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86–995 PDF 2003

S. Hrg. 108–50

NOMINATIONS OF CLAY JOHNSON, III, ALBERT

CASEY, AND JAMES C. MILLER, III

HEARING

BEFORE THE

COMMITTEE ON 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

ON THE

NOMINATIONS OF CLAY JOHNSON, III TO BE DEPUTY DIRECTOR FOR 

MANAGEMENT OF THE OFFICE OF MANAGEMENT AND BUDGET; AND 

ALBERT CASEY AND JAMES C. MILLER, III TO BE MEMBERS OF THE 

BOARD OF GOVERNORS OF THE U.S. POSTAL SERVICE

APRIL 2, 2003

Printed for the use of the Committee on Governmental Affairs

(

(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS 

SUSAN M. COLLINS, Maine, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

ARLEN SPECTER, Pennsylvania 

ROBERT F. BENNETT, Utah 

PETER G. FITZGERALD, Illinois 

JOHN E. SUNUNU, New Hampshire 

RICHARD C. SHELBY, Alabama 

JOSEPH I. LIEBERMAN, Connecticut 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

RICHARD J. DURBIN, Illinois 

THOMAS R. CARPER, Deleware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas 

MICHAEL D. BOPP, Staff Director and Counsel 

JOHANNA L. HARDY, Senior Counsel 

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Counsel 

SUSAN E. PROPPER, Minority Counsel 

JENNIFER E. HAMILTON, Minority Research Assistant 

DARLA D. CASSELL, Chief Clerk 

(III)

C O N T E N T S 

Opening statements: Page 

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

Senator Carper ................................................................................................. 2

Senator Akaka .................................................................................................. 3

Senator Dayton ................................................................................................. 4

Senator Lautenberg .......................................................................................... 17

Senator Levin .................................................................................................... 19

Senator Pryor .................................................................................................... 33

WITNESSES 

WEDNESDAY, APRIL 2, 2003

Hon. Kay Bailey Hutchison, a U.S. Senator from the State of Texas ................. 4

Hon. John Cornyn, a U.S. Senator from the State of Texas ................................ 5

Clay Johnson, III to be Deputy Director for Management of the Office of 

Management and Budget .................................................................................... 7

Albert Casey to be a member of the Board of Governors of the U.S. Postal 

Service ................................................................................................................... 22

James C. Miller, III to be a member of the Board of Governors of the 

U.S. Postal Service ............................................................................................... 23

ALPHABETICAL LIST OF WITNESSES

Casey, Albert: 

Testimony .......................................................................................................... 22

Biographical and financial information .......................................................... 69

Responses to pre-hearing questions ................................................................ 76

Cornyn, Hon. John: 

Testimony .......................................................................................................... 5

Hutchison, Hon. Kay Bailey: 

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

Johnson, Clay, III: 

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

Biographical and financial information .......................................................... 37

Responses to pre-hearing questions ................................................................ 42

Miller, James C., III: 

Testimony .......................................................................................................... 23

Prepared statement .......................................................................................... 83

Biographical and financial information .......................................................... 85

Responses to pre-hearing questions ................................................................ 99

(1)

NOMINATIONS OF CLAY JOHNSON, III, 

ALBERT CASEY, AND JAMES C. MILLER, III 

WEDNESDAY, APRIL 2, 2003

U.S. SENATE, COMMITTEE ON GOVERNMENTAL AFFAIRS, Washington, DC. 

The Committee met, pursuant to notice, at 10:07 a.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Susan M. Collins, 

Chairman of the Committee, presiding. 

Present: Senators Collins, Akaka, Carper, Dayton, Pryor, Lautenberg, and Levin. 

OPENING STATEMENT OF CHAIRMAN COLLINS 

Chairman COLLINS. Good morning. The Committee will come to 

order. 

Today the Committee on Governmental Affairs is holding a hearing to consider three nominees, the nomination of Clay Johnson to 

be the Deputy Director for Management at the Office of Management and Budget, and the nominations of Albert Casey and James 

Miller to be members of the Board of Governors of the U.S. Postal 

Service. 

The Office of Management and Budget has an important dual 

mission. On the one hand it oversees the preparation of the Federal 

Budget and helps formulate the President’s spending plans. On the 

other hand, OMB also oversees Federal procurement, financial 

management, information, and regulatory policies in all executive 

agencies. But despite its dual responsibilities, the agency has gravitated increasingly toward the budget side of the ledger, to the point 

where some experts question whether management has become little more than just a silent partner. 

I am pleased, therefore, that this administration has placed more 

emphasis on management issues. The President’s management 

agenda, for example, is meant to ensure that management issues 

are appropriately considered. OMB is responsible for assessing 

agencies’ performance in five key areas: Financial management, 

human resources, e-government, competitive sourcing, and linking 

budget to performance. 

The Bush Administration is also attempting to link management 

and budget issues through its Program Assessment Rating Tool 

also known as PART, which is intended to help identify strengths 

and weaknesses in Federal programs. This will help us make agencies more accountable, and ensure that they are performing as intended. OMB is responsible for further refining and improving this 

tool while working with agencies to develop better performance 

2

measures and to collect accurate and timely data. Ensuring good 

management in an array of areas, including information technology, personnel, financial systems and procurement, can help to 

ensure that agencies are carrying out their responsibilities in the 

most effective and efficient manner. Thus we can save taxpayers 

money and lead to more accountability. 

I am very pleased that Clay Johnson has agreed to take on this 

challenge. His extensive management background in both the public and private sectors would certainly help to provide him with the 

experience and tools that he will need as Deputy Director for Management. 

I am also pleased that today we are considering the nominations 

of Albert Casey and James Miller to be members of the Board of 

Governors of the U.S. Postal Service. The Postal Service is in the 

midst of serious financial and operational challenges, the effects of 

which affect the economy as a whole. It is the linchpin of a $900 

billion mailing industry that employs 9 million Americans in fields 

as diverse as direct mailing, printing and paper manufacturing. As 

members of the Board of Governors, Mr. Casey and Mr. Miller will 

be faced with a multitude of challenges that the Postal Service 

must overcome to provide affordable universal service for every 

American. It has been more than 30 years since the Postal Reorganization Act was passed. The time has come to reassess how the 

Postal Service should adapt to its customers, competitors and technology in order to best fulfill its mission in the 21st Century. 

The White House Commission on the Postal Service is now examining the financial and operational challenges confronting the Postal Service. At the end of July the Commission will release a report 

of its findings, including recommendations for legislative change. 

For my part, I believe that privatization of the Postal Service is 

not the answer to the problems the Postal Service faces. The need 

to preserve a strong and universal Postal Service is clear, and particularly evident for those of us who represent States with large 

rural areas. 

Mr. Casey and Mr. Miller bring strong credentials and experience to the positions to which they have been nominated. As Members of the Postal Service Board of Governors they would be 

charged with overseeing the Postal Service and guiding it through 

the approval of all major policies and initiatives. 

I would now like to turn to my colleague from Delaware, Senator 

Carper, who I am pleased to say has been designated by Senator 

Lieberman to act as the Ranking Member for this hearing. So we 

are very pleased to have his participation today as well as that of 

Senator Akaka and Senator Dayton. 

Senator Carper.

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. Thank you, Madam Chairman. Good morning. 

Chairman COLLINS. Good morning. 

Senator CARPER. I only wish that more of our colleagues are running for President. 

Senator DAYTON. Well, he has just dropped a notch in my standing. [Laughter.] 

Senator CARPER. You will have your turn soon, I am sure. 

3

To colleagues Senator Akaka and Senator Dayton, good morning 

as well. And Senator Hutchison and Senator Cornyn, welcome. 

There must be somebody from Texas coming up today. [Laughter.] 

Thank you for joining us. We look forward to your introductions. 

I am pleased to be here today as the Committee considers three 

important nominees, some of whom we have known for a while. 

Welcome, we value your service and welcome your willingness to 

serve further. 

As we all know, balance sheets in both the Postal Service and 

certainly the Federal Government as a whole have taken quite a 

hit in recent years, and strong effective management has been and 

is going to continue to be one of the keys in turning things around. 

I look forward to questioning both Messrs. Casey and Miller 

about the role that they believe the Board of Governors can play 

in the coming months as the Postal Service attempts to continue 

to recover from declining volume, recession, and terrorist attacks. 

The Postmaster General predicted that an increase in volume 

was on the horizon the last time that he appeared before this Committee, but some fundamental changes need to be made in the 

Postal Service in the coming years if it is to remain viable in this 

21st Century. If, as I believe it should be, postal reform means giving the Postal Service more flexibility in setting prices and managing its own affairs, then the Board of Governors will need to play 

an active role. 

I also welcome Clay Johnson to the Committee, and I point out 

that the Federal Government is not only in deficit right now but 

is in the midst of a massive transition. Dozens of agencies were all 

brought together earlier this year as part of the Department of 

Homeland Security. In order for what we have put together to 

work, we are going to need some strong leadership from the top, 

especially since some key agencies with Homeland Security missions were not brought over to the new Department. 

I look forward to hearing from Mr. Johnson, how OMB can help 

Secretary Ridge and his colleagues to coordinate with agencies like 

the Department of Health and Human Services, the FBI, and the 

CIA, in making our Nation more secure. I also look forward to 

hearing how he will help other agencies manage their scarce resources and continue to fulfill their missions at a time when budgets are tight and our country is mobilized and at war. 

Thank you, Madam Chairman. 

Chairman COLLINS. Thank you very much. Senator Akaka.

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Thank you very much, Madam Chairman. I join 

you and the Committee in welcoming our distinguished nominees 

this morning. Our nominees know that sound management is vital 

to the government function we rely on every day. I believe that effective management demands accountability and transparency. 

This administration has placed great emphasis on outsourcing 

government functions. However, regardless of whether work is performed by Federal employees or contractors, the Federal Government needs to have the people and the tools necessary to identify 

costs and manage outsourced activities. Mr. Johnson, if confirmed, 

I hope you will help agencies adopt appropriate management stratVerDate 0ct 09 2002 13:48 Jun 19, 2003 Jkt 086995 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 C:\DOCS\86995.TXT SAFFAIRS PsN: PHOGAN
4

egies that promote equity. I also hope you will seek the active participation of Federal employees, their unions and management associations. 

Mr. Miller and Mr. Casey, there are many challenges facing the 

Postal Service, as we all know, and I hope that the Postal Service 

of today will continue to be competitive tomorrow. I look forward 

to hearing more about your views. 

And also in welcoming you, I want to welcome your family members and friends, or I should say supporters of our nominees. 

Thank you very much, Madam Chairman. 

Chairman COLLINS. Thank you very much. Senator Dayton.

OPENING STATEMENT OF SENATOR DAYTON 

Senator DAYTON. Thank you, Madam Chairman. I think, as you 

said, we have three extremely well qualified individuals here, and 

I look forward to the opportunity to discuss some of the issues with 

them, but I have nothing further to say at this time. Thank you. 

Chairman COLLINS. Thank you very much. 

As Senator Carper keenly detected, we do have two nominees 

today who are from Texas, and thus we are very honored to be 

joined by the two very able Senators who represent that State. I 

will note that the two nominees from Texas are offset by a nominee 

from New England. So it all balances out in the end. 

It is my pleasure to first call on the Senior Senator from Texas, 

Senator Kay Bailey Hutchison, for any comments that she would 

like to make. 

STATEMENT OF SENATOR HUTCHISON, A U.S. SENATOR FROM 

THE STATE OF TEXAS 

Senator HUTCHISON. Well, thank you very much, Madam Chairman. I am very pleased to be here to talk about two very important 

constituents whom I have known for years and years. 

I will say that Clay Johnson has with him—and he will probably 

introduce them as well—his wife, Anne, and his sister, Margaret. 

His other sister, Liz, and I went to college together, so I have certainly known their family for quite a long time. 

As many of us know, Clay Johnson has been the Assistant to the 

President for Presidential Personnel since President Bush was 

sworn into office. His organization has been responsible for the 

identification and recruitment of approximately 4,000 senior officials, middle management personnel and board and commission 

members for President Bush. He had the same very important job 

for then Governor George Bush in Austin, and later was Governor 

Bush’s Chief of Staff. 

He also has substantial private sector experience, which I think 

will really help him in the management of this very important 

agency. Before entering public service, he was the Chief Operating 

Officer for the Dallas Museum of Art, and he was President of the 

Horchow Mail Order Company, which became the Nieman Marcus 

Mail Order Company. 

He earned his bachelor’s degree from Yale, and a master’s degree 

from the MIT Sloan School of Management. 

I know that his experience in the public sector and the private 

sector is going to be very helpful. OMB has a very important job, 

5

a very tough job, and I think he will be helpful in managing that 

office. 

He is from Fort Worth and his family has been from Fort Worth 

for a long time, for generations actually, as has his wife Ann. 

Al Casey is a New Englander, who made his way to Texas as 

soon as he could. [Laughter.] 

He is nominated of course for a governor position for the U.S. 

Postal Service. He was Postmaster General once before under 

President Reagan, and has been an interim member of the Postal 

Service Board since August 2002. 

He is a distinguished Executive in Residence at the Cox School 

of Business at SMU and he has extensive private sector experience 

as well. He was Chairman and Chief Executive Officer of First Republic Bank Corporation, Chairman and Chief Executive Officer of 

American Airlines and its umbrella organization, AMR Corp. He 

was President of the Times Mirror Company for 8 years. 

He was born in Boston, received an undergraduate degree in economics from Harvard and an MBA from Harvard Business School. 

He served our country in the Army for 4 years during World War 

II. 

He has a great record of management experience and I will say 

that from the things that all of you have said this morning, you are 

looking for independent leadership of this organization, and I can 

assure you Al Casey is the perfect person for this job. 

Before I leave, Madam Chairwoman, you said there is a New 

Englander nominated. Well, he had experience at Texas A&M, so 

I want to say a word for Jim Miller as well, also known for his integrity and independence. Jim Miller would be a fine member of 

the Postal Board. 

And I think you are looking for exactly these two kind of people 

and what they will bring to the table is, I hope, a turnaround of 

the Postal Service that will make it self supporting and more competitive. So I thank you for having us here today. I am going to 

leave to go to the floor because we are doing our tribute to the 

troops right now, but I would not miss the chance to say a word 

about my two fellow Texans and also Jim Miller, who has great 

Texas experience. 

Chairman COLLINS. Thank you very much, Senator. I appreciate 

your being here with us this morning. 

Senator Cornyn, it is a pleasure to also welcome you here today, 

and I would ask that you proceed with your statement. 

STATEMENT OF SENATOR CORNYN, A U.S. SENATOR FROM 

THE STATE OF TEXAS 

Senator CORNYN. Thank you, Senator Collins. 

I want to add my voice to that of Senator Hutchison in support 

of all of these nominees, but particularly on behalf of Clay Johnson, 

who I got to know when he served as the Appointments Director 

and the Chief of Staff for then Governor Bush in Austin when I 

was Attorney General of the State of Texas. 

To me, Clay Johnson represents the finest example of those who 

do not get the attention, do not get the accolades that those of us 

who run for office and who hold elected office do. We get a lot of 

attention. Some of it is welcome, some of it is unwelcome, but the 

6

truth is, it is people like Clay Johnson, who day in and day out 

make government work for the benefit of the people of my State, 

and in his job now and in his new job, on behalf of the American 

people. 

In my previous life I served as Attorney General to the State of 

Texas, and in so doing, I had the responsibility to oversee the work 

of 3,700 employees, about two-thirds of whom collected child support for about 1.2 million children in our State. And in that job I 

came to appreciate the challenges of managing large numbers of 

people, and I really came to feel, and I have not been formally 

trained in management, as has our nominee, Clay Johnson, nor do 

I have the experience he has, but I almost feel like the word ‘‘management’’ is a misnomer when we talk about the challenges that 

we have in dealing with people. 

Really what it boils down to, I believe, is leadership, setting the 

priorities, providing the resources, and holding people accountable 

for performing. And then finally, in essence, being a head cheerleader, to try to encourage them in every way that we can to be 

successful in the jobs that they have chosen to perform. I cannot 

think of anybody who would be more prepared, by virtue of his 

training and experience, than Clay Johnson, to perform this important job as we go forward at the Office of Management and Budget 

as Deputy Director for Management. 

I wanted to be here today and just take these few moments to 

add my voice of support for this outstanding nominee, and really 

my support for all three of these nominees, but particularly for 

Clay and his wife, Anne Johnson, who are friends as well. 

Thank you very much. 

Chairman COLLINS. Thank you very much. And again, we appreciate your taking the time out of your busy schedule to introduce 

these nominees. Thank you very much. 

We will now first consider the nomination of Clay Johnson to be 

the Deputy Director for Management of the Office of Management 

and Budget. 

Mr. Johnson, I would ask that you come forward and remain 

standing so that I can swear you in. 

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? 

Mr. JOHNSON. Yes. 

Chairman COLLINS. Thank you. You may be seated. 

Mr. Johnson has filed responses to the biographical and financial 

questionnaire, answered prehearing questions submitted by the 

Committee, and has had his 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. 

First, Mr. Johnson, I do want to give you the opportunity to introduce any family members that are here with you, if you would 

have them stand. 

7

1 The biographical and financial information appears in the Appendix on page 37. 

Responses to pre-hearing questions appears in the Appendix on page 42. 

TESTIMONY OF CLAY JOHNSON III1 TO BE DEPUTY DIRECTOR 

FOR MANAGEMENT OF THE OFFICE OF MANAGEMENT AND 

BUDGET 

Mr. JOHNSON. Thank you, Senator. I would like to introduce my 

wife Anne, and my sister Margaret Johnson, who lives here in the 

District, and I am delighted that they are here to support me in 

this. 

Chairman COLLINS. We welcome both of you. Mr. Johnson, do 

you have a statement you would like to make? 

Mr. JOHNSON. I only have just a very brief comment to make 

here at the outset. 

I am honored and pleased that the President has asked me to 

take on the challenging and important responsibilities of the Deputy Director for Management position at OMB. If confirmed by the 

Senate, I look forward to working with this Committee, the Congress, the leaders of the departments and agencies, the Federal employees and the unions, Senator Akaka, which you mentioned, to 

ensure that the Federal Government is giving our citizens the results they deserve and expect. 

I have met with the majority of the Members of this Committee, 

and I share the Committee’s enthusiasm and excitement and interest in all the many opportunities we have before us to improve how 

the government is managed, and I look forward to working with 

you in the future. 

Thank you. 

Chairman COLLINS. Thank you very much. I am going to start 

my questioning today with three standard questions that we ask of 

all nominees. 

First, is there anything that 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? 

Mr. JOHNSON. No, not that I am aware of. 

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? 

Mr. JOHNSON. I do not. 

Chairman COLLINS. And third, 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? 

Mr. JOHNSON. Yes, I do. 

Chairman COLLINS. We will now start a round of questions limited to 6 minutes each. 

Mr. Johnson, as I alluded to in my opening statement and in my 

prior conversations with you, there is a long-held view that management issues at OMB have taken a back seat to the budget 

issues, that the budget debates are so all-consuming, that OMB 

tends to slight the management responsibilities. As I have remarked and others have said, it is important that we put the ‘‘M’’ 

back in OMB. 

8

Do you agree with the assessment that management issues have 

not received the attention that they have deserved in previous administrations, and how would you work to make sure that management issues, which have such an impact on the delivery of services 

and the cost of programs, are a high priority at OMB? 

Mr. JOHNSON. Well, I am not a student of what past administrations have done, but I do know that management is an important 

priority for this administration and this President. I would like to 

think that he, President Bush, asked me to do this because it was 

important, as opposed to asking me to do it because it was unimportant. I noted from the very beginning that he has challenged 

Mitch Daniels, the Director of OMB, to think boldly and aggressively about how the Federal Government can be managed better. 

And there are opportunities, there are technologies, there are 

things taking place in the workforce, Federal workforce, now that 

afford this administration, the Federal Government now, opportunities to significantly improve things that were not available previously. 

And I think great work has been done in the last 21⁄2 years, first 

with Sean O’Keefe, and second with Mark Everson, all under Mitch 

Daniels’ directorship, to focus on how the Federal Government has 

managed to make an attempt to significantly change how the Federal Government is managed. And I hear, albeit mostly anecdotal 

feedback from long-time career employees in different agencies, 

that this administration is doing as much, if not more, than any 

previous administration in terms of trying to significantly change 

how agencies are really managed, how to make the Federal Government more performance oriented. 

So I am very confident and comfortable that this is a high priority for the President, and I am very confident and comfortable 

that I can continue to make it a high priority for this administration and for the Federal Government. 

As I pointed out in my questionnaire answers, I have been involved in helping the President identify and appoint most all of the 

senior leadership in the Federal Government. So I know them, they 

know me. I think I have their respect. I respect them. And so my 

ability to communicate and interact with the leadership of other 

departments and agencies is significant, and that is the primary 

challenge now. It is not figuring out what to do. I think there is 

some very good planning that has taken place in the last 2 years, 

and that the primary emphasis going forward is to actually go do 

and implement and execute the plans that have been laid out before us. 

Chairman COLLINS. The General Accounting Office, every other 

year, issues a list of programs that are known as the ‘‘High-Risk 

List’’. These are programs that the GAO has identified as being 

particularly vulnerable to mismanagement, waste, fraud, and 

abuse. It is startling to me that there are programs that have been 

on that list since it was originated more than a decade ago. Every 

single year, probably half the list is comprised of the same programs that were there 10 years ago. What will you do to make sure 

that programs that have been identified as high-risk programs 

have their deficiencies or management flaws remedied, so that we 

9

see programs actually leaving the list rather than appearing year 

after year? 

Mr. JOHNSON. Jim Lockhart, who is the Deputy Administrator of 

Social Security, talked to me and some others a couple of weeks 

ago about how they went about getting one of the items that had 

been on the high-risk list off the high-risk list this past year, and 

it really was pretty straightforward, and I bet what applied there 

would apply to these other items as well, which is they made sure 

that the senior official in the agency, the administrator, was very 

interested in getting off the high-risk list, that the rest of the organization knew what a priority it was for the administrator, that 

there was a very specific plan developed for getting the item off the 

high-risk list. There were to-do items, and it was a plan that everybody felt comfortable with; it assigned was clear responsibility, it 

was clear who was in charge, whose responsibility it was for getting this item off the high-risk list, milestones to be hit, specific actions on specific dates. And they did it. 

It strikes me that the same approach is called for on these other 

items. And so I have talked to David Walker about this, and am 

making sure that for all the 24 items, I think it is, 23, on the highrisk list, that the same thing exists, that there is an action plan, 

it is clear who is responsible. Some of these things have persisted, 

as you said, been there for 10, 12 years. They are not going to be 

removed in 6 months. But there is a plan that everybody is comfortable with, we know what we are dealing with, we are not going 

to get to the end of a 2-year effort and say, ‘‘Well, that is really 

not good enough.’’ We are going to get agreement up front what we 

need to do to get it off the list, and then we are going to identify 

who is responsible for following through on the plan, and then 

make sure it happens. 

So I see OMB’s role, my role in particular, as ensuring that there 

is a specific plan, there is clear accountability, and that people 

meet the milestones they say they are going to meet and do the 

necessary work to get the items off the high-risk list. 

Chairman COLLINS. I am pleased to hear that. This Committee 

is going to hold a series of hearings to look at some of these programs and identify exactly what the issues are in the hope of assisting in the task that you have outlined. 

Mr. JOHNSON. Great. 

Senator COLLINS. Senator Carper. 

Senator CARPER. Thank you, Madam Chairman. 

Mr. Johnson, welcome. How are you? 

Mr. JOHNSON. Fine, thank you. 

Senator CARPER. Nice to see you. And welcome to your wife and 

sister. I could just barely see your wife’s lips move when you spoke. 

[Laughter.] 

I sometimes say to Bill Frist or Trent Lott beforehand, and occasionally to Senator Daschle, that I would not want their job for all 

the tea in China. And I have thought about your job. It is not a 

particularly wonderful position to have——

Mr. JOHNSON. Or my previous job. 

Senator CARPER. I thank you for doing it. From most accounts, 

I have heard, you’re doing it well. 

10

Part of what you have done for the President is to go out and 

to identify people to serve in leadership positions in this administration and previously in the administration in Texas, and obviously you have given a lot of thought to trying to match the right 

person with the right set of skills, with the jobs that you are trying 

to fill. What is it about you and your set of skills that well equip 

you for this position? 

Mr. JOHNSON. I like to bring method to madness, order to chaos, 

structure where there may not be as much structure as there can 

be or should be. 

Senator CARPER. You might like serving in the Senate. [Laughter.] 

Mr. JOHNSON. I like getting people around a table and figuring, 

clarifying real succinctly what it is we are trying to do, how we are 

going to get there, who is responsible, and I think I am good at it. 

And that is what is called for in this position. 

And I have had firsthand experience with a large Fortune 500 

company and a privately held company, and in all these areas that 

we are dealing with here in the Federal Government, with very different, smaller groups of people, smaller budgets, but firsthand experience in all these arenas. So I have first hand experience. I 

think what I like doing is tremendously applicable here, and I 

think also the knowledge of the people, the key players involved, 

that I have, makes me well qualified to do this. 

Senator CARPER. Talk to us a little bit about the nature of the 

job for which you have been nominated. Just describe it for us. 

Mr. JOHNSON. Well, the job in general, in most summary form, 

I see it as trying to bring better management practices to how the 

programs the Federal Government supports are managed and how 

the agencies and departments are managed. We are to provide 

leadership in the management arena. We cannot manage the State 

Department, not supposed to manage the State Department, the 

Interior Department, EPA, but we are to work with the secretaries 

or administrative heads of those departments to help identify what 

the opportunities are to make those departments more results oriented, and bring focus to it, and then identify what can be done. 

And if laws need to be changed, work with Congress and this Committee, and on the House side as well, to identify those legislative 

actions that would allow the Federal Government to be more results oriented. 

So it is as a facilitator. It is not our firsthand responsibility to 

take responsibility, but to provide them with a direction and hold 

them accountable for sound management practices, and the President is very interested in this. He meets with his Cabinet Secretaries at least once, I think it is, every month or two, and during 

almost every one of those meetings he asks them how they are 

doing. With all else that is going on, he asks them how are they 

doing on the President’s management agenda? Are they out of the 

red score category yet? Are they at yellow, or are they green in the 

category? They get it. They understand that this is an interest of 

his and a priority of his. And my responsibility, one of my key responsibilities is to keep making that point with them, and they are 

involved, and they are engaged, and how to help them identify and 

11

follow through on those opportunities to better manage their agencies. 

Senator CARPER. I believe that the administration has proposed 

something called a human capital fund. 

Mr. JOHNSON. Human capital performance fund. 

Senator CARPER. There has been a fair amount of discussion 

about whether or not we can adjust our compensation systems to 

attract some of the key people that we need, to retain those who 

might otherwise leave us, and to reward those who are doing a better job. As a former governor of Delaware I was interested in being 

able to attract good people, keep good people, and to reward people 

who really did a terrific job. The legislature in my State was always concerned, and understandably so, that we would invite favoritism and situations where people would receive better treatment better compensation, not just because they were more critical, 

more valuable, and tougher to keep, but because of favoritism. Just 

take a moment and talk with us about how we meet the laudable 

objectives of such a performance fund and balance that with the 

concerns that such a fund could create. How do we deal with those 

concerns? 

Mr. JOHNSON. I believe it is very important to reward performance, identify and recognize performance, and encourage better 

performance and discourage bad performance. Right now our pay 

systems do not do that. They reward longevity. Sixty, 75 percent 

of all the Senior Executive Service people are paid at the highest 

level, so high performance, low performance, does not make any 

difference. They cannot make any more money if they do exceptionally well, nor are they going to make less if they do exceptionally 

poorly. That is not a good situation to have. 

The human capital performance fund is an opportunity to start 

getting into the rewarding of high levels of performance. Again, it 

allows a lot of flexibility from agency to agency but it would allow 

us to start demonstrating creative ways of using extra pay to either 

encourage people to come into the Federal Government, that otherwise could not be encouraged to come because we do not normally 

offer enough, or to reward and retain superbly performing individuals that you otherwise might lose. So that is the primary purpose 

behind the human capital performance fund. 

There is a question, is there bias? If we reward performance are 

we going to open ourselves up to people playing favorites and giving their friends higher increases than people that are not their 

friends? I do not believe that there is more or less bias in the Federal Government or more or less tendency to play favorites in the 

Federal Government than there is in the private sector. There are 

pay systems in the private sector and have been, especially with all 

the high-performing companies, that do this. I do not know why the 

Federal Government would be more apt to engage in bias and playing favorites than the private sector. Plus there are things you can 

do to review performance evaluations that were given. If somebody 

gives an exceptional performance to somebody, have a supervisor 

review it to make sure they sign off and agree. There are all kinds 

of checks and balances that can be engaged in, but I do not believe 

there is any problem at all with the human capital performance 

12

fund, or some vehicle like that, leading to people getting bonuses 

or extra pay for reasons other than exceptional performance. 

Senator CARPER. Let me say in closing, thank you for that response. The concerns about a system like this being misused are 

real and I think are genuinely felt. I would just urge you to give 

some thought to the kinds of checks and balances that are appropriate, and that you and your colleagues can use in addressing the 

concerns when they are raised, because they will be. Thank you. 

Chairman COLLINS. Thank you, Senator Carper. Senator Akaka. 

Senator AKAKA. Thank you very much, Madam Chairman. It is 

good to have you here before us, Mr. Johnson. OMB has proposed 

revisions to the public-private competition process used to determine whether Federal workers or contractors should perform government functions. OMB’s Office of Federal Procurement Policy has 

emphasized that agencies need to do a better job analyzing processes and reviewing internal agency structures before conducting a 

public-private competition. In fact OFPP has noted that some Federal agencies may have outsourced too many functions and should 

consider bringing back some of them into government. 

As Deputy Director for Management, how would you ensure that 

agencies improve their internal management efficiencies to ensure 

that functions are being outsourced appropriately? 

Mr. JOHNSON. As you know, the A–76 Circular is being rewritten 

to address the hundreds of concerns expressed and expressions of 

support when it was put out for public comment. A lot of the concerns had to do with, is it fair? I have seen some of the drafts of 

the rewritten A–76 Circular and I believe those issues are being 

addressed. 

Is somebody responsible for the overall fairness and effectiveness 

of the system? I believe there is an attempt being made to do that 

that I think will be effective. There was concern expressed about 

it being positioned as an outsourcing initiative. We have to be careful that it is not positioned as that. It is not an outsourcing initiative. It is a taxpayer fairness, or it is a value to the taxpayer, issue. 

There were provisions in the old circular that allowed certain 

things to bid outside without a competition, if the numbers of employees were small, which could be viewed as not fair to employees 

on the inside. I think there are some attempts being made to address those kind of issues. 

It is important that the procurement people, not only the people 

that are inside to manage the competitions, but if something has 

been bid and now is going out to somebody on the outside, that 

there are acquisition and procurement people in place qualified to 

manage that relationship? I think there have been examples, I 

think at HUD primarily where a lot of things were bid out and 

given to the outside and they, by their own admission, would say 

that they lost control of that and they are now trying to bring some 

of those items in. 

So you have to have the professional competencies at all those 

levels to make sure that the taxpayer is really getting what the 

goal is, which is value. That they are getting the highest delivery 

of service at the best price for these things that are inherently commercial. I am confident that the revised A–76 Circular and the way 

it will be implemented will do that. 

13

Senator AKAKA. I have long supported providing adequate funds 

to Federal agencies to pay for recruitment and retention incentives 

and as we look to the future we know that we will have a huge 

problem with this. We have been talking about how human capital 

programs will deal with this. 

Unfortunately, agencies generally lack the funds to utilize these 

management flexibilities. However, the administration has proposed creating a $500 million human capital performance fund to 

reward high performance by Federal workers. I have several questions. One is, where was this money found to create this fund, and 

were other budgets lowered as a result? What role will OMB take 

to ensure that this funding is administered in a fair and equitable 

manner? And what steps will you take to make sure that agencies 

also have funds for recruitment and retention bonuses as well as 

student loan repayments? 

Mr. JOHNSON. The Federal Government is involved in doing a lot 

of things that require a lot of money so we have to be very careful 

about how we spend the taxpayer’s money. But the notion of rewarding employees for performance, having something like a 

human capital performance fund, is so important that the President supported Mitch Daniels’ recommendation to find $500 million 

to support the fund, to get the Federal Government in the business 

of rewarding exceptional performance, or attracting exceptional 

performers, or retaining exceptional performers. I am not aware 

that other budgets were reduced to create that $500 million fund. 

I just do not know the answer to your question. 

The second and third parts of your questions were? 

Senator AKAKA. I was asking about what steps would you take 

to make sure that agencies will have funds for recruitment and retention. 

Mr. JOHNSON. What we hope to do is, with this fund, demonstrate the creative ways it can be used and how effective money 

spent in this fashion can be. And then we would come back to Congress for additional funding or to perhaps work with the Congress 

to change the pay system in general that allows this kind of flexibility in pay. OPM will be responsible, Office of Personnel Management, if it is agreed to by Congress, will be responsible for the implementation of the fund and make sure that it is used fairly. They 

will require each agency to submit a plan for how they intend to 

spend their proportional share of the monies. If the agencies then 

do not follow through on that they can have the monies taken from 

them; again if all of this is agreed to by Congress. 

So I think there are necessary safeguards in place and I think 

the fair way to think about it is this is a first step in a direction 

that I would bet most all the elected members of the House and 

Senate agree we ought to be going in. 

Senator AKAKA. Thank you very much, Madam Chairman. My 

time has expired. 

Chairman COLLINS. Thank you. Senator Dayton.

Senator DAYTON. Thank you, Madam Chairman. As I said earlier, I think the nominee is very well-qualified. My only conflict or 

concern is, he was a year ahead of me in college, and it is hard for 

my classmates and I to follow behind a class that produced the 

President of the United States, and the Deputy Secretary of State, 

14

and a couple of ambassadors, just for starters. I do not think our 

humility could withstand another high-level agency head. 

Mr. JOHNSON. Your classes did OK. 

Senator DAYTON. We are struggling along behind you. In between you and the class behind us who got Garry Trudeau and 

Doonesbury, so we are making do as we can. I am glad you are taking this position because you are well known for your veracity and 

your integrity and your probity, and I would say—we did not have 

a chance to talk before this hearing but I want to put this on the 

public record anyway. I do not expect you to respond because you 

are new to this situation, but I have found with OMB a lack of veracity that I find very disturbing. 

I took the position of chair of the Joint Committee on Printing 

a year ago in January 2002. The then-chairman of the Rules Committee, Chris Dodd, offered me that opportunity and when you are 

one-hundredth in seniority the chance to be chairman of any committee is just something you leap at, so I did. The Joint Committee 

on Printing is responsible for overseeing the Government Printing 

Office, and has a bicameral, bipartisan and not political board of 

members from both the House and the Senate. 

We were going along with a former administration appointee who 

was a 23-year career employee. He was a veteran of the Government Printing Office, so this was not somebody with a political 

background. Suddenly, we just got blindsided in the summer of last 

year when Mr. Daniels issued a directive to all the Executive 

Branch agencies to ignore a 100-year long-standing Federal law 

that requires Federal agencies to use the Government Printing Office for their printing. Mr. Daniels just declared the law was unconstitutional, and with no forewarning, no attempt to meet with myself or the head of the Government Printing Office. I held a hearing, wrote him a letter asking him to come, offered at the hearing 

and before in the letter to try to work things out. No interest whatsoever, no response. 

And I found two things that were disturbing about our interaction. First, there was no attempt to make any kind of effort to 

resolve anything. Mr. Daniels just took a sledgehammer whack at 

the institution, and then took no responsibility for managing it or 

trying to make anything better come out of it. 

But also Mr. Daniels used at the hearing and has used thereafter 

a figure that scores all this contracting with the private sector as 

saving the government $70 million a year. I tried to find out where 

that number came from. I called OMB. I asked, where is the study, 

where is the analysis that proves or that even states that 

privatizing this function will save $70 million a year? No one produced it. If you can find one when you get over there, I would like 

to see it. But my view is he just pulled a number out of the air, 

as far as I could tell, and asserted that time after time so that became the justification for this. 

Then the President made an excellent appointment, or a nomination later confirmed by the Senate: Bruce James, a man with an 

extensive printing background. Last fall I worked with him to get 

him expedited through the committee process. 

I want good government. I do not care whether it is a Republican 

Administration or a Democratic Administration, I want government 

15

to work as well as possible for the citizens. Now that Mr. James 

got on board, there is an agreement to set aside all of these matters that Mr. Daniels was absolutely determined to proceed with. 

I give credit to Mr. James and I am glad that he was able to be 

a voice of reason here. 

I have asked Mr. Daniels to walk forward with me as we establish the facts about printing and information dissemination. I think 

the facts are exactly what are needed here. But there was not any 

interest in facts during that time. 

Another example that came up just last week. I had the police 

officers come to me from Minnesota. Police officers are pretty 

straightforward individuals. I do not know—it does not even matter 

what their political views are—they want to make government 

work. They get funds to put cops on the street, and they were particularly concerned about a Byrne formula grant. Again, I do not 

expect you to know any of this. 

I did not know about it, Madam Chairman, until this came to me 

last week. But the program has been proposed by the President to 

be zeroed out in funding and the justification for that in the budget, which I pulled out, that the President submitted, OMB submitted on his behalf, says, of particular concern are the billions of 

dollars in State and local law enforcement grants that have been 

awarded through programs that lack verifiable performance goals 

or measures such as the State criminal alien assistance program, 

the Byrne formula grants, and some others. Some of these programs were eliminated in the 2003 budget and others have been 

assessed using the new PART. It goes on to later say, the PART 

found similar, although less severe, problems with other grant programs performance goals and measures. 

I read that and I think that any objective reader would read that 

to say that the program which has been proposed to be zeroed out 

in funding, the Byrne formula grant had been evaluated by PART 

and found to be wanting in some way. It turns out it was not evaluated by PART. PART did evaluate some other programs including 

the COPS program. It did not evaluate the Byrne formula grant 

program. I just think that again does not serve the cause of honest 

and objective decisionmaking on anybody’s part when assertions 

are made or points are implied that are not in fact true. I have just 

seen that over and over. 

My time is running out, but at the macro level of this I see this 

manifested with the budget. When this administration took over, 

the Office of Management and Budget provided a 10-year projection 

of the budget and that seemed to fit. Any projections going out 10 

years, understandably, get to be in the area of speculation. But on 

the other hand, we are doing tax policy for 10 years and the President and others are proposing to make tax cuts permanent. So we 

are going out as far as the eye can see, and yet within a year after 

when deficits became more of a concern, the budget now is presented with a 5-year projection, even though the tax proposals continue to be 10 years. 

I think that, in my mind, evidences a lack of willingness to confront the issues head-on. I expect this agency to be responsible to 

the President and to serve the President under any administration. 

16

But I also expect it to be an honest broker in terms of numbers and 

information. 

That leads me to my last concern and the time for your response. 

Now this talk about dynamic scoring is another one, and Mr. Daniels was quoted in an article I read last week as saying that he 

thought that under dynamic scoring, which he advocates, the President’s tax proposal should be reduced, 35 percent, in terms of its 

cost to the Treasury. I do not know where that number came from. 

I assume it came from the same study that had the $70 million in 

savings for GPO. But when OMB presents their assessment of tax 

proposals they do not include the additional interest on the debt 

that is paid over that period of time. 

So again I would ask you to make sure that OMB is an honest 

broker and comes forward and advocates the President’s policies. 

But on a management level, OMB must be willing to work with all 

of us who would like to make this government work better, and 

like to do so regardless of who happens to be in the Executive 

Branch. 

And second, that when OMB does come forward with things as 

important to the future of this Nation, given the fiscal decisions 

that are being made by both the Executive and Legislative 

Branches, OMB must come forward in an honest, straightforward 

way. If they believe honestly that there is going to be a 35 percent 

boost, then let us talk about that head-on, but let us talk about the 

fact that there is going to be additional interest paid on the debt. 

Let us deal with the numbers, and if the administration believes 

in those numbers, believes in those policies, believes they are beneficial, then it ought to be willing to put the numbers out straight, 

and explain those, or defend those, or justify them, and take on 

and engage in that debate, not try to hide it or twist it or distort 

it so that it fools us and fools the public unless we ferret it out. 

So sorry for the diatribe, but I welcome your going in there, sir, 

and I look forward to seeing the evidence of your presence there. 

Thank you. 

Thank you, Madam Chairman. 

Do you have any comments? On dynamic scoring, you are welcome to——

Mr. JOHNSON. I have a lot of respect for Mitch Daniels, and the 

President does too, and I think he would be the first to say he is 

about honest debate over dynamic scoring, or the cost of this, or 

why something was zeroed out. I do not know what the problems 

were. I am not familiar with that particular situation. 

Senator DAYTON. I understand that. I am not looking for an answer. I just want to inform you. 

Mr. JOHNSON. I will make sure that he is aware of the concerns 

that you have raised. On the management side of things, I look forward to working with you, and the way you like to work which is, 

everybody is up front, and here are the numbers, and here is what 

the pros and here is what the cons are, and let us not hide anything from each other. That is the way I like to work and I do not 

believe there is going to be any problems with the way this Committee and the management part of OMB is going to work, and I 

look forward to working with you. 

17

Senator DAYTON. I would ask then, when you get there, and I 

mean this, that you find and send to me the study or analysis that 

demonstrates that there is going to be $70 million of savings per 

year in privatizing the Government Printing Office. I would also 

appreciate any backing for the 35 percent dynamic scoring figure 

that I assume is now going to start to be computed in these numbers. 

Thank you, Madam Chairman. 

Chairman COLLINS. Senator Dayton, I apologize for cutting you 

off but Senator Lautenberg is waiting to question as well so if we 

could proceed, unless he wants to yield. 

OPENING STATEMENT OF SENATOR LAUTENBERG 

Senator LAUTENBERG. I began to tire of Mr. Johnson’s lengthy 

answers. [Laughter.] 

Mr. Johnson, you come with a distinguished record, and I am 

sure are well-qualified to do the job. So I would like to get on to 

the area of discussion that we have now heard repeated a couple 

times because it is a concern of ours, and it is a concern of mine 

as well. I come out of the corporate sector too, and as Senator Dayton said, that when you get to be chairman of anything in your 

early days it is an astounding and marvelous thing to have happen. 

You are looking at a 19-year service person here and I have finally 

worked my way from the last desk. 

So in my experience, and I am sure yours as well—you have had 

considerable business experience as well as government experience. 

I had pretty good fortune with an excellent company that three of 

us founded many years ago and today has over 40,000 employees. 

I wonder if your experience was any different than mine. 

We had a very productive group of employees in my old company 

ADP, Automatic Data Processing, but when I got to government I 

saw what I thought was a remarkable dedication, very skilled, very 

hard-working, less rewards than almost anybody in the private sector would get for overtime and things of that nature. I wonder with 

your experience now both in government and in the productivity or 

the performance of the employee groups within each of the bodies, 

government and the private sector? 

Mr. JOHNSON. No. I think there is a higher calling element that 

motivates somebody to come to work for the Federal Government. 

Because they can make more money, probably work fewer hours in 

the private sector. That is the con. The pro is, you can be involved 

in making this an even better country. So there are some different 

motivations involved I think, but the commitment to the calling, 

commitment to the purpose, the commitment to the country is second to none. 

I do still think that there are opportunities to place more emphasis on performance. I do not believe that the way we now evaluate 

performance, either program performance or individual performance, is satisfactory. I do not belive it is as good as it can be, and 

I do not believe it places the proper emphasis on performance. 

Therefore, I think there are opportunities to make our programs 

and our employees even more performance oriented. 

Senator LAUTENBERG. I regard that comment, your comment as 

a very positive one, trying to find a better way to incentivize emVerDate 0ct 09 2002 13:48 Jun 19, 2003 Jkt 086995 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 C:\DOCS\86995.TXT SAFFAIRS PsN: PHOGAN
18

ployees. I think we struggle with that, and it is frustrating when 

you have got someone who is an exceptional performer but because 

they are a particular grade and you do not have much budget or 

you have not got any budget left in most cases, it is hard to supply 

the kind of incentive that might make a difference. 

As a result of that, I have been concerned about why it is that 

the administration is so determined to turn the 400,000-some jobs 

at a minimal, maybe 850,000 as a target, over to the private sector, 

and setting things in place that would enable that it can be done. 

One of the things that bothers me is the air traffic control group 

had been identified as inherently governmental. That structure 

now has changed last year, and that would set the stage for privatization. That does not make a lot of sense to me and I would prefer 

that my family was not flying in the safety on the cheap in the air. 

Frankly, I cannot understand it because to me, the FAA responsibility is in those towers and everything, and we saw it manifest 

time and time again, almost makes them the equivalent of a 

branch of the military. 

So what do you think about putting this out to the lowest bidder? 

Because look what has happened with baggage screeners. We took 

them out of private hands, moved them to the government, gave 

them all a bid raise, and picked up 28,000 Federal employees in 

the process. Here we want to take the people who are not screening 

the bags, which is an important job, but you have got millions of 

people in the air every week and we want to see if we can find the 

cheapest bidder. That is like going in the operating room and 

checking the price for the surgery with the doctor and saying, are 

you the lowest in the area? So what do you think about my statement? 

Mr. JOHNSON. A couple of things. One, as I mentioned earlier, I 

think there is a tendency to view this as an outsourcing initiative, 

and it is not. It is a best value to the taxpayer. What we are working with the agencies to do, and the reason we are rewriting the 

A–76 Circular is to make it easier and more straightforward for the 

agencies to look at a particular job function that is inherently commercial and determine whether it is best to keep it inside or go outside with it. If the decision in all cases is to stay inside, then we 

can say that we have looked at it. We have taken the time, paid 

the attention to look at it and can determine that the best way to 

get this job done for the taxpayer is to keep it inside, or to take 

it outside; whatever the case may be. We do not care whether it 

stays all inside or goes all outside. 

The statistics are, I think that when these competitions are done 

in States and other cities and so forth, is about 60 percent of the 

competitions are won by the inside group. I do not know what the 

Federal Government statistics will be. But this is not an outsourcing initiative. It is a best value for the taxpayer initiative. 

The other thing is, my understanding about the air traffic controllers is, the reason it has been labeled an inherently governmental activity—excuse me, a commercial activity, is because air 

traffic controllers in some other countries are performed by private 

companies. I think the FAA’s determination is, even though it is 

inherently commercial because it is done by commercial enterprises 

in other countries, they do not want to subject it to a competition, 

19

which is fine with us. What they are looking to do is to subject the 

weather reporting to outside competition. So I do not believe there 

is any move afoot to outsource or to consider outsourcing alternatives for air traffic controllers. 

Senator LAUTENBERG. Mr. Johnson, you, by virtue of your education and your accomplishments apparently are a very thorough 

man and competent. I would, therefore, in that framework ask that 

you look at the performance of what has happened in Canada and 

the U.K. as a couple of countries have gone private and see that 

in the U.K. the number of near-misses has stepped up significantly. 

I do not like the idea of roller derby in the sky. In Canada they 

have had to bail out the system a couple of times because the private contractor could not make it. I would hate to see our aviation 

system tied up in a labor dispute with a private contractor who decides that they need more money. But anyway, I hope you will keep 

that in mind when you do your study, Mr. Johnson. 

Mr. JOHNSON. Yes, sir. 

Senator LAUTENBERG. If you would like to have a chat with me 

about it, I would appreciate it. 

Mr. JOHNSON. Right. 

Senator LAUTENBERG. Thanks very much, Madam Chairman. 

Chairman COLLINS. Thank you, Senator. It is my understanding 

that Senator Levin is on his way with some questions for you. 

He has now arrived and I will turn to him. 

OPENING STATEMENT OF SENATOR LEVIN 

Senator LEVIN. Great timing. 

Thank you, Madam Chairman. You have my welcome and congratulations and thanks for your service and dropping in to visit 

me in my office. 

Some of the questions that I am asking you today I have chatted 

with you about before. The first has to do with the Federal 

outsourcing policy to make sure that it is fair to both public and 

private sectors in allowing comparable appeal rights to both. Because I just had to race in here, I do not know whether you have 

been asked this particular question or not. If so, you can just indicate that, if you would. 

The GAO Commercial Activities Panel, I think as you remember 

and know, said the following: ‘‘Fairness is critical to protecting the 

integrity of the process and to creating and maintaining the trust 

of those most affected. Fairness requires that competing parties, 

both public and private, receive comparable treatment throughout 

the competition regarding, for example, access to relevant information and legal standing to challenge the way a competition has 

been conducted at all appropriate forums, including the General 

Accounting Office and the U.S. Court of Federal Claims.’’

Now the administration proposes to amend Title X to allow the 

Department of Defense to implement best value competitions. That 

implements one of the report’s recommendations. However, there 

has been no proposal yet from the administration to implement the 

report’s recommendations relative to bid protests, and that also requires legislation. Do you agree that fairness dictates that the public and private sectors receive comparable treatment in the bid protest process? 

20

Mr. JOHNSON. Yes, there has to be fairness. The demands placed 

on the employee group have to be similar to the demands placed 

on an outside group bidding for the business. 

Senator LEVIN. Not only demands but would you add to that that 

the rights, and that the opportunity should be similar? In other 

words, if there is a right to appeal on the part of an outside group 

to a particular decision, should a similar right to appeal be available to the inside group, the public sector? Because that is what 

the report recommended, what I just read to you. It said here, and 

this is the same panel that is being relied on for the recommendation to amend Title X relative to best value competitions, the same 

GAO Commercial Activities Panel recommended that when it 

comes to challenging the way a competition has been conducted at 

all appropriate forums that comparable treatment be available, or 

be received throughout that competition. So why should the bid appeal process not be comparable? 

Mr. JOHNSON. I am not familiar with what is being proposed for 

DOD or in Title X. I have worked some with Angela Styles and 

looked at what she is trying to do with the rewrite of the A–76 Circular and I feel like the issues about fairness and equal footing and 

accountability for the overall fairness of the process are being addressed very effectively with her rewrite of the A–76 Circular. 

Senator LEVIN. Would you, for the record, take a look at this very 

specific issue as to whether or not the bid protest procedures 

should be comparable for both public and private? Would you give 

us that answer for the record? 

Mr. JOHNSON. I will. 

Senator LEVIN. The proposed revision of the A–76 OMB Circular 

provides that the time allowed for a public-private competition 

‘‘shall not exceed 12 months from public announcement unless a 

deviation is granted.’’ Now one possible consequence of a failure to 

meet that deadline would be, according to administration officials, 

the privatization of the work without competition. In a January 16, 

2003 letter to OMB Director Mitch Daniels, the Comptroller General David Walker stated that those time frames are ‘‘unrealistic’’ 

and urged the administration to avoid ‘‘imposing aggressive, fixed 

deadlines’’ for public-private competitions. I personally am not 

aware of any circumstance in the procurement system where we 

impose similar deadlines on competitions that impact private contractors. 

So if you are confirmed as the deputy director for management 

will you try to avoid enforcing arbitrary deadlines for public-private 

competitions, or are you going to be enforcing arbitrary deadlines 

for public-private competitions? 

Mr. JOHNSON. I think what is being worked on now is that the 

goal is that they be done within 12 months. But there will be some 

competitions, the complexity of which will be such, that it will be 

unrealistic to get those things assessed within a 12-month period 

of time; so extensions will be granted. But there needs to be some 

process to allow that to happen. A lot can happen in 12 months. 

Right now these competitions take 3 years. Wars have been begun, 

fought, and ended in less than 3 years. The Normandy invasion did 

not take 3 years to plan and execute. 

21

Senator LEVIN. Political campaigns take a lot longer than 12 

months. You could add that to the list. 

Mr. JOHNSON. But anyway, 3 years is way too long to be conducting these competitions. So I think it is an admirable goal that 

we are trying to do these competitions in a reasonable period of 

time—reasonable for everybody’s benefit. 

This is not a top-down, do it to them versus with them kind of 

a policy. This is supposed to be reflective of what the end goal is, 

which is not outplacement. It is about ensuring best value for the 

taxpayer, but yet to do so in a—we need to get on with it. We need 

to conduct a competition, and we need to say that it needs to be 

inside or it needs to be outside and let us get on to the next issue. 

We do not need to be taking 3 years to conduct these competitions. 

Senator LEVIN. I agree with that as a goal. The question is, if 

the goal is not met, which way do you tilt it? Why should it tilt 

one way or another if the goal is not met? 

Mr. JOHNSON. The expectation is that some of these are going to 

take longer, especially as you take an organization, any of these 

agencies that are used to conducting a competition and they are 

used to taking 3 years, and running in molasses, if you will, and 

now they are being told, you can remove yourself from the molasses 

and you can actually run, it might take some while to get used to 

that. So we are realistic, but the goal is to recognize that these 

competitions can and should be conducted in a reasonable period 

of time and we think a year is, for most of these competitions, adequate. But we also believe that there will be exceptions to that and 

exceptions will be allowed. 

Senator LEVIN. I appreciate that, and I am glad it is not going 

to be inflexible. That red light is inflexible. I think my time is up. 

Perhaps I could just finish this one question. 

Chairman COLLINS. Certainly. 

Senator LEVIN. Because I do not think you answered my last 

question. Assuming that there is going to be a cut-off point, for 

whatever reason in some cases, assuming there is not going to be 

an extension, why should the outcome be tilted more towards privatization than towards leaving it public? Why tilt the answer? 

Mr. JOHNSON. You mean if the competition is not complete at the 

end of the 12- or 18-month period? 

Senator LEVIN. And there is no extension. 

Mr. JOHNSON. That the outside person wins? 

Senator LEVIN. Yes, why is that? 

Mr. JOHNSON. I am not sure that is the way it is being written. 

Senator LEVIN. Good. Glad to hear it. Thank you. 

Chairman COLLINS. Thank you, Senator. 

Senator Pryor, it is my understanding that you have met with 

the nominee and do not have further questions at this time; is that 

correct? 

Senator PRYOR. That is correct. 

Chairman COLLINS. Thank you, Mr. Johnson, for appearing 

today. I do believe we are very fortunate to have an individual of 

your ability, experience, and background willing to serve in this 

very challenging and difficult post. As Senator Dayton indicated, a 

lot of us have frustrations with OMB from time to time so I am 

22

1 The biographical and financial information appears in the Appendix on page 69. 

Responses to pre-hearing questions appears in the Appendix on page 76. 

sure that you will be hearing from us, and we look forward to moving rapidly on your nomination. Thank you. 

Mr. JOHNSON. Thank you so much. I enjoyed visiting with you. 

Thank you. 

Senator DAYTON. Madam Chairman, I just want to say for the 

record, and make it clear, I support the nomination and look forward to your presence there. 

Chairman COLLINS. Thank you, Senator. 

We will now consider the nominations of Albert Casey and James 

Miller to be members of the Board of Governors of the U.S. Postal 

Service. I would ask that you come forward and remain standing 

so that I can swear you in. 

[Witnesses sworn.] 

Chairman COLLINS. Mr. Casey, we learned something of your 

background from Senator Hutchison when she introduced you. I do 

not think I could do it better than she did. I will give a little more 

background on Mr. Miller for the benefit of the Committee record. 

Mr. Miller has a Ph.D. in Economics from the University of Virginia, and an undergraduate degree in Economics from the University of Georgia. He is currently chairman of CapAnalysis Group. He 

is a distinguished fellow for the Center for Study of Public Choice 

at George Mason University. He is a senior fellow at the Hoover 

Institution at Stanford University. 

He is a member of numerous boards of directors and has extensive experience in both the academic world and in the private and 

public sector. We welcome you both here this morning. 

Both of the nominees have filed responses to the Committee 

questionnaires, answered pre-hearing questions 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 information which is 

on file and available for public inspection in the Committee offices. 

As I indicated, we are going to see if you have statements that you 

wish to make, but first, if there is anyone you would like to introduce to the Committee, I want to give you that opportunity. 

Mr. Casey. 

Mr. CASEY. I consider the entire room my family. 

Chairman COLLINS. They are all nodding in agreement. Mr. Miller. 

Mr. MILLER. I include Mr. Casey and all the Members on the 

dais. 

Chairman COLLINS. Mr. Casey, I will ask you to proceed with 

any statement you would like to make. 

TESTIMONY OF ALBERT CASEY1 TO BE A MEMBER OF THE 

BOARD OF GOVERNORS OF THE U.S. POSTAL SERVICE 

Mr. CASEY. If I get approved, this will be my fifth Federal Government service since I retired from American Airlines. I really 

need the work. [Laughter.] 

I love Washington. I have spent a lot of time with the Congress 

and a lot of time with, you could call it the bureaucracy, the varVerDate 0ct 09 2002 13:48 Jun 19, 2003 Jkt 086995 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 C:\DOCS\86995.TXT SAFFAIRS PsN: PHOGAN
23

1 The prepared statement of Mr. Miller appears in the Appendix on page 83. 

The biographical and financial information appears in the Appendix on page 85. 

Responses to pre-hearing questions appears in the Appendix on page 99. 

ious government agencies and I found very good, dedicated people 

and I enjoy their association. I would just say that I have already 

appeared before the Presidential’s Commission on the Review of 

the Postal Experience and so forth and I left them with four ideas. 

If it is possible I would like to let these four ideas be a part of the 

record so you would know what I told the others. 

[The information refered to follows:]

PRESIDENT’S COMMISSION ON THE U.S. POSTAL SERVICE 

AUSTIN, TEXAS—MARCH 17,2003

1. MORE PRICING FREEDOM 

PRICES SHOULD BE BASED ON ‘‘VALUE’’ NOT COSTS—OTHERWISE NEVER HAVE EARNINGS. 

2. LABOR 

HAVE MANDATORY MEDIATION—IF NO AGREEMENT THEN ‘‘MEDIATOR’’ BECOMES ‘‘ARBITOR’’ NOT NECESSARY TO START ALL 

OVER AGAIN—THE WAY IT IS NOW.

3. PAY COMPARABILITY 

GIVE WEIGHT TO HEALTH BENEFITS AND PENSIONS.

4. GOVERNORS WITH MORE BUSINESS EXPERIENCE 

NORMA PACE AND IRA HALL (IBM)—NOT DEPENDENT ON POLITICAL INFLUENCE

I want more pricing freedom, and we can go into the details if 

you want to. As regards to labor, we have got to improve the working ansugement. You go to get the labor mediations, forced mediation and if they do not agree they have to start all over again with 

an arbiter. I should like the mediator to be the arbiter. Just plain 

speed it up; that is all. 

I want pay comparability reviews in none of the reviews of the 

unions or the others including the health benefits and the pensions 

of the Post Office when they compare pay scales. I think the pay 

scale in the Post Office is pretty good myself. 

Another thing is I should like a few more business-oriented governors. I will not belabor that point, but really we have got a wonderful group of governors. They are fine; they are wonderful, very 

pleasant and agreeable. But we have only got, as far as I know, 

only one other businessman on the record. And we have no representation west of Texas. I think the whole subject of the selection 

of governors should be reviewed. 

I will close with the fact that I told the Presidential commission 

the worst thing they could do is to leave the Post Office alone. We 

need change. Thank you. 

Chairman COLLINS. Thank you very much, Mr. Casey. Mr. Miller. 

TESTIMONY OF JAMES C. MILLER, III1 TO BE A MEMBER OF 

THE BOARD OF GOVERNORS OF THE U.S. POSTAL SERVICE 

Mr. MILLER. Madam Chairman, Mr. Carper, other Members of 

the Committee, thank you for having me here today. First I want 

24

to express my appreciation to the President of the United States 

for his confidence in me in nominating me for this position. 

Second, thank you for holding this hearing today and allowing 

me to come, and to inquire of my qualifications. 

I would like to make three points briefly, if I might. In addition, 

Madam Chairman, I did submit a short statement for the record. 

Chairman COLLINS. Which will be made part of the record. 

Mr. MILLER. First, I have had a great deal of experience in government, most recently as director of OMB, before that as chairman of the Federal Trade Commission, and before that I was the 

first head of the Office of Information and Regulatory Affairs at 

OMB. And I was a senior staffer at the Department of Transportation and a senior staff economist at the Council of Economic Advisers, where I worked for Alan Greenspan, and I was an assistant 

director of the old Council on Wage and Price Stability. So I have 

had a good deal of experience in government and I think this 

equips me to be able to understand and assess the role of the Postal Service, the nexus it has with the Federal Government. 

Second, I have had a good deal of experience in business, especially since leaving government. As you mentioned, I serve on the 

boards of directors of a number of companies: The board of Atlantic 

Coast Airlines and the board of Washington Mutual Investors, Inc., 

the fourth or fifth largest equity fund in America; also, the Tax-Exempt Funds of Virginia and Maryland, and the J.P. Morgan Value 

Opportunities Fund. I have been a consultant in the past and now 

I head this affiliate of Howrey, Simon, Arnold and White, known 

as the CapAnalysis Group. I have had a good deal of experience in 

business and I think this equips me to understand and to deal with 

the Postal Service as a commercial enterprise. 

The third thing, as you alluded to, Madam Chairman, is that I 

have had a good deal of experience in the academic world, in research, in public policy generally. I have published, just since leaving government, three books. I have been a lecturer at a number 

of local universities, including George Mason University. I served 

on the board of visitors of George Mason University. I have served 

on the board of visitors of the Air Force Academy. I have taught 

full-time at Texas A&M University and Georgia State University. 

I am, as you pointed out, a senior fellow at the Hoover Institute, 

and at George Mason Center for the Study of Public Choice. I have 

been associated with the American Enterprise Institution, the 

Brookings Institution, and most recently for a number of years 

with Citizens for a Sound Economy Foundation. So I see this experience equipping me to understand and deal with the Postal Service in its broader context of public policy. 

With all of that, those three points, Madam Chairman, those are 

the reasons I think I am qualified and was selected by the President for this post. And I look forward to working with you, members of the staff, and of course, my colleagues at the Postal Service, 

and I think also people at the Postal Rate Commission, to improve 

the Postal Service of the United States. Thank you. 

Chairman COLLINS. Thank you. As I explained to the previous 

nominee, there are three standard questions that we ask of all 

nominees and I would like to pose them to you now. 

25

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? Mr. Casey. 

Mr. CASEY. No, not at all. 

Chairman COLLINS. Mr. Miller. 

Mr. MILLER. None. 

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? Mr. Casey? 

Mr. CASEY. Nothing. 

Chairman COLLINS. Mr. Miller. 

Mr. MILLER. None. 

Chairman COLLINS. 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? 

Mr. Casey? 

Mr. CASEY. Indeed. 

Chairman COLLINS. Mr. Miller. 

Mr. MILLER. Absolutely. 

Chairman COLLINS. You passed that round very well. We will 

now turn to a round of questions limited to 6 minutes each. 

Both of you are well aware of the fact that Postal Service is experiencing serious financial challenges. In the year 2000, the Postal 

Service lost nearly $200 million. In 2001, this loss ballooned to $1.6 

billion, and for 2002 the Postal Service posted a net loss of $676 

million, which was certainly progress over the previous year but 

still a very substantial deficit. 

The Postal Service is mandated by law to break even. But it has 

simply, for a variety of reasons including a decrease in volume, not 

generated sufficient revenues to cover its operating expenses. That 

has led the Postal Service, for example, to put a freeze on capital 

commitments that is holding up a much-needed mail processing 

plant in Scarborough, Maine and elsewhere in the United States. 

These are all difficult issues. 

Mr. Casey, I know that you have already been serving on the 

Postal Board of Governors and that you are a member, or I believe 

the chairman of the audit committee; a difficult task indeed, so I 

would like to start with you. We are all waiting for the report of 

the commission which is looking at the Postal Service from top to 

bottom, but based on your experience and perhaps expanding on 

some of the points you made in your initial statements, what actions do you think the Postal Service needs to take to tackle the 

imbalance between its expenditures and revenues? 

Mr. CASEY. I think it is absolutely impossible for the Post Office 

to ever break even under the current rules. We go to the Postal 

Rate Commission with our cost. That is all we are able to go with, 

and we get the rate adjusted to recover our cost. We never get anything over our cost. How can you possibly do better than break 

even? A large number of the postal inspectors at the Post Office do 

government work for which it is not repaid. There is no way for the 

Post Office under the current legislation to break even. That is the 

first thing. 

26

I do not believe in privatization of the entire system. There may 

be pieces and parts and things like that, that possibly could be. I 

will just give you a specific example as to how we are handicapped. 

I have a home on Cape Cod. I hear all of you give these personal 

experiences. Do you know how many post offices there are on Cape 

Cod? Senator, I will ask you first. 

Senator DAYTON. If there are more than there are in Minnesota, 

I would be concerned. 

Senator LAUTENBERG. I know of two. 

Mr. CASEY. Two? There are 57 post offices on Cape Cod and in 

the winter there are not 57 people on Cape Cod. So I ask you, why 

can we not have the liberty to work this thing out? It is made to 

order for bringing down the number. We do not have that liberty. 

It is those kind of things that we really should pay attention to. 

I could carry on with some of my specific little stuff but I will 

not bother you with it. We need more revenue and we need less expenses, and the Board of Governors should spend all its time on 

those two items. End of speech. 

Chairman COLLINS. Mr. Miller, I know you have done considerable work in this area. I realize you are not yet on the Board of 

Governors but do you have any initial thoughts? 

Mr. MILLER. Madam Chairman, I have not really looked at this 

issue in detail in a decade. Just like going on the board of a company, you want to have access to the information on which you 

would make a decision. So I would reserve judgment. I do not know 

anything about the Cape Cod situation. It is unambiguously true 

that the best way to solve the deficit problem is get more revenue 

and have less cost. That is straightforward. But as for particular 

recommendations, I will not voice any until I have had a chance 

to study the matter. 

Chairman COLLINS. Mr. Miller, many years ago you expressed 

the view that perhaps the private express statutes of the Postal 

Service, the monopoly, should be repealed. You also spoke in favor 

of deregulating some of the Postal Service and allowing private 

companies to compete in delivery of mail. Is that still your view? 

Mr. MILLER. If I have the same information, the same studies, 

same data, same analysis that I looked at before, that would exactly be my view. I think anytime you take on a new responsibility 

you owe it to yourself or whomever appointed you to that or are 

responsible for putting you there, to give it your best shot, to take 

a new look at things. I will take a new look at things and I will 

give you my best judgment. 

Chairman COLLINS. So would it be fair to say that you recognize 

that the Postal Service has changed in the years since you made 

those statements and that you are not wedded to your previous 

analysis? 

Mr. MILLER. I think the Postal Service has changed. All institutions change in a decade or so. I will take a look at what changes 

have been manifest. I will make a fresh assessment based on what 

I find. But without question, if I were faced with the same information as I had before, same views and same analysis, I would hold 

the same view as I did then. 

Chairman COLLINS. Senator Carper. 

27

Senator CARPER. Mr. Casey and Mr. Miller, nice to see you both. 

Thanks for joining us, and for your service to the people of this 

country in a variety of capacities over your lifetime. Sitting here 

listening to you talk about your lives and what you have done with 

them, it is a rich and varied past and I think one that prepares 

you well for this responsibility. 

Senator Collins has talked a bit about privatization. You have 

been very forthcoming in your position there, Mr. Miller, and I appreciate your candor. I want to go back to Mr. Casey initially, if 

I could. I think you mentioned that one of the needs for the Board 

of Governors was people with more business experience. There is 

a fellow from Delaware on the board, a fellow named Bob Rider 

who——

Mr. CASEY. He was chairman previously. 

Senator CARPER. He is still a member of the board. 

Mr. CASEY. Very good man. 

Senator CARPER. We think he is as well. I agree with you that 

there needs to be a mix of people and experiences on the board and 

my sense is that both of you bring a good and varied background 

to the board. 

Mr. Casey, you have been the Postmaster General, you have held 

this position on the Board of Governors for a while as a recess appointee. Just talk to us a little bit about the nature of the board, 

what the Board of Governors does, maybe how that compares to 

other boards of directors of corporations, and just talk to us a bit 

about the nature of the board. Maybe how it acts today compared 

to how it did when you were Postmaster General back in the 

1980’s. 

Mr. CASEY. I will be glad to take a swing at it. Actually, the 

board really does not act like a commercial board. I have been on 

15 boards of directors. I have taught leadership and ethics at SMU 

for 13 years, part of the role of the board of directors has always 

been a part of my theme. What you must do is look at what are 

the factors, as I expressed revenues and expenses, of course, and 

give more authority down the line. Of course you are going to have 

rules, checks, and balances, but it should be delegated, I think, a 

lot more authority could be delegated than there is. I feel that 

would be the first thing that I would recommend. 

When I look at a company and I look at a board of directors I 

generally look almost entirely at just one factor and that is the people; how good are the people? I do not know all the people down 

in the loins of the Post Office, but I know four top men very well, 

the postmaster, the deputy postmaster, the chief of operations, and 

the financial officer. You could not have better people. I have been 

with seven corporations. I have been the CEO of five. Let me tell 

you, this team is good and we are lucky to have them. The first 

job and role of a board of directors is successorship. There is nothing that comes ahead of successorship. 

Fortunately, Jack Potter is about 46-years-old. Fortunately, we 

are going to have him for at least another business generation. I 

hope so. I think it is the best thing that could happen to the American public. He is very good. He is experienced, and he is fair. If 

you look for one strength in a member of the board—I do not mean 

board. I mean CEO. The one strength that is paramount—it is not 

28

education, it is not experience. It is fairness. A sense of fairness. 

You can work for any boss as long as you feel he is being fair to 

everybody. 

I don’t want to see the board spend its time like at ‘‘show and 

tell.’’ I should like them to spend their focus on just revenues, expenses, and capital expenditures. 

I should make one tiny addition, and that is, I think it is ridiculous to have the $15 billion cap on capital borrowing. As long as 

any borrowing, and you have a management that you have faith in, 

and it shows a proper rate of return, it should be accepted. 

Senator CARPER. Thank you. When were you Postmaster General, sir? 

Mr. CASEY. Nineteen-eighty-six. I remember it well. I came in because they had fired the Postmaster and they wanted an interim 

period to make a complete search. August 1, I was going to teach 

at Southern Methodist. So I came in January and went to August 

1, and before I left the vice chairman of the board was put in Federal prison. 

Senator CARPER. And you were sent off to SMU. 

Mr. CASEY. We had one thing that we really had to do. Do you 

realize how slow it is to get approvals in the Post Office? A new 

post office must take at least 18 months to 2 years. It is ridiculous. 

By the time it is there, the population has changed. 

So what I did is I brought in the brightest people in the Post Office and I said, I want to get rid of the second and the fourth level 

of bureaucracy. I want to have just the first, third, and the fifth; 

it will speed up things. Put them to work. They came back with 

a ridiculous study. It was mumbo-jumbo; it did not mean anything. 

So I wrote a letter and I said, 60 days from now everybody who 

is in the second or the fourth layer of bureaucracy must either go 

up, go down or go out. We lost 40,000 people. 

I think you can do things in the Post Office, and I think Jack 

Potter is doing them. He has had a wonderful record. 

Senator CARPER. It has been an impressive first 2 years, I agree. 

A follow-up question. When you look at the environment in which 

the Postal Service was competing or operating in your tenure, your 

brief tenure as Postmaster General and you look at the environment today——

Mr. CASEY. Very different. 

Senator CARPER. Talk about the differences and the similarities. 

And I see my time has expired. 

Mr. CASEY. Very different. We have two huge facilities down in 

Dallas. I will not bore you with all the details. They sort mail and 

handle mail and so forth. When I visited those facilities in 1986—

I had to have an excuse to go home once in a while—let me tell 

you, the place was swarming. It was like a beehive. It was human 

beings all around you. I went there last week, you do not see anybody there. It is all mechanized. The whole thing is mechanized. 

So those people that were sorting mail are now put out on the 

streets because of the population explosion and we need these fellows. To give you an example, 1.7 million new slots a year or some 

statistic like that. It is a totally different game. So we need capital 

investment. 

29

Senator CARPER. My time has expired. I have some folks waiting 

for me out in the anteroom. I am going to slip out but I will come 

back and rejoin you. Hopefully there will be an opportunity to ask 

a question of you, Mr. Miller. Thank you. 

Chairman COLLINS. Thank you. Senator Dayton.

Senator DAYTON. Madam Chairman, based on what Mr. Casey 

just said, I was struck by a couple of Mr. Miller’s writings. One is, 

it is time to free the mails. In the spring and summer of 1988 did 

that apply to the deputy postmaster general? I do not know whether, Mr. Casey, to ask you about the condition of the Post Office or 

get some advice on the airline industry in which you have background too. You were there for a very brief period of time, it seems 

to me the Postal Service could make a profit or could even break 

even. We might not like what it would need to do in order to accomplish that. We set a parameter of 6 days a week of service, 

which I think the American public wants, at least my constituents 

do, and the mail gets delivered to Pelican Rapids as well as Minneapolis and places even farther north than that. 

I agree with you that we should take many of the shackles off 

and let it operate, but I worry about any replacement that the Post 

Office got to accomplish something in terms of a bottom line when 

what we really also need to include are some of the parameters 

within which we want it to operate for the public purpose. 

Mr. CASEY. The other day I was exposed to a study by the Postal 

Rate Commission which was very interesting. Now we have generally $68 billion in revenue. So they said, what is the cost of this 

universal service, the unprofitable offices? If we get rid of all of 

them what would we literally save? They came out with a figure—

I recommend this study to the Committee. Go to the Postal Rate 

Commission. About 5 percent of—$3 billion could be saved, could 

be eliminated is their figure, if we eliminated the universality of 

service and tried to make some standard of how many things and 

how much—get rid of the unprofitable rural free deliveries. There 

is not the saving there that you would believe, if you can believe 

their study. The way they made the study—Jim, it is up to you to 

review it. You have got to get some facts. 

Senator DAYTON. You make my point, sir. Again, if we give somebody free rein, eliminate the universality, decide when they want 

to go 6 days, when it is profitable for 6 days, when it is profitable 

to go less we would save money. But I guarantee if you eliminate 

universality, you will be talking to a different Senator from Minnesota a couple years later. Now maybe that is a reason to pursue 

it, but——

Mr. CASEY. Minnesota is a pretty good State compared to Maine. 

Let me tell you about Maine. 

Senator DAYTON. No, I will leave that one for——

Senator LAUTENBERG. How many post offices do they have? 

Senator DAYTON. More than Cape Cod. 

Mr. Miller, I was going through last night—I am going to go 

through the archives and get some of your articles here. You are 

a prolific writer. If the President’s nominees for judges would have 

this kind of record we could confirm them directly. And your titles 

are intriguing too. One I see, independent agencies. Independent 

from whom? Based on what you are doing about the Postal Service, 

30

is the Postal Service independent of the Board of Governors and everything else? It seems to proceed on its own volition without any 

connection with anybody that I can tell. 

Mr. MILLER. Of course it has a role. Certain things have to be 

appropriated for it. It has a set of rules from Congress. Its rates 

and services are, to some extent, regulated by the Postal Rate Commission. And it does have a Board of Governors. I view the Board 

of Governors very much the same as a board of directors of a company. So I would anticipate that the Board of Governors would give 

policy guidance to the Postal Service, would not micromanage the 

Postal Service but give policy guidance to the Postal Service and 

make the larger decisions about major investments, major proposals to change rates, major changes in services, and so forth. 

It is a hybrid. It is not a government agency in the ordinary 

sense, and it is not a commercial enterprise in the ordinary sense. 

It is something of a hybrid. That is the reason, frankly, it is useful 

to have people who, like Mr. Casey, have had the experience in 

government as well as in business these posts. 

Senator DAYTON. I think your background qualifies you superbly 

well because it also needs to operate in a fiscally efficient manner. 

The last observation I would make, and if either one of you wants 

to respond please do. You mention the need to balance revenues 

with expenses. The ratemaking process I believe is 18 months or 

so. One of my concerns about government, is that we bury ourselves in process and it takes so long that they are always catching 

up. So I would just commend you, come back to us as a Board of 

Governors and the Postmaster General, tell us what we can do to 

take some of these shackles off and expedite these matters so it can 

operate, even as it is now, more efficiently than it does. 

Mr. MILLER. Can I point out, I think you have hit a very important issue, and Al was raising it earlier as well. It seems to me 

that there is a substantial set of constraints that slow the process 

down. I think there are ways, perhaps, of cutting through it, and 

I think you may have to make some decisions on that as well. But 

I think there are ways of making sure the Postal Rate Commission 

gets information in a more timely fashion and that they make decisions faster. Frankly, I do not want to prejudge but I do get the 

impression that perhaps the postal board and the Postal Service 

are not as responsive to the Postal Rate Commission as they should 

be, and the Postal Rate Commissioners maybe drag their feet. 

There seems to be an adversarial relationship between the two, 

and maybe there is some way of overcoming that. 

Senator DAYTON. Madam Chairman, my time is up and I have 

to leave to go on a conference call with all the postmasters of Minnesota. [Laughter.] 

As I say, I am happy to support both nominees. I think they are 

outstanding. 

I want to thank both of you for taking on this assignment. More 

power to you. 

Mr. CASEY. Thank you very much. I appreciate it. 

Chairman COLLINS. Thank you for participation today. Senator 

Lautenberg.

Senator LAUTENBERG. Thank you very much, Madam Chairman. 

31

I want to ask Mr. Miller about your early observations. We have 

met before in similarly hallowed halls and you talked about the 

Postal Service as a commercial enterprise. Does your experience or 

your commentary as written include an analysis—I have not read 

it—an analysis of what happens with those services that are rendered because it is a committment of our government. If you want 

to pick a place, the chairman of the Appropriations Committee, 

pick Alaska and see how difficult it is to service the mail up there. 

I would not want to be in the same room when you propose reducing or changing the service. Not to say that the Senator is not of 

balanced temperament. He is, but he also has considerable muscle 

and it makes a difference. 

I know a lot of people in the postal departments of our State and 

I find them diligent, and hard-working, and care about their jobs, 

and worried about their futures, worried about whether or not this 

government is going to be responsive to any—I say this government. I am not talking about George W. Bush’s Administration. I 

am talking about the government generally, because this is not the 

only time when they have been challenged as to whether or not 

they were going to farm out the work that they are doing. If you 

are willing to pay the $9 or whatever it is for overnight mail, you 

can get pretty good service from a couple of people. 

I do not know whether the same conditions are available to the 

Post Office to compete like that. What do we do with the decline 

in traditional message sending as a result of E-mail and faxes and 

all kinds of other technology improvements that make it easier? We 

have this loyal group of workers, hard workers out there. When 

their job is described it is not an exaggeration, and they describe 

the conditions. 

So when I see us in the mood that we seem to be to go ahead 

and privatize, I worry about it. I wonder whether there is not some 

other way—Mr. Casey, you had some ideas there that I thought 

were fairly interesting. You have got revenue and expense, and we 

learned that in our business——

Mr. CASEY. I would like to submit them, and yes, we are losing 

to the E-mail. We are losing—first-class mail is dropping. But we 

are fighting the good fight and I think I would let others who knew 

more about it handle exactly what the programs are. 

Senator LAUTENBERG. What about the Postal Service having new 

opportunities? Is that part of the responsibility of the Board of Governors to look at——

Mr. CASEY. Sure, absolutely. 

Senator LAUTENBERG. Does it happen? 

Mr. CASEY. They should force management to come forward with 

those ideas for them to pass favor on, or not favor them. But that 

is one of the demands that the governors must put on management 

of any corporation, but particularly the Post Office where it is atrophying right now. We have to have new products. 

Senator LAUTENBERG. The demands are still made there, and we 

all know that, for exceptional service whether it is a 6-day or what 

have you. I wonder whether there is a fair chance for those who 

are on the job now to be in a competitive spot with those others 

who are—and I have no problem with the Postal Service comVerDate 0ct 09 2002 13:48 Jun 19, 2003 Jkt 086995 PO 00000 Frm 00035 Fmt 6633 Sfmt 6601 C:\DOCS\86995.TXT SAFFAIRS PsN: PHOGAN
32

peting, whether it is FedEx or the others. They are a wonderful 

service and I think they have lifted the bar on service. 

But I think it is important that the Postal Service be given an 

opportunity to participate if we are going to have a department 

that in any way resembles the kinds of service that we presently 

render. 

Mr. CASEY. You mentioned FedEx. We combine very strongly 

with FedEx. You have probably seen the FedEx boxes right outside 

all the post offices. Also, we do not have an airplane in the Post 

Office at all any more. All the line mail by airplane, is taken by 

FedEx except letter mail, which means under 16 ounces—if it is 16 

ounces or more you can not fly it on a commercial aircraft. That 

is a handicap that is really hurting the airlines very badly. We 

would like a little more relief on that. That is only one pound and 

we are not allowed to put those in with the letter mail that go onto 

commercial carriers. They must go FedEx if they are going by air. 

Of course, going by truck they go contract carrier or——

Senator LAUTENBERG. I will tell you what happens here, and I 

think everybody knows it, because of the terrorist threat that we 

experienced here—I was not here at the time, but with anthrax 

and so forth, it slows the process, it has duplication all over the 

place. The way a lot of people get around it, I know colleagues in 

the Senate who have mail sent to their homes so it does not have 

to go through the Washington process, whatever they do there, before it gets to you. It is an inhibitor for revenues from the Post Office. 

Madam Chairman, you have been very gracious in the allocation 

of time and I would just throw out one question. I will try to make 

it brief. That is, the overrage that is in the pension fund, it is substantial. 

Mr. CASEY. Over $2 billion. 

Senator LAUTENBERG. The Committee voted to allow the Postal 

Service to reduce that excessive reserve. Now there are suggestions 

made all over the place that these available funds should be used 

for this or that. But we worry a lot around here about the Social 

Security funds and I think it would be a good place to put some 

of these reserves. It would help relieve the concerns that the fund 

will not be solvent at the time of need, and it is a substantial 

amount of money. What do you think about the funds being used 

in that manner? 

Mr. MILLER. I have not looked at this issue closely. I understand 

there are some disagreements about it, and I understand that OMB 

basically suggested that the Postal Service absorb more than what 

some believe to be its fair share on an actuarial sound basis. I will 

look at the information and I will make an assessment of whether 

it is the appropriate contribution to make on an actuarially sound 

basis. If it is beyond that then I would be in favor of its——

Senator LAUTENBERG. You have been hanging around the Chairman too long. 

Mr. CASEY. I do not want any more studies. I really do not. I want the $2 billion returned to the Post Office. We spent the 

money. We gave it to you, and you took it away erroneously. It 

should be returned to the Post Office in the form of reduced contributions over the next couple of years. We are representing 

33

today—there will be no postal rate increase for 2 years, providing 

the legislation passes. 

Mr. MILLER. Could I just mention something, Senator? My understanding is that there are some estoppels on some capital expenses and things of this nature. My own personal view, and it is 

a view I had in government, is that these across-the-board rules, 

like freezes and things of that nature, I do not think they are appropriate for the Postal Service or for government either. So in 

terms of meeting, as Al pointing out, the bottom line, you have got 

to carefully tailor your solution. It does not seem to me that you 

just automatically exclude capital improvements, or labor contracts. 

You have to do it intelligently and in a more sophisticated way 

than that. 

Senator LAUTENBERG. Thank you very much, Madam Chairman. 

I thank my colleague also. You are looking at the only Democrat 

junior to me. I take advantage of that. 

Chairman COLLINS. Senator Pryor. 

OPENING STATEMENT OF SENATOR PRYOR 

Senator PRYOR. He does take advantage of it, every chance he 

gets. 

Let me ask you if I may, Mr. Casey, about—you mentioned the 

Cape Cod example. To what extent do you believe that local communities should have a say in it whether a post office is opened 

there, or closed there, or moved within the area? To what extent 

do you think the community should be involved in that decisionmaking? 

Mr. CASEY. They should be involved from the beginning. But 

what the Post Office should do is develop rules, standards, and procedures for determining whether a particular post office should be 

closed and the community itself should participate in the 

evolvement of those rules and standards. There is no question 

about it. Our purpose is to serve the public. 

Senator PRYOR. Now a few moments ago Mr. Miller mentioned 

that he, and you may have concurred in this as well, that he sees 

the postal governing body, is that the Board of Governors? 

Mr. CASEY. Yes. 

Senator PRYOR. As very similar to and working the same as a 

board of directors for a corporation. Are there any differences in 

the two in your mind? 

Mr. CASEY. Not in my mind. I agree with him wholeheartedly. 

Senator PRYOR. Totally the same, the board of directors? 

Mr. CASEY. Absolutely they are the same. 

Senator PRYOR. What about you, Mr. Miller, are there any differences in your mind? 

Mr. MILLER. There is a different environment in which the Postal 

Service operates than an ordinary business firm, and board members take that into account. I think Mr. Casey would agree with 

that. But I think the role it plays is very much the same. You have 

different constituents in a sense because ordinarily board members 

of major corporations would not be spending as much time with 

you, your staff, and would not be spending time with significant 

other institutions like the Postal Rate Commission as we would exVerDate 0ct 09 2002 13:48 Jun 19, 2003 Jkt 086995 PO 00000 Frm 00037 Fmt 6633 Sfmt 6601 C:\DOCS\86995.TXT SAFFAIRS PsN: PHOGAN
34

pect to do on the Board of Governors of the Postal Service. But the 

principle that Mr. Casey was articulating is spot on. 

Mr. CASEY. Whether you are in the airline business or any other 

business, you have government regulations, you have authorities, 

you have local commissions and so forth. None of us are free day. 

But I agree with Jim, this is a board of directors. 

Senator PRYOR. Mr. Miller, in your analogy with the corporate 

world, if the corporation is the Postal Service and the Board of 

Governors is the board of directors, who are the shareholders? 

Mr. MILLER. The American taxpayer. 

Mr. CASEY. That is right. 

Senator PRYOR. I think what you were referring to a moment 

ago, Mr. Miller, is that there is a different environment in which 

it operates in. I think that one thing that concerns members of the 

Senate—I have only been here 3 months but in my time here I 

have heard discussion of one thing that does concern members of 

the Senate, both Democrats and Republicans, is that if the Postal 

Service becomes too focused and too concentrated on a profit motive 

then service will naturally suffer in rural and more remote areas. 

We mentioned Alaska a few moments ago. You all mentioned some 

other towns in Minnesota and wherever. Every State, almost every 

State has some rural and harder-to-serve areas. I think the mission 

of the Postal Service traditionally has been universal service. 

I would like to hear your comments on, is that a valid mission? 

Should the mission of the Postal Service be a universal service? 

Mr. MILLER. Let me say first, to the degree that you disagree 

with the bottom line should be covering cost, that is your responsibility because that is the law and you would have to change the 

law. We members of the board of the Postal Service are governed 

by the laws that affect and apply to the Postal Service. We could 

disagree, discuss that, but that is in fact a requirement that we 

must face and dutifully try to achieve, it seems to me. 

On the question of universal service, I think there should be universal postal service in the sense perhaps using a little ‘‘p.’’ That 

is to say that people ought not be isolated but have opportunities 

to communicate and to receive and to submit packages, etc. I think 

in terms of trying to meet some of these cost concerns, the Postal 

Service has to consider some alternatives. I do not know much 

about Cape Cod, but 57 post offices, that Mr. Casey was saying 

seems to me like probably too many, or that there should be some 

savings there. It might inconvenience someone. 

So the general proposition of universal service is one with which 

I concur. The devil is in the details of just how you apply it. But 

to the extent that there has to be some restraints or trade-offs of 

some sort because of a zero loss goal established by Congress, that 

is really your responsibility. 

Senator PRYOR. Let me ask this. Is one of your trade-offs——

Mr. CASEY. Give me equal time. 

Senator PRYOR. Let me follow up with him because I am about 

to—I will be glad to give you plenty of time to answer. 

Is one of the trade-offs in your mind possibly different postal 

rates for rural and harder-to-serve areas or limited delivery schedules? In other words, in a rural area like we talked about a lot of 

them already this morning, I can understand how rural Americans 

35

would feel punished if they had to pay more and if their service 

was slower or less frequent. So I would like to hear your thought 

on that. 

Mr. MILLER. Let me first say that an enterprise, a large enterprise such as the Postal Service, would probably be well-advised 

not to discriminate in that sense. Private enterprises usually do not 

discriminate in that sense even though they may know internally 

that there are big cost differences. FedEx and UPS do not discriminate in that same sense. 

But picking up on a question Senator Lautenberg had of Governor Casey on new services, I was asked this question in the set 

submitted to me, Madam Chairman, whether I agreed with the 

Postal Service’s getting into new services. I think the Postal Service’s thinking of and perhaps configuring new services within the 

Postal Service itself makes a lot of sense, within the delivery of 

mail. 

On the other hand, I would be opposed to the Postal Service’s 

going beyond the delivery of mail in terms of services. If it wanted 

to open a McDonald’s, I would be opposed to it. If it wanted to open 

some record club or such like, I would be opposed to it. Not to say 

that it would, but I do think that the basic principle is that the 

Postal Service is a very special organization. I believe its mission 

really is the delivery of mail. Things that are ancillary to the delivery of mail such as selling mugs and commemorative stamps and 

things of this sort are fine. But I do not think it ought to go beyond 

that. Just want to put that on the record. 

Mr. CASEY. I would just like to say, the Post Office is doing a 

great deal of adjustment today. We have many of our customers 

and so forth that get 2- and 3-day delivery. In Sun Spot, Arizona 

the Post Office is only open from noon until 3 p.m. We get all kinds 

of things. 

You go into a rural area and you make them put all their postal 

boxes on one side of the road so the delivery man does not have 

to go back and forth. You could use cluster boxes. The Post Office 

is working at this. As I said earlier, the Postal Rate Commission 

made its study of the universality of service and what expenses 

they would be relieved of if they were relieved of the universality 

and it is $3 billion, $3 billion out of $60 billion. I am not sure—

I would like to do it, but we can keep up the universality of service. 

Senator PRYOR. Thank you. 

Chairman COLLINS. Thank you, Senator Pryor. Senator Carper.

Senator CARPER. Just one more quick question before we all head 

back to the salt mines. I am struck by how cumbersome it is for 

the Postal Service to adjust its rates, and to be able to provide discounts to certain customers. I would just ask each of you to share 

with us your thoughts about how we might change that to give the 

Postal Service the ability to price their products more as a private 

sector company would. 

Mr. MILLER. Senator, we did talk briefly about this when you 

were out of the room, but I would just say that it seems that it is 

appropriate for the Postal Rate Commission to be somewhat adversarial to the Postal Service. It is the regulator, after all. But there 

does seem to me to be an undue amount of adversarial relationship 

between the two, and that slows things down. I think that some 

36

changes are due—it may even take some legislation by you. I do 

not know. I will have to look at that and I will give you my recommendations. But some freeing up of the system I think is in 

order; some more flexibility is in order. 

I would still say that it is important that the rate structure be 

nondiscriminatory and it not be gouging in the conventional way of 

thinking of that term, since the Postal Service still has a monopoly 

on the delivery of first-class mail. So I think there are some important goals for the Postal Service and for the Postal Rate Commission to pursue in maintaining that kind of rate structure. Governor 

Casey can, I am sure, regale us with case after case about how difficult it is for this organization, commercial enterprise, to respond 

quickly as opposed to how a commercial organization can respond 

to changing demands, costs, and consumer preferences. 

Senator CARPER. I will not ask you for a case by case but just 

a quick thought on this subject, please. 

Mr. CASEY. Jim Miller is absolutely right. For today’s electronic 

calculation and gathering of data and so forth, there is no excuse 

for having 18 months—if you have an 18-month horizon, you have 

got to have a lot of projections in there. Look at the economy today. 

Nobody projected that it was going to go the way it has—so there 

are things that can be done and should be done. 

I am not sure they are so terribly adversarial. They are good people at the Postal Rate Commission. Their study on the universality 

of service I think was excellently done. And they are committed 

people. I enjoy them. We had lunch with them all yesterday. They 

are very nice people. I dislike the 18-month delay in approving 

rates. 

Mr. MILLER. I do not think, it is a people problem so much as 

it is an institutional and procedural problem that needs to be 

solved. 

Senator CARPER. Thank you very much, Madam Chairman. 

Chairman COLLINS. Thank you, Senator Carper. Any time you 

want to act as the Ranking Member I am sure we would welcome 

that——

Senator CARPER. Thank you. 

Chairman COLLINS [continuing]. As much as we miss Senator 

Lieberman today. 

I want to thank Mr. Casey and Mr. Miller for appearing before 

the Committee today. I also want to very sincerely thank you for 

your willingness to serve. Both of you have numerous demands on 

your time and are avidly sought after for your experience and your 

ability, and I personally appreciate your willingness and your continued commitment to public service. 

Mr. CASEY. Thank you very much for your kind words, and to all 

the Senators and the staff. 

Mr. MILLER. Thank you, Senator. 

Chairman COLLINS. Without objection, the hearing record will remain open till 5 p.m. today for the submission of any additional 

questions. If there are any, we will get them to you very quickly, 

or any statements for the record. We will submit Mr. Miller’s statement in the record without objection. 

This hearing is now adjourned. 

[Whereupon, at 12:13 p.m., the Committee was adjourned.] 

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