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27–641 PDF ★ (Star Print) 2006

S. Hrg. 109–63

NOMINATIONS OF CAROLYN LEWIS GALLAGHER,

LOUIS J. GIULIANO, AND TONY HAMMOND

HEARING

BEFORE THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

ON THE

NOMINATIONS OF CAROLYN LEWIS GALLAGHER, TO BE GOVERNOR, 

U.S. POSTAL SERVICE; LOUIS J. GIULIANO, TO BE GOVERNOR, U.S. 

POSTAL SERVICE; AND TONY HAMMOND TO BE COMMISSIONER, 

POSTAL RATE COMMISSION

MAY 19, 2005

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs

(

(II)

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

SUSAN M. COLLINS, Maine, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

JOSEPH I. LIEBERMAN, Connecticut 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

MICHAEL D. BOPP, Staff Director and Chief Counsel 

JENNIFER A. HEMINGWAY, Professional Staff Member 

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Counsel 

ADAM R. SEDGEWICK, Minority Professional Staff Member 

TRINA D. TYRER, Chief Clerk 

(III)

C O N T E N T S 

Opening statements: Page 

Senator Collins ................................................................................................. 1

Senator Warner ................................................................................................ 3

WITNESSES 

THURSDAY, MAY 19, 2005

Hon. John Cornyn, a U.S. Senator from the State of Texas ................................ 4

Carolyn Lewis Gallagher, to be Governor, U.S. Postal Service ........................... 7

Louis J. Giuliano, to be Governor, U.S. Postal Service ........................................ 6

Tony Hammond, to be Commissioner, Postal Rate Commission ......................... 7

Hon. Christopher S. Bond, a U.S. Senator from the State of Missouri ............... 12

ALPHABETICAL LIST OF WITNESSES

Bond, Hon. Christopher S.: 

Testimony .......................................................................................................... 12

Prepared statement .......................................................................................... 13

Cornyn, Hon. John: 

Testimony .......................................................................................................... 4

Prepared statement .......................................................................................... 5

Gallagher, Carolyn Lewis: 

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

Biographical and financial information .......................................................... 17

Pre-hearing Questions and Responses for the Record ................................... 31

Responses to post-hearing questions for Ms. Gallagher from: 

Senator Lautenberg ...................................................................................... 42

Senator Akaka ............................................................................................... 43

Senator Lieberman ....................................................................................... 46

Giuliano, Louis J.: 

Testimony .......................................................................................................... 7

Biographical and financial information .......................................................... 48

Pre-hearing Questions and Responses for the Record ................................... 57

Responses to post-hearing questions for Mr. Giuliano from: 

Senator Akaka ............................................................................................... 67

Senator Lieberman ....................................................................................... 69

Hammond, Tony: 

Testimony .......................................................................................................... 7

Prepared statement .......................................................................................... 8

Biographical and financial information .......................................................... 71

Pre-hearing Questions and Responses for the Record ................................... 78

Responses to post-hearing questions for Mr. Hammond from: 

Senator Akaka ............................................................................................... 89

(1)

NOMINATIONS OF CAROLYN LEWIS GALLAGHER, LOUIS J. GIULIANO, AND TONY HAMMOND 

THURSDAY, MAY 19, 2005

U.S. SENATE, 

COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:18 a.m. in room 

SD–562, Dirksen Senate Office Building, Hon. Susan M. Collins, 

Chairman of the Committee, presiding. 

Present: Senators Collins and Warner. 

OPENING STATEMENT OF CHAIRMAN COLLINS 

Chairman COLLINS. The Committee will come to order. 

The Committee will now consider the nominations of Carolyn 

Lewis Gallagher and Louis Giuliano to be Governors of the U.S. 

Postal Service and Tony Hammond to be a Commissioner of the 

Postal Rate Commission. 

This Committee is very familiar with the many serious issues 

facing the Postal Service and has spent a great deal of time developing postal reform legislation. 

The Board of Governors of the U.S. Postal Service is comparable 

to the Board of Governors of a corporation. The Board selects the 

CEO, in this case the Postmaster General, who then becomes the 

Board’s tenth member. 

The Board directs the exercise of powers of the Postal Service. 

It controls its expenditures, conducts long-range planning, and sets 

policy. The most important duty of the Board is to represent the 

public interest. 

Carolyn Lewis Gallagher is an Austin, Texas business executive 

with an impressive record. She was named governor by the President through a recess appointment on November 3, 2004. Without 

confirmation, the appointment will expire at the end of this year. 

She serves as a member of the Strategic Planning Committee 

and the Board’s Governance Committee. Ms. Gallagher has strong 

private sector experience. She is currently an investor and adviser 

to several businesses and has some 20 years of experience in acquiring and growing companies. 

In addition to her business background, she has a commitment 

to public service. President Bush also appointed her in 2003 to 

serve on the President’s Commission on the U.S. Postal Service. 

2

The Commission’s report has been the foundation for the legislation that this Committee has drafted. It is very helpful to have 

someone who actually served on the Commission now be a member 

of the Board of Governors. 

Louis Giuliano is Chairman of the Board of Directors of ITT Industries. He also was named a governor by President Bush through 

a recess appointment last November. He serves as Chairman of the 

Capital Projects Committee and is a member of the Audit and Finance Committee. 

Mr. Giuliano has a strong private sector background also. As ITT 

Board Chairman, he is responsible for managing all aspects of 

Board activities and helping to set the strategic and operational direction of this Fortune 500 global industrial company. 

Before becoming chairman, he served as President and Chief Executive Officer at IT&T and played a key role in improving the 

company’s operating performance. He also has a number of charitable causes with which he is involved. 

The Postal Rate Commission is an independent regulatory agency. The five commissioners review Postal Service requests for new 

domestic mail rates, fees, and classification. The Commission reviews these requests and then makes recommendations to the governors of the Postal Service. 

In addition, the Commission may propose changes in mail classifications. It also investigates complaints of postal customers that 

are of national significance and it issues advisory opinions in response to Postal Service requests to substantially change postal 

services. 

The Postal Rate Commission also hears from postal customers 

regarding decisions to close or consolidate post offices. For any of 

us who represent rural States, that is always a big issue. 

Tony Hammond first became the Commissioner of the Postal 

Rate Commission by a recess appointment in 2002. Later that year, 

the Senate confirmed his appointment to a term expiring on October 14, 2004. So I do want to point out that Mr. Hammond has 

been previously confirmed. 

Before being named to the Commission, Commissioner Hammond 

was owner and managing member of T. Hammond Company, a private consulting firm based in Arlington, Virginia. He has also 

served as senior vice president of a direct marketing firm and as 

senior consultant to Forbes 2000, Incorporated. 

As Members of this Committee well know, the U.S. Postal Service is an essential part of our society and our economy. It is the 

linchpin of a $900 billion mailing industry that employs more than 

nine million people. 

We also know the fiscal challenges facing the Postal Service 

could threaten the future of affordable service. Each of these nominees appears to possess, without prejudging their responses, the 

knowledge, the experience, and the talents and commitment needed to strengthen the Postal Service. 

I welcome them to the Committee today and I look forward to 

hearing their views. 

We are very pleased today to be joined by distinguished members 

of the U.S. Senate who are going to introduce the nominees and we 

will start with Senator Warner. 

3

OPENING STATEMENT OF SENATOR WARNER 

Senator WARNER. Thank you very much, Madam Chairman. To 

expedite things here, you have given a very comprehensive biographical sketch of the nominees. I am privileged to be here on behalf of Mr. Giuliano of Virginia today who has been nominated to 

serve on the Board of Governors of the U.S. Postal Service. 

As you said, Madam Chairman, the Board is responsible for directing the overall operation and developing a long-range plan to 

ensure the viability of the U.S. Postal Service, an institution that 

dates back to 1775. 

And I cannot resist saying that during World War II, 1943, before I went in the Navy, I worked as a postal worker. There was 

a tremendous shortage. Postal workers by and large were in uniform and gone, so they had to hire a bunch of 16-year-olds to drive 

the trucks and deliver the mail which I was happy to do, particularly during Christmastime. 

So it is a very special privilege for me to introduce this distinguished gentleman and I hope that you find the Postal Service in 

good hands that we left it in 60 years ago. [Laughter.] 

We might go back and check it out. 

You have outlined his background, but clearly his extraordinary 

accomplishments eminently qualify him to take on the managerial 

positions and the Board’s functions for the Postal Service as the 

Postal Service has been under a lot of tough challenges here recently, particularly in what I think is a good, healthy, competitive 

world. 

So I will not review all of his accomplishments because the 

record is now containing the Chairman’s observations. 

His lovely wife is here. I wonder if you might take a moment to 

introduce your wife. 

Mr. GIULIANO. Certainly. I would like to introduce my wife, Barbara, who I am very pleased could join us this morning. 

Senator WARNER. Thank you. Madam Chairman, I will put the 

balance of my remarks in the record. 

Chairman COLLINS. Without objection. And thank you for being 

here. Senator Warner, I know you have a number of other commitments, so we will excuse you to be on your way. Thank you. 

Senator WARNER. Good luck to you. 

Mr. GIULIANO. Thank you. 

[The prepared statement of Senator Warner follows:]

PREPARED STATEMENT OF SENATOR WARNER 

Madam Chairman Collins, Senator Lieberman, and my other distinguished colleagues on the Senate Homeland Security and Governmental Affairs Committee. I 

thank you for holding this confirmation hearing. 

Today, I am pleased to introduce to you Louis Giuliano of Virginia, who has been 

nominated to serve on the Board of Governors of the U.S. Postal Service. This Board 

is responsible for directing the overall operation and developing a long-range plan 

to ensure the viability of the U.S. Postal Service, an institution that dates back to 

1775. 

Mr. Giuliano’s background makes him highly qualified for this position. He received his Bachelor of Science in chemistry and Masters of Business Administration 

(MBA) from Syracuse University. 

Subsequent to earning his MBA, Mr. Giuliano joined Allied Signal, where he ultimately served as president of the company’s Avionics Systems Group and was responsible for overseeing seven principal operating units across the nation. 

4

Following his 19-year career at Allied-Signal, Mr. Giuliano joined ITT Industries, 

a Fortune 500 global engineering and manufacturing company. While at ITT Industries, Mr. Giuliano served in a number of key leadership positions including chairman, president, chief operating officer, senior vice president, and vice president. 

Mr. Giuliano played an instrumental role in growing the company’s revenues and 

performance, leading to significantly stronger margins and higher cash flow. He led 

ITT through strategies designed to streamline processes and increase competitiveness throughout the company. 

Madam Chairman, Louis Giuliano is obviously a very accomplished businessman. 

His extensive experience and accomplishments of increasing performance in such a 

competitive industry make him well qualified to serve as a Governor of the U.S. 

Postal Service. I support his nomination, and look forward to the Committee reporting out his nomination favorably.

Chairman COLLINS. We are also very pleased to be joined today 

by another of our colleagues, Senator John Cornyn of Texas. Welcome. 

STATEMENT OF THE HON. JOHN CORNYN, A U.S. SENATOR 

FROM THE STATE OF TEXAS 

Senator CORNYN. Thank you very much, Chairman Collins. It is 

nice to be here before the Committee, especially to introduce another Texan, Carolyn Gallagher, the President’s nominee to serve 

on the U.S. Postal Service Board of Governors. 

I believe you always find this Austin, Texan well-qualified or you 

will find this Austin, Texan well-qualified for the position and deserving of the Committee’s unanimous support. 

I assured her that the fact that the seats were not filled on the 

Committee was actually a good thing and that hopefully her nomination as the other nominations represented here today will go 

through smoothly and without any unexpected speed bumps. 

As this Committee well knows, the U.S. Postal Service must 

modernize its operations and adapt its business model and practices to conform to a new environment. 

We live in a world of instantaneous communications, cell phones, 

the Internet, e-mail, blogs, faxes, and the rest. And that does not 

make the U.S. Postal Service irrelevant. It just means that the status quo cannot continue and it must modernize. 

Clearly Ms. Gallagher understands this and has the skills and 

qualifications critical to helping the U.S. Postal Service do just exactly that. 

You were generous in your introduction, but let me just sort of 

expand a little bit on what you said, Madam Chairman. 

Her education and private sector background speaks for itself, an 

undergraduate degree from Duke University and a Master’s in 

Business Administration from the Harvard Business School. 

She knows what it takes to succeed in a competitive environment. She served as the President and CEO of Texwood Furniture 

which posted annual profits for 12 years under her leadership. 

And she has been deeply involved in the community of Austin, 

Texas for many years serving on numerous nonprofit boards. 

She has direct experience in the issues confronting the U.S. Postal Service today making her even more qualified. These include, as 

you noted, a 2003 appointment by President Bush to serve on the 

Commission on the U.S. Postal Service and then, of course, her November 2004 recess appointment which further demonstrates PresiVerDate 0ct 09 2002 14:29 Jun 15, 2006 Jkt 027641 PO 00000 Frm 00008 Fmt 6633 Sfmt 6601 C:\DOCS\27641.TXT SAFFAIRS PsN: PAT
5

dent Bush’s commitment to ensuring that good people serve on the 

U.S. Postal Service Board of Governors. 

In closing, let me just stay that Carolyn Gallagher is a nominee 

uniquely qualified to meet the 21st Century challenges of the U.S. 

Postal Service. I support her nomination and I encourage the Committee to do so as well and to unanimously report her nomination 

to the floor so she can be quickly confirmed. 

Thank you very much. 

[The prepared statement of Senator Cornyn follows:]

PREPARED STATEMENT OF SENATOR CORNYN 

Chairman Collins and Ranking Member Lieberman, I appreciate the Committee 

allowing me to come before it and introduce Carolyn Gallagher, the President’s 

nominee to serve on the United States Postal Service Board of Governors. 

I believe you will find this Austin, Texan well qualified for the position and deserving of the Committee’s unanimous support. 

As this Committee knows the U.S. Postal Service must modernize its operations 

and adapt its business model and practices to conform to the 21st Century. 

We live in a world of instantaneous communication: Cell phones, the Internet, email, blogs, faxes and the rest. This doesn’t make the U.S. Postal Service irrelevant, 

just that the status quo can’t continue. 

Clearly Ms. Gallagher understands this and has the skills and qualifications critical to helping the U.S. Postal Service modernize. 

Briefly, let me touch on those: 

Her education and private sector background speaks for itself:

• an undergraduate degree from Duke University and a Masters in Business 

Administration from the Harvard Business School

• She knows what it takes to succeed in a competitive environment—she served 

as the President and CEO of Texwood Furniture which posted annual profits 

for 12 years under her leadership

• and she has been deeply involved in the Austin, Texas community over the 

years, serving on numerous non-profit boards.

Moreover, she has direct experience in the issues confronting the U.S. Postal 

Service today, making her uniquely qualified. These include: 

In 2003 President Bush appointed her to serve on the President’s Commission on 

the United States Postal Service. 

This Commission was charged with exploring ways to modernize the U.S. Postal 

Service, which it did when it submitted its report in July of 2003. This report has 

proven a critical road map to reforming the U.S. Postal Service. 

In addition, Ms. Gallagher has been serving as a Postal Service Governor as a 

result of a November 2004 recess appointment, demonstrating President Bush’s 

commitment to ensuring good people continue to serve on the U.S. Postal Service 

Board of Governors. 

In closing, just let me say that Carolyn Gallagher is a nominee uniquely qualified 

to meet the 21st Century challenges the U.S. Postal Service faces. 

I support her nomination and I encourage the Committee to do so as well and 

to unanimously report her nomination.

Chairman COLLINS. Thank you very much, Senator. Your endorsement carries great weight with this Committee and you are 

right to assure the witness that the absence of senators is actually 

a good sign, not a bad one. 

So thank you. I know your schedule also is very crowded today, 

so you are welcome to depart if you would like. 

Senator CORNYN. Thank you, Madam Chairman. I neglected to 

extend the same courtesy to Ms. Gallagher that Senator Warner 

did to Mr. Giuliano and that is I would like for her to introduce 

her husband who I know is with her here today supporting her 

nomination. 

6

1The biographical and financial information of Ms. Gallagher appears in the Appendix on 

page 17. 

Pre-hearing questions and responses for the Record for Ms. Gallagher appears in the Appendix on page 31. 

Post-hearing questions and responses for Ms. Gallagher appears in the Appendix on page 

42. 

Ms. GALLAGHER. Yes. I am pleased to introduce my husband, 

Tom, who is with me today. Thank you. 

Chairman COLLINS. Thank you. We welcome all the family members who are here today. 

Mr. Hammond, it is my understanding that Senator Bond is on 

the way and I do not want you to feel left out. We will have your 

introduction as soon as he arrives. 

If you have any family members that you would like to introduce, 

I would invite you to do so at this time. 

Mr. HAMMOND. No one. 

Chairman COLLINS. OK. Thank you. 

All three of the nominees have filed responses to a biographical 

and financial questionnaire, answered pre-hearing questions submitted by the Committee, and had their financial statements reviewed by the Office of Government Ethics. 

Without objection, this information will be made part of the hearing record with the exception of the financial data which are on file 

and available for public inspection in the Committee offices. 

Our Committee rules do require that all witnesses at nomination 

hearings give their testimony under oath. So I would ask that you 

all stand and raise your right hand. 

Do you swear that the testimony you are about to give to the 

Committee will be the truth, the whole truth, and nothing but the 

truth, so help you, God? 

Ms. GALLAGHER. I do. 

Mr. GIULIANO. I do. 

Mr. HAMMOND. I do. 

Chairman COLLINS. Ms. Gallagher, I am going to ask you to lead 

off and proceed with any opening comments that you might have 

at this time. 

TESTIMONY OF CAROLYN LEWIS GALLAGHER,1 NOMINEE TO 

BE GOVERNOR, U.S. POSTAL SERVICE 

Ms. GALLAGHER. Thank you, Madam Chairman. 

First, I would like to thank Senator Cornyn for his gracious introduction. It is both a great honor and a humbling experience to 

appear before you today. 

I would like to thank President Bush for having the confidence 

in me to appoint me to the Board of Governors and I would like 

to thank you and the distinguished Members of your Committee for 

considering my nomination. 

Thank you. 

Chairman COLLINS. Thank you. Mr. Giuliano.

7

1The biographical and financial information of Mr. Giuliano appears in the Appendix on page 

48. 

Pre-hearing questions and responses for the Record for Mr. Giuliano appears in the Appendix on page 57. 

Post-hearing questions and responses for Mr. Giuliano appears in the Appendix on page 67. 

2The biographical and financial information of Mr. Hammond appears in the Appendix on 

page 71. 

Pre-hearing questions and responses for the Record for Mr. Hammond appears in the Appendix on page 78. 

Post-hearing questions and responses for Mr. Hammond appears in the Appendix on page 

89. 

TESTIMONY OF LOUIS J. GIULIANO,1 NOMINEE TO BE 

GOVERNOR, U.S. POSTAL SERVICE 

Mr. GIULIANO. Good morning, Chairman. 

Chairman COLLINS. Good morning. 

Mr. GIULIANO. It is my pleasure to be here this morning. I am 

honored to have been nominated and to be considered by your 

Committee. It certainly is a new departure for me in my activities. 

I would like to say that one of the major surprises to me as I 

evaluated whether or not to even be considered for this position 

was getting to know the management of the Postal Service. 

Through that process, I became convinced that there was a team 

of people there that had energy and a commitment to change and 

a capability that would be very important for the future. 

I decided that I would like to do anything I could to help that 

team take on the challenges for the future and to continue that 

progress, a significant record of accomplishment that they have 

achieved over the last several years and continue to improve that 

going forward. 

So I am very glad to be here today and thank you for your consideration. 

Chairman COLLINS. Thank you. Mr. Hammond. 

TESTIMONY OF TONY HAMMOND,2 NOMINEE TO BE 

COMMISSIONER, POSTAL RATE COMMISSION 

Mr. HAMMOND. Thank you, Chairman Collins, for inviting me to 

be here today and I especially appreciate the serious consideration 

that you have given to postal issues during the time that I have 

served on the Postal Rate Commission. 

And I would in advance like to thank Senator Bond when he arrives for being willing to introduce me again to this Committee. 

And I would also like to congratulate Governors Gallagher and 

Giuliano on their appointments. I know that they are joining a 

committed team at the U.S. Postal Service. 

And if I could take one moment, my fellow commissioner, Ruth 

Goldway, has been able to join us and I am pleased to have her 

here today also. 

Since the time I was originally before this Committee almost 3 

years ago up until the past month, the Postal Rate Commission did 

not have an omnibus postal rate case before us. And that stability 

in postal rates for over 3 years has been very beneficial to the 

American public. 

I know it was largely the result of congressional action and it has 

made a big difference in the mailing industry in this country. 

However, during the time I have been on the Commission and 

serving as vice chairman, we have had a number of issues dealing 

8

with postal rates and efficiencies and been active in them. And if 

I could mention just briefly a few of them. 

We have adopted initiatives designed to improve flexibility in the 

ratemaking process through negotiated service agreements between 

the Postal Service and mailers. 

We have adopted rules of practice that now require the Postal 

Service to provide road-map testimony in omnibus rate case filings. 

This is so that rate payers can more quickly identify changes that 

would affect them. 

We have attempted to increase the Postal Service’s financial 

transparency by adopting rules that direct the Postal Service to 

provide relevant financial and operating reports. Our goal has been 

to reduce the need for legal discovery and to shorten the rate hearing process. 

We have also recommended approval of a number of experimental products which allow the Postal Service to increase services 

in its core mission which is, of course, delivery of the mail. 

These are just some of the activities that the Commission has 

been active in since the Senate confirmed me to the unexpired term 

in 2002 and I am grateful for that opportunity to serve. 

If confirmed for a full term at the Postal Rate Commission, I will 

continue to handle all the cases and issues that come before us in 

a fair and responsible manner. 

And, again, thank you for giving me this opportunity today. I will 

be happy to answer any questions that you might have. 

[The prepared statement of Mr. Hammond follows:]

PREPARED STATEMENT OF TONY HAMMOND 

Thank you, Madam Chairman and Members of the Committee, for inviting me to 

appear this morning. I especially appreciate the serious consideration that you have 

given to postal issues during the time I have served on the Postal Rate Commission. 

I would like to thank Senator Bond for taking time to be here today to introduce 

me again to this Committee. As a native Missourian, I know we feel honored that 

he has devoted almost 30 years to public service on our behalf. 

I also want to congratulate Governor’s Gallagher and Giuliano on their appointments. I know they are joining a committed team at the U.S. Postal Service. 

Since the time I was originally before this Committee almost three years ago, 

until this past month, the Postal Rate Commission did not have an Omnibus Postal 

Rate case come before us. 

The stability in postage rates for over three years has been very beneficial to the 

American public. I know it was largely the result of congressional action and has 

made a major difference in the mailing industry in this country. 

However, during the time I have served as Commissioner and Vice Chairman, we 

have been active on a number of issues dealing with postal rates and efficiencies. 

The Postal Rate Commission has adopted initiatives designed to improve flexibility in the rate-making process through Negotiated Service Agreements (NSA’s) 

between the Postal Service and mailers. 

We have adopted rules of practice requiring the Postal Service provide ‘‘roadmap’’ 

testimony in Omnibus Rate Case filings so ratepayers can more quickly identify 

changes that affect them. 

We have attempted to increase the Postal Services’ financial transparency by 

adopting rules directing the Postal Service to provide relevant financial and operating reports, in order to reduce the need for discovery and to shorten rate hearings. 

The Postal Rate Commission has also recommended approval of a number of experimental products which allow the Postal Service to increase services in its core 

mission, which is the delivery of the mail. 

These are just some of the activities that the Commission has been active in since 

the Senate confirmed me to the unexpired term in 2002. I am grateful for that opportunity to serve. 

If confirmed for a full term at the Postal Rate Commission, I will continue to handle all cases and issues before us in a fair and responsible manner and, again, 

9

thank you for giving me this opportunity today. I would be pleased to answer any 

questions you might have.

Chairman COLLINS. Thank you very much for your service and 

your testimony. 

Ms. Gallagher, you are in the unique position of having served 

on the President’s Commission of the Postal Service as well as 

serving as the Governor of the Postal Service Board since last November. 

Now that you have seen the Postal Service up close as a governor, have you changed your mind on any of the recommendations 

made by the Commission? 

Ms. GALLAGHER. Not that I can think of, Senator. I have been 

impressed with the management, even more so than we were on 

the Commission. They are doing a terrific job. And I think for the 

most part our recommendations, I will still support. 

Chairman COLLINS. That is very helpful to know. I was very impressed with the work done by the Presidential Commission, but 

obviously seeing the Postal Service more from the inside perspective might cause you to alter your judgment. It is good to know 

that you think those recommendations are still valid and should be 

pursued. 

Ms. Gallagher, in response to the prehearing questionnaire on 

the use of the Postal Service’s $32 billion pension liability and its 

annual pension related payments, you stated that the use of the 

savings should be balanced between mitigating rate increases and 

pre-funding retiree health benefits. 

The Postal Bill that Senator Carper and I have introduced would 

return roughly 25 percent of these savings to the Postal Service to 

mitigate future rate increases and the remaining 75 percent would 

be used to pre-fund retiree health benefits. 

Ms. GALLAGHER. I do agree with it, Senator. I think both are critical to the long-term health of the Postal Service. It is hard to be 

sure of what the right thing is. But I think it is a good balance and 

addresses both. 

Chairman COLLINS. Mr. Giuliano, do you support that general 

approach? 

Mr. GIULIANO. Well, I think it is consistent with my statement 

and it is hard for me to in my perspective argue with specific percentages or ratios. But I think generally it is consistent with what 

I think would be the right thing to do. 

I think you also have to put it in context of the total bill and 

whatever other restraints and limitations are in the bill, what happens with military liabilities and be mindful of the total issue. 

Chairman COLLINS. Ms. Gallagher, the Treasury Department has 

suggested that none of the money should be used to mitigate rate 

increases and instead should be used entirely for pre-funding retiree health benefits and other obligations. 

Could you give the Committee a sense of what kind of impact 

that would have on future rate increases if none of the money could 

be used to mitigate rate increases? 

Ms. GALLAGHER. Clearly we are in a situation where our costs 

are going up. I do not think that will change in the future. I think 

if it was all used toward the retirement unfunded liability that we 

would clearly have to raise rates under the cap more often than we 

10

would otherwise and certainly more, although obviously limited by 

the cap in your bill. So I do think there would be more and bigger 

rate requests. 

Chairman COLLINS. Mr. Giuliano, would you like to comment on 

that also? 

Mr. GIULIANO. Yes. Clearly it would have a negative impact, if 

you will, on the rate structure and require larger rate increases 

than we anticipate now. I think it is important to recognize that 

the Postal Service has an opportunity to grow this business, to actually provide greater service and greater performance to the 

American taxpayer with the introduction of additional capabilities, 

but better service. 

Even though their track record is much better than it has been 

in the past, there are still ways to improve. And what you want 

to be able to do is make this a more attractive service, one that actually helps American enterprise in a more positive way going forward. 

I also think that you have to remember how this money was generated to begin with. This was already money supplied by the rate 

payers and it would be kind of a double bill not to be able to get 

any of that benefit. 

Chairman COLLINS. I think that is an excellent point. 

Mr. Giuliano, you raise the question of growing the Postal Service’s business and one reason that I am very excited about both 

yours and Ms. Gallagher’s involvement is you have so much private 

sector experience in doing just that. I think it is going to be very 

helpful and already has been very helpful to the Postal Service to 

have the benefit of your experience. 

One real challenge for the Postal Service is declining First Class 

Mail volumes. As you know, this raises questions about the longterm future for the Postal Service since First Class Mail revenues 

cover more than two-thirds of the Postal Service’s institutional 

costs, many of which are related to maintaining the delivery and 

retail networks that are fundamental to universal service, there is 

a lot of concern about what can be done to reverse the decline in 

First Class Mail. 

Mr. Giuliano and Ms. Gallagher, could you give us any insights 

on how you think the Postal Service could begin to reverse this 

troubling trend and what steps have been taken so far in this regard. 

Mr. GIULIANO. Well, I think the Postal Service and the management team has already demonstrated the beginnings of that. And, 

actually, I think we had about a 3- or 4-month period here where 

First Class Mail actually went up. Now, that may have been a confluence of positive factors that may not be repeating all the time. 

Chairman COLLINS. An election year, I think, was a major factor. 

Mr. GIULIANO. The election helped, but it was compounded by 

the financial services businesses and some of these negotiated 

agreements. These have changed people’s perspective as to how big 

a role First Class Mail played in their advertising and their promotional activities. 

I think that is a key indicator. I think improving services, adding 

things like the automated postal machines, Click ’n Ship, extending 

hours. I know we are talking about extending the hours that the 

11

post offices are open. Relatively simple things that make it more 

convenient and easier to do business. 

We are thinking about this from the customer’s perspective. 

What do they need to do their job. What do they need to grow their 

businesses and how can the mail process help that. I think if we 

continue to look at things like that, improved could be significant 

mitigation of volume decline. 

Most businesses face issues like this in one form or another. It 

may not be the same drivers, but most businesses are faced with 

issues where either different technology or different competitors 

come in and create this type of problem. There has to be creative 

thinking as how to overcome it. 

That is why I think that it is so important that in the Postal Reform Bill, we review the impact the total legislative package has 

on the ability of the Postal Service to have some flexibility in how 

it addresses customer needs. 

Chairman COLLINS. Ms. Gallagher. 

Ms. GALLAGHER. I agree with Governor Giuliano. I think clearly 

there is opportunity to find more ways to make the products and 

services at the Postal Services useful to its customer. I do think 

that has been a strong initiative of the Postal Service. He mentions 

Click ’n Ship and the automated postal centers which I think both 

have made a big difference in the use of the postal services. 

We are also working on intelligent mail which I think will be a 

tremendous new service that can bring in volume and enhance the 

way people use the Postal Service. 

I do think the Postal Service should be limited to its core business of delivering the mail, but it has the obligation to continually 

look for better ways to do that. 

Chairman COLLINS. Thank you. 

The Collins-Carper Postal Reform Bill is designed to foster more 

efficient postal operations by giving the Postal Service much more 

flexibility than it has now to set its own rates and implement revised operating procedures. 

The bill includes, however, a strict rate cap that is intended to 

ensure that rates will not rise faster than inflation. 

A key assumption is that the level of services provided by the 

Postal Service will remain sufficient to meet the personal and business needs of this Nation. 

A major concern that mailers have brought to my attention is 

that if the Postal Service projects that its costs are likely to rise 

faster than inflation during some period, it might decide to cut 

services instead of implementing more efficient operating practices. 

We tried to avoid that in our bill by requiring the Postal Service, 

in consultation with the Postal Rate Commission, to develop and 

define standards of service. I assume that you all support the overall goal of developing service standards and providing performance 

data against which those standards can be measured. 

But do you agree with the suggestion that these standards, performance goals, and other measures should be included on the 

Postal Service’s Web site so that the public would have easy access? 

12

One of my concerns is to make the Postal Service more transparent to its customers. Having more information available is one 

way to do that. 

Ms. GALLAGHER. Senator, I certainly agree that more transparency is better and I think the Postal Service is moving in that 

direction voluntarily as well. 

And I do agree with setting performance standards and making 

the performance on those standards public. In terms of what specific standards those should be. I do not know at this time, but I 

do agree with the overall goal. 

Chairman COLLINS. Mr. Giuliano. 

Mr. GIULIANO. First of all, I think the Postal Service is very 

transparent compared to most businesses. I mean, they even publish their financial statements monthly. There is no business that 

I know that does that. So I think that there is a fair amount of 

transparency already. 

I would like to come at this from the customer’s perspective. Certainly a customer ought to know what it is contracting for in terms 

of service performance. The idea of setting strict service standards 

and having them published is fine. 

But in my view, if you are really going to satisfy customers, it 

may actually restrict the opportunities that a customer might have 

to modify service in a way that is more important to them. There 

may be large mailers or certain classes of customers that want a 

different type of performance. And that would be very meaningful 

to their business. 

And so I am concerned about just restricting service to a specific 

set that is difficult to change and certainly may be legislated or 

monitored by a regulatory agency. 

I think that the best opportunity for the postal customers is to 

be able to work out service standards within the cost and the 

bounds, the other bounds of that total package that might be best 

for them. 

Chairman COLLINS. I would now like to recognize the distinguished Senator from Missouri who has joined us. We thank you 

very much for being here today, Senator Bond. I understand you 

are going to introduce Mr. Hammond. 

STATEMENT OF THE HON. CHRISTOPHER S. BOND, A U.S. 

SENATOR FROM THE STATE OF MISSOURI 

Senator BOND. Thank you very much, Madam Chairman. I may 

be known as the late Senator from Missouri, but we were trying 

to work out the schedule, a number of commitments I had today. 

And I apologize for being late. 

But I did want to take an opportunity to tell you a little bit about 

a fellow Missourian and a good friend, Commissioner Hammond, a 

graduate of Southwest Missouri State University, soon to be known 

as Missouri State University. 

He is an owner of the family farm in Hickory County, Missouri. 

He served on Capitol Hill from 1979 to 1989 on the official staff 

of Congressman Gene Taylor. And anybody who does not remember 

Gene Taylor, I have many stories to tell about the way he assisted 

me when I arrived here as a rookie in 1987. 

13

Working on Congressman Taylor’s staff, Tony dealt with many 

things in serving the congressman on the Post Office and Civil 

Service Committee. He had many legislative experiences with Postal Service rates and operations. 

He has been Executive Director as well as Finance Director of 

the Missouri Republican party. He was Director in 1998 of the 

campaign operations at the Republican National Committee and 

previously served as a field representative. 

Before being named to the Postal Rate Commission, Commissioner Hammond was owner and managing member of Hammond 

Company, a private consulting firm, and he served as senior vice 

president of a direct marketing firm and a senior consultant to 

Forbes 2000, Inc. 

For the past several years, Commissioner Hammond has worked 

hard to assure that postal rates are set openly and that they are 

fair. He has been responsible for making sure that an adequate 

level of affordable mail service is available throughout the country 

as the cost of mail service has generally tracked the rate of inflation. 

It is my prediction that he will continue to provide the highest 

level of care and service that this country needs as he continues 

another term with the Postal Rate Commission. It is with great 

pride that I support his nomination. I trust the Committee will as 

well. And if you need any help on the floor, I will be more than 

happy to provide it. 

But, Madam Chairman, thank you for the hearing and I thank 

you for giving me the opportunity to say just a few words about a 

good friend for whom I have the highest respect. 

[The prepared statement of Senator Bond follows:]

PREPARED STATEMENT OF SENATOR BOND 

Thank you, Madam Chairman, for allowing me to join you today to introduce a 

fellow Missourian, Mr. Tony Hammond, who has been serving as Commissioner of 

the United States Postal Rate Commission since the Fall of 2002. 

Commissioner Hammond is a graduate of Southwest Missouri State University in 

Springfield and remains an owner of the Hammond family farm in his native Hickory County Missouri. 

He served on Capitol Hill from 1979 to 1989 on the official staff of Missouri Congressman Gene Taylor as Legislative Director. During Taylor’s tenure as Ranking 

Member of the Post Office and Civil Service Committee, Hammond dealt with the 

diverse issues and interests concerning U.S. Postal Service rates and operations. 

From 1989 to 1994, Mr. Hammond was Executive Director, as well as Finance Director, of the Missouri Republican Party. 

During the 1998 election cycle, Hammond was Director of Campaign Operations 

at the Republican National Committee where he was responsible for political programs nationwide. He was previously RNC Regional Field Representative in the 

Great Lakes Region and the Southern Region where he assisted campaigns and 

state party organizations in implementing RNC programs. 

Before being named to the PRC, Commissioner Hammond was owner and managing member of T. Hammond Company, a private consulting firm based in Arlington, Virginia. He also served as Senior Vice President of the direct marketing firm, 

Feather , Larson& Synhorst, and Senior Consultant to Forbes 2000, Inc. 

For the past several years, Commissioner Hammond has worked hard to assure 

that postal rates are set openly, and that they are fair. He has been responsible for 

making sure that an adequate level of affordable mail service is available throughout this country as the cost of mail service has generally tracked the rate of inflation. It is my prediction that he will continue to provide the highest level of care 

and service that this country needs as he continues another term with the Postal 

Rate Commission. 

It is with great pride that I introduce Mr. Hammond before this Committee today.

14

Chairman COLLINS. Thank you very much, Senator Bond. Your 

endorsement means a great deal to this Committee and we appreciate your taking the time out of your busy schedule to be here. 

I know that you have other demands on your schedule, so we are 

happy to excuse you at this time if you would like. 

Senator BOND. I appreciate that. Thank you. 

Chairman COLLINS. Thank you. 

I am now going to turn to some substantive questions for Mr. 

Hammond. Before I do that, there are three standard questions 

that I need to ask all of you for the record. 

First, is there anything you are aware of in your background 

which might present a conflict of interest with the duties of the office to which you have been nominated? 

Ms. GALLAGHER. No, there is not. 

Mr. GIULIANO. No. 

Mr. HAMMOND. No. 

Chairman COLLINS. Second, do you know of anything personal or 

otherwise that would in any way prevent you from fully and honorably discharging the responsibilities of the office to which you have 

been nominated? 

Ms. GALLAGHER. No. 

Mr. GIULIANO. No. 

Mr. HAMMOND. No. 

Chairman COLLINS. And, finally, do you agree without reservation to respond to any reasonable summons to appear and testify 

before any duly constituted Committee of Congress if you are confirmed? 

Ms. GALLAGHER. Yes, I do. 

Mr. GIULIANO. Yes. 

Mr. HAMMOND. Yes. 

Chairman COLLINS. Thank you. It shows you were listening to 

the questions. Two nos and a yes. That is exactly what we were 

seeking. 

Mr. Hammond, in your answers to written questions, you expressed the importance of the Postal Service providing high-quality, timely data to the Postal Rate Commission. 

In the legislation that Senator Carper and I have introduced, we 

increase the data reporting requirements that the Postal Service 

would have to provide, including requiring annual cost, revenue, 

rates, and service reports requiring SEC type reporting and giving 

the Postal Rate Commission subpoena power. 

Do you support these changes? 

Mr. HAMMOND. Yes, I totally support those changes. I think that 

increased financial transparency at the Postal Service is necessary 

for everyone. 

New periodic reporting requirements would also specifically assist us during consideration of rate cases, and in between consideration of rate cases because, as you know, currently, between omnibus rate cases, we get very little updated information. 

And since we were fortunate to go for over 3 years without a rate 

case before us, the data that we had used before was really close 

to being outdated. So that would be very beneficial to us if indeed 

we were to have that. And I hope that you will include that in the 

legislation, yes. 

15

Chairman COLLINS. Are there other changes beyond what are included in our legislation that you feel would help the Postal Rate 

Commission do its job? 

Mr. HAMMOND. I think that from what I have seen in your draft 

bill that would cover it very well. 

Chairman COLLINS. In answers to written questions, you also 

stated that you believe that a rate cap mechanism could help shorten the rate making process. 

The complaints that I hear all the time is that the rate-making 

process is too lengthy, too expensive, and too litigious. On the other 

hand, the rate cap must be established to provide the Postal Service with incentives to continue its work to become more efficient. 

The legislation that I have introduced establishes the Consumer 

Price Index, the CPI, as the rate cap on each class and only allows 

for rate changes for exigency, rate changes in extraordinary circumstances. 

First, do you support the rate cap? 

Mr. HAMMOND. Yes. 

Chairman COLLINS. Do you think the CPI is the correct index? 

Mr. HAMMOND. I think that it is a good index to use, yes. 

Chairman COLLINS. Is there anything that you would recommend 

with regard to the rate cap mechanism in the bill? 

Mr. HAMMOND. Well, I believe you have taken care of this in the 

legislation as it gets to markup; we’ll see—but making it very difficult for the Postal Service to go beyond this except in exigent circumstances, to go outside the rate cap would—it needs to have 

strict limits on it. 

I think those circumstances should be emergency circumstances 

such as something as drastic as when the deadly anthrax mailings, 

for instance, came through rather than just the Postal Service finding that it is not raising enough revenue. 

You have to force efficiencies on any government monopoly and 

I appreciate the management of the Postal Service recently doing 

a very good job. But still it remains a government monopoly and 

I think you have to have the safeguards that you have put in place 

in that legislation to make sure it stays that way. 

Chairman COLLINS. Our legislation allows the Postal Service to 

change rates for market dominant products, but requires a prior review by the Postal Regulatory Commission. The Postal Service has 

expressed a desire for an after-the-fact review. 

In your opinion which approach best meets the needs of both the 

Postal Service, its customers, the competitors, the general public? 

We obviously have a lot of different interests to balance. 

Mr. HAMMOND. Right. Well, certainly the U.S. Postal Service if 

it is to survive well into the 21st Century is going to have to have 

more rate flexibility. 

But on the other hand, especially if you are going to go into market dominant products, it remains a government monopoly and you 

have to have somewhere such as a postal regulatory commission so 

that rate payers, the stakeholders, have a place to go rather than 

the Postal Service having ultimate flexibility of just charging whatever they want to. 

16

So you do need to have review by, in this instance because it is 

a monopoly, a regulatory agency to protect the interest of the public. That is what it is there for. 

Chairman COLLINS. Thank you. 

I would like to thank all of the nominees for appearing today and 

for your willingness to serve the public. 

I believe the Postal Service is so important to this country and 

making sure that we have the very best people involved on the 

Board of Governors, and the Postal Rate Commission is truly vital. 

We need to make sure we are strengthening the Postal Service 

for the 21st Century and make sure that this institution, which has 

endured for over 200 years, continues to serve us for another 200 

years. 

I want to thank you all for your commitment, for your willingness to serve what I think is a very important cause. 

Without objection, the hearing record will be kept open until 5 

p.m. today for the submission of any additional questions or statements for the record. 

Again, my thanks to all of you, and this hearing is now adjourned. 

[Whereupon, at 11 a.m., the Committee was adjourned.] 

(17)

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