U.S. GOVERNMENT PUBLISHING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Publishing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

25–499 PDF 2017

REFORMING THE POSTAL SERVICE: FINDING A 

VIABLE SOLUTION 

HEARING 

BEFORE THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

MAY 11, 2016 

Serial No. 114–135 

Printed for the use of the Committee on Oversight and Government Reform 

( 

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

http://www.house.gov/reform 


KING-6430 with DISTILLER
(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

JASON CHAFFETZ, Utah, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

JIM JORDAN, Ohio 

TIM WALBERG, Michigan 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

CYNTHIA M. LUMMIS, Wyoming 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

RON DESANTIS, Florida 

MICK MULVANEY, South Carolina 

KEN BUCK, Colorado 

MARK WALKER, North Carolina 

ROD BLUM, Iowa 

JODY B. HICE, Georgia 

STEVE RUSSELL, Oklahoma 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

GLENN GROTHMAN, Wisconsin 

WILL HURD, Texas 

GARY J. PALMER, Alabama 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

MATT CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

BRENDA L. LAWRENCE, Michigan 

TED LIEU, California 

BONNIE WATSON COLEMAN, New Jersey 

STACEY E. PLASKETT, Virgin Islands 

MARK DESAULNIER, California 

BRENDAN F. BOYLE, Pennsylvania 

PETER WELCH, Vermont 

MICHELLE LUJAN GRISHAM, New Mexico 

JENNIFER HEMINGWAY, Staff Director 

ANDREW DOCKHAM, General Counsel 

JEFFREY POST, Government Operations Subcommittee Deputy Staff Director 

SHARON CASEY, Deputy Chief Clerk 

DAVID RAPALLO, Minority Staff Director 


KING-6430 with DISTILLER
(III) 

C O N T E N T S 

Page 

Hearing held on May 11, 2016 ............................................................................... 1 

WITNESSES 

Ms. Megan Brennan, Postmaster General, U.S. Postal Service 

Oral Statement ................................................................................................. 5 

Written Statement ............................................................................................ 7 

Mr.Robert G. Taub, Acting Chairman, U.S. Postal Regulatory Commission 

Oral Statement ................................................................................................. 24 

Written Statement ............................................................................................ 26 

Ms. Lori Rectanus, Director, Physical Infrastructure Issues, U.S. Government 

Accountability Office 

Oral Statement ................................................................................................. 56 

Written Statement ............................................................................................ 58 

Ms. Jessica Lowrance, President-Elect, Association for Postal Commerce 

Oral Statement ................................................................................................. 78 

Written Statement ............................................................................................ 80 

Mr. Fredric Rolando, President, National Association of Letter Carriers 

Oral Statement ................................................................................................. 97 

Written Statement ............................................................................................ 100 

APPENDIX 

Oxford Strategic Consulting G–20 Postal Services 2016, Submitted by Mr. 

Lynch, can be accessed ........................................................................................ 160 

RESPONSE Postmaster General to Chairman Chaffetz QFRs 2016–06–09 ...... 161 

RESPONSE Lowrance-PostCom to Chairman Chaffetz QFRs 2016–06–02 ....... 176 


KING-6430 with DISTILLER

KING-6430 with DISTILLER
(1) 

REFORMING THE POSTAL SERVICE: FINDING 

A VIABLE SOLUTION 

Wednesday, May 11, 2016 

HOUSE OF REPRESENTATIVES, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, D.C. 

The committee met, pursuant to call, at 10:02 a.m., in Room 

2154, Rayburn House Office Building, Hon. Jason Chaffetz [chairman of the committee] presiding. 

Present: Representatives Chaffetz, Duncan, Jordan, Walberg, 

Amash, Farenthold, Lummis, Massie, Meadows, DeSantis, Buck, 

Walker, Blum, Hice, Russell, Carter, Grothman, Hurd, Palmer, 

Cummings, Norton, Clay, Lynch, Connolly, Kelly, Lawrence, Lieu, 

Watson Coleman, DeSaulnier, Boyle, Welch, and Lujan Grisham. 

Chairman CHAFFETZ. The Committee on Oversight and Government Reform will come to order. 

And without objection, the chair is authorized to declare a recess 

at any time. 

Good morning, and thank you for being here. This is an important topic that affects every American, and it is a vital part of our 

commerce in the United States of America. We are here to discuss 

the future of the United States Postal Service and to address options for ensuring its long-term viability. 

Each year, more than 40 percent of the world mail volume is carried through the United States Postal Service. The Postal Service 

employs more than 400,000 full-time workers spread throughout 

the country. It is also the backbone of more than a trillion-dollar 

mailing industry that employs more than 7.5 million people. 

However, due to the ongoing changes in the way Americans use 

the mail, the Postal Service faces an unprecedented financial crisis. 

Since 2006, mail volume has declined more than 25 percent or 

about 60 billion pieces of mail annually. As a result, the Postal 

Service has lost money for 9 straight years. With nearly a decade 

of running behind, the Postal Service faces mounting long-term financial challenges. The agency has $125 billion in unfunded liabilities, including $54 billion for retiree health care, and has exhausted its $15 billion statutory debt limit. 

Further, the Postal Service lacks the funds it needs for critical 

infrastructure investments. Chief among those is the purchase of a 

delivery fleet projected to cost roughly $6 billion. Think about all 

those millions and millions of postal boxes that need somebody to 

come actually deliver the mail to them. It is a miraculous thing, 

I think, in this country that for less than 50 cents you can put a 

stamp on an envelope and a day or 2 or 3 days later, that is going 


KING-6430 with DISTILLER
2 

to show up at another address within the country. It really is truly 

amazing. But if you are going to purchase new delivery vehicles 

and prepare for the next decade or two, you are going to need some 

money, and it is something that the Postal Service does not have. 

In the meantime, they must manage a delivery fleet of vehicles, which on average is 24 years old and costs $1 billion a year in 

maintenance. That is just the maintenance cost. While the Postal 

Service has made efforts to cut cost and streamline its operations, 

it is not enough. 

I think it is important to note that many of the unions have been 

very helpful in actually working with the Postal Service and making cuts, but they don’t want to keep continuing to cut the number 

of personnel, and neither do I. We want to see a growing, vibrant, 

thriving Postal Service. 

So today, we are going to hear from representatives of five key 

stakeholders within the postal community, including the postmaster general, the Postal Regulatory Commission, the Government Accountability Office, private industry, and one of the more 

important postal unions. There are a number of postal unions. I 

wish we could have them all up at the same time, but we have one 

here with us today. 

The witnesses will discuss reforms as needed, as well as how certain reform proposals would work. One of the things that is most 

critical in dealing with this has to do with Medicare, and I look forward to hearing from the Postmaster General Brennan and the 

NALC union President Rolando about a joint proposal to require 

the Postal Service retirees to fully enroll in Medicare in order to 

receive Federal health care benefits in their retirement. 

Since 1983, postal workers have paid some $29 billion, $29 billion they have paid into Medicare. Currently, postal retirees have 

a choice in enrolling in Medicare. As Federal retirees, they can continue their sole enrollment in Federal employee health care plans, 

or they can enroll in both a Federal plan and Medicare. While 

three-quarters of retirees already enroll in both Medicare and the 

Federal plan, the Postal Service and its retirees could see significant savings if all retirees were duly enrolled. 

I look forward to hearing more about this proposal. It is one of 

the most key elements, biggest elements in our drafting and coming forward with a reform package that has a vibrant and sustainable Postal Service. Let me just say I think it is important to note 

the approach that we are taking here. 

Are there costs to be cut? Yes. Are there things that we can do 

to become more effective, more efficient? Yes. But I also do believe 

that the Postal Service is a vital tool of commerce, and a thriving, 

vibrant, productive Postal Service is essential to our economy. We 

cannot ignore this. 

Think about the world of the internet. Think about the way commerce is moving. Think of the way we communicate. Think of how 

we send bills and communicate as nation. You have to have a vibrant, thriving Postal Service in order to achieve all of that. That 

is why I think so many people are here today, and it is one of the 

most important things that our committee will be addressing and 

taking care of. That is the goal, and that is what we are trying to 

achieve. 


KING-6430 with DISTILLER
3 

And thank you all for being here. We should have a good hearing 

today. 

Chairman CHAFFETZ. With that, I will now recognize the ranking 

member, my good friend Mr. Cummings of Maryland. 

Mr. CUMMINGS. Thank you very much, Mr. Chairman. And I, 

first of all, want to thank you, Mr. Chairman, for your hard work 

and staff on both sides working so hard for a long time to try to 

resolve the many complex issues that Postal Service faces. And I 

want to thank the Postal Service community and all of those affected by it because there is a genuine effort to try to come to some 

type of resolution that is a win-win-win-win for everybody. And I 

express my appreciation because it helps us as we move along. 

I also want to thank our witnesses for being here to discuss ideas 

for addressing the significant challenges facing this very critical institution. Since its establishment more than 240 years ago, the 

Postal Service has served as the critical link that touches each one 

of our lives and connects us all together, our families, our businesses, and our communities. 

Through more than 32,000 post offices staffed by more than 

600,000 people, the Postal Service delivers more than 150 billion 

pieces of mail a year to more than 150 million addresses. Since the 

last postal reform legislation was enacted some 10 years ago, the 

Postal Service has encountered deepening financial challenges. As 

a result of the increasing popularity of one-line communications 

and transactions, the volume of mail handled by the Postal Service 

has fallen by more than 25 percent since 2006, and this trend is 

expected to continue. 

The cost of the Postal Service’s operations have also risen in part 

because the Postal Service is required to provide universal delivery 

service to every address in the United States. Every year, about 

900,000 new addresses are created in this country, and the Postal 

Service, its network and facilities, letter carriers and workers must 

expanded to deliver to every single new address. 

Congress has also imposed substantial burdens on the Postal 

Service that have nothing to do with providing universal service. 

The Postal Accountability and Enhancement Act of 2006 required 

the Postal Service to fully prefund its liabilities for retiree health 

care costs, a requirement that no other Federal agency or private 

sector company faces. These liabilities, together with unfunded 

pension liabilities, currently amount to about $125 billion, which is 

almost double the agency’s annual revenues. 

Since 2006, the Postal Service has instituted many cost-saving 

measures, including the following: cutting 200,000 positions 

through attrition, cutting work hours by 331 million, consolidating 

more than 360 facilities and 20,000 delivery routes, and changing 

retail operation hours in approximately 13,000 post offices to match 

customer demand and reducing the number of administrative areas 

and districts. 

And let me say this. I have said it to their faces; I have said it 

behind their backs. I think the unions have bent over backwards 

trying to work with the Postal Service and have done—I mean, of 

all the committees I have sat on and dealt with, I think here we 

have a genuine effort by unions to understand what is going on, to 

make sure that they do right by their members, and at the same 


KING-6430 with DISTILLER
4 

time make sure that we have a viable and strong postal system. 

And I want to thank them. 

The Postal Service reports that these initiatives have saved the agency some $15 billion a year. However, there are significant legal 

restrictions that limit the Postal Service’s ability to cut costs and 

introduce new products to counteract its deteriorating financial 

condition. As a result, despite its diligent efforts, the Postal Service 

has reported a net loss of $5.1 billion for fiscal year 2015, its ninth 

consecutive year of losses. The Postal Service projects $5.9 billion 

in net losses for fiscal year 2016. 

Only Congress can modify the nature and the structure of the 

funding obligations imposed by statute on the Postal Service’s 

health care and pension programs. Of course, these problems are 

not new, and we have gone far down the road of developing reform 

legislation in previous Congresses. But Congress has been unable 

to reach a final bill. The time now is to act. 

And so I want to again thank you, Mr. Chairman, for your commitment to working on a bipartisan basis, and it truly has been bipartisan with me and other colleagues to develop a realistic reform 

proposal. I am encouraged by our discussion and hopeful that we 

will be able to help put the Postal Service on a viable and sustainable path. 

I believe that any postal reform legislation that this committee 

considers should do the following, as I close: alleviate the burdensome requirement for prefunding retiree health benefits, allow the 

Postal Service to have separate postal-only health plans that integrate fully with Medicare, allow the Postal Service to offer nonpostal financial services such as post-office-to-post-office money orders and certain types of gift cards, and require the Postal Service 

to create a new chief innovation officer charged with developing 

new, innovative products, as any other business. 

And so we need to work together to address the problems facing 

the Postal Service, and we need to treat the employees of the Postal Service fairly and compassionately. Waiting until the Postal 

Service runs out of cash is simply not an option. The Postal Service 

is an institution on which all Americans rely. 

And finally, I want to thank Mr. Connelly and Mr. Lynch for 

their hard work on this effort. We have met many times trying to 

get through this, and we will. 

And so, ladies and gentlemen, we simply cannot fail. We simply 

cannot kick the can down the road. The time to act is now, and I 

do believe that we are well on the road to accomplishing that. 

And with that, I yield back. 

Chairman CHAFFETZ. I thank the gentleman. 

I think it is important to note the good work that Mr. Meadows 

of North Carolina, Mr. Lynch, and Mr. Connelly have put into this, 

and I concur with my colleague Mr. Cummings that if we are going 

to do this and actually pass it all the way to the President’s desk, 

it does need to be a bipartisan bill. And that is the goal and that 

is the intention. 

I will hold the record open for 5 legislative days for any members 

who would like to submit a written statement. 

But we would like to recognize our witnesses here today. We are 

honored to have the postmaster general of the United States Postal 


KING-6430 with DISTILLER
5 

Service, Ms. Megan Brennan. We have the Honorable Robert Taub, 

acting chairman of the United States Postal Regulatory Commission. We have Ms. Lori Rectanus, who is the director of physical 

infrastructure issues at the United States Government Accountability Office; Ms. Jessica Lowrance, executive vice president of the 

Association for Postal Commerce; and Mr. Fredric Rolando, president of the National Association of Letter Carriers. 

We welcome you all, and thank you for being here. 

Pursuant to committee rules, all witnesses are to be sworn before 

they testify. If you will please rise and raise your right hands. 

[Witnesses sworn.] 

Chairman CHAFFETZ. Thank you. Let the record reflect that all 

witnesses answered in the affirmative. 

In order to allow time for discussion, we would appreciate it if 

you would limit your oral comments to no more than 5 minutes. 

Your entire written statement will be made part of the record. 

We thank you for your participation. We will now recognize the 

postmaster general for 5 minutes. 

WITNESS STATEMENTS 

STATEMENT OF MEGAN BRENNAN 

Ms. BRENNAN. Thank you. Good morning, Mr. Chairman, Ranking Member Cummings, and members of the committee. Thank 

you, Chairman Chaffetz, for calling this hearing. I’m proud to be 

here today on behalf of the dedicated men and women of the 

United States Postal Service, who work hard every day to serve the 

American public. 

The Postal Service currently operates with a business model that 

is unsustainable. In the past decade, total mail volume declined by 

28 percent, and first-class mail, our most profitable product, has 

declined by 35 percent. To put this in perspective, the annual value 

of the revenue lost as a result of this volume decline is $21 billion 

per year. Nevertheless, the Postal Service is required to maintain 

an extensive network necessary to process and deliver the mail to 

every address 6 days a week. 

The cost of that network is largely fixed or growing, regardless 

of volume. However, less volume and limited pricing flexibility 

means that there is less revenue to pay for that network and fund 

other costs imposed upon us by law. 

We continue to make difficult but necessary decisions within the 

constraints of our business model to adapt to our rapidly changing 

marketplace. We have streamlined our operations, restructured our 

networks, and improved productivity for 6 consecutive years. As a 

result of these efforts, we’ve achieved annual cost savings of nearly 

$15 billion. We have also been successful in stabilizing marketing 

mail revenues and growing our package delivery business, which 

together enable America’s e-commerce. 

However, all of these actions cannot offset the negative impacts 

caused by the continued decline in the use of first-class mail. Since 

2012, the Postal Service has been forced to default on more than 

$28 billion in mandated payments to the Treasury for retiree 

health benefits. Without these defaults, the deferral of capital inVerDate Nov 24 2008 09:49 Jun 23, 2017 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 H:\25499.TXT APRIL

KING-6430 with DISTILLER
6 

vestments and aggressive management actions, we would not be 

able to pay our employees, our suppliers, or to deliver the mail. 

Without legislative and regulatory reform, our net losses will 

continue to grow regardless of our ongoing efforts to grow revenue 

and improve operational efficiencies. If allowed to continue, this 

will have a devastating impact on the future of the organization 

and the customers we serve. 

Mr. Chairman, we need legislation now. Over the past year, we 

have been working with postal stakeholders to identify key reforms 

capable of achieving broad support and which would return the 

Postal Service to financial stability. The legislation we are seeking 

reflects the results of these discussions and includes the following 

four provisions: require full Medicare integration for postal retiree 

health plans, restore our exigent price increase for market-dominant products, calculate all retirement benefit liabilities using postal-specific salary growth and demographic assumptions, and provide additional product flexibility. 

By enacting legislation that includes these provisions, the Postal 

Service can achieve an estimated $32 billion in combined cost reductions and new revenue over the next 5 years. Enactment of 

these provisions, favorable changes to our rate-setting system by 

the Postal Regulatory Commission, and our aggressive efficiency 

and revenue initiatives will return the Postal Service to financial 

stability. 

Medicare integration is the most important of the legislative provisions we recommend. As the second-largest contributor to Medicare, our proposal allows the Postal Service and our employees to 

fully utilize the benefits for which we have already paid. By requiring full Medicare integration for Postal Service retirees, we will essentially eliminate the current unfunded liability for retiree health 

benefits. 

We are also seeking to restore the exigent rate increase as a permanent part of our rate base. In April, the Postal Service was required by the PRC to eliminate the exigent surcharge and to reduce our prices. This will reduce our revenues this year by $1 billion and by approximately $2 billion annually, further worsening 

our financial condition. Reinstating the exigent surcharge is critical 

to the Postal Service’s financial stability. 

Mr. Chairman, our financial challenges are serious but solvable. 

The proposals we are advancing today are fiscally responsible. 

They enable the Postal Service to invest in the future and to continue to provide affordable and reliable delivery service. Mr. Chairman, I look forward to working with this committee and our stakeholders to restore the financial health of the United States Postal 

Service. 

This concludes my remarks. I welcome any questions that you 

and the committee may have. Thank you, Mr. Chairman. 

[Prepared statement of Ms. Brennan follows:] 


KING-6430 with DISTILLER
7 


KING-6430 with DISTILLERInsert offset folio 1 here 25499.001
8 


KING-6430 with DISTILLERInsert offset folio 2 here 25499.002
9 


KING-6430 with DISTILLERInsert offset folio 3 here 25499.003
10 


KING-6430 with DISTILLERInsert offset folio 4 here 25499.004
11 


KING-6430 with DISTILLERInsert offset folio 5 here 25499.005
12 


KING-6430 with DISTILLERInsert offset folio 6 here 25499.006
13 


KING-6430 with DISTILLERInsert offset folio 7 here 25499.007
14 


KING-6430 with DISTILLERInsert offset folio 8 here 25499.008
15 


KING-6430 with DISTILLERInsert offset folio 9 here 25499.009
16 


KING-6430 with DISTILLERInsert offset folio 10 here 25499.010
17 


KING-6430 with DISTILLERInsert offset folio 11 here 25499.011
18 


KING-6430 with DISTILLERInsert offset folio 12 here 25499.012
19 


KING-6430 with DISTILLERInsert offset folio 13 here 25499.013
20 


KING-6430 with DISTILLERInsert offset folio 14 here 25499.014
21 


KING-6430 with DISTILLERInsert offset folio 15 here 25499.015
22 


KING-6430 with DISTILLERInsert offset folio 16 here 25499.016
23 


KING-6430 with DISTILLERInsert offset folio 17 here 25499.017
24 

Chairman CHAFFETZ. Thank you. 

Chairman Taub, you are now recognized for 5 minutes. 

STATEMENT OF ROBERT G. TAUB 

Mr. TAUB. Mr. Chairman, Ranking Member Cummings, good 

morning. I’ll hit a few key points of the committee’s very detailed 

written testimony. In 2015, the Postal Service had a total net loss of $5.1 billion, 

which is an improvement from 2014. However, this is the ninth 

consecutive net loss since 2007 and has increased the cumulative 

net deficit since then to $56.8 billion. These continuing losses have 

negatively impacted liquidity, requiring the Postal Service to use 

all of its $15 billion statutory borrowing capacity and causing total 

liabilities to far exceed total assets by $50.4 billion. 

In the past 5 years, the Postal Service has not made any of the 

required prefunding payments to the retiree health benefit fund. 

This accruing nonpayment into the fund has skewed the Postal 

Service’s current liabilities in relation to its assets. To reduce its 

debt ratio to historic averages, the Postal Service would have to 

significantly increase its current cash position or investments in 

capital assets and reduce its obligations to the retiree health benefit fund. 

Low liquidity levels in recent years have impeded the Postal 

Service’s ability to make capital investments in infrastructure. It 

now operates an aging vehicle fleet, increasing the need and consequently the costs for maintenance and repair. Also unmet is the 

need to invest in sorting and handling equipment to fully capitalize 

on business opportunities in the growing package delivery markets. 

Total mail volume in 2015 dropped to levels not seen in more 

than 27 years, and the Postal Service anticipates further reductions in total volumes for 2016. The continuous decline in first-class 

mail seriously jeopardizes the Postal Service’s ability to cover its 

fixed overhead costs. 

Recent increases in revenues and subsequent higher liquidity are 

largely due to the temporary market-dominant product exigent surcharge. The additional revenue from competitive products, which 

are mainly parcels, is not sufficient to offset the future revenue loss 

resulting from the termination of the exigent surcharge, which was 

removed April 10. In order to maintain the operating net income 

it is currently achieving, the Postal Service would have to make up 

the loss of that revenue, which is approximately $2.1 billion annually. 

With the growing liability of retiree health benefits, the inability 

to borrow for needed capital investments and the continued loss of 

high-margin, first-class mail revenues, the important task of improving the financial condition of the Postal Service is daunting. 

Despite the financial news, there is still strength in the system. 

The Postal Service is the one government agency that touches 

every American on a daily basis. It is an organization that literally 

serves 155 million American households and businesses on a typical day. It facilitates trillions of dollars in commerce. The fundamental problem is that the Postal Service cannot currently generate sufficient funds to cover its mandated expenses and also invest in critically deferred capital needs. 


KING-6430 with DISTILLER
25 

Where can we look for answers? I would argue the starting point 

is to look at ourselves. What do we as a nation need from postal 

and delivery system and what is its cost? What exactly is universal 

mail service in the United States? 

The Commission has determined that, unlike other countries, the 

universal service obligation, or USO, in the United States is largely 

undefined and instead is comprised of a broad set of policy statements with only a few legislative prescriptions. The Commission 

estimates the cost of providing universal service to be more than 

$4 billion annually. When assessing the current state of the Postal 

Service, policymakers should look at this fundamental issue and 

decide exactly what we as a nation need from the Postal Service 

and, most importantly, how those expectations are to be funded. 

Mr. Chairman, Ranking Member Cummings, thank you for holding this hearing today and shining a spotlight on this critical part 

of our nation’s infrastructure. I know you deeply appreciate the importance of these issues. There are no easy answers, but answer we 

must, and the Commission stands ready to help you in the search 

for solutions. 

On behalf of all for commissioners and the entire hardworking 

agency staff, thank you for the opportunity to testify today. 

[Prepared statement of Mr. Taub follows:] 


KING-6430 with DISTILLER
26 


KING-6430 with DISTILLERInsert offset folio 18 here 25499.018
27 


KING-6430 with DISTILLERInsert offset folio 19 here 25499.019
28 


KING-6430 with DISTILLERInsert offset folio 20 here 25499.020
29 


KING-6430 with DISTILLERInsert offset folio 21 here 25499.021
30 


KING-6430 with DISTILLERInsert offset folio 22 here 25499.022
31 


KING-6430 with DISTILLERInsert offset folio 23 here 25499.023
32 


KING-6430 with DISTILLERInsert offset folio 24 here 25499.024
33 


KING-6430 with DISTILLERInsert offset folio 25 here 25499.025
34 


KING-6430 with DISTILLERInsert offset folio 26 here 25499.026
35 


KING-6430 with DISTILLERInsert offset folio 27 here 25499.027
36 


KING-6430 with DISTILLERInsert offset folio 28 here 25499.028
37 


KING-6430 with DISTILLERInsert offset folio 29 here 25499.029
38 


KING-6430 with DISTILLERInsert offset folio 30 here 25499.030
39 


KING-6430 with DISTILLERInsert offset folio 31 here 25499.031
40 


KING-6430 with DISTILLERInsert offset folio 32 here 25499.032
41 


KING-6430 with DISTILLERInsert offset folio 33 here 25499.033
42 


KING-6430 with DISTILLERInsert offset folio 34 here 25499.034
43 


KING-6430 with DISTILLERInsert offset folio 35 here 25499.035
44 


KING-6430 with DISTILLERInsert offset folio 36 here 25499.036
45 


KING-6430 with DISTILLERInsert offset folio 37 here 25499.037
46 


KING-6430 with DISTILLERInsert offset folio 38 here 25499.038
47 


KING-6430 with DISTILLERInsert offset folio 39 here 25499.039
48 


KING-6430 with DISTILLERInsert offset folio 40 here 25499.040
49 


KING-6430 with DISTILLERInsert offset folio 41 here 25499.041
50 


KING-6430 with DISTILLERInsert offset folio 42 here 25499.042
51 


KING-6430 with DISTILLERInsert offset folio 43 here 25499.043
52 


KING-6430 with DISTILLERInsert offset folio 44 here 25499.044
53 


KING-6430 with DISTILLERInsert offset folio 45 here 25499.045
54 


KING-6430 with DISTILLERInsert offset folio 46 here 25499.046
55 


KING-6430 with DISTILLERInsert offset folio 47 here 25499.047
56 

Chairman CHAFFETZ. Thank you, Mr. Taub. 

I would now recognize Ms. Rectanus of the GAO. Did I pronounce 

your name properly? 

Ms. RECTANUS. Yes —— 

Chairman CHAFFETZ. Okay. 

Ms. RECTANUS.—you did. Thank you. 

Chairman CHAFFETZ. Thank you. 

STATEMENT OF LORI RECTANUS 

Ms. RECTANUS. Good morning. Chairman Chaffetz, Ranking 

Member Cummings, and members of the committee, I’m pleased to 

be here today to discuss the Postal Service’s financial challenges. 

The Postal Service is a critical part of the Nation’s communications system, but its financial situation is dire. We placed the Postal Service on our high-risk list in 2009 where it remains today. 

Today, I will discuss the factors affecting the Postal Service’s deteriorating financial condition, the status of unfunded liabilities, 

and choices Congress faces to address these financial challenges. 

The Postal Service’s financial struggles are well-documented. Beginning in 2007, expenses began consistently outgrowing revenues, 

and it has lost over $56 billion since then. This situation is primarily caused by decline in mail volume, particularly in profitable 

first-class mail commensurate with an increase in expenses, largely 

because of salary increases. Increases in compensation and benefits 

alone will add over $1 billion in additional cost in fiscal year 2016. 

The gap between revenue and costs continues despite the significant efficiency initiatives undertaken by the Postal Service. 

Regarding unfunded liabilities and costs, they are a large and 

growing burden on the Postal Service. At the end of fiscal year 

2015, the Postal Service had about $125 billion in unfunded liabilities and outstanding debt, which accounted for 182 percent of its 

revenues. Retiree health benefits account for $55 billion of the unfunded liability due in part because the Postal Service stopped 

making required payments in 2011 and is not expected to make the 

required 2016 payment. 

Given this history and future events, it is not likely that the 

Postal Service will be able to make its required retiree health and 

pension payments in the near future. Beginning in fiscal year 2017, 

the Postal Service will be required to start making annual payments for health benefits on top of annual pension payments. 

Using available data, we determined these payments could total 

about $11 billion. Although this is less than what was required in 

fiscal year 2015, it is about $4.6 billion more than what the Postal 

Service paid that year. And the expiration of the temporary rate 

surcharge and the lack of major cost-savings initiatives will further 

stress the Postal Service’s ability to make these payments. 

Having large unfunded liabilities for postal retiree health and 

pension benefits places taxpayers, employees, retirees, and the 

Postal Service itself at risk. If the Postal Service does not adequately fund these benefits and Congress wanted these benefits to 

continue, the Treasury, and hence the taxpayer, may need to step 

in. Alternatively, unfunded benefits could lead to pressure for reductions in benefits or pay. For the Postal Service, unfunded beneVerDate Nov 24 2008 09:49 Jun 23, 2017 Jkt 000000 PO 00000 Frm 00060 Fmt 6633 Sfmt 6633 H:\25499.TXT APRIL

KING-6430 with DISTILLER
57 

fits endanger its future viability by saddling it with bills later after 

employees have already retired. 

Postal Service actions alone under its existing authority are insufficient to achieve financial solvency. Comprehensive legislation 

is needed. In doing this, Congress faces several difficult decisions 

and tradeoffs in key areas. First, what is the level of postal services 

needed in the 21st century, and what are we willing to pay for 

those services? Given how communication is changing, Congress 

could consider what postal services should be provided on a universal basis and the best way to provide those services. 

Second, what is the appropriate level of compensation and benefits that should be paid in an environment of revenue pressures? 

Congress could consider revising the statutory framework for collective bargaining to ensure that the Postal Service’s financial condition is considered in binding arbitration. 

And third, what is the continued viability of the Postal Service’s 

dual role of providing affordable universal service while remaining 

self-sufficient? In assessing any alternatives to the current structure, Congress should consider costs that might be transferred from 

the Postal Service, which is financed by ratepayers, to the Federal 

Government, which is funded by taxpayers. 

In conclusion, we must take a hard look at what level of postal 

services we need in the future and what we can afford. The status 

quo is not sustainable. 

This concludes my prepared statement. Chairman Chaffetz, 

Ranking Member Cummings, and members of the committee, I 

would be pleased to answer any questions you have. 

[Prepared statement of Ms. Rectanus follows:] 


KING-6430 with DISTILLER
58 


KING-6430 with DISTILLERInsert offset folio 48 here 25499.048
59 


KING-6430 with DISTILLERInsert offset folio 49 here 25499.049
60 


KING-6430 with DISTILLERInsert offset folio 50 here 25499.050
61 


KING-6430 with DISTILLERInsert offset folio 51 here 25499.051
62 


KING-6430 with DISTILLERInsert offset folio 52 here 25499.052
63 


KING-6430 with DISTILLERInsert offset folio 53 here 25499.053
64 


KING-6430 with DISTILLERInsert offset folio 54 here 25499.054
65 


KING-6430 with DISTILLERInsert offset folio 55 here 25499.055
66 


KING-6430 with DISTILLERInsert offset folio 56 here 25499.056
67 


KING-6430 with DISTILLERInsert offset folio 57 here 25499.057
68 


KING-6430 with DISTILLERInsert offset folio 58 here 25499.058
69 


KING-6430 with DISTILLERInsert offset folio 59 here 25499.059
70 


KING-6430 with DISTILLERInsert offset folio 60 here 25499.060
71 


KING-6430 with DISTILLERInsert offset folio 61 here 25499.061
72 


KING-6430 with DISTILLERInsert offset folio 62 here 25499.062
73 


KING-6430 with DISTILLERInsert offset folio 63 here 25499.063
74 


KING-6430 with DISTILLERInsert offset folio 64 here 25499.064
75 


KING-6430 with DISTILLERInsert offset folio 65 here 25499.065
76 


KING-6430 with DISTILLERInsert offset folio 66 here 25499.066
77 


KING-6430 with DISTILLERInsert offset folio 67 here 25499.067
78 

Chairman CHAFFETZ. Thank you. 

Ms. Lowrance, I will now recognize you for 5 minutes. 

STATEMENT OF JESSICA LOWRANCE 

Ms. LOWRANCE. Mr. Chairman, Ranking Member Cummings, and 

the members of the committee, thank you for the opportunity to 

speak with you today about postal-related issues facing the mailing 

industry. 

The mailing industry provides over 7.5 million jobs and accounts for $1.4 trillion in economic activity. While the mailing industry is 

a vital part of the Nation’s economy and surpasses in size both the 

airline industry and the oil and natural gas industry, it is one that 

faces significant challenges. Not only are there policies, issues that 

must be considered, but also economic issues that balance the 

infrastructural needs of the American economy and the public welfare. 

Mail is and will remain a vital part of the American economy 

and the manner in which the Nation communicates and does business. Despite all that has transpired over the last several years, 

market-dominant mail still consists of over 154 billion pieces or 97 

percent of the Postal Service’s business. 

The American mail system is a sender-paid service. As volume 

continues to decline, however, the Postal Service is pressed to find 

new ways to help lessen its financial burden. From our perspective, 

there are several fundamental matters that need immediate attention, including the need for predictable, affordable mail services; 

complete, accurate, and transparent costing of products and services; and reliable, consistent mail service. 

At the end of this calendar year, the Postal Regulatory Commission, as directed by the PAEA, will be reviewing the current system 

of rate regulation. Although the Postal Service has expressed displeasure with the price cap, the CPI-based cap has operated substantially as intended to the benefit of all postal customers, Postal 

Service, and the general public. 

For business customers, the cap provides customers with an assurance of postal rate stability and predictability, which is key to 

the decision as to whether to continue to invest in mail as a business communication and commercial vehicle. For the years it has 

been in effect, this inflation-based price cap has served as an effective restraint against abuse of the Postal Service’s monopoly power. 

The Postal Service has been required to focus more closely on the 

elimination of postal waste and inefficiencies in a manner that 

would not have happened in the absence of the cap. 

Unfortunately, there are obligations such as the prefunding mandate and the nonparticipation of postal retirees and Medicare that 

has made operating under such a cap a challenge. The need for 

costing transparency has never been so apparent as it is today. The 

mailing industry has consistently called for greater clarity and 

transparency in the reporting of postal costs. This lack of transparency has resulted in other Postal Service decisions that have 

imposed additional cost on mailers without creating corresponding 

efficiencies in the postal network. 

The Postal Service, its customers, and the Postal Regulatory 

Commission would benefit greatly by an upgrading of postal costs 


KING-6430 with DISTILLER
79 

and modeling systems. The Postal Service should move without dispatch to an informed visibility-based system. This would enable 

costs to be tracked in an automated fashion similar to how it tracks 

service performance throughout the Nation. 

For business customers, the quality of mail delivery is a key component of the value of mail. Timeliness, consistency, and reliability 

are extremely important to these users and recipients of the mail. 

The Postal Service’s inability to provide consistent and reliable 

service is causing many enterprises to look to other means as their 

preferred method for communicating and doing business. 

Legislative reform is just one of the many tools that would need 

to be leveraged in order for the Postal Service to be, and remain, 

fiscally viable. At the very least, mailers urge Congress to address 

those issues that are solely within its power to do so. One, fix the 

mandated prefunding requirements; and two, allow for fuller postal 

employee participation in Medicare. 

With the upcoming 10-year review of the current rate regulation 

system, mailers need an accurate accounting and understanding of 

the cost of the products and services they receive from the Postal 

Service. The Commission should not be required to judge the performance of the existing system on the basis of data that are inadequate for sound decision-making. It is imperative that the Postal 

Service be directed to use the many data-driven tools such as the 

intelligent mail barcode and informed visibility to supply the data 

the Commission so sorely needs to make the informed decisions 

about the current system of rate regulation and how to move forward in its review. 

At the end of the day, the mailers need reliable, consistent mail 

service and affordable, predictable prices in order to continue to invest in mail for business communication and commerce. 

Chairman Chaffetz, Ranking Member Cummings, and the members of the committee, this concludes my prepared statement. I can 

answer any questions. 

[Prepared statement of Ms. Lowrance follows:] 


KING-6430 with DISTILLER
80 


KING-6430 with DISTILLERInsert offset folio 133 here 25499.133
81 


KING-6430 with DISTILLERInsert offset folio 68 here 25499.068
82 


KING-6430 with DISTILLERInsert offset folio 69 here 25499.069
83 


KING-6430 with DISTILLERInsert offset folio 70 here 25499.070
84 


KING-6430 with DISTILLERInsert offset folio 71 here 25499.071
85 


KING-6430 with DISTILLERInsert offset folio 72 here 25499.072
86 


KING-6430 with DISTILLERInsert offset folio 73 here 25499.073
87 


KING-6430 with DISTILLERInsert offset folio 74 here 25499.074
88 


KING-6430 with DISTILLERInsert offset folio 75 here 25499.075
89 


KING-6430 with DISTILLERInsert offset folio 76 here 25499.076
90 


KING-6430 with DISTILLERInsert offset folio 77 here 25499.077
91 


KING-6430 with DISTILLERInsert offset folio 78 here 25499.078
92 


KING-6430 with DISTILLERInsert offset folio 79 here 25499.079
93 


KING-6430 with DISTILLERInsert offset folio 80 here 25499.080
94 


KING-6430 with DISTILLERInsert offset folio 81 here 25499.081
95 


KING-6430 with DISTILLERInsert offset folio 82 here 25499.082
96 


KING-6430 with DISTILLERInsert offset folio 83 here 25499.083
97 

Chairman CHAFFETZ. Thank you. 

Mr. Rolando, you are now recognized for 5 minutes. 

STATEMENT OF FREDERIC ROLANDO 

Mr. ROLANDO. Thank you, Chairman Chaffetz and Ranking 

Member Cummings and members of the committee, for inviting me 

to testify today. 

You’ve asked me to focus on the urgent need for postal reform 

legislation and the provisions that we believe are necessary. I’m 

pleased to do that today, but before I do, it’s important that we 

take a moment to recognize the current reality of the Postal Service. It is no longer 2009 when the Great Recession sent mail volume plummeting and the prefunding mandate crushed the Postal 

Service’s finances, raising doubts in some quarters about the viability of the agency. Postal employees never doubted the viability of 

the Postal Service, but we worked hard to help the Service to adapt 

and survive as it shed more than 200,000 jobs and we boosted productivity dramatically. 

The Postal Service has returned to operational profitability, now earning $4.4 billion over the past 2–1/2 years, our pension funds 

are healthy and better funded at 92 percent than most private sector pensions, and we have set aside some $50 billion for retiree 

health when most large private companies have not set aside a 

dime. 

Thanks to the growth of direct mail and booming e-commerce, 

total mail volume recovered and stabilized in 2015, increasing the 

Postal Service’s revenue to $69 billion. 

There’s no question that the Postal Service remains a vital part 

of the Nation’s economic infrastructure. In 2015, we delivered more 

than 150 billion letters, magazines, and packages, 6 and even 7 

days a week. The Postal Service’s revenue is just a small part of 

the $1.4 trillion of the GDP accounted for by the U.S. mailing industry, which now employs 7–1/2 million Americans. 

With an 84 percent approval rating for the American people, we 

believe the Postal Service can thrive in the 21st century with the 

right public policies. Now is not the time to weaken this treasured 

agency through service and delivery reductions, especially those 

that have failed to attract congressional support in the past. Instead, this committee should offer sensible and targeted reforms 

that would provide financial stability and allow the Postal Service 

to innovate. 

Specifically, it should address three specific legislative and regulatory burdens that severely hinder the Postal Service. First, the 

Postal Service is required to massively fund future retiree health 

premiums decades in advance, regardless of financial conditions 

facing the agency or the country. No other public or private enterprise in America faces such a mandate, and most firms don’t 

prefund at all. This mandate by itself accounts for nearly 90 percent of all reported losses since 2007. 

NALC has suggested numerous ways to address the prefunding 

mandate over the years. As part of an overall reform effort that 

does not weaken our networks or diminish services to the public, 

we support reforms to the FEHBP program to maximize participation in Medicare among eligible postal retirees. This would almost 


KING-6430 with DISTILLER
98 

eliminate the $50 billion unfunded liability for future retiree health 

while raising Medicare spending by less than 2/10 of 1 percent annually. Given that the Postal Service and its employees have contributed $29 billion to Medicare, this approach is fair and appropriate. 

Second, Congress should consider the policy that requires 100 

percent of postal retirement funds be invested in low-yielding 

treasury bonds. Together, the Civil Service and FERS postal pension accounts, along with the postal retiree health fund, hold nearly $350 billion in treasury securities. That makes the Postal Service and its employees the third-largest creditors of the U.S. Federal 

Government just behind China and Japan. No other company in 

America would invest its retirement assets in such an unsophisticated way, especially during a period when treasuries are yielding 

2 to 4 percent annually. 

Starting with the retiree health fund, we should apply private 

sector best practice by investing in well-diversified portfolios of private stocks, bonds, and real estate, as well as government bonds. 

Current policy forces the mailing industry to give Uncle Sam a lowcost loan instead of sensibly investing to cover future health-care 

liabilities. It makes no financial sense to invest in assets that yield 

less than the rising cost of care. 

My submitted testimony makes the case for prudent investment 

change, addresses common objections to it, and explains how several independent agencies invest successfully in private securities. 

By changing the investment policy, Congress could raise the 

long-term rate of return on the assets, reduce the burden of 

prefunding, offset the cost of postal Medicare integration, relieve 

upward pressure on postal rates, and reduce the misguided impulse 

to slash service. 

Third, in my full testimony I address the postage rate-making 

process, which the PRC will formally review in 2017. There’s a remarkable degree of stakeholder consensus about the principles of 

successful postal reform. All four postal unions, the Postal Service, 

and a wide range of companies and postal trade associations have 

agreed on reform principles for your consideration. And these principles were outlined in a letter sent to the chairman yesterday, and 

it urged legislation that would mandate postal-specific assumptions, satisfy—not eliminate—satisfy the prefunding burden by reforming FEHBP to maximize Medicare participation, invest the retiree health fund sensibly, permit the Postal Service to provide 

non-postal products in limited circumstances, and adjust the market-dominant rate base to ensure adequate revenue through the 

PRC review if necessary. 

Our coalition’s recommendations are grounded in common sense 

and best practice. They represent the measures on which we could 

agree while remaining confident that they would stabilize the Postal Service while allowing it to innovate to meet the evolving needs 

of our country. NALC and our sister postal unions remain committed to helping this committee find a fair and equitable path forward that does not damage our network of universal and affordable 

service or the employees that make that network special. 


KING-6430 with DISTILLER
99 

Thank you very much again for this opportunity to testify, and 

am happy to answer any questions. 

[Prepared statement of Mr. Rolando follows:] 


KING-6430 with DISTILLER
100 


KING-6430 with DISTILLERInsert offset folio 84 here 25499.084
101 


KING-6430 with DISTILLERInsert offset folio 85 here 25499.085
102 


KING-6430 with DISTILLERInsert offset folio 86 here 25499.086
103 


KING-6430 with DISTILLERInsert offset folio 87 here 25499.087
104 


KING-6430 with DISTILLERInsert offset folio 88 here 25499.088
105 


KING-6430 with DISTILLERInsert offset folio 89 here 25499.089
106 


KING-6430 with DISTILLERInsert offset folio 90 here 25499.090
107 


KING-6430 with DISTILLERInsert offset folio 91 here 25499.091
108 


KING-6430 with DISTILLERInsert offset folio 92 here 25499.092
109 


KING-6430 with DISTILLERInsert offset folio 93 here 25499.093
110 


KING-6430 with DISTILLERInsert offset folio 94 here 25499.094
111 


KING-6430 with DISTILLERInsert offset folio 95 here 25499.095
112 


KING-6430 with DISTILLERInsert offset folio 96 here 25499.096
113 


KING-6430 with DISTILLERInsert offset folio 97 here 25499.097
114 


KING-6430 with DISTILLERInsert offset folio 98 here 25499.098
115 


KING-6430 with DISTILLERInsert offset folio 99 here 25499.099
116 


KING-6430 with DISTILLERInsert offset folio 100 here 25499.100
117 


KING-6430 with DISTILLERInsert offset folio 101 here 25499.101
118 


KING-6430 with DISTILLERInsert offset folio 102 here 25499.102
119 


KING-6430 with DISTILLERInsert offset folio 103 here 25499.103
120 


KING-6430 with DISTILLERInsert offset folio 104 here 25499.104
121 


KING-6430 with DISTILLERInsert offset folio 105 here 25499.105
122 


KING-6430 with DISTILLERInsert offset folio 106 here 25499.106
123 


KING-6430 with DISTILLERInsert offset folio 107 here 25499.107
124 


KING-6430 with DISTILLERInsert offset folio 108 here 25499.108
125 

Chairman CHAFFETZ. Thank you. Thank you all. We will now 

start by recognizing the gentleman from Tennessee, Mr. Duncan, 

for 5 minutes. 

Mr. DUNCAN. Well, thank you very much, Mr. Chairman. 

General Brennan, I have an article here from the Los Angeles 

Times that says, ‘‘after peaking in 2006, total mail handled by the 

Postal Service has declined 27 percent.’’ Is that fairly accurate, and 

is mail volume still slowly declining? 

Ms. BRENNAN. That’s correct. 

Mr. DUNCAN. All right. And do you feel like you have taken every 

step you can do thus far to adjust to that decline? 

Ms. BRENNAN. Congressman Duncan, you’re correct in terms of 

the decline in total mail volume. The challenge for us is the continued decline particularly in first-class mail, which pays the bills, defines our network requirements, hence, our actions to right-size the 

infrastructure and take cost out of the system. There are still opportunities, but I think as noted, we’ve reduced our annual cost 

base by $15 billion. 

Mr. DUNCAN. I will tell you a little story. About 4 years ago they 

had an article about me and my dad in the Knoxville News Sentinel, and I got the nicest handwritten letter from Peyton Manning 

about that article. He said he could tell from that article I had the 

same kind of relationship with my dad that he has with his dad. 

Well, 2 or 3 months later my chief of staff saw Peyton Manning one 

night and told him how much I appreciated that, and he said Peyton Manning told him that his mother told him once that if you 

wanted to really make an impression on people nowadays, send 

them a handwritten note or letter. Maybe you should try to get 

more people to follow the Peyton Manning method of impressing 

people because it made a big impression on me, I can tell you. 

Ms. BRENNAN. I would agree with that, Congressman. 

Mr. DUNCAN. Maybe you should get him to do an ad for you or 

something. 

[Laughter.] 

Mr. DUNCAN. Let me ask you this. Would it make any difference, 

or how much of a difference would it make if you went to 5-daya-week service? 

Ms. BRENNAN. We’ve spent the better part of the past year, Congressman, on trying to build consensus with key stakeholders, a 

narrower group of provisions, high value, that would generate more 

than $32 billion in cost reductions and savings over the next 5 

years. The reality is in my discussions with public officials, members of this committee, there’s no congressional consensus for moving to 5-day delivery. 

Mr. DUNCAN. Right. 

Ms. BRENNAN. The Postal Service is looking at, how do we leverage our infrastructure, which is an asset? How do we grow profitable revenue? How do we look to fill the mailbox and fill the truck? 

That’s what we’re focused on. 

Mr. DUNCAN. Many companies in the private sector that had 

pension plans that they saw they couldn’t afford anymore, they 

stopped giving those pensions to their new hires. Have you considered doing something like that, reducing the pension benefits for 

new hires, and would that make any difference? 


KING-6430 with DISTILLER
126 

Ms. BRENNAN. Congressman Duncan, I would say that we have 

a plan forward. There is a way to resolve these legacy costs and 

these liabilities, and that’s by permitting the Postal Service to integrate with Medicare. It’s universal practice. Our employees, as 

noted by the chairman and the ranking member, have paid more 

than $29 billion in Medicare taxes, and we should benefit from that 

opportunity. There is a way forward without looking at diminishing 

benefits to either current or future employees. 

Mr. DUNCAN. Ms. Rectanus, when you looked at this, these fig- ures are so staggering. I saw some figure that $56 billion in total 

losses over the last several years or something. What did you find 

or what do you consider to be the most troubling aspect of the entire financial condition of the Postal Service? What is the worst 

problem or the biggest problem? 

Ms. RECTANUS. Fundamentally, what we have found is the Postal 

Service’s business model that relies on revenue to cover its costs is 

no longer working. Certainly, the unfunded liabilities, particularly 

the RHB, have contributed to that, but there is a broader problem, 

and that is the fundamental business model of mail volume that 

the Postal Service has been using isn’t working anymore. And to 

their credit, they have been trying to right-size their network and 

make changes. 

But what we would argue is it’s even beyond the unfunded liabilities. Even if you take those out, the ability of the Postal Service 

to raise its—to reduce its costs to align with the revenue, they just 

don’t have the ability to do that right now without comprehensive 

reform. As one example, their controllable income, which is what 

they talk about the income before they account for their unfunded 

liabilities in fiscal year 2015 was less than it was in fiscal year 

2014 even though in fiscal year 2015 they had the exigent for the 

full year. And that’s just an example of even when there is an influx of money, the operating costs are still growing such that 

their—it’s harder and harder for them to get ahead of their costs. 

Mr. DUNCAN. Well, the unfunded liability problem is a problem 

for the entire Federal Government. It is more than just the Postal 

Service. It is staggering. 

Thank you, Mr. Chairman. 

Chairman CHAFFETZ. Thank you. I will now recognize Mr. 

Cummings for 5 minutes. 

Mr. CUMMINGS. Thank you very much. 

You know, the Postal Service has come up with methods to save 

some $15 billion per year, is that right, Ms. Brennan? 

Ms. BRENNAN. That’s correct, Congressman Cummings. 

Mr. CUMMINGS. And I have always been concerned about making 

sure that we save as much money as possible. At the same time, 

I was hoping that we could find ways to bring in more money. So, 

Ms. Rectanus and Mr. Taub, do you agree that in order to be financially viable long-term it is important for the Postal Service to develop innovative products and services? 

Ms. RECTANUS. We do support the Postal Service’s continued 

ability to be innovative and develop products and resources that 

people need. The challenge that you run is trying to find that sweet 

spot between areas in which the Postal Service will be profitable 

since they can’t afford to lose money, but you don’t want them to 


KING-6430 with DISTILLER
127 

be able to compete unfairly because of their unique status, or conversely, lose money because of their unique status. 

Mr. CUMMINGS. And so you end up in a no-spot? 

Ms. RECTANUS. We believe —— 

Mr. CUMMINGS. You know, it is kind of hard. On the one hand 

we want them to be able to bring in more money, but then we tie 

their hands and shackle their feet and say we don’t want you to 

do this and don’t want you to do that. So what do you recommend 

that they do? I mean, what would you—and, Mr. Taub, you certainly are—you look like you are anxious to join in on this, so I 

would like to hear what you all have to say because it becomes 

very frustrating —— 

Mr. TAUB. Yes. 

Mr. CUMMINGS.—for the Postal Service and for us. So I am just 

wondering what you see there. 

Mr. TAUB. Yes. From the—again, this is a cost-and-revenue 

issue. I would say the first —— 

Mr. CUMMINGS. I am talking about things that are going to be 

profitable. I don’t want anything that is not profitable, and I think 

Ms. Brennan would—that doesn’t even make sense. Let’s take that 

off the table. 

Mr. TAUB. Right. 

Mr. CUMMINGS. We are talking about profitable things. Let’s go 

from there. 

Mr. TAUB. Yes. The 2006 law took a very hard line in saying the 

Postal Service could only offer what are defined as postal products, 

what you can think of as traditionally hard-copy delivery letters, 

packages. So clearly, the law would need to open that aperture if 

you’re going to move beyond that. 

The Postal Regulatory Commission in 2011 in a report to Congress and the President laid out a variety of recommendations. One 

of them was to suggest that if that aperture were to be open, the 

Commission now has this experience as the regulator to call balls 

and strikes and ensure fair competition issues, ensure that cost 

coverage is there. 

I would note, though, as I indicated in my opening statement 

that this also is part of that larger question of what is it that the 

United States Postal Service should do as a government institution, 

and I think that’s an important understanding. What are the 

boundaries, as opposed to simply looking for revenue opportunities 

that may not be in their core competency. But if the financial issue 

of that fire in the house can be put out and the—we can start rebuilding it and look in that holistic way. 

Mr. CUMMINGS. Now, Postmaster General, you have been in this 

position for a little while now, and I am just wondering, you know, 

talk about what you all have been trying to do and how that has 

worked out and with a more perfect situation what you would like 

to be able to do. 

Ms. BRENNAN. Yes —— 

Mr. CUMMINGS. In that regard. 

Ms. BRENNAN. Yes. If I may just say, sir, we are innovating at 

the core in the mail by giving mail a digital reflection to stabilize 

it and look to grow advertising mail. In the package arena we’ve 

partnered with large e-commerce retailers to customize delivery soVerDate Nov 24 2008 09:49 Jun 23, 2017 Jkt 000000 PO 00000 Frm 00131 Fmt 6633 Sfmt 6633 H:\25499.TXT APRIL

KING-6430 with DISTILLER
128 

lutions, same-day, next-day, Sunday delivery, delivery of other 

products, groceries as an example. 

And I think as Commissioner Taub mentioned, it’s innovating for 

us at the core. Our core competency is delivery. How do we leverage that delivery network? We’ve partnered with other government 

agencies to do in-person proofing. We did a pilot test in Arizona to 

on-board census workers. We think there’s some opportunity for us 

in the future with other government agencies to do ID verification 

whether it’s at a local retail or on the doorstep with the enhanced 

technology we have embedded in our mobile delivery devices. 

Mr. CUMMINGS. You know, I visited the Amazon plant—as a matter of fact, the chairman and I went—in Maryland, and it was 

amazing to hear them talk about the last mile and how much they 

couldn’t do their job unless the Postal Service was a part of it. How 

much is that helping you —— 

Ms. BRENNAN. Very much —— 

Mr. CUMMINGS.—financially? 

Ms. BRENNAN. I would say this. The growth in package volume, 

Congressman Cummings, over the past year or past 5 years I’ll 

cite, 49 percent growth in package volume, more than 1.5 billion 

more packages in the system. The Postal Service now delivers 

roughly 30 percent of all packages in the country. 

Credit to President Rolando and President Dwyer of the National 

Rural Letter Carriers Association who worked with us to enable us 

to have greater flexibility with the workforce to be responsive to 

the customer requirements of an Amazon and others that we’re 

working with. 

Mr. CUMMINGS. I mean, what do you see—what do you project 

in the future with regard to that? Do you see an expansion of that? 

It seems like this online shopping—and I literally go, you know, to 

the mall myself, but apparently that is old-fashioned now. So do 

you see that expanding more? 

Ms. BRENNAN. Yes, Congressman Cummings —— 

Mr. CUMMINGS. Not my thing, I am talking about the —— 

Ms. BRENNAN. Absolutely. 

Mr. CUMMINGS.—online. 

Ms. BRENNAN. No, I—hyper growth, hyper growth. But the challenge it’s a very competitive delivery space. We compete for customers every day. It’s the value proposition, competitive pricing, 

the transit time, performance, and certainly visibility. And the 

Postal Service has made investments in all of those components to 

ensure we improve our competitive standing. 

We need to recognize that while our strength is last-mile deliver, 

we’re challenged there. The so-called Uberization of package delivery, it’s a very competitive space, so we recognize we’ve got to compete for that business. 

The challenge, though, ultimately for us, the package growth 

alone won’t offset the losses in first-class volume, hence the need 

to address the legacy costs, specifically looking at Medicare integration as the cornerstone of our legislative ask. 

Mr. CUMMINGS. Thank you, Mr. Chairman. 

Chairman CHAFFETZ. Thank you. I now recognize the gentleman 

from Texas, Mr. Farenthold, for 5 minutes. 

Mr. FARENTHOLD. Thank you, Mr. Chairman. 


KING-6430 with DISTILLER
129 

And I want to follow up on a couple of things that the ranking 

member talked about, Ms. Brennan. You used the phrase ‘‘give 

mail a digital reflection.’’ What does that mean? 

Ms. BRENNAN. Yes. Yes, Congressman. We created a catalog 

called Irresistible Mail that imbeds in the catalog new technologies 

well beyond QR codes to include augmented reality near-field communications, so you open that catalog, it comes to life, so making 

it more creative and making it more relevant to the end consumer. 

Mr. FARENTHOLD. Okay. Super. And I think you also touched on 

the amount of work that you guys do for Amazon, and I think that 

is a great revenue opportunity, but I am afraid it is a short-term 

problem. I imagine there are a lot of people who spend their day 

at Amazon looking for ways to deliver packages faster and more efficiently. For instance, here in Washington, D.C., I have got about 

an hour and 5 minutes to order something that will be waiting for 

me when I get home tonight, and that isn’t you all that are doing 

the last-mile delivery on that. 

I work on the Transportation Committee. Amazon is talking 

about developing drones to deliver packages. One day in the nottoo-distant future they are going to say bye-bye to you guys, and 

how are you all preparing for that? I mean, you are saying they 

are 41 percent of your package volume. 

Ms. BRENNAN. Congressman, I would say this: As I noted, it is 

a very competitive delivery space, so we’ve got to compete for that 

business. The term ‘‘coopetition’’ exists whether it’s with Amazon, 

who’s a valuable customer as well as business partner, or UPS and 

FedEx who are traditional competitors, also business partners for 

us. So, again, it comes down to delivering the best value, and that 

includes service and price. 

Mr. FARENTHOLD. And let’s talk about service and price for a second. I live in Corpus Christie, Texas, and we were the unfortunate 

victims of a consolidation of a mail processing center. So now, instead of mailing something to my neighbor across the street and 

having it processed in Corpus Christie and delivered the next day, 

it is trucked to San Antonio, processed, and maybe delivered in 3 

days at the same price. At some point, you know, companies like 

Amazon want it there quicker. As you cut the quality of your service, especially on your lead program or your lead product, first-class 

mail, it starts to become less valuable and makes email look like 

a better alternative. 

Ms. BRENNAN. Congressman, the consolidation was in response 

to that decline in single-piece first-class mail, which is down more 

than 35 percent over the last decade. The service standard change 

and consolidation did not impact the delivery of packages, which is 

the growth product. We did the responsible thing, which was rightsize the infrastructure, address the latent capacity, and look at how 

to better utilize our assets. Now, service is foundational and it is 

key to growth. We recognize that. 

Mr. FARENTHOLD. And so we also spent a little bit of time talking 

about some of the—and I think almost everybody on the panel had 

a wish list of postal reforms that would make things better. Obviously, you know, shifting people to Medicare where it is a taxpayer 

responsibility instead of a postal responsibility makes sense, and it 

is probably fair, even though I hate to see even, you know, what 


KING-6430 with DISTILLER
130 

is it a 2/10 of a percent increase in the Medicare cost? It is so big 

anyway, we are talking a lot of dollars. 

Postal reform that has been talked about in past Congresses included other things, things like cluster boxes, curbside mail instead 

of delivery to the door and, you know, no junk mail on Saturdays 

but maybe the higher revenue packages and the like. Why are we 

still talking about those? 

Ms. BRENNAN. Why are we still or not talking about —— 

Mr. FARENTHOLD. Or why are we not talking about those? 

Ms. BRENNAN. Yes. 

Mr. FARENTHOLD. Why did they make sense a year ago —— 

Ms. BRENNAN. Yes. 

Mr. FARENTHOLD.—yet nobody is bringing them up today? 

Ms. BRENNAN. Again, Congressman, my approach in the past 

year was to try to build consensus around provisions, high value 

likely to generate broad support. 

Mr. FARENTHOLD. So there is something about—you know, it 

would be difficult for—we will take my family, for example. If we 

don’t have the money to do anything, it is hard to generate consensus about not taking a vacation, but we are not taking a vacation because we don’t have the money. I mean, that is just an example. So at some point you are going to have to make, I think, 

some hard choices, and you are not going to walk away with everyone happy. And I think that is what we were elected to do here in 

Congress not just with the Postal Service but on a governmentwide basis and say, okay, we can’t afford that, so let’s pick the stuff 

that is important and to pick the stuff that will work and make 

those hard decisions. 

Ms. BRENNAN. Congressman, we have made the hard decisions. 

You just noted one, the consolidations. The accelerated pace with 

which we ran was because of our dire financial situation. 

Mr. FARENTHOLD. But you all have stopped the consolidations 

now and are looking at other things. A report says they are going 

to be no more consolidations this year. Is that —— 

Ms. BRENNAN. Congressman, we deferred the consolidations until 

we stabilized the network because service is our mission, and service was not where it needed to be. It has since improved and we’re 

showing positive trends in that regard. 

I would offer—your comment about mode conversation, cluster 

boxes, for all new delivery, based on the delivery characteristics of 

that environment, we either effect delivery through box-on-post or 

centralized delivery. And of the more than 900,000 new possible deliveries that we added last year, over 70 percent were centralized 

or box-on-post. So we’re making the right business decisions. 

Mr. FARENTHOLD. All right. I see I am out of time. Thank you. 

Chairman CHAFFETZ. I thank the gentleman. 

I will now recognize the gentleman from Massachusetts, Mr. 

Lynch. Microphone? Thank you. 

Mr. LYNCH. Is it working? Oh, I am sorry. Okay. There we go. 

Thank you, Mr. Chairman. I also want to thank Mr. Cummings 

and Mr. Connolly and Mr. Meadows for all their work. We have 

done a lot of work on the side here to try to coordinate our efforts 

up here. And I am very pleased to see that the same thing is happening down there. I mean, we have a new postmaster general, 


KING-6430 with DISTILLER
131 

along with the National Association of Letter Carrier, rural letter 

carriers, mail handlers, the clerks, supervisors, and then the PRC, 

as well as the mailing community and the GAO, inspectors general, 

everybody on the same page. And so it troubles me that we can’t 

move this ball forward. 

I do want to focus on one key aspect of this, and that is the coordination of benefits between the FEHBP—I hate these acronyms—but the Federal Employee Health Benefit Plan and Medicare. So, Postmaster General Brennan, the situation we have right 

now, as has been noted by the chairman—and the chairman deserves a lot of credit because he has really been the one that has 

brought us all together with the ranking member and has us all 

working together, and it has been completely bipartisan and really—we do a lot of work up here, and this effort has been really bipartisan. 

But the way this works right now, the Postal Service is the second-largest contributor to Medicare, and the largest—and as the 

chairman and the ranking member noted, your people, the postal 

employees paid in $29 billion so far to Medicare. And the largest 

group is DOD, I believe, and they have a TRICARE wraparound 

with Medicare. And they are the largest. But when folks come out 

of the military and go on benefits, they are required to use Medicare as their primary insurer, so that is a good way to reduce their 

costs. 

And we don’t do that at the Postal Service. We have about 25 

percent of our employees that are relying solely on FEHBP and are 

not using, as they could, as they could because they have paid in— 

they are not using Medicare as their primary insurer. This in fact 

would—and I think President Rolando mentioned this in his testimony. It would basically eliminate—out of that $50 billion in unfunded liability, it would just about eliminate all of it, is that right? 

Ms. BRENNAN. That’s correct. 

Mr. LYNCH. Okay. And I have been listening closely, you know, 

because you have different groups out there. The only criticism 

that I have heard so far is that postal employees who pay into 

Medicare might actually use it. That is the only criticism I have 

heard, that people who pay into Medicare will use it, and some people see that as a negative. But I think it is entirely fair and reasonable to expect that people who paid in $29 billion might actually 

use some of those benefits, so I really don’t see that as a realistic 

criticism. 

The second opportunity in this—and you have done a great job 

with this proposal, and I think it ought to be adopted, and we 

ought to move this as quickly as possible in the form of legislation, 

more this forward. I really do think—and I realize we can’t fix everything, but just because you can’t fix everything doesn’t mean 

you shouldn’t fix something. And we can help. We can help up 

here. With a major piece of legislation here, we can help the post 

office immediately. We got other problems we will have to deal 

with, but that is for another day. 

The other thing I think that might be done quickly is, President 

Rolando, you mentioned the corpus of our health benefit trust fund. 

And right now, we are required, I believe, to hold that in treasuries, which for the past few years has been dismal in terms of 


KING-6430 with DISTILLER
132 

what it returns, you know, to the fund. And I know part of the proposal suggests that maybe 50 percent of that fund might be managed by a commission. Could you talk about that a little bit? 

Mr. ROLANDO. Yes. What we were talking about doing is having, 

you know, a board that would govern this that could invest 50 percent, up to 75 percent in something like the thrift savings plan 

lifecycle funds. 

Mr. LYNCH. Okay. 

Mr. ROLANDO. We looked at the period going back to 2007 where 

we were earning, I don’t know, somewhere about 4 percent with 

Treasury securities. Had it been invested in a lifecycle fund—and 

again, keep in mind this would have been through the worst recession in 80 years—we would have earned somewhere about 7 percent, which would have raised the fund another $10 billion just as 

an example. 

Mr. LYNCH. Okay. All right. I think we have to be careful with 

that, but I think that is a reasonable compromise. 

Okay. I think my time has expired, and I will yield back. Thank 

you, Mr. Chairman. 

Chairman CHAFFETZ. I thank the gentleman, and I appreciate 

Mr. Lynch’s work and passion on this issue and look forward to 

continuing to work with him on it. 

I now recognize the gentleman from North Carolina, Mr. Meadows, for 5 minutes. 

Mr. MEADOWS. Thank you, Mr. Chairman. Thank each of you. 

As we enter into this, I want to start out, Mr. Taub, by saying 

thank you for your work. It was good to visit with the PRC and 

all the dedicated employees that work there. 

Mr. Rolando, I want to just say I know I was not on your Christmas card list. I do appreciate the fact that you have been willing 

to work with me in an open-minded way. That was your commitment to me, my commitment to you, and I want to thank you. 

Ms. Brennan, thank you so much for being here. Obviously, as 

we look at this, this is an interesting time and so for all the postal 

workers, you know, I just want to say thank you. 

I have been a secret shopper because, you know, I am not shy 

about my criticism either. And so in Spruce Pine just the other day, 

I went into a place—actually, I sent my wife in because now I start 

to get recognized in some of these places. And the service that 

Debbie Calloway gave my wife was nothing less than spectacular. 

And she didn’t know who she was, and we went in. And so I went 

back in to thank her for her service. And that is what we need to 

do in terms of service standards. 

As a fiscal conservative, one of the things that you are asking me 

to do is get rid of a prefunding requirement that was, you know, 

part of a previous deal, and so why should I do that? Make a very 

short, compelling case on why I should do that. 

Ms. BRENNAN. First, I would say, Congressman Meadows, it’s the 

right thing to do to ensure that our pensions and the retiree health 

benefits is funded. It was the accelerated pace of that funding that 

created a large part of the challenge, but now we’re beyond that 

come this fall. The issue now is it’s a system that’s unaffordable 

for us. And, again, going back to we’ve paid more than $29 billion 

into the fund. Our employees should benefit —— 


KING-6430 with DISTILLER
133 

Mr. MEADOWS. All right. So you are saying that you paid $29 billion, we ought to do that. So I am willing to take the leap. Now, 

we have heard all kinds of different testimony. That doesn’t get us 

where we need to go, does it? 

Ms. BRENNAN. In and of itself, it’s not enough —— 

Mr. MEADOWS. Yes, it is about 2.8, $3 billion of a $5 billion deficit, so we need some other areas. We can’t make it up in volume 

because part of what is concerning me is that it indicates that we 

are just going to raise rates, that this is a revenue problem. And 

at $69 billion, it is not just a revenue problem, it is a management 

problem, so how do we take this without raising rates as being the 

ultimate answer and really fundamentally reform it and make it 

work? Are you in support of safe and secure delivery, you know, 

through cluster box? Is that something that you would support 

wholeheartedly? 

Ms. BRENNAN. Depending on the characteristics of the delivery 

environment, yes. We currently do affect delivery to cluster boxes 

—— 

Mr. MEADOWS. Would you support expanding that in a meaningful way, understanding that we may have to grandfather a lot, but 

we have been discussing is really looking at safe and secure delivery, which you may get some pushback from Mr. Rolando and some 

of those on that side, let’s recognize that, but we have all got to 

come together to figure this out. Are you supportive of that? Yes 

or no? 

Ms. BRENNAN. Yes. And, sir, what I—if I may, the comment I 

made earlier about new delivery and based on the delivery characteristics, what we would not recommend is mandatory conversion 

of existing door delivery, of which we have over 37.5 million businesses and residents that get door delivery —— 

Mr. MEADOWS. Well, so let’s say if we grandfather some of those 

in and we start to work—because I have been working with Mr. 

Lynch in an area that is different than mine. If we work through 

that, you are asking me to go ahead with the prefunding and jump 

off a cliff, I am asking you, are you willing to work with us to make 

sure that we implement safe and secure delivery in a meaningful 

way? 

Ms. BRENNAN. Yes. And if I may also comment, management has 

demonstrated a willingness to address operational efficiencies and 

to reduce costs, and we’ll continue to do that —— 

Mr. MEADOWS. Okay. So —— 

Ms. BRENNAN.—in our —— 

Mr. MEADOWS. Go ahead. 

Ms. BRENNAN. I apologize. 

Mr. MEADOWS. I —— 

Ms. BRENNAN. If I may, Ms. Rectanus mentioned that we don’t 

have any major cost reductions initiatives planned. We do. We have 

more than $5 billion in cost reductions embedded into our 5-year 

plan, and we continue to look at opportunity to drive operating efficiencies. That’s our responsibility. 

Mr. MEADOWS. But most of the opportunities we have talked 

about actually have been with increasing service, you know, or trying to increase a portfolio, whether it is banking or anything else, 

and that just doesn’t—I have only got a few seconds left, so here 


KING-6430 with DISTILLER
134 

is my concern. We are talking about all of this, and we are missing 

out on service standards. It is the number one thing that I get calls 

about, you know, why is my meal not being delivered, why are we 

having a problem? 

And even me, you said, you know, that first-class mail that is 

your bread and butter, and this first-class mail actually is all postmarked in December. I got it in April. Now, that is not a funding 

problem. That is a management problem. And it is not just here. 

It is not just in my district because in Peachtree City we have the 

same thing where we mailed actually wedding invitations for my 

son that took 8 weeks to get to another Member of Congress. 

And so what we have to do is put this together and make sure 

that we have a service standard that doesn’t just increase costs, 

and I am willing to work in a bipartisan way to do that, but we 

have to make sure that we do it in a way that serves the best interest of the public. And are you committed to do that? 

Ms. BRENNAN. I am committed. And if you would, if you’d give 

me those envelopes, I will look at that. 

Mr. MEADOWS. I don’t want to get somebody fired but —— 

Ms. BRENNAN. No. No, you won’t —— 

Mr. MEADOWS.—we just need to —— 

Ms. BRENNAN.—because—Congressman —— 

Mr. MEADOWS. But I will give them to you. Actually, I had about 

40 different pieces of mail that came to me that had the same problem. 

I will yield back. 

Ms. BRENNAN. Thank you. 

Chairman CHAFFETZ. I thank the gentleman, 

Mr. CONNOLLY. Mr. Chairman, I just want to note, now I know 

why my wedding invitation wasn’t —— 

Mr. MEADOWS. You are always invited there, Mr. Connolly. 

Chairman CHAFFETZ. I now recognize the gentlewoman from Illinois, Ms. Kelly, for 5 minutes. 

Ms. KELLY. Thank you, Mr. Chair. I just wanted to say every 

time we have a postal hearing I text my brother because he works 

for the post office, so I ask him did he have any questions that he 

wanted me to ask you. But one thing I wanted to say as far as the 

consolidations, I am glad that you thought enough, even though 

they might be necessary to slow it down because service does come 

first, and that is some of the things that he has spoken about because of all the closed stations, the long lines, and not enough 

clerks in the window. So I am glad that you are still putting service 

first and taking that into consideration because people will go other 

places if they don’t feel like they are getting good service. And we 

definitely want the post office to thrive. 

Ms. Brennan, one of the elements of the joint postal reform proposal put forward by the Postal Service, the postal unions, and certain elements of the mailing industry is the use of postal-specific 

demographic assumptions when calculating pension liabilities. The 

proposal would also require any surplus resulting from those calculations to be used to pay down the Postal Service’s debt to the 

U.S. Treasury. 

Intuitively, it makes sense to use the demographic and salary 

growth statistics of the postal workforce when calculating the PostVerDate Nov 24 2008 09:49 Jun 23, 2017 Jkt 000000 PO 00000 Frm 00138 Fmt 6633 Sfmt 6633 H:\25499.TXT APRIL

KING-6430 with DISTILLER
135 

al Service’s pension liabilities. What is it about the demographics 

of the postal workforce compared to those of the government’s entire workforce that you believe will result in lower cost? 

Ms. BRENNAN. Specifically, Congresswoman, the salary wage 

growth. And we estimate over a 5-year period that to be valued at 

roughly $3.2 billion. 

Ms. KELLY. Okay. Has the Postal Service calculated how much 

in savings would result from the use of postal-specific demographic 

assumptions? 

Ms. BRENNAN. Roughly $3.2 billion over a 5-year period. 

Ms. KELLY. Okay. Ms. Rectanus, GAO has done a significant 

amount of work on postal pension funding issues in recent years. 

In 2014, the GAO supported the use of the most accurate actuarial 

assumptions for postal pension liability calculations. Do you agree 

with Ms. Brennan that the Postal Service should use postal-specific 

demographics when calculating pension liabilities? 

Ms. RECTANUS. Yes, we support it because if it is the most accurate data, then that should be used to get a better number of what 

the liability is. 

Ms. KELLY. And do you have any views on the amount of the potential savings that may be available if that is used? Do you agree 

or do you have different —— 

Ms. RECTANUS. We have not done the calculation so I can’t—and 

we haven’t looked at the Postal Service’s data so I can’t comment 

on that. 

Ms. KELLY. Okay. Thank you. And I yield back my time. 

Chairman CHAFFETZ. Thank you. 

Mr. CONNELLY. Would the gentlelady —— 

Ms. KELLY. Yes, I will yield. Yes. 

Mr. CONNELLY.—yield? I thank my friend. And I want to thank 

you all for being here. And I have got to say, Postmaster General 

Brennan, you represent a breath of enormous fresh air. I mean, I 

want to say publicly how much I appreciate working with you. We 

have been able to forge a bipartisan coalition. Mr. Chairman, thank 

you for your leadership and bringing us together to do that. 

And I share the sentiments of my friend Mr. Lynch from Massachusetts and am very hopeful we are going to get postal reform, not 

everything but a big chunk of what we need to be addressing so 

thank you. 

Ms. Brennan, what does it mean for the Postal Service to lose 

the exigent rate, which expired, I think, in April, right? 

Ms. BRENNAN. Yes, Congressman Connelly. This year, we estimate that impact to be up to a billion dollars this fiscal year and 

roughly $2.1 billion going forward, worsening our financial situation. 

Mr. CONNELLY. And, Ms. Rectanus, in your testimony you state, 

‘‘The Postal Service’s financial condition continues to deteriorate’’ 

and you attribute that to ‘‘declining mail volume and growing expenses at the same time,’’ is that correct? 

Ms. RECTANUS. Yes, that is. 

Mr. CONNELLY. And yet do you believe that some of the elements 

of the reform we have been talking about, freeing up the Postal 

Service to, you know, engage in some other lines of business that 

may be profitable like other postal services around the world do, 


KING-6430 with DISTILLER
136 

so lifting some of those restrictions, lifting the burden of a unique 

prepayment requirement, as Mr. Rolando pointed out, unique to 

the Postal Service. No other Federal agency, no other private corporation in America is held to that standard in terms of that prepayment. And it is, you know, whatever it is, $5 billion plus, plus 

the Medicare reform I think we have been talking about, which I 

wish Mr. Farenthold were still here. That is not a taxpayer giveaway. Postal workers have paid $29 billion for a service they don’t 

participate in, benefit from yet. Those things, could they turn 

around that financial description you have offered in your report? 

Ms. RECTANUS. GAO has not taken a position on specific elements in that proposal. However, we have supported appropriate 

restructuring of the —— 

Mr. CONNELLY. Well —— 

Ms. RECTANUS.—retiree health benefits —— 

Mr. CONNELLY.—if I may because I am running out of time, I am 

not asking you for your position; I am asking you for your analysis. 

If those things were adopted, would your numbers and your prognosis change? 

Ms. RECTANUS. Certainly they would benefit the Postal Service. 

What we would not want to see, however is not an equal focus on 

cost reduction and right-sizing and trying to get the house in order 

so that whatever revenue is generated is appropriate and people 

understand that solutions are trying to be gotten in both areas. 

Mr. CONNELLY. If the chairman will allow the postmaster general 

to comment on that as well, and then I will be done. I thank the 

chair. 

Ms. BRENNAN. Thank you, Congressman Connelly. And it relates 

to the questions from Congressman Meadows. We need the legislative reform, a favorable resolve of the rate-setting process, and 

management actions need to continue to drive operational efficiencies and grow profitable revenue. All the above would put us 

on firmer financial footing, have manageable debt, and have the 

ability to invest. 

Mr. CONNELLY. Thank you. And thank you, Mr. Chairman. 

Chairman CHAFFETZ. Thank you. 

Mr. CONNELLY. Thank you, Ms. Kelly. 

Chairman CHAFFETZ. I will now recognize the gentleman from 

Georgia, Mr. Hice, for 5 minutes. 

Mr. HICE. Thank you, Mr. Chairman. 

Ms. Brennan, I think I heard this; I just want to clarify. How 

many employees at the Postal Service total? 

Ms. BRENNAN. We have about 498,000 career and 136,000 flexible or non-career employees. 

Mr. HICE. Okay. What was the 7.5 million referred to twice, Ms. 

Lowrance, you and Mr. Rolando both. 

Ms. LOWRANCE. That is the entire mailing industry, so it includes private sector, as well as the Postal Service. 

Mr. HICE. Okay. So more or less, what, 550,000, 600,000? I didn’t 

tally that. 

Ms. BRENNAN. Yes, roughly 634,000. 

Mr. HICE. Six thirty-four, okay. And yet we all understand we 

have got a declining industry as a whole because of a variety of facVerDate Nov 24 2008 09:49 Jun 23, 2017 Jkt 000000 PO 00000 Frm 00140 Fmt 6633 Sfmt 6633 H:\25499.TXT APRIL

KING-6430 with DISTILLER
137 

tors, digital and so forth. Does the Postal Service have too many 

employees? 

Ms. BRENNAN. We have a requirement, our universal service obligation, to deliver to all 155 million delivery points, 135 million of 

which are physical delivery points. The other 20 are post office 

boxes. So that requires an extensive network, and that network includes employees, facilities, vehicles and equipment —— 

Mr. HICE. I understand that, but is it top-heavy? Do we have too 

many employees? 

Ms. BRENNAN. No. I would say that we consistently look at how 

to rebalance and where there are opportunities. And if you look at 

the reduction in overall complement, we’ve reduced more than 

168,000 employees over the last decade. 

Mr. HICE. Okay. So we have 634,000 employees, we have a declining business, but you don’t think we have too many employees 

still? 

Ms. BRENNAN. The challenge, sir, is the workload content associated with package delivery, as an example —— 

Mr. HICE. No —— 

Ms. BRENNAN.—is —— 

Mr. HICE.—I understand that. 

Ms. BRENNAN. There’s —— 

Mr. HICE. But that problem is why we have a declining business. 

The result of a declining business—what would a private company 

do? If a private company is losing money month after month, year 

after year, quarter after quarter, what would they do? 

Ms. BRENNAN. What we did, sir, in terms of rationalizing the network, consolidating facilities, adjusting retail hours at post offices 

to match customer demand, some of the same management actions 

that I’ve been recently criticized for. 

Mr. HICE. But we are still losing money. And I will go on. You 

said a few moments ago that your goal is to fill mailboxes and 

trucks. Is that your strategy to turn this thing around? 

Ms. BRENNAN. Our strategy is far more complex than that, Congressman. 

Mr. HICE. I would hope so. 

Ms. BRENNAN. I was trying to simplify. 

Mr. HICE. Well, but that is what you said was your goal. 

Ms. BRENNAN. It’s—you don’t want to—you can’t cost-cut your 

way to prosperity. There are opportunities for us, certainly, to drive 

efficiencies. There are opportunities for us to look at overall operating expense, and we do that every day, but we also need to look 

at opportunity to grow. There are opportunities to grow. Mail still 

works. We delivered 154 billion pieces of mail last year and 150 billion was mail, 4 billion packages —— 

Mr. HICE. But you continue to lose money. That is the issue, and 

it seems rather unrealistic when you have a declining industry to 

think that somehow the goal of simply filling mailboxes and trucks 

is going to be successful in the long run. 

Ms. Rectanus, you mentioned earlier that the Postal Service has 

been on high risk since 2009. And you summarized the reason— 

two basic reasons: less mail and higher salaries. Do you see an opportunity without cutting, be it the workforce or whatever, for the 

Postal Service to turn this around? 


KING-6430 with DISTILLER
138 

Ms. RECTANUS. We have proposed that it’s really got to be a balancing act between generating revenue and aligning costs. We do 

believe that there’s more right-sizing that the Postal Service can 

do, and that’s addressing where they have excess capacity but then 

putting that where they do need capacity, certainly exploring some 

of the workforce issues that they have, and they—Ms. Brennan is 

right. They’ve done a great job over the past several years to manage their workforce, but we’re starting to see it creep up again in 

fiscal year 2015, and looking at the delivery mechanisms. 

Again—and you need to do that by also looking at the revenue, 

but you have to look at both of them. And, yes, part of it is what 

does the mail picture look like today and in the future and what 

type of services are going to be required, and how do we want to 

provide those services, which is what we would like to see through 

comprehensive postal reform. 

Mr. HICE. Okay. Well, let me springboard off of that and come 

back to you for my final question, Ms. Brennan. What is the Postal 

Service’s long-term plan for addressing the declining industry? 

Ms. BRENNAN. Let me first, if I may, Congressman, address your 

comment earlier about the losses. The majority of the losses are 

tied to the prefunding mandate. 

In terms of our long-term plan, it is addressing infrastructure, 

how to leverage that, repurpose that to support the growth, address 

the latent capacity —— 

Mr. HICE. Support what growth? 

Ms. BRENNAN. Package growth, sir. We’ve grown our packages 49 

percent over the past 5 years. We will right-size the infrastructure, 

as we’ve been doing with where we need to consolidate with the decline in letter volume. We’ll continue to look at every opportunity 

to improve operating efficiencies. We have a number, as I mentioned, of over $5 billion of cost reductions identified in our 5-year 

plan. 

Mr. HICE. Thank you. I think it is time for the Postal Service to 

act as private business has to act in similar situations of constantly 

losing money without relying upon the taxpayer. At some point we 

have got to change. 

Mr. Chairman, I thank you for your indulgence. 

Chairman CHAFFETZ. I thank the gentleman. 

I will now recognize the gentleman from California, Mr. Lieu, for 

5 minutes. 

Mr. LIEU. Thank you, Mr. Chairman. 

Postmaster General Brennan, last October the U.S. Postal Inspection Service issued a release about mail theft. And it says that 

these crimes are increasing and that mail theft from collection 

boxes and customers’ mailboxes is a big problem. It also said in 

most cases of mail theft from centralized mailbox units involved 

counterfeit master keys. 

So two questions for you. One is when you talk about rightsizing, are you reducing U.S. Postal Inspection Service members at 

all, and does that have an effect on mail theft? And second, as you 

move to more and more cluster boxes, doesn’t that also increase 

mail theft because you just need one master key and then you have 

access to a whole lot of mailboxes? 


KING-6430 with DISTILLER
139 

Ms. BRENNAN. To your first question, no, we are not reducing. In 

fact, we have two classes currently and in training to increase the 

postal inspection staffing. 

And in terms of the theft, particularly as you’re aware in your 

district, Congressman, we’ve got a postal inspection task force 

that’s working with local authorities and the community and taking some proactive measures to address that. I’d be more than 

happy to brief you in detail given the sensitivity of those corrective 

measures. 

Mr. LIEU. Thank you. I would appreciate that. 

Ms. BRENNAN. Certainly. 

Mr. LIEU. Second, in terms of trying to raise revenue, what is 

your view of postal banking as a way to generate revenue and also 

serve communities that may not be served as well by banks or may 

not have a trust of private banks but may trust the post office? 

Ms. BRENNAN. Fundamentally, we’re open to any new product 

and service that would generate profitable revenue. That said, we 

do provide some banking services now. We provide money orders, 

electronic money transfers, and cash treasury checks. We would 

need to look at that through a business prism. Can we execute effectively? Can we grow profitable revenue? And is this a service 

that is not offered in the public sector? 

Mr. LIEU. Okay. We have had a number of difficulties with service in my district, so the first point I want to make is when we contact your office, they have been enormously responsive and they 

are able to help cases. About 97 percent of cases get resolved. The 

problem is we continue to get more and more cases, and now it 

looks like it is a systemic issue in western L.A. County. A 

councilmember in west L.A., his office had not gotten any mail for 

an entire week. We just checked again, and even when they get 

mail, it is sort of spotty, so this past Monday and Tuesday they are 

not getting any mail. We get complaints from Santa Monica and 

Redondo Beach. 

In the city of Beverly Hills it got so bad that the local newspaper 

did an entire series on it. So last August, for example, they printed 

a story saying, ‘‘residents agree, Beverly Hills post office fails to deliver.’’ Last September, ‘‘post office acknowledges crisis and meeting at Congressman Lieu’s office.’’ Last December, ‘‘Beverly Hills 

post office issues continue.’’ And then this January from Beverly 

Hills Courier, ‘‘Beverly Hills post office ends year with more customer woes.’’ 

And with the indulgence of the chair, if I could submit these for 

the record. 

Chairman CHAFFETZ. Without objection, so ordered. 

Mr. LIEU. Thank you. 

I would just like your commitment that you will work with our 

office to look into these issues. I am elevating it because you happen to be here, but also, we have tried with the local folks on numerous occasions. And what will solve individual cases, systemically, they just keep on coming in. I think there needs to be a systemic fix. 

Ms. BRENNAN. Congressman, absolutely. And if I may just address Beverly Hills, which I am familiar with specifically, we did 

make some adjustments in transportation and staffing to improve 


KING-6430 with DISTILLER
140 

the performance out of that particular facility, and I’ll be glad to 

talk to you and follow upon the other issues. 

Mr. LIEU. All right. Thank you. And then my last point, one of 

my colleagues said that the Postal Service should be run more like 

a business. You don’t actually set the rates for your products, correct? 

Ms. BRENNAN. Products that generate roughly 76 percent of our 

revenue are capped at household inflation. 

Mr. LIEU. Right. And in fact, if you actually set your products at 

market rates, you would be getting a lot more revenue. Isn’t that 

correct? Potentially? 

Ms. BRENNAN. We have an opportunity in 2017 with the review 

by the PRC of the rate-making process to look at the present price 

cap, is it meeting its objective as outlined in PAEA, which was to 

ensure that revenues cover our expenses and to ensure the financial stability of the Postal Service. We think there’s opportunity 

there. We think a rigid price cap is fundamentally unsuited in an 

environment where you have declining workload and fixed or growing infrastructure costs. 

Mr. LIEU. My view is if people want the Postal Service to run 

like a business, they need to give it tools to make it run like a business. Otherwise, they should stop saying that. I yield back. 

Chairman CHAFFETZ. I thank the gentleman. 

I will now recognize the gentleman from North Carolina, Mr. 

Walker, for 5 minutes. 

Mr. WALKER. Thank you, Mr. Chairman. Thank you, panel, for 

being here today. 

A lot of this to me is about the perception’s trust in the post office as a whole. And just going back and looking at the numbers 

over the last few years, 2015, $5.1 billion lost; 2014, $5.5 billion; 

’13, $5 billion; 2012, $15.9 billion; 2011, $5.1 billion; 2010, $8.5 billion. At some point the people are saying what is going on here? 

So this is just a perception. This is the reality of a major trust 

issue. I have 5 minutes to speak. In those 5 minutes, the approximate amount that the post office will lose is $47,564. That is a 

huge issue. 

And I have heard today from some of the witnesses that we are 

working hard or some of the members, the colleagues, that they are 

working hard to try to do things better, but I have a couple specific 

questions in regards to this rate increase that we are beseeching 

Congress on. If you did receive this rate increase, can you tell me 

about where this extra money would be reinvested, General Brennan? 

Ms. BRENNAN. In terms of if we were granted —— 

Mr. WALKER. If you were granted a rate increase, where would 

that money go? Where would —— 

Ms. BRENNAN. Well, one —— 

Mr. WALKER.—you invest it? 

Ms. BRENNAN. First of all, we would look to pay down debt if we 

were to—able to address these long-term liabilities. And the net 

losses that you cited, Congressman, are in large part due to the 

prefunding requirement. The past 3 years we have had controllable 

income, which is revenue less expense, that which was—is within 

our control. 


KING-6430 with DISTILLER
141 

Mr. WALKER. Would you agree with this statement that the Postal Service could run out of money between 6 months and a year 

at the most? 

Ms. BRENNAN. What we will do, our fiduciary responsibility 

would be to make decisions and prioritize which payments to make 

to ensure that we would be able to continue to deliver the mail and 

pay our employees and our suppliers. 

Mr. WALKER. My concern with that statement is that wasn’t a recent statement. That statement was from over 3 years ago, and we 

have seen continuing beseech of Congress as far as more and more 

funding, this isn’t working out. 

I want to hone in today on something, though, specifically about 

packages versus the mail. And I want to make sure that I am clear 

on this, as we have done some research on this lately. The increases that you are requesting, would they be used to subsidize 

the package area of the post office business or would it be to increase the mail delivery? Can you expound on that a little bit 

today? 

Ms. BRENNAN. Yes. In terms of the cross subsidization issue, the 

PRC annually reviews to ensure that there is no cross subsidization, that our competitive products cover their cost, and also that 

they contribute a minimum of 5.5 percent to institutional costs. 

The PRC has found annually since the inception of PAEA that that 

is in fact happening. 

Mr. WALKER. Well, you have stated that Postal Service has made 

consolidations to respond to the decline in the mail, but you have 

also stated that you are investing in package delivery. I believe you 

just said that just a few minutes earlier. And that as a result of 

those investments, package delivery was not slowed by the consolidations. But Title 39, section 101, subsection (e) states that ‘‘in determining all policies for postal services, the Postal Service shall 

give the highest consideration to the requirement for the most expeditious collection, transportation, and delivery of important letter 

mail.’’ Do you think that the Postal Service is following both the 

spirit and the letter of this law given your current actions? 

Ms. BRENNAN. I do believe we’re following the spirit of that law. 

Mr. WALKER. Well, if that is the case, then, the annual compliance report suggests that the post office, the Postal Service is routinely prioritizing competitive products over market-dominant products. Do you disagree with that? 

Ms. BRENNAN. I’d have to see that, sir, in terms of what you’re 

actually referring to. 

Mr. WALKER. Well, I believe it is your annual compliance report 

that once again —— 

Ms. BRENNAN. That says —— 

Mr. WALKER.—suggests that the Postal Service is routinely 

prioritizing competitive products over market-dominant products. 

Can you expound on that? 

Ms. BRENNAN. No, I believe that may be the PRC’s comment that 

it suggests—I’m not sure what you’re referencing there. If I can 

talk about the annual compliance —— 

Mr. WALKER. Sure. 

Ms. BRENNAN.—report and annual compliance determination, 

we’re very transparent about performance in terms of transit time 


KING-6430 with DISTILLER
142 

performance, in terms of volume growth, and in terms of investments within the organization. 

Mr. WALKER. Thank you, Mr. Chairman. I appreciate the time. 

Thank you, General Brennan, and I will yield back. 

Chairman CHAFFETZ. Thank you. I now recognize the gentleman 

from Pennsylvania, Mr. Boyle, for 5 minutes. 

Mr. BOYLE. Yes, thank you, Mr. Chairman. 

I was struck by the fact that—I don’t know when this was; I 

know it was recent—that Pew Research did a poll of favorability 

ratings of different, various government agencies, and the post office came out the highest at 84 percent, which I can’t remember 

where Congress was, but I think Postal Service was slightly higher 

than where Congress ended up, significantly lower than that. That 

is made all the more remarkable by the fact that you have had a 

decade where there are 200,000 fewer employees than there were 

just a decade ago. 

My question, though, is regarding the rather unique requirement 

the Postal Service lives under where essentially you have to prepay 

75 years of obligations within a 10-year window. Can you talk 

about the effect that that has had on the balance sheet? And do 

you know of any other government agency or for that matter private sector company that has to live under such a unique requirement? I will leave that to anyone who wants to grab in. If you 

would like to go ahead. 

Ms. BRENNAN. I’ll be happy to, Congressman. In terms of the 

prefunding requirement, my understanding is it’s—would be 

unique to the Postal Service. There is some responsibility with the 

Department of Defense in terms of prefunding. My understanding 

is that their amortization payments are over a longer period of 

time, plus they are appropriated and integrated with Medicare. 

Mr. BOYLE. If anyone else would like to add something? 

Mr. TAUB. Yes, Congressman, this was enacted as part of the 

2006 law in a bipartisan way with the best of intentions. Of course, 

the next year, our economy went into the deepest recession since 

the Great Depression, and with that the mail volume accelerated 

and caused these challenges. The postmaster general is correct. 

I would point out when the 2006 law was enacted, there was zero 

dollars prefunded for future retiree health benefits. Today, as we 

speak, there’s more than $50 billion that has been prefunded. 

There’s still an outstanding obligation of roughly half that amount, 

but we have gone from nothing prefunded to $50 billion today. 

Mr. BOYLE. If you would like to add something. 

Mr. ROLANDO. Yes, I would. Thanks. Yes, this is unique to the 

Postal Service, but I’d like to point out that the proposals that the 

consensus group has put together, we would not only fully fund the 

retiree health fund, we would be overfunded if you took all the 

components that something else—something that nobody else is 

able to do. 

Mr. BOYLE. Thank you. I would just add that my great concern 

is, particularly as we have this conversation of going from 6-day to 

5-day mail, that we continue to be in this negative cycle of cutbacks 

and closures that is really a self-fulfilling prophecy. That can be 

very destructive to communities and neighborhoods. I represent a 

largely suburban and urban residential district. When we went 


KING-6430 with DISTILLER
143 

through even just a rumored closing of our post office in the 19116 

zip code, that set off a firestorm. And maybe not for people my age 

but for those who are of an older age, having that local post office 

there is an important part of the community. 

So as we look at these decisions, and certainly dollars and cents 

plays a major role, I think we also have to put a value on what 

the local post office means to the community. And if that is the 

case in a neighborhood and in a suburban area, I think it is only 

more so the case in a rural area, which tends to be more remote. 

Thank you. I yield back. 

Mr. MEADOWS. If the gentleman would yield for just a second? 

Mr. BOYLE. Sure. 

Mr. MEADOWS. I want to make sure it is clear. We are not talking about 5-day delivery. I mean, I don’t want that to be the headline that comes out of this hearing because your point is welltaken. So whether it is in a suburban area or a very rural area, 

I don’t want the phone calls to start coming in. 

Mr. BOYLE. Thank you, Mr. Meadows. 

Mr. MEADOWS. I agree with Mr. Lynch —— 

Mr. BOYLE. Yes. Okay. Thank you —— 

Mr. MEADOWS.—and so I thank —— 

Mr. BOYLE. And if I could —— 

Mr. LYNCH. Would the gentleman —— 

Mr. BOYLE. Actually, if I could reclaim my time —— 

Mr. LYNCH. Sure. 

Mr. BOYLE.—and then will yield briefly to Mr. Lynch, I would 

say that while that might not be the point of today, there have 

been numerous proposals about going to 5 days, and it has me very 

concerned and a number of our constituents for the reasons you described. 

I will yield now to Mr. Lynch. 

Mr. LYNCH. Thank you. Yes. Very briefly, Mr. Chairman, and I 

thank the gentleman for yielding. 

I know there was some implications here that the postal workers 

were not doing their part or that, you know, costs are creeping up 

and things like that. I just want to read you something. In 2011, 

the American Postal Workers Union, which is the largest union, 

and the Postal Service reached a voluntary agreement that resulted in a sea change of significant and far-reaching concessions. 

The 2002–2015 agreement contained wage freezes for year 1, wage 

freeze for year 2, and that is within a 5-year contract, followed by 

a 1 percent raise, a 1.5 percent raise, and a 1 percent raise cost 

of living, and it was deferred to the third and fourth year. 

So extremely, extremely, extremely modest increase on the part 

of the employees, including 2 years of a wage freeze in a 5-year 

contract. So, you know, just people should bear that in mind. I 

yield back. Thank you. 

Chairman CHAFFETZ. Thank you. I thank the gentleman. 

I will now recognize the gentleman from Alabama, Mr. Palmer. 

Mr. PALMER. Thank you, Mr. Chairman. And for the record I 

want to say that my wife and I love our postman. He does a great 

job. 

Ms. Lowrance, it was mentioned earlier about some of the things 

that are being done in the private sector. I would like to ask you 


KING-6430 with DISTILLER
144 

what cost-cutting initiatives has industry had to implement in the 

wake of the evolving postal world as we know it? 

Ms. LOWRANCE. So we’ve seen a great consolidation in our industry. We have seen some of the larger print houses kind of eat up 

all the little ones to get rid of access capacity. We’ve seen plant closures and layoffs and those sorts of things in order to kind of compensate for the decline in mail volume that’s seen across the industry. 

Mr. PALMER. If you had to guess, what cost-cutting efforts would 

the Postal Service have to take or be taking if it were a private 

company? 

Ms. LOWRANCE. Well, I think that the Postal Service has shown 

an ability to cut costs in the extreme conditions that they’ve been 

functioning under. I mean, I’m not really at liberty to say that layoffs should happen or anything should happen to the common employee of the Postal Service. I think that there are great lengths 

of additional price signals and cost efficiencies that they could gain 

through working with the industry. I think the industry has done 

more and more in the form of work share to take work hours out 

of, you know, the postal facilities and continue to rely on the industry to do things that they do very well. 

Mr. PALMER. I want to bring up a couple of things that have 

come to my attention that I think might be helpful. For instance, 

there is an economic analysis from a group called Keybridge you 

might be familiar with Ms. Brennan that says the Postal Service 

could save over $2 billion on the delivery vehicle procurement that 

you are planning, which is expected to cost over $6 billion. How do 

you respond to that? 

Ms. BRENNAN. Congressman, I’d have to read that report. In 

terms of the actual cost, we have some estimates about the cost, 

but a number of factors will determine the cost of the vehicle fleet 

replacement. 

Mr. PALMER. You are correct in that. There are a number of factors, and that is one of the reasons why your costs are so high because you are buying vehicles that you plan to keep in place for a 

number of years and your fuel costs, your maintenance costs are 

exorbitant compared to what other private companies would be 

doing. And I highly recommend that you take a look at that 

Keybridge analysis. And if you have trouble finding it, I think if 

you will let the committee know, we can find that for you, get that 

for you. 

There is also an issue, Ms. Brennan, that in November the inspector general put out their semiannual report and found that 

there was $1.8 billion in funds that could be put to better use and 

$455 million in questionable costs from April to September of 2015 

alone. I would like to know how you responded to the IG’s report. 

Ms. BRENNAN. Well, Congressman, that’s a compilation of literally probably hundreds of audits and/or studies, so I would need 

to look at them in separation or in isolation to address that. Currently, the OIG does valuable work for us and identifies opportunity. Oftentimes, it is work that we are currently undertaking 

and working through, so I would certainly acknowledge that there 

is opportunity for process improvement and additional efficiencies 

that will help drive down costs. 


KING-6430 with DISTILLER
145 

Mr. PALMER. Well, considering the environment that you are in 

right now and, you know, these two combined would be somewhere 

in the range of $2.3 billion and that you could save another $2 billion in your vehicle procurement, you know, it gets you a little over 

$4 billion, I think that ought to be a couple of things at the top 

of your list for consideration. 

And then I am not for layoffs either, but I also am concerned 

about the public perception of the post office and, again, for the 

record, we think the world of our postmen. But there was a survey 

done by Accenture, evaluated 24 government-operated postal organizations and two private companies that together deliver 75 percent of the world’s mail and found that the post office ranked last 

as the lowest-performing postal agency or commercial operator in 

the world. And my concern is it is not just with the cost-cutting but 

the public perception of what the post office does and yet you add 

the poor performance, and I think because of the labor contract you 

are under, the inability to remove poor-performing workers and 

then these losses, the post office has got to really address these 

issues to improve its image and to make it a viable industry. 

Thank you, Mr. Chairman. I yield back. 

Chairman CHAFFETZ. I thank the gentleman. 

I will now recognize the gentlewoman from Michigan, Mrs. Lawrence, for 5 minutes. 

Mrs. LAWRENCE. Thank you. 

It is an honor to be here today, and thank you, Chairman and 

the ranking member, for calling this hearing. 

I wanted to be clear for the record that I had a 30-year career 

with the Postal Service starting as a letter carrier, so I have a lot 

of respect for Mr. Rolando. 

I also want to say no other organization in America is compelled 

to prefund future retirement benefits at the level that is done by 

the Postal Service. It is clear that pushing a public agenda which 

operates with no taxpayer funds—so there was some allusion earlier that we are using taxpayer dollars. The revenue that we generate from the sale of our products is what we fund and operate 

our business with. And so often it seems to get confusing in debate 

when we start talking about the Postal Service as if we are using 

taxpayer dollars. So it operates with no taxpayer funds to the brink 

of financial crisis by forcing it to assume the financial burden assumed by no other agency or company is the height of the financial 

irresponsibility of Congress, and Congress should fix this problem 

that we created. 

Today, as we are having this debate about the future of the Postal Service—and yes, there are some issues that we need to work 

with. And, Ms. Brennan, I have been very clear with you in private 

conversations, and, you know, trusting you to continue to keep delivery standards as one of the primary objectives, and as I look 

here with our postal customers and mailers who depend on us. 

But one of the things I wanted to talk about is the downsizing 

commitment that has been made by the Postal Service, reducing 

your workforce by 200,000 careers since 2006, reducing your work 

hours by 331 million, changing operation hours. Can you, Ms. 

Brennan—and I would like Mr. Rolando to weigh in on this as well, 

and my mailers if you have time—how has this consolidation and 


KING-6430 with DISTILLER
146 

reduction of workforce aligned with the phase 1 and phase 2 of the 

Network Rationalization plan or initiative? 

Ms. BRENNAN. Yes, if I may start, Congresswoman, we completed 

phase 1. Phase 2 we completed 17 of the projected 82 consolidations. So we have additional consolidations that we’ll revisit. We’ll 

redo the economic analysis, given that that is now 5 years old, and 

would make the appropriate notifications before we resume those 

consolidations. 

Mrs. LAWRENCE. Mr. Rolando, how is it affecting the day-to-day —— Mr. ROLANDO. Well, first, I’d just like to say keep in mind a lot 

of this is in reaction to the prefunding itself. I keep hearing over 

and over, what would you do if you were a private company, and 

if we were a private company, we wouldn’t have $50 billion of resources tied up in a fund for 75 years into the future. It would certainly affect the standards, it would affect service, it would affect 

rates, it would affect vehicles, it would affect infrastructure, it 

would affect all kinds of things. 

So I think the takeaway from all of this is we’re not allowed in 

that way to act like a private company. We do have to prefund. 

There’s no appetite in Congress for us not to prefund, so that’s why 

we’ve put together this coalition to find a way to satisfy that mandate. We’ve come up with a way to do it. And moving on from then, 

then we can act as a private company or as a Postal Service in a 

rational and efficient manner moving forward. 

Mrs. LAWRENCE. And I just want to add, it is about being competitive. We are in a very competitive market, the Postal Service, 

and if you truly want this company to be efficient and competitive, 

then we as Congress must recognize how we are tying the hands 

of the Postal Service. 

And so I say to my colleagues very passionately that we absolutely want to the Postal Service, which is covered—you know, 

when I was employed, I had to take an oath that I would protect 

the mail and make sure that it is protected from foreign agencies 

and how important and special it was to be an agent of the Postal 

Service. But then we tie their hands and then we criticize them. 

And one of the things that I want to talk about is the future of 

these packages. We know that drones in other industries are coming, but we consistently tie our hands and we see the other industries moving forward to embrace the ability to be competitive, to reduce costs, but we in the Postal Service—we, I am saying we because I am a retiree—those in the Postal Service continuously fight 

against these restrictions, so we as Congress must step up and 

take ownership of what we have created. And we have amazing opportunity now to remove some of those barriers as we hold the 

Postal Service accountable for filling their role of delivery. 

And I am over, so thank you. 

Mr. MEADOWS. [Presiding] I thank the gentlewoman. 

The chair recognizes the gentleman from Missouri, Mr. Clay, for 

5 minutes. 

Mr. CLAY. Thank you, Mr. Chairman. 

And let me start with Ms. Rectanus. Do you know of any other 

government agency or private sector company that has to fully 

prefund the health care costs of its retirees? 


KING-6430 with DISTILLER
147 

Ms. RECTANUS. The issue you’re asking about is whether anybody’s quite like the Postal Service, and the issue is they are a 

unique organization that were designed to be a Federal entity, an 

independent agency within the Federal Government. And so they 

are designed to be self-sustaining. So that’s why they are in a different situation than other organizations. 

Mr. CLAY. But the 2006 Postal Accountability Act imposed that 

requirement on the Postal Service, correct? 

Ms. RECTANUS. That’s correct. 

Mr. CLAY. How much money has the Postal Service been required to pay in, and has it been able to make all of these payments? 

Ms. RECTANUS. To date, the Postal Service has paid about $18 

billion on top of the original money that was put in originally. They 

have missed $28 billion in payments as far as the retiree health 

benefits program —— 

Mr. CLAY. And so $28 billion is the value of the unfunded liability? 

Ms. RECTANUS. No, sir. That’s the amount of money the Postal 

Service has not put in. The amount of money that is unfunded is 

about $54 billion. 

Mr. CLAY. I see. Ms. Brennan, I understand that 86 percent of 

the losses that the Postal Service accumulated between the years 

’07 and ’11 are attributable to this prefunding requirement. Is that 

right? 

Ms. BRENNAN. That’s correct, Congressman Clay. 

Mr. CLAY. Do you believe that the prefunding mandate is unfair 

to the Postal Service, and do you agree with Mr. Rolando? 

Ms. BRENNAN. I agree with Mr.—President Rolando’s comments. 

I would say that it’s responsible to prefund. The challenge for us 

in the recent past was the accelerated payment schedule. Going 

forward, though, the challenge for us is to ensure Medicare integration. 

Mr. CLAY. Is modifying this prefunding requirement an essential 

part of the joint reform proposal to which the Postal Service, postal 

unions, and certain mailers have agreed? 

Ms. BRENNAN. Yes, Congressman. Given that the prefunding requirement ends this fall, the challenge now is to address the larger 

issue of an unaffordable system for the Postal Service and our retirees. 

Mr. CLAY. And how much money do you think this would save 

the Postal Service? 

Ms. BRENNAN. Fully integrating with Medicare for all of our retirees 65 and older would save us over $17.5 billion over the next 

5 years. 

Mr. CLAY. I see. Is it true that the Postal Service’s retiree health 

care fund is already 50 percent funded? 

Ms. BRENNAN. That’s correct, Congressman. We’re better situated 

than most. 

Mr. CLAY. And do you know what the current balance in that 

fund is? 

Ms. BRENNAN. The current assets are over $50 billion in the 

RHB fund. 


KING-6430 with DISTILLER
148 

Mr. CLAY. Wow. The prefunding requirement may have made 

sense back in ’06, but it no longer makes sense to have the Postal 

Service comply with a requirement that would force it into insolvency. 

And just one question for Mr. Rolando. Give me your overall 

sense of how the morale is among Postal Service workers today. 

Mr. ROLANDO. The overall morale, we deal really in four different 

avenues if you will with the Postal Service depending on the level 

of engagement of each of the probably employees, organizations. 

We deal in a collective bargaining arena whereby obviously we’re 

addressing things that are going to affect morale in terms of pay 

and benefits and working conditions. 

We work together in an arena of growing the business and making sure that service is what it needs to be so that we can face our 

customers every day. Obviously, that can be rewarding and frustrating at the same time. 

We deal together in a legislative arena, as we’re doing today, to 

make sure that the Postal Service is here to serve the American 

people for many years to come. 

And then we deal in another arena that I will call the culture 

of the Postal Service. And I think that’s an important thing that’s 

been embedded for a long time in the way it exists that we certainly have the commitment from leadership in the Postal Service 

and the unions to address that. And all those things contribute to 

the morale of postal workers all over the country in different ways. 

Mr. CLAY. Thank you for that response. 

May I yield of the rest of my time to the gentleman from Massachusetts? 

Mr. LYNCH. Just quickly, Mr. Chairman. Thank you. 

I just want to push back a little bit on a suggestion that was 

made earlier by one of my brothers across the aisle about the comparative value or the comparative performance of the United states 

postal system versus some of the international competition. There 

is a great report out by Oxford University. It is Oxford Strategic 

Consulting, and they measured the efficiency of the postal services 

in the top 20 countries, in the G–20, and the United States Postal 

Service came out the best, and remarkably, it is the only system 

in that top group that does not receive taxpayer funding. So ours 

is doing better than all the rest, contrary to the statement made 

earlier. 

And remarkably, the United States Postal Service scores the 

highest for efficiency even as it delivers far more letters per employee, 268,894 in the last study period, than any other service in 

the G–20. Japan came in second, and it is less than one-third of 

that. 

And also we have universal service, which a lot of these other 

countries don’t have, so we deliver to every single location. And the 

only criticisms that the British study had was that, unlike in Siberia where their post offices actually sell groceries, ours do not. But 

we have grocery stores that do that. 

But I just want to push on—we came out the best in the study. 

It was a very credible study, and —— 

Chairman CHAFFETZ. I thank the —— 


KING-6430 with DISTILLER
149 

Mr. LYNCH.—it was reported by CNN. I would like to enter this 

as part of the record. 

Chairman CHAFFETZ. Without objection, so ordered. 

Mr. LYNCH. Thank you. 

Chairman CHAFFETZ. I thank the gentleman. His time is expired. 

I will now recognize the gentleman from Wisconsin, Mr. 

Grothman, for 5 minutes. 

Mr. GROTHMAN. Thank you much. 

Chairman Taub, one of the objectives of the current system and 

any new system that comes out of the rate review is to make sure 

we have high-quality service standards. And right now, there is 

some indication that we are struggling in that regard. If the Postal 

Service continues to have problems in that area, what action do 

you think the Commission will take? 

Mr. TAUB. Congressman, the Commission by law has what’s 

called the annual compliance determination where annually we 

look to ensure that rates and fees that were in effect in the last 

year were in compliance, as well as service standards were met. We 

just issued our most recent one just about a month-and-a-half ago, 

and we did find that service standards indeed weren’t met. All the 

first-class mail did not meet their targets, both parts of periodicals 

mail, most of standard mail. 

We directed the Postal Service to come back in 120 days with a 

comprehensive plan particularly on the—what’s called flats, the 

periodicals and the standard and the first-class flats, a 90-day report on first-class letters and cards. So once we get that back, we’ll 

assess next steps. But it was a very directed study, did bring attention, which has been a trend that unfortunately hasn’t been 

trending in the right direction. 

So that’s why this year we took, shall we say, a little bit more 

of an aggressive stance to ask the Postal Service to come in with 

a more comprehensive focus as to what are the pain points, what 

are the pinch points, how do we get past this because service, as 

the postmaster general said, is the basic standard that has to be 

met. 

Mr. GROTHMAN. Okay. I have a question for Ms. Brennan here. 

You know, we talked a lot about how the volume of mail has 

dropped over the last 10 years from 213 billion to 154 billion. And 

we use 2006 as the base year. But do you know what it was like 

10 years before or 20 years before that? 

Ms. BRENNAN. Off the top of my head, I don’t, Congressman. I’ll 

get that information for you. 

Mr. GROTHMAN. Was it going up? I mean, the point I am trying 

to make is it —— 

Ms. BRENNAN. It was growing, sir, yes. 

Mr. GROTHMAN. So it might have been 154 billion in 1986 or 

1990? Two thousand and six was the high point in terms of total 

volume in the system. 

Mr. GROTHMAN. So what I am getting at here is I wonder if you 

are creating kind of an artificial cause for a problem by grabbing 

the higher at 213 and say we are at 154 so of course we are going 

to have a crisis? Maybe we were at 154 in 1980 and you weren’t 

having a problem. You know what I am saying? 

Ms. BRENNAN. I understand your point. I —— 


KING-6430 with DISTILLER
150 

Mr. GROTHMAN. But you don’t know the answer? 

Ms. BRENNAN. I would tell you that it’s not artificial, the challenges that we face. 

Mr. GROTHMAN. Okay. One of the biggest capital investments you 

have—and we had a hearing on this before—is replacing the aging 

vehicles. What is the current status of that situation? 

Ms. BRENNAN. Congressman, we’re currently in the technical review phase for the prototype vehicles. The plan is that we will determine one or more suppliers with multiple vehicle types that will 

test over roughly an 18-month period different topographies, different climates, and that will help inform our decisions as we move 

to the production timeline. 

Mr. GROTHMAN. Okay. Last time you guys were in here on this 

topic you said you were going to buy 120,000 vehicles. Is that still 

the plan? 

Ms. BRENNAN. That would be the upper bound in terms of replacement, and clearly, given our financial situation and certainly 

the suppliers’ capability, we would be looking to purchase and deploy roughly 20 to 25,000 year. 

Mr. GROTHMAN. Okay. So you are going to try to spread it out 

maybe —— 

Ms. BRENNAN. Correct, multiple years —— 

Mr. GROTHMAN.—over 6 years —— 

Ms. BRENNAN.—Congressman, yes. 

Mr. GROTHMAN.—5 or 6 years. Okay. Next question. What is the 

pay if I go to work for the post office, start out either deliveryman, 

one of the guys and/or gals in the office? What is the starting pay 

for that? 

Ms. BRENNAN. I would tell you the average work hour rate that 

I have off the top of my head is $41. 

Mr. GROTHMAN. Pardon? 

Ms. BRENNAN. Average work hour rate, fully loaded, $41. If it 

was a non-career employee, roughly $15 an hour. 

Mr. GROTHMAN. Okay. So if I get a job—and I know you have got 

to work part-time in the first place. If I get a job as—I don’t know 

that you start out as a mailman or not, but what do I expect starting as far as my pay? 

Ms. BRENNAN. It would depend on the craft. If you were a letter carrier, roughly $15 an hour for a supplemental non-career employee. 

Mr. GROTHMAN. How about a career employee? 

Ms. BRENNAN. It would depend again on if you were new, roughly probably 20, $25 an hour. I’ll get you the exact, Congressman. 

Mr. GROTHMAN. Twenty-five dollars an hour, plus—do those people get overtime? Do you have overtime? 

Ms. BRENNAN. Yes, absolutely. More than 8 hours in a day or 40 

hours in a week, consistent with the FLSA rules. 

Mr. GROTHMAN. Okay. And is that common? 

Ms. BRENNAN. Overtime can be in certain locales. It’s seasonal. 

It depends on employee availability, mail volume, and the like. 

Mr. GROTHMAN. What’s your average mailman make right now? 

Ms. BRENNAN. Average salary? 

Mr. GROTHMAN. Yes. 

Ms. BRENNAN. Again, let me—I’ll provide that for the record. 


KING-6430 with DISTILLER
151 

Mr. GROTHMAN. Okay. My time is up. I will yield the remainder 

of my time. 

Chairman CHAFFETZ. Wow, thank you, impressive. Let that be a 

lesson to all of us that are still sitting here. 

We will give 6 minutes to the gentlewoman from New Mexico, 

Ms. Lujan Grisham. 

Ms. LUJAN GRISHAM. Thank you, Mr. Chairman. I really appreciate that. 

I am going to change up what I was going to do a little bit because I really appreciate the comments that my colleague Mr. 

Lynch made, although I don’t need that report. If you want to see 

the efficiencies of the post office, go visit and do a ride-along with 

a letter carrier, and you will have no doubt that it is one of the 

most efficient systems in the world. And so thank you very much 

for that honor. And I plan to do more of that, particularly in the 

area that another one of my colleagues as already mentioned, Mrs. 

Lawrence. 

But in this effort, because of budgetary issues, that we were consolidating, and, Ms. Brennan, I heard that that is on hold. But 

given the fact that that has really hurt rural and frontier areas, 

disabled and senior population who are traveling distances to get 

prescription drugs, I am very happy to hear that that is on hold. 

But in addition to that and the numbers that have already been 

talked about, 200,000 employees, more than 360 facilities consolidated, there is now a 2011—so it is a little bit dated—but that 

GAO report says that, look, when you reduce the level of your services, you are actually hurting your revenue stream. So it is counterproductive. 

And as you look at these issues, I would love it if you would give 

us further information in writing to this committee about your efforts in modernizing services and addressing these issues given 

your, I think, unfair mandates, that there is a healthy balance and 

we want to make sure in fact that we are building a revenue 

stream and at the same time continue to take appropriate actions 

to protect the populations who need the Postal Service in a way 

that I think is different than the average person receiving mail. So 

if you would do that, I would appreciate it. 

Ms. BRENNAN. Yes. 

Ms. LUJAN GRISHAM. And thanks for that update. 

The second thing that I want to talk about that is, I think, a bit 

may be different than what my colleagues have addressed, but in 

my community, unfortunately, in my district, in my State we are 

seeing a high number of vandalism and mail theft. I want to thank 

you for your work, particularly in Albuquerque, but I am concerned 

that with lack of personnel we have a backlog in those investigations. You don’t get those investigations, we don’t deal with the 

perpetrators. If we don’t deal with the perpetrators, soon we have 

this—we are on a merry-go-round in this situation as well so that 

it continues to occur at much higher rates than around the country. 

And I will tell you that given, you know, our poverty issues and 

our other public health issues, which I will address later today in 

terms of substance abuse, it is a significant problem. And so it also 

creates safety issues for folks who are not dealing with this approVerDate Nov 24 2008 09:49 Jun 23, 2017 Jkt 000000 PO 00000 Frm 00155 Fmt 6633 Sfmt 6633 H:\25499.TXT APRIL

KING-6430 with DISTILLER
152 

priately. Because of those backlogs and investigatory issues, we are 

not replacing those damaged mailboxes. 

And I would love for you to give me a sense about what you can 

do differently or if you have had any thoughts or what do you need 

from Congress to make sure that you can address these what I am 

going to call hotspots if you will so that we can do something about 

it. 

Ms. BRENNAN. Yes, thank you, Congresswoman. In terms of in 

Albuquerque and the effort we have again with the Postal Inspection Service partnering with local law enforcement and community 

members, we’ve got an antitheft prevention type campaign. I’ll be 

happy to come up and brief you in more detail because it is important to us. 

And as we deploy centralized boxes, we need to ensure that they 

are secure and that we can minimize any potential theft there. But 

I’ll be happy to come up and give you more specifics. Given the sensitivity —— 

Ms. LUJAN GRISHAM. And I would like you to really—and I am 

happy to do that, but I really want you to think about and talk 

about if I have got more time—although I am happy to give it back 

to the chairman because he is so good to me, and I meant that 

genuinely—that I think it is important to think about it in a policy 

mechanism because the truth is—and again, in my community, I 

love my community and I love my State and I love my district, but 

we have real challenges. 

You know, I have got a police force that is under consent decree 

that also has one of the lowest staffing in the country and is in real 

trouble in terms of recruitment and staffing. So leveraging there is 

not leveraging. 

And the reality is is that we are not keeping up and we have a 

real public safety issue, and we have got a confidence issue. And 

it needs to be addressed, so what else can we be doing? And you 

ought to take into account all those kinds of circumstances. So the 

reality is, because those boxes are still damaged and we still have 

a problem, people don’t have access to their mail. 

Ms. BRENNAN. We need to correct that, whether it’s holding mail 

at the post office or looking at other ways to affect delivery. We 

don’t want disruption in service. 

Ms. LUJAN GRISHAM. And it is recognizable when you see all 

these damaged boxes in my community. It is a huge problem. 

Mr. Chairman, I yield back the rest of my time. 

Chairman CHAFFETZ. Thank you. I thank the gentlewoman and 

I appreciate it. 

I have some comments and questions, and then Mr. Lynch, and 

then we will wrap up. 

Mr. Taub, give me your perspective on the PRC. We are looking 

at a reform package. How would you reform or adjust what the 

PRC does or doesn’t do? What reforms are you looking for? 

Mr. TAUB. Mr. Chairman, I think the most important thing, of 

course, is the financial balance sheet. That’s the house that’s on 

fire that has to be dealt with. 

In terms of the Postal Regulatory Commission, attached to my 

testimony is a study that mandated by law at least every 5 years 

the Commission looks at the entire Postal Accountability Act of 


KING-6430 with DISTILLER
153 

2006, as well as the whole law, and offers recommendations for 

changes to the President and Congress. We did that in 2011. We’re 

in the midst of doing that report right now. The 2011 report did 

suggest a variety of possible opportunities where the Commission 

—— Chairman CHAFFETZ. Pardon me, but when do you anticipate 

that will be complete? 

Mr. TAUB. We should have that complete by the end of the year. 

My hope is that this would be delivered to Congress —— 

Chairman CHAFFETZ. Can you have it by the end of May? 

Mr. TAUB. I wish we could. We just issued a few weeks ago a call 

for public input and comment on that, a baker’s dozen of issues. We 

asked the public to input by June 14. So when the public gives us 

the input, then we have to put that together. So we will strive to 

—— Chairman CHAFFETZ. Any preliminary suggestions? 

Ms. BRENNAN. Yes —— 

Chairman CHAFFETZ. As the chairman of this committee, let me 

give you an outline of where we are headed with this. We do anticipate introducing a discussion draft of a bill soon. I anticipate that 

that will be available for perhaps 2 weeks unless there is some 

major hiccup, and then the intention is to introduce a bill, mark 

it up. 

We are actively trying to address the prefunding issue. We are 

obviously, as we have heard from across the whole spectrum of the 

board, trying to deal with the Medicare portion of that. It is amazing that, you know, $29 billion has been paid in since 1983, and 

that has to be adjusted. 

If there are structural adjustments or suggestions or ideas that 

any of you have, we need to have those now. We have been meeting 

and hearing and listening and now we are having a formal hearing, 

but we need those as soon as possible. 

From the GAO’s perspective, I want to go to the Board of Governors. And it is a little unfair to put any of you on the spot but 

the GAO, you know, we can put you on the spot. How many Board 

of Governors are there? 

Ms. RECTANUS. At this point there is—well, there’s one Board of —— Chairman CHAFFETZ. Out of? 

Ms. RECTANUS. Nine. 

Chairman CHAFFETZ. That is the right answer. There is one out 

of nine. Quite frankly, I can’t figure out what in the world the 

Board of Governors does. It is almost never fully staffed. One of the 

things that we are looking at doing is fusing the Board of Governors and the PRC into one entity. If somebody has a problem or 

a challenge with that or has a different suggestion than that, let 

us know, but to have two separate groups, one of which is never 

fully staffed and literally has one person, they don’t have a 

quorum, they can’t operate. And yet nobody seems to mind. I don’t 

get any complaints. 

So that is one thing that I am looking at that I am just saying 

to the world if you have a suggestion on that, let us —— 

Mr. TAUB. Mr. Chairman? 

Chairman CHAFFETZ. Yes? 


KING-6430 with DISTILLER
154 

Mr. TAUB. Just to make a personal observation from having been 

involved in this for so long, the current structure of the statute sets 

the Commission up as a regulator, not the operator, the Postal 

Service. Nineteen seventy when the old Post Office Department 

was abolished, the current governors and board was created to exercise the power of the Postal Service and represent the public interest generally. 

I would simply observe that, to the extent they are together, 

making sure thinking through these issues of regulator versus operator, but beyond that observation —— 

Chairman CHAFFETZ. I still see a role of Congress, I still see the 

role of the postmaster, and I still see the role of the PRC, but this 

extra layer does not make a lot of sense to me. Postmaster General, 

do you have a comment? 

Ms. BRENNAN. If I may —— 

Chairman CHAFFETZ. Yes. 

Ms. BRENNAN.—Mr. Chairman, I appreciate your offer for insight 

on this, and we’ll be happy to share it. I think Chairman Taub outlined it well in terms of the differentiation of responsibility. 

My only caution is that it would be problematic for the regulator 

to become the operator, so that would just be the caution. But we’re 

happy to provide some additional insight. 

Chairman CHAFFETZ. And you want to triangulate the issue, but 

at the same time, it is problematic when there is not a functional 

group, and there hasn’t been for a while, and there doesn’t seem 

to be any desire to get one. And so I am just looking at structurally 

changing that. But duly noted. You don’t want your regulator to 

also be your operator, and there does need to be an arm’s length 

distance. But there is also a role of Congress, and we have to serve 

in some of those functions as well. 

Mr. Rolando, kind of walk us through—I don’t know what time 

frame—but the unions have—I mean, the enrollment is way down 

because in large part the reductions in staff. If somebody is watching this for the first time, give them a perspective of how the 

unions have stepped up and have helped to address this problem. 

And there have been quite a number of staff reductions along the 

way. 

Mr. ROLANDO. Well, Mr. Chairman, as far as reductions, yes, 

there’s been a loss of 200,000 jobs in the last 10 years. I think for 

the majority of the collective bargaining agreements now, no new 

employees come in as career employees. They come in as non-career employees —— 

Chairman CHAFFETZ. Right. 

Mr. ROLANDO.—without any benefits, much lower pay, and have 

to wait for a career position to become available for them to be eligible for that. 

As far as—and then the collective bargaining itself, it’s a process 

that’s worked well for a long time in terms of negotiating agreements, whether by settlement or through interest arbitration. 

And as I mentioned before, there’s other arenas that we deal 

with with the Postal Service, for example, in the legislative arena. 

That’s an extremely, I think, important thing that we do, along 

with the mailing industry, to be able to get a consensus together 


KING-6430 with DISTILLER
155 

to move something through Congress that’s going to preserve the 

Postal Service in the future. 

So we have—and again, I talked briefly before about being involved in the growth of the business and service and the networks 

and the value working together to do that, you know, to the point 

of bringing in business to the Postal Service. And again, the fourth 

arena is just the whole culture of the Postal Service. 

Chairman CHAFFETZ. Thank you. Ms. Lowrance, let’s talk about 

what you would like to see first and foremost out of Congress. And 

we have your testimony and you have answered some questions, 

but give me the best synopsis you have on what you need people 

in Congress to do. 

Ms. LOWRANCE. We need predictable and reliable mail service, so 

if you’re going to say it’s going to take 3 days, take 3 days to get 

there, right? We have planning purposes from business mailer perspectives that we do to interact with the Postal Service and have 

the most efficient manner possible. 

We need predictable, stable Postal Service prices, right? If we see 

rate shock or extreme conditions to raise revenues in order to cover 

the existing cost, mail will leave faster and faster and faster and 

they’ll find other means to communicate. 

And then lastly, transparent costs. And I know both pricing and 

costing can be done currently at the regulator, and we’re looking 

at the 10-year review to see if that—if the current pricing mechanism is the right fit under the conditions. 

So, I mean, if Congress were to do anything, I would say releasing some of the liabilities on the balance sheet is really what would 

help mailers going into the rate review, as well as help the Postal 

Service alleviate some of the pressures on the cap and be able to 

really concentrate on service since that seems to be a large message that came across today. 

Chairman CHAFFETZ. Thank you, and I appreciate it. 

The Postal Service, as I said at the beginning, serves a vital element of our commerce here in the United States. They have a monopoly, and they have high fixed costs. When you have high fixed 

costs, you don’t reduce services and raise rates and expect to solve 

your problems. What you need to do is move volume. You have got 

to make the post office more relevant in people’s lives so that there 

is more volume that can move through the system. So again, raising rates and cutting services is not the way we are going to necessarily get there. 

Now, I can tell you personally I have migrated a long way the 

more I have studied this where initially my inclination was the 

outlet is, you know, 5-day service, that sounds good, let’s increase 

the number of postal holidays, that sounds good, but the more you 

dive into it, the more you realize that is not the way the economy 

is moving. What is happening is there is more e-commerce out 

there and people want to have their packages and goods delivered 

right to them right now. And so you see the Amazons of the world 

and others that consumers are starting to expect Saturday and 

even Sunday delivery, and the post office is in a unique position 

but they are not monopoly to produce that. 

Personally, I feel very strongly that the post office should not be 

participating in business that is also found on Main Street. Selling 


KING-6430 with DISTILLER
156 

coffee and T-shirts, with all due respect, other services that you 

can find it down the street, I don’t think that is necessarily the role 

of somebody who has a tax advantage, has a monopoly, and I have 

very deep concerns about that. 

The one thing that I haven’t heard in the last couple hours of 

this hearing that I continue to harp on and it is incumbent upon 

us but also I think the post office itself is the government-to-government business. When I think of where do I go to get my passport, I think of the post office. That type of business arrangement 

needs to expand. It does at the State level and it should at the Federal level. It drives me crazy to no end that we go out and spend 

all this money FEMA to try to remap the United States and have 

all these drug distribution facilities. 

We already have got post offices and letter carriers and others 

that already know their community. They could walk the streets 

without the street signs. They don’t need their own special map. 

We have already done that with the Postal Service, and yet we 

spend hundreds of millions of dollars, if not billions of dollars, 

doing that. We have disaster with FEMA and others that happen, 

but we have to be prepared for that, but it is your post office and 

your postmaster that probably understands the area and the community better than anybody. 

I visited Montezuma Creek, Utah, a small place down on a Navajo Indian Reservation, a dilapidated building, but that local postmaster had been there for more than 20 years. She knows her community. She knows all the people. She knows people who speak 

English, who don’t speak English. She knows who rides in on a 

horse to come get their mail. She knows the community. That is 

the type of effort that the rest of the Federal Government should 

be engaged in. 

Also, I want to continue to look—and this committee has jurisdiction on the census. We are going to go out and spend billions of 

dollars on the census to try to recreate what the post office already 

has in place. And I can tell the postmaster is itching to speak here, 

so please. 

Ms. BRENNAN. I’m sorry, Mr. Chairman, I did just want to—a 

proof point to your comments, too, if I may. One was working recently with a Midwestern city to provide information on vacant 

buildings through our address management system. 

Another you mentioned, the census, we did a pilot I mentioned 

earlier in the hearing out in Arizona on-boarding census workers, 

but we think there’s an opportunity for us with the actual conducting of the census given in-person proofing at the facility or on 

the doorstep with the technology we now have. 

Chairman CHAFFETZ. Your local letter carrier is going to far 

more understand that there aren’t 15 people living in this house. 

I have been walking the street going to their door for the last 7 

years and there aren’t 15 people in this building. That type of thing 

and insight, they are going to spend the billions of dollars. Let’s 

spend it smartly. And I hope this committee will further look at 

this. 

I have gone way over my time here, but I am excited to move 

this forward and again appreciate the work that Mr. Meadows, Mr. 

Lynch, Mr. Connelly, and certainly Mr. Cummings. 


KING-6430 with DISTILLER
157 

And as we wrap up, I think, Mr. Lynch, did you have—let me 

yield to Mr. Lynch and —— 

Mr. LYNCH. Very briefly. And I think there is a wonderful opportunity there with the Postal Service and the census. We are walking those streets already, so there is a way to, I think, maximize 

the skills and the expertise that the Postal Service has. 

I do want to push back a little bit again. You know, I cited the 

Oxford report that said the United States Postal Service was the 

best in the world, and one of my colleagues indicated his belief 

that—I haven’t seen the study—but that we were the worst in the 

world. I think that the best judge of this is actually the customer, 

is the American citizens. 

And, you know, the Pew Research Center polled Americans about 

their government. And I think Mr. Boyle brought this up, but the 

people of the United States in that poll said that the most trusted 

government employees in the United States today is the United 

States postal worker. And that is a tribute to you, Postmaster General, and also to the unions and the people who do that work every 

single day. 

So, you know, I just want to say that they rank you, I think, 84, 

84 percent. You are the highest of any government employees. Congress was also in that study, and we were around 6 percent between swine flu and the Taliban. That is where Congress came in. 

So —— 

Chairman CHAFFETZ. Well, this committee competes with the 

Zika, so we are way down there. 

Mr. LYNCH. Amen to that. But, you know, it is indeed ironic that 

we have a member of a body that has 6 percent approval criticizing 

the employees who have 84 percent approval rating in the eyes of 

our constituents. 

So I will yield back. I will leave it at that. Thank you. 

Chairman CHAFFETZ. Thank you. I recognize Mr. Cummings. 

Mr. CUMMINGS. I want to thank you all for your testimony. 

I just think that we have got to get this done. I mean, we can 

go around this circle forever and ever and be in the same place 10 

years from now. Again, I want to thank all of you all for coming 

to the table. 

But I am interested in what the chairman said about government-to-government. Do you see that, I mean, growing or going, 

Postmaster General? 

Ms. BRENNAN. Sir, I do see opportunity there. I think another example that —— 

Mr. CUMMINGS. And how will we get there? I mean, how would 

you —— 

Ms. BRENNAN. We may need some support from you and the 

chairman on that, but I think some of the outreach effort we have 

had with some of the other agencies is a starting point, leveraging 

our infrastructure. 

I think another example is the TSA pre-verification for frequent 

fliers. There is an opportunity, I think, for us to handle some of 

that work as well. 

Mr. TAUB. Mr. Chairman, if I may, Mr. Ranking Member 

Cummings, I just—I think one of the key pieces if the Postal Service is going to go down this road is also the funding associated with 


KING-6430 with DISTILLER
158 

that, and that goes to that larger issue of what is it that we want 

this government institution to do. And I know with a house on fire 

financially we need to put that out and the legislative process 

doesn’t always lend itself to the ability to get to first principles. But 

if there is some way, whether in this round or the next, to think 

about what it is that this government institution must do and what 

are the costs associated with that and where does the revenue 

come in. 

My only concern would be the extent they take on more responsibility in this area, there’s costs there, and if the associated funding 

doesn’t go to it, then we’re adding more of a burden to the Postal 

Service. 

Ms. BRENNAN. Yes, hence my comment, Robert, about needing 

need some assistance from the chair and the ranking member. 

Mr. TAUB. I was just trying to get a little more —— 

Ms. BRENNAN. Thank you. 

Mr. CUMMINGS. Certainly, we would not want you to go into 

something that is going to not yield a sufficient profit. That doesn’t 

make any sense. And we certainly don’t want to burden you with 

more obligations when the yield is simply to cost more. That is ridiculous. But I am hoping that we will be able to resolve some of 

these things and, as I said, resolve them soon. 

Again, thank you very much. 

Chairman CHAFFETZ. The final point I would make on the government-to-government is that, yes, these other agencies are funded with resources to execute on these things, and if they are going 

to spend money on them, they should be spending them and looking at the option of doing it to the Postal Service. 

I think the unions would appreciate that. They have got the 

physical infrastructure unlike any other entity. They would be able 

to do that whether, again, passports, census. You are going to get 

a request from us to look at the financials of how the whole passport business has worked, but I look within my own district, the 

Department of Motor Vehicles, you know, there are other State opportunities, not just the Federal Government opportunities, where 

they need a physical location that is safe and secure and that people know where it is. 

So we have had a good, healthy hearing. We appreciate your participation. I hope the men and women of the Postal Service know 

that we care about them and that we are trying to do the best 

thing, but I agree with Mr. Cummings. It is time to do it sooner 

rather than later. 

With that, the committee stands adjourned. Thank you. 

Ms. BRENNAN. Thank you. 

[Whereupon, at 12:28 p.m., the committee was adjourned.] 


KING-6430 with DISTILLER
(159) 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD


KING-6430 with DISTILLER
160 


KING-6430 with DISTILLERInsert offset folio 109 here 25499.109
161 


KING-6430 with DISTILLERInsert offset folio 110 here 25499.110
162 


KING-6430 with DISTILLERInsert offset folio 111 here 25499.111
163 


KING-6430 with DISTILLERInsert offset folio 112 here 25499.112
164 


KING-6430 with DISTILLERInsert offset folio 113 here 25499.113
165 


KING-6430 with DISTILLERInsert offset folio 114 here 25499.114
166 


KING-6430 with DISTILLERInsert offset folio 115 here 25499.115
167 


KING-6430 with DISTILLERInsert offset folio 116 here 25499.116
168 


KING-6430 with DISTILLERInsert offset folio 117 here 25499.117
169 


KING-6430 with DISTILLERInsert offset folio 118 here 25499.118
170 


KING-6430 with DISTILLERInsert offset folio 119 here 25499.119
171 


KING-6430 with DISTILLERInsert offset folio 120 here 25499.120
172 


KING-6430 with DISTILLERInsert offset folio 121 here 25499.121
173 


KING-6430 with DISTILLERInsert offset folio 122 here 25499.122
174 


KING-6430 with DISTILLERInsert offset folio 123 here 25499.123
175 


KING-6430 with DISTILLERInsert offset folio 124 here 25499.124
176 


KING-6430 with DISTILLERInsert offset folio 125 here 25499.125
177 


KING-6430 with DISTILLERInsert offset folio 126 here 25499.126
178 


KING-6430 with DISTILLERInsert offset folio 127 here 25499.127
179 


KING-6430 with DISTILLERInsert offset folio 128 here 25499.128
180 


KING-6430 with DISTILLERInsert offset folio 129 here 25499.129
181 


KING-6430 with DISTILLERInsert offset folio 130 here 25499.130
182 


KING-6430 with DISTILLERInsert offset folio 131 here 25499.131
183 

Æ 


KING-6430 with DISTILLERInsert offset folio 132 here 25499.132