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[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]

                        THE FINANCIAL CONDITION
                         OF THE POSTAL SERVICE

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

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                          OVERSIGHT AND REFORM
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 30, 2019

                               __________

                           Serial No. 116-16

                               __________

      Printed for the use of the Committee on Oversight and Reform
      
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                   COMMITTEE ON OVERSIGHT AND REFORM

                 ELIJAH E. CUMMINGS, Maryland, Chairman

Carolyn B. Maloney, New York         Jim Jordan, Ohio, Ranking Minority 
Eleanor Holmes Norton, District of       Member
    Columbia                         Justin Amash, Michigan
Wm. Lacy Clay, Missouri              Paul A. Gosar, Arizona
Stephen F. Lynch, Massachusetts      Virginia Foxx, North Carolina
Jim Cooper, Tennessee                Thomas Massie, Kentucky
Gerald E. Connolly, Virginia         Mark Meadows, North Carolina
Raja Krishnamoorthi, Illinois        Jody B. Hice, Georgia
Jamie Raskin, Maryland               Glenn Grothman, Wisconsin
Harley Rouda, California             James Comer, Kentucky
Katie Hill, California               Michael Cloud, Texas
Debbie Wasserman Schultz, Florida    Bob Gibbs, Ohio
John P. Sarbanes, Maryland           Ralph Norman, South Carolina
Peter Welch, Vermont                 Clay Higgins, Louisiana
Jackie Speier, California            Chip Roy, Texas
Robin L. Kelly, Illinois             Carol D. Miller, West Virginia
Mark DeSaulnier, California          Mark E. Green, Tennessee
Brenda L. Lawrence, Michigan         Kelly Armstrong, North Dakota
Stacey E. Plaskett, Virgin Islands   W. Gregory Steube, Florida
Ro Khanna, California
Jimmy Gomez, California
Alexandria Ocasio-Cortez, New York
Ayanna Pressley, Massachusetts
Rashida Tlaib, Michigan

                     David Rapallo, Staff Director
        Lucinda Lessley, Policy Director and Senior Investigator
                Mark Stephenson, Director of Legislation
                     Laura Rush, Deputy Chief Clerk
               Christopher Hixon, Minority Staff Director

                      Contact Number: 202-225-5051
                         
                         
                         C  O  N  T  E  N  T  S

                              ----------                              
                                                                   Page
Hearing held on April 30, 2019...................................     1

                               Witnesses

The Honorable Megan J. Brennan, Postmaster General, United States 
  Postal Service
    Oral Statement...............................................     4
Ms. Margaret M. Cigno, Director, Office of Accountability and 
  Compliance, Postal Regulatory Commission
    Oral Statement...............................................     6
Mr. Joel Quadracci, Chairman, President, and CEO, Quad/Graphics
    Oral Statement...............................................     7
Mr. Fredric V. Rolando, President, National Association of Letter 
  Carriers
    Oral Statement...............................................     9
Mr. Chris Edwards, Director of Tax Policy Studies, Cato Institute
    Oral Statement...............................................    11

* Opening statements, and the prepared statements for the above 
  witnesses are available at the U.S. House of Representatives 
  Repository:  https://docs.house.gov.

                           INDEX OF DOCUMENTS

                              ----------                              

The documents entered into the record during this hearing are 
  listed below, and available at: https://docs.house.gov.

  * Prepared statement of the Greeting Card Association; 
  submitted by Rep. Connolly.

  * Questions for the Record, from Rep. Wasserman Schultz, 
  addressed to Postmaster General Brennan.

  * The American Catalog Mailers Association, written testimony; 
  submitted by Chairman Cummings.

  * National Active and Retired Federal Employees Association 
  letter; submitted by Chairman Cummings.

  * Public Citizen, written testimony by Bartlett Collins Naylor, 
  Financial Policy Advocate; submitted by Chairman Cummings.

  * Package Coalition, written testimony; submitted by Chairman 
  Cummings.

  * Statement from the American Postal Workers Union; submitted 
  by Chairman Cummings.
  * Statement by Rep. Gerry E. Connolly

 
                        THE FINANCIAL CONDITION
                         OF THE POSTAL SERVICE

                              ----------                              

                        Tuesday, April 30, 2019

                   House of Representatives
                          Committee on Oversight and Reform
                                                   Washington, D.C.

    The committee met, pursuant to notice, at 10:05 a.m., in 
room 2154, Rayburn House Office Building, Hon. Elijah Cummings 
(chairman of the committee) presiding.
    Present: Representatives Cummings, Norton, Clay, Lynch, 
Connolly, Krishnamoorthi, Rouda, Hill, Wasserman Schultz, 
Sarbanes, Welch, Kelly, DeSaulnier, Lawrence, Plaskett, Gomez, 
Ocasio-Cortez, Pressley, Tlaib, Jordan, Amash, Foxx, Massie, 
Meadows, Hice, Grothman, Comer, Cloud, Gibbs, Roy, Miller, 
Green, and Steube.
    Chairman Cummings. Good morning, everyone. Today, we are 
holding a very important hearing on the future of the United 
States Postal Service.
    The Postal Service is one of our most essential and 
recognizable institutions. It provides universal service to 
every single address in the United States. It delivers mail and 
packages to nearly 159 million locations, no matter how remote.
    I have often said that we take our postal system for 
granted, because it is so dependable, and it binds together 
every corner of our Nation. Unfortunately, the Postal Service's 
financial condition has been deteriorating over the past 
decade.
    The three primary reasons for this: First, there has been a 
decline in first-class mail, which has been the Postal 
Service's most profitable product. Second, the Postal Service's 
expenses have been increasing more quickly than its revenues. 
And third, Congress put in place requirements in 2006 for the 
Postal Service to make billions of dollars of payments each 
year to pre-fund retiree health benefits.
    This is a requirement that no other Federal agency or 
private-sector company faces. The Postal Service has made 
several changes to meet these challenges. It has reduced its 
work force by hundreds of thousands of people. It has hired 
more part-time employees than ever.
    Let me go back for a moment to all the employees who have 
been--that they're no longer there. They gave their blood, 
their sweat, and their tears so many years, and I want to 
compliment the unions, because every time I--every time we try 
to work with the Post Office to make sure that we--did whatever 
was necessary to make sure they stayed afloat, the unions have 
been extremely cooperative and worked with us very closely, and 
to make reasonable changes. And from the depth of my heart I 
truly appreciate that.
    And then it has consolidated facilities and delivery 
routes. So, at the same time the Postal Service has an 
obligation to provide universal service. So, it has continued 
expanding its network to deliver mail to approximately 1 
million new addresses a year. I mean think about that. And it's 
one million new addresses per year.
    As a result, even with deep cuts to its work force, the 
Postal Service has been forced to begin defaulting on its re-
funding payments for retiree health benefits. It now owes more 
than $42 billion for retiree health benefits.
    The Postal Service has also been forced to start defaulting 
on pension benefit payments as well. Today, one of the most 
pressing concerns for the Postal Service is dwindling 
liquidity. As its expenses continue to grow more quickly than 
its revenues, the Postal Service faces challenges with having 
enough cash to conduct its operations.
    For example, in Fiscal Year 2018, the Postal Service had 
less than two months' worth of cash on hand on an average day. 
That's not good. If major changes are not made soon, there will 
come a time when the Postal Service will run out of cash, and 
its ability to provide the services Americans rely on will be 
in jeopardy.
    Congress, ladies and gentlemen, has a responsibility to 
ensure that that day never comes. Never. For several years now 
I've worked closely with my colleagues on this committee to 
develop bipartisan legislation to reform the Postal Service and 
place it on a more sustainable path.
    I worked with Representatives Connolly, and Lynch, and 
Lawrence, and I work closely with Representative Meadows, all 
of whom have spent a phenomenal amount of time on this issue, 
as well as former Chairman Chaffetz and former Chairman Gowdy. 
And I hope to work productively with Ranking Member Jordan as 
well.
    Last Congress, this committee passed bipartisan reform 
legislation. We've all had to give a little during those 
negotiations. Was that legislation perfect? No. Were there some 
people that were unhappy with parts of it? Yes. But, again, not 
only did the unions come together, but our stakeholders came 
together. I mean that's unusual to have everybody joining hands 
and saying, ``Yes. Well, we may not like everything in this, 
but we're going to make this work, because this is for the 
American people.''
    But that bill would have saved nearly $6 billion over 10 
years, according to the Congressional Budget Office. That was a 
significant accomplishment. Unfortunately, the bill was never 
brought to the House floor.
    So, today it is our responsibility to move further than we 
did in the past. We now have a whole new Congress. We now have 
members that are new to this committee and new to this issue. I 
hope today's hearing will be an opportunity for all of our 
members, new and old, to get an overview of the challenges 
faced by our Postal Service, and to get an update on its 
current financial condition, and to hear about the many 
different proposals that have been made for reform.
    The Administration has also proposed some ideas through its 
taskforce. One is to allow the Postal Service to explore new 
business opportunities to leverage its current assets and 
business liens. Of course, this was an initiative that we 
included in our legislation last Congress, and one that I 
strongly supported.
    Finally, I want to highlight one principle that I hope will 
guide us through our efforts. We must not place the burden of 
reforming the Postal Service on the backs of the Postal 
workers. Their wages and benefits are modest. Our nation can 
and must honor the commitments we have made to the men and 
women who dedicate their lives to delivering our mail day in 
and day out in every conceivable condition.
    So, I want to thank our witnesses for being here today, and 
I look forward to our discussion. And I now yield to the 
gentleman, ranking member, Mr. Jordan.
    Mr. Jordan. Thank you, Mr. Chairman, and thank you for this 
hearing.
    This morning this committee has jurisdiction with the 
Postal Service, and it is our responsibility, our 
responsibility to make the necessary legislative reforms and 
protect the interests of the American taxpayer.
    It saddens me to report that due to years of Congress 
kicking the can down the road the U.S. Postal Service remains 
in dire financial straits. The United Postal Service has been 
on the GAO high risk list for over a decade. For the past 11 
years it has been losing money at a rapid clip. The losses now 
total $69 billion.
    What's worse is that the United States Postal Service's 
unfunded liabilities equate to 139 billion, almost double its 
annual revenue. This is a slow-motion train wreck that keeps 
getting worse while Congress looks on. The situation is 
untenable under current law, and congressional action is 
required to stop the bleeding, and prevent a catastrophic 
financial reckoning that would actually soak taxpayers.
    We need real institutional reform. Can't afford to keep 
moving money from one financially failing program into another. 
Some reforms are quite obvious. They must require the Postal 
Board of Governors to have fiduciary duties to a newly defined 
stakeholder, the American taxpayer.
    This is not already the mandate of a government-run 
service. It's just flat-out wrong. If we fail to act, we risk a 
taxpayer bailout of the U.S. Postal Service, something that I 
could not support. The reforms have been right in front of us 
for over a decade, but we've lacked the courage to act. This 
situation is especially sad because we are lagging behind the 
rest of the world in reforming our postal system.
    For instance, Sweden has repealed its postal monopoly in 
1993. Sweden Post has reorganized into a corporate structure. 
Germany's Deutsche Post was largely commercialized in a stock 
offering in 2000, and Germany opened its postal markets to 
competition in 2008.
    Britain opened its postal market to competition in 2006, 
and after 500 years of government ownership, commercialized the 
Royal Mail and share offerings in 2013 and 2015.
    In New Zealand, the government forced the postal service to 
cut costs, and put it into a corporate form. The country 
appealed its monopoly in the 1990's.
    The Trump Administration is doing its part. In 2018, the 
President organized a taskforce to evaluate postal operations. 
In December, the taskforce proposed 26 recommendations, 
including that the United States Postal Service must reduce 
labor costs and restructure health and retirement benefits. I 
hope we can discuss the taskforce proposals today. We must now 
endeavor to make the tough choices, tough decisions, those 
before us have failed to make. I hope today can be the 
beginning of living up to the expectations of those who sent us 
to Washington to deal with the tough problems.
    And with that, Mr. Chairman, I would yield back.
    Chairman Cummings. Thank you very much. Without objection, 
the chair is authorized to declare a recess of the committee at 
any time.
    The full committee hearing is convenient to review the 
current financial condition of the Postal Service as well as 
the urgent need for reform legislation.
    Now I want to welcome our witnesses. We are very pleased to 
be joined by the Postmaster General of the United States Postal 
Service, Ms. Megan J. Brennan; Margaret Cigno, the Director of 
the Office of Accountability and Compliance for the Postal 
Service Regulatory Commission; Joel Quadracci, Chairman, 
President, and CEO of Quad Graphics; Fredric Rolando, President 
of the National Association of Letter Carriers; and Chris 
Edwards, the Director of Tax Policy Studies, at the Cato 
Institute.
    If the witnesses would kindly rise and raise your hands, 
and I will swear you in.
    Do you swear or affirm that the testimony you are about to 
give is the truth, the whole truth, and nothing but the truth, 
so help you God? You may affirm. Thank you very much.
    Let the record show that the witnesses answered in the 
affirmative. I want to thank you. And I want to let you know 
that the microphones are very sensitive, so please speak 
directly into them.
    Without objection, your written statement will be made part 
of the record.
    With that, Postmaster Brennan, you are now recognized to 
give an oral presentation.

   STATEMENT OF MEGAN J. BRENNAN, POSTMASTER GENERAL, UNITED 
                     STATES POSTAL SERVICE

    Ms. Brennan. Thank you, Mr. Chairman. Good morning.
    Chairman Cummings. Good morning.
    Ms. Brennan. Good morning, Ranking Member Jordan, and 
members of the committee.
    Thank you, Chairman Cummings, for calling this hearing. I 
am proud to be here today on behalf of the 630,000 hardworking, 
dedicated men and women of the United States Postal Service.
    The Postal Service is grateful for this committee's focus 
on the need for postal reform. We also appreciate the 
engagement of the Administration and that the President's 
taskforce recognized the importance of the Postal Service to 
the U.S. economy as both a service provider and an employer.
    Today, the Postal Service will deliver more than 450 
million pieces of mail and 20 million packages to 159 million 
addresses. We serve every American home and business, and play 
a vital role in every American community. We are an 
indispensable part of America's economic infrastructure.
    Two years ago, I testified before this committee to 
advocate for Postal reform. Given our deteriorating financial 
condition, the need for legislative reform is even more urgent 
today. The President's taskforce agrees that our business 
model, with its rigid price cap, is unsustainable.
    Since 2007, total mail volume has declined by 31 percent, 
and first-class mail, our most profitable product, has declined 
by 41 percent. In response we have streamlined our operations, 
restructured our network, reduced the size of our work force, 
and improved productivity. From these efforts we reduced our 
annual cost base by approximately $13 billion. In just the past 
five years we have grown our package revenue by $9 billion, and 
we continue to strengthen the value of mail.
    Nevertheless, given the constraints imposed by law, no set 
of management actions is sufficient to offset the continuing 
decline in the use of mail. The Postal Service is required to 
maintain an extensive network necessary to fulfill our 
universal service obligation to deliver the mail six days a 
week regardless of volume.
    As our country grows by more than 1 million new delivery 
points each year, the cost of our network continues to 
increase. We are delivering less mail to more addresses, which 
means there is less revenue to pay for mandated costs. And 
although we have grown our package business, the rate of growth 
has slowed, due to increased competition.
    Since 2012, the Postal Service has been forced to default 
on $48 billion in mandated payments for retirement-related 
benefits. Without these defaults, the deferral of critical 
capital investments, and aggressive management actions, we 
would not have been able to pay our employees and suppliers, or 
deliver the mail.
    We cannot overcome systemic financial imbalances caused by 
business model constraints. Forcing the Postal Service to 
default on mandated payments and order to deliver the mail is 
an untenable public policy. Even if the Postal Service decides 
to continue with our current pattern of defaults, absent 
legislative and regulatory reforms, we are likely to run out of 
cash in 2024.
    Mr. Chairman, the Postal Service, led by its board of 
Governors, is working through the details of a 10-year business 
plan to restore the organization to financial stability. And 
this plan will include recommended legislative reforms.
    We believe it is important for the committee to continue to 
consider core legislative provisions that would need to be part 
of any long-term financial solution. These include requiring 
full Medicare integration for parts A, B, and D for postal 
retiree health plans, or exploring other Medicare integration 
scenarios, restoring half the exigent price increase for 
market-dominant products, and providing some additional product 
flexibility.
    These provisions have already gained broad support among 
postal stakeholders.
    Mr. Chairman, Ranking Member Jordan, the Postal Service 
matters to the American public and the American economy. I look 
forward to working with you in this committee, and our 
stakeholders to restore the financial health of the United 
States Postal Service.
    This concludes my remarks. I welcome any questions that you 
and the committee may have. Thank you.
    Chairman Cummings. Ms. Cigno?

STATEMENT OF MARGARET CIGNO, DIRECTOR, OFFICE OF ACCOUNTABILITY 
          AND COMPLIANCE, POSTAL REGULATORY COMMISSION

    Ms. Cigno. Chairman Cummings, Ranking Member Jordan, and 
members of the Committee of Oversight and Reform, good morning.
    Chairman Cummings. Good morning.
    Ms. Cigno. I am pleased to testify before you today.
    The Commission is an independent Federal agency that 
provides transparency and accountability of the U.S. Postal 
Service's operations and finances. It is composed of five 
commissioners, each appointed by the President, and confirmed 
by the Senate.
    The Commission determines the legality of the Postal 
Service's prices and products, adjudicates complaints, and fair 
competition issues, and oversees the Postal Service's delivery 
performance. The Commission carries out this work with a very 
small budget and staff. Its current year appropriation is $15.2 
million to regulate the much larger Postal Service.
    Commission funding comes entirely from the off-budget 
permanently appropriated Postal Service fund, which is wholly 
comprised of rate payer, not taxpayer funds.
    The U.S. Postal Service is a $71 billion operation, with 
over 600,000 employees. The Postal Service receives no taxpayer 
moneys. The sale of postage products and services funds its 
operation.
    Starting in Fiscal Year 2014, the Commission developed a 
separate annual financial analysis to provide greater clarity, 
transparency, and accountability of the Postal Service's 
financial deed and trends. This financial analysis not only 
reviews the overall financial position of the Postal Service, 
but also analyzes volumes, revenues, and costs of both market 
dominant and competitive products.
    The Fiscal Year 2018 report was issued on April 19, 2019. I 
would like to highlight some of the Commission's conclusions 
from this year's report.
    In Fiscal Year 2018, the Postal Service recorded a net loss 
of $3.9 billion. This was the 11th consecutive net loss posted 
since Fiscal Year 2007, and has increased the cumulative net 
deficit to $62.6 billion.
    As part of the detailed financial analysis of the Postal 
Service income statements, the Commission also analyzes the net 
loss from operations. Net loss from operations excludes from 
expenses the payments for unfunded retirement benefits, and the 
non-cash adjustments to the Workers' Compensation liability. In 
Fiscal Year 2018, the Postal Service recorded a net loss from 
operations of $2.1 billion.
    These continuing losses have created a substantial gap 
between the Postal Services assets and liabilities. Total 
assets and liabilities are comprised of current and non-current 
portions. In Fiscal Year 2018, the Postal Service had current 
assets of $11.6 billion and current liabilities of $69.5 
billion.
    If current assets are insufficient to meet its short-term 
liabilities, the Postal Service could have problems paying its 
creditors. The gap between current assets and current 
liabilities has increased substantially since Fiscal Year 2008.
    Total mail volume in Fiscal Year 2018 continued to decline. 
Over the last 12 years market-dominant products volume has 
declined by approximately 70 billion pieces. And although 
volumes for competitive products continued to grow in Fiscal 
Year 2018, the rate of increase was lower than in recent years.
    In addition, competitor products volume only makes up 3.9 
percent of the total mail volume of the Postal Service. 
Nevertheless, competitive products account for 35.2 percent of 
total attributable costs and 28.5 percent of total contribution 
to institutional costs.
    Every five years the commission is required to issue a 
report on how well the PAEA is operating, and to recommend 
legislation or other measures necessary to improve the 
effectiveness and efficiency of our Nation's postal laws. In 
its 2016 report, the Commission found that the most important 
legislative recommendations it could make related directly to 
improving the financial condition of the U.S. Postal Service.
    In 2017, the Commission issued its findings related to the 
system for regulating raising classes established the PAEA. Of 
relevance to this testimony, with respect to finances, the 
Commission found that the system has not maintained the 
financial health of the Postal Service as intended by the PAEA.
    As a result of this and other findings, the Commission 
concurrently issued a notice of proposed rulemaking to address 
the shortcomings identified by the Commission in its review. 
The Commission is currently considering rules to modify 
existing regulations, or adopt an alternative system that the 
Commission believes will achieve the objectives.
    In summary, the Postal Service faces significant financial 
obstacles for the future. Continued losses, including two years 
of operating losses, have put the Postal Service in a perilous 
financial position. With the growing liability of retiree 
health benefits, the inability to sufficiently fund needed 
capital investments, and the continued loss of high-margin 
first-class revenues, the important task of improving the 
financial condition of the Postal Service is daunting. The 
Commission stands ready to assist in your search for answers on 
behalf of our Nation's postal system.
    Thank you for the opportunity to testify today. And I am 
happy to answer any questions.
    Chairman Cummings. Thank you very much.
    Mr. Quadracci?

  STATEMENT OF JOEL QUADRACCI, CHAIRMAN, PRESIDENT, AND CEO, 
                         QUAD/GRAPHICS

    Mr. Quadracci. Good morning, Mr. Chairman, Ranking Member 
Jordan, and members of the committee.
    On behalf of our coalition and our company, I want to thank 
the members, and in particular, Chairman Cummings and Mr. 
Meadows, along with Mr. Connolly and Mr. Lynch for your 
continued leadership and bipartisan efforts on the urgent 
matter of restoring the Postal Service to financial stability.
    It has become critical to enact the substance of the 
bipartisan bill from the 115th Congress with some modest 
updating. We respectfully urge the committee to move forward as 
swiftly as possible.
    I am here today on behalf of the Coalition of the 21st 
Century Postal Service, or C21, which broadly represents an 
industry that employs over 7-and-a-half million people, and 
generates revenue of over $1.4 trillion, and in one way, shape, 
or form, they rely on the Postal Service to be healthy.
    As a marketing solution partner with the foundation and 
print, Quad is a member of C21. The partnership with our 
clients lets our customers thrive in a multi-channel marketing 
world. Quad's print foundation has allowed us to grow from 11 
employees in Wisconsin to now providing 20,000 employees with 
family supporting wages, 55 plants in 26 states, serving 7,000 
clients, and mailing 10 billion pieces of mail each year.
    The Postal Service is vital to the urban core of our 
country, and is even more crucial to rural America, where 
access to broadband is hardly universal, and the USPS delivers 
critical supplies, mail packages, et cetera. Overall, in 2018, 
the Postal Service delivered more than 146 billion pieces of 
mail and packages, with 70 billion in revenue.
    Let's put these numbers in perspective, however. While 
revenues have held up relatively steady by repeated CPI 
increases and one-time exigent surcharge, the volume number 
represents a decline of 31 percent since its peak in 2006. And 
while mail volume declines, the number of delivery points 
increases yearly by a million addresses. That combination has 
challenged the Postal Service as unsustainable.
    Irrespective of these volume declines, operations have run 
generally near or close to black at times, but do have a 
fighting chance to get there. The elephant in the room has been 
the obligation to pre-fund retirement healthcare to an extent 
so devastating the USPS has defaulted on $48 billion in 
payments.
    Rarely have circumstances turned what was intended to 
buttress a public good into mortal threat to the organization 
overall. The digital world continues to disrupt our industries, 
forcing us to adapt our businesses to new realities. The Postal 
Service is no different.
    Three months after PAEA was enacted at the end of 2006, the 
best year in USPS's history, Steve Jobs introduced the iPhone. 
There was a double-digit increase in postage rates, which was 
followed quickly by the Great Recession, and the route was on.
    The advent of online business and e-mail social media, 
streaming, and other online channels shifted a great deal of 
advertising out of the postal system. After the recession 
ended, the mail volumes did not return, demonstrating that the 
shift to electronic alternatives was real and permanent.
    While print has hit a significant reset in volume, it fits 
into a comprehensive advertising strategy through the power of 
print by itself, and integrated into a comprehensive 
multichannel strategy. Print is not going away. Our own market 
surveys show that 71 percent of Millennials read direct mail, 
and in the last 30 days, one in three redeemed direct mail 
coupons.
    Printed products have a clear place in this multichannel 
world, but only if they remain cost-effective, with a positive 
ROI.
    Postage is now the single largest expense for mailers, 
ranging up to 60 percent of the cost of the printed piece. 
Prior to the recession postage was approximately 50 percent, 
and at one time was only a third. While print is less than 20 
percent.
    Above inflation, postage rates cannot be part of the 
solution. The CPI cap has worked as intended, providing mailers 
with price predictability and certainty. On the bright side, 
for the Postal Service is e-commerce explosion. Packages now 
generate more than 7 billion toward the USPS overhead.
    USPS serves those who receive and ship packages, and even 
competitors, which depend on USPS to deliver to areas not 
economically efficient. Prices for competitive products must be 
based on market conditions, and not imposed as favor of costing 
methodologies that arbitrarily raise prices for consumers.
    The prime need to stabilize USPS for the short run is 
address pre-funding. We urge you to draw upon private sector 
best practices to reduce pre-funding costs. In a rare moment of 
convergence, we join the postal unions on these common-sense 
recommendations. Set the pre-funding target at 60 percent of 
vested liability for retiree health benefits, fully integrate 
with Medicare. These changes should reduce the USPS liabilities 
by about $85 billion.
    Additions to legislation are crucial. Our service 
performance measurements worked out during the last Congress by 
Mr. Meadows with Senator Heitkamp, and directing the Commission 
to take into account in its 10-year rate setting review the 
financial impact of this legislation, including our commitment 
in the legislation to a one-time increase worth 8.5 billion.
    The stakeholders also request the committee not include 
rescinding the authority of the PRC, to prescribe rules for 
distributing costs, clearing the way for arbitrary price 
increases on packages, particularly, and mandating a mode of 
delivery to consumers and business.
    Thank you, Mr. Chairman.
    Chairman Cummings. Thank you.
    Mr. Rolando?

 STATEMENT OF FREDRIC ROLANDO, PRESIDENT, NATIONAL ASSOCIATION 
                       OF LETTER CARRIERS

    Mr. Rolando. Thank you, Chairman Cummings, Ranking Member 
Jordan, and members of the committee for the opportunity to 
testify and for the tireless bipartisan work of the committee 
in recent years to strengthen the Postal Service.
    Over the past decade or so, Postal employees have worked 
diligently to adapt to technological change, and increase 
productivity. Thanks to the e-commerce boom, we have recovered 
strongly from the recession. However, only Congress can address 
our biggest financial challenge, the unsustainable burden to 
pre-fund future retiree health benefits.
    This burden, which was imposed by the Postal Accountability 
and Enhance Act of 2006 is one that no other enterprise in the 
country faces, and has accounted for 92 percent of our reported 
financial losses since 2007. Without it, the Postal Service 
would have recorded profits in each of the past six years.
    While Congress could not have foreseen the devastating 
impact of the coming recession, it nevertheless saddled the 
Postal Service with an unaffordable mandate. A clear mistake 
that reclassified a long-term liability into a short-term 
liability.
    Compounding the Postal Service's financial woes was the PRC 
decision to make the 2013 exigent rate increase temporary, even 
though the recession-related volume loss was permanent. This 
continues to cost the service $2.1 billion per year.
    A simple repeal of the pre-funding mandate remains the most 
obvious solution to the postal financial crisis. A repeal, in 
combination with a more sensible rate setting system from the 
PRC's 10-year review, would go a long way toward stabilizing 
the service's finances.
    In fact, Representative Peter DeFazio and Tom Reed 
yesterday introduced a pre-funding repeal bill, HR-2382. If 
enacted, we would still have 12 to 13 years of funds sets aside 
for retiree health premiums, a total of $47-and-a-half billion.
    After the retiree health fund is used up for its intended 
purpose, the Postal Service would return to the pay-as-you-go 
approach to retiree health that other Federal agencies and 
private businesses use. The resulting near-term financial 
stability would create the conditions for the Postal Service 
and its stakeholders to evolve and adapt as we have for much of 
our history.
    We recognize that some Members of Congress would prefer to 
maintain the pre-funding policy, but focus on ways to reduce 
its burden by fully integrating with Medicare. Unfortunately, 
that approach has failed to advance in Congress for a number of 
reasons. Most notably, the refusal of other committees of 
jurisdiction to take up measures containing Medicare proposals 
and the lack of certain safeguards.
    Even more problematic was language to ban new door delivery 
service, and to require the conversion of existing door 
delivery to curb line, and centralize delivery. In fact, a 
bipartisan majority of 247 members of the last Congress co-
sponsored House Resolution 28, a resolution that opposed such 
door delivery changes.
    Going forward, NELC is committed to building consensus to 
overcome these obstacles with the House, with the Senate, and 
the postal stakeholder community. We believe there are viable 
options that could be pursued to reduce future postal 
liabilities by tens of billions of dollars, without burdening 
the taxpayers. The consensus among the stakeholders is simple, 
adjusting the pre-funding target to levels observed in the 
private sector, and to phase in Medicare integration in a way 
that limits its impact on the trust funds over the next 10 
years.
    In addition, we support the idea of basing the level of 
pre-funding on the Postal Service's vested liability for 
retiree health benefits. What it would cost to cover current 
retirees and employees near retirement age, who are actually 
eligible for such benefits. This would match the best practice 
of Fortune 1000 companies that choose to pre-fund, while 
reducing the pre-funding burden on the Postal Service 
significantly.
    By initially providing postal health plans, the Medicare 
Part D benefits available to private health plans, and then 
phasing in integration with Medicare Parts A and B, Congress 
would provide meaningful financial relief to the Postal 
Service, while minimizing the impact on the trust funds. This 
phase-in could be done by applying the standard private sector 
requirement to enroll in Medicare's Part A and B at age 65 to 
active Postal employees who are now under the age of 55.
    Let me close with two final points, Mr. Chairman. First, 
I'd like to urge the committee to aggressive pursue postal 
reform this year, but to do it with caution and humility. As we 
learned in 2006, it's hard to predict the future. Long-term 
economic forecasts are notoriously inaccurate. And the costs of 
misconstruing the future can be high.
    Indeed, the internet did not destroy the Postal Service as 
predicted. Just imagine if we had given into those who were 
advocating the end of Saturday delivery in 2011 or 2012. We 
would have missed out on the e-commerce boom. Worse, we would 
have unnecessarily eliminated tens of thousands of good jobs 
and weaken the Postal Service.
    Second, we urge you to get both the content and the 
sequence of postal reform right. Let's address the most 
important issue first, the misguided pre-funding burden. Let's 
implement the PRC's new rate setting system. Let's fill the 
seven vacancies and the board of Governors with talented people 
who are capable of developing a workable business plan, and 
then let the Postal Service and its employees adapt and 
innovate to meet the evolving needs of our Nation.
    Thank you again for this invitation to testify.
    Chairman Cummings. Thank you very much.
    Mr. Edwards?

  STATEMENT OF CHRIS EDWARDS, DIRECTOR OF TAX POLICY STUDIES, 
                         CATO INSTITUTE

    Mr. Edwards. Thank you very much, Mr. Chairman, and members 
of the committee. Thanks for inviting me to testify.
    While USPS mail volume is plunging, and the company is 
losing billions of dollars a year, European countries are 
facing the exact same problems of plunging mail volumes, but 
their response has been to open up postal markets to 
competition, and to privatize postal companies. A very 
different response than ours.
    America should follow suit. Privatization and competition 
would give the USPS the flexibility it needs to cut costs and 
to innovate, while creating equal treatment of businesses 
across postal and package markets.
    Aside from legal monopolies, the USPS enjoys numerous other 
benefits, including the fact that it pays no Federal, state, or 
local taxes. But at the same time, Congress ties the hand of 
the USPS, preventing it from solving its own financial 
problems.
    So, what are some of the solutions? Well, first, I would 
say close post office locations. There are thousands of 
locations with very few customers.
    I live in Northern Virginia, near Seven Corners, and 
there's actually two post office locations right near me within 
a half-a-mile on Leesburg Pike. It makes absolutely no sense. 
So, I would suggest closing one of my post offices in my 
neighborhood.
    Cut labor costs. The USPS has $110 billion in unfunded 
liability for retiree pension and health. Most private 
businesses do not even provide retiree health benefits, let 
alone defined benefit plans, which have gone the way of the 
dinosaurs.
    Third, narrow the universal service obligation. The United 
States is one of the most expansive universal service 
obligations in the world.
    And fourth, end cross-subsidies. There's been a lot of 
discussion of whether the USPS is using its monopoly mail to 
subsidize its package delivery. It's a complex issue, and I 
know the PRC recently had a ruling on that, but this issue is 
not going to go away, because the USPS is a special government-
owned entity.
    Federal Express pays $2 billion a year in Federal, state, 
and local taxes. The USPS pays none. So, that creates a lot of 
unfairness and distortion, and an uneven playing field.
    In the long-term, Congress should privatize the USPS, 
repeal its legal monopolies, and give the company flexibility 
to adjust to changing postal markets. Privatization may sound 
radical, but governments around the world have transferred 
thousands of state-owned businesses worth more than $3 trillion 
to the private sector, everything from railroads, to airports, 
to postal systems have been privatized in Europe.
    Europe has opened its postal markets to competition, and 
some nations, like the UK and Germany, have privatized their 
post offices.
    A major report last year by the European Commission 
summarized a bunch of reforms that European postal companies 
are making. European postal companies, they are cutting costs 
with more flexible employment. They're using performance pay 
for workers. They're cutting delivery speed. They're cutting 
the frequency of delivery. They're delivering to common street 
mailboxes instead of doors. And some of them are closing down 
post offices.
    Sweden and Germany essentially don't have post offices any 
more. They do retail postal activities through grocery stores 
and convenience stores, and that sort of stuff.
    European postal companies are diversifying to try to make 
money in this new challenging environment. But the USPS is 
government owned. It's harder to diversify. Nor would we want 
USPS diversifying into industries like banking or grocery 
delivery, because it would create unfair competition to tax-
paying businesses.
    So, again, I think the solution is privatization. 
Privatization would improve corporate governance. The USPS 
board is dysfunctional currently. Privatization would allow the 
USPS to access debt and equity markets for investment that it 
desperately needs. A privatized USPS would pay Federal, state, 
and local taxes. It would put the USPS on a level playing field 
with other businesses.
    Congress could impose the universal service obligation on a 
privatized USPS, but it should narrow the mandate, a narrower 
universal service obligation.
    Postal markets are changing rapidly. Household-to-household 
personal letters have plunged to just three percent of total 
mail volume. Advertising mail represents 62 percent of the 
entire household mail volume today. Sixty percent of bill 
paying has moved online. There is more than 200 billion e-mails 
sent around the world every single day. The world is rapidly 
changing. America should follow the reforms in Europe.
    Thanks a lot for having the hearing.
    Chairman Cummings. Thank you very much.
    Mr. Connolly. Mr. Chairman?
    Chairman Cummings. Yes.
    Mr. Connolly. I just have a unanimous consent request. I 
would ask that the prepared statement of the Greeting Card 
Association be entered into the record.
    Chairman Cummings. Without objection.
    Mr. Connolly. I thank the chair.
    Chairman Cummings. We'll go now into questioning, and I'll 
yield myself five minutes.
    Let me say this. Ms. Brennan, I have few questions of you, 
Postmaster. But first of all, I want to thank you and your 
staff, and certainly your deputy, Mr. Stroman, you all have 
been constantly meeting with us. I was just sitting up here 
thinking about the many times that I met with all the 
stakeholders.
    I've been on this committee along time, 23 years, and 
there's no entity that I've been in meetings with more than the 
Postal Service. So, we worked hard. Mr. Meadows----
    Mr. Meadows. Amen to that.
    Chairman Cummings. Mr. Meadows, Mr. Connolly, and Mr. 
Lynch. I mean lots of meetings. And Ms. Lawrence.
    And so, I want to thank all of you all for trying to work 
with us, and you all have been there for us whenever we needed 
information.
    Postmaster Brennan, I'd like to go through some of the 
financial figures for the Postal Service, so that we can clear 
up some matters. The Postal Service receives no taxpayer 
funding, and relies solely on the sale of postage, and postage 
products to generate revenue. Is that right?
    Ms. Brennan. That's correct.
    Chairman Cummings. According to the Postal Service's 10K 
filing for Fiscal Year 2018, the Postal Service's reported 
operating revenue was $70.6 billion, an increase of $1 billion, 
or a 1.5 percent increase from the prior year. Nonetheless, it 
ended the year with a net loss of $3. 9 billion. What are the 
primary reasons for these losses?
    Ms. Brennan. Mr. Chairman, the fundamental root cause of 
our financial instability is a flawed business model that 
imposes significant costs on us, legally mandated costs, yet 
constrains our ability to raise revenue to offset those costs.
    Chairman Cummings. Mm-hmm.
    Ms. Brennan. Specifically, an unaffordable retiree health 
benefit plan, which I think you heard from a number of the 
panelists. And the solution there is Medicare integration.
    A strict price cap on products that generate roughly 70 
percent of our revenue is a burden to our ability to improve 
our financial standing.
    Chairman Cummings. The Postal Service has incurred 
cumulative net losses of $69 billion from 2007 to 2018. How can 
the Postal Service still be functioning if you lost that much 
money over the past decade?
    Ms. Brennan. Mr. Chairman, I think as a number of the 
panelists had indicated, and as you did as well, the onerous 
burden to pre-fund retiree health benefits is roughly 80 
percent of those net losses in the past decade.
    Now what the Postal Service has done over these years is we 
prioritized our fundamental mission, which is delivering the 
mail. So, we deferred needed capital investments to help us in 
terms of a competitive marketplace. And we defaulted on 
mandated payments of more than $48 billion.
    Chairman Cummings. So, in fact, the Postal Service reported 
it had been defaulting on payments for retiree health benefits 
and pension benefits to conserve cash. But absent legislative 
action, will the Postal Service ever be able to make those 
payments at any point in the future?
    Ms. Brennan. Mr. Chairman, absent legislative and 
regulatory reform, in all probability we'll be out of cash in 
2024. And that will threaten our ability to meet our obligation 
to the American public, and to our business partners like Mr. 
Quadracci, who relies on our platform for his business.
    Chairman Cummings. Now at the end of Fiscal Year 2018, the 
Postal Service reported that it had cash revenues of $10.1 
billion, and that its average daily liquidity balance during 
that year was $11.3 billion, which represents about 54 days' 
worth of cash.
    How much cash does the Postal Service need to make its 
regular biweekly payroll?
    Ms. Brennan. Well, I would tell you, Mr. Chairman, we have 
a daily cash outlay of over $200 million. And our financial 
advisor, who looked at our liquidity, which, as we describe it, 
is cash on hand and ability to borrow. That 11.3 billion is 
insufficient. For an organization with a $70 billion revenue 
stream, at a minimum, we should have roughly 20 billion in cash 
on hand or ability to borrow.
    Chairman Cummings. That would equal how many days?
    Ms. Brennan. Roughly, 100 days.
    Chairman Cummings. And we have a few months right now.
    Ms. Brennan. Correct.
    Chairman Cummings. What is the impact of having less than 
two months' worth of liquidity on a company the size of the 
Postal Service?
    Ms. Brennan. Well, again, Mr. Chairman, it requires you to 
be very judicious in terms of how you prioritize your spend, 
and also, frankly, hinders your potential ability to improve 
your competitive standing, because you're deferring capital 
investments, and you're making priorities day in and day out to 
ensure that you can continue to pay your employers and pay your 
suppliers, and deliver the mail.
    Chairman Cummings. Absent legislative action, when might 
the Postal Service run out of cash it needs to perform its 
mission for delivering the mail?
    Ms. Brennan. Mr. Chairman, if we make our legally mandated 
payments in 2019, we will be out of cash in 2020.
    Chairman Cummings. You know, the situation you described is 
simply no way to run a business, I think you said is a flawed 
business model, and it's simply not sustainable. However, 
things do not have to be this way. Congress can enact 
legislation, making some basic reforms, which is what we've 
been trying to do, including eliminating unreasonable payments 
imposed by Congress that will end these defaults, and ensure 
the Postal Service is not always operating on the brink of 
liquidity event.
    This should not be a partisan issue, would you agree?
    Ms. Brennan. I would agree.
    Chairman Cummings. This committee hash previously passed by 
bipartisan legislation that would have helped address the 
Postal Service's financial challenges. And I believe that we 
can pass similar legislation again, and take it to the floor of 
the House to get it passed this year. So, I hope the members on 
both sides of the aisle will join me in supporting this effort.
    With that, I yield now to----
    Mr. Connolly. Mr. Chairman, could I just ask you a 
question?
    Chairman Cummings. What's your question?
    Mr. Connolly. You made a really good point about this 
committee passing the bill. My recollection is we actually 
passed it on the unanimous vote of this committee, is that 
correct?
    Chairman Cummings. That's right.
    Mr. Connolly. I thank the chair.
    Chairman Cummings. I now recognize Mr. Hice for five 
minutes.
    Mr. Hice. Thank you, Mr. Chairman.
    Mr. Rolando, it is true that the Postal Service is not 
supposed to be involved in political campaigns, correct, other 
than delivering mail? The Office of Special Counsel found 
systematic violations of the Hatch Act in 2016 with the Letter 
Carriers 2016 initiative. Are you familiar with that report, 
and the violations?
    Mr. Rolando. Somewhat familiar with the issue they had with 
the Postal Service. Yes.
    Mr. Hice. You ought to be very familiar with it. And just 
out of curiosity, were there any letter carriers requesting to 
campaign for Donald Trump during that time?
    Mr. Rolando. I don't know.
    Mr. Hice. Had they come forward to campaign, have a leave 
of absence, would you have forced management to grant Trump 
supporters a leave of absence to campaign for him?
    Mr. Rolando. That would have been my decision, Congressman.
    Mr. Hice. Whose decision would that be?
    Mr. Rolando. It would have been the Postal Service, if 
they're requesting leave to do anything.
    Mr. Hice. I mean who at the Postal Service?
    Mr. Rolando. Their supervisor.
    Mr. Hice. All right. Well, there was a concerted effort 
across the board for political activity on behalf of Hillary 
Clinton, and I'm just curious how that happened, and the 
violations. Were there any consequences for violations of the 
Hatch Act?
    Mr. Rolando. Not that I'm aware of, because there weren't 
any violations by letter carriers.
    Mr. Hice. There most certainly were.
    Mr. Rolando. Well, that's not what the report said, sir.
    Mr. Hice. Well, the report makes it clear that there were 
systematic violations.
    Mr. Rolando. Not by letter carriers.
    Mr. Hice. Who were the violations committed by?
    Mr. Rolando. I believe they were directed at the Postal 
Service.
    Mr. Hice. Well, I mean aren't letter carriers the ones that 
took a leave of absence?
    Mr. Rolando. They are the employees of the Postal Service.
    Mr. Hice. And they were the ones who took a leave of 
absence for two months to campaign.
    Mr. Rolando. They were the ones that had their requests for 
leave approved by the Postal Service.
    Mr. Hice. And their requests were approved, and they 
campaigned for two months, had a leave of absence for two 
months, kept their job, came back. So, I'm curious if there 
were any consequences to that.
    Mr. Rolando. To who, sir? To the letter carriers?
    Mr. Hice. To those who were responsible. For crying out 
loud, this is not a complicated question.
    Mr. Rolando. Oh, it is. It actually is a complicated 
question.
    Mr. Hice. The Hatch Act was violated. I'm curious if those 
who were guilty of violating it, were there any consequences?
    Mr. Rolando. You'd have to ask the Postal Service, because 
I believe----
    Mr. Hice. Well obviously, because I'm not going to get any 
answers from you. Let me go to you, Ms. Brennan. You told this 
committee back in 2016 at the front end of the five-year plan 
that you had identified some $5 billion in cost reductions, 
which was a good thing, but I'm curious if that strategy that 
you mentioned in 2016 has been implemented.
    Ms. Brennan. In part, Congressman. And what we're focused 
on, looking out, is a 10-year plan that would address the USO 
and address pricing and product flexibility, giving the Postal 
Service the opportunity to better compete in an increasingly 
competitive environment.
    Mr. Hice. So, that the plan that you mentioned four years 
ago has not been fully implemented.
    Ms. Brennan. All the savings have not been achieved.
    Mr. Hice. Okay. You also mentioned in February 2017, two 
years ago, you assured me personally, that the issue of 
replacing aging vehicles was going to occur in any month. You 
said that the award would be granted in a matter of months. 
That never took place, did it?
    Ms. Brennan. Congressman, if we were talking about the next 
generation delivery program, that is a multi-year research, 
development, and testing program, that we just completed the 
testing actually in March.
    Mr. Hice. All right. So, there was not an award, a contract 
award for----
    Ms. Brennan. You may have been talking about the contract 
award, or we may have been discussing the contract award for 
the prototypes.
    Mr. Hice. But that was never done.
    Ms. Brennan. Yes, it was.
    Mr. Hice. It was done?
    Ms. Brennan. Yes.
    Mr. Hice. All right. So, where do we stand now on aging 
vehicles?
    Ms. Brennan. We just completed the prototype testing in 
March. So, we are currently analyzing the results of the 
testing that was done over a multi-month period in different 
topographies, different climates. And those results will help 
inform the production requirements going forward.
    Mr. Hice. Okay. I'd love to explore this further. My time 
is running out.
    Mr. Edwards, let me end with you. You brought up some 
interesting points a while ago. The Post Office is running out 
of money. Ms. Brennan mentioned 2024. I don't know if it will 
go that long, or not. But if the Postal Service were a private 
company, what changes would immediately be taking place to make 
it solvent?
    Chairman Cummings. The gentleman's time has expired, but 
you may answer the question.
    Mr. Hice. Thank you, Mr. Chairman.
    Mr. Edwards. I mentioned some cost-cutting, like closing 
post offices, cutting labor costs, that sort of thing. One 
thing I did want to mention about the retiree healthcare, the 
vast majority of private companies do not even offer private 
healthcare. And even if we move that entire burden over to, 
say, Medicare, the taxpayers, today, there is more than $3 
billion every year of new healthcare costs accruing from 
current employees.
    So, you could move the costs over to taxpayers now. It 
doesn't solve the problem. These costs keep accruing and 
accruing. There's kind of a death spiral going on here.
    Chairman Cummings. Ms. Norton?
    Ms. Norton. Thank you, Mr. Chairman. And I certainly 
appreciate this hearing, because this Postal Service is an 
issue we work on every Congress, and don't seem to move very 
far. I recall that under a republican Congress we did pass a 
bill, and this bill never made it to the floor of that 
Congress.
    And, of course, we've seen nothing in the Senate, this pre-
funding notion put on the Postal Service - and nobody else. It 
can hardly be considered a best practice any longer. If it was 
such a best practice, then obviously we'd make everybody do it.
    And that bill that we passed some years ago, this 
committee, the Postal Service, Postmaster General Brennan was 
required to enroll its employees in Medicare. How many have 
elected to enroll in Medicare Parts A and B?
    Ms. Brennan. Delegate Norton, roughly 76 percent of our 
retirees are enrolled in Medicare Part A and B. The balance 
that are not is roughly 88,000 retirees. When this committee 
last----
    Ms. Norton. The balance are who? I'm sorry. The balance who 
have not enrolled are who?
    Ms. Brennan. Roughly 88,000, the number. Retirees.
    Ms. Norton. Already retired. And, therefore, in the old 
system.
    Ms. Brennan. They're not enrolled in Medicare Part A and B. 
And you mentioned in the last Congress, and the provisions of a 
bill, there was bipartisan support for Medicare integration for 
retirees. Restore half the exigent price increase, and provide 
us some product flexibility, and in total, those provisions 
would have generated roughly 50 to 55 billion over a 10-year 
period.
    Ms. Norton. Mr. Rolando, we have understood that some in 
the unions, I don't know if it was your union, in particular, 
have opposed required enrollment in Medicare. Has that been the 
view of the letter carriers?
    Mr. Rolando. Speaking for the letter carriers, the only 
objection we had to Medicare integration was to have some 
protections for requiring and mandating anybody to pay 
something that they wouldn't be able to use. For example, 
veterans that had VA benefits that don't integrate with 
Medicare. Retirees that might live out of the country, you 
know, to be able to have exceptions. Don't make somebody buy 
something they can't use.
    Ms. Norton. Well, of course, Postmaster General Brennan, 
have the Postal Service employees already, I mean in light of 
Mr. Rolando's notion involving veterans, perfectly 
understandable, but have Postal Service employees already 
contributed to Medicare?
    Ms. Brennan. Yes, ma'am. In fact, the Postal Service and 
Postal employees, through Medicare taxes, have contributed more 
than $32 billion to the Medicare trust fund since 1983.
    Ms. Norton. So, they've already contributed. That even 
retirees who have elected not to enroll in Medicare have 
actually contributed to Medicare while they were still working.
    Ms. Brennan. While they were employed?
    Ms. Norton. Yes.
    Ms. Brennan. Correct.
    Ms. Norton. Do you know how much integrating Postal Service 
employees into Medicare would increase costs to the Medicare 
system? I think it may have been Mr. Edwards who said, you 
know, you're shifting the costs from one system to the other. 
The difference is while the Medicare system is in some 
considerable trouble, it's certainly not where the Postal 
system is.
    And typically, the Congress responds when Medicare is in 
that kind of trouble, at least when we get close to the date 
when it's going to run out for people.
    So, I'm asking do you have any sense of how much 
integrating Postal Service employees into Medicare would 
increase the costs of the Medicare system itself, or would 
somehow burden the Medicare system itself?
    Ms. Brennan. Yes. And depending on the scenario, as 
President Rolando outlined a so-called carveout for those who 
may not benefit, our actuaries have estimated roughly 700 
million to a billion dollars per year, which is roughly one-day 
spend.
    Chairman Cummings. Your time has expired.
    Ms. Norton. Thank you, Mr. Chairman.
    Chairman Cummings. Congressman Massie?
    Mr. Massie. Thank you, Mr. Chairman.
    Ms. Brennan, the President convened a taskforce to evaluate 
operational and management challenges at the U.S. Postal 
Service. I assume you looked at it. Are there any things in 
there that resonated with you? Are there any recommendations 
that you think we should take up?
    Ms. Brennan. Yes, Congressman Massie. First, we appreciate 
the Administration's interest, and that they recognize the 
value of the Postal Service as a service provider and an 
employer.
    The taskforce recognized that the business model is 
unsustainable, that a price cap, again, on products that 
generate roughly 70 percent of our revenue is unsustainable. 
They made recommendations about re-amortizing our retiree 
health benefits. They also made a host of administrative and 
legislative recommendations that should inform the public 
policy discussion going forward.
    Mr. Massie. Are there any of those that you prefer the 
most? Any of those recommendations to Congress legislatively?
    Ms. Brennan. Well, eliminating the price cap would be a 
priority. Giving us additional flexibility. The taskforce made 
recommendations about enabling the Postal Service to expand 
products and services with other Federal agencies, local, state 
tribal nations. I think that's an opportunity for us to 
leverage our physical and IT infrastructure.
    Mr. Massie. So, along those lines, one of the 
recommendations from the report argues for redefining mail 
classes to reduce costs, or to exit the product class 
altogether. So, there may be products that you can get into 
that you're not into now. But are there products right now that 
aren't profitable, or that maybe should be combined, maybe 
classes that should be combined, or classes that we shouldn't 
be offering?
    Or are there products that, frankly, the private sector may 
be doing that the Post Office doesn't need to do anymore? Can 
you talk about those, and that recommendation in the report?
    Ms. Brennan. Yes, Congressman. There was a recommendation 
as I would describe as regrouping the products into essential 
and commercial. And in talking with some of our business 
customers, they would tell you that everything they mail is 
essential. That said, I believe it's a discussion that we 
should have with the stakeholders.
    The proposed regrouping doesn't necessarily serve as a 
proxy to our current market-dominant and competitive products, 
but I think it's worth a discussion.
    Mr. Massie. Mr. Edwards, I'd like to ask you about the 
President's recommendations. Is there anything in that report 
that stood out to you, or things that we should be doing, or 
things that aren't in the report that they need to be doing at 
the Post Office to be more competitive?
    Mr. Edwards. I thought it was a very good report. They 
didn't go far enough. I mean the crisis here is much more dire, 
I think, than a lot of people are recognizing. Those healthcare 
costs keep accruing every year. First class mail volume keeps 
plunging.
    I would agree with the USPS that we should raise the price 
cap on their monopoly products, but then we should open them to 
competition. You can't have one without the other. You need to 
protect consumers by opening up the USPS to competition, at the 
same time, giving them the flexibility.
    I mean the marketplace is changing dramatically. Amazon's 
getting into delivery, it looks like, down the road. We need to 
let USPS defend itself. And the way to do that is to privatize 
them, open them up, give them pricing flexibility, and let them 
diversify into other businesses. That's the way that they can 
defend themselves, and, frankly, their workers in the long run.
    Mr. Massie. What is the most troubling part of the U.S. 
Postal Service's finances to you? You started out by saying, 
``We have more dire consequences facing us sooner than we 
realized.''
    Mr. Edwards. Some people on the panel have mentioned it. 
It's because first class mail keeps plunging in volume. Forty-
five percent fall since 2001. That is their most profitable 
product.
    You know, the USPS has very vigorous competitors, UPS and 
FedEx, and probably Amazon in the future. So, I think there's a 
death spiral here. I think that ultimately Congress is going to 
have to do a major reform. This is unsustainable, the direction 
we're going.
    Mr. Massie. Thank you, Mr. Chairman. I yield back the 
balance of my time.
    Chairman Cummings. Thank you very much, Mr. Massie. Mr. 
Lynch?
    Mr. Lynch. Thank you, Mr. Chairman. I also want to thank 
Mr. Connolly and Mr. Meadows for their great work on this 
issue, and as well as Ms. Holmes-Norton. She's been terrific on 
it. We've been at this for a long time.
    I do want to point out a couple things. As Ms. Cigno has 
pointed out, right now the Postal Service, and forever, the 
Postal Service has been funded by stamps. Stamps. That's how we 
fund it. So, it doesn't get a big tax, you know, benefit. You 
know, we don't have an appropriation that we give to the post 
office. They basically work their system off of stamps.
    And because stamps come in one at a time, it is 55 cents 
now for a first-class stamp, we give them a credit line. The 
Federal Government gives them a credit line, because it takes a 
while to collect all those stamps, and reimburse. So, this idea 
that the taxpayer has been footing the bill here is not 
accurate.
    Second, I want to point out to my esteemed colleague from 
Ohio, the ranking member, that Sweden, you know, he holds up 
Sweden as the example, Sweden has about 10 million people. 
Okay? The United States has about 330 million people. So, 330 
million people versus 10 million people. So, that's a real 
discrepancy there.
    Sweden and all the EU countries, they have the national 
health service. So, all their workers, all their workers have 
their healthcare paid for by the government. The retirees have 
all their benefits paid for by the government. So, we don't 
have that. The postal workers are paying their own way here. 
We're helping out, obviously. There are some economies of scale 
that work in their favor, but to try to say that we're all of a 
sudden going to just switch this over.
    We could use the example of Great Britain, which is a much 
better--there's about 60 million people there. So, a better 
example. But when they went to a privatization model, their 
postal rates went up between 30 and 40 percent.
    So, Mr. Quadracci, what would that to your industry if we 
went up 30 to 40 percent on our postal costs?
    Mr. Quadracci. Well, it actually close to happened. And I 
took on my job in 2006, which was a glorious year, but it was 
the last year that the post office could increase rates before 
the cap came into play. And so, when that happened in 2007, 
before the impact of the recession----
    Mr. Lynch. Yes.
    Mr. Quadracci [continuing]. I had to quickly shutter about 
a million square feet of capacity because the increase drove 
huge significant volume out of the system.
    Mr. Lynch. All right. So, it would not be good.
    Mr. Quadracci. It would not be good.
    Mr. Lynch. Okay. The other thing I want to point out about 
the British conversion, they tried to--well, they did privatize 
their system. And, again, they already have everybody on 
national healthcare, so there's no healthcare costs to the 
postal system there. But they still had to go up 30 to 40 
percent.
    They also had $38 billion in unfunded--I'm sorry. The 
comparison for us would be the taxpayer would have to pick up 
$38 billion in unfunded liability for retirees' retirement 
costs. And then we would have to pick up, the taxpayer would 
have to pick, at least, Mr. Edwards, that's what you were 
alluding to, we would have to shift the--it doesn't go away. It 
just gets shifted.
    So, privatization, which I firmly oppose, would require the 
taxpayer in the United States to take the $38 billion in 
underfunded liability from the postal workers' pensions, which 
they're carrying now themselves, and then they'd also have to 
pick up, the taxpayer would have to pick up $62 billion in 
retiree healthcare unfunded liability.
    So, we're shifting about $100 billion in debt over to the 
taxpayer, based on the privatization model that we have here 
today. So, you know, I just think there's much more that we can 
do here to help the Postal Service get squared away. I do 
believe in the idea of ending that odd system of paying 
retirees from the day that they join the Postal Service. You 
have to basically pay for their retirement immediately for 30 
years hence, which is not the way the rest of the world works. 
We usually use a pay-as-you go system.
    But, you know, as a proud son of a postal work, you know, 
two of my sisters are postal workers, I think if we added them 
up, I've told people before, I believe there's 17 members of my 
family, at one point, that were either working for the post 
office right now, or are retirees, or who have passed on.
    So, it's been a real blessing in my family to make sure 
that those people have decent retirements after working their 
whole lives, decent healthcare. Look, we should hold ourselves 
to a higher standard here in the United States. We should treat 
our postal workers with respect and decency, based on the job 
that they do.
    I yield back.
    Chairman Cummings. Mr. Lynch, I just want you to know, that 
my wife thinks I'm crazy, but I still use postage stamps.
    [Laughter.]
    Chairman Cummings. I just want you to know I'm supporting 
all the members of your family.
    Mr. Lynch. Well, thank you.
    Chairman Cummings. I pay all my bills, all of them.
    Mr. Connolly. Mr. Chairman.
    Chairman Cummings. Yes?
    Mr. Connolly. I just want you to know I come from the part 
of Boston where my family envied Mr. Lynch's family. We wanted 
to work for the post office.
    [Laughter.]
    Chairman Cummings. Mr. Meadows.
    Mr. Meadows?
    Mr. Meadows. Thank you, Mr. Chairman. And I want to thank 
you, Mr. Chairman, Mr. Connolly, Mr. Lynch for your work on the 
previous bill. And I guess I'm here today a little bit 
conflicted, in that I convinced all my colleagues to go along 
with a bipartisan bill. Mainly because a lot of the people that 
are in the audience, some of you that are there at the table 
today helped me understand the crisis that we're facing.
    Ms. Brennan, I'm coming to you because I'm very upset with 
a lack of followup from you. And you've taken an advocate, 
someone who is willing to put in political cause, and you've 
turned me into someone who questions whether I can trust what 
you tell this committee, and specifically what you tell me.
    And you met with me, with Mr. Stroman, back in January. You 
told me that you have a business plan. I said even if it has 
the S word for subsidy, I wanted a plan on how we can make the 
postal system viable long-term. You said you would get that to 
me in 10 days.
    You know what? Ten days came and went, and I didn't get 
anything. So, we followed back up with you. We said, ``Where is 
the plan?'' And I was told that I would get it in a week. A 
week came and went, and it didn't come. I'm looking at your 
testimony, you don't even have a business plan today, Ms. 
Brennan. And I guess at what point are we going to get serious 
about fixing the postal system? And are you going to followup 
on the commitments you made to me personally?
    Ms. Brennan. Yes. And Congressman Meadows, to be clear, 
when we met, it was early January, and we----
    Mr. Meadows. January 4.
    Ms. Brennan. And we indicated we would be meeting with our 
board to discuss----
    Mr. Meadows. No. You didn't--you've changed the narrative. 
Did you commit to get me a plan?
    Ms. Brennan. Yes, I did.
    Mr. Meadows. Do I have that plan?
    Ms. Brennan. You do not. It is still a work in progress. 
Congressman Meadows----
    Mr. Meadows. Only in D.C. is 10 days three months?
    Ms. Brennan. Congressman Meadows, throughout this timeline, 
as we were continuing to work on a 10-year plan with our board, 
we kept your office informed.
    Mr. Meadows. No, you didn't.
    Ms. Brennan. And I personally spoke to your chief of staff 
a few weeks back.
    Mr. Meadows. We followed up with you, because we didn't 
hear from you, Ms. Brennan. And I've got e-mails to support it.
    Ms. Brennan. Then I apologize Congressman Meadows, because 
it was my understanding that we were keeping your office 
informed as we continued to meet with the board each month to 
work on a 10-year plan.
    Mr. Meadows. So, how long are we going to have to wait for 
a plan to come from the board, Ms. Brennan? I mean we've been 
dealing with this--it's been in crisis mode for two or three 
years. When are we going to have a plan?
    Ms. Brennan. And yes. And if this committee had acted, and 
if we were able to pass reform, we'd be in a much better 
position today.
    Mr. Meadows. You're changing the goalpost here. You're 
changing the goalpost, Ms. Brennan. I asked you for a plan to 
make it solvent long-term.
    Ms. Brennan. Fair enough. And we are finalizing a plan that 
addresses a $125 billion gap, Congressman. That's not something 
you do overnight. So, I apologize if I did not get the plan and 
submit it to you.
    Mr. Meadows. Did you just recently find out that you had 
this gap?
    Ms. Brennan. No, sir.
    Mr. Meadows. Neither did I. When we spoke, we knew the 
crisis we were at, and yet, you sat in my office, and didn't 
give me the details, and lacked the courtesy of following up to 
let me know that it was being held up. We had to followup with 
you
    Ms. Brennan. And I apologize for that----
    Mr. Meadows. So, how do you take an advocate----
    Ms. Brennan [continuing]. then, Congressman Meadows. I'd 
like you to remain an advocate. You've been a tireless advocate 
for the Postal Service, and we need you to continue to support 
the Postal Service.
    Mr. Meadows. Well, I need a plan.
    Ms. Brennan. Fair enough.
    Mr. Meadows. I need a plan. Even my democrat colleagues 
today understand we need a plan. And at what point are we going 
to get it?
    Ms. Brennan. We're in agreement. In fact, I had asked to 
meet with you, and my understanding is you requested to meet 
with our Governors, as opposed to meeting with me.
    Mr. Meadows. Actually, the Governors reached out to me to 
meet with me. And so, let me just tell you, when we have it, I 
have met with all these people. You're more connected. You know 
what's going on.
    Ms. Brennan. Mm-hmm.
    Mr. Meadows. You are more connected than the NSA. And here, 
I am suggesting that you're taking an advocate and turning him 
into someone who has become hostile, because you are not 
willing to give us some facts.
    Ms. Brennan. Well, I'm going to work on regaining your 
trust.
    Mr. Meadows. When can I get a plan? You've talked to the 
board of Governors, the two of them.
    Ms. Brennan. Mm-hmm.
    Mr. Meadows. When are we going to have a plan?
    Ms. Brennan. As I communicated to the chairman and the 
ranking member, within 60 days was our commitment to ensure 
that we brief out to this committee leadership, as well as our 
stakeholders.
    Mr. Meadows. And so, in 60 days you're going to come up 
with a plan, which puts us about the August recess, where we 
can't get anything done. Ms. Brennan, I told you if we're going 
to act, we have to act now. And your delay is causing a real 
implication on behalf of the American people.
    I yield back.
    Ms. Brennan. If I may, Mr. Chairman.
    Chairman Cummings. You may.
    Ms. Brennan. May I respond to that, please?
    Chairman Cummings. Yes, you may respond.
    Ms. Brennan. This committee can act now on the core 
provisions that have been communicated, that have gained broad 
support among key stakeholders that will go a long way in 
putting us on firmer financial footing, and giving us some 
runway, Congressman, to try to build consensus for a plan that 
will address broader structural issues.
    As you well know, we need stakeholder consensus in order to 
move----
    Mr. Meadows. We are not going to a part-time bailout. I 
think the chairman would agree with me here. We want a plan so 
you're not back here in two years asking for more money.
    Chairman Cummings. Thank you very much. Postmaster Brennan, 
how long will it take you to get this plan? You said 60 days. 
Sixty days from when?
    Ms. Brennan. From when I spoke with you two weeks ago, Mr. 
Chairman.
    Chairman Cummings. So----
    Ms. Brennan. We're finalizing the plan.
    Chairman Cummings. Now my math does not put us in August. 
What is it? July. I believe in effectiveness and efficiency. 
And I don't want to waste my time and I don't want to waste 
yours. I also believe in fairness to the gentleman.
    We're going to set a date consistent with----
    Ms. Brennan. Fair enough.
    Chairman Cummings [continuing]. that. And we're going to 
bring you all back. And at that time, we hope to have your 
plan. And I'd like to have--I'm going to set it so that we will 
have the plan a little bit in advance, so we will have a chance 
to read it, and then we can talk about it. All right?
    Ms. Brennan. Yes.
    Chairman Cummings. We will let you know that date----
    Ms. Brennan. Fair enough.
    Chairman Cummings [continuing]. today. All right?
    Ms. Brennan. Thank you.
    Chairman Cummings. I just asked you to do that.
    Mr. Connolly. Mr. Chairman?
    Chairman Cummings. Thank you very much. Yes?
    Mr. Connolly. Could I just--I just want to say we have 
never had a better partner on the other side of the aisle on 
postal reform than Mr. Meadows.
    Chairman Cummings. I agree.
    Mr. Connolly. And it is quite consequential if his 
perception that a promise was made and not kept. And so, I 
would strongly exhort the Postal Service to provide that plan, 
Mr. Chairman, along maybe the timeline you provided, and to 
repair the damage done in the communication between yourself 
and Mr. Meadows.
    He is an essential partner. He has never broken his word to 
us on this side of the aisle. He has, in fact, relented on some 
things I know he cared about for the sake of having harmony on 
a bill. And I don't want to lose that. And I want to assure our 
friend from North Carolina he'll have our support in enforcing 
his request.
    I thank the chair for his indulgence.
    Chairman Cummings. I agree with everything syllable you 
just said.
    Mr. Rouda?
    Mr. Rouda. Thank you, Mr. Chairman. And thank you to the 
committee members here long before me who have worked so 
diligently on this issue. And thank you to our witnesses for 
being here today.
    I would like to followup on a couple more questions on the 
business plan that Representative Meadows just mentioned. You 
said 60 days to get that finished. Can you give me an 
indication, Postmaster General Brennan, as to how far along you 
are in that planning process now? Like, are you 50 percent 
done, 60 percent done? I come from the business world, so I am 
just kind of curious with a business plan as robust and as 
extensive, and requiring as much due diligence as this does, 
for a budget this large, I'm hoping you're pretty far down that 
path.
    Ms. Brennan. We are, Congressman. It's final validation.
    Mr. Rouda. Okay. Thank you. And then this question is for 
you as well, and Mr. Rolando.
    It seems that there's a fair amount of agreement on how we 
can better position the business going forward so that it is at 
least breakeven, if not profitable. Can the two of you just 
tell us up here the major three, four, five things where there 
is concrete agreement?
    Ms. Brennan. I'll speak for myself. Medicare integration.
    Mr. Rouda. Okay.
    Ms. Brennan. Or some scenario that includes Medicare 
integration. Because, to us, if health costs--health benefit 
costs are roughly 14 cents for every dollar of revenue. It is 
essential to improving our financial condition.
    And I believe pricing and product flexibility. They're the 
cornerstones of our ask.
    Mr. Rouda. And when we talk about Medicare and we talk 
about how other countries have privatized, many of those other 
countries, if not all of them, provide universal healthcare for 
their citizens. So, we don't really have an apples-to-apples 
comparison when we talk about that, correct?
    Ms. Brennan. No, we don't. I think in a number of different 
criteria, when you look at the European Post, probably more so 
size and scale. We deliver 47 percent of the world's mail.
    Mr. Rouda. Mr. Rolando?
    Mr. Rolando. Yes. I think there's--I know if you're 
referring to just pre-funding, I think there's three parts that 
I think we somewhat agree on going forward. There's obviously 
the 10-year review that needs to be completed by the PRC in 
terms of the pricing.
    There's the filling the board of Governors with qualified 
people, so that they can get to work on the vision necessary to 
proceed, and to fill our networks. And as far as the pre-
funding goes, I believe we have some generic agreement on using 
common sense corporate practices in terms of addressing the 
pre-funding, if, again, we don't do the obvious solution of 
repealing this in terms of the vested liability, the percent of 
the liability, the investment of any new funds that aren't just 
Treasury securities, the benefits of part D for Medicare and 
the integration, with exceptions of Medicare A and B.
    Mr. Rouda. And we talk about these innovations to the 
business model, I know both of you, and everyone on the panel 
are discussing those possibilities, one question I've got on 
the universal delivery mandate, is there thought of adjusting 
the pricing depending on the delivery address being affected? 
And if so, wouldn't that have a dramatic impact on rural areas, 
the cost of receiving their mail?
    In other words, is one cost first class for everyone versus 
modified cost structure based on delivery?
    Ms. Brennan. No. We're not looking at--particularly, when 
you look at our market-dominant products, in terms of our 
pricing. You know, the universal service obligation certainly 
recognizes the value of delivering to every address in America 
regardless of location.
    Mr. Rouda. Wouldn't that be one of the concerns, though? If 
it was completely privatized and based on a competitive 
structure, wouldn't you have different pricing by address, 
literally, potentially?
    Ms. Brennan. Potentially, yes, Congressman. I think you 
would look at a surcharge, as some competitors currently do to 
deliver in deep rural America. When you look at the network 
economics, it would likely bear that out from a business 
perspective.
    Mr. Rouda. Mr. Rolando, there are 68 million Americans who 
are underserved by banks and financial institutions. Do you 
believe the Postal Service should be given authority to offer 
limited financial services such as check cashing and 
rechargeable gift cards as broadening the base of products and 
services the Postal Service can provide?
    Mr. Rolando. I believe that there is a lot of things 
involving financial services that the Postal Service could do 
under existing law. I think that's one of the things that 
getting a full board of Governors. I would defer to their 
wisdom, and vision, and judgment in terms of anything beyond 
current law with financial services.
    Mr. Rouda. Okay. Thank you, Mr. Chairman. I yield back the 
remainder of my time.
    Chairman Cummings. Mr. Grothman?
    Mr. Grothman. Yes. Mr. Edwards, how much did the Post 
Office lose last year, do you know?
    Mr. Edwards. They've been losing, you know, 4 or 5 billion 
a year for over a decade now.
    Mr. Grothman. Okay. Can you rattle off just a few of your 
suggestions that will not result in getting rid of the 
universal mandate? Your suggestions for reducing that deficit.
    Mr. Edwards. Well, closing post office locations, like I 
said, in my testimony. Sweden and German essentially don't 
have----
    Mr. Grothman. Could you rattle off like how much each one 
of those things you--how much savings you would find in those 
things?
    Mr. Edwards. I don't know off the top of my head. I mean 
the USPS has over 30,000 locations. So, you can imagine the 
huge infrastructure costs that entails. If we move those post 
office locations to convenience stores and grocery stores, like 
European countries have done, I think that will save a lot of 
money.
    The $110 billion of unfunded liabilities for pension and 
health is a massive problem. I don't disagree in the long term, 
if you restructured USPS that some, or maybe even all that cost 
could be moved on to taxpayers. That is what Britain did when 
they privatized their Royal Mail.
    The issue is, those costs are already past. You have to 
think moving forward. We have to allow USPS the flexibility for 
pricing, for marketing mail, for periodicals, and the 
flexibility to cut costs.
    Mr. Grothman. Okay. I am going to ask a couple questions of 
Ms. Cigno. But first of all, I would like to ask Mr. Quadracci, 
do you have an opinion on that, as far as what you would do to 
reign in the costs?
    Mr. Quadracci. Yes, I do. I've been involved in this a long 
time. This is also a family business. So, I grew up around 
postal for better or for worse. And these are not new ideas. 
We've talked about a silver bullet for many years.
    I run a very tough business. The post office is a very 
tough business. And I think we all naturally try and go for a 
silver bullet, when, in fact, the way I have to run my 
business, a lot of incremental tough decisions day by day.
    I met with the taskforce from the President. I was invited 
in. And I told them that I thought that the solution was in 
this bill. And if you think about privatizing the post office, 
yes, maybe that's an idea at some future point. And when you 
say privatize, you're basically saying let it run like a 
business.
    Well, the first thing I would do if I was running it like a 
business is, I'd have to get rid of the pre-funding of the 
retirement healthcare. I'd have to do most of the stuff that's 
done in this bill, and the fact that we haven't passed this is 
just accumulated the losses that could have maybe--energy could 
have been spent in investing in better incremental improvement.
    Mr. Grothman. I will ask you. I assume a fair amount of the 
Postal Service cost is employee related. Okay? And you have 
many employees. So, you have some feeling about what adequate 
compensation is, adequate retirement, adequate fringe benefits, 
adequate----
    Mr. Quadracci. Yes.
    Mr. Grothman. Do you think there is any potential cost 
savings there?
    Mr. Quadracci. There always is. I mean automation has taken 
on a lot of new levels. We automate all over the place. But I 
have to manage all the same challenges of healthcare, benefits, 
while most of my contracts being under a CPI cap. So, you know, 
it's tough business, but you've got to make a lot of different 
decisions. But there are costs that can come out on the labor 
side in any business.
    Mr. Grothman. Okay. You think that is particularly true of 
the post office, or not?
    Mr. Quadracci. I think it's particularly true of any 
business that has a lot of employees.
    Mr. Grothman. Okay. I don't mean to put you on the spot 
there.
    Mr. Quadracci. That's Okay.
    Mr. Grothman. Okay. I will ask some questions with regard 
to the delivery vehicles. Ms. Brennan, you have an older fleet 
right now of vehicles. It is about 24 years old, on the 
average, is that right? Your delivery vehicles?
    Ms. Brennan. Congressman, we have over 200,000 vehicles in 
our fleet. When you look at our delivery fleet, the majority of 
those vehicle are called long-life vehicles. Yes. And the 
average age is 27 years.
    Mr. Grothman. Would there be a savings if you were to begin 
to replace some of them, given your billion dollars a year in 
maintenance.
    Ms. Brennan. Yes, sir. And that billion dollars includes 
some field costs as well, but yes.
    Mr. Grothman. Okay. What is the status? We've had testimony 
before in this hearing. What is your status, when you begin to 
think new acquisitions will be made?
    Ms. Brennan. Congressman Hice asked a similar question, and 
we just completed the testing of the prototype vehicles this 
past month. We're now in the stage where we're assessing those 
test results, and that will help inform the production 
requirements. And ultimately, our request for production, which 
would likely be later this summer, early fall.
    Mr. Grothman. So, you will begin to order new vehicles, or 
they'll be in production later this year.
    Ms. Brennan. Well, I would say this, Congressman, we deploy 
roughly 10,000 to 12,000 new vehicles a year. But this next 
generation, that will be also a multi-year procurement 
timeline.
    Mr. Grothman. When do you think you will buy the first 
ones?
    Ms. Brennan. Likely 2021, given the production capacity.
    Mr. Grothman. We're still two years off.
    Ms. Brennan. Correct. For the next generation. In the 
meantime, though, Congressman, we are also testing commercial 
off-the-shelf vehicles, and that will be an opportunity for us 
to replace potentially up to 50,000 vehicles in the next year 
or two.
    Mr. Grothman. Thank you much.
    Chairman Cummings. Ms. Hill?
    Ms. Hill. Thank you. I want to thank the chairman for 
convening today's hearing, and I look forward to working with 
him and all the members of the committee to enact reform 
legislation in this Congress. And I want to thank you all for 
being here.
    As the chairman stated, it appears that the financial 
condition of the Postal Service has deteriorated for three 
reasons. Decline in first-class mail, increase in expenses, and 
the pre-funding requirement.
    Mr. Rolando and Mr. Quadracci, you've both stated, and 
actually, Ms. Postmaster, you have all stated that repealing 
the pre-funding mandate will have the biggest impact on long-
term solvency, is that correct?
    Ms. Brennan. That's correct. It's roughly $3 billion.
    Ms. Hill. Great. So, how would you address, and I guess the 
question is to the three of you. Actually, this can be to 
everyone. How would you address the other two reasons about, 
you know, the reduction in first-class mail, and the increase 
in expenses? Just briefly.
    Mr. Rolando. I would say, again, this is a three-part 
process. The pre-funding is just a part of it. As far as the 
revenue, I think it's really important to fill the vacant seven 
positions on the board Governors, and, again, allow them to 
exhibit their vision and their expertise, and to fill the 
networks, and, you know, deal with the revenue stream.
    On the expense side, again, there's a 10-year review that's 
being done by the PRC that should conclude sometime this year. 
And I think that will balance that.
    But those three pieces are all really important. As I said 
in my opening statement, in terms of, you know, doing any kind 
of 10-year review, I think it's almost premature to try to do 
that without having some idea of what's going to come out of 
that review, and what's going to happen legislatively with 
regard to the pre-funding, unless the review would really just 
project those things, you know, happening in a particular way.
    Ms. Hill. And Ms. Brennan?
    Ms. Brennan. I would add afford the Postal Service more 
flexibility with products that we can provide our customers. 
Leverage our unrivaled physical infrastructure and our IT 
infrastructure.
    Ms. Hill. What products would you increase, or include that 
are not currently----
    Ms. Brennan. One I would say, if you think about the 
current process with passports, there is an opportunity for us 
to provide other services that maybe local, state, tribal 
nations currently provide. I also think if you considered the 
digital space, and I.D. services, an opportunity where the 
Postal Service may be able to play there as well.
    Ms. Hill. Great. Ms. Cigno, anything you would like to add? 
Or Mr. Quadracci?
    Ms. Cigno. No. I think they covered it pretty well.
    Ms. Hill. Thank you. Mr. Quadracci?
    Mr. Quadracci. Yes. I think they covered it as well, but 
I'd say that there's been a fair amount of innovation to be 
worked with the post office years ago about doing some 
discounting for people who would start to use multi-channeling 
to mail. And it's been very successful. So, I think we have a 
very good public-private relationship, where we also, by the 
way, as a printer, do a lot of the work for the post office. 
And that has been very helpful over the years. So, I think 
innovation is going to be important.
    Ms. Hill. Thank you. And Mr. Edwards, you, in your 
testimony, spoke about a problem with the union work force 
being paid too much. You tout slashing the work force and large 
cuts as efficiency gains. And to me, you know--you discussed 
reducing the delivery to every other day. And closing office 
locations.
    So, I am just wondering if, to put it simply, your proposal 
is literally to cut jobs, pay people less, and serve fewer 
people?
    Mr. Edwards. Yes. And I think, looking down the road, that 
is going to happen, where the USPS is in a dire situation. The 
Postmaster mentioned that they had--the USPS owns over 200,000 
vehicles, an enormous cost. They've got to replace that fleet.
    If you went to every second day delivery, you could cut the 
fleet in half. That would be enormous savings, and frankly, 
would be a green reform, good for the environment.
    Ms. Hill. Okay. I only have a little bit of time left. But 
you are a director of tax policy studies at a think tank that 
was founded by the Koch family. It is a nonprofit organization. 
And on a page on your website that talks about tax deductible 
contributions that corporations can be making, tax deductible 
contributions.
    The first quote under the section called, Praise for Cato, 
is from Frederick Smith, the chairman and CEO of the FedEx 
Corporation. So, just to clarify, FedEx is a major supporter of 
your organization, and you're here advocating for the 
privatization of postal services.
    So, essentially FedEx is receiving a tax deduction to have 
someone come testify in front of Congress to take measures that 
would directly benefit them, is that correct?
    Mr. Edwards. Well, what you just highlighted was the fact 
that we're very transparent about who our funders are.
    Ms. Hill. Okay. Well, I am glad you're transparent about 
it, but that's the end result, right? That you're advocating 
for something that would directly benefit FedEx.
    Mr. Edwards. No one told me what to say here. I can say 
whatever I want from my perspective of analyzing the finances 
of the USPS.
    Ms. Hill. Okay. Just wondering why we should trust you. 
Thank you. I yield back.
    Chairman Cummings. The gentle lady's time has expired. Were 
you finished, Mr. Edwards?
    Mr. Edwards. Yes.
    Chairman Cummings. I just wanted to make sure you had an 
opportunity.
    Mr. Edwards. Yes.
    Chairman Cummings. Very well. Ms. Miller?
    Ms. Miller. Thank you, Mr. Chairman. And thank you all for 
being here today.
    The United States Postal Service is critical in districts 
like mine where we do not always have access to reliable 
broadband or cell phone service. The Postal Service helps 
connect my constituents with their loved ones, and deliver 
goods to their home. That is why I am troubled to hear about 
the financial insolvency facing this important service. It is 
necessary that we look at options to help increase revenue and 
ensure that our constituents can still receive their mail in a 
timely fashion.
    Postmaster General Brennan, can you talk about rural 
delivery? Is it correct that the USPS does not charge any 
surcharges to my constituents, or to any ZIP codes in America?
    Ms. Brennan. Congresswoman, for market-dominant products, 
that's correct. On the competitive side we do adjust pricing. 
We have published rates, and we have non-published rates. And 
the non-published rates can include a different price for 
competitive product delivery in rural America.
    Ms. Miller. Okay. Thank you.
    Director Cigno, how much have package prices been raised 
over the past few years? And is this in line with private 
carriers?
    Ms. Cigno. I think on average the increases have been 
roughly about five percent over the past couple of years. I 
think this is in line with private carriers, although, I would 
note that private carriers have a lot of unpublished rates. So, 
it's hard to do a one-to-one comparison between the rates, 
because I don't know what they charge a lot of their customers.
    Ms. Miller. Okay. Thank you.
    Mr. Edwards, as you know, President Trump signed an 
executive order to establish a task force on the United States 
Postal Service. One of the recommendations made by the task 
force was to allow the USPS to explore new business 
opportunities, to expand revenue, such as allowing the USPS to 
process hunting and fishing licenses.
    How would ideas like this be helpful in helping the USPS 
collect new revenue?
    Mr. Edwards. I think it's reasonable to allow USPS some 
modest diversification, but once they--if you think about the 
USPS making a major leap, say, into banking, or a grocery 
delivery, and other sorts of things like that, it makes no 
sense, because we already have private sector entrepreneurs 
doing those sorts of things. And they pay Federal, state, and 
local taxes. The USPS pays no Federal, state, or local taxes. 
So, it's an issue of unfair competition.
    So, some diversification is fine, but I mean making big 
leaps into other industries where we already have private 
businesses makes no sense.
    Ms. Miller. How can Congress empower the USPS to make some 
of those changes?
    Mr. Edwards. Well, I think, as I testified in my written 
testimony, I think that the USPS is in a giant dilemma now. It 
needs to diversify to survive. It really does. Mail volume is 
plunging. Marketing mail volume is falling as well.
    So, its core is disappearing. It's in a dire situation. It 
has to diversify. But we can't let it diversify if it's going 
to be competing against taxpaying companies. The only way out, 
in my view, is privatization. And I think, you know, Congress 
can put this off and put it off. In the end, it's going to 
happen because it has to to survive, it has to diversify. If we 
want it to diversify, it's got to be on a level playing field 
with other companies.
    Ms. Miller. Are there ways in the USPS can better utilize 
technology in order to allow for better cost allocation and 
targeted pricing?
    Mr. Edwards. I'm sure it can. As I mentioned in my 
testimony the European commission came out with a giant 300-
page report last year on European postal systems. And reading 
that report, it really did strike me that the more 
entrepreneurial European systems were getting heavy into 
technology all over the place.
    And I know the USPS is doing a lot on that, but I'm sure 
more could be done. Again, I think the issue is privatization. 
Private companies are just much more innovative than government 
bureaucracies.
    Ms. Miller. Okay. Thank you so much. Mr. Chairman, I yield 
back my time.
    Chairman Cummings. Thank you very much. Let me say this, as 
I call on Ms. Wasserman Schultz. Ms. Wasserman Schultz, I just 
want to compliment you on your efforts with regard to safety of 
our postal workers. The fact, the pipe bomb, I know it affected 
your office directly. And it would have affected me. I was on 
the list, too. It just didn't get to me.
    But I am looking at possibly doing a hearing that combines 
that issue with another safety issue, which is the one that was 
mentioned on 60 Minutes this past Sunday, where Fentanyl is 
being shipped from China. And they say if you just touch it, 
you can die. So, again, that goes to safety of our employees. 
But I am sure you may have some questions now. But I just 
wanted you to know that's on our radar screen.
    Ms. Wasserman Schultz. Thank you. Thank you, Mr. Chairman.
    Chairman Cummings. Ms. Wasserman Schultz?
    Ms. Wasserman Schultz. Thank you, Mr. Chairman. I 
appreciate your kind words and your underscoring the importance 
of security for our postal workers throughout the entire 
system, and certainly from mail recipients as well.
    And just to recap, I do have a brief question about that, 
and then I have a question related to pre-funding.
    Just as a reminder, and Ms. Brennan, my question will be of 
you. In October 2018, packages containing explosive materials 
were sent to democratic leaders, including President Obama and 
Secretary Clinton. My name and district office address were 
listed as the return address for every single one of those 
packages.
    Unfortunately, one package was returned by the USPS to my 
office. Some packages were captured in transit, and others 
reached their intended recipient.
    The explosive device returned to my office had to be 
detonated in a nearby stairwell right outside my office. 
Luckily, the perpetrator was apprehended and no one was 
injured. And I'm internally grateful to the FBI, local law 
enforcement, and the USPS for their efforts to keep us safe.
    But this incident did expose potentially serious holes in 
our postal system security. Safety of mail services is critical 
for not only its recipients, but mail carriers and workers who 
work at post offices and mail processing centers. Every worker 
who not only handled, but was in proximity to these packages 
were in danger.
    They were determined to be explosive devices. Let me be 
clear. When the package containing a pipe bomb was delivered to 
my district office, my staff and everyone working in the 
building was threatened, and the pipe bomb package was in my 
office for 48 hours.
    Ms. Brennan, with the incident I just described in mind, 
since these attempted mail bombings in November, has USPS made 
changes to or improved its safety procedures? Do you believe 
that major postal centers are adequately equipped with 
appropriate technology to track and identify suspicious 
packages or abnormalities, keeping in mind that none of these 
packages were intercepted while they were in the mail system?
    Ms. Brennan. Congresswoman, first, the safety and security 
of our employees and the customers we serve is paramount. I 
would like to talk to you privately about some of those 
enhancements we made, given the sensitivity, but suffice it to 
say, in that particular situation, it was trained and alert 
employees, as well as the enhancements we made, invisibility, 
as packages moved through our network, that ultimately enabled 
us to identify those additional packages.
    Ms. Wasserman Schultz. Are you not able to share additional 
steps that you have taken? Because most of the packages left 
the Postal Service, and actually reached some stage of its 
intended recipient's address. Most of them were not intercepted 
in the Postal Service.
    So, are you currently investigating any additional 
equipment or technology to assist in identification of 
suspicious packages? I'm certainly happy to discuss that with 
you----
    Ms. Brennan. Yes.
    Ms. Wasserman Schultz.--privately to the degree that that 
is necessary. What is the timeframe and likelihood of 
implementation for your measures that you are in the process of 
looking at?
    Ms. Brennan. Ongoing. These are ongoing efforts to improve 
the security of our infrastructure. That's our network. 
Obviously, continuing to train employees to identify suspicious 
packages. You know, clearly, once we saw that package, how it 
was prepared, the number of stamps on that package, et cetera. 
And also, the investments we made in identifying those types of 
packages as it moves through our network.
    Ms. Wasserman Schultz. Well, given that that was 2018, this 
is 2019, you can understand how troubling it is that we 
wouldn't already have those kinds of security measures in----
    Ms. Brennan. Mm-hmm.
    Ms. Wasserman Schultz.--place. And that we obviously 
aggressively need to add security measures beyond which you 
already had in place.
    And Mr. Chairman, I would very much appreciate--I think 
it's absolutely essential that we do hold a hearing. I there's 
nothing partisan about this issue. We are all potentially 
endangered. And so, if you would, both because of the Fentanyl 
issue and the overall security issues that this brought to 
light, it would be incredibly important.
    Chairman Cummings. I promise you, we will followup.
    Ms. Wasserman Schultz. Thank you so much.
    And then just moving on in my last 45 seconds, Mr. Rolando, 
I know we've talked about the pre-funding issue. The pre-
funding payments are statutorily prescribed, ranging from $5.4 
billion to $5.8 billion annually. Is there any other agency in 
the U.S. Government that is required to accelerate their 
funding like this, or are they allowed to pay as people are 
projected to retire under normal circumstances?
    Mr. Rolando. To my knowledge, the Postal Service is the 
only agency.
    Ms. Wasserman Schultz. And Mr. Rolando, how much of USPS's 
losses since the mandate came into effect can be directly 
attributed to the pre-funding mandate?
    Mr. Rolando. Since 2007, I believe it's about 92 percent.
    Ms. Wasserman Schultz. Ninety-two percent.
    Mr. Rolando. Yes.
    Ms. Wasserman Schultz. Well, that certainly cries out for 
doing something differently, and addressing this situation in a 
very significant way. In business, if we actually had 92 
percent of a deficit that could be attributed to a policy 
change, then perhaps you would rethink and revisit the policy 
change. And so, I just wanted to make sure that that was 
underscored because it had not been up to this point.
    With that, I yield back. Thank you.
    Chairman Cummings. Thank you very much. With unanimous 
consent, I'm going to grant the gentleman a minute-and-a-half.
    Mr. Meadows. Thank you, Mr. Chairman.
    And I want to than the gentlewoman for raising this issue 
of security, and I want to not only join her, but make it a 
priority where you come in, privately brief us immediately.
    And let me tell you the reason for this is, we have to take 
this extremely seriously. And I know you're making efforts, but 
failure is not an option, Ms. Brennan. And just like her staff 
was at risk, let me tell you why it comes home to me as well.
    We got a notice on our door up here, which appeared to be a 
suspicious package addressed to someone from an unknown place. 
I got on the phone to call, because as I said, maybe the postal 
letter carrier is at risk. And I was put on hold for an hour-
and-43 minutes, where I actually made it to the post office 
quicker than they actually answered my--we got a real person. 
They put me on hold. Actually, it was even worse than that. 
They put my wife on hold for an hour-and-43 minutes. So, I 
actually went to the post office to say, ``We've got this 
suspicious package,'' of which we gave to the postal inspector.
    When we got there, it was great, but to her point, it is a 
critical, critical thing that we have to address, and I think 
within the next couple of weeks we need to make sure we have 
this understanding on what you're doing.
    I thank the gentleman. I yield back.
    Chairman Cummings. I want to thank the gentleman for his 
statement.
    What I will do is working with the ranking member and 
certainly all those that are interested, we will set up that 
private meeting. But, again, I'm going to also followup in the 
bigger picture, too. All right? Thank you very much.
    Mr. Comer?
    Mr. Comer. Thank you, Mr. Chairman, and Ms. Brennan. Thank 
you all for being here. Like most Americans I support the post 
office, the Postal Service. Like everyone on this committee, I 
think we agree we need major reform to the postal system.
    My grandmother was a rural mail carrier. She retired from 
the post office, so I am very familiar with the challenges that 
the Postal Service has. But I am very concerned about the 
proposals to the definition of universal service.
    What would this mean for rural mail delivery? It sounds to 
me like the proposal is to make rural Americans pay more to 
receive non-essential packages. Is that your understanding?
    Ms. Brennan. No, Congressman, it's not. And we certainly 
recognize the importance of rural America. The taskforce 
recognizes the importance of rural America.
    Mr. Comer. Okay. Well, with respect to the two tiers of 
service, essential and non-essential, let's touch on that. 
Who's to say what's essential? Are groceries not essential for 
rural Americans when rural grocery stores are struggling to 
stay open? Are clothes for kids not essential for moms who 
don't have affordable retail options? Are any items sold by 
small businesses not essential for that small business? Who 
determines essential and non-essential?
    Ms. Brennan. Congressman, I think that will be the 
discussion. That was a recommendation from the taskforce. 
Clearly, you could argue that that's subjective. It's 
arbitrary, and I think that's a discussion the stakeholders 
need to have.
    My comment earlier regarding essential was that any 
business that mails with us considers that product essential to 
their business.
    Mr. Comer. Well, let me close by saying this. I would 
strongly encourage you to get a plan as quickly as possible to 
this committee. There aren't a lot of things that I think have 
potential for bipartisan support, but this possibly is one, if 
there is a plan.
    You talk to the business community, there's a lot of 
concerns with the post office. I know there are things the 
Postal Service does that puts them at a competitive 
disadvantage to some of the private companies. I'm aware of 
that.
    So, I think it is imperative that we try to come up with a 
solution, but we can't do that without a viable plan. And just 
touching on what my friend and colleague, Representative 
Meadows, said, we don't need a plan to put a Band-Aid on it, 
and then have you all come back next year asking for another 
assistance subsidy bailout, or whatever. We want to see you 
succeed, but we have to have a viable plan.
    So, Mr. Chairman----
    Mr. Meadows. Will the gentleman yield?
    Mr. Comer. I yield to Representative Meadows.
    Mr. Meadows. So, let me go back. I mean there's been a lot 
of comments. And Ms. Brennan, I want to make sure that I'm 
clear with a couple of things.
    One is, with all due respect to my good friend, Mr. 
Edwards, we're not going to close post offices. There is not 
the political will on Capitol Hill to do it. And candidly, when 
we did it before, it did not save money. And you are working 
it, as much as this might sound like a good idea, it doesn't 
save money. And it disproportionately impacts rural 
communities, and so, as you're working on the plan.
    The other is quit focusing on pre-funding. We gave that up 
last time. We said, ``Okay, we understand the pre-funding is 
there.'' The problem is with pre-funding out of the way, you're 
still not profitable. And by profitable, you still do not break 
even in a non-profit environment, I guess. You are still 
operating in red ink, even with the pre-funding out of the way.
    So, I need your plan to assume that pre-funding goes away, 
which I think we've passed that Rubicon a long time ago. But 
for us to focus on pre-funding as the end-all, be-all, it does 
not solve our problem. Would you agree with that, Ms.----
    Ms. Brennan. I would agree with you Congressman Meadows. 
It's why I mentioned that $120 billion cumulative loss, and 
that we have to address broader issues.
    Mr. Meadows. And so, let me in the few short--with the 
gentleman's permission, with a few short--what are we going to 
do about--I know we've been looking at parcels, and that's 
going to be the saving grace. And yet parcel increases, in 
terms of the overall market, went up by 15 percent. Your market 
share only went up by six.
    I mean that is a business model that is not sustainable 
either. What are we going to do to address that?
    And I yield back.
    Ms. Brennan. And it's not solely package growth. I think as 
Mr. Quadracci mentioned, when you look at the efforts we have 
to enhance the value of mail, promotions, giving print a 
digital reflection, to keep customers in the mail, when you 
think about our--what, in essence, are two lines of business, 
package volume is roughly four percent of our volume. Mail is 
96 percent of our volume.
    So, that mix, while there's been some adjustment, we'll 
still be heavily relying on mail. So, we have to continue to 
keep mail relevant, keep it targeted, make it creative to keep 
customers in the mail.
    Chairman Cummings. Thank you very much. Mr. Welch?
    Mr. Welch. Thank you very much. And I thank the chairman 
for this hearing. I thank the witnesses. This committee has 
been laboring on this for a long time, and it's tough.
    You know, one of the reasons I will go to you, Mr. Edwards. 
You made the case that if there are going to be some other--
you're making the case for privatization. I understand that. 
But the public policy question is whether there are some 
services, such as the Postal Service, that has been around 
longer than the country has been around, where you make a 
public policy decision that that will be provided, because it 
serves some significant goals. Do you dispute that?
    Mr. Edwards. No. I think with a privatized post office, 
Congress could, like most European countries, I think every 
European country has, you keep a universal service mandate on 
that private formerly monopoly provider, and you could fund it. 
You could do an annual calculation to find out how much that 
costs the USPS. Maybe a few billion dollars a year. And you 
could give them a line item subsidy to cover all the addresses 
for whatever universal mandate you want. But then you open the 
playing field to other companies.
    Mr. Welch. So, you are saying you'd have competition with 
other private entities trying to compete with the post office 
itself.
    Mr. Edwards. Right. But then the post office is the 
universal service provider, and it would have a mandate for 
that.
    Mr. Welch. I disagree with that, but I understand what 
you're saying. Because I think what tends to happen is that it 
will be kind of a race to the bottom. A lot of services would 
be offloaded and the profitable services will be the ones where 
there's competition. And I think at the end of that, the public 
will lose. But that is obviously a philosophical debate.
    Postmaster General Brennan, what's your view on that, what 
he just said?
    Ms. Brennan. The Postal Service view is we're a creature of 
statute.
    Mr. Welch. Right.
    Ms. Brennan. We were established as a fundamental 
government service. And we believe that there is a path forward 
to sustainability while remaining a quasi-governmental 
institution.
    Mr. Welch. Right. And the big advantage that you have is 
you can provide a level of service that our citizens still 
value, right.
    Ms. Brennan. Correct.
    Mr. Welch. And I hope that would include continuing six-day 
delivery.
    Ms. Brennan. The challenge for us is when you look out, 
we're delivery less mail to more addresses. And that's not 
sustainable in the long run.
    Mr. Welch. Right.
    Ms. Brennan. But I do believe part of the discussion, as we 
discuss the USO, would be delivery frequency.
    Mr. Welch. Right. But here's the dilemma that we have. The 
better the service, the more people will use it, in general. I 
mean would you agree with that?
    Ms. Brennan. Yes.
    Mr. Welch. And then you have the challenge of trying to 
figure out how to pay for it, correct?
    Ms. Brennan. Yes.
    Mr. Welch. Yes. Mr. Rolando, you have any thoughts about 
what it is we need to do to maintain service consistent with 
the enormous pressures that folks you represent have to contend 
with?
    Mr. Rolando. Yes. I guess it really depends on the agenda, 
you know. If the agenda is to raise costs, reduce service, take 
business away from the Postal Service, and hand it over to 
private delivery companies, that's one agenda. If the agenda is 
to work with Congress to correct, again, an unintended error 
some 13 years ago, it's a whole different group of ideas. And 
it's what we are here to try to move forward.
    Mr. Welch. All right. The work force in the Postal Service 
has shrunk quite a bit, right?
    Mr. Rolando. By about 200,000. Yes, sir.
    Mr. Welch. Yes. That's a lot of folks. And there's a lot of 
temporary workers on whose pay and benefits are significantly 
different than the full-time force, correct?
    Mr. Rolando. Productivity is an all-time high. We are 
working with about 200,000 less people, and postal employees 
are not hired to career positions any longer. They have to come 
in as non-career.
    Mr. Welch. By the way, you guys work hard.
    Mr. Rolando. We do.
    Mr. Welch. I'm showing up at my apartment, it's nine at 
night and I see a postal person. What's going on? Are you 
complying with OSHA? Are you working them too hard? What's 
going on?
    [Laughter.]
    Mr. Welch. Seriously. I mean what----
    [Laughter.]
    Mr. Rolando. Oh, that's a question?
    Mr. Welch. Well, I'm amazed. I'm coming home, and they're 
there delivering the mail. They've been at it for 10 or 12 
hours. They work harder than Jordan does.
    [Laughter.]
    Mr. Welch. Anyway, thank you. I yield back.
    Mr. Meadows. Will the gentleman yield? The gentleman 
yields?
    Mr. Welch. I do yield. Yes.
    Mr. Meadows. Let me ask you this, Mr. Rolando.
    Mr. Rolando. Yes.
    Mr. Meadows. You just said employees are coming in non-
career. Is that what you said?
    Mr. Rolando. Yes, sir.
    Mr. Meadows. Can you explain that, because I don't think a 
lot of people understand what that means, and how that is 
different than maybe before.
    Mr. Rolando. Yes. It used to be, prior to, I don't know, 
maybe 2012, 2013, letter carriers were, I'll speak for my 
union, letter carriers were hired as part-time flexibles, but 
they were career employees, and then over a period of time they 
would become full-time regulars.
    The way the hiring works now, you come in as what's known 
as a CCA, which is non-career position. And then career 
positions are filled from the non-career work force later on.
    Chairman Cummings. Do benefits come with that?
    Mr. Rolando. The non-career position?
    Chairman Cummings. Non-career.
    Mr. Rolando. No, sir.
    Chairman Cummings. All right. Thank you very much. Mr. 
Jordan?
    Mr. Jordan. I'm going to yield the gentleman from North 
Carolina.
    Mr. Meadows. I thank the gentleman. So, let me followup on 
a few real quick things that I think are critical.
    Ms. Brennan, did you say we're going to look at five-day 
service? Because that is very concerning. That is exactly the 
opposite way that we went the last time. Mr. Hice tried that. 
And all due respect to Mr. Hice, it didn't work then. I don't 
know that it's going to work now. So, why are we considering 
that?
    Ms. Brennan. Congressman Meadows, I would say, as you know, 
in the last Congress, and for actually the last five years, 
we've been working to build consensus around a bill. And it's 
why we did not address delivery frequency in the past.
    The board is looking at a range of potential options, 
recognizing that many of them will require legislative reform.
    Mr. Meadows. But Ms. Brennan, as you know, did you tell the 
board that dog won't hunt?
    Ms. Brennan. Well, not----
    Mr. Meadows. It just won't. And I guess how are you going 
to deliver, have Sunday delivery for Amazon, if you're going to 
five days?
    Ms. Brennan. Again, I would say, Congressman Meadows, there 
are a number of potential revenue-generating and cost-reduction 
initiatives in this plan. I don't anticipate----
    Mr. Meadows. You mean the plan we're going to get.
    Ms. Brennan. That's correct, sir.
    Mr. Meadows. Now did I hear you correctly earlier that you 
are just in the final verification of that plan?
    Ms. Brennan. No. My comment was the validation, the rigor 
around the range of magnitude of savings over a 10-year period, 
given it's a 10-year plan. I recognize----
    Mr. Meadows. So, you are validating your assumptions. Is 
that what you're saying?
    Ms. Brennan. Yes. Correct. The financial validation, and 
frankly, and----
    Mr. Meadows. But if you've got those, why are you not 
sharing that with Chairman Cummings at this point?
    Ms. Brennan. I had a conversation with the chairman and the 
ranking member at a high level where we are with the plan, and 
in broad categories, what the plan will address. And as I 
noted----
    Mr. Meadows. So, is it making the assumption that you have 
a five-day delivery?
    Ms. Brennan. There is in there, delivery frequency.
    Mr. Meadows. So, yes and no. Five-day delivery or not?
    Ms. Brennan. Yes. And seven-day package delivery.
    Mr. Meadows. Okay. So, quit wasting----
    Ms. Brennan. We recognize the political implications.
    Mr. Meadows [continuing]. our time, Ms. Brennan. We have 
very little time to get this done. And what you're doing is you 
are saying you are going to deliver packages seven days a week, 
and deliver mail five days a week. I do not understand that. I 
understand it from a financial standpoint, but I don't 
understand how you can say that your primary objective is to 
deliver mail, and that packages are a follow-on. And yet, you 
are going to put the priority on seven-day delivery for 
packages, and cut back mail to five days. Why would you do 
that?
    Ms. Brennan. Congressman Meadows, it's one of a number of 
initiatives that we would put forward. The board has a 
fiduciary responsibility to outline a path forward. Now 
ultimately this Congress, this committee determines what the 
universal service obligation entails.
    Mr. Meadows. So, did you tell the board of Governors that 
that idea has been rejected by Congress on both sides of the 
aisle previously?
    Ms. Brennan. Yes. We had conversations about the political 
reality of that particular----
    Mr. Meadows. And that it has been rejected? They know that 
it's been rejected previously.
    Ms. Brennan. Yes.
    Mr. Meadows. And they continue to go on down that----
    Ms. Brennan. Again, we have a responsibility to put forward 
a plan, and as I indicated, there are a range of initiatives. 
The challenge for us, as noted, is we're adding a million new 
deliveries a year as mail continues to decline.
    Mr. Meadows. So, it sounds like you're a package company 
and not a mail company.
    Ms. Brennan. Ninety-six percent of our----
    Mr. Meadows. If you're adding a million new parcels----
    Ms. Brennan [continuing]. volume is mail, not packages. 
Ninety-six percent of our volume is mail, not packages.
    Mr. Meadows. You keep coming back--listen, this is not my 
first rodeo. I understand how the numbers work. Is your mail 
volume declining in terms of overall?
    Ms. Brennan. Yes.
    Mr. Meadows. Is your package volume increasing overall?
    Ms. Brennan. Yes.
    Mr. Meadows. Okay. So, don't go with the other statistics 
that would try to blur the lines. The truth of the matter is 
you're moving more to packages. And if that's where we're going 
to be, let's be honest about it.
    Ms. Brennan. I'm being very candid and direct here, 
Congressman. The reality is----
    Mr. Meadows. With the fact that you're looking at five-day 
delivery.
    Ms. Brennan. The reality is the board has the 
responsibility----
    Mr. Meadows. The Chairman is not with you on five-day 
delivery, and neither am I, Ms. Brennan. You know that.
    Ms. Brennan. Congressman Meadows, as I indicated, 
ultimately, Congress will determine what the USO entails. But 
we have a responsibility to put forward a plan that closes this 
gap. It would be irresponsible not to.
    Mr. Meadows. I yield back.
    Chairman Cummings. Thank you very much. Ms. Lawrence?
    Ms. Lawrence. Okay. I want to thank Mr. Cummings for this 
hearing. I also want to thank Postmaster General Brennan for 
everything that you do.
    There's no other Member of Congress who has served in the 
Postal Service for 30 years and had a career. I was a letter 
carrier. I carried mail door to door. I worked midnight, sorted 
mail. I was a supervisor on the floor, supervising employees. I 
have been an EO investigator. I have been a manager. I've 
worked in the budget department and in the labor department.
    So, I have seen the post office, Mr. Edwards, adjust to 
volume, adjust to work force, and privatizing it is not an 
option for me. However, the Postal Service must adjust to the 
times and must become a--not a profit-making--it concerns me 
when we say that we need to be competitive with private 
industry. That is just like saying I need to run a race with 
everyone else, but I am going to tie your legs together. 
Everyone else can run, but I am going to keep the strings on 
you. So, a lot of the things that you are proposing, just, the 
math doesn't work.
    With that being said, the Postal Service, under 39 USC 
Section 202, and I quote, ``The exercise of the power of the 
Postal Service shall be directed by the board of Governors. By 
statute, the board of Governors is comprised of 11 members, 
including nine individuals appointed by the president, and with 
the advice and consent of the Senate. And the postmaster and 
the post deputy are both appointed by the board of Governors.''
    My question to you, Postmaster, how many members does the 
board have today?
    Ms. Brennan. Currently, Congresswoman, there are two 
independent Governors, and the deputy and I. So, there are four 
of us that comprise the temporary emergency committee of the 
board.
    Ms. Lawrence. That is not a quorum, correct?
    Ms. Brennan. That's correct.
    Ms. Lawrence. How long has the board lacked a quorum? A 
long time.
    Ms. Brennan. It's been years. Yes.
    Ms. Lawrence. It's been years.
    Ms. Brennan. Since 2015, I believe, ma'am.
    Ms. Lawrence. So, because of this non-functioning part of 
our responsibility as a government to provide you, under 
statute, a board of Governors to make a lot of these decisions 
that we are talking about, the board has created this so-called 
temporary emergency committee to ensure governance of this.
    Can you explain what is the role of the temporary emergency 
committee, and what power do you have?
    Ms. Brennan. Its fundamental responsibility is to ensure 
continuity of operations.
    Ms. Lawrence. So, at one time there were only two people, 
correct?
    Ms. Brennan. Correct.
    Ms. Lawrence. You and the deputy.
    Ms. Brennan. That's correct.
    Ms. Lawrence. And so, now we just recently received four. 
We still don't have a quorum, but you're making decisions on 
operations that we're holding you accountable for, correct?
    Ms. Brennan. That's correct.
    Ms. Lawrence. What is the challenge of operating in this 
arena, with all the challenges and changes not having, by 
statute, the structure to be able to be responsive and to do 
your job?
    Ms. Brennan. As we've said, for years, Congresswoman, that 
we're best served having a fully functioning board, whether 
it's nine independent Governors, or five. The issue becomes 
individuals that have the experience, the credentials, and that 
generally represent the public interest.
    So, it's critically important that the Senate move to 
confirm the three Governors that are currently, or, excuse me, 
the three nominees that are in process.
    Ms. Lawrence. Mm-hmm. So, I am going to close with I want a 
plan. I do want a 10-year plan. I will never support reducing 
delivery days. We know fundamentally that it's a lot of money 
to be made in high-density populated areas. Rural America will 
suffer tremendously.
    I represent a high-volume area. I'll get postal delivery 
and it will be competitive, and a lot of people want to pick it 
up. But it's very few companies, even today, FedEx, and all of 
the competitors that we talk about, use the Postal Service for 
first and last mile. We know that they do not make money, so 
they will drop it at a local post office, and pay the post 
office to make that mile road down the road to have one or two 
homes.
    So, when we are looking at this plan, and we start talking 
about that, I expect a plan that not only just looks at 
numbers, but look at the overall commitment that the Postal 
Service was established to provide the service to our country.
    The other thing I want to talk about is the work force. We 
have a work force in the Postal Service that has all the 
challenges, thank goodness, of being representative of the 
diversity of this country. We are one of the largest employers 
of veterans. We are one of the largest employers of handicapped 
employees.
    So, while we talk about a lot of these things, a lot of our 
story hasn't been told. We have the second largest fleet in the 
United States of America next to the military. We need to be 
efficient. Look how long it has taken us to get through 
Congress to actually buy a fleet that is functional, and that 
can provide that service.
    So, with that, I close. And we have a lot of work to do. I 
want us to get a board of Governors, so that we can actually 
hold you accountable.
    Thank you.
    Chairman Cummings. Thank you very much. Mr. Gibbs?
    Mr. Gibbs. Thank you, Chairman. To the Postmaster General, 
I'm a little confused. Back in I guess the last Congress, I was 
on this committee, but the bill, it didn't move. It said that 
retirees who were over the age of 65 would be required to 
enroll in Medicare, who weren't already enrolled.
    My first question is, are the current retirees enrolled in 
Medicare?
    Ms. Brennan. Yes. Actually, the majority, roughly 75 to 76 
percent are integrated with Medicare.
    Mr. Gibbs. That was my second question. Okay. When they 
were working, and current workers now, may we separate the two, 
did they pay into Medicare, and did the post office pay into 
Medicare?
    Ms. Brennan. Yes, Congressman. Between the Postal Service 
and employees, we paid more than $32 billion into the Medicare 
trust fund since 1983.
    Mr. Gibbs. So, this pre-funding level, if most employees, 
retirees are in Medicare, and both the employer and employee 
paid into the system like in the private sector, so this pre-
funding, that's actually for, like, the supplemental coverage 
of Medicare?
    Ms. Brennan. That's--excuse me?
    Mr. Gibbs. Is that for like providing supplemental Medicare 
coverage?
    Ms. Brennan. It's pre-funding to cover the entire employee 
and retiree pool.
    Mr. Gibbs. Yes. But they're already----
    Ms. Brennan. It's current active and retired. Excuse me, 
Congressman.
    Mr. Gibbs. Yes. Where I'm confused, if they're in the 
Medicare system, Okay, and they pay like everybody else, just 
like everybody else, and then you have to buy a supplemental 
policy for the 20 percent, is that what the pre-funding for? Or 
are you paying twice?
    Ms. Brennan. No. The pre-funding is to ensure that our fund 
is 100 percent funded. Right now, it's roughly 42 percent 
funded. So, we have to make amortization payments each----
    Mr. Gibbs. No. I've got that. Where I don't understand is 
if they're in the Medicare system why do you have this level of 
pre-funding if it is paying for 100 percent of the Medicare 
costs?
    Ms. Brennan. Not all of those retirees are currently 
integrated with Medicare.
    Mr. Gibbs. Well, 25 percent. So, that's 25 percent then.
    Ms. Brennan. Correct. It's roughly like----
    Mr. Gibbs. Okay.
    Ms. Brennan [continuing]. 87,000 or 88,000 people.
    Mr. Gibbs. Okay. Okay. Okay. That kind of answers that. 
Because I've been confused.
    Now current workers, are they scheduled to go into that 
system, or Medicare 100 percent, like in the private sector?
    Ms. Brennan. That's the discussion. We believe that this is 
a fundamental question of fairness, and that we should be 
treated like any self-funded entity that requires--that provide 
healthcare benefits typically require Medicare become the 
primary, and if you have a secondary, like FEHB.
    Mr. Gibbs. Yes. That's where I was getting at, because I 
was getting confusion when I talk to different letter carriers 
and stuff.
    Ms. Brennan. We'd be happy to come and brief you or your 
staff, Congressman.
    Mr. Gibbs. Okay. In my area, in Ohio, and I assume around 
the country, you've closed a lot of processing centers. Like, I 
think in the northern Ohio you've probably closed--there's 
probably one left, and there's--at least three are closed. Have 
you reviewed how that has affected your cost savings, supposed 
cost savings versus service?
    Ms. Brennan. Those consolidations certainly were as a 
result of a continuing decline in volume. So, we looked at the 
latent capacity in our network. We identified savings. And not 
in all cases did we achieve the savings during the targeted 
timeline, but that's an opportunity that continues.
    And we'll have to continue to look at the infrastructure as 
the mail mix changes, and as the overall volume declines.
    Mr. Gibbs. I just have a concern. I think we need six-day 
delivery. And then I've been concerned about some of the 
processing centers closing. It might have gone too far and 
affected service. Then it also affects your bottom line at the 
end, because people are dissatisfied that, especially large 
mailers, they might be going different options, but just a 
comment.
    Mr. Gibbs. The Office of Special Council found that there 
were systematic Hatch Act violations by the Post Office, and 
specifically, the letter carriers left pay for the Hillary 
campaign. My question is the Office of Special Council required 
that the Postal Service submit a corrective action plan by 
August 31st, 2017. Did the Postal Service submit that 
corrective action plan?
    Ms. Brennan. We did, Congressman.
    Mr. Gibbs. Okay. Thank you. I yield back.
    Chairman Cummings. Thank you. Ms. Plaskett?
    Ms. Plaskett. Thank you very much. And good afternoon to 
everyone.
    Postmaster General Brennan, I am pleased that you're here 
before the Oversight and Reform Committee to discuss the 
current financial conditions of the Postal Service.
    One of the themes that I've heard throughout this hearing 
that I want to reiterate is the need for communication. Over 
the past two years I've had several correspondences and was 
grateful for an in-person meeting with Deputy Postmaster 
Stroman. But there have been times when your leadership team 
and others have not been as responsive to my office and I 
assume other offices as well with regard to systemic issues 
within the Postal Service.
    I'm grateful for the opportunity I have now to have this 
conversation with you in a public hearing, but I can understand 
that, and I'm concerned, because I have been sitting on 
Oversight since I came to Congress. And if it's difficult for 
me to be in touch with you, I can only imagine what my other 
colleagues, who do not have direct oversight over the Postal 
Service, the kind of communication that they have with your 
office.
    So, as I hear other colleagues speaking, I think that's 
something that really needs to be addressed, this notion of 
being able to communicate, and getting information back and 
forth.
    I wanted to talk with you about some issues that I have 
noted and want to get your opinion on. In the Virgin Islands, 
of course, after what we've gone through in 2017, with two 
hurricanes, one of the things I'm concerned with, with the 
growing number of natural disasters in this country, and the 
issues that we had with regard to getting mail, and 
communication directly to the islands, is that we are now just 
two weeks away from the 2019 hurricane season.
    And over the past two years, and looking back on what has 
been done, and what worked, and what didn't work, can you tell 
me what steps the U.S. Postal Service has taken to improve its 
preparedness for natural disasters, especially hurricanes, 
tornadoes, and such throughout the country?
    Ms. Brennan. Yes. If I may address your first comment, I 
am----
    Ms. Plaskett. Sure.
    Ms. Brennan [continuing]. personally accessible. We have a 
government relations team that is accessible to all the 
members. I'd be happy, certainly, to followup, and apologize if 
there was any lack of communication or a gap in being 
responsive to you.
    Ms. Plaskett. Mm-hmm.
    Ms. Brennan. In terms of preparation, as you would imagine, 
we have incidents that occur every day throughout this country. 
So, we have continuity of operation planning that we do, 
emphasis on protecting people, product, and property. And the 
same in the Virgin Islands. And I know the devastation that 
occurred, we responded by adjusting our transportation. We 
chartered planes to bring volume and product into the Virgin 
Islands, and bypass the gateway typically that we use in Puerto 
Rico.
    Our new area vice president for the northeast area just 
recently visited the islands. So, we'd like to take the 
opportunity to introduce you to him as well, and ensure that 
we're well prepared----
    Ms. Plaskett. Sure
    Ms. Brennan [continuing]. for this upcoming hurricane 
season.
    Ms. Plaskett. Sure. I mean what happens oftentimes is that 
our mail is going through Puerto Rico, and that becomes an 
issue of us fighting with our neighbor for accessibility. If I 
have problems in the Virgin Islands, and having to report to 
Puerto Rico about those problems, that becomes problematic, 
because they're going to cover for themselves in some way with 
regard to the issues that are being systemically filtered down 
to the people of the territory.
    And so, those routes become very problematic to us, having 
mail go through Puerto Rico. Because they're fighting for as 
much mail as they can get to keep the FTEs and the people that 
are there. With regard to that, you know, we just recently had 
a review that was done, an excellent review that was done by 
your agency on manpower hours.
    Ms. Brennan. Yes.
    Ms. Plaskett. And they said that 22 individuals needed to 
be hired. Well, in terms of communication, I didn't know when 
you were doing those hirings. And I understand that a lot of 
those were contractual hires that needed to be made. And my 
concern now is that we didn't open that pool up to the local 
people. And a lot of the individuals who were hired are 
actually from Puerto Rico, who are then going to be coming to 
the Islands. They'll stay there. They'll stay in the Virgin 
Islands for two years, and then they'll take that FTE back to 
Puerto Rico again. And we'll end up exactly where we were, with 
our letter carriers and others doing the bulk of the work, mail 
sorters, supervisors, the stress and strain of having less FTEs 
on the ground.
    Mr. Rolando, would you say that that has happened in the 
past. Have you heard any of those complaints from individuals 
in the Virgin Islands?
    Mr. Rolando. It's been a while since I've been down there. 
I went down there to check on the employees right after the 
hurricane. And there were some staffing issues at the time 
related----
    Ms. Plaskett. Mm-hmm.
    Mr. Rolando [continuing]. to what you're talking about. I 
don't know if it's been corrected, or if it was directly 
related to the storms, but yes.
    Ms. Plaskett. But I would just say as I hear throughout all 
of this, is that we want to be a part of those plans. We want 
to be a part of those discussions. I know that you have 
bureaucracy, and you have regs that you're dealing with. But 
there are individuals that are sitting here on this committee 
who want to make this work, not just for our constituents, but 
for you as well. Because the people who work in the Post Office 
are people that we deal with every day, whether they're family 
members or individuals. So, if that communication can work a 
little better, that would be helpful.
    Ms. Brennan. Absolutely commitment to that. And we 
recognize that the churn, if you don't have a labor pool that 
you identify from the Island, so point taken.
    Ms. Plaskett. Thank you. I yield back.
    Ms. Brennan. Thank you.
    Ms. Plaskett. Thank you for your indulgence, Mr. Chairman.
    Chairman Cummings. Ms. Ocasio-Cortez?
    Ms. Ocasio-Cortez. Thank you, Mr. Chair. Postmaster General 
Brennan, before 2006, to your knowledge, was the Postal Service 
fiscally sound? Would you say it was solvent?
    Ms. Brennan. Yes. We were in a much better position than we 
were post-2006.
    Ms. Ocasio-Cortez. And that's when you all maintained a 
pay-as-you-go system for retiree health benefits, is that 
correct?
    Ms. Brennan. Prior. That's correct. Yes.
    Ms. Ocasio-Cortez. Prior to 2006. Now I know that there's 
been a lot of conversation here about the retiree health 
benefits, and my colleague across the aisle urged us all, you 
know, and urged you, saying, ``We need a plan. We need a 
plan.'' And I believe that we do need a plan, but we need a 
plan. Congress needs a plan. Because before 2006 things were 
fine on your end. And it was in 2006 where we passed 
legislation that--the Postal Accountability and Enhancement Act 
that required you to fully pre-fund the Postal Service's 
portion of the cost providing healthcare for future retirees, 
is that correct?
    Ms. Brennan. That's correct.
    Ms. Ocasio-Cortez. So, when you opened today you talked 
about how a lot of the failures in our system have to do with a 
failed business model. And that business model was changed in 
large part by us, is that correct?
    Ms. Brennan. That's correct. It was imposed on the Postal 
Service by the Congress.
    Ms. Ocasio-Cortez. So, this was an imposition on us. We 
created this problem. I would say that we created this problem. 
And I think that it's on us to fix it, at least in this 
specific respect, with retiree health benefits.
    So, Postmaster General Brennan, how much money is currently 
saved in the retiree health benefits fund?
    Ms. Brennan. In the current fund, the RHB fund, the assets 
are really $48 billion.
    Ms. Ocasio-Cortez. $48 billion that's already currently 
saved. Is any other Federal agency required to pre-fund the 
cost of retiree healthcare coverage?
    Ms. Brennan. The only other Federal agency is Department of 
Defense, through their TRICARE system. We are better funded 
than they are, and as you well know, they are appropriated, and 
they are required to integrate with Medicare.
    Ms. Ocasio-Cortez. That's right. And I find that to be such 
an irony, because we don't even pre-fund our own retiree 
benefits here in Congress. And so, we're asking you to reach a 
higher standard that we even create for ourselves. I don't 
think it's surprising that we've tied your hands. We've made 
your job impossible, and then we're upset that we've given you 
an impossible standard that you haven't been able to meet.
    Mr. Quadracci, are private sector firms like the ones that 
you work with required by law to pre-fund the cost of retiree 
healthcare coverage?
    Mr. Quadracci. No, we'd be out of business.
    Ms. Ocasio-Cortez. So, you'd be out of business. Congress 
doesn't even impose this on ourselves. Yet, this is a standard 
that we have imposed on you. And even when DOD has a similar 
requirement, we actually fund it. And they have that Medicare 
provision that you're asking for.
    Mr. Quadracci. If I might, also, I think we're 
characterizing this as a bailout. It is not a bailout.
    Ms. Ocasio-Cortez. Absolutely.
    Mr. Quadracci. We just want to not have them do what no one 
else has to do.
    Ms. Ocasio-Cortez. And I think you bring up an excellent 
point, Mr. Quadracci, because you're not asking for a dime. 
You're just asking us to end this unreasonable requirement, 
fiscal requirement----
    Mr. Quadracci. Yes.
    Ms. Ocasio-Cortez [continuing]. that no other business and 
virtually almost no other Federal agency has.
    Postmaster General, how critical is eliminating the burden 
of pre-funding retiree health benefits to placing the Postal 
Service on sound financial footing?
    Ms. Brennan. It will go a long way, Congresswoman. It will 
generate roughly $3 billion in savings per annum, and over $33 
billion over a 10-year period.
    Ms. Ocasio-Cortez. You know, I think it is so important 
that that gets across, because there is no way that we can 
develop a plan, there's no way that I think you can develop a 
plan that is realistic unless we lift this burdensome 
requirement on you.
    Ms. Brennan. That's correct. Any reform bill must have a 
fix for this burden that would require Medicare integration for 
retirees.
    Ms. Ocasio-Cortez. Mm-hmm. And I know my colleague from 
Massachusetts, he talked about his family wanted to be postal 
workers. And I know that that's certainly a reality for my 
family as well, because it is one of the--in our current 
economic climate, it's one of the few positions, at least in 
the career workers' position, that you can get access to 
dignified healthcare and strong benefits.
    And we talk about privatizing. A lot of private delivery 
corporations do not cover healthcare for a lot of their 
employees. It's extremely stressful work conditions. And I 
think that when we--this is also a question of dignity of work. 
I want to commend you and your commitment for maintaining that 
dignity of work for our Postal Service workers, and ensuring 
that we find a business model that works in a way that does not 
compromise the right to healthcare.
    So, that being said, I would like to make the 
recommendation that we eliminate this burden of the pre-funding 
retiree health costs, so that you can do your job.
    Thank you very much.
    Ms. Brennan. Thank you. And our employees take great pride 
in the mission. Thank you.
    Chairman Cummings. Thank you very much. Ms. Pressley?
    Ms. Pressley. Thank you, Chairman Cummings. The Postal 
Service is certainly a fundamental pillar of the 
interconnectivity of our global economy, a critical resource 
for communities across America. I'm glad we can discuss 
potential solutions to solve the financial challenges of what 
is such a critical American service.
    My mother, may she rest in power, I recall her, and her 
generation, you know, there were three things the black folks 
wanted to do that were a pathway to upward mobility. You were 
either a teacher, you were a nurse, or you were a letter 
carrier. And there was great pride in that.
    I want to talk for a moment about the Postal Services work 
force and the needs of working families. According to recent 
SCC filings, the Postal Service is ``the second largest 
civilian employer in our Nation, with approximately 634,000 
employees as of the end of 2018.''
    In fact, in the district I represent, the Massachusetts 
7th, there are approximately 2,897 U.S. Postal Service workers. 
The highest concentration of workers across our state. The 
issue of pay and benefits is a top concern for many of these 
workers, particularly the vast number of non-career workers the 
USPS now employs.
    Ms. Brennan, can you explain the differences in basic pay 
and benefits between career and non-career positions?
    Ms. Brennan. Yes, Congresswoman. The non-career employee 
wage rate is roughly $11 less than a career employee. That's an 
average wage rate that I'm citing. And they have limited 
benefits.
    Now what I would say is the non-career, or the flexible 
work force, will become tomorrow's career employee. There is a 
path to a career position.
    Ms. Pressley. Okay. So, can you speak a little bit more 
about that? What is the Postal Service doing to retain and 
support both career and non-career employees so that they can 
gain that foothold into the middle class that I spoke about a 
moment ago?
    Ms. Brennan. We have a very low turnover rate with the 
career employees, but with the non-career employees we do have 
a challenge in retention. One, it's setting clear expectations 
at the outset that it's a physically demanding job, and also, 
as you would likely appreciate, when we do exit interviews with 
employees, it's less about the pay and more about the treatment 
and their relationship with the supervisor. So, making inroads 
there to ensure we have better workplace environment for all 
employees.
    Ms. Pressley. So, in preparation for this hearing I was 
going over some data and it showed that nearly half of all USPS 
workers are women, is that correct?
    Ms. Brennan. That's correct.
    Ms. Pressley. Okay. And the average salary for a career 
employee was less than $57,000 in 2018. Does that sound about 
right?
    Ms. Brennan. That sounds directionally close for wages. It 
does not include benefits. Yes.
    Ms. Pressley. Okay. Well, that was my next question, 
because although this is not an issue that should be 
genderized, we do know it is one that is disproportionately of 
unique import to women. Could you just talk about, particularly 
in single female-headed households, childcare, what you 
provide, if there is anything flexible or onsite that you might 
provide. What types of benefits do you provide?
    Ms. Brennan. In terms of benefits, none for childcare, per 
se, but we do, of course, follow the--I'm sorry. I'm drawing a 
blank. Dependent care. And we provide FMLA leave.
    Ms. Pressley. Okay. So, flexible----
    Ms. Brennan. We do provide those provisions.
    Ms. Pressley [continuing]. time off.
    Ms. Brennan. Yes. Where feasible, where operations dictate.
    Ms. Pressley. Okay. And no childcare onsite, or anything 
like that?
    Ms. Brennan. No.
    Ms. Pressley. Okay. Well, as we consider proposals to 
reform the Postal Service, it is critical we remember the men 
and women who work for the Postal Service. They are providing a 
service that really is vital to our Nation, and so, I just 
wanted to take this opportunity to say thank you to all those 
hardworking folks out there. And we're doing everything we can 
to support you, and everything you do for our families, we want 
to make sure that you have that same stabilization and those 
opportunities.
    So, thank you, and I yield back.
    Chairman Cummings. Thank you.
    Ms. Brennan. Thank you.
    Chairman Cummings. Ms. Brennan, just one question. 
Veterans, how many veterans, what is the percentage of veterans 
that----
    Ms. Brennan. We have over 100,000 veterans. Roughly 13 to 
15 percent of the work force, Mr. Chairman.
    Chairman Cummings. Okay. Mr. Jordan?
    Mr. Jordan. Mr. Chairman, thank you again. I want to thank 
all our witnesses. If I could, just a couple quick questions.
    Postmaster General Brennan, just back where some of the 
previous questions were. If you got rid of the pre-funding 
mandate, I think your answer to that was it will go a long way 
toward helping you become financially solvent. But it wouldn't 
get you there. Is that right?
    Ms. Brennan. It would not close the full gap.
    Mr. Jordan. The pre-funding mandate was 2006, I believe.
    Ms. Brennan. That's correct.
    Mr. Jordan. Okay. And since that time have you--separate 
and aside from that, have you run surpluses or deficits each of 
those respective fiscal years?
    Ms. Brennan. Both. I'd lay out the timeline for you by 
year. But most recent, net income losses and controllable 
losses.
    Mr. Jordan. More often than not, though, you were losing 
money each of those years.
    Ms. Brennan. That's correct. Yes. The last 12 years we have 
had net losses. And as indicated, the majority of those losses 
were tied to the pre-funding requirement.
    Mr. Jordan. Understand. But I think someone said earlier, I 
forget who, but even with that issue, and I'm not dismissing 
it's an issue----
    Ms. Brennan. Mm-hmm.
    Mr. Jordan [continuing]. you're still not there.
    Ms. Brennan. No. That's correct. We've got $125 billion gap 
that we're facing over the next 10 years.
    Mr. Jordan. Okay. I know you had a long conversation with 
Mr. Meadows a couple different times on this plan. And I do 
appreciate the fact that you called the chairman and I a couple 
of weeks ago. We had a nice conversation. I distinctly remember 
in that conversation encouraging you to call Mr. Meadows. I 
take it you didn't.
    Ms. Brennan. We, in fact, did.
    Mr. Jordan. Did you?
    Ms. Brennan. Yes.
    Mr. Jordan. Okay. Good. Okay. Good. Well, I appreciate 
that, because I didn't know that you had. So, we do look 
forward to receiving that, and getting a chance to analyze it, 
and move forward from there.
    With that, Mr. Chairman, again, thank you, and would yield 
back.
    Chairman Cummings. Thank you very much. And really to all 
of you, I want to thank you for being here today. This is so 
very, very important.
    As I listened to all the comments, I just want us to be 
very careful. When we talk about things like privatization, Mr. 
Edwards, one of my concerns is that--I don't want us to be 
placed in the situation where people are paying $1.50 for a 
stamp. I mean I love the postal system, and I buy my stamps. 
But that's kind of high.
    I think it's important that we balance all of these things. 
And the thing that really, I guess, concerns me is we were so 
much there. We had a solution. And it was a solution that I 
felt pretty good about, and Mr. Meadows felt good about. And 
I'm hoping that--and I looked at the commission's reports, and 
all that kind of stuff. I still think it's the best solution.
    How we'll be able to get back to that level of comfort, 
and, again, I'm not saying everybody is going to be 
comfortable, but the level of comfort we had with the bill that 
came out of this committee unanimously, I don't know how we're 
going to do that, but we're going to try to do that as best we 
can.
    Again, Madam Postmaster General, please make sure that we 
get the report. I can tell you we will have a date for you 
today. I think it's going to be around July 7, somewhere around 
there. But you will know today.
    Chairman Cummings. And I am going to ask unanimous consent 
to enter into the record the following for this hearing: A 
statement from the National Active and Retired Federal 
Employees, written testimony from the American Catalog Mailers 
Association, a statement from the American Postal Workers 
Union, written testimony from the Package Coalition, and 
statement from the Public Citizen. Without objection, so 
ordered.
    Chairman Cummings. And I want to thank you, Mr. Jordan, for 
your cooperation in sitting down and trying to work this thing 
out.
    The last thing I would say to all of our stakeholders, 
let's hold hands and get through this. I don't want you all to 
get splintered. Try to keep working together. Keep talking. 
Keep letting us know what you would like to see in a bill.
    And I guarantee you, you're going to be conflicted with 
some other stakeholder. I just want you to know that before you 
even bring anything to us. But I think it's worth a try.
    Mr. Gomez, you're coming right in under the bell.
    [Laughter.]
    Chairman Cummings. Boy, you're close, man. I was just about 
on the one-inch line, about to go over the goal. And as you 
prepare yourself with your questions, I'm stalling for you.
    [Laughter.]
    Chairman Cummings. But we are so glad to see you. Amen.
    [Laughter.]
    Chairman Cummings. Ladies and gentleman, the distinguished 
gentleman, my friend, Mr. Gomez.
    [Laughter.]
    Mr. Gomez. Thank you all for waiting for me, and making 
sure I had that big introduction. Mr. Chairman, thank you so 
much. I really do appreciate it.
    We all know that the Postal Service reaches every ZIP Code 
in this country. It provides more than 159 delivery points, 
reaching most of the most of the remote areas of the Nation. 
But as people become more reliant on e-mail, the post office 
has been struggling to keep up with the rising expenses.
    Most pressing, the Postal Service has had a difficult time 
complying with the requirements put in place by Congress to 
pre-fund retiree health benefits. According to the GAO, the 
Postal Service owes their retirement benefit program more than 
38 billion in payments.
    Yes, we need to protect our national Postal Service, but we 
must also ensure that any reforms from Congress don't take 
benefits away from postal workers.
    Postmaster General Brennan, taken all these factors into 
consideration, what is being done by the work force to adjust 
to the realities of the retiree health benefit mandate and 
declining revenues. I almost ran out of breath.
    [Laughter.]
    Mr. Gomez. Go ahead.
    Ms. Brennan. Thank you.
    The Postal Service has been clear that Medicare integration 
is vital, and it's essential to improving our financial 
situation. I think there is general consensus among a broad 
stakeholder group that that is an onerous burden unique to the 
Postal Service, and we need to move forward.
    In terms of reacting to the change in the mail mix, and the 
overall decline in volume, like any business, we'll address 
where we have latent capacity in our network, and we'll 
consolidate operations where it makes sense to do so.
    Mr. Gomez. Well, thank you, because that does turn to an 
issue in my district. My constituents have reached out to me 
regarding the closure of one of my neighborhood postal 
facility, the Little Tokyo facility, in my district, which is 
heavily used by seniors, was closed suddenly without proper 
notice. Now my constituents have been directed to use another 
facility a mile away that might not sound too far for some, but 
those with very limited mobility issues, it might as well be in 
another part of the city.
    Postmaster, I'd like to discuss the process in which postal 
facilities are selected for closure. According to your written 
testimony the Postal Service consolidated 363 mail processing 
facilities between September 30th, 2006, and September 30th, 
2018. Can you explain how processing facilities are chosen for 
closure and consolidation?
    Ms. Brennan. Yes. If I may first answer your comment about 
the post office--I believe that was an emergency suspension, 
temporary closure. So, I'll followup on that, and we'll get 
back to you.
    Mr. Gomez. Okay.
    Ms. Brennan. In terms of when we look at opportunities to 
consolidate operations, we look at the overall volume, we look 
at the efficiency of the facility. We do an economic analysis 
to determine where there are opportunities. And clearly, the 
governance is service that we're able to maintain service 
levels.
    Mr. Gomez. You said it was a--the one facility might have 
been an emergency. How is that determined?
    Ms. Brennan. For instance, say the roof leaks, or if some 
natural disaster or incident occurs that impedes our ability to 
safely conduct business there. I don't know the specifics of 
that facility, but I'll find out for you.
    Mr. Gomez. Okay. Thank you so much.
    And did the closure, do you know if the closure or the 
consolidation of these facilities contribute to the slowed 
delivery of mail and the service declines that many communities 
are experiencing?
    Ms. Brennan. We actually adjusted service standards, and 
what we called an operating window change. And the 
consolidations were part of that overall effort.
    Mr. Gomez. Okay. You also wrote in your testimony, ``Our 
actions have been necessary and we are prepared to do more, 
including making difficult operation decisions that may impact 
services, but we urgently need legislative regulatory reform.''
    What additional actions that may impact service is the 
Postal Service considering, and what savings would be expected 
from these actions?
    Ms. Brennan. Congressman, as we talk through with the 
committee throughout this morning, our board takes their 
fiduciary responsibility seriously. We are looking at a 10-year 
business plan that includes both cost reductions as well as 
revenue-generating initiatives to close that gap. It's a 
deliverable I owe to the chair and members of the committee.
    Mr. Gomez. Okay. Could additional processing facilities and 
other types of facilities, such as post offices, be closed? If 
so, what is the timeframe within which such closures may occur?
    Ms. Brennan. Congressman, I don't want to preempt any 
plans. Certainly, we have a process, should we go forward with 
a consolidation of a facility that includes a public meeting.
    Mr. Gomez. No. I appreciate that. And I'm not going to 
push. It's just, you know, mail delivery is something that 
Americans have been able to count on for decades and 
generations, right? And it is the one thing that I think in 
government we should hold almost sacred. And I want to make 
sure that we keep pushing to make sure that every community has 
access to the Postal Service, and the workers are treated 
fairly.
    So, with that, I appreciate your staying around, making 
sure I had a time to ask some questions, but I really do 
appreciate your response. And Postmaster General, your office 
was able to help with some issues that I had in my district as 
well. So, thank you so much.
    Ms. Brennan. Thank you. And be assured, we believe there's 
a path forward with congressional assistance and regulatory 
reform.
    Mr. Gomez. Mr. Chairman, I yield back.
    Chairman Cummings. Thank you very much. I want to thank all 
of you again for just a very informative hearing. And so, 
without objection, all members will have five legislative days 
within which to submit additional written questions for the 
witnesses to the chair, which will be forwarded to the 
witnesses for their response. I ask our witnesses to please 
respond as promptly as you are able to.
    With that, this meeting is adjourned.
    [Whereupon, at 12:45 p.m., the committee was adjourned.]

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