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THE U.S. POSTAL SERVICE IN CRISIS 

HEARING 

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

OF THE

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

AUGUST 6, 2009 

Available via http://www.gpoaccess.gov/congress/index.html 

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 

(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

ROLAND W. BURRIS, Illinois 

PAUL G. KIRK, JR., Massachusetts 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

JOHN MCCAIN, Arizona 

GEORGE V. VOINOVICH, Ohio 

JOHN ENSIGN, Nevada 

LINDSEY GRAHAM, South Carolina 

ROBERT F. BENNETT, Utah 

MICHAEL L. ALEXANDER, Staff Director 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY 

THOMAS R. CARPER, Delaware, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

MARK L. PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

ROLAND W. BURRIS, Illinois 

JOHN MCCAIN, Arizona 

TOM COBURN, Oklahoma 

GEORGE V. VOINOVICH, Ohio 

JOHN ENSIGN, Nevada 

JOHN KILVINGTON, Staff Director 

VELVET JOHNSON, Professional Staff Member 

BRYAN PARKER, Staff Director and General Counsel to the Minority 

DEIRDRE G. ARMSTRONG, Chief Clerk 

(III) 

C O N T E N T S 

Opening statements: Page 

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

Senator McCain ................................................................................................ 4 

Senator Lieberman (ex officio) ......................................................................... 5 

Senator Collins (ex officio) ............................................................................... 7 

Senator Burris .................................................................................................. 8 

Senator Coburn ................................................................................................. 31 

Senator Akaka .................................................................................................. 34 

WITNESSES 

THURSDAY, AUGUST 6, 2009 

Hon. John E. Potter, Postmaster General, U.S. Postal Service ........................... 9 

Ruth Y. Goldway, Chairman, Postal Regulatory Commission ............................. 11 

David C. Williams, Inspector General, U.S. Postal Service ................................. 13 

Nancy H. Kichak, Associate Director for Strategic Human Resources Policy, 

U.S. Office of Personnel Management ................................................................ 15 

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

Accountability Office ............................................................................................ 17 

Fredric V. Rolando, President, National Association of Letter Carriers, AFL– 

CIO ........................................................................................................................ 39 

William Burrus, President, American Postal Workers Union, AFL–CIO ........... 41 

Dale Goff, President, National Association of Postmasters of the United 

States .................................................................................................................... 43 

James E. West, Director, Postal and Government Affairs, Williams-Sonoma, 

Inc. ......................................................................................................................... 45 

Mark Suwyn, Executive Chairman, NewPage Corporation ................................. 47 

ALPHABETICAL LIST OF WITNESSES

Burrus, William: 

Testimony .......................................................................................................... 41 

Prepared statement .......................................................................................... 107 

Goff, Dale: 

Testimony .......................................................................................................... 43 

Prepared statement .......................................................................................... 110 

Goldway, Ruth Y.: 

Testimony .......................................................................................................... 11 

Prepared statement .......................................................................................... 76 

Herr, Phillip R.: 

Testimony .......................................................................................................... 17 

Prepared statement .......................................................................................... 92 

Kichak, Nancy: 

Testimony .......................................................................................................... 15 

Prepared statement .......................................................................................... 88 

Potter, Hon. John E.: 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 61 

Rolando, Fredric: 

Testimony .......................................................................................................... 39 

Prepared statement .......................................................................................... 101 

Suwyn, Mark: 

Testimony .......................................................................................................... 47 

Prepared statement .......................................................................................... 128 

Page

IV 

West, James E.: 

Testimony .......................................................................................................... 45 

Prepared statement .......................................................................................... 119 

Williams, David: 

Testimony .......................................................................................................... 13 

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

APPENDIX 

The U.S. Postal Service and Six-Day Delivery: Issues for Congress, July 

29, 2009, CRS submitted for the Record by Senator Carper ............................ 132 

Post Office and Retail Postal Facility Closures: Overview and Issues for 

Congress, August 7, 2009, CRS submitted for the Record by Senator Carper ......................................................................................................................... 161 

Observations by the Board, submitted for the Record by Senator Carper ......... 184 

Letter from Ruth Y. Goldway, dated August 20, 2009, in response to Senator 

Lieberman’s query ................................................................................................ 194 

Questions and responses for the Record from: 

Mr. Potter .......................................................................................................... 197 

Mr. Herr ............................................................................................................ 206 

Mr. Rolando ....................................................................................................... 211 

Mr. Burrus ........................................................................................................ 214 

(1) 

THE U.S. POSTAL SERVICE IN CRISIS 

THURSDAY, AUGUST 6, 2009 

U.S. SENATE, SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, FEDERAL SERVICES,

AND INTERNATIONAL SECURITY,

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS,

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:02 a.m., in 

room SD–342, Dirksen Senate Office Building, Hon. Thomas R. 

Carper, Chairman of the Subcommittee, presiding. 

Present: Senators Carper, Akaka, Burris, Lieberman (ex officio), 

McCain, Coburn, and Collins (ex officio). 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. Good morning. Our hearing will come to order. 

Our thanks to our witnesses and to our guests for joining us today. 

This hearing is the latest in a series of hearings over the past 

half-dozen or so years that this Subcommittee and full Committee 

have held on the Postal Service’s struggle to adapt to a changing 

mail and communications industry and now to a deeply troubled 

economy. 

As we all know, the economic crisis that our country is currently 

battling has had an impact on just about every family and just 

about every business. This downturn has impacted the Postal Service and some of its biggest customers far more than most. 

Financial data that the Postal Service released yesterday for the 

third quarter of the current fiscal year bears this out. This data 

also tells me that the title of this hearing is accurate. Our Postal 

Service is, indeed, in crisis. 

According to the Postal Service, mail volume was down last quarter more than 14 percent when compared to the third quarter of 

last year. This led to a loss of some $2.4 billion, an amount that 

nearly equals the Postal Service’s total losses for all of last fiscal 

year. This latest quarterly loss brings the Postal Service’s year-todate loss to some $4.7 billion, and current projections point to a 

record loss of more than $7 billion by the end of this fiscal year, 

and this projected loss takes into account some $6 billion in cost 

savings that the Postal Service and its employees are expected to 

achieve by the end of next month. These numbers are, indeed, sobering. Some would say they are also alarming. 

But I would point out that our postmaster general has said, and 

I am sure he will say again here today, that the mail will continue 

2 

to be delivered as it has always been delivered and postal employees will continue to be paid. I would also add that the path out of 

this situation that we find ourselves in is, at least in my estimation, clear. 

First, it is imperative that the Postal Service next month be 

given some measure of financial relief, not a bailout, not lip service, 

not berating, instead, a prudent measure of fiscal relief and perhaps even a little bit of tough love. 

I mentioned earlier, the postmaster general’s assurances that the 

mail will continue despite the dire financial projections we will be 

discussing today. Having said that, absent some action from Congress and the President in the very near term, however, we cannot 

promise that will always be the case. 

In recent months, a number of us have come to the conclusion 

that the most appropriate way to give the Postal Service a measure 

of relief in the throes of this deep recession is to restructure the 

aggressive retiree health prefunding schedule that was imposed on 

it in 2006. That schedule has the Postal Service making enormous 

payments of more than $5 billion per year through 2016 to prefund 

its future health obligations to its retirees. This is on top of regular 

payments of $2 billion or more for current retirees’ premiums. The 

combination will be enough to sink many businesses in this economic downturn that has buffeted our Nation and our world over 

the past year. 

Senator Lieberman and I have introduced legislation, S. 1507, 

the Postal Service Retiree Health Funding Reform Act, to restructure the Postal Service’s retiree health payment schedule to give it 

the financial breathing room to get through the next several years. 

Our proposal works much like a mortgage renegotiation would for 

a family in which someone has lost a job and needs to find a way 

to keep their family home. 

The example that I use to explain this to some of my colleagues 

is to take an example of a young couple that get married, no children, both employed, good jobs, buy a home. They have a choice to 

take a mortgage of 10 years, 15, 20, 25, 30 years, but they say, we 

will go with the 10-year mortgage and that is what they start to 

take and it is what they start to pay. Life goes on. Kids come along. 

Somebody loses a job. The economy is tough. 

And they go back to their mortgage company and say, we would 

like to restructure that mortgage. We feel that we need to restructure that mortgage. We can’t meet the payments on a 10-year 

mortgage. It is too aggressive given the financial reality that we 

face today and we would like to have a 20-year mortgage, or a 25, 

or 30—not a 50, not a 100, but something more reasonable than 

a 10 in the current economic condition that family would face. 

Our bill or something very similar to it must pass and be signed 

into law before the current fiscal year ends in September. That 

said, our bill is not a silver bullet. It does not solve all of the Postal 

Service’s problems. It merely sets the stage for the work that needs 

to be done in a number of areas to streamline postal operations further and to bring back at least some of the business that has been 

lost. 

Much of the cost-cutting discussion since our last hearing in January has focused on the Postal Service’s proposal to move from 6- 

3 

day to 5-day delivery, perhaps by eliminating Saturday service. The 

Postal Service estimates that making this change would save it upwards to $3 billion per year or more. And based on recent polling, 

a clear majority—not all, but a clear majority of the American people would not oppose the elimination of Saturday service. 

And Congress unanimously endorsed language, included in our 

postal reform bill in 2006, that gave the Postal Service the authority to make the business decision to reduce frequency of delivery 

if it felt like it needed to do so. But every year since then, Congress 

through language included in the annual appropriations bill has 

decided to prevent the Postal Service from exercising that new authority. With the situation that the Postal Service is facing now, I 

believe it is time for us to reevaluate this prohibition. 

Congress also needs to reevaluate the position it often takes on 

facility closures. The Postal Service currently maintains more than 

35,000 retail outlets and more than 400 processing plants around 

the country. This network was developed for a time before e-mail, 

before electronic bill pay, and before any number of communications revolutions in our society. We simply don’t need all these facilities in this day and age. 

But all too often, we in Congress put up roadblocks whenever the 

Postal Service even mentions that it might be time to close or consolidate some of those facilities. We just can’t afford to do that anymore. 

The Postal Service itself needs to continue to find new ways over 

time to make the products and services it offers more relevant and 

to increase demand for them. We did give the Postal Service some 

new commercial flexibility back in the 2006 Postal Service law. 

They have been able to take advantage of that flexibility in some 

instances, and one example is the Flat-Rate Priority Box promotion 

that I am sure a lot of us have seen on television in recent months. 

I think that has been successful and very well received. 

There is a great partnership, I think, between the Postal Service 

and UPS and FedEx, where the Postal Service delivers packages 

the last mile or the last five miles. I understand you share their 

aircraft and there is a variety of things that you are doing to be 

more entrepreneurial, and we need to see more of that. 

I understand the response has also been good for a so-called summer sale that the Postal Service hopes will bring additional advertising and other commercial mail back into the system in the coming weeks. 

But I am also certain that more can be done in kindling a new 

entrepreneurial spirit at the Postal Service and we are going to explore that today. 

And finally, I would be remiss if I didn’t mention labor costs. All 

four major Postal Service’s union contracts are set to expire in 2010 

and 2011. It is my hope that these unions will continue to work 

constructively with the Postal Service through these negotiations to 

adjust pay, benefits, and work rules to reflect the reality that the 

Postal Service faces in the mailing and communications market 

today. 

And in conclusion, let me just say, there are many services that 

the Federal Government provides to the people of this country. Few 

of them are appreciated as much as the work of the Postal Service. 

4 

I have seen approval ratings of a lot of us who serve in the Senate. 

I have seen customer satisfaction ratings for the Postal Service 

that most of the American people hold. The Postal Service numbers 

are better than most of ours, and we applaud the efforts, the years 

of efforts, that have led to that achievement and we want to make 

sure that the level of service and level of satisfaction is continued 

to be held by the American people, the customers of the Postal 

Service, and the folks who work at the Postal Service will continue 

to be proud of the work that they are doing. 

With that, let me turn to my colleague, Senator McCain. Welcome. 

OPENING STATEMENT OF SENATOR MCCAIN 

Senator MCCAIN. Thank you, Mr. Chairman, and thank you for 

that very comprehensive statement. I want to thank you and Senator Collins for the very hard work that you and other Members 

of the full Committee have done on this issue over the years. 

I would point out, in 2006, I believe the legislation was passed 

overwhelmingly, if not by voice vote, and we had addressed the 

problem. Three years later, here we are with a bigger problem. So 

we didn’t address the problem in 2006. 

Obviously, as we all know, this morning, the Postal Service loses 

$2.4 billion in one quarter. I read your statement, Mr. Potter. I see 

no specific proposals you have except that perhaps maybe we 

should close some post offices. In other words, Mr. Potter would not 

commit to an exact number of post office closures, but said some 

urban facilities are likely to consolidate certain operations while 

others will vacate expensive locations. Mr. Potter, it is about time 

we got some absolutely specific proposals to get the post office back 

onto at least a zero-loss basis. 

Now, we have had lots of hearings. We passed legislation. So far 

this year, I guess the estimate is a $7 billion loss. We can’t do that 

to the taxpayers of America. We have every right to expect some 

specific recommendations both from Mr. Potter and the Administration, so that we can enact them into law, and obviously, a lot 

of this is due to the fact that America has changed. Just as we 

went from horses and buggies to automobiles, we have gone from 

hand-delivered mail to the Internet, text messaging, e-mails, Twitter, and all of the other new means of communications. The Postal 

Service has to adjust to it or they will go the way of the horse and 

buggy and bridles. And so far, we have not seen either from the 

Administration or from you, Mr. Potter, who I understand is well 

compensated for your work, a specific, concrete proposal to bring 

the situation under control. 

The 2006 bill was advertised as solving the Postal Service’s problems. It didn’t. And also, Mr. Chairman, I recommend in the future 

that we have some consumer advocates come and testify before this 

Subcommittee and full Committee as to their ideas as to how we 

can solve this problem, because clearly we are not getting them 

from the Administration. 

Senator CARPER. Thanks very much. 

Let me turn now to our Chairman, Senator Lieberman. I want 

to thank you for being an original cosponsor of our legislation. 

5 

OPENING STATEMENT OF CHAIRMAN LIEBERMAN 

Chairman LIEBERMAN. Thanks, Senator Carper. I want to thank 

you and Senator Collins for the extraordinary work you have done 

over the last several years at the request of the full Committee. 

Normally, I don’t come to the Subcommittee meetings, but I think 

we are at such a moment of crisis that I felt it was my responsibility to be here, first to thank you for what you have done. 

The Postal Reform Act of 2006 represented quite a remarkable 

accomplishment in terms of the variety of different stakeholders 

that were brought together on its behalf and I think it was a constructive and progressive piece of legislation. But as we know now, 

the problems confronting the Postal Service of the United States 

went beyond what the Postal Reform Act of 2006 could do, in one 

way that we were already well familiar with at that time, which 

was the extraordinary revolution that has occurred in communication in our time as a result of digital technology and electronic 

mail, e-mail. That is just a new reality of our life. The second painful reality that we didn’t foresee at that time, of course, was the 

great recession that we have gone through in the last couple of 

years. 

In my own view, the Postal Service, its workers, its employees 

have made some very great efforts to try to put the boat back on 

an even keel. I mean, I cite these numbers again. USPS has reduced costs by more than $6.1 billion this year by reducing 87 million work hours, realigning carrier routes, halting construction of 

new postal facilities, freezing postal officer and executive salaries 

at 2008 levels, reducing travel budgets, and the like. Also, trying 

to reduce the costs of more than 500 existing contracts that will result in short- and long-term savings. 

But the obvious reality is, notwithstanding all those efforts, as 

most graphically demonstrated by the quarterly report yesterday, 

loss of $2.4 billion, that the Postal Service is in a dizzying downward spiral, and unless we act forcefully, this great American institution created in our Constitution—that is how serious the Founders of our country believed the responsibility was to provide for, as 

they said, post offices and post roads—created in our Constitution—unless we apply some tough medicine here and we do it 

working together, this dizzying downward spiral for the U.S. Postal 

Service could become a death spiral and none of us obviously want 

that to happen. 

Last week, the full Committee voted to report out S. 1507, which 

I was proud to cosponsor with Senator Carper. It is the U.S. Postal 

Service Retiree Health Benefits Funding Reform Act. I think it is 

a good first response to the current crisis. I think without it, the 

Postal Service effectively doesn’t have enough money to pay its bills 

as of October 1 of this year. The Postal Service has made clear that 

they will continue to deliver the mail and pay salaries, but there 

is a lot else it is not going to be able to do. 

So to me, one might change what we propose this way or that 

way, but I think it is critically necessary to do this rescheduling 

of payments into the Retiree Health Benefits Fund, payments that 

are now being done at a level that is way above any other governmental program of its kind and any private sector program of its 

kind, as well. 

6 

The reality is, though, that is not going to be enough. That is a 

short-term step to enable the Postal Service essentially to keep 

going after October 1. We have got to agree on a broader strategy 

that will save the Postal Service, because it is not going to stay 

alive if we continue to do business as we have been doing business, 

notwithstanding what has been happening. 

And when I say that, I speak not just to the Postal Service, its 

workers, and management, I speak of us here in Congress, because 

none of the measures that we have talked about is going to be 

enough to make this work. All of us have to think about doing 

things that we never would have thought about for the Postal Service. 

I know in S. 1507, an amendment was introduced by one of our 

colleagues in the Committee that requires the binding arbitrator in 

a labor-management dispute to consider the financial condition of 

the Postal Service. I know that our friends in the unions who represent workers for the Postal Service are very upset about this. 

Frankly, I didn’t see how I could justify voting against that amendment. It is a statement of reality. 

That same reality has to now be adopted by those of us who are 

privileged to serve and have responsibility here in Congress. That 

is why I know that there are discussions of consolidating more 

branch offices of the Postal Service, of going to 5-day-a-week mail 

delivery. These are onerous responses. We would never have considered them at an earlier time, but I don’t see how we can keep 

this venerable American institution, which so much of America and 

American commerce still depend on, going without taking steps exactly like that. 

And our constituents are not going to be happy, but every time 

they express their unhappiness to us, I think we have got to say, 

if we don’t take some of these tough moves, what it means is that 

we are going to either have to raise your taxes to make payments, 

greater payments to the Postal Service from the U.S. Treasury or 

we are going to have to put it on the government credit card, which 

is an act of irresponsibility because we are turning the burden of 

repayment over to our children and grandchildren and those who 

follow. Those are the choices we are going to have to make. 

I remember some years ago, there was a little post office in Connecticut that the Postal Service wanted to stop. People were furious. They loved that little post office. It wasn’t very busy, but they 

loved it. All of our Congressional delegation went to bat. The post 

office was kept open. But those were different times and we simply 

cannot do that anymore. 

This great Postal Service of ours is an iconic American institution that has always delivered for the American people. Now it is 

time for the management, workers, and Congress to deliver for the 

Postal Service. If we don’t apply the kinds of tough measures—call 

it tough love if you want—this institution which we depend on is 

simply not going to be there. 

Thank you, Mr. Chairman. 

Senator CARPER. Thank you very much for that statement, and 

again for your strong support of this legislation. 

No one on this Committee has worked harder than Senator Collins to enact the postal reform legislation in 2006. I was proud to 

7 

be her partner in doing that and thank her for her work then and 

now on these issues. 

OPENING STATEMENT OF SENATOR COLLINS 

Senator COLLINS. Thank you, Mr. Chairman. First, let me commend the Chairman for holding this important hearing this morning. I appreciate the opportunity to join you. 

I must say, however, that it is most disappointing to once again 

be discussing the dire financial condition of the U.S. Postal Service. 

Just 21⁄2 years ago, Congress passed crucial reforms that Senator 

Carper and I authored that rescued the Postal Service from the 

GAO’s High-Risk List. Today, the Postal Service is once again in 

a financial crisis and once again it has landed on the High-Risk 

List. In 2008, the agency lost $2.8 billion, and this year, as my colleagues have indicated, it is projected to have a net loss of a staggering $7 billion. 

The Postal Service matters to our economy. It is the linchpin of 

a $900 billion mailing industry that employs nine million Americans. So what we are talking about affects far more than the employees who are working in the local post office or distribution centers. It affects nine million Americans working in fields as diverse 

as paper manufacturing, printing, publishing, direct mail, and financial services. 

Indicative of that is one of our witnesses today. It is the Chairman of NewPage, which is a paper company that has a large plant 

in Rumford, Maine. NewPage is representing many other businesses, nonprofits, and organizations whose operations are inextricably linked to the Postal Service. 

If the Postal Service, for example, were to resort to excessive rate 

hikes or decrease delivery service, it has ramifications for all of 

these companies. They may have to respond with layoffs, increased 

prices to consumers, or reduced services. Any of these adjustments 

would contribute to an even more perilous condition for the Postal 

Service. Why? Because when businesses cut their costs, they reduce 

mailing costs, and that leads to a further erosion of the Postal 

Service’s shrinking mail volume, which in turn will prompt more 

proposals for rate increases and renewed calls for truncated delivery services. 

As Senator Lieberman has indicated, this is a vicious cycle that 

has no good outcome. We must prevent this death spiral. We all 

must put our shoulders to the wheel and accomplish the difficult 

task of transforming the Postal Service. 

The postmaster general has offered three major proposals for 

Congress to consider. First, adjusting the payments to the Retiree 

Health Benefits Fund. Now, I would note that while I support an 

adjustment in this area, the bill approved by this Committee would 

result in an increase in the unfunded liability of $4 billion, and I 

think that is a problem. 

Second, the postmaster general has proposed to eliminate 6-daya-week mail delivery. Third, he has proposed closing or consolidating postal facilities. The Postal Service is reviewing 677 of its 

3,200 stations and branches nationwide for closure or consolidation. 

This proposal, like the Postal Service’s plan to reduce delivery from 

8 

6 to 5 days a week, would result in reduced service to its customers. Is that really the right response to this crisis? 

Will it make a real difference in the cost structure of the Postal 

Service? If it will, we obviously should consider those moves. But 

when you look at where the costs are in the Postal Service, it raises 

a lot of questions in my mind. The Postal Service also cannot expect to gain more business, which it desperately needs, if it is reducing service. 

Now, let us look at just the proposal for closing or consolidating 

the 677 branches and stations. The non-personnel costs of these facilities on the list account for about six-tenths of 1 percent of overall Postal Service operating costs. That is right. If the Postal Service were to close all of the branches and stations that are on the 

list—and that is not the plan, but let us say they closed every one 

of them—it would reduce the operating costs, when you exclude 

personnel, by less than 1 percent. So we need to look at whether 

that is worth it or whether there are better, more effective means 

of reducing costs. 

Last week, before this Committee approved the bill to provide 

some relief to the Postal Service from the required payments to the 

Retiree Health Benefits Fund—a bill that I voted to report from 

this Committee—our Committee adopted several amendments to 

address some of the cost drivers and to make the bill more fiscally 

responsible. I believe that additional changes need to be made on 

the Senate floor, but there is no question that we do have to act. 

We simply must rescue an institution dating to the earliest days 

of our Nation. We cannot allow the Postal Service to fail because 

it is too fundamental to our economy. 

But it is going to take an honest assessment of where the costs 

are, and it is going to take everyone working together—Postal 

Service management, employees, members of the mailing community, this Congress, and the Administration—to contribute to the 

solution. We must work together to find a real, lasting, and fiscally 

responsible solution. 

Thank you, Mr. Chairman. 

Senator CARPER. Senator Collins, thank you. Thanks for your 

statement. Again, thanks for your hard work on this, literally for 

years, and for your staff, as well. 

Senator Collins has said that our bill increases the Postal Service’s unfunded liability by $4 billion. It does. But any bill that reduces the Postal Service’s payments this year and for the next several years would do that. It would happen because the fund that 

we created in the Treasury to prefund Postal Service Retiree 

Health Benefits will have less money in it and thus earn less interest. It is a drawback of extending relief, really, at all, so I just want 

to note that for the record. 

Senator Burris from Illinois has joined us. We are delighted you 

are here and you are recognized for your statement. Thank you for 

coming. 

OPENING STATEMENT OF SENATOR BURRIS 

Senator BURRIS. Thank you, Mr. Chairman, Ranking Member 

McCain, Senator Lieberman, and Senator Collins. I am pleased to 

9 

1The prepared statement of Mr. Potter appears in the Appendix on page 61. 

be here today as we consider the challenges facing the U.S. Postal 

Service and its employees. 

I know that we have a large group of witnesses here today, so 

Mr. Chairman, I will withhold giving a major opening statement, 

but I certainly will have some questions during the question and 

answer session. 

Senator CARPER. We are delighted you are here. Thank you for 

your attendance and your faithful participation. 

Our first witness today will be John Potter, the 72nd Postmaster 

General of the United States. Mr Potter began his career in the 

Postal Service in 1978 and held a number of senior management 

positions there before being named postmaster general in 2001. 

Our next witness is Ruth Goldway. Ms. Goldway was reappointed Commissioner of the U.S. Postal Regulatory Commission 

by President Bush, I believe in 2008, and is scheduled to serve 

until at least 2014. She previously was appointed to this position 

by President Clinton to the Postal Rate Commission, which is the 

predecessor to the Postal Regulatory Commission. Welcome. 

Thanks for coming, and thank you for your service. 

Our third witness today is David Williams, Inspector General of 

the U.S. Postal Service. Mr. Williams has a breadth of experience 

in the Federal Government, serving as Inspector General for a total 

of five Federal agencies during his career. 

Our next witness is Nancy Kichak, Associate Director of the 

Human Resources Policy Division at the Office of Personnel Management. In her position, Ms. Kichak leads the design, development, and implementation of new merit-based human resources 

policies. Thank you for that work and for coming today. 

Our final witness is Phillip Herr. Mr. Herr is Director of Infrastructure Issues at the Government Accountability Office and no 

stranger to this Subcommittee. Mr. Herr has been with GAO since 

1989, managing reviews for a variety of domestic and international 

government programs since that time. 

Each of you will be recognized for roughly 5 minutes. I will ask 

you to try to stay as close to that as you can. Your entire statements will be made a part of the record. 

Mr. Potter, please proceed. Thank you for joining us. 

TESTIMONY OF HON. JOHN E. POTTER,1 POSTMASTER 

GENERAL, U.S. POSTAL SERVICE 

Mr. POTTER. Good morning, Mr. Chairman and Members of the 

Subcommittee. I appreciate the opportunity to speak to you today. 

First, I want to express my sincere thanks to you, Chairman Carper, to the Members of the Subcommittee and the Committee on 

Homeland Security and Governmental Affairs for your tremendous 

progress in moving S. 1507 forward for consideration by the full 

Senate. In making this legislation a priority, you have shown the 

American people that you support a strong and efficient national 

postal system. 

By providing immediate relief from a crushing prepayment 

schedule for retiree health benefits, enactment of this bill will enVerDate Nov 24 2008 14:33 May 12, 2010 Jkt 053836 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 P:\DOCS\53836.TXT SAFFAIRS PsN: PAT
10 

hance our liquidity at a time when it is urgently needed. It will reduce our projected losses by over one-third in 2009 and 2010. 

We support this bill’s amendments, in particular, one that improves our arbitration process by requiring an arbitrator to consider not just pay comparability, but the Postal Service’s financial 

health, as well, and another that accelerates the GAO’s report on 

our business model. This will initiate a necessary and broader debate about the manner in which the Postal Service can continue to 

serve the American public. On behalf of the Postal Board of Governors, management, and the entire Postal Service, I offer you my 

full support and cooperation as we work toward these goals. 

In the longer term, we believe that fundamental restructuring of 

the legislative and regulatory framework for the Postal Service is 

required. At stake is the future of what has been since this Nation’s founding the right of every American to send and receive 

mail. The Postal Service exists as a governmental entity whose 

mission is universal service to all. That mission is a direct reflection of the values on which this country was founded. It is those 

values of equality of opportunity that continue to drive the Postal 

Service today, as they have for more than 234 years. 

To address the challenges we face, we must push business effectiveness and operational efficiency to the limits permitted by current postal laws. We must foster growth by increasing the value of 

postal products and services to our entire spectrum of customers. 

These achievements are possible only by enhancing our performance-based culture. Our ultimate success will require an extraordinary level of commitment from postal stakeholders. There will be 

inevitable tradeoffs between financial self-sufficiency and affordability, and the costs of underwriting an ever-expanding universal 

service network and other governmental obligations. 

We believe that a modern, self-sufficient postal system can be 

structured to continue providing universal service to all at affordable prices. To do so, however, requires new flexibility to adjust 

networks and services to modern conditions and to minimize entrenched governmental and work rules and expectations that carry 

with them costs and inefficiencies. If the postal community is not 

able to achieve this break with the past, then it appears to us that 

the remaining options will be more unpalatable to most stakeholders. This would force the Postal Service to operate under its 

present, increasingly outmoded business model until enough customers abandon the system to make financial failure unavoidable. 

Mr. Chairman, the thoughts I have just expressed are not new. 

They are taken almost verbatim from the transformation plan that 

we developed and implemented in 2002 at the direction of Congress. We achieved and exceeded many of the goals of the plan. 

Service and customer satisfaction continue to set new records. We 

have removed more than $40 billion in cumulative costs, increasing 

efficiency as our delivery base and its costs have grown by the addition of 11 million new addresses. Innovative new pricing and 

product initiatives are producing results, and our employees are 

more engaged than ever. 

Yet even with the success of these efforts and new levels of flexibility provided by the Postal Accountability and Enhancement Act 

of 2006 (PAEA), our situation is more tenuous than ever. This does 

11 

1The prepared statement of Mr. Goldway appears in the Appendix on page 76. 

not reflect a change in will, a change in priorities, or a change in 

commitment. Rather, it reflects changes in the economy and 

changes in mail use patterns. It reflects an infrastructure that exceeds customer needs and costs that are beyond our authority to 

control. 

The issue is not the value of the mail. Despite the vast technological changes over the last decade, the mail still is a vital channel 

for financial, business, and personal communications. It is a conduit for trillions of dollars in transactions each year. It is one of 

the most trusted services in America and one of the most effective. 

It offers unsurpassed value, and we are working to increase that 

value each and every day. 

At the end of the day, though, through focused and complementary efforts, we can protect a vital and vibrant national postal system. The Postal Service must and will continue to bring efficiency 

and service to even higher levels. Together, we must identify a new 

business model, one that supports success in a new business environment, and we must close the huge gap between our revenues 

and our costs. 

S. 1507 will offset part of that gap. Increased efficiency will narrow the gap even further. And with the ability to change from 6- 

day to 5-day mail delivery, we can not only eliminate that gap, but 

return to profitability without placing any financial burdens on the 

American taxpayer. 

It will take hard work. It will take creativity. It will take cooperation and good faith on the part of everyone with a stake in 

the mail. Individual interests can be served only by advancing the 

common interest because the Nation’s mail system was created to 

serve everyone equally. This must be our only goal as we work to 

preserve and strengthen the U.S. Postal Service, the finest in the 

world. 

Mr. Chairman and Members of the Subcommittee, that concludes 

my statement. Again, I want to thank you for your support of legislation that will reduce our costs, and I would be pleased to answer 

any questions you may have. Thank you very much. 

Senator CARPER. Thank you, Mr. Potter. Ms. Goldway, you are 

recognized. Please proceed. 

TESTIMONY OF RUTH Y. GOLDWAY,1 CHAIRMAN, POSTAL 

REGULATORY COMMISSION 

Ms. GOLDWAY. Thank you. Chairman Carper, Ranking Member 

McCain, Ranking Member Collins, Chairman Lieberman, and other 

Members of the Subcommittee, thank you for the opportunity to 

testify on the financial crisis facing the U.S. Postal Service today. 

I am honored to be participating at this hearing. As many of you 

know, I have served on the Commission for 11 years with many opportunities to support and second-guess chairmans. This is my first 

opportunity to speak in front of you myself. The testimony we have 

submitted has been prepared in consultation with Chairman Blair. 

All of the Commissioners are in general agreement with these matters. However, there are somewhat different emphases that each 

one of us bring to these matters. 

12 

I think your comments and those of Postmaster General Potter 

have fully described the financial situation in which the Postal 

Service finds itself. Suffice it to say that their revenues are down 

at least $6 billion so far this year, and at the end of the year, they 

may well need additional Congressional action in order to meet all 

of their payments. 

To put it in perspective, however, UPS and FedEx have had revenue declines of 11 percent and 21 percent, respectively. This is a 

difficult time for the industry as a whole. 

The Postal Service has responded to the revenue loss with the 

most aggressive cost cutting in its history. In fact, under the postmaster general, the Postal Service has cut costs for several years. 

From 1999, over 160,000 career workforce positions have been 

taken out and they are expecting another 100 million work hours 

this year. 

Whatever the concerns of those of us who have evaluated the 

Postal Service and its financial activities in the 1990s or in the 

early part of this century, management and labor have worked remarkably cooperatively and effectively to streamline the system. I 

think we can be confident that they are going to be responsible 

about cost control in the future. 

At the request of the House Subcommittee on the Federal Workforce and Postal Service and District of Columbia, the Commission 

recently examined the underlying assumptions and methodologies 

used by the Office of Personnel Management and the Postal Inspector General to determine the Postal Service’s unfunded liabilities 

for its retiree health care benefits. You received full copies of those 

reports, I believe, and they are also available online. Hopefully, our 

analysis will prove helpful to you in informing the debate should 

this Committee consider long-term measures to address funding for 

the Retiree Health Care Benefit Fund. 

The Commission developed an alternative calculation to those 

provided by the other two agencies utilizing current industry and 

government best practices, and this produced a long-term liability 

that could result in over $2 billion in lower payments per year than 

current law requires, and the chart on page 4 that we submitted 

in my testimony describes that in greater detail. 

The Postal Regulatory Commission is also in the process of reviewing the Postal Service’s request for reduction in post offices, 

postal branches and stations. We have initiated a docket to review 

that matter. Since some media reports have been inaccurate about 

the process, let me be very clear. The law gives the Postal Regulatory Commission the authority to review the process the Postal 

Service proposes, not to decide on the merits of closing individual 

facilities. 

The review does require us to look at the potential impact that 

such closings would have on the communities, the adequacy of financial analysis that the Postal Service has developed in planning 

for these closures, and the adequacy of public notice and participation in the process. 

The law requires the Postal Service to seek an advisory opinion 

from the Commission when it proposes operational changes that 

could substantially affect service nationwide. Therefore, the Postal 

Service would also have to submit to the Commission any proposal 

13 

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

to reduce days of delivery. We recognize, of course, that Congress 

must act to allow such a change. 

Whether it is 5-day delivery, collection box removal, which has 

been substantial, or closure of facilities, as the Postal Service proposes, the Postal Service seems intent on reducing its physical 

presence. No proposals have been put forward to find new sources 

of revenues at post offices, such as partnering with other public 

agencies or reinvigorating its brand. These plans bring into question long-held concepts of how the Postal Service fits into the 

framework of American society. 

The Commission is well aware from its proceedings of the impact 

the Postal Service has on our Nation’s charities, educational institutions, political processes, and the overall flow of information. Voting by mail is increasing exponentially in the country, and it was 

not long ago that the Postal Service demonstrated its ability to 

bind the Nation together when it allowed residents of New Orleans 

to elect a mayor even though they themselves had been dislocated 

from the city by Hurricane Katrina. 

In a recent Gallup Poll, 95 percent of those indicated supported 

the Postal Service and felt that post offices were personally important to them. 

While cost savings are important, I believe that the Postal Regulatory Commission has a role in determining whether those cost 

savings are beneficial in the long term or whether they may, in 

fact, be counterproductive in terms of providing ongoing support for 

and interest in the Postal Service from the community and the Nation as a whole. 

The Postal Accountability and Efficiency Act have provided considerable room for innovation. Postal products continue to be 

shaped by historic class differences, largely in place by the 1920s, 

but potential new markets could be developed around hybrid products that combine characteristics between classes, for example, a 

standard mail product with a guaranteed date of delivery. Opportunities to better use its existing facilities have yet to be explored. 

The American public continues to demand effective, reliable, and 

affordable nationwide Postal Service—— 

Senator CARPER. I am just going to ask you to wrap it up in just 

a moment, if you would. 

Ms. GOLDWAY. OK. The Postal Regulatory Commission stands 

with the rest of the postal industry, with the Committee and Congress to work towards any changes that will be required of us in 

the future. 

Senator CARPER. All right. Thanks so much. Mr. Williams, welcome. 

TESTIMONY OF DAVID WILLIAMS,1 INSPECTOR GENERAL, U.S. 

POSTAL SERVICE 

Mr. WILLIAMS. Thank you, Mr. Chairman and Senator McCain, 

Members of the Committee and the Subcommittee. I appreciate the 

opportunity to discuss the Postal Service’s retiree health care liabilities. 

14 

The Postal Service’s financial stability is currently threatened by 

disruptive effects of new communications technologies and the massive and sudden economic downturn. This situation has turned into 

an immediate crisis because of the significant diversion of cash to 

pay for future retiree health care benefits. For example, the first 

6 months of this year’s payment to the benefit funds was $2.7 billion. If not for this payment, the Postal Service would have made 

$400 million instead of losing $2.3 billion in the first half of 2009. 

The Postal Accountability and Enhancement Act of 2006 requires the Postal Service to make 10 annual payments of $5 billion each 

in addition to the $20 billion already set aside for prefunding its 

retiree health benefits. The size of the $5 billion payments has little foundation, and the current payment method is damaging to the 

financial viability of the Postal Service, even in profitable times. 

The payment amounts were not actuarially based. Instead, the 

required payments were built to ensure that the Postal Act did not 

affect the Federal budget deficit. This seems inexplicable, since the 

Postal Service is not part of the Federal budget, does not receive 

an appropriation for operations, and makes its money from the sale 

of postal services. 

The payment amounts are fixed through 2016 and do not reflect 

the fund’s earnings, estimates of the Postal Service liability as a result of changing economic circumstances, declining staff size, or developments in the health care and pharmaceutical industries. The 

payments do not take into account the Postal Service’s ability to 

pay and are too challenging even in normal times. 

In the current economic climate, the Postal Service is forced to 

borrow and place its solvency at risk. Borrowing to pay a debt that 

will be incurred in the future is a controversial practice not seen 

in business or government. 

Beyond the problems with the payments, we believe it is important to know if the Postal Service’s obligation is reasonably estimated. My office asked an actuarial consulting firm, the Hay 

Group, to benchmark OPM’s assumptions against those commonly 

used in the public and private sector, review OPM’s estimates of 

the Postal Service’s liabilities, estimate how well the Postal Service 

will have funded its retiree health obligations when the mandated 

payments end, and estimate the proper funding levels, given adjustments to the assumptions. 

In brief, the actuaries found OPM’s assumption of health care inflation will average 7 percent indefinitely, is unreasonably high 

when compared to the 5 percent inflation rate commonly used by 

Fortune 100 companies, State and local governments, and public 

utilities. The payments are aggressive, reducing the Postal Service’s unfunded liabilities more quickly than typical prefunding 

plans. 

When the broadly-applied 5 percent for growth in health care 

costs is used, the estimates show that the Postal Service will have 

overfunded its obligations by $13 billion by the end of 2016. By the 

end of 2016, the current payments will have essentially created an 

accidental annuity. At 5 percent interest, the $104 billion fund will 

earn more than $5 billion a year. This is a significant amount of 

money to cover retiree premiums, which are predicted to be $2 billion this year. 

15 

1The prepared statement of Ms. Kichak appears in the Appendix on page 88. 

The punishing payments threaten the Postal Service’s solvency 

and the current crisis. Because the Postal Service has been forced 

to borrow during profitable years, borrowing levels are now 

stressed during times of need. Resetting the annual payments from $5 billion to $1.57 billion will leave only $26 billion unfunded by the end of 2016. Resetting 

payment levels will provide a more achievable financial goal. New 

payments will take into account the substantial annual earnings of 

the fund. Last year, the fund earned $1.3 billion. Payments should 

be reset periodically to recognize factors such as medical and technological innovations and breakthroughs, current efforts to reduce 

inflation within the medical sector, and changing interest rates for 

the fund. 

The Postal Service must meet its retiree benefit obligations while 

acting like a business and paying its expenses from the sale of 

postal services. As a result, the retiree health benefit obligations 

and all other postal liabilities should be derived mathematically 

and not politically. 

I am aware that there were voices on your Committee and in the 

House that called for the proper payment level to be set at the time 

that the payments were distorted. I am hopeful that these voices 

will now be heard to correct this debilitating problem. If the distortion is corrected, the Postal Service can more realistically address 

the remaining serious challenges and opportunities before it. 

Thank you. 

Senator CARPER. Mr. Williams, thank you for that illuminating 

testimony. Thank you. 

Ms. Kichak, you are recognized. Please proceed. 

TESTIMONY OF NANCY KICHAK,1 ASSOCIATE DIRECTOR, STRATEGIC HUMAN RESOURCES POLICY, U.S. OFFICE OF PERSONNEL MANAGEMENT 

Ms. KICHAK. Chairman Carper, Senator McCain, and Members of 

the Subcommittee, I appreciate the invitation to provide the Office 

of Personnel Management’s views regarding the funding of the Federal employees health benefits for retired employees of the Postal 

Service. We welcomed the introduction of S. 1507, which is intended to provide short-term relief to the Postal Service in meeting 

its obligations to fund its share of retiree health benefits costs. 

In 2006, Congress enacted the Postal Accountability and Enhancement Act, which requires the Postal Service to pay the employer’s share of post-retirement FEHBP premiums for its employees in a similar manner to how Federal agencies fund employee retirement costs under the Federal Employees Retirement System. 

Under FERS, employing agencies pay the cost of future retirement 

benefits while individuals are employed. Prefunding retirement 

benefits assures there is sufficient money set aside to pay benefits 

without further agency contributions. 

In the same way, the purpose of prefunding post-retirement 

FEHBP premiums by the Postal Service is to ensure postal employees will have employer funding available for their health insurance 

after retirement. The law created a new fund and provided for iniVerDate Nov 24 2008 14:33 May 12, 2010 Jkt 053836 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 P:\DOCS\53836.TXT SAFFAIRS PsN: PAT
16 

tial deposits of certain surpluses related to the Civil Service Retirement System, plus an amount held in escrow as a result of prior 

legislation. 

P.L. 109–435 also provided that through 2016, the Postal Service 

will make the annual pay-as-you-go costs for current postal retirees 

plus annual payments in specified amounts that range from $5.4 

to $5.8 billion per year. Prior to this 2006 change in the postal law, 

the Postal Service obligations to CSRS, the retirement fund, which 

they no longer pay, totaled about $5 billion a year. 

Beginning with 2017, the pay-as-you-go costs will be paid from 

the fund and the Postal Service’s annual payments will equal accruing costs for active employees plus amortization of the unfunded 

liability actuarially determined by OPM. 

As requested, we have reviewed the Postal Service’s OIG report 

and disagree with its conclusions. The Postal OIG position is based 

upon a study by the Hay Group which used different assumptions 

from those used by OPM. Although the private sector plans reviewed in the Hay study used trends starting at a higher rate and 

decreasing to an ultimate average rate of 5 percent, the Hay report 

applied the 5 percent throughout the projection. Hay also did not 

study FEHB experience that covers the Postal Service. 

We believe OPM’s 7 percent trend assumption is appropriate. 

The assumption is based on careful consideration of historical 

trends of the FEHB program. The program differs from other retiree medical programs in several respects. Retirees and employees 

are covered under a single program and participation in Medicare 

is not required. Both of these program features drive premiums upward. 

Last week, the Postal Regulatory Commission released a report 

which included a Mercer review of the OPM assumptions. Mercer 

applied a variable select and ultimate trend rate with increases 

higher than 7 percent until 2016 and lower thereafter. Use of the 

Mercer select and ultimate trend assumptions produces results 

that are similar to the level 7 percent trend used by OPM. The 

Mercer report states that a 7 percent trend rate or higher would 

be a reasonable trend assumption and is indeed consistent with the 

historical results achieved. 

Both OPM and Hay employ an assumed discount of 6.25 percent. 

However, had Hay applied the same methodology in selecting a discount rate for their analysis as they did for their trend assumption, 

they should have used something substantially less than 6.25 percent. A lower discount rate would have resulted in a larger liability. We believe it is extremely important to make and apply assumptions consistently. 

OPM has no objections to legislative changes that do not jeopardize the funding for employee and retiree benefits. S. 1507 meets 

that requirement. We believe the bill would provide temporary relief to the Postal Service in a financially responsible manner. It 

provides that the Postal Service would begin paying the normal 

cost for its employees today along with a stream of payments that 

represents the amortization of existing unfunded liability. 

Thank you for the opportunity to discuss this issue. I would be 

happy to answer any questions. 

17 

1The prepared statement of Mr. Herr appears in the Appendix on page 92. 

Senator CARPER. Ms. Kichak, thank you very much for that testimony, too. Mr. Herr. 

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

Mr. HERR. Thank you. Chairman Carper, Ranking Member 

McCain, Members of the Subcommittee and full Committee, I am 

pleased to appear again before this Subcommittee to discuss issues 

facing the U.S. Postal Service. Today, I will first provide updated 

information on the Postal Service’s financial condition and outlook; 

second, explain GAO’s recent decision to place the Postal Service’s 

financial condition on our High-Risk List; and third, discuss options and actions to address its current and long-term challenges. 

It is widely recognized that the Postal Service’s financial condition has deteriorated sharply over the past year. Mail volume is 

projected to decline 28 billion pieces this fiscal year, leading to 

some sobering statistics. A net loss of $7 billion, which has been 

mentioned previously, an increase in outstanding debt by the annual statutory limit of $3 billion to a total of $10.2 billion, and an 

unprecedented $1 billion cash shortfall that will threaten the Postal Service’s ability to make its mandated annual payment of $5.4 

billion for future retiree health benefits. 

The outlook for fiscal year 2010 is even more challenging, as the 

Postal Service is projecting its outstanding debt to increase to $13.2 

billion, just under its $15 billion statutory limit. These figures reflect the impact of the current economic recession as well as how 

mail use has changed as businesses and consumers have moved to 

electronic communication and payments. 

Further, the Postal Service does not expect mail volume to return 

to its former levels. In fact, the postmaster general’s statement 

today projects volume declines of another 8 to 15 billion pieces next 

year. 

Last week, GAO added the Postal Service’s financial condition to 

our list of high-risk areas because we believe that restructuring is 

urgently needed. Simply put, no single change will be sufficient to 

address the Postal Service’s challenges. 

The short-term challenge is cutting costs quickly enough to offset 

the unprecedented volume and revenue declines. The long-term 

challenge is to restructure its operations, networks, and workforce 

to reflect changes in mail volume and use. 

We have called for the Postal Service to develop and implement 

a broad restructuring plan, with input from key stakeholders and 

approval by Congress and the Administration that includes time 

frames for actions. The plan should address: Realigning the Postal 

Service to reflect changes in the use of the mail; better aligning 

costs with revenues; optimizing its operations, network, and workforce; increasing mail volumes and revenues where possible; and 

retaining earnings to finance needed investments and repay debt. 

Turning to restructuring options in three key areas, compensation and benefits, postal operational networks and revenue enhancement. Compensation and benefits, as most here know, repVerDate Nov 24 2008 14:33 May 12, 2010 Jkt 053836 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 P:\DOCS\53836.TXT SAFFAIRS PsN: PAT
18 

resent about 80 percent of the Postal Service’s costs. Reducing 

these costs by taking advantage of looming retirements is crucial. 

About 162,000 employees are eligible to retire this year, and this 

number will increase to almost 300,000 within the next 4 years. In 

addition, benefit costs could be contained by paying a lower percentage of health and life insurance premiums, in line with those 

of other Federal employees. 

There are also savings opportunities in postal operational networks and facilities. There is excess capacity in the 400 mail processing facilities nationwide. For example, processing capacity for 

First-Class Mail exceeds needs by 50 percent. 

About 30 percent of the Postal Service’s retail revenue comes 

from stamps sold by mail, on the Internet, and at grocery stores. 

Accordingly, the network of 37,000 retail facilities, where maintenance has been underfunded, also offer consolidation opportunities, 

we believe. 

And because cutting costs cannot be the only solution, it is important to look for ways to generate revenue through new or enhanced postal products. 

In closing, GAO has begun work on the PAEA-mandated study 

of the Postal Service’s business model that will examine these and 

other options that lead to structural and operational reforms at the 

Postal Service. We look forward to working with your offices and 

other stakeholders here today on this effort. 

Mr. Chairman, this concludes my statement and I would be 

happy to answer any questions. Thank you. 

Senator CARPER. Thank you, Mr. Herr, and we are very grateful 

to the GAO for the good partnership and the input you have provided for us over the years as we have wrestled with these issues. 

Thank you, and thank you for your testimony today. 

We will have 7 minutes for questions. I will ask our colleagues 

to try to remain within that time frame and I will, too. We will 

have time for a second round if that is necessary. I am told we are 

not going to have any votes scheduled on the floor until maybe 3 

o’clock, so hopefully we will conclude here well before that. That is 

not going to be a problem. 

I would like to start by asking the panel, if you will, to weigh 

in on—first of all, I thought that was very good testimony. It was 

very helpful testimony for me. I learned some things, and I suspect 

my colleagues did, as well. I thought it was, as they say at Fox, 

fair and balanced. It was interesting to hear a little bit of disagreement here between Mr. Williams and Ms. Kichak and we will have 

an opportunity to explore that and some of the assumptions. 

I would just note that if we are successful at passing health care 

reform, almost everybody, whether you are a Democrat or a Republican or the Administration or not, one of the things everybody 

agrees on is we have got to bend the cost curve. We have got to 

bend it down, find ways to rein in the growth of health care costs, 

so we may provide some additional business for Hay or Mercer or 

these other consultants after we pass legislation, I hope this year, 

on reining in the growth of health care costs and improving its 

quality and extending coverage to those who don’t have it. 

But let me start the questioning of our panel today by asking you 

to weigh in on a debate that we had in the Committee last week, 

19 

about the best way to restructure the Postal Service’s retiree 

health prefunding payments. A bill that Senator Lieberman and I 

introduced reduced the Postal Service’s payments this year and for 

the next several years in an effort to give the postmaster general 

and his team the breathing room that we think they need to get 

through this tough time they have ahead of them, and we think 

this legislation should buy them the time that they need to find additional savings and hopefully attract more business. 

An alternative approach put forward by our colleague, Senator 

Collins, would have provided some relief this year and next, but 

would have reduced the amount of that relief in order to reduce the 

Postal Service’s payments later in this decade. 

I would just like to get the panel’s thoughts on these two approaches. Mr. Potter, if we could just start with you, please. 

Mr. POTTER. Mr. Chairman, in terms of the two approaches, obviously, I support what came out of Committee because it provides 

short-term relief. I understand the point that was made by Senator 

Collins earlier about the fact that, at the end, there would be some 

underfunding by about $4 billion, and her proposal sought to address that. I believe that the needs of the Postal Service in the immediate couple of years are very urgent and therefore I would support the proposal as it came out of Committee because it provides 

more short-term relief. It gives us an opportunity for further discussion about the public policy issues around the Postal Service, 6- 

day to 5-day delivery and other things that need to be done to address our situation. 

Senator CARPER. All right, thank you. 

Ms. Goldway, I would ask you to keep your responses fairly brief, 

if you would. 

Ms. GOLDWAY. The Commission recognizes that the Postal Service needs some immediate assistance. Your bill S. 1507 does provide relief that is, I think, financially responsible. I would say that 

the Commission’s review of the issue of long-term health care retiree benefit liability differs from the OPM in the number of employees that we forecast in the future and that forecast underlies 

my earlier comment in my confidence that the Postal Service is 

going to continue to cut. And therefore, in any future review of the 

postal liability issues, the understanding of the lower number of 

employees may help to resolve the long-term liability issues. 

Senator CARPER. Before I turn to Mr. Williams, Mr. Potter, recall 

for us, if you will, the level of postal employees, say, 6 years ago 

compared with what we have today. 

Mr. POTTER. We hit our maximum number of career employees 

in late 1999. We had 803,000 career employees. We have been addressing the diversion of mail to electronics and have been managing our workforce very aggressively. Today, we have 630,000 career employees, so we have managed to reduce that, working with 

the unions and within the contracts, by over 170,000 people, the 

number of current employees we have. If you look at where we are 

today versus where we are the same day last year, we are down 

37,000 career employees. We are down over 40,000 if you included 

non-career. 

Senator CARPER. Thank you. Mr. Williams. 

20 

Mr. WILLIAMS. We are very supportive of S. 1507. We like a lot 

of things about it. It pays the current retirees out of the fund. That 

was the purpose for the fund’s construction. It is actuarially based, 

which is very powerful and useful. It addresses the period of time 

from the date of employment all the way through the projected retirement and that is a very good feature, too. 

As we look, we do not believe 7 percent is a sustainable inflation 

rate and we think—and apparently we will get into that later, but 

we think 5 percent is much better. There isn’t anybody paying 7 

percent. There are a lot of people prefunding and they are all paying 5 percent. 

The last thing is, we think it would be useful in the future if we 

revisited this occasionally and if we used Postal Service’s specific 

employee data instead of large data, and we would want to focus 

on a more recent period. OPM went back to 1983 and the medical 

industry is almost unrecognizable from that period of time. 

Senator CARPER. All right. Thank you, Mr. Williams. Ms. Kichak. 

Ms. KICHAK. Well, he said a lot of things I would like to address—— 

Senator CARPER. Don’t address all of them, just one or two. 

Ms. KICHAK. OK. Let me just say that with S. 1507, one of the 

things that is very powerful in that legislation the way it is addressed is that the Postal Service is going to pay the accruing costs 

every year for its employees. So if it is able to bring down its employment numbers of active employees, it can control that part of 

its costing, which makes projecting what the loss is immaterial. 

Those payments will be based on the actual number of employees. 

Senator CARPER. Thank you, ma’am. Mr. Herr. 

Mr. HERR. Yes. As I testified in January at the hearing you held 

earlier this year, we support short-term relief from these payments. 

We understand the Postal Service is in a very difficult financial situation. We believe that this is one way to help give them some 

breathing room so that they can come out from underneath this. 

We also believe, though, that it should be tied to a broader restructuring so that there is a quid pro quo, if you will, so that there is 

something that is given in return. 

Senator CARPER. All right. Thank you. 

This question is probably to you, at least initially, Mr. Potter, 

and I will ask you to be very brief in responding to it. But the options that face the Postal Service, one, rein in your costs, and you 

have endeavored to do that by trying to right-size your payroll, 

your number of employees with the amount of mail that you are 

delivering. You can try to close some facilities, post offices, some of 

the stations, satellite stations. You can try to close processing centers, there are over 400 of those. 

You can try to find new business, create new business opportunities, and what I want to do is to go there. Just talk to us very briefly about some of the things that you are doing now to be more entrepreneurial under the language in the bill that we passed 3 years 

ago. What are you doing to be more entrepreneurial? What can you 

do to be more entrepreneurial going forward? 

Mr. POTTER. Thank you for that question, Mr. Chairman. What 

are we doing? We are taking advantage of pricing opportunities 

and flexibility that is in the PAEA. We now have, for example, our 

21 

package services. We are out contracting with different companies 

to get their business. We didn’t have that ability in the past. We 

now have different pricing based on how you access postal products. We have pricing if you go online, pricing if you have some volume. So we are offering some volume discounts. A different price 

is offered if you come in and use our lobby services. We have a 

summer sale for the first time ever in the Postal Service to encourage people to advertise with us. Our intent is to keep going with 

this type of flexibility. We have increased the number of different 

sizes and shapes for our Flat-Rate Priority Box that have really 

been doing very well in the marketplace. 

I think longer term, though, Senator, we have to think about the 

fact that we have a network of 37,000 retail outlets. America loves 

them and we want to keep as many of those open as we possibly 

can, but we cannot just sell stamps in those outlets because of the 

substitution factor going on with stamps and mail. And when I look 

around the world, I see lots of examples of what other posts are 

doing. If you are in Australia and you want to update your driver’s 

license, renew it, you go to the post office. If you are in Italy and 

you go into a bank, more than likely, you are going to the post office. If you are in Japan and you want to buy insurance, more than 

likely, you are going to the post office. If you are in France and you 

have a cell phone issue, more than likely, you are going to the post 

office. 

I think we have done a good job of trying to sell mail and do 

what can be done there. I think we have just begun to scratch the 

surface with the PAEA and we are aggressively pursuing that. 

Senator CARPER. Thank you. Thank you for that response. Senator McCain. 

Senator MCCAIN. Mr. Potter, do you believe that we should implement many of the recommendations of the GAO, in their report 

that Mr. Herr just mentioned? 

Mr. POTTER. Yes, I do, Senator. And if I could, we have been 

working very diligently to implement much of what he talked 

about. If you look back at the year 2000, we had 446 mail processing plants. Today, we have 355. So we have taken out over 20 

percent of our mail processing plants. 

Senator MCCAIN. You have taken out over 20 percent, and how 

much has your volume dropped in that period of time? 

Mr. POTTER. Our volume has dropped a similar amount. What 

we have here, and the reason I asked for 6-day to 5-day delivery, 

if you look at where we were—if you look at where we are this year 

versus last year, our volume is down 12.6 percent. Eighty percent 

of our cost is labor. Our cost in post office operations and in mail 

processing operations is down over 13 percent. The one area that 

we cannot control our costs and match our costs to the workload 

is delivery, because moving from door to door 6 days a week is a 

fixed cost. And if the volume declines, that portion of a letter carrier’s day that is fixed cannot be adjusted by the fact that mail volume has declined. 

We have gone from 5.9 pieces of mail, on average, for every door, 

since 2000, down to 4.1 pieces. We have managed very aggressively 

to take costs out to offset that loss. But the fact of the matter is, 

22 

I think we have reached a breaking point with the recession and 

that is why we are seeking to go from 6-day to 5-day delivery. 

Senator MCCAIN. So we are now presented with a situation 

where in October, you would not be able to make payroll or not 

make the $5.4 billion payment, is that correct? 

Mr. POTTER. Yes, sir. We will experience a shortfall of approxi- mately $700 million. 

Senator MCCAIN. Short. 

Mr. POTTER. Yes. 

Senator MCCAIN. So obviously, we are going to make payroll. 

Mr. POTTER. Yes, sir. 

Senator MCCAIN. So what adjustments need to be made? 

Mr. POTTER. Well, Senator, in January, we recognized that this 

was an upcoming issue. 

Senator MCCAIN. Although you certainly didn’t predict the size 

of the losses. I think we can go back—— 

Mr. POTTER. That is true. 

Senator MCCAIN [continuing]. Through the Congressional Record 

to clearly indicate that. 

Mr. POTTER. They have been accelerating. 

Senator MCCAIN. Dramatically. 

Mr. POTTER. And if I could just clarify, the $2.4 billion loss in 

this quarter, there is some bright news in the sense that if you look 

at quarter three versus quarter two, although we are reporting a 

$2.4 billion loss, $800 million of that loss is a workers’ compensation adjustment, a non-cash adjustment, because interest rates are 

projected to be low, and because of that, we have had to make a 

non-cash adjustment because the net present value of what we had 

there obviously has declined because it will not earn as much because of lower interest rates. 

Senator MCCAIN. I have only 7 minutes—— 

Mr. POTTER. I am sorry. So our net loss actually went down without that one-time adjustment from quarter two to quarter three. 

Senator MCCAIN. So clearly, your temporary short-term fix is not 

to make the full $5.4 billion payment. 

Mr. POTTER. My preference would be that we get legislation 

passed that would address the retiree health benefit issue and then 

we would be able to meet all of our obligations. 

Senator MCCAIN. But if that legislation is not passed—— 

Mr. POTTER. Yes, sir. Then we will not pay the full $5.4 billion 

payment. 

Senator MCCAIN. Mr. Herr, what is your assessment of the measures that the Postal Service has taken so far in keeping with your 

previous reports and your previous recommendations as to what actions need to be taken in previous GAO reports to Congress? 

Mr. HERR. Senator McCain, as we looked at the Postal Service’s 

situation this year and we considered the step to go to the HighRisk List, we felt that given the importance of the service provided 

to the American people, the challenging condition in terms of the 

financial situation the Postal Service faces, coupled with the real 

paradigm change in how people communicate, using the Internet, 

making electronic payments, we felt that we needed to put them 

on the High-Risk List to help bring a sense of urgency to this matter. 

23 

Senator MCCAIN. I understand. How have the actions of the Postal Service been in sync or complying with or agreeing to the proposals you have made, the GAO has made, to improve the situation, which is obviously very serious? 

Mr. HERR. Well, we have seen some steps. For example, on the 

delivery side, there was a very big agreement between the Postal 

Service and one of its union to do readjustments of routes, and that 

has resulted in some savings this year. 

Senator MCCAIN. What haven’t they done? 

Mr. HERR. Processing is one area, although there is reference to 

some changes there. There are some studies underway. The other 

area—— 

Senator MCCAIN. Processing, meaning what? 

Mr. HERR. Having the opportunity to do some more consolidations there. I mentioned, for example, in my oral statement that 

the First-Class Mail processing capacity exceeds the need. 

Senator MCCAIN. But, Mr. Herr, isn’t the fundamental problem 

the benefits? 

Mr. HERR. Well, 80 percent of their costs are salary and benefits. 

I mentioned also the need to take advantage of the looming retirements, so through attrition, you would be able to cut those costs, 

as well. 

Senator MCCAIN. It is my understanding that USPS pays a higher percentage of employee health benefits premiums than other 

Federal agencies, 80 percent versus 72 percent, and USPS pays 100 

percent of employee life insurance premiums while other Federal 

agencies pay about 33 percent. And I am cognizant that the Postal 

Service is not a Federal agency, but there is certainly a significant 

difference there. 

Mr. HERR. Yes. That is a point that we have been making both 

in our High-Risk designation and also in prior reports and testimonies. And the differential there, my understanding is that if you 

costed that out, would be in the $600 to $700 million range. 

Senator MCCAIN. Six to seven-hundred million dollars? 

Mr. HERR. Correct. 

Senator MCCAIN. Per annum? 

Mr. HERR. That is my understanding, yes, sir. 

Senator MCCAIN. That still doesn’t get—— 

Mr. HERR. No, it doesn’t. 

Senator MCCAIN. What does? 

Mr. HERR. I think you are going to have to look more broadly at 

the infrastructure, but then at the other piece being the salary and 

benefits, I think you are going to have to look at ways to streamline the workforce. 

Senator MCCAIN. Thank you, Mr. Chairman, and I thank the 

witnesses. Could I just ask one more question of Mr. Herr? 

Senator CARPER. Sure. 

Senator MCCAIN. Are you aware of the pending legislation before 

Congress that was passed through the Committee? 

Mr. HERR. Yes, sir. 

Senator MCCAIN. How do you view it? Short-term fix? Long-term 

fix? No fix at all? 

Mr. HERR. It is a short-term fix. As I mentioned earlier, I would 

think it should be coupled with a restructuring effort so that there 

24 

is a sense of urgency to start this moving forward, getting them 

through this short-term difficulty, but then laying groundwork to 

help the institution get out ahead of what is a real looming financial problem. 

Senator MCCAIN. Thank you, Mr. Chairman. I thank the witnesses. 

Senator CARPER. Thank you, Senator McCain. Senator Lieberman. 

Chairman LIEBERMAN. Thanks, Mr. Chairman. 

Thanks to all of you. I think your testimony highlights what we 

all are coming to understand, which is that we don’t have any easy 

choices here. None of us—and I am speaking from the point of view 

of Congress—none of us want to close any postal facilities. None of 

us want to go to 5-day-a-week delivery as opposed to 6 days. The 

only reason we are thinking about those, and I fear we will probably have to do both of those, is that the alternative is increasing 

fiscal desperation for the U.S. Postal Service, and the alternative 

to that—because it all comes back to us. 

You can’t just keep doing what you are doing. The money doesn’t 

come out of the air. Either we are going to have to raise taxes, 

which none of us want to do, to pay the growing, surging deficits 

of the Postal Service, or we are going to end up doing what is easy 

but very wrong, which is to put it on the government credit card 

and delaying payment for coming generations, and that is going to 

have terrible consequences on our children, grandchildren, and on 

our country’s long-term fiscal viability. I just can’t say that enough, 

which is why we are talking about what we are talking about. 

In that regard, I think all of us, Mr. Potter, the Postal Service, 

we in Congress, really have an obligation to bring the public up to 

where we are about this crisis. They don’t want the 5-day-a-week 

delivery. They don’t want any postal facility to close. But if the alternative is higher taxes or putting it off so their kids have to pay, 

I think it is going to make it easier for them. 

Some of this goes to definition, Mr. Potter. I want you to take 

just a moment to explain what the difference is between a post office and a branch or station, because as I understand it—correct 

me if I am wrong—you are not talking about closing post offices, 

is that right? 

Mr. POTTER. That is correct. The difference between the two is 

that a post office is generally a zip code that has one postal facility 

within its boundaries. 

Chairman LIEBERMAN. Right. 

Mr. POTTER. A station is part of a larger post office located in 

our bigger cities, so, for example, Chicago, L.A., New York. The geography within that city is broken up by different postal facilities. 

In some cases, it is a station, which has delivery and retail units, 

a branch or a finance unit. It could just be a storefront where we 

sell postal services. 

And so what we are talking about here is a review of our big city 

post offices. We spend $16.9 billion on those operations, $2 billion 

of which are for non-personnel costs. And so it is a matter of reviewing what is a quarter of the expenses that are incurred by the 

post office in these 3,200 facilities. 

25 

Chairman LIEBERMAN. OK. I hope that is helpful to people. It is 

to me. 

Second, am I right, you have said that the workforce is down 

170,000? 

Mr. POTTER. Over 170,000 since our peak in 1999. 

Chairman LIEBERMAN. Right. And am I right that there is a nolayoff clause in the agreement between the post office and the 

workers? 

Mr. POTTER. There are no lay-off clauses in each of the contracts. 

There are different levels of protection depending on the contract. 

So there are employees that could be laid off, but our contracts are 

very complex. If you were to lay off career employees, that would 

mean that you would have to eliminate all use of non-career employees. The biggest body of people that could be laid off are in the 

carrier craft—— 

Chairman LIEBERMAN. Right. 

Mr. POTTER [continuing]. But we have some 15,000 non-career 

employees there, and we have to deliver 6 days a week. So we have 

competing obligations. I mean, you would like to lower your costs, 

but you still have to perform that delivery 6 days a week. And so 

therein lies the dilemma. 

Chairman LIEBERMAN. OK. So the way you have reduced 

170,000, which is almost 20 percent, I think, by what you said, the 

number, is by attrition, I presume? 

Mr. POTTER. Yes, it is, so we capture all attrition that we can, 

and obviously we have been very aggressive about doing that in the 

last couple of years because of the downturn. As I said earlier, we 

have reduced some 37,000 career jobs in the last year. That is actually higher than the normal attrition. We have voluntary early retirement options for our employees to increase the amount of people who might consider leaving. 

Chairman LIEBERMAN. As you know, and we will hear from the 

second panel, the groups representing employees and others are 

unhappy about the amendment added in the Committee bill that 

said that binding arbitrators could consider the fiscal condition of 

the Postal Service. You said in your opening statement that you 

support that. I wonder if you could indicate why. 

Mr. POTTER. Well, right now, there is direction to the arbitrator 

in the law that says that the arbitrator should consider paying 

wages comparable to the private sector. 

Chairman LIEBERMAN. Right. 

Mr. POTTER. That is a very broad direction. In the past, arbitrators have assumed that the language meant that our employees 

were comparable to policemen, and there is, if you just take verbatim what that directive is, it does not in any way, shape, or form 

link to what the financial position of the institution is, and I think 

that by adding that phrase, you are bringing balance to what an 

arbitrator would consider when it comes to the Postal Service and 

how you would view each of these agreements and how critical they 

are to the health of the business when 80 percent of the costs that 

we incur are labor. 

Chairman LIEBERMAN. Do any of the four other witnesses oppose 

that amendment to allow the binding arbitrator to consider the fiscal condition of the Postal Service? 

26 

Mr. HERR. No, sir. 

Ms. GOLDWAY. Chairman Lieberman, if I might just add to the 

record with regard to your question of the definition of post offices—— 

Chairman LIEBERMAN. Yes. 

Ms. GOLDWAY. The Postal Regulatory Commission has a different 

interpretation. The Postal Service is defining post office in terms 

of its administrative organization, in other words, who reports to 

whom, whereas the Postal Regulatory Commission defines it in 

terms of the service actually provided in the community. So to the 

extent to which branches and stations function like post offices, the 

way you and I imagine a post office, we define those as post offices 

and expect and anticipate that all of the laws regarding closing 

post offices cover those stations and branches. 

Chairman LIEBERMAN. I appreciate that. I am over my time, but 

I would ask you to submit to the Subcommittee what that definition is. In other words, where do you draw the line? 

Ms. GOLDWAY. Right. Thank you. 

Chairman LIEBERMAN. The Postal Service’s definition is quite 

clear in terms of administrative functions, but when does a branch 

become a post office in the definition of the Commission? 

Ms. GOLDWAY. Thank you. We will do that. 

Chairman LIEBERMAN. Thanks, Mr. Chairman. 

Senator CARPER. Thank you, Senator Lieberman. Senator Collins. 

Senator COLLINS. Thank you, Mr. Chairman. 

Mr. Herr, I support changing the payment schedule for the Postal Service to give it some relief to get through this difficult time. 

Where Senator Carper and I disagree is in our assessment of what 

the increase in the unfunded liability ought to be and also in our 

valuation of the Postal Service’s ability to pay far greater amounts 

into the fund in the second 5 years of the 10-year period. 

I worked very closely with the GAO to come up with the amortization schedule that I proposed. As I indicated, under Senator Carper’s proposal, the unfunded liability would increase by $4 billion. 

Under my proposal, it would still increase, but the increase would 

be $500 million as opposed to $4 billion—big difference. 

I want to turn to the second issue, however, and that is whether 

it is realistic to expect the Postal Service to be able to pay far more 

between 2015 and 2019—the second 5 years—than is the case 

under current law. Under Senator Carper’s proposal, the Postal 

Service would have to pay $6.3 billion more into the Retiree Health 

Benefits Fund than is required under current law in the second 5 

years. In other words, under the bill the Committee reported, it 

lowers substantially the payments for the next 5 years, but then 

ramps them up for the second 5 years to the tune of $6.3 billion 

over the current law’s schedule. 

How optimistic are you that the Postal Service’s financial situation is going to improve so greatly that it will be able to pay $6.3 

billion in payments above what would be required by current law? 

Mr. HERR. Senator Collins, I think looking at the situation the 

Postal Service is in now, if dramatic and rapid change is not embraced and enacted, it would be difficult for them to make those 

larger payments. So that is why we believe this restructuring plan 

27 

is very important going forward. So however the Committee decides 

to move forward in terms of its legislation, we believe that this 

should be linked to a plan that will help the Postal Service move 

forward and expeditiously deal with some of these structural problems that it faces. 

Senator COLLINS. Again, I support providing some relief to the 

Postal Service because we truly are in a crisis, but I do not want 

to be back here in 2015 having the Postal Service say to us, ‘‘there 

is no way that we can pay these ramped-up amounts,’’ and that is 

exactly what is going to happen. And that is why I think that the 

proposed amortization schedule that my staff and I worked out 

with the GAO is a far more realistic assessment. It still provides 

relief, but the difference is an increase in payment in those out 

years of $0.5 billion to $6.3 billion. We have to be realistic. 

Mr. Potter, the postmasters have suggested that one source of 

savings out of retail operations is to negotiate with the unions 

about cross-craft training, in other words, to have more flexibility 

in the work rules. Are you pursuing what seems to me to be an excellent suggestion by the Postmasters Association? 

Mr. POTTER. Yes, we are, Senator. We have had those similar 

discussions in the past. 

Senator COLLINS. Are you optimistic that you are going to be able 

to implement some changes in the work rules that will save 

money? 

Mr. POTTER. I wish I could be optimistic, but having discussed 

these issues in the past, we were not successful. So hopefully the 

conditions that we are in today would have people be more open 

to that level of flexibility. 

Senator COLLINS. Let me return to the question that I raised 

with the GAO witness. What are your grounds for believing that 

the Postal Service will be able to pay $6.3 billion more in the second 5-year period than would be required under the current amortization schedule? 

Mr. POTTER. Senator, I have two reasons to believe that $6.3 billion would not have to be paid. The first reason is that there is an 

assumption in the modeling that was done about the number of 

employees that the Postal Service will have going forward. The 

number that was in the initial analysis assumed that there would 

be a growing number of employees. Today, we have 630,000 people, 

a number that has dropped from some 800,000 employees in 1999. 

I also believe that the country cannot survive with an inflation 

rate on health benefit costs of 7 percent, and I believe that the Senate and the House are having significant debates about that very 

issue. So as the second-largest employer in America, I can tell you 

that the issue needs to be successfully addressed because I think 

the burden is on every business for those costs going forward. 

So it is those two things that make me optimistic, and I believe 

that we will reach our target of ultimately being about 550,000 employees. So again, I am optimistic that you are going to see the 

type of changes in our system that will lower that cost, and I am 

hopeful—and I don’t control it—that health benefit cost growth will 

be mitigated. 

Senator COLLINS. Mr. Chairman, I am going to have to leave for 

a while for an important meeting that I cannot miss, and I will reVerDate Nov 24 2008 14:33 May 12, 2010 Jkt 053836 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 P:\DOCS\53836.TXT SAFFAIRS PsN: PAT
28 

turn, but I realize this panel will have finished. I do want to point 

out another issue as I am leaving, and that is the postmaster general’s testimony today, which requests that Congress lift restrictions on the ability of the Postal Service to get into new non-postal 

lines of business. The postmaster general has indicated that he is 

interested in getting into banking, cell phones, logistics, all sorts of 

non-postal lines of business. 

I want to point out for everyone, and I wish I could get to a question for Mr. Herr about this, that the Postal Service’s past forays 

into non-postal services have had very little success. In fact, GAO 

did a study in December 2001 that concluded that none of the earlier initiatives were profitable. 

I would also point out that there are real competitive issues here 

if we are allowing the Postal Service to compete with the private 

sector on non-postal areas. So this is an issue that has not come 

up today and I will be submitting some questions for the record. 

Thank you. 

Senator CARPER. And I hope you will come back and join us as 

soon as you—— 

Senator COLLINS. Do you really hope I will come back? [Laughter.] 

Senator CARPER. No, I really do. [Laughter.] 

Mr. Potter, take just a few seconds. I didn’t understand you to 

say that you wanted the Postal Service to get into all those businesses. Is that what you said? 

Mr. POTTER. No. I did say that, Senator, but let me just respond 

to Senator Collins, and let me assure her, we are not spending a 

nickel on exploring any of these ideas. I was simply using that to 

illustrate that other countries, when faced with the same dilemma 

that we are faced with, have provided, again, more flexibility in 

that regard. 

Senator COLLINS. Aren’t you asking for that authority? It was my 

understanding you were asking us to repeal the prohibition in the 

2006 Act. 

Mr. POTTER. Yes, I am, Senator, and I would assume that will 

come with a regulatory framework so that any proposals that we 

would make would have to go through the Postal Regulatory Commission. But I do think there is a real issue about how we generate 

revenue out of these over 30,000 retail outlets that we have. 

Whether that is providing other government services or broadening 

what we can do there, I think it is something that needs to be addressed. Again, it is this juxtaposition, do we have them or do we 

not have them, and how can we finance them? That is all it is. 

Senator CARPER. Well, I am sure we will return to this issue 

again and maybe again. Thanks very much. 

Let me turn to Senator Burris. Thank you. 

Senator BURRIS. Thank you, Mr. Chairman. 

This has been a very enlightening discussion and information 

and I really have empathy and sympathy as we deal with this 

major crisis in our postal system. 

As a new member of the U.S. Senate and, of course, a person 

who receives a great deal of mail delivered to my home, I find a 

lot of this information a little disconcerting in terms of what we are 

going to do. I even see the number of post offices or branches that 

29 

has been recommended to be closed in Chicago and the State of Illinois that even concern me a little bit more. 

Mr. Potter, in terms of the 677 postal branches and stations that 

are being considered for closure or consolidation, how is the Postal 

Service conducting its study and what are the criteria being considered, and how many possible layoffs would be involved? 

Mr. POTTER. First of all, let me describe the study. Basically, as 

I described earlier, we have 3,200 locations in major cities around 

the country. It is an almost $17 billion cost base. What we have 

asked in the initial round is for our local facilities to determine and 

do an analysis of what facilities they have, look at space that is 

available in those facilities and surrounding facilities, to look at 

what traffic we have in terms of people coming into those retail 

outlets, and to look at backroom operations to view whether or not 

those could be consolidated. 

There is, again, an initial review that is being conducted to identify candidates. There will be a further review with in-depth analysis around whether or not there are cost benefits to the Postal 

Service. There could be even real estate opportunities to the Postal 

Service. That will be done at the local level, fed up to the area 

level, further review at the national level. There is a pending issue 

in front of the Postal Regulatory Commission and we look forward 

to their opinion. 

And then decisions will be made with, obviously, input from the 

Postal Regulatory Commission about what actions would be taken. 

There will be community outreach to get feedback from the community as part of that process. And then before any actions would be 

taken, there will be a 60-day notification period for the general 

public. And that is, again, in general what is going to happen. 

Senator BURRIS. Well, how did you then arrive at 677 postal 

branches and stations at this point if all that still has to be done? 

You said these are proposals or—— 

Mr. POTTER. Well, my understanding of how this whole thing 

transpired was that we began a nationwide effort to conduct this 

review. At one point, we were asked to provide an update. Where 

all 3,200 was going to close or where do you stand, and there was 

an interim list provided, that is very fluid and it got published, and 

I wish it hadn’t. 

Senator BURRIS. My time is short and I have so many questions—— 

Mr. POTTER. Sure. 

Senator BURRIS. How many people are we talking about in terms 

of layoffs? Do we have a number on that? 

Mr. POTTER. There is no intent to lay anyone off. 

Senator BURRIS. So you are going to do all this by attrition? 

Mr. POTTER. Yes. 

Senator BURRIS. So if my station, which I see on this list—I 

guess it is a station because evidently it is not a post office, which 

I use at my home, it is on the Chicago list, and I see it is scheduled 

for some reason—it is Grand Crossing—to be closed. That would be 

a little concerning—— 

Mr. POTTER. Well, it is not scheduled to be closed. It is still 

under consideration, which is probably the best way to say it. And 

30 

those employees, the people who work in that unit in these big cities, they have bidding rights to move anywhere else in the city. 

Senator BURRIS. Based on union seniority, I would assume? 

Mr. POTTER. Yes. And so they would move to other facilities 

within that city. 

Senator BURRIS. Now, has any study been made of what it would 

take, and this is just an inquiry, or speculation of the cost of a 

First-Class stamp to cover our costs? What would it cost? We are 

now paying 44 cents for a First-Class stamp. 

Mr. POTTER. Right. 

Senator BURRIS. Would it have to go up to 75 cents? To a dollar 

per stamp? 

Mr. POTTER. To cover the current costs. 

Senator BURRIS. Yes. 

Mr. POTTER. Well, some prognosticators have said that it would 

have to go up about 15 percent. 

Senator BURRIS. Fifteen percent of 24—— 

Mr. POTTER. All of our rates would have to go up 15 percent. But 

I caution you to say what was earlier stated: Given our financial 

situation and given the fact that substitution is a reality, each and 

every one of our products could move through a different channel, 

raising rates when you are in the type of situation that we are in 

now which is just going to drive mail away from the system. I 

think there is a misnomer here that the bulk of our revenues come 

from the citizens buying stamps. The fact of the matter is, over 75 

percent of postal revenues comes from commercial entities. 

Senator BURRIS. Those are the catalogs and all the other—— 

Mr. POTTER. That is catalogs, that is banks, that is—think about 

what you get in the mail. It is those folks that make decisions 

about what channel—— 

Senator BURRIS. And wouldn’t your rate increases also apply to 

those items? 

Mr. POTTER. It has, and there are elasticities for every one of our 

rates. So anytime we raise rates, we always calculate the fact that 

a rate increase is going to drive people further away from the mail. 

So we are very cautious about raising rates. 

Senator BURRIS. I am not advocating that. 

Mr. POTTER. No. I just want to make—— 

Senator BURRIS. Mr. Williams, you looked at that because you 

are nodding your head. 

Mr. WILLIAMS. I am aware of the ongoing effort. We try not to 

do it simultaneously. We will come in behind the effort to try to 

validate it and will certainly work with your office to assure that 

you are made aware of—— 

Senator BURRIS. Another question I have, Mr. Potter, in terms of 

the use of technology, and I heard Mr. Herr say that there is an 

excess capacity in processing, and the use of technology. Has the 

Postal Service really kept pace with the processing technology in 

order to deliver the various items to the public? Is that also something that would cost additional monies? 

Mr. POTTER. Senator, we have the best mail processing system 

in the world. You put a letter in a collection box. It literally is not 

touched by a human being until it is put into a mailbox as an individual piece. It is read by machines. It is sorted by machines—— 

31 

Senator BURRIS. Is there sorting to the light? 

Mr. POTTER. To the light? 

Senator BURRIS. Yes. Technology. 

Mr. POTTER. Well, again, I invite you to come and visit a post 

office—— 

Senator BURRIS. I have. We will talk about that. 

Mr. POTTER. OK. 

Senator BURRIS. OK. Mr. Chairman, my time has run out. I was 

trying to push the postmaster to get some more answers. I don’t 

know if you will have a second round of questions with this 

panel—— 

Senator CARPER. I am inclined not to because we are coming up 

on 12 o’clock and we have another panel to go—— 

Senator BURRIS. Thank you, Mr. Chairman. 

Senator CARPER [continuing]. But I am not going to be taking a 

second round and I would urge my colleagues not to, but we will 

certainly be submitting questions to our witnesses. This has been 

a very good back-and-forth, I think. 

Our next Senator is Senator Coburn. Good to see you, Doctor. 

OPENING STATEMENT OF SENATOR COBURN 

Senator COBURN. Thank you, Senator Carper. I will try not to 

use my 7 minutes. I know we have another panel. 

In your estimates, Mr. Potter, you show a continuing decline in 

mail volume, First-Class Mail volume, until 2011, is that correct? 

Mr. POTTER. Yes, Senator. 

Senator COBURN. Do you still think you are going to see a resurgence in First-Class Mail in 2011? 

Mr. POTTER. Senator, it is not a resurgence in the sense that 

there are—— 

Senator COBURN. Do you still think you are going to see an increase in First-Class Mail? 

Mr. POTTER. Yes, I do, because the number of transactions has 

declined because of economic activity. When economic activity picks 

up, the number of transactions through the mail will pick up. People have stopped using credit cards. They don’t get a credit card 

bill at the end of the month. Once they start using them again, as 

an example, that would drive—— 

Senator COBURN. You and I will have a dinner bet on whether 

or not that happens. 

Mr. POTTER. OK. We will. 

Senator COBURN. I think that the electronic mail is accelerating, 

not decelerating. Everything that I see in my personal life, my kids’ 

life, people who used to mail the church bulletin send it by e-mail. 

People who used to mail a statement of what is happening somewhere send it by e-mail. I think that is going to continue. I think 

you are entirely too optimistic in terms of what you think is going 

to happen in First-Class Mail. 

Mr. POTTER. Well, we could see a precipitous drop in John Q. 

Public putting stamps on mail. What that reflects is commercial 

use of First-Class Mail and it is basically bill presentment. 

Senator COBURN. Well, that is what I am talking about. I am getting all my bills now not through the mail. 

32 

Mr. POTTER. I wish you were a better customer of ours, but that 

is OK. [Laughter.] 

Senator COBURN. I appreciate your service in the rain, snow, and 

sleet. Thank you. [Laughter.] 

I am still very worried about the projections that you have in 

terms of return of revenue, and that is just one side of the equation. Does either the IG or Mr. Herr, the GAO, have any comments 

about their projections on revenue? 

Mr. WILLIAMS. We have not. What the information we have indicates is that it is not going to be as bad as it is now, but it is unlikely to return for the reasons that you said. It is unlikely to return to the levels that existed before we went into the crisis. 

Mr. HERR. Senator Coburn, I want to point out a figure in my 

statement on page four. We show the percentage of household bill 

payments made by mail and electronically from fiscal years 2000 

to 2008, and the mail payments were down to 56 percent in 2008 

and the electronic were up to 38 percent. So you can see that trend 

fairly obviously there. 

Senator COBURN. And that rate of change hasn’t changed, has it? 

Mr. HERR. Well, it appears the lines are converging pretty quickly. 

Senator COBURN. Right. But they are on a straight line, so that 

the rate of change is, in fact—the slope of the curve is it is staying 

steady, so you are going to continue to see that type of increase and 

that type of decline. 

Mr. HERR. I think that is consistent with broadband penetration. 

People begin to move to these kind of payments. 

Senator COBURN. All right. 

Ms. GOLDWAY. I simply wanted to add that the Postal Regulatory 

Commission used to get from the Postal Service volume estimates 

on a quarterly basis, prior to 2006. They shared their volume forecasting with us, and it might be beneficial for them to resume that 

practice in light of the recent experiences and expectations in volatility. We would have a better—— 

Senator COBURN. The problem is their forecasts aren’t accurate. 

That has been the problem. 

Ms. GOLDWAY. Well, we would have a better opportunity to examine what they are and be able to give an opinion as to their accuracy if we had them. 

Senator COBURN. I don’t disagree, but the point is, they are highly inaccurate, as we have seen. We have had these hearings for 3 

years and we have been talking about this issue, and quite frankly, 

those of us that have been pessimistic have been much more accurate than what the Postal Service has been, as well as the Postal 

Board of Governors. 

You have 630,000 employees at this time? 

Mr. POTTER. Yes, sir. 

Senator COBURN. And what is your total fully absorbed labor and 

benefit costs? 

Mr. POTTER. It is $57 billion. 

Senator COBURN. Fifty-seven billion dollars? 

Mr. POTTER. Yes, sir. 

Senator COBURN. So that comes out around $80,358 per employee. That is fully absorbed in terms of benefits? 

33 

Mr. POTTER. Yes, sir. 

Senator COBURN. Would there be any benefit of having postal 

employees have the same health benefits that the rest of the Federal workforce has? 

Mr. POTTER. Obviously, there would be about a $600 million reduction in costs. 

Senator COBURN. All right. That is just if they had that. 

Now, let me ask you another question. If, in fact, you could 

achieve—Safeway has 200,000 unionized employees. They have had 

a 0.5 percent increase in the cost of health care the last 4 years. 

They have had a marked increase in satisfaction by their employees of the health care they do have. They have a healthier workforce with less time off because they are actually intervening in 

chronic disease and cash payments incentivizing people for weight 

loss, bad risk. Why is it that we would not want to sit down with 

your unions and say, here is a unionized workforce that has helped 

their country, but also have gotten better, had less out-of-pocket 

costs. Why would you not want to model health care after what 

Safeway has done? 

Mr. POTTER. I personally would. We are part of the Federal Employee Health Benefit Program. In years past, under a different 

Administration, we went down the path of seeking to determine 

whether or not we could withdraw from FEHBP and we were 

strongly advised that was not a path to seek. 

Senator COBURN. But your average cost is higher than the average FEHBP, is that correct? 

Mr. POTTER. I don’t believe so. I would have to check that. 

Senator COBURN. I believe it is. You check it and I will check it. 

Mr. POTTER. Yes. I am not sure, Senator. 

Senator COBURN. So if—we are obviously going to solve your 

problem in the short term. The question for the American people 

is, what is the long term? How are we going to solve it? I believe 

we ought to give you the flexibility to go to 5 days, just based on 

mail volume alone. I believe we ought to give you the flexibility to 

do what you want in terms of your core business and trying to 

make it fit into what the real world market looks like today. 

But what I don’t believe we should do is continue to just get out 

of the one crisis and move to the next. My hope is, with hearings 

like this that I know Senator Carper and Senator McCain are going 

to continue to have, that we will look at the real hard issues and 

be realistic to the American public, because ultimately, if, in fact, 

future health care benefits aren’t paid for, somebody is going to pay 

for them, aren’t they? 

Mr. POTTER. Exactly. 

Senator COBURN. Somebody is, and that somebody is either going 

to be a rate payer or the U.S. taxpayer. 

Mr. POTTER. I wholeheartedly agree with your sentiment, and 

the quicker we do it, the better off I believe we will all be. 

Senator COBURN. All right. Just so you would note, there is a difference in terms of your cost on FEHBP. You subsidize 85 percent 

of the premium risk. The Federal Government is 72 percent. 

Mr. POTTER. Oh, no. I understood that. 

Senator COBURN. So your costs per employee for the same insurance is higher. 

34 

Mr. POTTER. I agree. I thought you were talking about within 

FEHBP for an employee, if you looked at the 100 percent, I believe 

our employees take lesser plans. Blue collar people tend to be 

healthier. 

Senator COBURN. Well, they are walking. They are getting exercise. 

Mr. POTTER. I know. It is great. But I am just saying that is 

what was in my head, not the contribution level. 

Senator CARPER. Thank you, Dr. Coburn. 

Senator Akaka, good to see you. Welcome. Please proceed. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Thank you very much, Mr. Chairman, and I 

thank you for having this hearing. I want to also thank the witnesses for participating today. 

The Postal Service has shown signs of financial distress, as has 

been expressed here, for some time, and still faces that. The Government Accountability Office recently placed the Postal Service 

back on its High-Risk List. I am very much in favor of extending 

needed assistance to the Postal Service to get them through this 

difficult time. Most recently, this proposed fix came in the form of 

S. 1507, which the Committee passed last week. This bill would 

provide flexibility in prefunding future retiree health benefits in 

order to close budget gaps over the next several years. 

However, I am disappointed that at the mark-up of S. 1507, an 

amendment was added that affects the bargaining process and arbitration, giving unnecessary deference to management in negotiation by requiring that an arbitrator consider the financial health of 

the Postal Service. I understand that the Postal Service’s financial 

condition already is a key consideration in arbitration, so this 

amendment has no practical effect other than to maybe insult and 

disgust the postal workers. 

I believe that we should not have included this additional substantive policy change on this must-pass legislation, especially with 

the strong objection from so many postal workers. I believe that 

there is still time to find a compromise to address the concerns by 

recognizing the current economy and the fiscal crisis at the Postal 

Service without injecting ourselves once again into the bargaining 

process. 

Mr. Potter, in the first quarter of this year, packet service in Hawaii met the established service standard less than 7 percent of the 

time. Most were well over the service standard. Only a quarter of 

packages were delivered within 3 days of the service standard. 

While I am very concerned about these Hawaii numbers in particular, which are the worst in the country, I am also concerned 

about the negative image of the Postal Service that such issues can 

lead to. At this hearing, we have heard suggestions about closing 

post offices and reducing delivery days. I am concerned that the 

point may be reached when USPS is no longer the carrier of choice 

due to lagging service and cuts. 

What is the Postal Service doing to ensure that, despite these 

problems, it continues to provide world class and universal service? 

Mr. POTTER. Senator, let me first address the Hawaii issue. Simply stated, we lost the shipping. When we pay ground rates, we put 

35 

mail on boats and move it to Hawaii. We have had trouble finding 

a supplier that would operate at a frequency that would provide a 

higher level of service. So we are continuing to work on that issue 

and it is one we know we have to address. 

Senator AKAKA. Commissioner Goldway, the PRC released a report outlining the current state of the Postal Service’s universal 

service obligation that found USPS is generally fulfilling the obligation. It seems to me that some of the cost-cutting options, service 

reductions and closings, could have serious effects on the USO. 

Do you think that the options discussed for cost cutting could 

cause the Postal Rate Commission (PRC) to reevaluate the Postal 

Service’s fulfillment of the universal service obligation? 

Ms. GOLDWAY. Thank you, Senator. I think the Commission is, 

in fact, concerned about the proposals to reduce the footprint of the 

Postal Service throughout the Nation and we will be in the end 

case looking at these proposals in terms of their impact on universal service. We hope to have public hearings in the context of 

this end case, and we may, in fact, review the universal service obligation study that we did 2 years ago to look at what ought to be 

universal service in this dramatically different time that we are in, 

or how universal service could be provided. 

I am very concerned that the cuts proposed by the Postal Service 

may, in fact, be counterproductive, and by reducing access to the 

community in these options that they propose, that there will be 

simply less opportunity for the Postal Service to respond or to grow 

in any way in the future. 

Senator AKAKA. Thank you very much for your response. 

General Potter, I believe that any service cut from 6 days a week 

to five days cannot be taken lightly. In addition, determining which 

day would have the least impact on the use of Postal Service as the 

carrier of choice is a very important decision. Reducing to a 5-day 

week would most likely save money by reducing staff hours processing and delivering mail. Likely, some of this would be through 

layoffs in addition to attrition. 

In the past, you mentioned that a weekday likely could be cut, 

so I would like you to address why and what changed this to Saturday. And second, how long would it take after the announcement 

of a 5-day week until any cost savings were realized? 

Mr. POTTER. Senator, the reason we moved to Saturday was because of further analysis around volume. Only 11 percent of mail 

is delivered on Saturday. In addition, many businesses—and one of 

the reasons it is low on Saturday is because many businesses are 

closed on Saturday and we don’t provide delivery on Saturday 

today, and so if we were to pick a day during the middle of the 

week, what would happen is we would only have 4 days of delivery 

to businesses and we thought that and think that doing that would 

be harmful to our position from a competitive standpoint. We know 

that the competitors do not deliver on Saturday without a surcharge, and so we are positioned well in that regard. 

I forgot the second part of your question. 

Senator AKAKA. Yes, the cost savings from this. 

Mr. POTTER. We estimate the cost savings to be $3.3 billion, and 

in terms of how quickly we could get it, literally, the day that we 

start, we can capture that savings. And so right now, our thinking 

36 

is once it is approved, reviewed by the Postal Regulatory Commission and approved in the sense that we have the legal authority to 

do it, we would provide no less than 6 months’ notice to our customers so they can make adjustments to their operation and we 

begin saving money the day that we did it. 

Senator AKAKA. Thank you very much. My time has expired. 

Senator CARPER. Senator Akaka, thanks. 

Let me just follow up very briefly on Senator Akaka’s question. 

You may have said it and I missed it in the back and forth between 

the two of you, but other countries which have 5-day service, I understand that they don’t all simply get rid of Saturday service. 

They may get rid of Wednesday service. They may keep their postal windows open and their post offices, so folks who come to the 

post office can still get some kind of service. I think there may be 

one country, I don’t know if it is Canada, where when it is holiday 

seasons or different times of the year, they go back to 6-day-a-week 

service. Is there a fair amount of variety in the way countries approach this? 

Mr. POTTER. To the best of my knowledge, most have eliminated 

Saturday when they go to 5-day delivery. I think our concept has 

evolved, and if I could just take a minute to describe what it is. 

We would continue to open post offices on Saturdays. So we are 

strictly talking about delivery. We would provide box mail service 

on Saturdays, and part of the reason for that is there is a lot of 

money that moves through the mail and those recipients of money 

have said that they need access to the remittances that come 

through the mail. So we would continue to provide delivery to post 

office boxes. 

We would continue to allow big customers to come and pick up 

their mail at plants as it is generated. A lot of the banks do that 

and some of the utilities. And the American public has told us in 

surveys that we have done that they want to continue to have access to postal personnel on weekends. Maybe they work during the 

week and they come on Saturday to pick up a package that may 

not have been able to get delivered because no one was home. And 

so we would continue to operate our post offices on Saturday. 

What we are talking about here in the $3.3 billion in savings is 

strictly from elimination of that sixth day of delivery. 

Senator CARPER. Thanks very much. 

Senator BURRIS. Mr. Chairman, just one quick question. 

Senator CARPER. Yes, real quick if you would, please. 

Senator BURRIS. Mr. Potter, that 11 percent that is not delivered 

on Saturday, will it be delivered on Monday? 

Mr. POTTER. That is true. Yes, sir. 

Senator BURRIS. Which means that is an extra load on the carrier who has to deliver that mail. Has that been taken into consideration? 

Mr. POTTER. Yes, sir, because we do have holidays. And so we 

have experience today with holidays and we have, when we estimated our costs going forward and our savings, that was a key part 

of the calculation. It turns out that because the machines sort the 

mail and put it in walk sequence, the bulk of that workload is absorbed by the carrier and our systems and there really is no addiVerDate Nov 24 2008 14:33 May 12, 2010 Jkt 053836 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 P:\DOCS\53836.TXT SAFFAIRS PsN: PAT
37 

tional cost as a result of moving that work, or limited additional 

cost as a result of moving that workload from Saturday to Monday. 

Senator CARPER. Thanks. Before we excuse this panel, I want to, 

on behalf of all of us, thank you for being here, for helping us wrestle with a tough issue, and for those of you who work on this on 

a daily basis, to say thank you for your leadership. 

We still have to hear from our second panel. I very much look 

forward to their testimony, as well. But I would just conclude before this panel leaves that, as several people said, there are no silver bullets, and I don’t know that there are, but there are a lot of 

ways that we can address the challenge that we face, and the post 

office working with their employees and their employee unions 

have wrung a lot of costs out of the system, reduced payroll by almost 200,000 people over the last decade, and we will see some additional reduction through attrition. 

We need to, as Members of Congress, we need to get out of the 

way. I don’t welcome a wholesale closing of post offices or stations 

around the country, but where it makes the most sense and where 

people have other opportunities for service, that is something that 

needs to be done. I am not anxious to see wholesale closing of processing facilities around the country, but to the extent that there 

are some that make sense, we need to get out of the way. 

You have difficult labor negotiations coming up in the next couple of years and we commend the approach that management takes 

to those negotiations, and frankly, the approach that our union representatives have taken, as well. Those will not be easy negotiations. We realize that. 

The issue of days of delivery, and how it might be 6 or 5 days, 

I think that is something that needs to be on the table, and there 

are different ways, as we said, that can be crafted in order to meet 

most concerns. One of the concerns that I have not heard addressed 

is if we don’t have service on Saturday, we don’t have service on 

Sunday, and Monday is a holiday, that would be 3 days without 

service and that might be a concern, a real concern, a legitimate 

concern for a number of folks. 

Having gone through potential ways to save some money, and I 

know that you have done a number of those and are looking at a 

number of those, the issue of generating new revenues, of being innovative, as you hire new people, and I realize you are not hiring 

a lot of people, but as you hire people, just hire some really outsidethe-box thinkers, people who are entrepreneurial and will think of 

ways of generating business that maybe the rest of us wouldn’t 

have come up with. We were sitting back here brainstorming a little bit on how to think outside the box in terms of maybe co-locating some other business that we do, maybe government kinds of 

business, co-locating them in postal facilities around the country. 

And the last point, I had a sidebar conversation during the testimony with Senator McCain, and I spoke earlier about the need to 

rein in the growth of health care costs. Every Democrat, every Republican in the Senate that I have talked to has said, as we move 

through health care reform legislation, as important as it is to extend coverage to people who don’t have it, it is incredibly important 

that we not raise the deficit and it is also incredibly important that 

38 

we reduce the growth of health care costs. We call it lowering the 

cost curve. 

Someone said that if we are still at 7 percent rate of inflation for 

health care costs, not just the Postal Service, our country will be 

in dire straits, very dire straits. And we were talking about putting 

our Federal Government further in a hole, threatening to bankrupt 

not just Medicare but our government, putting State and local governments, especially Medicaid burdens that the States carry, in an 

unsustainable way, and we further make our businesses uncompetitive with the rest of the world. So this is one we have got to 

come to grips with, and when we do, whether it is 5 percent or 4 

percent or 3 percent, we will be back to those consultants and asking them to help clarify this situation. 

In the meantime, while we work on that legislation, we need to 

work on the rest of this agenda and we look forward to working 

with you. Thank you. 

[Pause.] 

Senator CARPER. I am going to ask our second panel to find their 

seats, and I would like to take this opportunity to—I am just going 

to ask those in our audience that are still visiting with one another, I am going to ask you to do that outside, if you would. 

Let me welcome our second panel. Thank you for your patience 

for the last 2 hours, and we are delighted to welcome each of you. 

Our first witness will be Fred Rolando. He is the new President 

of the National Association of Letter Carriers. It is good to welcome 

you here today. Mr. Rolando began his career as a letter carrier 

over 20 years ago and was sworn in as President of the National 

Association of Letter Carriers, I believe just last month, taking the 

reins of leadership at, I am sure, a challenging time, and we applaud you for your willingness to serve in these challenging times 

and we look forward to working with you to get us through this, 

not just for your employees, but for our country. 

Mr. ROLANDO. Likewise. 

Senator CARPER. But congratulations on your election. 

Next, I watched Bill Burrus shake hands with Senator Burris 

and I thought, I wonder how one of them misspells their name? 

Senator BURRIS. Mr. Chairman. The Burrus with the ‘‘u’’ did not 

know how to spell. [Laughter.] 

Senator CARPER. Well, I am sure the witness with the ‘‘u,’’ will 

have an opportunity to rebut that. But Bill Burrus, we are delighted to welcome you back to this Committee and Subcommittee, 

as the President of the American Postal Workers Union. Mr. 

Burrus began his career with the Postal Service in 1958—I like to 

kid him, I say at the tender age of 12—and was elected President 

of the Postal Workers Union in 2001. 

Our third witness is Dale Goff. It is good to see you, thank you 

for joining us. He is President of the National Association of Postmasters of the United States. He has been with the Postal Service 

for 39 years, 29 of those as postmaster in Covington, Louisiana. 

Our next witness is James West, Director of Postal and Legislative Affairs for Williams-Sonoma. Mr. West has been with Williams-Sonoma since they began their catalog business in 1975. During that time, he has seen the company grow from $1 million in 

sales to over $3 billion in sales. 

39 

1The prepared statement of Mr. Rolando appears in the Appendix on page 101. 

And our final witness today is Mark Suwyn, Executive Chairman 

of NewPage Corporation. Mr. Suwyn has held a variety of senior 

executive positions in the private sector, including 25 years, I am 

told, with a company that my home State is just a little bit familiar 

with, and that is the DuPont Company, so it is a special treat to 

welcome you here today. 

Your statements will all be made part of the record, your entire 

statements. I would ask you to summarize, and if you could keep 

it to about 5 minutes, we would be most grateful. 

Mr. Rolando, you are up first. Thank you. 

TESTIMONY OF FREDRIC ROLANDO,1 PRESIDENT, NATIONAL 

ASSOCIATION OF LETTER CARRIERS 

Mr. ROLANDO. Good morning, Chairman Carper, Senator Akaka, 

Senator Burris. Thank you for inviting me to testify. 

The Postal Accountability Enhancement Act was designed to help 

the Postal Service deal with the public’s increased Internet use by 

giving it more flexibility to compete in competitive services that 

continue to grow. I believe that more and more innovative ways of 

using the mail and the network are within our reach. 

However, when this Committee led the charge for postal reform 

and successfully passed it, one of the key components was to 

prefund retiree health benefits. Your intent to shore up unfunded 

liability for our retirees was indeed commendable. Nevertheless, 

the crippling economy has forced us to restudy the unfunded liability a little closer, and it is now even more clear that the aggressive 

schedule of payments is only part of the problem. 

I will focus first on the short-term issues that we are faced with 

and then move into the long-term strategy. 

The requirement for the Postal Service to prefund the massive 

75-year liability over just a 10-year period is just no longer feasible. 

No other company in America is required to prefund future retirement benefits at all, much less at such an accelerated pace. The exorbitant cost of prefunding, $5.4 billion this year, accounts for most 

of the $6 to $7 billion that the Postal Service has indicated that 

it will lose this year. 

As the reaction to a possible 15 percent drop in mail volume this 

year and in view of a potential year-end cash flow crisis due to the 

excessive cost of the prefunding schedule, the Postal Service has 

put forth a blueprint for dismantling its core business, with service 

cuts and downsizing. Its branch and station optimization program 

and the 5-day delivery study are part of that response. 

As Congress reviews these developments, it should ensure the 

public that the Postal Service does not make structural decisions 

that will do more harm than good over the long run. Downsizing 

to meet depression-level demand without considering the long-term 

impacts on the ability of the Postal Service to meet new demands 

when the economy recovers would be short-sighted. Short-term savings that undermine the Postal Service’s capacity to offer new services and to take advantage of future growth opportunities would be 

self-defeating. 

40 

There are endless opportunities for the Postal Service, but it will 

never be able to take advantage of them if we begin closing our 

doors and limiting our services to our customers as a knee-jerk reaction to a temporary and fixable problem. 

I would like to commend this Subcommittee for the attention and 

dedication it has given to the Postal Service and your obvious commitment to see it survive this downturn in the economy. I believe 

there has to be a two-tiered legislative approach. 

The first, as I mentioned earlier, must address the cash flow 

problems associated with the prefunding payment. I believe that 

H.R. 22 and the OMB proposal both do this effectively. 

However, using the short-term emergency relief legislation as a 

last-minute vehicle during a mark-up session to address long-term 

labor practices is short-sighted, is unbalanced in its nature, and is 

an inappropriate vehicle for such an important and labor-specific 

issue. I sincerely wish I had this opportunity to testify before this 

Committee took such an amendment under consideration. At the 

very least, I would have liked to discuss the factual information behind it that was discussed inaccurately at the Committee’s markup, as well as some of the testimony from the first panel. 

I believe S. 1507 was intended to responsibly address the Postal 

Service’s financial challenges, but the National Association of Letter Carriers (NALC) is completely opposed to the amendment offered by Senator Coburn. Inclusion of this amendment serves only 

to upset the balanced collective bargaining procedure that was established by President Nixon nearly 40 years ago which is incorporated into the Postal Reorganization Act of 1970. During those 

40 years, numerous interest arbitrations have been conducted in 

accordance with the existing provisions of the Act. I can assure you 

that in resolving critical collective bargaining impasses, the arbitrators and the parties have consistently examined and taken into 

account the financial condition of the Postal Service along with the 

many other relevant factors. 

Once this amendment issue is resolved and the immediate shortterm relief is passed, it will be crucial for Congress to begin looking 

at ways to strengthen the Postal Service for the long run. Longterm reforms will be critical to not only the survival of the Postal 

Service, but to the continued growth of the broad industry that relies on its network. 

Congress can take the first step by reforming the retiree health 

prefunding provisions in the law. The current schedule of 

prefunding payments, again, designed to fund 80 percent of a 75- 

year liability by 2016, is unaffordable and has become unreasonable. Moreover, the actuarial methods adopted by OPM to implement the prefunding policy discriminate against the Postal Service 

and significantly increase its cost. 

As the OIG confirmed in a study released July 22, 2009, OPM 

has inflated the cost of future postal retiree health benefits by tens 

of billions of dollars by using an unreasonable assumption about 

the long-term growth rate. 

Additionally, the OPM has severely shortchanged the Postal 

Service when it set up the Postal Retiree Health Benefit Fund by 

grossly underestimating the postal surplus that was in the Civil 

Service Retirement System Pension Plan, the surplus that was 

41 

1The prepared statement of Mr. Burrus appears in the Appendix on page 107. 

transferred to the Retiree Fund in 2007. In other words, to use the 

analogy of the Chairman, not only do we need to refinance, but we 

need to revisit the formulas that are used in the rate and the 

downpayment that was used for that fund. 

Congress should resist radical reforms to the Postal Service, like 

5-day delivery, massive closures and consolidations, and interference in the carefully-balanced and successful collective bargaining process, in favor of practical reforms that will stabilize the 

Postal Service’s finances and give it time to take advantage of the 

new commercial freedoms provided by the Postal Accountability 

and Enhancement Act when the economy recovers. I urge you to 

look at the overall methodology of the prefunding payments as well 

as the network opportunities sitting before the Postal Service. We 

do not need to destroy the Postal Service in order to save it. 

Thank you for this opportunity to testify today. I will be happy 

to answer any questions you may have. 

Senator CARPER. You are quite welcome, and thank you for that 

testimony and for joining us, and again, congratulations. 

Mr. ROLANDO. Thank you. 

Senator CARPER. Mr. Burrus, please proceed. 

TESTIMONY OF WILLIAM BURRUS,1 PRESIDENT, AMERICAN 

POSTAL WORKERS UNION AFL–CIO 

Mr. BURRUS. Thank you, Mr. Chairman. Mr. Chairman, Members of the Committee, particularly Senators Akaka and Senator 

Burris, with whom I share the same name, I will summarize my 

written remarks, but I ask that the full text be submitted for the 

record. 

Senator CARPER. They will be, for all of our witnesses. 

Mr. BURRUS. Mr. Chairman and Members of the Subcommittee, 

thank you for providing my union, the American Postal Workers 

Union, the opportunity to testify on behalf of the members that we 

are privileged to represent. 

As you know, the Postal Service is in the midst of a severe financial crisis, caused in large part by the Nation’s economic difficulties 

and the resulting decline in mail volume, which is compounded by 

the oppressive burden of prefunding retiree health costs. The interest of the Chairman and this Subcommittee in drafting legislation 

that would mitigate the prefunding requirement was welcomed by 

the postal community. We were aware of the concerns associated 

with scoring such legislation and looked to the Administration and 

the Chairman for their assistance in achieving a reasonable solution. 

The introduction of S. 1507 gave us hope that legislation would 

soon be enacted that would provide substantial short-term relief to 

the cash-strapped agency, and progress was well underway until 

the full Committee voted to amend the bill. One amendment, which 

requires arbitrators in negotiation of postal labor agreement, to 

take the financial health of the Postal Service into account drastically changed the focus of the Committee’s efforts from assisting 

a troubled industry to an assault on postal workers. It is a meanspirited amendment that is intended to shift the payment of the 

42 

employer’s share of retiree health care liabilities from the employer 

to employees. The Committee did not consider imposing a surtax 

on postage rates to pay the unfunded liability, but adopted an 

amendment that would, in effect, assess a tax on postal workers. 

Let us be clear. The Postal Service obligation to pay $68 billion 

over an 8-year period was the product of the PAEA, which was endorsed by this Subcommittee. The offers did not anticipate the recession that would soon grip the Nation and failed to appreciate 

the impact it would have on mail volume and postal revenue. 

One goal of the PAEA was to force postal management to reduce 

its network and labor force. It sought to achieve this objective by 

squeezing postal finances to such an extent that management was 

left with no other options. It imposed on the Postal Service the burden of prefunding retiree health care payments, exacerbating the 

crisis. By requiring payments of $14 billion over the last 2 years, 

with more to come, the supporters of PAEA share the blame for the 

Postal Service’s inability to ride out the economic crisis. 

S. 1507 would have alleviated the problem, but the amendment, 

which is not at all germane to the subject of the main legislation, 

would subvert the collective bargaining process, and by endorsing 

the amendment, the Committee has declared war on postal workers. 

When I began my career 55 years ago, postal employees labored 

under the absolute control of the Congress and suffered from serious neglect. After years of struggle, in 1971, the Postal Service was 

converted to an independent agency of the Federal Government 

and postal workers were granted the right to organize and engage 

in collective bargaining. Negotiations over the following 38 years 

have resulted in postal wages that have tracked the Consumer 

Price Index. 

Arbitrator Clark Kerr, a renowned economist, issued a similar 

decision in 1984 that interpreted comparability, the standard for 

postal wages, and since then, the parties have been guided by his 

decision. The recent action of the Committee would jettison this 

history and require the unions and management to embark on a 

contentious journey aimed at applying competing standards. 

In the abstract, supporters can make the case that requiring arbitrators to consider the financial health of the Postal Service is a 

reasonable standard that should be applied universally. But one 

only has to look at recent history to see that such application has 

been selective. Wall Street executives who nearly bankrupted the 

financial institutions of our country awarded themselves indecent 

bonuses from the Treasury to the very companies that they nearly 

destroyed, and massive bailouts were funded by the taxpayer. If 

there was ever a time to consider financial health, one would think 

the Wall Street debacle would have been it. 

The financial health of the USPS has been a consideration in the 

arbitration of every contract, but the amendment is intended to elevate this factor above all others. One does not have to be a rocket 

scientist to understand the purpose. Clearly, the authors of the 

amendment hope it will constrain wages and benefits. The amendment to S. 1507 is not an effort to be fair and reasonable. It is an 

attempt to turn back the clock and penalize postal employees, and 

43 

1The prepared statement of Mr. Goff appears in the Appendix on page 110. 

penalize them for what? For abiding by the rules and managing to 

attain a middle-class wage? 

I repeat, this is a mean-spirited amendment that undermines the 

collective bargaining process and the American Postal Workers 

Union, my union, will oppose S. 1507 because we believe its enactment would be disastrous for the American public and disastrous 

for postal employees. 

Mr. Chairman, that concludes my testimony and I would be 

pleased to respond to any questions. 

Senator CARPER. Thank you so much for being here and for your 

testimony, and we will look forward to that exchange of questions. 

Mr. Goff, welcome to you. 

TESTIMONY OF DALE GOFF,1 PRESIDENT, NATIONAL 

ASSOCIATION OF POSTMASTERS OF THE UNITED STATES 

Mr. GOFF. Mr. Chairman, Members of the Subcommittee, I am 

honored to share with you the thoughts of the National Association 

of Postmasters of the United States (NAPUS) regarding the fiscal 

and operational challenges confronting the U.S. Postal Service. 

Today’s inquiry is not new for this Subcommittee. It has consistently promoted a healthy Postal Service, conducting constructive 

oversight and approving vital legislation. The 2006 Postal Reform 

Act is a prime example. However, the conditions facing the Postal 

Service today are more daunting than those preceding enactment 

of postal reform. 

The economy is only now beginning its deep climb out of recession, and sectors that use mail were impacted greatly, resulting in 

a dramatic fall in mail volume. In 2006, prefunding retiree health 

benefits was challenging, but in 2009, it is suicidal. 

The Postal Service must engage its workers to craft a coherent 

and responsible plan for the future and transmit the plan sensibly. 

I strongly urge the Postal Service and its Board of Governors to 

commit to biweekly high-level meetings with their employee associations to help mark a path for the future. 

In the meantime, it is crucial that Congress enact emergency 

postal relief legislation rapidly. Without a refinancing plan, the 

next crucial steps may be moot. 

The subsequent legislative phase should be a review of the Postal 

Service’s retiree health liability. Two recent reviews of the liability, 

by the Postal IG and by the PRC, concluded that OPM’s original 

estimate is overstated. The disparity could be up to $4 billion per 

year in fiscally harmful payments. NAPUS urges the Subcommittee 

to reevaluate the postal prefunding schedule in light of this new 

analysis. 

Beyond this reexamination, I caution the Subcommittee against 

impulsive acts that yield artificial solutions. At this point, the climate to reduce the frequency of mail delivery is misguided. The 

2003 President’s Commission Report warned that diminishing delivery frequency may save money, but the Postal Service’s value to 

the Nation would suffer. 

The Postal Service is presently considering closing a significant 

number of stations and branches. The USPS has yet to reveal the 

44 

final number of locations that it plans to close, nor how much 

money will be saved through these actions. Community and employee involvement is essential. Postmasters will have to respond 

to community outrage should their facility be targeted for closure. 

Therefore, the realignment process must be transparent and cannot 

be an after-the-fact defense. 

Although this facility review does not appear to jeopardize post 

offices, NAPUS is attentive to a possible wayward gaze at post offices serving rural and small communities. The Postal Service 

would save only $586 million if small and rural post offices were 

closed. This would deny vast areas of this Nation accessible and affordable postal services, yet make no more than a dimple in the 

Postal Service’s financial health. 

As we move further along the legislative decision tree, changing 

customer preferences and mailer behavior should not be ignored. 

We should not mimic Chicken Little. But also, we should not emulate an ostrich. Ossifying on the sidelines renders the Postal Service archaic and irrelevant. 

Demand for a universal, accessible Postal Service is steadfast. Its 

employees are trusted public employees and the agency is one of 

the most valued public institutions. However, the Postal Service 

has yet to exploit its wide national retail footprint to partner with 

other governmental entities and associates with complementary 

private sector endeavors. 

Postal employees play a fundamental role, promoting changes 

and making sacrifices. We have contributed substantial sums and 

reduced compensation through increased health benefit premiums 

over the past few years. In addition, many postmasters have 

worked beyond the normal work day without additional compensation to ensure that mail is accepted, processed, and delivered. And 

postmasters were forced, just recently, to relinquish an 80-year-old 

leave program to shave postal costs. 

For its part, the Postal Service must scrutinize the benefit package of its most highly compensated employees and it must aggressively streamline its bureaucracy to increase efficiency and effectiveness and success. 

In order to achieve more savings out of operations, I encourage 

the postmaster general to negotiate with our unions regarding 

cross-craft training. An accord in this area would boost the skills 

of individual postal employees and enable postmasters to more effectively utilize the talents of their employees. 

Legislative and operational solutions will not happen overnight. 

Nevertheless, Congress must act quickly to reconcile the differences 

between S. 1507 and H.R. 22. Admittedly, the legislation provides 

only a temporary repair. However, failure to enact legislation will 

result in the agency’s default of the required liability payment and 

calls into question Congressional commitment to the Postal Service. 

Mr. Chairman, thank you. 

Senator CARPER. You bet. Thank you very much, Mr. Goff. 

Mr. West, welcome. Please proceed. 

45 

1The prepared statement of Mr. West appears in the Appendix on page 119. 

TESTIMONY OF JAMES E. WEST,1 DIRECTOR, POSTAL AND 

LEGISLATIVE AFFAIRS, WILLIAMS-SONOMA, INC. 

Mr. WEST. Thank you, Mr. Chairman, Members of the Subcommittee, and I thank you for the opportunity to testify with regard to the actions necessary to preserve the U.S. Postal Service 

as a viable and healthy business entity. I have submitted written 

testimony that you will put in the record, as you said. 

Thank you very much for the introduction to Williams-Sonoma 

and its growth. When I started with the company in 1972, we were 

just mailing one catalog and we had annual sales of less than $1 

million and we had only one store, in San Francisco. We have since 

achieved growth of sales exceeding $3 billion across six brands, 

seven direct-mail catalogs, six e-commerce websites, and 630 retail 

stores. These stores are located in 45 States, Puerto Rico, and Canada, and we employ up to 30,000 associates. 

We have achieved this growth in large part by using catalogs as 

our primary advertising vehicle and our strategic partnership with 

the Postal Service is an essential part of our execution strategy. We 

will mail approximately 250 million catalogs this year, making us 

one of the largest catalog mailers in the United States. Our ability 

to recover from the current economic recession and ensure our future success depends to a significant degree on the continued ability of the U.S. Postal Service to provide us with effective and increasingly cost-efficient mail delivery. 

To this end, we see the following as essential for recovery to the 

U.S. Postal Service: Maintaining pricing levels to mitigate further 

mail volume decline. Develop sound business plans based on realistic volume and revenue expectations. Seek prudent Congressional 

support and oversight. And transform the USPS business model 

and operations to meet customer needs in the future. 

It is imperative that mail volume be stabilized. Without a doubt, 

increased postage costs on consumers or commercial mailers will 

only serve to drive more volume out of the system. Any increase, 

especially an exigent increase to cover expected losses, must be 

avoided. 

Financial savings are available from many sources: Relief from 

current financial obligations, additional operational cost savings, 

retention and expansion of the current cost avoidance practices, 

and the right-sizing of the Postal Service infrastructure to fill the 

demands of lower mail volume. 

The legislation currently under consideration, S. 1507, provides 

modification to Postal Service financial obligations which, at the 

minimum, are needed to relieve the USPS of excessive financial 

burdens. My company, along with the Direct Marketing Association, the Association of Postal Commerce, and the American Catalog Mailers Association, to name a few, supports the passage of this 

legislation. 

The Postal Service must be commended for its success in reducing operating expenses. Arguably, the most significant contribution—the next most significant contribution would come from a 

modification of the universal service obligation. Reduction in the 

number of delivery days is a very difficult decision and it will reVerDate Nov 24 2008 14:33 May 12, 2010 Jkt 053836 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 P:\DOCS\53836.TXT SAFFAIRS PsN: PAT
46 

quire the compromise in which all share, but the unfortunate reality is that mail volume simply no longer supports 6 days of delivery. 

Processing facilities and retail services, likewise, must be 

brought in line with mail volume. Prudent business practices dictate that a company must continually modify its infrastructure to 

match the volume of its business and the USPS can no longer be 

an exception. 

The Postal Service must become more aggressive in developing 

realistic business plans and forecasts. The volume and revenue expectations in the near term as well as for the next 2 to 3 years 

must reflect the most conservative forecasts for mail volume. The 

USPS should be encouraged to actively engage with its largest commercial partners in developing business plans that will reflect the 

expectations of those who produce the largest portion of its mail 

volume. 

Completing the transformation of the USPS into a modern business enterprise will require more and sometimes difficult support 

from Congress. We encourage continued oversight, but this oversight must not overly scrutinize or inhibit changes, nor should it 

burden the Postal Service with such obligations that a typical enterprise would find untenable. Flexibility, adaptability, and competitive positioning must be goals of the transformation that the 

Congress will be called on to support, but not micromanage. 

We are now aware that over three-quarters of mail volume and 

revenues come from commercial mailers, and commercial mailers, 

such as my own company, are operating in an increasingly multichannel environment. Service expectations from our customers and 

the need for economic performance is forcing us to be increasingly 

demanding of our business partners and to utilize new and efficient 

ways to reach out and serve our customers. We have more choice 

and effective ways to communicate with our customers than we 

have ever had before. 

Williams-Sonoma, as well as most other companies, is evolving to 

meet the new economy that is driven by new and innovative methods of communicating with and serving our customers. The only 

way that the Postal Service can retain its role in our own marketing strategy will rest on its ability to operate competitively and 

with the same flexibility that is required of the companies that it 

serves. 

In closing, I would like to reiterate our recommendations. Mitigate further mail volume decline by maintaining current postage 

rates. Develop business plans in partnership with the Postal Service’s largest customers. Provide prudent Congressional oversight 

and support of the USPS. And transform the Postal Service into an 

efficient business organization that will remain viable for the years 

ahead. 

Thank you, Mr. Chairman and Members of the Subcommittee, 

for your time and consideration. 

Senator CARPER. You bet. Thank you for those recommendations 

and for your entire testimony. 

And finally, Mr. Suwyn, you are recognized. Please proceed. 

Thank you for joining us. 

47 

1The prepared statement of Mr. Suwyn appears in the Appendix on page 128. 

TESTIMONY OF MARK SUWYN,1 EXECUTIVE CHAIRMAN, 

NEWPAGE CORPORATION 

Mr. SUWYN. Thank you, Mr. Chairman, other Members of the 

Committee. I am the Executive Chairman of NewPage Corporation, 

which is the Nation’s largest producer of coated paper. That is the 

shiny paper that shows up in his catalogs and magazines and other 

point-of-purchase display materials. In fact, Williams-Sonoma is 

one of our most important customers. 

We have nine paper manufacturing facilities in the United States 

plus one in Canada. We are also a major supplier to magazine publishers and an industry that is a vital source of news and information important to our country socially and economically. In fact, 

more than 80 percent of the paper that we produce is used in magazines, catalogs, and advertising, and with that, you can imagine 

the viability of the U.S. Postal Service is critical to the future of 

our company. 

As Senator Collins pointed out earlier, there are about nine million employees whose livelihood depends on an effective, efficient, 

and low-cost Postal Service. Certainly our company, with most of 

the paper that we produce ultimately going through a system that 

shows up in your mailbox, it is critical that be a viable economic 

system. 

The thing we want to keep in mind is that the studies continue 

to show that the lowest cost, the most effective way to get a response from advertising is via print advertising to your home. Now, 

that is a need that is going to be there for advertisers. The key concern, I think, has to be can the Postal Service become efficient 

enough to hold costs down so that they are the preferred route to 

that home. 

Meanwhile, you have newspapers that are waning and in some 

cases disappearing and they have always been a source of delivery 

of a lot of inserts and coupons and other kinds of advertising materials. So there is going to be a vacuum created here with newspapers waning, and if costs in the Postal Service continue to go up, 

some other entrepreneur is going to find a way to get in there and 

begin to deliver some of those materials. If that were to occur, that 

would just accelerate this downturn that we are looking at as other 

people begin to find ways to deliver that material to your home, 

and there are some experiments going on underway right now 

around the country. 

I think one of the real issues looking forward near term is what 

is the shape of the curve? Are we going to continue to go down at 

10 percent per year? Are we going to flatten out? Are we going to 

come back? I think if the Postal Service costs, the postal rates do 

not go up, I personally believe there is going to be a modest rebound, certainly on the industrial side. I can’t comment on the 

First-Class letters. But there is going to be a rebound because a lot 

of what is going on now is a downturn because of the economy, and 

there will be a rebound in number of catalogs and direct mail, etc., 

as the economy rebounds. The question for the longer term is, who 

is going to end up delivering this to the home? 

48 

Certainly, costs have to be taken out. We are all having to do 

that. We have had to downsize our company because we have experienced about a 20 percent downturn in terms of total demand and 

so we have had to take costs out. We have had to shut some facilities down to match the ability to produce with the demand. 

But we think there are also ways to look for revenue growth for 

the Postal Service. As I indicated, there are inserts and coupons 

that are very important to be delivered to the home that newspapers are going to be delivering less and less. 

We are doing a little experimentation with the concept of 

backhauls. Those same inserts and catalogs, etc., that are delivered 

by the Postal Service could be put in a pouch and brought back and 

then collected and put through recycling going forward. I think the 

summer sale, where you are determining what kind of level of volume can you get depending on what price or postal rate you are 

charging is also an important one to understand what is the flexibility and elasticity of pricing. 

Our company is running some specials where we have made 500 

tons of paper available to catalogers to try to reach new prospects, 

and that is 500,000 new mailings this year. 

So in summary, costs are going to have to be reined in, and there 

is a lot of discussion here in terms of how one can do that. I believe 

that can be done, that the Postal Service will, in fact, be increasingly viable going forward as the route to deliver, in our part of the 

business, advertising to the home, which is very important for the 

overall economy of the country. Thank you. 

Senator CARPER. Mr. Suwyn, thank you, really all of you, for excellent testimony. Well delivered, well prepared. 

We are going to be voting at 3 o’clock this afternoon on the nomination of Judge Sotomayor to become a Justice of the Supreme 

Court. I am scheduled to speak on her behalf in support of her 

nomination at 1:15. I was scheduled to speak at 12:10 and we have 

moved it once. We can’t move it again. So I am going to have to 

leave here at about 1:05. I am going to ask one of my colleagues— 

I spoke with Senator Lieberman, who needs to leave, as well, but 

I would ask if one of my colleagues, if Senator Akaka or Senator 

Burris, would consider, if I do have to leave before we conclude, 

closing out the hearing. If one of you could do that, I would be most 

grateful. Thank you. 

Let me just go back in time. When I got out of the Navy in 1973 

and moved from California to Delaware to enroll with the G.I. Bill 

in a MBA program at the University of Delaware. I had a lot of 

wonderful professors. One of my labor professors was a fellow 

named Art Sloane, who is still alive, still doing well. I saw him not 

long ago and he gave me the 13th edition of his labor economics 

book that he had written. I learned a whole lot from him, not just 

during the semester that he was my professor, our professor, but 

in the time since then. He has been good to give me advice on a 

wide range of issues, many of them pertaining to business and 

labor. 

One of the things that he taught me is about the difficult role, 

and actually the similar role that those who are elected to lead 

labor unions, the similar role that you have to us. We have constituents whose concerns are addressed and you have, as well. And 

49 

we have found, as we know from personal experience, it is impossible to please everybody. We have to do what we think is right and 

push as hard as we can for their well-being. I appreciate the difficult situations that Mr. Rolando, Mr. Burrus, and Mr. Goff find 

themselves in, and others, as well. 

And I want to thank you and your predecessors, for the way you 

have worked with the Postal Service to try to find efficiencies and 

to bring down costs and to be able to do more with less in terms 

of personnel. 

A member of the Senate who is not here today asked me to explain to him the amendment that was adopted that said that an 

arbitrator in the labor negotiation, the contract negotiation, shall 

consider, along with wage comparability, shall consider the financial condition of the Postal Service, and he said to me, ‘‘Let me see 

if I have got this right. The Postal Service already has a line of 

credit with the Treasury, is that right?’’ I said, ‘‘Yes.’’ He said, 

‘‘How much is it?’’ I said, ‘‘It is capped at $15 billion. I think right 

now, they have used about $10.5 billion. It can be increased by an 

additional $3 billion per year to a maximum of $15 billion.’’ 

And my friend said, ‘‘Let me see if I have got this right. We just 

came off of 8 years of the largest growth in our Nation’s debt in 

history.’’ He said, ‘‘We actually accumulated more new debt in the 

last 8 years than we did in the first 208 years of our country’s history.’’ I said, ‘‘Yes, that is right.’’ And he said, ‘‘Let me see if I have 

this right, as well. We are on course to run up this year the biggest 

budget deficit that we have run up ever in the history of our country. It will be over $1 trillion.’’ I said, ‘‘That is right.’’ 

And he said, ‘‘So we have the taxpayers of this country on line 

for whatever has already been extended in that line of credit up to 

a maximum of $15 billion.’’ And I said, ‘‘That is correct.’’ And he 

said, ‘‘When the arbitrators are considering, or they are involved in 

labor negotiations under current law, what do they have to consider? Are there any things that they have to consider?’’ And I said, 

‘‘Well, as I understand it, there is a directive in the law that says 

the arbitrator must consider wage comparability, and whether it is 

to UPS, FedEx, whether it is to police or fire, whoever it might be 

to. But there is a direction to consider that.’’ 

He said, ‘‘Do they consider the matter of the financial well-being 

of the Postal Service?’’ And I said, ‘‘Well, my understanding is that 

they do, although that is not something that they are directed to 

do by law.’’ And he said to me, ‘‘What is the big deal? If they already do it and you are asking that we just make sure they do it, 

what is the big deal about that? I just don’t get it, especially given 

the fact that our taxpayers in this country are on the hook for so 

much money, huge debt, huge national debt, growing enormously, 

and on the hook for maybe another $15 billion here? I just don’t 

get it.’’ 

And I would just ask for people, my colleagues like the one I just 

described who just don’t get it, just explain for him and for us what 

we don’t see, please. 

Mr. ROLANDO. I think it is important to consider that the 

premise that you just described is based on some inaccurate information. First of all, I understand during the mark-up that Senator 

Coburn suggested that the current law prevents arbitration boards 

50 

from considering postal finances. On the last panel, Postmaster 

General Potter indicated that the law offers direction to the arbitrators, and neither of those are true. The law with regard to the 

term ‘‘comparability’’ offers direction to the company only, not to 

arbitrators. The only language that offers any direction to the arbitrator is to consider the evidence offered by the parties, which as 

I stated in my testimony historically has included the finances of 

the Postal Service and many other important—equally important 

factors. 

With regard to the law preventing arbitrators from considering 

postal finances, there is no such language. So the very premise that 

all that was based on, both of those are incorrect. I think that is 

very important to reconsider that the law, the way it stands now, 

allows the arbitrator to consider all the evidence and offer a fair 

decision, including all those things, and to offer anything other 

than everything that should be considered is going to tip the scales 

in an unfair balance. 

Senator CARPER. Mr. Burrus. 

Mr. BURRUS. Yes. I was present in 1970 and 1971 when the first 

postal reorganization was under consideration and we were discussing with Congress the right to strike and collective bargaining 

rights, binding arbitration. And as was expected, the final analysis 

was we were Federal employees and should not, did not, and would 

not have the right to strike. So we elected instead and Congress 

drafted the language—we had input into it—that we would have 

free collective bargaining with binding arbitration. 

Free collective bargaining is either free or it is not. It is like 

pregnancy. There is no little bit of free collective bargaining. There 

is not qualified free collective bargaining. We either have the right 

to bargain collectively with our employer without restrictions, without obligations, without either side putting their thumb on the 

scale and tilting the outcome favorable to his or her side, and we 

elected, and Congress embraced it, that we would engage in free 

collective bargaining and we would forego the inherent right in the 

laws of our country, which is natural, the right to strike. That bargain was struck 39 years ago. 

Now, 39 years later, Congress seeks to impose a qualifier, a condition of free collective bargaining, and that is unfair. We have 39 

years of history of arguing the financial health of the employer, the 

U.S. Postal Service. That has been a factor in every arbitration, 

and we have had since 1983, the last 26 years, we have had three 

arbitrations and three negotiated contracts. And each of those negotiated contracts before us at the bargaining table was on the 

health of the U.S. Postal Service. 

One negotiation, the Postal Service reprinted the stamp in honor 

of my predecessor, Moe Biller, that many of you knew, and presented a 50-cent stamp if the Postal Service were to accept the 

union’s proposals. That is what the impact it would have on the financial health of the Postal Service. That has been a factor in 

every negotiation inserted into the law, and as Mr. Rolando said, 

presently, there is reference that a standard exists today of comparability. That is not the standard for arbitration. That is the 

Postal Service’s obligation, but it is not a standard for the arbitrator. This would be the first insertion in the law where the arbiVerDate Nov 24 2008 14:33 May 12, 2010 Jkt 053836 PO 00000 Frm 00054 Fmt 6633 Sfmt 6633 P:\DOCS\53836.TXT SAFFAIRS PsN: PAT
51 

1 Copy of ‘‘Observations by the Board,’’ submitted for the Record by Senator Carper appears 

in the Appendix on page 184. 

trator was required to comply with the standard in rendering the 

decision. 

The expectation, the intent is to cut postal workers’ salary, and 

the underlying purpose is to adjust the salaries to pay for the unfunded health care liability. Postal employees should not be put 

under that restriction. They should not be. This would almost guarantee it. 

The Postal Service coming off of a year where they are suffering, 

all of us—my union goes to negotiations in 2010, Mr. Rolando’s and 

others in 2011. Next year, I will be at the bargaining table representing the 250,000, 300,000 employees that I represent on the 

heels of the Postal Service suffering a $7 billion deficit, $5.4 billion 

of the $7 billion caused by the PAEA. Only $1.6 billion is for other 

purposes. I would be entering negotiations facing that debt and 

newly-inserted language saying that they must consider the financial health of the Postal Service. 

What would we end up with? No matter what the outcome would 

be in 2009 rolling into 2010, the next three, four, or five negotiations will be embroiled in further defining what it meant. Comparability was enacted in 1970. We went to arbitration in 1978 and 

1983, and then for the next 9 years, we re-litigated that issue seeking from the arbitrators clarity. What did it mean? It is not just 

inserting the language, but the parties—my attorneys come forward with their arguments. The Postal Service attorneys come forward with counterarguments. And it is the arbitrator that makes 

the final decision. But this would put postal bargaining in the uncertainty of no finality to how does it apply to the bargaining process for many years. 1

Senator CARPER. Mr. Burrus, I don’t mean to be rude, but my 

time has expired and we have not given Mr. Goff a chance to say 

anything. Would you just go ahead and conclude your sentence and 

then I want to give him—— 

Mr. BURRUS. Sir, I have concluded it. 

Senator CARPER. OK. 

Mr. BURRUS. That is my response. 

Senator CARPER. Thank you very much. 

Mr. Goff, could I ask you to just be brief in your response, 

please? Thank you. 

Mr. GOFF. I will be very brief, Mr. Chairman. As managers in 

the Postal Service, we don’t have arbitration rights. So with that, 

I will refrain from making comments on the issue. I think my two 

esteemed colleagues have handled the subject well. 

Senator CARPER. All right. Thanks very much. 

I apologize. I am going to stay for a few more minutes. I would 

just say in closing, I appreciate your sharing those thoughts with 

us very much. 

A different subject, but I want to go back to it. Dr. Coburn mentioned the Safeway Supermarket. They have 200,000 employees. 

They have literally spent as much money for health care in 2008 

as they spent in 2004. I think the United Food and Commercial 

Workers represent many of their employees. I visited their corVerDate Nov 24 2008 14:33 May 12, 2010 Jkt 053836 PO 00000 Frm 00055 Fmt 6633 Sfmt 6633 P:\DOCS\53836.TXT SAFFAIRS PsN: PAT
52 

porate headquarters before. I have spoken to a number of the folks 

there and will coincidentally talk to one of their top people later 

today on an issue relating to health care coverage and health care 

reform. 

I think it was Albert Einstein who said in adversity lies opportunity, and my hope is that maybe in some of the adversity that 

we face here that we are discussing with respect to the Postal Service, we will also find some opportunity, and the opportunity, we 

need to look at other employers, major employers like Safeway who 

have a unionized workforce and to see what they are doing and to 

see if there is something we can learn from the way that they are 

providing health care in a way that seems to be well accepted, well 

received by their employees and actually being able to do it for the 

same amount of money. And I am going to explore that opportunity 

and I would just encourage all of us to do the same. 

In closing, and I am going to pass it off to Senator Lieberman 

and then I think to Senator Burris and then to Senator Akaka, and 

if Senator Akaka or Senator Burris could conclude, that would be 

great, this has been, I think, just an excellent hearing. It has been 

an excellent hearing and I am grateful to everyone who has prepared for it and participated in it. Excellent testimony, good questions, and I think very helpful responses. 

Senator Lieberman. 

Chairman LIEBERMAN. Thanks, Senator Carper. 

Mr. Rolando and Mr. Burrus, I apologize that I didn’t get to hear 

your full testimony because I had to go back to my office for a 

meeting. 

Mr. ROLANDO. It will only take 5 minutes. [Laughter.] 

Chairman LIEBERMAN. I will read it. But it was very interesting 

and helpful, actually, to hear you respond to Senator Carper’s question because on the face of it, as Senator Coburn introduced this 

amendment and the mythical or real conversation that Senator 

Carper cited, I think the response of most Members of the Committee was not hostile to postal employees—I have my whole career 

been very proud to be an advocate—but, well, how could you not 

allow them to consider the fiscal condition of the Postal Service, the 

binding arbitrator. 

Now, you have taken us inside the world that you live in in 

terms of these negotiations and informed at least me of two things. 

One is, which is reassuring, I suppose, that in every arbitration 

you have been through, in fact, the arbitrators do consider the financial condition of the Postal Service. In fact, it is relevant and 

it is discussed and it is argued and all the rest. 

So I will tell you that one reaction, the first reaction to that I 

had is, well, if they do it already, what is wrong with putting it 

in the statute? But then you went to your second point, and I am 

going to go back and look at this because I think it perhaps takes 

us to a way to reach common ground here, that this would be the 

only factor so stated in the law, if Senator Coburn’s amendment is 

adopted. Am I right? 

Mr. BURRUS. Yes. 

Chairman LIEBERMAN. So I want to ask you to think about 

whether you would submit to the Committee a broader rewrite 

which would list a series of factors that the arbitrator should conVerDate Nov 24 2008 14:33 May 12, 2010 Jkt 053836 PO 00000 Frm 00056 Fmt 6633 Sfmt 6633 P:\DOCS\53836.TXT SAFFAIRS PsN: PAT
53 

sider. Do you know what I am saying? In other words, I know that 

you are worried about this one. You are worried that this is going 

to be used as a premise, that is, the fiscal condition of the Postal 

Service, for cutting back on wages or benefits or conditions of labor. 

From the point of view of the Members of the Committee who 

voted for it, and I would say probably most people in the American 

public, they would say, well, of course, any arbitrator would have 

to consider the fiscal condition of the employer, but you are concerned that this is the only factor so outlined. I don’t need a particular response now unless you want to give one. I want to ask 

you whether one way to reach common ground here is for us to list 

a series of factors that the arbitrator would consider as part of a 

binding arbitration, including others that are more acceptable, 

shall I say, to you. 

Mr. ROLANDO. It certainly has possibilities. We will be happy to 

submit such a list. 

Chairman LIEBERMAN. All right. And I will think, also, about 

what you had to say. 

I take it that both of you, were this amendment not in our legislation, would support the legislation. Am I right? 

Mr. BURRUS. Yes. 

Mr. ROLANDO. Yes, sir. 

Chairman LIEBERMAN. And not only would you support it, you 

think it is important—— 

Mr. BURRUS. Yes. 

Chairman LIEBERMAN [continuing]. And very constructive. So 

you feel so strongly about the amendment that you would oppose 

something you think is actually good for the Postal Service and for 

your members, I presume, just because of the amendment, correct? 

Mr. BURRUS. Correct. 

Chairman LIEBERMAN. Did you want to say something, Mr. 

Rolando? 

Mr. ROLANDO. Yes. With all due respect, I have every confidence 

that this Congress won’t pass legislation that includes an antiunion amendment. 

Chairman LIEBERMAN. OK, but I hope we can come to a point, 

because it is not only critical to the Postal Service, to everybody 

who pays for it, gets mail, but to your workers that we get this 

passed so we can figure out a way to find common ground. 

I thank you all very much. I think it is very important to say 

that this probably will go to the floor of the Senate in September. 

I know the leadership—no opinion that I have heard from Senator 

Reid and others about this amendment, but a very strong concern 

about the fiscal condition of the Postal Service and wanting very 

much to deal with this in September. So we should reason together 

during the weeks between now and then. 

Mr. BURRUS. Thank you. 

Mr. ROLANDO. Thank you. 

Senator CARPER. I think, Senator Lieberman, you may have 

stumbled across a very constructive proposal and we look forward 

to exploring that and we welcome your willingness to provide us 

with some other ideas. Thank you. 

Mr. BURRUS. Well, before you leave Senator and while this issue 

is still fresh in our minds, qualifying free and open rights under 

54 

our Constitution, it is very dangerous, difficult, and fraught with 

all sorts of problems to try to include—for everything you include, 

you are excluding something else. That is the beauty of free collective bargaining, that there are no parameters. It is the parties, 

back and forth. In one specific set of negotiations, one thing might 

be important to either side. That may disappear before the next 

round. 

So trying to qualify that, giving my best effort at it is fraught 

with danger and I would be very hesitant to put pen to paper to 

try to identify what the parties should or should not consider. 

Chairman LIEBERMAN. All right. Well, I just want to say, and I 

will do it real briefly, that the hope here is not to interfere with 

free collective bargaining. But as you have said, and you were 

there—and, of course, it is typical of public employees generally— 

as part of the right to freely bargain collectively, people accept 

binding arbitration. So the question now is do you want to give any 

standards to the binding arbitrator, not to interfere with the free 

collective bargaining? Because right now, the arbitrator presumably could do whatever they think is fair. They don’t have anything. OK. We will continue the dialogue. 

Senator CARPER. Senator Burris, thanks. 

Senator BURRIS. Thank you, Mr. Chairman. 

To the Committee, to Mr. Rolando and Mr. Burrus, this is an 

eye-opener for me because I was looking at it as Senator Lieberman just said, that certainly it is a natural process for the arbitrator to look at the financial condition or the circumstances of the 

Postal Service, to not have knowledge of the history of the collective bargaining situation. I understand that you just said that 

would really cause your union—and I assume, Mr. Rolando, your 

union, also—to oppose the amendment to S. 1507. And that is very 

interesting. 

Could you all just back up then and answer some specific questions for me, because I have some limited knowledge of the Postal 

Service. I asked the postmaster general about the processing and 

technology. Would any of you say that you have been exposed to 

the best available technology on the market? What comments could 

you all make about the technology that has been brought in and 

to what extent that technology—now, naturally, it is going to hopefully improve the processing, perhaps eliminate some positions, but 

I understand, Mr. Burrus, your union even supported a project that 

was proposed out of Chicago a few years back, the American Postal 

Workers did, and I am just wondering, to your and Mr. Rolando’s 

knowledge, has the Postal Service really kept up with technology? 

Mr. BURRUS. Yes. We have the most advanced technology in the 

mail processing environment anywhere in the world. My members 

are the most productive processors anywhere in our society or any 

foreign countries, and as a result of that, we have the lowest postage in the world. We have the most efficient service, the most highly recognized and accepted by the general public, and the lowest 

postage in the world. So it is not a question of whether or not we 

have become more productive. 

My criticism of our productivity, we have the capacity in this 

country to handle the world’s volume of mail. We are that efficient. 

We could take all the mail that is processed throughout the world 

55 

and process it in the American Postal Workers’ system. That is how 

efficient we are. And it causes a major issue that I have been fighting for a number of years, championed by Senator Lieberman in 

the 2006 legislation, because we are so efficient, I can’t accept or 

understand why we pay others to reduce postage to perform our activities through discounts. 

We are paying private companies that perform the same work that we perform for four times our wages. We are paying over $200 

an hour for people to do the same thing that we do so that when 

the mail gets to us, it has already been processed. 

Senator BURRIS. Explain that. I don’t understand that. Do you 

mean the—— 

Mr. BURRUS. The Postal Rate System has a—— 

Senator BURRIS. Would they be the catalogs and—— 

Mr. BURRUS. They have discounts attached to their rate system. 

So if the private company, the mailers, are performing some of the 

postal functions, they get a reduction in their rate based upon the 

value of the function they perform. 

Senator BURRIS. Yes. 

Mr. BURRUS. They are avoiding our processing system. Our processing system, as I said, is the most efficient in the world, the most 

cost effective in the world. We are paying private processors four 

times our salary through rate reductions to perform the exact same 

work that we perform. Unbeknown to the Senators, I am sure, we 

have a companion mail processing system in this country that is 

operated by private companies—Pitney Bowes, Siemens, Lockheed—— 

Senator BURRIS. Lockheed Martin? 

Mr. BURRUS. Lockheed. They have a private system out there 

that is located within blocks or miles of the postal processing systems and workers are performing the same work with the same 

equipment under the same conditions that my members perform. 

But their rates are adjusted four times our salaries in order for 

them to perform that activity. 

Senator BURRIS. But doesn’t Lockheed Martin sell some of this 

equipment to the Postal Service? 

Mr. BURRUS. Yes, they do. They sell the equipment to the Postal 

Service and they use it themselves in their processing plants. 

Senator BURRIS. Are any of you familiar with the process called 

sorting to the lights? Has that been implemented in the Postal 

Service, where you have the reader—because I heard the postmaster general say that mail is not even touched by the human 

hand until it is delivered by the—— 

Mr. BURRUS. That was an exaggeration, but I heard it, too. 

Senator BURRIS. And what I am trying to get at is there is a 

process called sort to the light where it would not be—or mail in 

some of these local—— 

Mr. BURRUS. We called it lights out facilities. 

Senator BURRIS. Yes. Is some of the mail still being thrown by 

the schemes into the slots to—— 

Mr. BURRUS. We piloted that in Florida and it has not been expanded nationwide. We still have workers hands-on interfacing 

with mail through the processing—— 

Senator BURRIS. We are sorting to the zip codes? 

56 

Mr. BURRUS. Yes. They don’t do it one at a time. 

Mr. WEST. Senator Burris, if I can comment on this—— 

Senator BURRIS. Yes, Mr. West? 

Mr. WEST. A lot of what Mr. Burrus is talking about is a process 

in our mailing—in the process of producing and mailing our catalogues whereby what we do is we decide who is going to be receiving our catalogs. It is all done electronically and within computers. 

And we are pulling and processing our customers’ names and addresses, and part of the most efficient way of deciding who is going 

to get those catalogues involves what we call sorting the mail and 

sorting it into sequence that verifies the addresses, verifies that everything is correct, and subsequently puts the mail into the sequence, ultimately, within which it is going to be delivered. We are 

doing that, but we are doing it in computers far before it ever even 

touches a catalog. And we produce basically the customers’ names 

and addresses that are going to get the catalog before it is even 

printed. 

And I would like to comment a little bit further on one other 

thing you are talking about, technology, and just one thing that 

hasn’t been mentioned is in the world of standard mail and standard flats. We are at the beginning of introducing—the Postal Service is introducing new technology and new equipment throughout 

their system called Flat System Sorting, or Flat Sequencing System (FSS), that is going to sort catalogs in the same system in the 

same process similar to the way that Mr. Potter described FirstClass Mail. 

Mr. GOFF. Senator Burris, we do have the technology. Our concern, especially as the managers that run the units that process 

mail, is that we can have all the technology in the world. If we 

don’t have the volume, the technology is useless. With the flat sorter machines, if we don’t have the volume, there is nothing to run 

on the machines. We have the best technology, but we also need 

some people to run the machines, so inadequate staffing comes into 

play. So when you have the best technology, if you don’t have the 

manpower to go with it, too, it hurts us. 

Senator BURRIS. Very good. My time is up, Mr. Akaka, so I am 

going to defer to you. Please. 

Senator AKAKA [presiding]. Thank you very much, Senator 

Burris. 

My question is to Mr. Rolando and Mr. Burrus. As you both 

know well, many of your private sector brothers and sisters have 

been forced to accept wage and benefit cuts as a result of the economy. Proponents of Senator Coburn’s arbitration amendment argue 

that public sector employee groups likewise need to tighten their 

belts in order to meet our economic challenges. 

Over the last few years, how has a difficult financial climate affected negotiating benefits through the regular arbitration process? 

Mr. ROLANDO. Well, the last contract we have, 2006 to 2011, did 

not involve interest arbitration. It was negotiated between the parties and I think both sides felt they have a fair contract and we 

look forward to doing the same in 2011. 

Senator AKAKA. Mr. Burrus. 

Mr. BURRUS. And the last contract changed the contribution rate 

between the employer and the employees on health benefits, and 

57 

all the unions agreed to shift—my union, 4 percentage points from 

the employer to the employees, the other unions 5 percentage 

points from the employer to the employee. A major shift. As you 

know, most unions over the years have resisted very heavily in 

having employees pay a greater share of health benefit costs. In 

bargaining the last round, we voluntarily negotiated. Understanding the escalating costs of health care, we voluntarily agreed 

to shift that cost. 

We are constantly in discussions with the Postal Service, in and 

out of negotiations with postal management. How can we be of assistance? What can we do together? How can we make changes in 

this time where there is significant volume loss and financial difficulties? I am in discussions currently on a proposal that could 

save the Postal Service over $1 billion. It has not been finalized, 

so I am not free to share any details of it, but we are always in 

that mode with postal management, to find some way that we can 

jointly come up with a way to make them more efficient to respond 

to the crisis that we find ourselves in today. 

Mr. GOFF. Senator, I know you asked that question to my two 

labor colleagues, but as part of our consultative process, postmasters have absorbed the 1 percent increase over the years, shifted from the employer to the employee. I think we have started the 

shift even before the recession hit. 

As I said in my testimony, I think there is another sector of the 

Postal Service that needs to be looked at. There is a sector, senior 

management, that has free health insurance and free life insurance 

and I think that needs to be addressed. 

Mr. ROLANDO. Yes, it is important, Senator, working between 

contracts on issues together, and NALC has been working with the 

Postal Service to adjust routes jointly. We are doing all routes in 

the country twice this year to adapt to the current fluctuations that 

we have in the volume. That is an important part of the process. 

It saved the company quite a bit of money. 

Just a comment on Senator Coburn’s somewhat negative reference to the 80 percent labor cost in the Postal Service, speaking 

for my members, if you look at the dedication and the productivity 

of those employees, I believe the Postal Service and the ratepayers 

are getting a great return for that cost. 

Senator AKAKA. Mr. Rolando, I want to follow up on a question 

that I asked Mr. Potter on the first panel about a 5-day delivery 

week. As I said, reducing a 6-day week would most likely save 

money by reducing staff hours on the street delivering mail. Do you 

believe that buy-outs or regular attrition alone is enough to reshape and reduce the mail delivery workforce to a 5-day rotation? 

Mr. ROLANDO. Well, the Postal Service is doing a study on that 

now and we have asked for the data that they are looking at that 

led them to that conclusion, and to date, we haven’t received that 

data, so it is difficult for me to comment on that. 

I will say that, yes, certainly reducing from 6-day to 5-day on its 

surface would save costs. So would reducing to 4 days, 3 days, 2 

days, and 1 day to eliminate costs. But until you look at the overall 

effect of your ability to generate new revenue using the network as 

we know it today, I think it is kind of silly to make any type of 

structural changes like that. 

58 

Senator AKAKA. Mr. Burrus and Mr. Goff, can you tell me more 

about the impacts you would expect on post office workers and 

postmasters if the delivery week were shortened? 

Mr. BURRUS. I think it would be the demise of the U.S. Postal 

Service, and the impact would be there would be no more postal 

employment. If you go from 6 days to 5 days, what follows is the 

relaxation of monopoly. American citizens will demand receipt of 

important items—or routine items—on that day, and if the Postal 

Service doesn’t deliver it, somebody else will. And you will have entrepreneurs that will start in your major cities, where it is cheaper. 

You will have entrepreneurs that will see an opportunity to have 

home delivery, access to the mailbox, access to people’s homes with 

items that individuals, American citizens, are expecting and wanting. 

I think it will be the demise of the Postal Service. It will be the 

first step down a road that says, if someone else can do it on the 

Saturday, why can’t they do it on Friday and Thursday and Tuesday? I think it takes us down that road and the Postal Service will 

become irrelevant. 

Senator AKAKA. Mr. Goff. 

Mr. GOFF. Senator, in the remarks that Mr. Rolando made about 

the study, there is a study going on and we responded to some inquiries from the Postal Service and our first comment was that we 

oppose 5-day delivery for several reasons. The first reason being 

that in the last three hearings, we have heard three different figures as to what the savings would be with 5-day delivery. Whose 

figures are correct? Which ones? We heard a different figure today 

on the savings on 5-day delivery. So, just on that point, convince 

me that we all have the same figure and maybe we will be in favor 

of this. 

What concerns the constituents that I represent is that we have 

problems now in smaller offices, especially in the rural areas. We 

are having difficulty hiring people to replace the postmaster, so he 

or she can have their day off and not break the FLSA law. What 

happens is that nobody comes in and replaces them. We have tasks 

right now, we cannot hire people. This would just prolong it and 

it would do something that would be even more drastic. 

I agree with Mr. Burrus. I think 5-day delivery is a demise of 

the Postal Service. After 39 years, I don’t want to see this institution go away. I am convinced that it will be here 200 years from 

now. 

But some of the things that we need to look at are those that 

Mr. Potter mentioned today. I think Senator Carper asked about 

what would happen after the third day. The postmaster general 

said, we have experience after holidays now, and I kind of laugh. 

I said in my statement, let us not take the approach of being an 

ostrich. Let us not bury our head in the sand. Come out to a post 

office and see what happens to us on the day after a holiday, and 

when we are trying to make up for the overload from the weekend. 

It is a different story if you are actually out there doing it. 

Senator AKAKA. Thank you. Mr. Burris, any questions? 

Senator BURRIS. Yes. Mr. Goff just hit on—that is where I was 

going with the postmaster on that reduction, on that 11 percent increase and he says, well, we have holidays, but this would be a regVerDate Nov 24 2008 14:33 May 12, 2010 Jkt 053836 PO 00000 Frm 00062 Fmt 6633 Sfmt 6633 P:\DOCS\53836.TXT SAFFAIRS PsN: PAT
59 

ular process every day and I am wondering what impact would 

that have on the processing and the letter carriers having to carry 

that 11 percent every Monday—— 

Mr. GOFF. The concern that we have is that the savings realized 

by not delivering on Saturday would be offset by Monday and Tuesday, trying to catch up from the weekend. 

Senator BURRIS. Do you all pay overtime, by the way? 

Mr. GOFF. Yes, there is. After 8 hours a day, 40 hours in a week. 

Senator BURRIS. And is it double or time-and-a-half? 

Mr. BURRUS. We have a sliding scale. 

Senator BURRIS. A sliding scale? 

Mr. BURRUS. We have penalty pay, that if you violate certain 

limitations, then it is double-time, twice the salary, that we have 

time-and-a-half and then double-time. 

Senator BURRIS. So I am wondering how they are calculating this 

$3.2 billion savings by going to 5 days a week and cutting out 677 

stations and units. I don’t even know how that is going to take 

place because he said they are just studying it. 

Mr. GOFF. Yes. As Mr. Rolando said, I think it would be incumbent upon us to see the final product of the study—— 

Senator BURRIS. That is correct. 

Ms. GOLDWAY [continuing]. To give us the correct figure. Maybe 

all the parties that came up with the different figure will come 

close then. But until we have that study, until it is completed, and 

until the stakeholders are included in that study, then we are not 

going to get a good figure out of it anyway. 

Mr. ROLANDO. It is interesting that the Postal Regulatory Commission, I believe, put the savings at closer to $1.9 billion, I believe. Whichever figure you pick, in light of cutting out one-sixth 

of your service of a $75 billion operating budget, again, it seems 

kind of a silly road to go down. 

Senator BURRIS. In terms of the cost of the First-Class Mail—I 

don’t mean the catalogs—I would assume that if you go up, as the 

postmaster general said, from 44 cents to a 15 percent increase, 

that would cover the cost. That would mean that a First-Class 

stamp would be 50 cents. And I heard you, Mr. Burrus, make mention about a 50-cent stamp, or someone mentioned a 50-cent stamp. 

Mr. BURRUS. I did, but that was printed in jest. They were having a joke with my predecessor, the president of our union. 

Senator BURRIS. Well, do you think the American public would 

pay 50 cents? We get an increase every year now. 

Mr. BURRUS. But we don’t get an increase every year, but—— 

Senator BURRIS. We had two in—— 

Mr. BURRUS. The law permits an increase every year up to CPI. 

Senator BURRIS. Yes. 

Mr. BURRUS. But prior to 2006, the law provided the Postal Service to break even over time and we were on a 3-year cycle, so we 

didn’t raise rates—from 1971 to 2006, we raised rates every 3 

years. The first year, they would make money. The second year, 

they would break even. The third year, they would lose money. And 

the law said they had an obligation to break even over time, but 

it was unrelated to the CPI. It was based upon Postal Service expenses. 

60 

Senator BURRIS. OK. I just have too many questions. I will turn 

this over. Thank you, Mr. Chairman. 

Senator AKAKA. Thank you very much, Senator Burris. 

I want to thank all of our witnesses today for your testimonies, 

and your responses to our questions have been helpful. 

The hearing record will remain open for 2 weeks for additional 

statements and questions from the Members of the Committee for 

our witnesses. 

Again, thank you very much. This hearing is adjourned. 

[Whereupon, at 1:25 p.m., the Subcommittee was adjourned.] 

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53836.148
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53836.150
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53836.152
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53836.153
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53836.154
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53836.155
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Æ 


53836.157