market has been evolving, and I think that over 

the next few years, I think, as Senator Carper said, watching how 

that industry changes will be important to see what makes the 

most sense. 

Senator BROWN. OK. I’m all set, Mr. Chairman, for now. Thank 

you. 

Senator CARPER. Thanks very much. 

Senator, part of the Mark caucus here today. There are more 

Marks in the U.S. Senate than any other name. How many are 

there, four or five? Are there five? 

Senator BEGICH. Four, and if you include Marco, it would be—— 

Senator CARPER. All right. Well, we are glad that the Mark Caucus is well represented here today. Mark Begich of Alaska. 

Senator BEGICH. Thank you, Mr. Chairman. 

Let me, if I can do a quick followup on the vehicle issue on a couple fronts, I agree with you, I think, on the short term, or short 

distance. It is hard to get economics out of fuel efficiency. But on 

your long-haul trucks, are you looking on those, because some of 

the Postal Service, the large semi truck movements, I mean, that 

is where the real money is in energy savings on vehicles. Vehicles, 

not necessarily until they get into mass production and go down a 

big long path there. But trucks, in the sense of long haul, are you 

looking at that piece of the equation? 

Mr. DONAHOE. Yes, Senator, we are. We do two things with what 

we call the heavy fleet. We have our own fleet of vehicles, two-ton 

all the way up to, like you say, tractor trailers. We are working 

with the industry to have the latest as far as technology. As a matter of fact, in New York City, we operate 30 electric two-ton vehicles right now, like a big bread truck, and we have been very successful, we think, with using that technology. 

The majority of our long-haul heavy fleet is done by contract, and 

we work with our contractors on that, too. There are incentives in 

their contract to make their vehicles more energy efficient. If you 

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15 

see when you are driving along the roads today these skirts that 

they have been putting on the trailers—— 

Senator BEGICH. Right. 

Mr. DONAHOE [continuing]. All of our contractors are moving in 

that direction, because we found just a simple addition like that 

helps fuel economy. So we incent people and we work closely with 

them. 

Senator BEGICH. Have you thought of, on the vehicle end of it, 

and I forget the number, you said 185,000, 200,000 vehicles, just 

going out to the market and saying, look, here is what we need. 

We need to replace this vehicle fleet. We are open to lease, purchase, like when we got heavy into updating all our computer systems, for example, when I was Mayor, the departments came and 

said, buy all this stuff, and we said, we are not buying this stuff 

because the changeover that occurs. But also, we figured we could 

get a better deal with the companies because they would use us to 

bulk up their production, and therefore cut their costs and do other 

product sales off the same frame. In this case, it would be the same 

frame. In ours, it was the same computer technology. 

Have you looked into saying to the private sector, rather than 

you all trying to—I sometimes worry, to be very frank with you, 

with government and quasi-government trying to always analyze 

what is the best result rather than just going out to the private 

sector and saying, OK, this is what we have. We have 185,000 vehicles we need to purchase. Here are the parameters. Give us your 

best deal on what you can do to bring us in. Even though your hesitation will be, well, we do not have the money, well, you do not 

know what they can offer until you ask that question. And they are 

hungry out there, so have you approached it that way? 

Mr. DONAHOE. Here is the way we have been doing it. We have 

been working through the technologies just to get an idea of how 

well it works within our organization. One of the things we learned 

from the vehicles we have now—we call them long life, and the 

original intent was to try to keep them for 25 years—was when we 

bought them, we tested them in Arizona. Arizona is not a real good 

place to test vehicles—— 

Senator BEGICH. Come up to Alaska. 

Mr. DONAHOE [continuing]. If you need them to be in the snow. 

Well, hey, I am from Pittsburgh. We are not as snowy as you, but 

we have our obstacles going up and down hills in the wintertime. 

But at any rate, what we are doing is this. We are looking to figure 

out what the best technology is. 

Now, we are working with private industry. We have had General Motors (GM) working with us on the hydrogen fuel. We have 

had a number of different companies in on electric—Ford, Chrysler, 

and a couple other companies. So we are trying to figure out the 

best thing. 

The key for us right now is this. We have to get a good idea 

going forward, to the Chairman’s point, about what the technologies look like 4, 5, 6, and 10 years down the road. We have 

done some lease-back work in the past. It has not been the most 

effective for us from a financial standpoint because I cannot write 

any of that off from a tax perspective. So we are looking ahead. We 

have been talking with private industry. We will make some deciH605-41331-79W7 with DISTILLER

16 

sions, probably 2 or 3 years down the line, because, again, I have 

to get the short-term finances straightened out in this organization 

first. But rest assured, we are working with private industry on 

this. 

Senator BEGICH. OK. Let me ask you, and again, I thank you for 

when you came to my office a couple months ago. First, I want to 

say thank you for recognizing Alaska is unique, and we had a conversation about universal service, or service for all areas. And as 

you know, we have written you a letter regarding the 5-day service. 

I recognize you need flexibility, but my big concern is how do you 

deal with areas very remote that may have flights coming in, that 

have certain kind of supplies that come in on certain days in rural 

Alaska. It may be Saturday is the day because the weather is good 

and some other issues. 

Can you give me, first, your thought on universal service and bypass mail, the combination of the two, and then how you will address rural communities, and obviously in Alaska, with 5-day 

versus what it is today? But first, on the universal and bypass mail 

comments. 

Mr. DONAHOE. Well, we are fully in support of our mission to 

provide universal service to the American public. Any changes that 

we would make, that still comes first and foremost. Service is in 

our name and that is our mission. 

From a standpoint of how that ties into bypass, we realize how 

important the Postal Service is to not just the economy in Alaska 

like it is to the rest of the United States, but people’s livelihood 

and ability to get food and medicine, and we also take that very 

seriously, and I think our people up there do a really good job making sure that the mail gets through every day. 

Your point about the delivery and the discussion around Saturday is something that we have been looking at. We have had some 

comments from a number of people from different parts of the 

country about what do you do going forward. Our proposals are for 

delivery flexibility and it is just that. We think, for the most part, 

that we would make the changes and Saturday would be the day, 

but there are some weeks during the year that we do not deliver 

mail on Monday. We are thinking of maybe delivering on Monday 

in some of those cases. And in the case of Alaska and in the case 

of Hawaii, if there are some provisions that we have to work with, 

you just, like you said, if there are no clouds on a Saturday, the 

mail has to get through that day. We have to be flexible with that, 

too. That is why we have used the term ‘‘delivery flexibility’’—— 

Senator BEGICH. Got you. 

Mr. DONAHOE [continuing]. And not just elimination, OK. We 

want it to work, because we realize it is our responsibility to provide that service. 

Senator BEGICH. And last, because my time is about to expire, 

what is your—or how will you be engaging stakeholders, and again, 

like in the case of rural Alaska versus Anchorage or Fairbanks or 

going out to rural—how will you engage them on this schedule 

flexibility? 

Mr. DONAHOE. Well, one of the things we did, last year, we spent 

some time, and, of course, we could do that again as we move toward changes that we would be getting out of the passage of the 

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POST Act, we would engage customers the same way we do as we 

change Post Office access points. We are going through a process 

right now where we are looking at small Post Offices. We are actually mailing out letters and inviting people in to talk to us. We 

would do the same thing. We would listen to the customers who receive the mail and the customers who send the mail. 

Senator BEGICH. Very good. Thank you, Mr. Chairman. I just 

want to agree with you on the pension issue. I think that is a critical No. 1 issue, and I am very supportive, as you and I have had 

this conversation about—— 

Mr. DONAHOE. Thank you. 

Senator BEGICH [continuing]. So I think you are doing a good job 

there. Thanks. 

Senator CARPER. Thanks, Senator Begich. Senator Pryor. 

Senator PRYOR. Thank you, Mr. Chairman. 

Mr. Donahoe, let me start with you, if I may. The Postal Regulatory Commission made some recommendations, I believe it was 

last year, about some things you should do as you are closing Post 

Offices. One of the recommendations is that the people in the area 

should receive actual notice, which I assume would be like a postcard type notice, but actual notice. And apparently your current 

practice is just to notify your P.O. box customers and carrier delivery customers about the affected facility. 

And the second recommendation would be that the Postal Service 

would expand the methods available for providing and receiving 

customer input. 

And the third recommendation they made is that they would expand the contents of the public notice and include better information about alternatives for customers. 

My understanding is you did not implement those recommendations. Do you know why you did not? We are having some Post Offices close in our State and the people in our State, at least, feel 

like they are not notified of this adequately. They do not have opportunities for input. When there are opportunities for input, it 

seems like the decision has been made, and maybe you are going 

through the motions, checking the box, but you are really not taking input. So if you want to comment on that—— 

Mr. DONAHOE. We do not go through the motions, OK. Let me 

say this to you. We agree with all the recommendations and we 

have made some changes that we have posted in the Federal Register just recently. It has just closed, as a matter of fact, the comment period to implement those changes. 

Here is what we are looking at—and we like to call it access 

change versus just closing Post Offices, because the intent is to provide better access to the American public. We are going through a 

process right now and we have had a process that has been in 

place for 30 years where we have examined small offices and we 

agree that it could be much more customer friendly. Mailing notices out to customers, having community meetings, and also listening to and providing them with—listening to their recommendations and providing what they are asking for. 

We are looking at this across the country. Today, 35 percent of 

all Postal services and products are bought outside the Post Office, 

so whether it is online or at the Costco or Office Depot and places 

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like that, you can buy stamps, ship packages, and that is going to 

continue to evolve in that direction. 

What we want to do is make sure we are where the American 

public needs us to be. Now, that is the case of large downtown offices, like you see in Washington, D.C., or in rural Arkansas. What 

we want to do is take a good look at how to provide that access 

in the best way, both financially as well as the number of hours 

a day, and I will give you an example of some of the things we are 

looking at. 

In some small offices, we are looking at consolidation because 

what we are finding is many of these offices do not even have an 

hours worth of work in a day. People do not do that much business 

with us. And if it is close, to another postal facility a mile or so, 

we can consolidate. 

In other cases, what we are looking at is many towns have three 

businesses, the gas station, a general store, and a Post Office, and 

what we are looking for is talking to the general store or the gas 

station to take a contract to provide service. That keeps them in 

business. That keeps the cash-flow. That allows people to have access to those businesses and at the same time get their Postal services that way. 

There are so many options. We are willing and we want to hear 

from people, but we have to move on these things. 

Senator PRYOR. All right. Well, let me ask you this followup, 

then. You say you are listening and you want to hear from people. 

Mr. DONAHOE. Yes. 

Senator PRYOR. How many facilities have been on the list for closure, and then you went through the public comment process and 

you decided not to close those? 

Mr. DONAHOE. I will have to get back to you on that. I cannot 

tell you off the top of my head. What we have been focusing on 

most recently are places that were already what is called suspended, so they were already closed and we have just cleaned the 

paperwork up and finished them off. There is a number that we are 

looking at right now, about 1,000, but I would have to get back to 

you as far as specifics, and I will be more than happy to do that. 

Senator PRYOR. Yes. I would like to know those numbers, and 

Mr. Chairman, I have other questions for the record along those 

lines, as well, but I would like to ask about Senator Carper’s bill. 

It sounds like you have already said that you support the financial 

parts of his legislation. You think that is very important for the financial viability of the Postal Service. But what about, if you go 

to 5-day delivery, how much will that save the Postal Service? 

Mr. DONAHOE. That will save us about $3.1 billion. 

Senator PRYOR. A year? 

Mr. DONAHOE. A year. 

Senator PRYOR. OK. And on the criteria, and this is another part 

of the Chairman’s bill here, but on the criteria for closing Post Offices and Postal facilities, you mentioned today small facilities or 

maybe, I do not know if you said this, but low-volume facilities. 

What is your criteria there? What criteria does the Postal Service 

use? 

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Mr. DONAHOE. What we are looking at right now, the first look 

was just places that did less than an hours worth of business in 

a day, and that is generally 10 or less transactions. 

Senator PRYOR. So does that mean that the Post Office will close 

there? 

Mr. DONAHOE. No. 

Senator PRYOR. What does that mean? 

Mr. DONAHOE. That means we are looking at it to either consolidate it or potentially contract the work out or leave it alone. We 

are trying to keep as wide—as much of an open mind on these 

things, but again, from a financial perspective, we have to put everything on the table as far as taking costs out of the organization. 

Senator PRYOR. To me, it seems like if it is just numbers-driven, 

I can think of some areas in Senator Begich’s State where, naturally, it is going to be low volume—— 

Mr. DONAHOE. Yes. 

Senator PRYOR [continuing]. Because of the very sparse population. 

Mr. DONAHOE. Yes. 

Senator PRYOR. So would you consider that as a factor, as well? 

Mr. DONAHOE. Well, what we have to do, again to my comments 

with Senator Begich, is balance the requirement for universal service. In many cases, and this is something we definitely look at, if 

you have a small office that does not generate much revenue but 

there is nothing within 30 miles of it, we certainly would not close 

it. But if it is something that generates low revenue and there is 

a potential for better access within a half-mile or a mile, then that 

is a different story. 

Senator PRYOR. One of the provisions in Senator Carper’s bill 

talks about the shipping of alcoholic beverages, which right now 

you are prohibited from doing. 

Mr. DONAHOE. Yes. 

Senator PRYOR. Do you know how much revenue it would generate for you if you were allowed to ship alcoholic beverages? 

Mr. DONAHOE. We do not know, but we think it is an excellent 

idea because what the Postal Service brings is convenience in that 

whole industry. We have seen other posts, Australia Post, for an 

example, has done that, and that is one of their biggest growth 

products. And we have the network to provide that service, along 

with the ability to have it held. Our proposal is to hold packages 

for pick-up, so an adult would have to come in and pick that alcoholic beverage up. But we think it is a very interesting proposal. 

Senator PRYOR. OK. And one last question on Senator Carper’s 

bill, and that is there is a provision in there about when you are 

in arbitration with your employees, that the arbitrator could consider the financial condition of the Postal Service. Is that the rule 

today, or would that be a change? 

Mr. DONAHOE. That would be a change. We support that. We 

think it is important, anytime you go to arbitration, and especially 

in today’s world, where if you look at the future of the Postal Service, the arbitrator should consider that. We have recently conducted a negotiation with the American Postal Workers Union. I 

think it was a very good, responsible contract by both sides. That 

is a great thing. But we also think it is responsible for the industry 

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that protection is in there in case a union decided to go to arbitration and did not want to sit down and work with us. 

Senator PRYOR. All right. Thank you, Mr. Chairman. 

Senator CARPER. Thanks. Those were great questions. 

Senator PRYOR. The ones about your bill, were—— 

Senator CARPER. Especially the ones about my bill. 

Senator PRYOR. Were those the best questions? 

Senator CARPER. As a matter of fact, I would yield you more time 

if you want to ask more questions about my bill. [Laughter.] 

Senator PRYOR. Thank you. 

Senator CARPER. Thank you. 

I just want to followup on the shipping of wine and beer. That 

is a little bit like thinking outside the box. The idea of on Mother’s 

Day, my son who was living at the time in New Delhi, India, sent 

his mom a greeting card, and I think it was a partnership between 

Hallmark. He used pictures that he had taken when she was over 

there visiting a month or two earlier and made just a beautiful 

Mother’s Day card and it was delivered by the Postal Service. That 

is very smart. Our next-door neighbors get Netflix, and that is a 

pretty good piece of business. I am not sure how long-lived that 

business will be when people move into streaming, but it is a nice 

piece of business and it is the kind of thing that we just want you 

to do more and more of. 

I want to ask a question about how important is it that the Postal financial relief bill that we consider here in Congress go beyond 

pension and retiree health issues. How important is that? 

Mr. DONAHOE. It is critical. As I mentioned to Senator Brown, 

what happens is if we just address the retiree health benefits, that 

just gets us through this year from a cash standpoint and a net income standpoint. If you recall, last year, we lost $8.5 billion. Unfortunately, this year, we are predicting losses around $8 billion. So 

you can see, even if we got the relief, $5.5 or $5.6 billion going forward. That will not be enough. 

It is critical that we address the FERS issue, the overpayment, 

and that we can get that money back. That will go against the 

debt. We will not spend that anywhere else. It will either be on retiree health benefits or against the debt. The delivery flexibility, 

the flexibility going forward on the products that we have talked 

about, anything and everything in that bill is critical. We have to 

get the whole thing done, and then from an industry standpoint, 

we have to make sure that we make all those things happen. 

Senator CARPER. And it seems to me that there is a fair amount 

of agreement that we ought to try to redirect the overpayments in 

the Civil Service Retirement System, the overpayments into the 

Federal Employee Retirement System, and to use those to pay 

down the obligation for employee retiree health and also for debt 

and maybe for workers’ compensation. But as I understand it, that 

is only about maybe a third of the problem in terms of going forward. The flow of moneys from the Civil Service Retirement System and stopping the overpayments to FERS, I think that is only 

about a third of the problem, is that correct? 

Mr. DONAHOE. This is what would happen. Right now, we have an outstanding responsibility of $91 billion for the prepayment of 

the health benefits. We have paid $43 billion so far through rateH605-41331-79W7 with DISTILLER

21 

payer money. So that is—we have about 47 percent of the way 

paid. If we were able to access the funds, $50 to $75 billion, that 

would clear that side of the ledger. 

The volume loss that we are experiencing in first class mail 

keeps the pressure on our organization and the industry as a whole 

to continue to reduce costs and at the same time figure out how 

to use the mail in more creative ways, like I had shown here before, with standard ad mail, with packages, and even trying to slow 

down the drop-off from first class. 

One of the things that our customers told us, is that if you can 

figure out a way to make First-Class more appealing from a bill 

presentment standpoint, we will stay—we will try to work with our 

companies to stay in the mail. 

The first recommendation was what was called Reply Rides Free, 

where we were going to give—charge the same postage for 1.2 

ounces as we do for one ounce. The customers said, too complicated, 

so what we are proposing now is to give two ounces for the price 

of one. This way, the customer can use better paper, can put messages in there with their first class correspondence, because in 

many cases, that is the only way that a customer—a bill sender 

gets in front of their customer’s eyes. So our proposal is we want 

to keep our foot on the gas pedal on the cost side, like we have 

been talking about, but that revenue, the top line is just as important. 

Senator CARPER. All right. Mr. Herr, do you want to just comment very briefly on the question, really the first question I asked 

here in this exchange, and that is how important is it that the 

Postal financial relief bill that we consider here in Congress go beyond simply pensions and retiree health issues. 

Mr. HERR. I think that if you take care of one side without addressing overcapacity in the processing network and also looking at 

alternative ways to provide retail access, in a few years, you will 

come back and you will find that some of these structural problems 

will not have been addressed and you will be facing a similar set 

of challenges. Net mail volume is down 20 percent since 2006. The 

projections are that it is going to continue to decline. Addressing 

excess capacity and making sure that the systems align with the 

needs for the mail coming in is critical. 

Senator CARPER. All right. Thanks very much. 

You have concluded a round of negotiations. There will be people 

who always criticize what you do and the contract you negotiated 

with the APWU, but I think maybe most fair-minded people say it 

seems like a fair contract and it certainly heads in the right direction. You have three other unions that you deal with. Give us the 

status on negotiations with those, please. 

Mr. DONAHOE. Well, we are still in negotiations with the Rural 

Carriers. We would like to conclude a successful negotiation with 

the same outcome that we did with the APWU. I think the APWU 

is a very responsible contract, not just for the Postal Service and 

the employees, but also for the industry. So we would like to conclude with the Rural Carriers the same way. 

This November, we begin discussions—or I should say August, 

because the contract ends in November—with the Mail Handlers 

and the National Association of Letter Carriers, so we expect to see 

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22 

the same type of framework in those contracts that we have been 

able to negotiate with the APWU. 

Senator CARPER. All right. I want to go back, and this will be the 

last question I ask. We have been joined by Senator McCaskill. 

Welcome. But the other question I want to ask, I want to talk 

about business opportunity. People ask me how I feel about 6-day 

delivery and I say I am agnostic on that. And if a way could be 

found to save substantial amounts of money, maybe not as much 

as $3 billion, but substantial amounts of money through negotiations, then I think we ought to consider that. 

If we cannot find substantial savings, then we are not going to 

consider that as much, but talk to us about the opportunity costs 

of not having 6-day delivery. I have always said, and we have 

talked about this before, some day, somebody will look back at the 

Postal Service and say we had a Post Office in every community 

in America and we went to every door 6 days a week. Why did we 

not think of X, Y, or Z in being able to more fully exploit that business model? Just talk to us, just very, very briefly, about the opportunity cost of eliminating Saturday mail delivery, whether it is Express or whether it is actually doing the work of FedEx and UPS. 

Just talk about that a little bit, if you would. 

Mr. DONAHOE. We would rather not eliminate Saturday delivery. 

It is something we feel very proud of, the fact that we do go to 

homes and businesses every day, 6 days a week, to every home and 

business across America. The critical issue is the continued pressure that we have on First-Class mail and the fact that the contribution, as that drops, continues to put financial pressure on the 

organization. 

We think that it is important to provide that service. Even at 5 

days a week, we will still be the—we will have the greatest network reach of everyone because we will continue to go to every 

home and business 5 days a week. We also think it is important 

to continue to work with our customers to sustain first class as 

long as we can, as well as add new opportunities from a revenue 

standpoint. 

I think it would be—I do not know of any one specific cost area 

that we could achieve that would be able to offset the benefits of 

the reduction of that day of delivery. Our goal is to get the organization from an expense standpoint down to $60 billion as soon as 

possible, and that is a combination of reducing costs and eliminating the retiree health benefits, and delivery flexibility. That 

takes us from $73.5 down to $65 billion. And between administrative cuts, work hour cuts, successful union negotiations, I would 

like to get us down to $60 billion. 

What that does is that gives us about a $5 billion cushion from 

the revenues right now, $65 billion that we will have this year. 

That gives us the ability to pay down the debt. That keeps us 

strong going into the future. And then that addresses some of the 

capital issues that we have been talking about today. 

Senator CARPER. Thanks so much. 

Senator McCaskill, welcome. 

Senator MCCASKILL. I would like to followup on the Chairman’s 

question he just asked. We have a difference between two different 

agencies that say that the 5-day delivery—you all say, Mr. 

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23 

Donahoe, that it is going to save $3 billion, and the Regulatory 

Commission said it would generate $1.7 billion. I do not know how 

much of that difference is attributable to the loss of business that 

inevitably is going to occur when you cannot do 6-day delivery. I 

mean, you guys have an advantage right now with 6-day delivery. 

If you were looking at this through the very cold lens of just a pure 

business model, you are giving away the major advantage you have 

when you give away that sixth day. 

Can you speak to why there is such a wide disparity between the 

savings that these two agencies came up with, and what keeps us 

from going to four? And are we not really, if we are not careful, 

if we go to five, are we not really talking about the beginning of 

a death spiral here? 

Mr. DONAHOE. Yes. Let me address a number of your questions, 

Senator. First of all, just to repeat what I said to the Chairman, 

we do not want to go from the six to five, but financially, we are 

in a situation where we have to take that as an option going forward. It is tied directly to the loss of the contribution on FirstClass mail. If I had an answer to stop that, we would get that in 

place right now, but America is changing. People are paying bills 

online. Every bill that is paid online, that is 18 cents that comes 

out of our coffers to cover 6-day delivery and a number of the small 

Post Offices out there. 

The difference between our estimate and what the PRC estimates boils down to two things. Their estimate of revenue loss is 

$600 million. Ours is $200 million. We have talked to a lot of customers. We have done a lot of opinion polls. Many customers in the 

past used to make sure that we delivered mail on Saturday. They 

have moved away from Saturday. It is by far our lightest day of 

volume for two reasons. No. 1, many businesses are closed on Saturday. And No. 2, what we have been told is people, to a large extent, do not look at their mail on Saturday as much as they do the 

rest of the week because they are busy with many other things. So 

the $200 versus the $600 million, that is one part of the difference. 

The other part of the difference is our estimates of being able to 

save and to capture the costs. We think that we can capture a substantial portion of the cost of Saturday delivery by absorbing it into 

Monday. The reason we say that is 95 percent of the letter mail 

that we deliver today is sorted by automated machines in our processing facilities. So that variable cost in the morning that a carrier 

would have experienced years ago, they do not experience today. 

We also know that once you are out on a route and you deliver 

to a number of houses, our average coverage factor is around 90 

percent today. A letter carrier absorbs a lot of that time in their 

daily work. Saturday business today costs us $3.8 billion. We think 

we can save $3.1 billion. We know we will have to add some costs 

in there that we cannot absorb, but we think, based on our history 

of taking costs out of this organization, we will be able to do that. 

The other thing is, I have committed everybody to do it. It is 

going to get done. 

Senator MCCASKILL. Let me also ask you about the potential impact on 5-day delivery on rural residents. I was disappointed when 

I realized that the Postal Service’s survey that you did in this regard were not really in rural communities. I mean, one was in subH605-41331-79W7 with DISTILLER

24 

urban Atlanta and the other was suburban Seattle. Would it be 

possible to take a real look at a rural community, not one that is 

within a commuting distance of a major city? It is those folks that, 

in terms of getting their medicine, which, of course, we all know 

that Saturday delivery is very important for, in terms of their ability to receive mail on Saturdays. Is there a reason why what I 

would call a true rural community was not included in the survey? 

Mr. DONAHOE. Well, we can go back and take a look at that. 

There have also been a number of surveys done across the country 

by Rasmussen and the Gallup Poll that have looked at many different communities across the country, and consistently what 

comes back is this. When asked the question, if you made a choice 

between no delivery Saturday, closing Post Offices, or substantial 

increases in postage rates, 70 percent of Americans have come back 

and said, eliminate Saturday delivery. 

Our proposal is to eliminate delivery but to keep the Post Offices 

open. So from a rural perspective, people would still have access to 

Postal services, and if they wanted, they could rent a box, too, and 

get their mail that way. 

Senator MCCASKILL. The rural Post Office closings, I am a little 

worried about what I have learned, that there may be a situation 

where you call something other than a Post Office so that you get 

around some of the requirements in terms of notice to the community. Could you illuminate that situation for me, because changing 

the name of a Post Office to a substation or to some other name 

and then not having to go to the community and get the kind of 

input that is needed, I mean, I am not—I get it that we have a 

huge problem here. I get it that the money coming in does not 

match the money going out. And I am not trying to throw tacks in 

front of the bus, except I do think it is important that these rural 

communities feel like that they have an opportunity to weigh in 

and I want to make sure that there is not some ability that you 

may have to get around the regulations for notice and public hearing by just renaming it something different. 

Mr. DONAHOE. We agree 100 percent. We have a process in place 

right now—as a matter of fact, we just finished up a Federal Register notice where we will provide public notice and gather public 

input on any changes to access that we make out there. We know 

that the Postal Service, especially in rural areas, is very important. 

And to your point, we have to balance the cost and the benefits to 

those. 

We will not do anything to hoodwink the American public that 

way. We have what we are proposing in the Federal Register is a 

top-down approach. That assures fairness, so you do not have one 

State that is going gung-ho and another that does not take a look 

at it. It also assures that we make the right decisions. With Senator Begich, we were talking earlier about the importance of what 

we do in Alaska, and I appreciate in Missouri and in Arkansas, we 

have a lot of rural areas, too. 

So you have my assurances that we will make it a very fair process. People will have plenty of input. We will make the right decisions. We will make sure that we reach out. We are going to send— 

anybody that is going to be affected, postcards will go out to cusH605-41331-79W7 with DISTILLER

25 

tomers. We will have a public hearing. We will discuss it. We will 

take their input. 

Senator MCCASKILL. Mr. Chairman, I want to compliment you on 

so many pieces, so many parts of your legislation. I think a lot of 

it is very, very strong, and I know how hard you have worked on 

this. And I do want to compliment Mr. Donahoe. I think you are 

trying very hard in very difficult circumstances to figure out how 

to put this puzzle together. 

I do feel very strongly that if we can save 6 days, it is very important to the integrity of the product we have, which is the U.S. 

Postal Service, rain, snow, or sleet, 6 days a week, it is going to 

happen, and I worry that we are going to diminish the ability of 

that business model to really survive if we start cannibalizing it by 

going to 5 days. So if there is any way I can work with you to save 

the 6-day delivery, I sure would like to do that. 

Senator CARPER. Good. Well, let us give it a shot. I am going to 

go back to the negotiations that will take place between the Postal 

Service and one or two of the unions going forward. That is a part 

of it, as well. And our ability to help them in other ways—— 

Mr. DONAHOE. Yes. 

Senator CARPER [continuing]. To compensate for the—savings which are anywhere between $1.7 billion and roughly $3.1 billion. 

It is somewhere between there. That is real money. 

Mr. DONAHOE. It is a lot—— 

Senator CARPER. That is real money. 

I want to come back, and before I yield to Senator Begich for his 

closing questions, just for clarification, your view of what would 

still be provided in a Postal world where there is no Saturday delivery. Would it include access to post office boxes? 

Mr. DONAHOE. Sure. 

Senator CARPER. Post Offices would be open? 

Mr. DONAHOE. Yes. 

Senator CARPER. What did you say about Express Mail? 

Mr. DONAHOE. Here is what we would do. We would keep the 

Post Offices open. We would have Post Office box accessibility. We 

would deliver Express Mail. We would also run the network, so 

mail coming through the network, payments and remittance for 

credit card companies and what not, that would all still run, so 

Monday that would be delivered, or in some cases, if people have 

what is called caller service, they would have access 24 hours a day 

at our large facilities for that mail. 

Senator CARPER. All right. Thanks very much. Senator Begich. 

Senator BEGICH. Mine is just a clarification and then just a 

statement. I caught what you had said to Senator Pryor in regards 

to 30 miles or within. As you know, in Alaska, 80 percent of our 

area is non-road access, so I am assuming that is part of the equation. 

Mr. DONAHOE. Sure. 

Senator BEGICH. OK, because when we did Essential Air Service 

(EAS), there was a great debate that we would cutoff Essential Air 

Service because you can get to a hub, to the next town. In many 

cases, it is hundreds and hundreds of miles away, and no road to 

get there. 

Mr. DONAHOE. Right. 

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26 

Senator BEGICH. So you recognize that as—— 

Mr. DONAHOE. Absolutely. Again, Alaska presents a situation 

with universal service similar to Hawaii. 

Senator BEGICH. Right. 

Mr. DONAHOE. Those are the two States that, really, we have to 

take a different look as we work through that. 

Senator BEGICH. Great. And just a statement. As you send out 

notifications to folks, I know everyone gets mail. They get material 

in the mail and they do not really pay attention to it until something bad happens, and then they go, I did not realize that was 

happening. In more of just jest, I would send out your postcard and 

it would say, ‘‘Closing your Post Office,’’ and I guarantee you, you 

will get 100 percent engagement. Otherwise, if it is just a regular, 

‘‘We are notifying you of the Post Office situation and change in operation,’’ here is what will happen. They will look. They will set it 

aside. They will pull the catalog and sit down and read their catalog for the day. 

Mr. DONAHOE. Maybe we will use the QR code, click here to find 

out what is going on with your Post Office. 

Senator BEGICH. I will tell you, Mr. Chairman—— 

Mr. DONAHOE. If anybody complains, though, I am going to tell 

them that you gave me the idea. 

Senator BEGICH. Well, I will tell you what happened. I will just 

give you one quick example. I was invited to a meeting when I was 

Mayor and it was about a land use issue. Of course, no one was 

going to come out, probably, for it, because it was so many months 

away. So the flier they sent out to the neighborhood was, ‘‘Come 

learn about how your taxes are going up.’’ The room had full capacity, and the two local city council members came in and said, ‘‘You 

are up front. We are not.’’ And then we talked about land issues 

and people were a little confused, but they got fully engaged. 

Mr. DONAHOE. Thank you for using the mail, too. We appreciate 

that. 

Senator BEGICH. They did, and they hand-delivered it on top of 

that. 

Mr. DONAHOE. There you go. 

Senator BEGICH. Thank you. 

Senator CARPER. Senator Begich, thanks so much. Thanks for 

being here today and for being a very active participant on this 

issue. We need your full participation, so thanks. 

All right. I think that is going to do it for our first panel. Thank 

you very much for joining us. Thanks for your testimony. 

Mr. DONAHOE. Thank you, Mr. Chairman. 

Senator CARPER. There will be some followup questions, I am 

sure, and we would appreciate your prompt response to those. 

Thank you. 

Senator BEGICH. Mr. Chairman, as the panel is coming up, do we 

have a vote at noon? 

Senator CARPER. Initially, we were going to have it at noon. It 

has been moved to, I am told, 12:17. 

Senator BEGICH. Twelve-seventeen. 

Senator CARPER. Twelve-seventeen, so we have the opportunity 

to hear our panel, the second panel, and will probably have to 

break it off around 12:30. 

H605-41331-79W7 with DISTILLER

27 

Senator BEGICH. OK. Thank you. 

Senator CARPER. Sure. Thank you. 

If you would all go ahead and find your seats, please, and I will 

ask those who are planning to leave to go ahead and make your 

way to the door. [Pause.] 

I am going to briefly introduce the witnesses for our second 

panel. As I said earlier, if you did not catch it, our vote has been 

moved from noon to about 12:15 and I want to complete the testimony for this panel before we have to break. We have a vote followed immediately by our respective weekly caucus meetings. But 

I want to finish this panel, have a chance to ask you a couple of 

questions, and then we will move on. 

Our first witness on panel two today is Margaret Cigno, pinch 

hitting today for Ruth Goldway, and we welcome you, the Director 

of Accountability and Compliance at the Postal Regulatory Commission. Ms. Cigno has also worked as a Specialist on rates and 

classification at the Commission and served as the lead Postal 

Auditor at GAO. 

Next, David Williams. Welcome. Nice to see you again. He is the 

Postal Service’s Inspector General. Mr. Williams is the second independent Inspector General at the Postal Service in its history, is 

that correct? 

Mr. WILLIAMS. Yes, Senator. 

Senator CARPER. All right. Before taking on the job, he worked 

as a Deputy Assistant Administrator for the Aviation Operation at 

the Transportation Security Administration. He has also served as 

Inspector General at five other agencies. Time allowed, I would ask 

you to tell us which ones, but we will find out another day. 

Next is Cliff Guffey, President of the American Postal Workers 

Union. How long have you been in office now? 

Mr. GUFFEY. Less than a year. 

Senator CARPER. All right. Does it seem longer? [Laughter.] 

Mr. GUFFEY. It has the propensity to be difficult. 

Senator CARPER. You have had a full year. Well, congratulations 

so far. I know it is not easy. 

Before becoming President, Mr. Guffey served for 9 years as the 

APWU’s Executive Vice President. He has served in top leadership 

positions in the union since 1986, and he started his career with 

the Postal Service in 1971. 

Next is Mark Strong, President of the National League of Postmasters, where he has held leadership positions in the League 

since 2006, I am told. Mr. Strong is currently the Postmaster in 

Sun City, Arizona. We could use some sun around this city. Maybe 

in a couple of days, we will get it. 

Finally, we have Jerry Cerasale, Senior Vice President for Government Affairs at the Direct Marketing Association (DMA). Mr. 

Cerasale has a long history working on Postal issues, including 

stints at the House Committee on Post Office and Civil Service and 

on the legal staffs at both the Postal Service and the Postal Regulatory Commission. 

It is great to see you. Thanks for coming today. Your full testimony will be a part of the record. Please proceed. 

H605-41331-79W7 with DISTILLER

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1The prepared statement of Ms. Cigno appears in the appendix on page 81. 

2The prepared statement of Ms. Goldway appears in the appendix on page 76. 

STATEMENT OF MARGARET CIGNO,1 DIRECTOR OF ACCOUNTABILITY AND COMPLIANCE, U.S. POSTAL REGULATORY COMMISSION 

Ms. CIGNO. Good morning, Chairman Carper, Senator Brown, 

Members of the Subcommittee. I thank you for the opportunity to 

present the views of the Postal Regulatory Commission on addressing the U.S. Postal Service’s financial crisis. 

Commission Chairman Ruth Goldway regrets being unable to 

testify personally today.2 She has prepared written comments highlighting her concerns with the rapid pace of Post Office closings. I 

ask that Chairman Goldway’s comments be made part of the official hearing record. 

Senator CARPER. Without objection. 

Ms. CIGNO. In 4 months, the U.S. Postal Service will conclude its 

fiscal year and it will not have sufficient cash or borrowing authority to pay all of its bills. Commission analysis during review of the 

Postal Service’s request for an exigent rate increase found that the 

Postal Service’s cash-flow problem is related to an overly ambitious 

requirement for the Postal Service to prefund its future retiree 

health benefit premiums. 

Over the past 4 years, the Postal Service has paid $21.9 billion 

to prefund these benefits. All other things being equal, without the 

prefunding requirement, the Postal Service would have achieved a 

small net profit over that time. Instead, over the last 4 years, it 

has accumulated losses exceeding $20 billion. This year, it will exhaust its borrowing authority and anticipates another multi-billiondollar loss that will leave the agency insolvent. 

Chairman Carper, you have proposed legislation to address this 

immediate crisis and to build on the Postal operating model of the 

Postal Accountability Enhancement Act (PAEA). The Commission 

supports the fundamental approach of your bill in addressing the 

financial crisis as well as longstanding issues related to Postal 

Service funding of its employee pensions and its future retiree 

health benefits. The strategy is grounded on objective, expert analysis that incorporates the best modern practices of business and 

government, as identified by the Commission in previous studies. 

The Commission appreciates that your bill also provides for regulatory oversight of non-Postal products and services that may be 

proposed under new flexibilities to be provided to the Postal Service. This will promote Postal growth and innovation while protecting the public interest, as is currently the case with Postal 

products and services. 

The Commission also supports modernization of its advisory 

opinion process to make it quicker and more robust. The requirement for the Postal Service to respond to the issues and recommendations in the advisory opinion is an important improvement which may be further strengthened by requiring its response 

prior to implementation of the proposed changes. 

The bill would alter the advisory opinion process to produce decisions within 90 days from the date of the Postal Service’s request 

to the Commission. Under current law, the Commission evaluates 

H605-41331-79W7 with DISTILLER

29 

1The prepared statement of Mr. Williams appears in the appendix on page 85. 

national service changes in formal hearings on the record that are 

subject to the Administrative Procedures Act protections. This type 

of proceeding can be time consuming. 

The proposed legislation would diminish the opportunity for citizens, mailers, competitors, and other interested parties to obtain 

information from the Postal Service and fully test Postal Service 

presumptions. As a result, the Commission would be able to 

produce its opinions more promptly. However, the detailed analysis 

and extensive outreach of the Commission’s recent advisory opinion 

on 5-day delivery would not have been possible in a 90-day case. 

The Commission has not yet concluded whether it supports the 90- 

day limit. 

The Postal Service has also advised that in the near future, it 

plans to request an advisory opinion related to the closing of a 

large number of Post Offices nationwide. The Commission understands the Postal Service’s need to adjust its retail network to reflect changing customer demand and its own evolving capabilities. 

However, the PAEA requires that affected Postal customers be 

properly notified and involved when the Postal Service considers 

closing the retail office on which they depend. 

The Postal Service has proposed revisions to its rules for closing 

and consolidating retail facilities. The Commission has provided its 

comments to the Postal Service, including recommendations to better ensure customers’ ability to offer input, improve the evaluation 

of affected facilities, and coordinate discontinuances with the availability of replacement retail services. 

In closing, I would like to reiterate the Commission’s support for 

addressing the Postal Service’s financial crisis as outlined in your 

bill. Timely congressional action to address the pension and retiree 

health benefit issues remain a key element of any reform effort. 

Effective oversight is vital when the entire mail system is under 

such great stress. The Commission will ensure Postal transparency 

and accountability and promote positive change and adequate service levels needed to keep the Postal Service vital and relevant. 

That concludes my oral statement. I would be happy to answer 

any questions. 

Senator CARPER. Well, I do not think you anticipated being here 

today, but since Chairwoman Goldway could not be here, you did 

a nice job and thank you very much for your participation. Give her 

our best. Thank you. 

Mr. Williams, please proceed. 

STATEMENT OF DAVID WILLIAMS,1 INSPECTOR GENERAL, U.S. 

POSTAL SERVICE 

Mr. WILLIAMS. Mr. Chairman and Members of the Subcommittee, 

I appreciate the opportunity to discuss the serious financial condition of the Postal Service, whose leadership anticipates being unable to meet its financial obligations in the fall. 

The Postal Accountability and Enhancement Act was crafted to 

incentivize the Postal Service to adopt a volume-driven infrastructure. PAEA also required prefunding of benefit plans, but the framers were unaware that the benefit funds had been subject to 

H605-41331-79W7 with DISTILLER

30 

wrongful overcharges. Consequently, the resulting payments have 

caused almost 90 percent of the $20 billion loss in the past 4 years. 

This causes inflated infrastructure costs and burdensome debt. 

In the near term, cost containment and infrastructure optimization are underway. It will take time, unless numerous large-scale 

actions are undertaken simultaneously, which could outstrip management’s ability to control optimization and to avoid unintended 

consequences, including service disruptions. 

So what is needed? In addition to benefit reform, Postal Service 

optimization of plants, Post Offices, and administrative infrastructure, my office has recommended conversion to evaluated letter carrier routes for effective management, flexible work rules matching 

the ebb and flow of mail, a comprehensive delivery point strategy 

maximizing curbside delivery and cluster boxes, evaluating the 

number of area and district offices, simplification of mail acceptance and pricing, growing the value of mail, and finding the Postal 

Service’s role in the digital age. 

The digital age is continuing to disrupt many communication industries. The technologies provide Americans low-cost instant communications, sophisticated data organization, search engines, 

hyperlinks, and impressive mobility. However, Americans need 

stronger infrastructures to cope with serious collateral issues. I believe citizens would benefit if the Postal Service could support 

Americans in addressing the emerging confidentiality, security, dependability, and privacy problems of digital communications; partner with Federal, State, and local government agencies to provide 

e-government services and Post Office window services for more 

complex business and provide a safety net for those being left behind by the digital revolution. 

Senator Carper’s bill proposes allowing the Postal Service to provide non-Postal services utilizing Postal physical and digital infrastructure in a manner consistent with public interest. The bill 

would provide the Postal Service an opportunity to find its digital 

role in America. 

The Postal Service has set aside more than $300 billion in cash 

to meet its future benefit fund obligations. Additional contributions 

of $55 billion will result in a 100 percent prefunding level. The 

$300 billion does not include the overcharges of $82 billion documented by my office and others. If the overcharges are returned, 

the prefunding levels will exceed 100 percent. 

While the benefit funds are reexamined and awaiting action, 

Congress and the Postal Service could explore an option of clarifying prefunding requirements to be inclusive of Postal Service assets. The purchase price of Postal Service real estate is $27 billion, 

but the fair market value is far greater. The Postal Service owns 

real estate in premium locations. For example, the nearby National 

Postal Museum has a purchase price of $47 million, but a tax assessed value of $304 million. If this example is any indication of 

the fair market value, taxpayers are well protected and a surplus 

of assets would likely be given over to the Treasury if the Postal 

Service were suddenly shut down, a very unlikely event. 

Alternatively, there are statutory provisions that may allow the 

Postal Service to work with OPM to fashion an appropriate arrangement to recognize the assets and meet the obligation. 

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1The prepared statement of Mr. Guffey appears in the appendix on page 90. 

1The chart referenced by Mr. Guffey appears in the appendix on page 92. 

Against this backdrop of overfunding, the Postal Service continues to be billed $11 billion every year for retiree obligations instead of taking the annual costs out of the funds created for that 

purpose. As I have testified before, I agree with Senator Collins’s 

call in September 2010 for OPM to change its calculation of Postal 

Service pension fund payments. Failing action by OPM, Senator 

Carper’s bill to require an OPM recalculation to correct the mistakes and balance the accounts is desperately needed to stop the 

crippling payments. 

As I outlined, there is an overwhelming need for a substantial 

and objective review of the benefit plans and payments. This will 

allow construction of a clear, fair, and accurate financial map for 

the Postal Service’s future course. Otherwise, the Postal Service 

will be billed into insolvency while overfunding its benefit funds. 

Thank you, sir. 

Senator CARPER. Thanks for your testimony. Not only thanks for 

your testimony, thanks for the work that you have done and continue to do on these areas. 

Mr. Guffey, please proceed. Thank you so much for joining us. 

STATEMENT OF CLIFF GUFFEY,1 PRESIDENT, AMERICAN 

POSTAL WORKERS UNION 

Mr. GUFFEY. Mr. Chairman and Members of the Subcommittee, 

I am Cliff Guffey, President of the American Postal Workers Union. 

I am pleased to participate in this hearing today with PRC Representative Margaret Cigno and Inspector General Williams, who 

have through their hard work, dedication, and leadership done 

much to help preserve and protect the U.S. Postal Service. 

As the Chairman and this Subcommittee know, legislative relief 

is necessary to restore the financial stability of the Postal Service. 

The APWU very much appreciates the leadership shown by the 

Chairman in proposing legislation that will meet the Postal Service’s critical need for immediate financial relief. We strongly support and the entire Postal community strongly supports the proposal to permit the Postal Service to use more than $5 billion each 

year from its overpayments in the civil service and FERS retirement accounts to meet its obligations to prefund Postal retiree 

health benefits and pay workers’ compensation obligations. 

It bears emphasis that this is not a request for a subsidy or a 

bailout of the Postal Service. The Postal Service has been dealing 

effectively with the challenge it is facing because of declining mail 

volumes. We are confident that under the leadership of Postmaster 

General Donahoe, it will continue to do so. 

Exhibit A to this testimony is a chart2 that shows that the Postal 

Service’s net income for Fiscal Years 2007 through 2010—as this 

chart shows, during this period that included the most severe recession since the Great Depression, the Postal Service had a net income excluding retiree health benefits prefunding payments of 

more than $600 million, and only in a government agency could 

they refer to that as a little amount of profit. That is profit. 

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32 

This was achieved by the Postal Service through very aggressive 

cost cutting measures. Over the past 31⁄2 years, the Postal Service 

has reduced work hours by 245 million hours and cut costs by $12 

billion. It will cut another 30 to 40 million work hours this year. 

The historic collective bargaining agreement just concluded by the 

APWU and the Postal Service will save the Postal Service billions 

of dollars and will provide necessary workforce and work hour 

flexibility. 

Thus, the Postal Service has shown the capacity to sustain itself 

during difficult times of declining mail volumes. What it cannot 

sustain is the burden of the unique and unreasonable requirement 

that it prefund its retiree health benefits over a 10-year period 

without access to the billions of dollars by which it already has 

overfunded CSRS and FERS. 

During the 4-year period of 2007 through 2010, when the Postal 

Service otherwise would have had a financial surplus, the statutorily required payments to prefund retiree health benefits totaled 

nearly $21 billion. In Fiscal Year 2010, the payment for retiree 

health benefits consumed 8.2 percent of Postal revenue. With the 

additional payment of $2.2 billion to fund retiree health benefits for 

current employees, that meant that the Postal Service was required 

to pay 11.5 percent of revenue for retiree health benefits. These 

payments deprived the Postal Service of capital needed to improve 

and maintain its distribution networks and develop and launch 

new products, and they resulted in a $12 billion debt. 

Mr. Chairman, I want to emphasize that we very much appreciate the leadership of the Chairman in addressing the issues of 

CSRS and FERS overfunding and retiree health benefits 

prefunding. We also appreciate the fact that Senator Collins has introduced legislation that would address the issues of CSRS and 

FERS overfunding and provide relief from retiree health benefits 

funding requirements, and we are encouraged by the fact that the 

members of the House also have introduced bills that would deal 

with these problems. 

There is a broad and strong consensus in the Postal community 

to support these measures. There is also a broad consensus to support the proposals to revise the prohibition on offering non-Postal 

products to permit the Postal Service to partner with State and 

local governments to offer additional government services in Postal 

facilities and accept beer and wine for shipment. We also support 

efforts to help the Postal Service adapt to changes in communications while continuing to fulfill the essential mission. These measures will help bolster Postal revenues and help maintain a Postal 

network that can deliver Postal services to every part of the country. 

I think that everyone should remember that Postal Service Post 

Offices are where the American flag flies in every community in 

this country, and to take those flags down and replace them with 

grocery stores or gas stations should be the last alternative and we 

should be putting government services, more government services, 

into those Postal facilities. We will help in any way we can to support sensible legislation that does not seek to address Postal financial problems at the expense of Postal employees. 

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1The prepared statement of Mr. Strong appears in the appendix on page 103. 

I will be happy to answer any questions the Subcommittee may 

have. Thank you. 

Senator CARPER. Thanks, Mr. Guffey. 

Mr. Strong, you are recognized. Please proceed. 

STATEMENT OF MARK STRONG,1 PRESIDENT, NATIONAL 

LEAGUE OF POSTMASTERS 

Mr. STRONG. Mr. Chairman, Members of the Subcommittee, 

thank you for inviting the National League of Postmasters to testify here before you today. It is a pleasure to be here and I commend you for holding this hearing. 

My name is Mark Strong and I am the Postmaster of Sun City, 

Arizona, a very large urban Post Office. I am the President of the 

League. I am originally from Montana and served in many small, 

rural Post Offices. Founded in the 19th century, the League is a 

national trade association that represents Postmasters throughout 

the United States. 

In examining how to address the Postal Service financial crisis, 

it is critical to understand why the Postal Service finds itself in the 

position it does today. It is not because of electronic diversion of 

mail. True, electronic diversion is slowly pulling some mail out of 

the system, but that has been with us for decades. Electronic diversion was a factor 30 years ago, was a factor present during the recession, and will be a factor for years to come. Electronic diversion 

has been and is a fundamental factor of Postal life and has not 

changed much in recent years. 

The two largest factors that caused the current crisis were the 

recession and the fact that the Postal Service has to make annual 

payments to prefund its retiree health benefit obligation, even 

though there are surplus funds in this pension plan. Today, the 

Postal Service is still running a deficit, but mostly because of the 

retiree health benefit payments that we are making. We would not 

be running a deficit if we were not paying $5 billion-plus into our 

Retiree Health Benefit Fund, despite the fact that there is $50 to 

$75 billion surplus sitting in our pension fund. 

Both Senator Carper’s bill and Senator Collins’s bill would fix 

this problem, and we strongly support those efforts. In fact, the 

League was one of the original supporters of Senator Collins’s bill. 

Without substantial relief in this area, the Postal Service cannot 

continue as a viable entity for the long term. No business of any 

type in any part of the country could afford to pay a $5 billion supplemental annual income tax that its competitors do not pay and 

remain viable. 

One thing the Postal Service should not do is close small Post Offices. As Senator Collins will tell anyone, small rural Post Offices 

are the keystone of many rural communities, and keeping them 

open costs the Postal Service very little money. According to the 

PRC data, and we recently checked this, the total net cost of the 

10,000 smallest Post Offices, more than one-third of all Post Offices 

in the United States, is less than seven-tenths of one percent of the 

total cost for the U.S. Postal Service. This is nothing, a rounding 

error in Postal Service spreadsheets. Closing small Post Offices 

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1The prepared statement of Mr. Cerasale appears in the appendix on page 117. 

does not save the Postal Service any significant amount of money, 

but it is one of those cost-saving measures that is popular with 

some mid-level Postal officials because they can look good and give 

the impression that they are driving large costs out of the system. 

Closing Post Offices is not popular with the American public. As 

indicated in my testimony, according to the 2010 Gallup Poll, 86 

percent of Americans oppose closing Post Offices. This is overwhelming nationwide endorsement of Post Offices, consistent with 

a 2009 Gallup Poll which showed that 88 percent of the public opposed closing Post Offices. 

As shown in my testimony, few other government services rank 

this high in importance in the public’s mind. The reason for this 

is that, as detailed in my testimony, Post Offices and Postmasters 

do much more than sell stamps and deliver mail. They perform all 

sorts of other community functions and are the glue that binds 

rural America together. 

Although it is sometimes difficult for urbanites to understand 

this, those words, the glue that binds rural America together, are 

not empty words. These words are not useless rhetoric and they are 

not gross exaggeration. They are the truth. If you allow the Postal 

Service to close substantial numbers of rural Post Offices, then you 

will seriously hurt America, even if the Postal Service could provide adequate Postal services without them, which it cannot do. 

One way to maintain rural Post Offices is to allow them to sell 

other non-Postal products, such as office supplies, in order to offset 

some of their costs. Senator Carper’s bill would do this. This poses 

a minimal problem of competition with the private sector, since 

there would be no local competitors in most rural areas. 

Thank you for considering our views, and I will take any questions. 

Senator CARPER. Thanks, Mr. Strong, for sharing those views 

with us today. 

Mr. Cerasale, please proceed. 

STATEMENT OF JERRY CERASALE,1 SENIOR VICE PRESIDENT, 

GOVERNMENT AFFAIRS, DIRECT MARKETING ASSOCIATION 

Mr. CERASALE. Good afternoon, Senator Carper. Thank you for 

having me here—— 

Senator CARPER. Our vote has just started, so we have about 15 

minutes and then we will wrap it up. 

Mr. CERASALE. OK. I will be very quick, sir. 

Senator CARPER. Go right ahead. 

Mr. CERASALE. Thank you for having me here and thank you for 

all that you have done for the Postal Service and the DMA. 

Senator CARPER. It was my pleasure. 

Mr. CERASALE. I am Jerry Cerasale, Senior Vice President for 

DMA. DMA is the leading trade organization for marketers and 

nonprofits, reaching consumers directly. Our members represent 

about 70 to 80 percent of the mail and 85 percent of Postal Service 

revenues. The Postal Service is an important communication channel for all our members and those of the magazine publishers, AlliH605-41331-79W7 with DISTILLER

35 

ance of Nonprofit Mailers, and the 21st Century Coalition, and it 

is in financial crisis. 

We agree with you on what you have done on the pensions. The 

pension obligations for every hour worked in the Postal Service 

have been fully funded by postage that we have paid. We have also 

paid between $50 to $75 billion in pension obligations for hours 

worked before the Postal Service was ever created, and that is a 

tax. We have also overpaid in FERS payments. And we ask, as you 

have done, we ask that these overpayments be used to offset the 

retiree health payments that are currently harming the cash-flow 

position of the Postal Service. We think that legislation should require the government to use any pension overpayment refund for 

retiree health benefits until those legacy costs are completely funded. 

Concerning facilities, we agree with you in the POST Act to give 

the Postal Service more flexibility. We support the use of kiosks 

and others to give retail services to the American public. We also 

support, as Senator Collins has, the collocation of Postal facilities 

in other retail outlets and vice-versa. We think the Postal Service 

should look very hard at collocating with Federal, State, and local 

governments, as well. 

We support the provisions on new products in the POST Act. We 

think that the Postal Service should work with and partner with 

the private sector with their expertise on those products, however, 

rather than starting out from scratch. We want to commend fully 

the Postal Service trying to merge and leverage mobile and print 

communications with their summer sale with the QR codes. We say 

to Postmaster General Donahoe, keep it up! Bring some more! 

We support the provisions in S. 353 requiring a cost-benefit analysis for any new mail preparation requirement, and if that costbenefit analysis shows that there is a shift of cost to the mailer, 

we think that should be considered as a rate increase under the 

cap, as well. 

DMA specifically has two concerns with the POST Act. First, we 

think that powers given specifically to the Governors should not be 

delegated. There is a reason to have Presidential-appointed Governors and we think that specific powers of the Governors should 

not be delegated. 

We also believe that the 45-day decision requirement on the 

Postal Regulatory Commission for transfer, just for transfer of 

products, from the market dominant to competitive and vice-versa, 

is too short. Transfer between those provisions can have serious 

consequences for DMA members, and we believe that extending the 

period would not harm the Postal Service because that product is 

still being offered, even though the PRC is looking at the transfer. 

And finally, the Postal Service has to right-size to deliver 150 billion pieces of mail rather than 250 billion, and we cannot afford 

that excess capacity and it has to be done today and not tomorrow. 

Thank you very much. 

Senator CARPER. Thanks so much for your testimony. In fact, I 

thank all of you for really valuable testimony. 

I just wanted to share, on the subject of whether or not the world 

has changed with regard to diversion to electronic media, I was 

just back over in Afghanistan and Pakistan. Senator Begich and I 

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36 

have been over there together before. I know Scott Brown and I 

were over there a year or so ago. 

And I think about what the world was like when I was a Naval 

flight officer serving in Southeast Asia during the Vietnam War 

and how important to us and our squadron—I was not on a ship 

or a submarine, but our squadron—how important the mail was to 

us, just to hear from our friends and families back home, to get letters, cards. I lived in California. We were home stationed in California when we were not overseas, and to be able to receive like 

at least a Sunday San Francisco Chronicle about 5 days late, to receive Time or Newsweek, again, about 4 or 5 days late, but at least 

to have them. 

When I was over in Afghanistan 2 or 3 weeks ago, I saw a lot 

of our soldiers, sailors, airmen, marines Skyping. They can literally 

access the San Francisco Chronicle or any newspaper they want to 

through the Internet. They can pay their bills electronically. I 

mean, the world has changed just dramatically and continues to. 

And for us, we have to have a Postal Service. We have to have 

one that does not add to our budget deficit. The idea that, whether 

or not it is 86 percent of the people that oppose closing Post Offices 

or 76 or 66 percent, at least that many people also oppose running 

huge budget deficits and they want us to do something about that, 

and what we have to do is to come up with a way to continue to 

have a strong, vibrant Postal Service, but at the end of the day, 

not add to our $230 billion for our budget deficit over the next 10 

years. I think we can do that, and the challenge for us is to figure 

out, working together, how to do that, and to think outside the box. 

Let me go to Senator Begich and then I have a question, but 

Mark, I would just ask you, no more than 5 minutes. 

Senator BEGICH. Yes. No, I am just going to make some general 

comments first, just because we have a vote and we are tight on 

schedule. 

But first, I want to thank all of you, and I think there is a recognition between the last panel and this panel, and I think I am 

going to use your words, to right-size the Post Office for the times 

that we are in today, and that is a challenge. And I think the bill 

that Senator Carper has brought forward is a good step. There are 

obviously tweaks that need to be done. 

As a matter of fact, Mr. Strong, I was in Healy, Alaska, not long 

ago, meeting with the Postmasters. It was interesting. They had no 

conference room, so they had to do the meeting in a restaurant bar, 

which I thought was very appropriate because we had great discussion of a lot of issues at lunchtime. But what was good was they 

talked about, especially in rural Alaska, the importance of the 

Postmaster and how that is a critical piece of the puzzle. 

So I just want to really say to all of you that you will find me 

a partner in trying to solve this problem. I can tell you, on the pension issue, I have dealt with this when I was Mayor. We had three 

pension programs, police and fire. Two were overfunded, one was 

underfunded, and we restructured it. End result, the city no longer 

had to pay a payment because we restructured it. The employees 

became more satisfied with the long-term benefit that they received. It was a win-win all the way around and they were highly 

unionized police and fire folks, but we figured it out. It was painful 

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getting there, to be very frank with you, but at the end of the day, 

we figured it out and the cash-flow worked out better. 

So I think the approach, again, Mr. Chairman, that you are taking is the right approach. I think there is going to be some work 

to do, and that is why this hearing was good, to kind of hear from 

you kind of some of the issues you had on the table. So thank you 

for what you are doing. 

I will just end with this comment. My son and I, I like having 

him collect stamps because there is history behind each stamp and 

we get to read about it at night. Last Thursday, we went to the 

Post Office Web site, ordered some first day edition stamps, and 

they came on Monday. When you think about that, that shows the 

efficiency, that you had to organize it, package it, put it in, deliver 

it, and we got it. That is just an amazing thing, or a stamped envelope that I could send from here and get it out to a village in Western Alaska is amazing. And so I credit the Post Office for great 

work, but we have challenges. 

And so, again, thank you, Mr. Chairman, for allowing me to say 

a few words. 

Senator CARPER. Great. We are delighted that you could be here 

and look forward to working with you on these issues. 

Maybe one question in wrapping it up, and this would be for 

maybe Mr. Guffey and Mr. Strong. Your members work directly 

with Postal customers every day, as we all know. What do you 

think the Postal Service needs to do to reach out to customers, 

whether individual customers or small businesses or the biggest 

mailers out there, to attract new business? What do we need to do 

to attract new business? 

Mr. GUFFEY. Well, one of the problems we have been facing for 

many years is maybe our work rules have gotten in a lot of the way 

to prevent the Post Office from staying open past 5pm. There is a 

Post Office within a block of our offices at 13th and L and there 

is one, I think, at 18th and K, but if they close at 5pm, the people 

who are bringing down the mail packages and what have you just 

miss out. They must go to one of our competitors. And we changed 

our work rules to allow the Post Office to stay open longer without 

the payment of overtime and doing certain things. 

We have also lowered some costs of new employees and long-term 

benefits so that the Postal Service can open, and where there are 

clerks working can lower their costs to perhaps keep Post Offices 

open longer in the general community rather than shutting them 

down because of their cost factor. In other words, we have tried to 

help the cost factors. 

We must be—we have also lowered the cost of processing inside 

plants. We have tried very hard to do that so that the big mailers 

could keep their discounts and bring more mail to the Post Office 

as necessary, to try to keep the costs down for the Post Office. 

The men and women of the American Postal Workers Union are 

very concerned about the Post Office and they want to help it to 

be a viable institution, and they overwhelmingly voted to do those 

type of things. 

Senator CARPER. Good. Congratulations. Thanks. Mr. Strong. 

Mr. STRONG. A number of things. I had a privilege of being on 

a panel with Jerry a couple of weeks ago, and I always talked 

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about the complexity of the back end of the Post Office, the bulk 

mail units where our customers come in, and it is a very complex 

operation. And I think we have to reduce that complexity and make 

it easier, for especially the occasional users to induct mail into our 

system. 

But one of the things that Jerry brought up was the fact that we 

also had to look at the complexity of our window, our retail services. Upselling the products that we currently have sometimes can 

be a struggle, not only for the customer to understand, but for our 

retail associates. So we have to reduce the complexity of the retail 

operation, as well. 

We already have an outreach program where we have carriers 

involved, we have rural carriers involved, we have the Postmasters 

involved, and it is a business connect, customer connect, and a 

rural outreach. We need to expand that and continue to grow that 

and get all of our employees very involved. 

Postmasters are great salesmen. We need to continue to get them 

into the field and to sell the products that we have. We have to get 

them the time and away from the desk to get that done. I think 

we can grow our product. I think we have the people to do it and 

I think we have the product lines to continue to grow and be a vital 

part of America and we need to continue to work at that. 

Senator CARPER. All right. We have about 5 minutes to vote. 

They do not hold the votes open for me, so I am going to run over 

there and vote. Maybe when they let me be the leader, I can, but 

I have about 5 minutes to go, so I am going to roll. 

Thank you so much for joining us today. Thanks for your preparation. Thanks for your hard work that you do every day to help 

make sure that we have a strong and vibrant Postal Service. 

I would like to quote Albert Einstein, who used to say, ‘‘In adversity lies opportunity.’’ And I think there is plenty of adversity here 

for the Postal Service, but there is also opportunity, and it is incumbent on each and every one of us to find that opportunity and 

to work together in a really creative way, thinking outside the box 

to come up with opportunities we had never thought of before. 

And when I see my neighbors getting those Netflix in the mail, 

when I see my wife being delighted to receive a Mother’s Day card 

from the other side of the world, when I see the Flat Rate Boxes 

that the Postmaster General was holding up here, when I talk to 

folks who are getting their medicines delivered 6 days a week to 

their mailboxes at home or at work, there is a lot of good ideas out 

there. Some of them have been realized. A lot of them have not 

even formed in our minds yet. We need to get to work on that. 

Maybe some of it can be with respect to the energy costs as I discussed earlier. 

The last thing I want to mention, we did not touch on this, but 

it is really part of the, what I call the 800-pound gorilla in the 

room in terms of driving Federal budget deficits, the cost of health 

care. It dwarfs almost everything else. And one of the major drivers 

in business today in this country, ever more so, is the cost of health 

care. We are spending today something like 18 percent of our GDP 

for health care costs. In Japan, they spend half that, 9 percent. 

They cover everybody. They get better results. They cannot be that 

smart. We cannot be that dumb. But part of our challenge here is 

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to figure out how to get better health care results for less money 

or better health care results for the same amount of money. That 

is an issue for another day, but it is an important issue as we deal 

with this one here today. 

I look forward to working with my colleagues that are here today 

and those that were not. I certainly look forward to working with 

Senator Collins. We are going to get this done. We are going to figure this out. It is not going to be easy. It is not going to be tomorrow or next week, but we are going to figure this out, and we will 

figure it out this year. 

With that having been said, this hearing is adjourned. Thank 

you all. 

[Whereupon, at 12:32 p.m., the Subcommittee was adjourned.] 

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90 

H605-41331-79W7 with DISTILLER


67637.050
91 

H605-41331-79W7 with DISTILLER


67637.051
92 

H605-41331-79W7 with DISTILLER


67637.052
93 

H605-41331-79W7 with DISTILLER


67637.053
94 

H605-41331-79W7 with DISTILLER


67637.054
95 

H605-41331-79W7 with DISTILLER


67637.055
96 

H605-41331-79W7 with DISTILLER


67637.056
97 

H605-41331-79W7 with DISTILLER


67637.057
98 

H605-41331-79W7 with DISTILLER


67637.058
99 

H605-41331-79W7 with DISTILLER


67637.059
100 

H605-41331-79W7 with DISTILLER


67637.060
101 

H605-41331-79W7 with DISTILLER


67637.061
102 

H605-41331-79W7 with DISTILLER


67637.062
103 

H605-41331-79W7 with DISTILLER


67637.063
104 

H605-41331-79W7 with DISTILLER


67637.064
105 

H605-41331-79W7 with DISTILLER


67637.065
106 

H605-41331-79W7 with DISTILLER


67637.066
107 

H605-41331-79W7 with DISTILLER


67637.067
108 

H605-41331-79W7 with DISTILLER


67637.068
109 

H605-41331-79W7 with DISTILLER


67637.069
110 

H605-41331-79W7 with DISTILLER


67637.070
111 

H605-41331-79W7 with DISTILLER


67637.071
112 

H605-41331-79W7 with DISTILLER


67637.072
113 

H605-41331-79W7 with DISTILLER


67637.073
114 

H605-41331-79W7 with DISTILLER


67637.074
115 

H605-41331-79W7 with DISTILLER


67637.075
116 

H605-41331-79W7 with DISTILLER


67637.076
117 

H605-41331-79W7 with DISTILLER


67637.077
118 

H605-41331-79W7 with DISTILLER


67637.078
119 

H605-41331-79W7 with DISTILLER


67637.079
120 

H605-41331-79W7 with DISTILLER


67637.080
121 

H605-41331-79W7 with DISTILLER


67637.081
122 

H605-41331-79W7 with DISTILLER


67637.082
123 

H605-41331-79W7 with DISTILLER


67637.083
124 

H605-41331-79W7 with DISTILLER


67637.084
125 

H605-41331-79W7 with DISTILLER


67637.085
126 

H605-41331-79W7 with DISTILLER


67637.086
127 

H605-41331-79W7 with DISTILLER


67637.087
128 

H605-41331-79W7 with DISTILLER


67637.088
129 

H605-41331-79W7 with DISTILLER


67637.089
130 

H605-41331-79W7 with DISTILLER


67637.090
131 

H605-41331-79W7 with DISTILLER


67637.091
132 

H605-41331-79W7 with DISTILLER


67637.092
133 

H605-41331-79W7 with DISTILLER


67637.093
134 

H605-41331-79W7 with DISTILLER


67637.094
135 

H605-41331-79W7 with DISTILLER


67637.095
136 

H605-41331-79W7 with DISTILLER


67637.096
137 

H605-41331-79W7 with DISTILLER


67637.097
138 

H605-41331-79W7 with DISTILLER


67637.098
139 

H605-41331-79W7 with DISTILLER


67637.099
140 

H605-41331-79W7 with DISTILLER


67637.100
141 

H605-41331-79W7 with DISTILLER


67637.101
142 

H605-41331-79W7 with DISTILLER


67637.102
143 

H605-41331-79W7 with DISTILLER


67637.103
144 

H605-41331-79W7 with DISTILLER


67637.104
145 

H605-41331-79W7 with DISTILLER


67637.105
146 

H605-41331-79W7 with DISTILLER


67637.106
147 

H605-41331-79W7 with DISTILLER


67637.107
148 

H605-41331-79W7 with DISTILLER


67637.108
149 

H605-41331-79W7 with DISTILLER


67637.109
150 

H605-41331-79W7 with DISTILLER


67637.110
151 

H605-41331-79W7 with DISTILLER


67637.111
152 

H605-41331-79W7 with DISTILLER


67637.112
153 

H605-41331-79W7 with DISTILLER


67637.113
154 

H605-41331-79W7 with DISTILLER


67637.114
155 

H605-41331-79W7 with DISTILLER


67637.115
156 

H605-41331-79W7 with DISTILLER


67637.116
157 

H605-41331-79W7 with DISTILLER


67637.117
158 

H605-41331-79W7 with DISTILLER


67637.118
159 

H605-41331-79W7 with DISTILLER


67637.119
160 

H605-41331-79W7 with DISTILLER


67637.120
161 

H605-41331-79W7 with DISTILLER


67637.121
162 

H605-41331-79W7 with DISTILLER


67637.122
163 

H605-41331-79W7 with DISTILLER


67637.123
164 

H605-41331-79W7 with DISTILLER


67637.124
165 

H605-41331-79W7 with DISTILLER


67637.125
166 

H605-41331-79W7 with DISTILLER


67637.126
167 

H605-41331-79W7 with DISTILLER


67637.127
168 

H605-41331-79W7 with DISTILLER


67637.128
169 

H605-41331-79W7 with DISTILLER


67637.129
170 

H605-41331-79W7 with DISTILLER


67637.130
171 

H605-41331-79W7 with DISTILLER


67637.131
172 

H605-41331-79W7 with DISTILLER


67637.132
173 

H605-41331-79W7 with DISTILLER


67637.133
174 

H605-41331-79W7 with DISTILLER


67637.134
175 

H605-41331-79W7 with DISTILLER


67637.135
176 

H605-41331-79W7 with DISTILLER


67637.136
177 

H605-41331-79W7 with DISTILLER


67637.137
178 

H605-41331-79W7 with DISTILLER


67637.138
179 

H605-41331-79W7 with DISTILLER


67637.139
180 

H605-41331-79W7 with DISTILLER


67637.140
181 

H605-41331-79W7 with DISTILLER


67637.141
182 

Æ 

H605-41331-79W7 with DISTILLER


67637.142