U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

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

48–240 PDF 2009

THE ECONOMICS OF UNIVERSAL MAIL POST PAEA

HEARING

BEFORE THE

SUBCOMMITTEE ON FEDERAL WORKFORCE,

POSTAL SERVICE, AND THE DISTRICT

OF COLUMBIA

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

SECOND SESSION

MAY 8, 2008

Serial No. 110–138

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

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

HENRY A. WAXMAN, California, Chairman

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

BRIAN HIGGINS, New York

JOHN A. YARMUTH, Kentucky

BRUCE L. BRALEY, Iowa

ELEANOR HOLMES NORTON, District of

Columbia

BETTY MCCOLLUM, Minnesota

JIM COOPER, Tennessee

CHRIS VAN HOLLEN, Maryland

PAUL W. HODES, New Hampshire

CHRISTOPHER S. MURPHY, Connecticut

JOHN P. SARBANES, Maryland

PETER WELCH, Vermont

——— ———

TOM DAVIS, Virginia

DAN BURTON, Indiana

CHRISTOPHER SHAYS, Connecticut

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

VIRGINIA FOXX, North Carolina

BRIAN P. BILBRAY, California

BILL SALI, Idaho

JIM JORDAN, Ohio

PHIL SCHILIRO, Chief of Staff

PHIL BARNETT, Staff Director

EARLEY GREEN, Chief Clerk

LAWRENCE HALLORAN, Minority Staff Director

SUBCOMMITTEE ON FEDERAL WORKFORCE, POSTAL SERVICE, AND THE DISTRICT OF

COLUMBIA

DANNY K. DAVIS, Illinois

ELEANOR HOLMES NORTON, District of

Columbia

JOHN P. SARBANES, Maryland

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio, Chairman

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

KENNY MARCHANT, Texas

JOHN M. MCHUGH, NEW YORK

JOHN L. MICA, Florida

DARRELL E. ISSA, California

JIM JORDAN, Ohio

TANIA SHAND, Staff Director

(III)

C O N T E N T S

Page

Hearing held on May 8, 2008 ................................................................................. 1

Statement of:

Goff, Oscar Dale, Jr., national president, National Association of Postmasters of the United States; Charles W. Mapa, president, National

League of Postmasters; and Ted Keating, president, National Association of Postal Supervisors ............................................................................. 85

Goff, Oscar Dale, Jr. .................................................................................. 85

Keating, Ted .............................................................................................. 109

Mapa, Charles W. ...................................................................................... 95

Potter, John E., postmaster general and CEO, U.S. Postal Service; Dan

G. Blair, chairman, Postal Regulatory Commission; and David Williams, Inspector General, U.S. Postal Service ............................................ 4

Blair, Dan G. ............................................................................................. 9

Potter, John E. ........................................................................................... 4

Williams, David ......................................................................................... 19

Young, William, president, National Association of Letter Carriers; John

Hegarty, national president, National Postal Mail Handlers Union; Don

Cantriel, vice president, National Rural Letter Carriers Association;

and Myke Reid, legislative and political director, American Postal

Workers Union, AFL–CIO ............................................................................ 37

Cantriel, Don ............................................................................................. 57

Hegarty, John ............................................................................................ 47

Reid, Myke ................................................................................................. 64

Young, William .......................................................................................... 37

Letters, statements, etc., submitted for the record by:

Blair, Dan G., chairman, Postal Regulatory Commission, prepared statement of ........................................................................................................... 11

Cantriel, Don, vice president, National Rural Letter Carriers Association,

prepared statement of ................................................................................... 60

Goff, Oscar Dale, Jr., national president, National Association of Postmasters of the United States, prepared statement of ................................ 88

Hegarty, John, national president, National Postal Mail Handlers Union,

prepared statement of ................................................................................... 50

Keating, Ted, president, National Association of Postal Supervisors, prepared statement of ........................................................................................ 112

Mapa, Charles W., president, National League of Postmasters, prepared

statement of ................................................................................................... 97

Potter, John E., postmaster general and CEO, U.S. Postal Service, prepared statement of ........................................................................................ 6

Reid, Myke, legislative and political director, American Postal Workers

Union, AFL–CIO, prepared statement of .................................................... 66

Williams, David, Inspector General, U.S. Postal Service, prepared statement of ........................................................................................................... 21

Young, William, president, National Association of Letter Carriers, prepared statement of ........................................................................................ 40

(1)

THE ECONOMICS OF UNIVERSAL MAIL POST

PAEA

THURSDAY, MAY 8, 2008

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON FEDERAL WORKFORCE, POSTAL

SERVICE, AND THE DISTRICT OF COLUMBIA, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, DC.

The subcommittee met, pursuant to notice, at 2:14 p.m., in room

2154, Rayburn House Office Building, Hon. Danny K. Davis (chairman of the subcommittee) presiding.

Present: Representatives Davis, Cummings, Clay, Lynch,

Marchant, and McHugh.

Staff present: Tania Shand, staff director; Lori Hayman, counsel;

Marcus A. Williams, clerk; Jim Moore, minority counsel; and Chris

Espinoza, minority professional staff member.

Mr. DAVIS. I apologize to those of you who have been waiting.

Normally I am pretty punctual. My father was the most punctual

guy that I have ever known, and he always believed in being on

time, and that is a trait that I inherited. I will tell you a little story

about that at some time, but I won’t do it right now.

The subcommittee will now come to order. Welcome, Ranking

Member Marchant, members of the subcommittee, hearing witnesses, and all those in attendance. Welcome to the Federal Workforce, Postal Service, and the District of Columbia’s oversight hearing on Economics of Universal Mail Post, the Postal Accountability

and Enhancement Act of 2006, PAEA.

The chairman, ranking member, and subcommittee members will

each have 5 minutes to make opening statements, and all Members

will have 3 days to submit statements for the record. Hearing no

objection, so ordered.

I will begin. Today the subcommittee is holding an oversight

hearing to examine the degree to which the U.S. Postal Service has

taken advantage of provisions contained in the Postal Accountability and Enhancement Act of 2006 to generate new revenue and improve operational efficiency.

Through the years, our universal mail system has served our Nation well and has been a world leader in efficiency and economy.

In 2007, it delivered over 212 billion pieces of mail to nearly 140

million delivery points. Over $80 billion was spent in providing

these and other postal services required as part of meeting the

Postal Service’s universal mandate.

Besides delivering the mail in an effective and economic manner,

the Postal Service has always maintained the public trust. In 2007,

2

for the third consecutive year, the respected Ponemon Institute

ranked the Postal Service as the most trusted government agency

and 1 of the top 10 trusted organizations in the country, public or

private. A recent Roper poll found that Americans rate the Postal

Service more favorably than any other government agency.

Additionally, the Postal Service closed 2007 with the strongest

quarter in its history in terms of mail delivery service scores. I am

especially happy to note that following last May’s hearing on mail

delivery problems in Chicago, the mail service for that area has

markedly improved. All this is good news for the Postal Service.

In order to continue making good news and providing universal

service at affordable prices, the Postal Service will have to meet

several challenges during the next few years. The most immediate

concern is the fact that mail volumes are declining even though

nearly 5,500 new delivery points are being added each day. Simply

stated, this means higher costs to deliver yet less mail.

It is my hope that the PAEA, of which I was a cosponsor, will

strongly position the Postal Service for the future by providing a

more timely and predictable ratemaking process and, at long last,

the opportunity to compete with private companies for increased

market share of the shipping business. It is only through an economically vibrant Postal Service, one that can respond rapidly and

effectively to changing market conditions, that we can preserve the

important American ideal of universal service.

Last February, the subcommittee held an oversight hearing

where we learned that the Postal Service and the Postal Regulatory Commission had made significant progress in the implementation of the PAEA. Most importantly, the PRC developed and

issued final regulations for a new ratemaking system nearly 8

months prior to the statutory deadline. As a result, new rates for

market-dominant products like first-class mail, periodical mail, and

standard mail will increase at no more than the rate of inflation

this coming Monday. The PRC also approved new rates for competitive shipping services, like Priority Mail and Express Mail,

which will take effect on the same day.

The subcommittee will continue to practice active oversight of

the Postal Service and their responses to the changes brought

about by the PAEA. I am especially looking forward to reviewing

the mandated PRC Report on Universal Postal Service and the

Postal Monopoly, which is due by December 19th of this year.

I thank you all very much and look forward to hearing testimony

from today’s witnesses. I now yield to the ranking member, Mr.

Marchant, for any opening statement he may have.

Mr. MARCHANT. Thank you, Mr. Chairman. Thank you very

much for having this hearing today.

The Postal Accountability and Enhancement Act of 2006 represents the first major postal reform legislation since 1970; so it is

not surprising that there have been some growing pains along the

way. However, it is important that Congress and this subcommittee

continue to ensure the Postal Service is fully implementing the

PAEA.

Many of my colleagues with whom I serve on this subcommittee

played vital and crucial roles to ensure its passage in the 109th

Congress and labored for many years to accomplish this major reVerDate 11-MAY-2000 14:59 Apr 21, 2009 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 U:\DOCS\48240.TXT KATIE PsN: KATIE
3

form for the U.S. Postal Service. We must make sure that we provide the proper oversight during the PAEA’s infancy so that the

years of effort by this subcommittee and other Members can be

fully realized.

Within a few days we will see the very first rate increase under

PAEA. I look forward to hearing today from the Postal Regulatory

Commission on their assessment of the new price adjustments that

the Postal Service has requested. I am also looking forward to a

discussion on the Universal Mail Rule, especially in light of the

PAEA and the ongoing postal reforms.

One of the great benefits of the act is that it helps create a

healthy postal system that can honestly assess what the American

citizen truly needs from its Postal Service without having to worry

about enterprise viability.

Ultimately, Congress’ goal is to have a Postal Service that is financially sound while still providing world-class services to Americans. I appreciate the testimony we will hear today from the witnesses on how we can best accomplish this goal.

Thank you, Mr. Chairman.

Mr. DAVIS. Thank you very much, Mr. Marchant.

Mr. Lynch, do you have an opening statement?

Mr. LYNCH. Very briefly, Mr. Chairman. And I thank you and

thank the ranking member as well for holding this hearing.

I, too, am very interested. We are in new territory here with the

PAEA, and we want to make sure that the Postal Accountability

and Enhancement Act fulfills all of our aspirations for a more competitive and a healthier work situation at the Postal Service. And

I guess today is a day that we will just take a benchmark, if you

will, on how we are going thus far.

And I just want to lend my voice to those who would encourage

management to work more closely with the union, all of the different unions here. We want a Postal Service that continues to

have the high reputation that the chairman spoke of earlier, the

level of trust that the public has in the institution and in the letter

carriers and the clerks and the mail handlers and the supervisors

they deal with on a personal basis every single day. We think that

therein lies much of the success that the Post Office has enjoyed.

But I am very interested in hearing from our panelists. I want

to thank this panel for lending its wisdom to the committee to help

us deal with some of the problems that we have.

I yield back the balance of my time.

Mr. DAVIS. Thank you very much, Mr. Lynch.

And, gentlemen, if you would rise and raise your right hands to

be sworn in.

[Witnesses sworn.]

Mr. DAVIS. The record will show that the witnesses answered in

the affirmative, and let me just make a little brief introduction of

our panelists so that we know exactly who they are.

We, of course, have Mr. John Potter, who was named 72nd Postmaster General of the United States of America on June 1, 2001.

Mr. Potter has led the Postal Service to record levels of service, efficiency, and performance. Mr. Potter, we are delighted.

4

Mr. Dan Blair serves as the first chairman of the independent

Postal Regulatory Commission, the successor agency to the former

Postal Rate Commission. Mr. Blair, we are delighted to have you.

And, Mr. David Williams was sworn in as the second independent Inspector General for the U.S. Postal Service on August 20,

2003. Mr. Williams is responsible for a staff of more than 1,100 employees that conduct independent audits and investigations of a

work force of about 700,000 career employees in nearly 37,000 retail facilities.

Gentlemen, we thank all of you for being here with us.

Mr. Potter, we will begin with you.

STATEMENTS OF JOHN E. POTTER, POSTMASTER GENERAL

AND CEO, U.S. POSTAL SERVICE; DAN G. BLAIR, CHAIRMAN,

POSTAL REGULATORY COMMISSION; AND DAVID WILLIAMS,

INSPECTOR GENERAL, U.S. POSTAL SERVICE

STATEMENT OF JOHN E. POTTER

Mr. POTTER. Good afternoon, Chairman Davis, Congressman

Marchant, and Congressman Lynch.

This past year has been one of profound change for the U.S.

Postal Service, one heightened by the effects of a difficult economy.

Despite the difficult environment, our employees have kept their

attention on service. As I reported to our Board of Governors yesterday, on-time delivery of first-class mail was very strong in our

second quarter. Overnight first-class mail achieved a 96 percent ontime score; 2-day mail rose to 94 percent; and 3-day mail achieved

a 92 percent on-time delivery. In all three cases, this was the highest score ever achieved in the second quarter, and the overnight

and 2-day scores matched all-time highs for their categories. Customer satisfaction remains strong at 92 percent.

As the chairman mentioned, Chicago service has also shown

steady progress. On-time delivery of first-class mail is at 95 percent, a one-point improvement over last year. Two-day achievement

was 94 percent, an improvement of 13 points compared to a year

ago. And on-time delivery of 3-day mail was 90 percent, which is

at 21 points better than was achieved last year. Our entire Chicago

service team has done an exceptional job, and I know they are

working to keep service strong.

Despite our service success, the economic slowdown has severely

strained our finances. As I reported to our Board of Governors yesterday, we ended our second quarter with a net loss of $707 million

for the quarter. Mail volume for the quarter was down by 3.3 percent, for a year-to-date decline of 3.1 percent. If this trend continues, it will be our largest annual volume decline ever.

I am very proud of the effort of the entire postal team. In meeting customer needs during this difficult period, every employee in

every function, as well as the unions and associations that represent them, have kept their eyes on service as they helped us reduce expenses and operate as efficiently as we possibly could. This

is critical in an environment in which prices for 90 percent of our

products are capped, but major costs such as fuel are not.

Long-term success in serving our Nation depends on a strategy

that balances efficiency and growth. This was recognized by the

5

Postal Act of 2006, the PAEA, which increased our pricing flexibility. We have begun to take full advantage of the new law by offering attractive and innovating published pricing for our shipping

services. We have priced these products to sell because there is significant opportunity to grow in this area. We have introduced volume pricing and savings through on-line and corporate account

payment options for shipping. For Express Mail we have expanded

our overnight network and moved to zone-based pricing, consistent

with the rest of the industry. We have added a larger Priority Mail

flat-rate box that also offers reduced postage for overseas military

addresses, and consumers are benefiting from the convenience and

value of the Forever stamp.

We are all anticipating the next step in pricing, negotiated service agreements and contract pricing. We are working with our customers and trying to navigate the regulatory process to make this

possible. As with any new strategy, for any new business, benefits

do not come without risk. It is important for all of our stakeholders

to understand that there must be some tolerance for risk as we

move forward in this important area.

The Postal Service will continue to evolve in support of providing

affordable universal service to every American through innovation,

efficiency, and, above all, service.

I would be pleased to answer any questions that you may have.

Thank you, Mr. Chairman.

Mr. DAVIS. Thank you very much, Mr. Potter.

[The prepared statement of Mr. Potter follows:]

6

7

8

9

Mr. DAVIS. And we will go to Mr. Blair.

STATEMENT OF DAN G. BLAIR

Mr. BLAIR. Good afternoon, Mr. Chairman, Ranking Member

Marchant, and members of the subcommittee. I appreciate your

continuing interest in and oversight of the Commission’s work. I

have a longer written statement that I would ask be included for

the record.

It has been a productive 2008 for the Commission. You are familiar with our efforts last year in implementing the PAEA, and 2008

represents the first year the Postal Service and the Commission

have operated under the new rules. Since I last appeared in February, the Commission has moved forward in reviewing proposed

rate adjustments for both market-dominant and competitive postal

products. In addition, we completed our annual compliance determination.

In brief, we found the Postal Service’s rate adjustment request

consistent with the new regulatory requirements. Those new rates

go into effect Monday. Some may object to annual increases in postal prices; however, the act granted the Service this new flexibility.

Importantly, having these new rules in place allowed the Service

to seek adjustments under the new system rather than filing an

old-style cost-of-service rate case. As Mr. Potter pointed out in his

written statement, this allows an infusion of $700 million this fiscal year. Had an old-style case been litigated, increases sought

could have been much higher than the CPI-based rate adjustments

to be implemented next week, and they likely would not have taken

place until late 2008 or early 2009.

One aspect of the new regulatory framework is the annual compliance determination. As time goes on, I believe this process will

prove to be one of the most important aspects of the new regulatory

framework. In this year’s compliance determination, we reviewed

the information submitted for 2007 by the Postal Service. The Commission determined that the Service made a good first effort to provide us with essential costs in volume data. Improvement will be

needed in some areas, and to that end we anticipate issuing regulations this summer addressing what information should be submitted by the Service in its annual compliance report.

In addition to this March trifecta, the Commission last year

issued a new strategic plan, adopted a redesigned Web site, and

continued its consultations with the Service on performance goals

as well as network alignment. We began work on the cooperative

mail study and new rules governing our complaint procedures. Further, we are working on meeting deadlines for issuing accounting

principles and practices for the Competitive Products Fund as well

as completing the Universal Service Obligation study. This report,

asked for by Congress, will reflect the fairness, objectivity, and substance that the Commission is well known for. Both of these will

be ready by the December 19th deadline. As you can see, the Commission has been a hub of activity, and we look forward to continuing our work with the Services as we proceed with PAEA implementation.

On a last note, I would like to thank, on behalf of my fellow

Commissioners, the Commission staff for their hard work and efVerDate 11-MAY-2000 14:59 Apr 21, 2009 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 U:\DOCS\48240.TXT KATIE PsN: KATIE
10

fort on these important projects. They are truly the Commission’s

most significant asset, and none of these results could have been

achieved without them.

I would be pleased to answer your questions.

Mr. DAVIS. Thank you very much, Mr. Blair.

[The prepared statement of Mr. Blair follows:]

11

12

13

14

15

16

17

18

19

Mr. DAVIS. And we will proceed to Mr. Williams.

STATEMENT OF DAVID WILLIAMS

Mr. WILLIAMS. Mr. Chairman and subcommittee members, I am

testifying today concerning significant economic challenges and opportunities facing the Postal Service. I would like to focus on four

areas within this large topic.

First, strengthening revenue operations presents significant opportunities for the Postal Service. Management must collect what

it is owed, while ensuring that mailers are not involuntarily subsidizing competitors or others.

The Postal Service needs to update and strengthen its data

streams and analytical disciplines for pricing and product costing.

Discounts must incentivize mailers to achieve the lowest combined

operational costs, and detailed, accurate product pricing is essential

to structure work-sharing discounts. Additional data is needed, and

existing stovepiped data in programs must be integrated and used

by marketing for analysis. Without this, discounts such as work

sharing and negotiated service agreements cannot be entered into

with confidence to ensure fairness and viability.

Also, customer needs must be better assessed, and private-sectorstyled sales incentives should be explored, and marketing should

expand its search for products and market-sector penetration strategies. And, last, the Postal Service should analyze its advertising

investments to see if they are achieving desired results.

The second challenging area is imagining and planning for a substantially changed business environment with the implementation

of several current technological advances. The flats sequencing system will complete the delivery point sequencing improvements

begun with letter mail. Intelligent mail bar-coding can provide vital

internal performance data and give customers long-sought-after

data about the location and delivery of their mail.

And, last, seamless acceptance can provide a more convenient,

streamlined virtual acceptance process.

As these systems come on line, there will be major impacts to the

network and facilities, staffing size and skill needs, revenue assurance and customer service. The Postal Act and current economic

conditions dictate that these efficiencies be exploited quickly, and

risks are dealt with decisively to take full advantage of these investments.

Infrastructure realignment represents the third great challenge

and opportunity. To date, the Postal Service has used an incremental approach to gain network efficiencies. This approach incorporates flexibility and anticipates changes requiring rapid response. The Postal Service has resisted committing to a rigid comprehensive plan featuring elaborate sequencing that would be cumbersome to amend. In other words, the plan resembles more an

order of battle than an enterprisewide blueprint.

Today’s dynamic environment presents special challenges to realignment, including an ongoing information age revolution and an

economic downturn, making it increasingly difficult to forecast mail

mix and volume; significant career uncertainties for employees; the

evolving commitment to incentivize mailer partnerships in search

of lowest combined costs; needed enterprise resilience to respond to

20

natural disasters and terrorist attacks; and integrating the technological advances I mentioned earlier.

For infrastructure realignment to succeed without business disruptions, an enduring alliance is needed between the Postal Service

and the Congress. Though realignment is absolutely required, there

are substantial risks. For example, if realignment stalls, a protracted anemic staffing of an oversized network would predictably

cause operational and customer service degradation.

The last challenge involves the Postal Service’s prepayments to the Retiree Health Benefits Fund. The prepayments of over $5 billion a year are greater than the Postal Service’s traditional net income. These prepayments are amortized over a short 10-year period and are not tied to the Postal Service’s ability to pay. Borrowing to pay a debt that will be incurred in the future is an unusual

practice. I encourage the consideration of indexing the payment to

the Postal Service’s revenue or economic factors, or extending the

amortization period.

In conclusion, the Postal Service is about to experience the curse

of living in interesting times. At the horizon is a different Postal

Service, and one that I believe will be better. The Postal Act positions the Postal Service to complete its transition and become the

successful business that Congress envisioned in 1970. The recent

imperatives contained in the Postal Act for that migration have

presented the Postal Service with readiness challenges. I believe

that senior leadership and the work force are capable and poised

to meet those challenges.

Thank you.

Mr. DAVIS. Thank you very much.

[The prepared statement of Mr. Williams follows:]

21

22

23

24

25

26

Mr. DAVIS. And I want to thank each one of you gentlemen for

your testimony.

Mr. Potter, perhaps I will begin with you. I think I heard you

mention rating scores of 90 or above a number of times, and I want

to understand what that really means. I know in Missouri, where

Representative Clay comes from, 90 is generally considered an A.

Is that what 90 means in rating the postal production and activity?

Mr. POTTER. Those ratings are done by an outside firm, IBM,

that puts mail into mailboxes and then tests how quickly it gets

to a destination, and it is a raw score. They look at how long it

takes to go from one point to the other. They have people who drop

the mail, non-postal employees, and they have people who measure

and give them information about when mail is received in their

mailbox at their homes. And they are independent non-postal people. So, it is an independent, accurate measurement of how quickly

mail moves through the system, and so I think you can have confidence in those numbers.

Mr. DAVIS. So any way you cut it, it means you are doing pretty

good.

Mr. POTTER. I think so.

Mr. DAVIS. I would agree. And I want to congratulate you and

the Postal Service again and all of its employees for the tremendous and outstanding work that you are doing.

Let me ask you, though, in your opinion, how important is this

concept of universal service to the future of postal operations and

the Postal Service?

Mr. POTTER. To me, personally, having grown up in a postal family, my father was in the Service for 40 years, universal service is

what we are all about.

When I look back at the history of the Postal Service, the Founding Fathers saw the need to connect every American and provide

them an opportunity to communicate with one another, and also to

participate in this greatest economy in the world. And time and

again we have seen Congress act to make sure and protect universal service. It wasn’t that long ago, given our history in the 1900’s,

early 1900’s, that the Congress moved from delivery of mail and

changed the definition. Up until that time, it was anything up to

4 pounds. Anything beyond that was done by others. But the Congress recognized at the time that there were communities in rural

areas and in some inner-city areas that were not getting the same

type of delivery as others, with the same frequency, nor for the

same price, and they turned to the Postal Service to allow everyone

to participate on an equal footing in communication as well as in

our great economy through the receipt of packages. So, I think it

is the core of who we are and what we are all about, and I think

it is vitally important.

Mr. DAVIS. Let me ask you then, how impactful do you think that

the new rate structure has been in helping the Service improve in

processing and delivering the mail?

Mr. POTTER. I think we are just beginning to see the tip of the

iceberg here when it comes to how that will be helpful. When I look

at the pricing, the thing that has been very helpful, as a result of

the efforts by Chairman Blair, his fellow Commissioners, and the

entire Postal Regulatory Commission, was to enable us to move

27

quickly to change rates this year. It is going to help us, given the

fact that we find ourselves in a tough economy; we are able to

make an adjustment.

It is going to create a challenge in the sense that going forward

we all, meaning everyone inside the Postal Service, is going to have

to figure out how to keep rates below the rate of inflation. But

when we had this discussion in years past, we kind of looked at it

as a business imperative. If we had rates that were rising precipitously, all we would do would be to drive mail away from hard copy

and probably move it to electronic medium or some other way of

moving. So we are embracing the notion of a rate cap, and that is

going to challenge us, and challenge us to work smarter, work together to overcome that.

When it comes to packages, we are for the first time going to be

able to take advantage of new package rate flexibility, and it is

going to be reflected in prices that people are going to pay beginning Monday. There are going to be some discounts for volume,

there is going to be on-line pricing that is different from our window pricing.

And, for example, we are trying to do things that are a little

unique. We were the first to come out with a flat-rate box for Priority Mail. One of our competitors matched it. Now we are increasing

the number of sizes that we have to make it even more convenient

for customers, because we found out that having done that in the

past, it works. And we are lowering the price of flat-rate boxes

going overseas to overseas military because we recognize how vitally important those packages are to those who are serving America overseas, and we want to do our small part to help them.

So in all, Mr. Chairman, as I said earlier, I think we have just

begun to scratch the surface, but I look forward to taking full advantage of the pricing flexibility afforded by the new law.

Mr. DAVIS. Thank you very much.

Mr. Blair, let me just ask you, one of the requirements of the

PAEA was for the Postal Rate Commission to evaluate nonpostal

services offered by the Postal Service and determine if such services should continue. Could you give us an update on the progress

of that study?

Mr. BLAIR. We are engaged in that process of evaluating nonpostal and postal services, and we have docketed this issue. As it

stands right now, we have asked the Postal Service to provide us

with fuller information as to what that inventory might be. I understand they are going to be asking us for some clarification. So

the dialog is continuing, and this process is continuing. I understand we have a December 20th deadline to complete this work,

and we will have this done on time.

Mr. DAVIS. Thank you very much.

I am going to shift now to Mr. Marchant and give him an opportunity for some questions.

Mr. MARCHANT. Thank you, Mr. Chairman.

A handful of State legislatures around the country have seen an

introduction of bills called ‘‘do not mail’’ bills. While none of these

bills have become law, what do you see? So far, I don’t think we

have a Federal law that has been introduced. What do you see as

the possible impact of some of those laws being put into place?

28

Mr. POTTER. Well, first of all, let me just say that I am adamantly opposed to any law that would have a do not mail requirement—or impose do not mail on us or any user of the mail.

That being said, the significant downside to that, I think, I would venture to say that up to $6 billion in revenue would be at risk in

a very short period of time, and that it could have significant impact on Postal Service finances.

At the same time I say that, I think that part of the issue here

is that the full story is not being told. In that regard, I think that

people are looking at paper and its impact on the environment, and

they are dramatically overstating the impact. It is a renewable resource. Many of our mailers use recycled materials. We are the

first organization to have cradle-to-cradle packaging for the packaging that we provide. So I think we have an industry that is extremely sensitive to the environment and has made huge progress

in terms of meeting and conforming to products that would be environmentally friendly.

I know of a number of different groups within the mailing industry, mailers, who have voluntary programs with customers who can

take their names off of mailing lists, and I think it would be detrimental to just do something via the law. I don’t think it is necessary, and I think the industry should be given the opportunity

to police itself.

Mr. MARCHANT. Thank you.

Mr. Williams, last fall we heard from small periodical publishers

and printers that were experiencing a fairly significant rate shock

in 2007. How is this class of mail being treated in this rate increase? And whichever one of you can answer that.

Mr. BLAIR. I will take that on.

Under this new rate increase, the Postal Service proposed rather

modest increases for periodicals as a whole, and it came within as

a class under the 2.9 percent cap. So periodical mailers generally

shouldn’t be seeing the kind of rate shock that has been experienced in the past under the old omnibus litigated cases.

Mr. POTTER. Basically, what we did is an across-the-board increase for periodicals because of the fact that we had just raised

rates on them last July, and because of the significant changes that

were built into that last rate case. It put a lot of burden on the

industry to modify their mailings to meet the change requirements.

And so it is an issue that we continue to have because, quite frankly, with the decline in the number of pages in periodicals, we have

seen their cost coverage drop below 100 percent. So we are working

aggressively with the industry. We are rolling out new equipment

called a flat sequencer, which will affect and make flat mail much

more productive.

So, again, we are working on a plan to do two things: first of all,

bring cost coverage of periodicals back up to 100 percent, and, No.

2, build a plan going forward that will assure that we stay at or

above 100 percent long term.

Mr. MARCHANT. And, Mr. Chairman, if you will allow me just a

little input from my district. I think that the Forever stamp was

a great idea. I think it allowed people to take a little of their budget into their own hands and gives them some opportunity to control

future rate jumps. But we are also experiencing in my area, an

29

area that were growing suburbs maybe 20 years ago are now

gentrifying a little bit, and we are beginning to see an increased

usage of the facilities. People are coming into the facility and are

not very savvy to electronic machines, and there is a little resistance. The business people seem to be able to adapt very easily to

the postal machines that are being put out in the lobby to cut down

on the lines and everything. The lines, interestingly enough, seem

to be created from a strong immigrant population that is very—

that loves to use the mail, U.S. mail, and I am sure that is to mail

outside the country.

So these are the kind of growing pains that we are experiencing

in my suburban Dallas district. Postmaster, I appreciate your help

in addressing some of those issues. And I would like to just give

compliments to the adaptability, the kind of a—I wouldn’t say newfound adaptability, but an increasing adaptability to just local

needs that postal customers have, and I think it is beginning to

pay off. Thank you.

Mr. POTTER. Thank you.

Mr. DAVIS. Thank you very much.

Mr. Lynch.

Mr. LYNCH. Thank you, Mr. Chairman.

I would like to just shift a little bit to some of the more basic

issues that are in front of you. I know, Mr. Potter, you had indicated earlier about the financial shortfall that we have had here.

I was wondering if any of you can tell me about the impacts of—

I know going back even as recently as 2005, we had diesel fuel at

$2.50 a gallon, and now it is $4.25. I am not familiar with the internal purchasing arrangements that you might have to buy fuel,

to basically get a bid on a price at a certain level beforehand. I

know, in fact, you don’t have the ability to pass on a surcharge like

some of your competitors do. How is that affecting your bottom

line? Where are we on transportation costs, on gasoline and for diesel? How is that going?

Mr. POTTER. Well, let me just throw some sound bites at you. We

buy 800 million gallons of gas a year. So, every penny in the price

of a gallon of gas is $8 million. Pick your benchmark. You know,

several years ago we were paying $1.50 a gallon for gas. We pay

a little less because we don’t pay taxes depending on where we buy,

when we buy for our pool. But the fact of the matter is, the price

for a gallon of gas has gone up about $2. When it is a penny and

it is $8 million, it is reasonable. But once you start looking at $8

million times 200 pennies, it is real money, and so it has impacted

our finances.

That doesn’t include the increased price for electricity because we

have to heat buildings, increased price of all of—anything to do associated with a facility. We have contract prices for our highway

contract routes, they are not included in that, as well as our air

transportation. So it has had a sizable impact on us.

Now, I have to give our employees a lot of credit, because they

have really risen to the challenge of trying to eliminate transportation where we don’t have to have it and where we don’t have to

use it. And so we have been able to cut back on the number of trips

that we have. We have been able to reduce our air transportation

costs by something as simple as filling trays tighter. So, we are

30

looking at every way possible to lower our use, as well as just finding other ways to save money to offset that cost.

I will just tell you that one of the things that you did for us with

the new law is you do enable us to do fuel surcharges for packages,

and on an exception basis, if we went for an exigent rate case, we

can do that for our market-dominant or our mail products, but we

have never explored that. And our preference would be to try and

tighten our belt as best we can, because we know our customers

are hurting at the same time, but we will explore those avenues

if we need to.

Mr. LYNCH. What I am concerned about is, I would like to somehow be able to break out that energy-related cost. And, yeah, jet

fuel, right through the roof as well. Why have you not considered—

we have this delta here in terms of what you are bringing in and

what we are spending in employee health costs. If we are sort of

masking this fuel surcharge that you are absorbing right now, it

just magnifies the impact of some of the other aspects of it. And

I know you have with the new PRC—you can go before them and

make a special request. I seem to think the language that we put

in there was meant for this type of situation, specifically where fuel

goes through the roof and you are stuck. So——

Mr. POTTER. If I could, Congressman. Just to add that one of the

things we are most concerned about is our customers, and every

one of our products has elasticities tied to it. So the higher we raise

the price, the less mail we have, and so therein lies a huge challenge. At a time when people are hurting and looking to figure out

how to save every dollar they can, the last thing we want to do is

drive them away from the mail, whether that is have them move

to electronic bill presentment or have them consider testing other

forms of advertising. We know we have strength there, and we

want to make sure that we do our best to work with our customers.

And seeking an exigent rate case, I would view it almost as a last

resort because of what I just described.

Mr. LYNCH. And I am happy to hear you say that. I am happy

to hear you say that. I just would like that information for us. If

you are not going to—by all means, don’t pass it on to the customer, and I think your reasons are well founded. However, for this

committee I would like to have some type of breakout that shows

me what increase in your costs, what the impact of fuel costs are

having on the Postal Service in general.

The other question I had is, the other committee I serve on is Financial Services, and we hear a lot about the disconnect between

CPI, which caps your market-dominant products, and the reality of

the increase in cost to people of a basket of goods, whether or not

CPI is really reflecting all of the increase in the cost of living. And

have you any thoughts on that? Given the fact that it is a cap on

90 to 95 percent of your products, is this something that accurately

reflects the costs out there, or is this something that needs to be

adjusted?

Mr. POTTER. Well, it is a very interesting question,and I think

you would really need an economist here to answer that question

with fact rather than opinion. I will say this: 80 percent of the

Postal Service’s costs are labor, and our labor contracts have costof-living adjustments in them tied to the CPI. So there is some reVerDate 11-MAY-2000 14:59 Apr 21, 2009 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 U:\DOCS\48240.TXT KATIE PsN: KATIE
31

lationship between the Postal Service, the bulk of Postal Service

costs, which is labor, and the CPI index.

Now, I think you have panels that will follow me that would be

very happy to weigh in on what you just asked and can take it

from a human vantage point, because it does control what people

take home on a daily and weekly basis, and I think they will give

you a little bit more of an emotional response than I am able to.

Mr. LYNCH. OK. I will save that question. Thank you.

I yield back.

Mr. DAVIS. Thank you, Mr. Lynch.

Mr. Clay.

Mr. CLAY. Thank you, Mr. Chairman.

And along the same lines as Mr. Lynch, Mr. Blair, how much did

the last rate increase generate in funding for the Postal Service?

Mr. BLAIR. I am told, and I get this from Mr. Potter’s statement, it is approximately $700 million for this fiscal year.

Mr. POTTER. The upcoming rate increase?

Mr. CLAY. The previous one. See, I hear from my constituents

every time you get a rate increase. So let’s cover all of them.

Mr. POTTER. Well, are popular with everyone.

Mr. BLAIR. I don’t have that off the top of my head. That was

last year, and I can tell you this year’s figures.

Mr. POTTER. Let me try to answer that. We anticipated that we

would get an additional 7.5 percent increase—approximately 7.5

percent increase in revenue. But with the volume decline, right

now we are running more around 3.5 because of the—closer to 3

percent because of the fact that volume is down 3.1 percent this

year.

Mr. CLAY. What does that translate into as far as dollar amount?

Mr. POTTER. On a—let’s round it—an $80 billion base, 7 percent, we anticipated a $5 million—like a $75 billion base. So we anticipated about a $5 billion increase, and what we are seeing out of

it is about a $2 billion increase.

Mr. CLAY. $2 billion? And then how much of that goes into

health care and into——

Mr. POTTER. Our health care bill on an annual basis is over—it

is over $7 billion when you look at it. It is about 10 percent of what

we take in.

Mr. CLAY. So, May 12th will be another rate increase.

Mr. POTTER. Right. And it’s 2.9 percent. Normally it would deliver around $2.3, $2.4 billion in additional revenues.

Mr. CLAY. What do you do with the profits?

Mr. POTTER. I pay people. Eighty percent of our costs are labor.

When you look at paying almost 700,000 career employees and

then with noncareer around 800,000 people, all who are getting

base pay increases of 1 percent plus and on top of that are getting

cost-of-living adjustments, which is about 66 percent of CPI, it goes

fast. It is above 3 percent. As a matter of fact, if you looked at our

costs, just to stay current, if we weren’t in this economic slowdown,

we would have to take and save $1 billion in efficiency to close the

gap between what we can generate in new revenues at the CPI

level and what our costs are.

So our costs had been growing before the economic turndown of about $1 billion above the rate of CPI, and it is that gap that we

32

have been closing through efficiency. I am really grateful to all our

employees for embracing that notion, therein lies the challenge for

the Postal Service.

Mr. CLAY. Now, every time you get a rate increase, my constituents are telling me they think the Postal Service is flush with cash.

Mr. POTTER. Well, you can tell them from me that is not the

case. I think you can tell them that is not the case.

Mr. CLAY. And, now, when you get these increases, do you use

judicious decisionmaking as far as being prudent with the cash?

Mr. POTTER. Without a doubt. The Postal Service in the last, I

believe, 7 or 8 years it has more productivity improvement than it

had in its first 30. So we have been managing and tightening our

belts. And I have to tell you, I think what is very surprising to people is the fact that we have had a decline of over 100,000 career

employees in the past several years. I say that not in any way,

shape, or form as we are bragging on that. I am saying that, collectively, unions, management associations, postal management, mailers have recognized the need to become more efficient if mail is to

stay viable, and we are working together to do that.

And so, as I said, when you look at the numbers, there is a gap

every year, and if you don’t improve your efficiency, you are going

to lose money. And if you don’t stay with it, that number is just

going to grow every year. And we are very open about sharing that

information. Let me assure you, we are very careful with every dollar that we get and how we spend every dollar that comes into the

Postal Service.

Mr. CLAY. Have you seen a cost reduction in contracting out of

employees?

Mr. POTTER. Does that save money versus using career employees? Yes. The same as——

Mr. CLAY. Does it save much?

Mr. POTTER. It depends on what type of employee it is and what

activity it is. Last time I believe I testified that when it comes to

delivery, using a contract employee saves you about half of what

it would cost to use a career employee. We don’t do that on—you

know, the bulk of our delivery has and will continue to be career

employees.

Mr. CLAY. How do they compare to quality and efficiency?

Mr. POTTER. The numbers say that it is the same.

Mr. CLAY. It is the same.

Mr. POTTER. That is what the numbers tell me.

Mr. CLAY. I thank you very much for your response.

I yield back, Mr. Chairman.

Mr. DAVIS. Thank you, Mr. Clay.

Mr. Potter, let me just ask you, the Postal Service operations rely

on employees coming to work every day, like in almost any other

industry. When employees’ sick leave usage increases, that has a

significant impact on operational costs. During the next several

years, many FERS employees will be eligible to retire, and they

currently do not have any incentive to save their sick leave because, unlike CSRS employees, they do not get any retirement benefit. Do you have any thoughts as to how that may impact operational costs during the next decade?

33

Mr. POTTER. Mr. Chairman, I don’t have a specific number. I am

sure we can do the analysis. I will tell you this, though: The use

of sick leave is a burden from a cost standpoint, but, more importantly, it is a burden from a service standpoint because we rely on

all of our employees to show up every day to get the mail out. If

they are not in because they are sick, we have to cover routes. And

I think it has as much of an impact on service as it does on cost.

But suffice it to say we would prefer that people did not use sick

leave if they are not sick, and that we should consider some type

of an incentive system or a change in the system that would encourage people to use sick leave only when they are sick and reward them for an accumulation of sick leave over time.

Mr. DAVIS. Have you observed any change in sick leave usage,

say, in the last year?

Mr. POTTER. Nothing that dramatic, or nothing that you could attribute to anything. I mean, we had a situation a couple months

ago where the flu was very strong, and we saw a bump. But the

long-term trend is that it has been rising, and what you described,

I believe, is a contributing factor.

Mr. DAVIS. What is the purpose of the repositioning rules that

would allow the Postal Service to involuntarily transfer veteranspreference-eligible supervisors and other management employees

without the right of appeal to locations that are far from their

homes following a downsizing or consolidation of a postal facility?

And does this undermine the spirit of, say, veterans preference?

Mr. POTTER. To the best of my knowledge—and obviously there

is local practices everywhere, we comply with all of—in terms of

downsizing, the RIF rules that OPM has put forward. And so I

think we are consistent with the Federal Government in terms of

applying veterans preference.

Mr. DAVIS. Thank you.

Mr. Williams, let me ask you a question. Based on your audit

work concerning mail delivery problems in Chicago, what can the

Postal Service do to prevent similar problems from occurring in

other parts of the country?

Mr. WILLIAMS. Thanks, Mr. Chairman.

What we found in Chicago, and we were asked to go in very

quickly as soon as the problem was identified, the problems surrounded improperly maintained equipment and poor mail-flow

processes that did not comply with the processes of the Postal Service. There were vacancy problems that weren’t carefully monitored,

and then the responsibilities of a number of the managers were not

being fulfilled.

We also found a culture there that was seriously problematic in

that it didn’t emphasize rapid and high-quality work. A number of

changes occurred as a result of that. As Chicago was growing

stronger, we began doing exactly what you just said, looking more

broadly.

Today, senior postal officials have daily and weekly reports that

come to them that is much richer in data with regard to the full

network and the delivery systems. And there is also a new system

report called the Area Mail Review Analysis that feeds and informs

biweekly teleconference calls that detect problems and move toward resolution.

34

My office has worked with the vice president of operations also

to develop an indicator which rank-orders the district’s performance in those areas, and we learned a great deal from Chicago. And

that allows the Postal Service, who uses a much more sensitive instrument for corrective action, and our office to move to those areas

where we see trouble. We are not seeing anything on the level of

Chicago, but we are certainly trying to move against problems as

they appear at the horizon.

I think in the case of Chicago, we would also be remiss if we

didn’t mention Gloria Tyson. She did a terrific job of turning that

around and was a very talented, hard-working person there.

Mr. DAVIS. Well, thank you very much. And what it is that you

did and whatever it is that you and the Postmaster General and

others were able to do with Chicago, we certainly appreciate it.

It sort of reminds me of a story about Abraham Lincoln and

Grant. When Grant was supposedly drinking a lot of whiskey, people were complaining to the President about it and said, well, you

know, this guy is really drinking a lot. But he was winning battles.

And the President said, well, whatever it is that he is drinking, let

me know.

So whatever it is that you did in Chicago, we want you to be able

to do the same thing in other places throughout the country.

I know that Delegate Christensen from the Virgin Islands has

expressed some concerns, and I would certainly appreciate it, Mr.

Postmaster General, if you all would look into that situation for

her.

I see that we have been joined by Representative Cummings. Let

me ask if he has some questions.

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

I know you have done this already, but I would be more than remiss if I did not recognize one of the giants of the Congress, Congressman Clay. I want to thank you for all you have done for us

and being a true role model in so many, many ways. I thank you

for being here.

Mr. Potter, let me ask you just a question or two about the

semipostal stamps. It is my understanding that there is a certain

limitation with regard to those stamps.

Mr. POTTER. Well, we would prefer to do one stamp at a time.

I think originally it was planned that every 2 years there would be

a turnover, and we would have a new cause that would be

achieved, receive the benefits from a semipostal.

Mr. CUMMINGS. Right now, is that the breast cancer stamp?

Mr. POTTER. Yes, it is.

Mr. CUMMINGS. I have been thinking about introducing legislation to make it so that we can do more than one at one time. Let

me be real clear on this, because I realize that people will come

and say, well, Cummings, you know, breast cancer is very significant and this may open up the floodgates to others. I know that

is probably the argument.

I have a tremendous sensitivity with regard to breast cancer, but

I also have a sensitivity with regard to a number of other diseases.

And when you consider, for example, Alzheimer’s, just as an example, with the many people who are coming down with that and sufVerDate 11-MAY-2000 14:59 Apr 21, 2009 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 U:\DOCS\48240.TXT KATIE PsN: KATIE
35

fering—and there are others—I am just wondering, is there a door

open for anything other than, or in addition to, breast cancer?

Do you follow what I am saying?

Mr. POTTER. I know what you are saying.

Mr. CUMMINGS. Because I just think that it is just—and I don’t

know, we have been—I think we are kind of limited to that now.

But it seems like—if you were worried about the floodgates, it

seems like we would have at least some type of rotating situation

where other causes might be brought up, so we might be able to

raise funds for them. So I am just wondering where we stand on

that.

Mr. POTTER. We have had experience with that, Congressman. At

one point we had two, we had the breast cancer and the family violence. And then we had the hero stamp, which was funds generated

for the victims of 9/11, the heroes.

What we found is, when you get to three, they really start to

compete with one another and they are not effective. Two, I think

we were doing all right.

Again, I think there is flexibility. But what you don’t want to

have is what you described, your terminology, ‘‘floodgates,’’ because

then, you know, you lose your ability to promote it; and our cost

to keep them, you know, stocked goes up.

And the one thing we are very concerned about is the administrative costs of this, not because it affects us, but because we get—

those funds get taken away from the charities. Anything above and

beyond the price of a stamp that it costs us to administer the program is lost to the charity.

Certainly, I would support going beyond the one, but I would

hesitate—I would encourage you to put a cap on it. Two or three

would be something that I think we could work with. Again, from

a promotion standpoint and administrative cost, we don’t want it

to become too burdensome, and we don’t want it to lose its effect.

Mr. CUMMINGS. I don’t either. I know sometimes you can spread

things so thin that there is no true beneficiary because it’s spread

so thin.

Mr. POTTER. Exactly.

Mr. CUMMINGS. I was curious. If you don’t have these numbers,

if you would be kind enough to get them to me, exactly how much

money has the breast cancer stamp raised. I would love to see that

information.

Mr. POTTER. For the purpose of accuracy, we will give you that

and the other two as well. We will give you as much information

as we have.

Mr. CUMMINGS. That will be good.

The other thing, when you think about something like Alzheimer’s—and I know the other two types of stamps you mentioned

are very, very serious issues; I don’t want to take away from that,

but I know there may be some other issues on the level of, say,

breast cancer, that people may look at them in the same kind of

light—that may very well cause people to come out and be very

supportive.

Mr. POTTER. Well, we also have a series of stamps that don’t generate funds, but generate awareness. So we have done a diabetes

stamp. We have an Alzheimer’s stamp in the works. They don’t creVerDate 11-MAY-2000 14:59 Apr 21, 2009 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 U:\DOCS\48240.TXT KATIE PsN: KATIE
36

ate the funds, though, to help support it, but they do create awareness. We have had numerous stamps over the years to do that as

well. But we will provide the information to you so that you can

use that when you are considering where you go with the law.

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

Mr. DAVIS. Thank you very much, Mr. Cummings.

Mr. Marchant, do you have any other questions?

If not, gentlemen, thank you very much. We appreciate your

being with us and we appreciate your testimony.

As we begin to set up for our second panel, I will go ahead and

introduce them.

For panel 2, we have Mr. William Young, who is the 17th national president of the National Association of Letter Carriers, the

300,000-member union representing city letter carriers employed

by the U.S. Postal Service.

We also have Mr. John Hegarty, who was sworn into office as

National Postal Mail Handlers Union’s national president, July 1,

2002. For the 10 years prior to becoming national president, Mr.

Hegarty served as president of Local 301 in New England, the second largest local union affiliated with the National Postal Mail

Handlers Union.

We also have Mr. Don Cantriel. He was elected vice president of

the National Rural Letter Carriers Association at the 101st Annual

Convention in Minneapolis, MN. Mr. Cantriel has served at all levels of the association, beginning with president of his local union.

And we have Mr. Myke Reid, who is the legislative and political

director of the American Postal Workers Union, the largest postal

union in the world, with over 300,000 members. Mr. Reid works as

a lobbyist for the American Postal Workers Union, as well as a

member of the union’s Political Action Committee.

Gentleman, we thank you all very much for being here with us

to participate.

You know what they say, Myke. The first shall be last and the

last shall be first.

Gentleman, if you would stand and raise your right hands to be

sworn in.

[Witnesses sworn.]

Mr. DAVIS. The record will show that the witnesses have answered in the affirmative.

Gentleman, we again thank you very much for being here. You

know the process. If you would take 5 minutes to make an opening

statement, the lights will indicate—green means that you have the

entire 5. You get down to the yellow light, it means that you have

1 minute left. Of course, the red light means that it is time to stop.

And your full testimony, written testimony, is in the record.

We will begin with you, Mr. Young.

37

STATEMENTS OF WILLIAM YOUNG, PRESIDENT, NATIONAL ASSOCIATION OF LETTER CARRIERS; JOHN HEGARTY, NATIONAL PRESIDENT, NATIONAL POSTAL MAIL HANDLERS

UNION; DON CANTRIEL, VICE PRESIDENT, NATIONAL RURAL

LETTER CARRIERS ASSOCIATION; AND MYKE REID, LEGISLATIVE AND POLITICAL DIRECTOR, AMERICAN POSTAL

WORKERS UNION, AFL–CIO

STATEMENT OF WILLIAM YOUNG

Mr. YOUNG. Thank you very much. Good morning, Chairman

Davis and Ranking Member Marchant. I am proud to be here as

a representative of nearly 300,000 active and retired members of

the National Association of Letter Carriers.

I am especially proud this week as we prepare for the NALC’s

annual Stamp Out Hunger Food Drive this Saturday. All across the

country, tens of thousands of letter carriers will collect donated

food for the Nation’s food banks to help feed the poor and hungry

in more than 10,000 communities. I hope you will spread the word

to your constituents to help out families by donating what they

can.

A year ago, we all appeared before you at a similar hearing. A

lot has changed since then, both good and bad. Let me start with

the positive.

Last year, I came to sound the alarm about the Postal Service’s

growing use of contractors to deliver the mail. I said then, and I

believe today, that the use of low-wage, no-benefit contractors to

perform the final delivery of mail is both wrong and a fundamentally flawed business strategy.

Fortunately, we have made a lot of progress on this issue of contracting out. We averted the need to submit the issue to a neutral

arbitrator by reaching a new 5-year collective bargaining agreement last July. We established firm limits on outsourcing and set

up a special committee to hammer out solutions with regard to subcontracting.

While that committee does its work, a moratorium on any new

contracting out has been extended to at least July 31st. We have

a long ways to go, but we are moving forward and I am hoping that

we can reach a long-term understanding.

I want to thank Postmaster General Potter and Vice President

Doug Tulino for working with us in such a constructive manner. I

also want to thank Alan Kessler, the new chairman of the Board

of Governors, for seeking to maintain positive labor relations. Indeed, he has even agreed to address our union’s convention in Boston this summer.

So there has been progress in the area of labor relations. That

is the good news.

The bad news is the economy. The recession has now taken hold

in the economy, and it hit the postal business several months ago.

Declining mail volumes due to the meltdown in the mail-intensive

housing and finance sectors, coupled with major cutbacks in advertising, has placed an extreme pressure on the U.S. Postal Service.

These economic challenges mean it is more important than ever to

maintain constructive labor relations, and the NALC is committed

to finding win-win solutions.

38

We are working with management on implementing the flat sequencing system, automation that will cost us jobs in the short run,

but will help the Postal Service thrive in the long run. We are exploring ways to more efficiently evaluate and adjust routes both to

cut costs and to improve the atmosphere in the Nation’s delivery

units. And we are working together to generate new revenues by

deploying letter carriers as sales agents for competitive postal products, an effort that I am proud to say has resulted in nearly half

a billion dollars in new annual revenue so far.

But we believe there are ways Congress can contribute to preserving the Postal Service. Innovative uses of our universal service

network should be promoted. Vote by mail is a perfect example. In

States that employ postal elections and allow no-excuse absentee

ballots, voter turnout has skyrocketed. This is why the NALC urges

Congress to pass H.R. 1667, the Vote By Mail Act, and H.R. 281,

the Universal Right to Vote By Mail Act sponsored by Congresswoman Susan Davis. These bills would provide grants to the States

to develop vote by mail procedures and guarantee every voter the

right to cast a ballot in Federal elections.

On the flip side, Congress can also help by addressing the threat

of so-called Do Not Mail initiatives at the State level. These misguided proposals have popped up all over. Fortunately, none has

been enacted, but they pose a real danger by wrongfully equating

direct mail with unsolicited phone calls that prompted the FTC’s

Do Not Call Registry.

But direct mail advertising is an unobtrusive medium that encourages economic growth. It helps both large and small businesses

find new customers and cultivate existing ones. It is also a vital avenue for political and social advocacy. And direct mail is crucial to

underwriting the cost of the universal postal service, just as advertising underwrites the cost of radio, television and newspaper communications.

Congress could bolster the Postal Service’s financial stability by

taking up a number of matters that did not receive priority attention during our long debate over postal reform. I would like to mention just three of them.

First, the Postal Accountability Enforcement Act: The Postal

Service is required to prefund the cost of health benefits for postal

retirees after receiving a down payment on this cost from the

transferred surplus to the postal portion of the CSRS fund. The

amount of the surplus was calculated by the Office of Personnel

Management’s Board of Actuaries.

The annual cost of this prefunding, some $5 billion per year, is

excessive, because OPM significantly underestimated the true size

of the postal pension surplus. The smaller-than-expected transfer

means higher-than-expected annual payments from the Postal

Service.

Although a law allows for review of the OPM calculation by the

Postal Regulatory Commission, it provides no remedy. We urge

Congress to take decisive action to correct this error in order to

save the Postal Service and the stamp-buying public hundreds of

millions, if not billions, of dollars per year.

Second, Congress correctly transferred from the Postal Service to

the U.S. Treasury the cost of CSRS benefits associated with miliVerDate 11-MAY-2000 14:59 Apr 21, 2009 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 U:\DOCS\48240.TXT KATIE PsN: KATIE
39

tary service by postal employees before they were hired by the Post

Office. Military costs are rightfully the responsibility of all taxpayers, not ratepayers. This same logic applies to the cost of military pensions earned by employees under the FERS program. We

urge you to consider that.

Third, we ask that Congress investigate and reverse the decision

by the Department of Health and Human Resources to deny the

Postal Service the employer subsidies provided for in the Medicare

Modernization Act. The Postal Service helps underwrite the cost of

prescription drug benefits for tens of thousands of Medicare-eligible

retirees, but when it applied for the employer subsidies, its application was rejected. HHS did this largely because the Office of Personnel Management decided not to seek the subsidies for the

FEMA program as a whole. OPM concluded that using taxpayer

funds to support another tax-funded program made little sense.

That may be, but in the Postal Service it is different because we

are not funded by the taxpayers. We believe the Postal Service is

entitled to Part B subsidies and hope that Congress will act to

overturn this decision.

Before I conclude, I would like to raise one last issue that came

out of postal reform. As you know, postal reform included a provision that imposes a 3-day waiting period of injured postal employees before they can begin receiving benefits under Worker’s Comp.

I was adamantly opposed to that provision because it is discriminatory. No other group of Federal workers is required to wait 3 days.

No one has given me a good reason why injured postal employees

should be singled out in this way. I urge the Congress to reverse

this unfair provision as soon as possible.

Thank you very much.

Mr. DAVIS. Thank you very much.

[The prepared statement of Mr. Young follows:]

40

41

42

43

44

45

46

47

Mr. DAVIS. We will go to Mr. Hegarty.

STATEMENT OF JOHN F. HEGARTY

Mr. HEGARTY. Good afternoon. Thank you Chairman Davis and

the other members of the subcommittee for inviting me to testify.

My name is John Hegarty. I am national president of the National Postal Mail Handlers Union, which serves as the exclusive

bargaining representative for more than 57,000 mail handlers employed by the U.S. Postal Service. In the interest of time and to accommodate your panel’s practice of creating a dialog through questions, I will be brief. Please enter my entire testimony into the

record.

It has been more than a year since I testified at your 2007 oversight hearing. In that year, the country has fallen deeper and deeper into an economic downturn, perhaps even a recession, which,

when combined with the increasing use of electronic and other

means of processing and delivering the mail, has created a potential economic crisis for the Postal Service.

In 2007, I stated that it was inappropriate, unwise, unsafe and

wholly unjustified for the Postal Service to outsource its core functions, including the processing of mail normally handled at air mail

centers or the processing of military mail headed to our troops in

Iraq and Afghanistan. That was my position then, it is my position

now, and it will be my position tomorrow.

Yet the Postal Service continues to pursue a fool’s gold solution.

I call it fool’s gold, because the Postal Service continues to make

plans to replace long-term career employees, who are dedicated to

the mission of the Postal Service, with low-paid, no-benefit, noncareer and often transient workers. Not only are the financial savings an illusion, but the American people should not have their

postal system subsidize the profits of privateers, whether in the

processing or the delivery of mail.

I want to highlight one point that has not received much attention, that the privatizing of mail has had an unfortunate corollary

effect of reducing the number of opportunities for veterans returning from combat and noncombat situations. The mail handler craft

welcomes veterans, as does the entire Postal Service.

Some of our brothers and sisters are serving overseas in the war

zones today. We are proud of that fact and have managed to partner with the Postal Service in preserving their job opportunities

and hiring preferences. Unfortunately, private contractors are not

held to the same requirements as the Postal Service when it comes

to hiring vets; and even if a private contractor were to hire a veteran and asked that veteran to perform some of the same tasks as

our members, that veteran would not have the same appeal rights

and the same job security as a career mail handler hired by the

Postal Service. The private gain of contractors is at the expense of

our veterans and, ultimately, at the expense of the American people.

We are fortunate to have H.R. 4236, the Mail Network Protection

Act, which has been introduced by Representative Stephen Lynch.

This bill attempts to give career postal employers a fair shot at

work slotted for privateers.

48

Mr. Chairman, you have been a postal employee. You know our

members. We can compete with anyone, but we must have a level

playing field with a chance to bargain about any subcontracting before it occurs.

We live in a century that will see vast changes in postal processing. In 1970, who could envision today’s machinery, some of which

is comparable in size to a football field. It does the work of many

employees. We monitor the integration of this machinery to ensure

that it performs work efficiently and securely without endangering

the safety of its operators.

My union works closely with the Postmaster General and his

staff to make sure those employees are properly trained, to ensure

that they perform their labor in a safe work environment, and to

minimize the personal inconvenience and dislocation that employees might otherwise suffering.

The installation and integration of machinery has been implemented relatively smoothly for several decades now because management and union representatives are required to bargain about

these issues, and therefore, we are able to work jointly to resolve

any disputes. The same should be true for proposals to outsource

or subcontract the work of career employees. But if the Postal Service continues to outsource work on a unilateral basis without bargaining with its unions, it will continue to drive a wedge between

postal management and the hundreds of thousands of loyal and

dedicated postal employees.

Another feature of the 21st century will be the realignment of

the postal network to meet modern business and population trends.

I must be honest. Our members nervously await the upcoming report on network realignment. We have had differences with the

Postal Service on aspects of this ongoing realignment.

Often those differences arise from the secrecy within the Postal

Service. If the Postal Service simply would share its draft plans

with us ahead of time, we could work to minimize the dislocation

and inconvenience to our members, as is required by our collective

bargaining agreement; and also to minimize the service disruptions

that may occur to your constituents.

In the end, if the service deteriorates unnecessarily, then no network realignment, no matter how attractive on paper, is justified.

And who knows better than the union members who collect, process and deliver the mail? We must take advantage of the work

force’s knowledge, skills and abilities, and try to preserve the qualified and productive work force currently employed.

I would like to take some time to commend the Board of Governors and the Postmaster General for their vision of a new postpostal reform world. In changing to a more traditional business

model, they have rolled out new products to enhance our competitiveness. While the Mail Handlers Union enthusiastically supports

new products and new pricing models, and we welcome volume discounts when appropriate, such discounts must be priced appropriately and not be set to lose overall revenue. Where volume discounts can be accomplished to the benefit of the Postal Service and

the customer, we have a win-win situation that all can and should

support.

49

That concludes my statement. Again, thank you for this opportunity to testify. If you have any questions, I would be glad to answer them.

Mr. DAVIS. Thank you very much, Mr. Hegarty.

[The prepared statement of Mr. Hegarty follows:]

50

51

52

53

54

55

56

57

Mr. DAVIS. We will go to Mr. Cantriel.

STATEMENT OF DON CANTRIEL

Mr. CANTRIEL. Chairman Davis, members of the Federal Workforce, Postal Service, and the District of Columbia Subcommittee,

as vice president of the National Rural Letter Carriers Association

representing 123,000 bargaining unit members, I would like to extend my thanks for scheduling a hearing on the oversight of the

Postal Service.

While we were given a wide range of freedom on what to focus

our testimony on, I would like to talk briefly about the recent economic trends our union experienced firsthand.

The Postal Service Accountability and Enhancement Act gives

the Postal Service more flexibility to act like a business than had

previously been allowed. Mr. Chairman, as you are well aware, the

Postal Service can now bank a percentage of their profits, use a

modern system of ratemaking to adjust rates, and it has the ability

to create new programs to increase revenue.

For example, in our recent national agreement with the Postal

Service, a new revenue-generating program called Rural Reach was

created to attract new customers and customers who are using our

competitors. In addition, rural carriers can also target customers

who would benefit from using additional Postal Service products

and services. What the Rural Reach program does is to allow rural

carriers to serve our customers better. By merely initiating conservation with customers about the products and services rural carriers offer, we can grow more revenue in the small-to-mid-sized

customer base.

Mr. Chairman, despite all the flexibility the Postal Accountability and Enhancement Act allows and the new programs we offer to

generate revenue, the Postal Service is still not immune from the

recent economic slump. Experts are still debating if what we are

experiencing right now is an economic recession or not, the first

since 2001, but there is little doubt we are in an economic downturn. Even before the Postal Accountability and Enhancement Act

was signed into law on December 20, 2006, first-class mail volume

was declining. More recently, total mail volume has also been declining. This economic downturn has caused normally heavy users

of the mail—the financial industry, the mortgage industry, etc.—

to limit or stop mailings altogether.

No one has felt this decline in total mail volume more than the

NRLCA membership, who, in the last mail count, lost anywhere

from 2 to 12 hours of their route evaluations. To put that into perspective, each hour of evaluation is worth approximately $1,500.

The NLRCA membership has taken a second blow to their pocketbooks with the rising costs of gasoline. Currently, rural carriers

serve on approximately 77,000 rural routes, traveling 3.4 million

miles a day, averaging 45 miles per route. On 67 percent, or roughly 51,000, of those routes, rural carriers provide and deliver mail

with their own personal vehicle.

Even though our members receive a vehicle maintenance reimbursement for providing their own vehicles, with the average price

of a barrel of oil setting new records almost daily, which, in turn,

increases the price of gasoline, and with gasoline averaging around

58

$3.60 per gallon, our vehicle reimbursement has not kept pace with

the rising cost of delivering the mail.

Along with the rising cost of gas, the cost of providing the route

vehicle and the declining mail volume, our craft faces another challenge, the introduction of automated flat mail which has the potential of reducing route evaluations even further. We continue to

work with the Postal Service to find ways to lessen the impact on

the lives of our members.

Mail volume is cyclical. First-class mail volume has declined and

standard mail volume has also declined. I am hopeful that total

mail volume will bounce back once our economy begins to recover.

I was somewhat concerned when I saw the title of this hearing

and I saw you wanted me to talk about the economics of the Postal

Service, post the Postal Accountability and Enhancement Act:

What Is Next.

I believe it is too early to fairly evaluate the effects of this new

law. As I have said before, the Postal Service and the mailers are

economically sensitive industries, and right now both are going

through some very challenging periods. We need to give this new

law a chance to work. Let’s look at the effects of the Postal Accountability Enhancement Act after there has been an economic recovery and economic expansion. The law itself provides for an evaluation of the act in 10 years. Most likely that will allow for a full

economic cycle and a better reflection of how the act is performed.

According to the Postal Regulatory Commission’s Quarter 2 reports for fiscal year 2008, revenue is up despite first-class mail volume being down. The Postal Service constantly claims that to continue functioning under the Postal Accountability and Enhancement Act with a declining mail volume, cost-reduction procedures

must be implemented, which to the rural craft usually means contracting out rural jobs.

Contracting out is still a very critical issue for our union. We

continue to support Representative Sires’ House Resolution 282

and urge Congress to become involved with this issue. I firmly believe that contracting out is not solely a collective bargaining issue.

Although we have some protection in our national contract with the

Postal Service that somewhat limits the Postal Service’s ability to

contract out, the current provisions do not fully address contract

delivery service.

CDS is definitely a change of policy for the Postal Service. Because CDS is a policy issue, I urge Members to become involved

and support legislation to address this issue.

We have been invited and have agreed to participate in a joint

committee with the National Association of Letter Carriers and the

Postal Service to discuss the issue of contracting out. I hope

through this joint committee our two letter carrier unions and the

Postal Service can find some common ground to solve this controversial issue. However, if the joint committee fails to produce

any significant or meaningful agreement and if the GAO report due

out in late July is favorable to our position, I pray Congress will

finally become proactive on this issue and advance legislation to

protect the sanctity of the mail.

59

Mr. Chairman and members of the subcommittee, I thank you for

allowing me to testify before you today. I would be happy to answer

any additional questions you may have.

Mr. DAVIS. Thank you very much, Mr. Cantriel.

[The prepared statement of Mr. Cantriel follows:]

60

61

62

63

64

Mr. DAVIS. Mr. Reid.

STATEMENT OF MYKE REID

Mr. REID. Mr. Chairman, Mr. Marchant, Ms. Norton, Mr. Lynch,

my name is Myke Reid. I am the legislative director of the American Postal Workers Union.

President William Burrus of the APWU could not be here this

afternoon, so he asked that I present this testimony on his behalf

and on behalf of the APWU. Thank you for providing us an opportunity to testify on behalf of more than 300,000 members of our

union.

The recent enactment of the Postal Accountability and Enhancement Act [PAEA], was intended by Congress to preserve and protect the Postal Service for the American people. Whether the act

will have its intended effect remains in doubt. Much depends on

the dedication and commitment of the public servants, from rankand-file postal workers to the Postmaster General, who are proud

to provide the best postal services in the world to this country.

Much also depends on you, Mr. Chairman, and on this subcommittee. The Postal Service needs your support.

As we meet here today, there is an active and ongoing effort to

dismantle the Postal Service as we know it, to privatize it and to

turn its work over to for-profit companies. When Congress enacted

the Postal Reorganization Act of 1970, Federal law had required for

more than 100 years that letter mail be delivered anywhere in the

country at a uniform rate.

According to the U.S. Postal Service and American history, 1785–

2002, uniform rates for letter mail within the United States were

established by 1855. The act of March 3, 1963, based postage for

a letter on its weight and eliminated all differences based on distance, thus providing universal service to customers no matter

where they lived in the country.

Section 101 of the Postal Reorganization Act, as amended by the

PAEA, provides, ‘‘The United States Postal Service shall be operated as a basic and fundamental service provided to the people by

the Government of the United States, authorized by the Constitution, created by act of Congress, and supported by the people. The

Postal Service shall have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary and business correspondence of the people. It shall provide prompt, reliable and efficient services to patrons in all areas and shall render postal services to all communities. The cost of establishing and maintaining the Postal Service

shall not be apportioned to impair the overall value of such service

to the people.’’

I mentioned a few minutes ago that there was an ongoing effort

to privatize the U.S. Postal Service. One of the forms those efforts

are taking is a purported study of the Universal Service Obligation

of the Postal Service. Regrettably, it seems that the study of the

Universal Service Obligation is being treated as an exercise in economics rather than an examination of public policy.

There are segments of our population for whom universal postal

services at uniform rates remain critically important. Public policy,

not economics, dictates that these people must be served. It is still

65

the specific intent of Congress stated in the law that effective postal services be ensured to residents of both urban and rural areas.

I am very concerned about the direction being taken by the Postal Regulatory Commission, which has undertaken through private

contractors to study the Postal Service’s Universal Service Obligation. My concern is that the PRC has selected as its contractors

people who are on record as favoring privatization and as believing

that the postal monopoly is needed to participate in this study.

One of these individuals is someone who has written extensively

on postal topics, including presenting testimony before the Presidential Commission. He also prepared a controversial analysis of

the PAEA that has been widely criticized. In his testimony before

the Presidential Commission, he characterized the postal monopoly

as having insidious effects, stating that the postal monopoly makes

the Postal Service a victim, corrodes labor relations, intimidates

customers, excuses endless political interference from Members of

Congress, and is the chain that binds the Postal Service hand and

foot.

These views are wrong and extreme. My reason for restating

them here is that I want to make sure that the subcommittee is

aware that these are the views of one of the two principal contractors selected by the PRC to help prepare its report on the Universal Service Obligation. Another principal of the contract selected by

the PRC is also on record as in favor of dismantling the postal monopoly.

Unfortunately, it seems clear to us that the PRC, instead of selecting reputable and unbiased experts to present a well-rounded

analysis of the Universal Service Obligation, has chosen individuals who are already on record as hostile to the postal monopoly

and hostile to uniform rates.

Any fair analysis of the universal service would have to include

pros and cons for the consideration of congressional policymakers.

There are certainly credible differing views among economists and

other postal analysts on the issues surrounding universal service.

Surveying the situation reminds of Harry Truman’s famous attitude toward economists. He quipped that if you laid all the economists in Washington end to end, they would still point in all directions. The issue of the Universal Service Obligation is a public policy issue. It cannot and should not be driven solely by economists

of any political stripe or of all political stripes.

The Postal Service belongs to the American people. It is a fundamental and valued service provided to the people of this country.

The Universal Service Obligation is a public policy, not an economic analysis. I am confident that this subcommittee and this

Congress will demand that it remain so.

In closing, I want to thank the subcommittee for providing

APWU this opportunity to testify about important issues arising

under the PAEA.

Mr. Chairman, I would be happy to respond to any questions

that you or your subcommittee members may have.

Mr. DAVIS. Thank you very much, Mr. Reid.

[The prepared statement of Mr. Reid follows:]

66

67

68

69

70

71

Mr. DAVIS. We will go right into some questions. I have one question I would just like to ask each of you, if you would respond to

it.

Could you describe for us ways that the Postal Service has used

the provisions of the new act to ensure the viability of the service,

especially as it relates to the work that you do?

Mr. HEGARTY. I am not sure we know yet how it is going to relate to the work that we do, but I think the portions of the law that

they are using to their advantage, that we have seen so far. And

I think it is quite early yet—is the pricing flexibility that was discussed earlier and the volume discounts now, how that is going to

affect us. Obviously, if it brings more customers into the Postal

Service and we have more volume, our employees will be gainfully

employed and possibly even increase the members of our craft.

One other thing that I think they need to look at down the road

is the flexibility in rolling out new products. I think there is a new

international product that they are looking at or have rolled out.

So, as I said, I think it is quite early in the game. But we are

hoping that the Postal Service will use their flexibility to continue

to bring mail into the buildings where we all work and the mail

that we all deliver, depending on our craft, so that we can all work

together for a viable Postal Service.

Mr. YOUNG. Just this morning I met with a group of letter carriers down here to lobby Congress, from Connecticut; and they

were talking to me about one of the things that Jack Potter mentioned during his testimony, the fact they have now put a surcharge on Express Mail for Sunday delivery. My members are very

concerned about this. One guy in Connecticut told me they got 19

special deliveries every Sunday. They now had one in the last three

Sundays. Only one Express Mail in the last three Sundays.

I caution my members that part of the problem is the economic

downturn and the fact that people that may have been willing to

pay an extra penalty to get that mail on Sunday maybe don’t have

the money now and can’t make that extra payment. So I agree with

John in his statement that it is a little early to tell.

But, clearly, as the Postal Service starts to experiment in an area

that they are not familiar with—and that is this new pricing flexibility that you all gave them in the law—they are going to struggle

a little bit; and I think we have all got to look behind those decisions and make sure. And I have confidence that they will do that,

but I am just saying, let’s give them some credit here now. They

are brand new at this, and they are going to have experience growing pains as they learn what they can and can’t do and what the

results of certain actions they are planning on taking are.

Mr. CANTRIEL. In our craft we are very hopeful that the flexibility you have given the Postal Service will allow them to bring in

new customers and more volume. As a rural craft, we are pretty

unique in the fact that our salaries are volume-driven, along with

the number of deliveries and miles that we travel each day; and

we are hoping that by giving the Postal Service the flexibility to

go to those customers and offer them ways to get discounts and

bring in bigger mailers, thus increasing the volume of mail that our

rural craft handles, that we will see some stability built back into

the Postal Service.

72

And as John mentioned earlier, as long as the Postal Service is

stable, our jobs become more stable and it benefits all of us, and

especially our customers out there, so we can take good care of

them.

Mr. REID. Mr. Chairman, one of the examples that APWU would

offer is sort of the carefully crafted language in the PAEA concerning work-sharing discounts with our—the language is designed to

protect revenue and provide fairness in rate-setting. We are concerned that in recent rate filings since the law was passed, the

Postal Service seems to be willing to circumvent the provisions of

the law.

We certainly have a number of other examples that we would

like to share with the subcommittee. If you would be interested,

Mr. Chairman, we would like to put those examples together and

provide them to the Chair.

Mr. DAVIS. Let me just ask you, we all know the importance of

workplace culture—that is, the more harmonious relationships are

that exist between labor, management—pretty much across-theboard, it increases, improves, creates levels of efficiency that become very helpful.

Are there any ways that any of you can think of that workplace

culture might be improved that would also help increase productivity?

Mr. YOUNG. I would love to go first on that one.

I think the NALC has found one way, and that is through our

alternate dispute resolution process. Grievances that used to linger

for years and years, which left employees wondering whether they

had been treated fairly or unfairly for 4, 5, 6 years, that is an employee that is not usually one willing to give a lot of discretionary

effort, especially if their perception is they haven’t been treated

fairly.

We are now able to resolve our cases. In 1994, we had almost

30,000 cases pending regional arbitration. We did 2,000 a year. So

figure it up, that is 15 years.

Now a person that gets, for instance, a removal in the Postal

Service today, next month there will be in arbitration. So I think

that is one way we found.

We are working very hard, our union. My executive vice president, Fred Rolando, is working on an alternate route inspection

process. The process that we use right now, Congressman, is

confrontational: It is like, the manager goes out with you and you

use a minute—maybe a dog is tugging at the pantleg of your pants,

he says, Well, that doesn’t happen every day, so he deducts a

minute from your time on the route; and then you get into a little

debate over whether that is the appropriate thing to do or not.

It is just a very confrontational, acrimonious system. We don’t

see any reason for that.

We think we can devise a system. It is a very simple one. The

one we are testing, you would laugh probably if I told you. But basically it is just, average the office time used by the carrier, average the street time used by the regular carrier, and give them what

they use and go about your business. It looks very promising.

We are also cooperating, as I mentioned in my testimony, with

the implementation of the flat sorter equipment. It is going to cost

73

my union some jobs, there is no question about that. The Postal

Service thinks that number is 8,540. We will see; it is what it is.

But nonetheless, we have always believed that the American public

is entitled to the most efficient postal service we can give them,

and if we don’t do it, somebody else can, and we don’t want that

to happen.

So those are three ways that I think—that at least we believe—

have potential, and I think the Postal Service would agree, have

some potential at increasing that efficiency.

Let me also mention what Potter mentioned, so you don’t forget.

We have achieved more productivity increases in the last 5 years

than the last 30 before that. So, clearly, we are working a lot harder and a lot more efficiently today than we were just 5 years ago.

Mr. DAVIS. Anyone else?

Mr. HEGARTY. I would like to highlight a couple of things, Mr.

Chairman. One thing you may not be aware of is that we were

asked, the four union presidents, a few months ago, to make a videotape with the chief human resources Officer and the executive

vice president, Tony Veliante. And it was basically a roundtable

discussion on how we could work to ensure the long-term viability

of the Postal Service.

We talked about a lot of things—Do Not Mail, Vote By Mail, the

Universal Service Obligation. And I think by making that tape

from the headquarters level, it shows the commitment that it is not

always an adversarial relationship.

You will notice in my testimony—there may have been a couple

of digs in there about the way things are and things I would like

to see changed, but it is not all bad. We have a good working relationship at the headquarters level, and that videotape shows that.

Now, we were told that would be rolled out to the field and that

our members would all have an opportunity to see that videotape

at some point, either in the break rooms or on Postal Vision, which

is a TV program that they show in the lobbies of the Postal Service,

etc. So we wanted to get that message to our members, that, yes,

we can work together on those things that we need to work together on.

Three programs that we have had some long-term success with

in my craft, one is the quality of work life. And I mentioned that

in prior testimony, where we work together within a facility. Both

management and the union have to buy into that. It is not an adversarial relationship by any means; it is a cooperative relationship. That has worked very well for us.

Two fairly recent programs that we partner with the American

Postal Workers Union and OSHA on, one is the VPP program, the

Volunteer Protection Program, where a facility has to achieve almost a stellar safety record to qualify for star status. It is a very

prestigious award, and we have had a lot of plants that actually

do that, reduce their injuries.

Also the ergonomic risk reduction program. That is another

headquarters-level initiative with the American Postal Workers

Union and the Mail Handlers and postal headquarters, where we

go into facilities and give the employees ownership of that process;

where they tell the people who are evaluating the jobs what they

74

think would make their job easier to do, less stressful, and eliminate repetitive motion injuries.

All of those programs have been very successful.

Mr. DAVIS. All right.

Let me ask Mr. Marchant if he has questions.

Mr. MARCHANT. Thank you, Mr. Chairman.

Postmaster Potter and others have said that operating under the

CPI-based rate cap poses some serious challenges to the Postal

Service.

Do you agree, and would you make a comment on that comment?

Mr. YOUNG. Well, I will start off again.

Yes, I do agree. It poses significant challenges. But I point to this

fact, Congressman: For the last 38 years, the Postal Service has

been able to keep wages under the rate of inflation. So it is not an

insurmountable challenge.

It is getting tougher and tougher every day. I think the questions

that Congressman Clay asked about the gasoline prices are illustrative of that. I have every reason to believe, as we go into the

future, it is going to be even more difficult than it was in the past.

But I just believe that by finding win-win solutions—and this is all

predicated, all predicated on our ability to work together.

I don’t want to bang a dead horse here, but that is another reason why I caution so strongly against contracting out, because I

can’t get the men and women that I represent to give their all to

the Postal Service when they think they are looking for ways to

eliminate their jobs and give it to private contractors who don’t get

the benefits of annual leave, sick leave, vacation and health benefits that they do. That is a hard sell.

When I can show the members that I represent that the Postal

Service is not going in that direction, like I can now with the moratoriums, it is a lot easier for me to get that kind of buy-in. And

what I am suggesting is—and I say this not only to you, sir, but

to my own members and to the Postal Service—if we don’t find a

way to work together, the employees and the employer, this institution will not survive, because there are those significant challenges

in front of them.

Mr. MARCHANT. Thank you.

Mr. Hegarty.

Mr. HEGARTY. I agree with President Young. I think it is a challenge for the Postal Service, but I think the unions have cooperated

with the Postal Service.

If you look at our collective bargaining agreements, most of them

reached within the last year-and-a-half, it is modest raises. It is

nothing out of the ordinary; as Postmaster General Potter stated,

it is not a full COLA.

Many times people point and say you have cost-of-living and you

have wage increases. I am not sure if the exact figure is 66 percent,

but that is what Postmaster General Potter said. So we are actually under the rate of inflation with our wage increases, with our

COLA. I would say in calendar year 2007 for the Mail Handlers,

it was about 2.8 percent, which is almost exactly where the rate

increases of 2.9 percent is going.

The other thing that our members stepped up to the plate and

agreed to—because we vote on our contracts; I can’t just sign a conVerDate 11-MAY-2000 14:59 Apr 21, 2009 Jkt 000000 PO 00000 Frm 00078 Fmt 6633 Sfmt 6633 U:\DOCS\48240.TXT KATIE PsN: KATIE
75

tract with the Postmaster General; we send it out for a vote of our

members—is, they have agreed to pay more for their health insurance every year during the 5 years of the contract, recognizing that

the Postal Service needs some flexibility and recognizing that costs

for health care are increasing.

So I think the unions have stepped up to the plate and recognized that fact as well.

Mr. MARCHANT. Thank you.

Mr. CANTRIEL. I agree with John and Bill both. The thing—there

are some real challenges in the Postal Service. The thing that I

think concerns our leadership and our membership is that the

Postal Service will take Band-Aid steps to try to save money and

not look at the long run.

And I think contracting out is one of the things that concerns us

the most. Yes, it will save you some money maybe initially, but any

good businessman will tell you, if you deliver a very good product

and give a very good service, people are willing to pay for that, and

if you deliver an inferior product, even though it is a little bit

cheaper, it will hurt you in the long run.

That is one of our biggest fears with contracting out, that if it

is allowed to just bring anyone in to do the jobs that our members

are doing now, and both the Letter Carriers and our union are

doing—and doing a very splendid job doing—we are afraid it will

give the Postal Service a reputation of not delivering the type of

service down the road that we feel is necessary to keep us a viable

organization.

Mr. REID. Mr. Marchant, let me suggest this is a question better

for President Burrus, who is not here today. During the shuffle, I

lost my counsel and advisors over here. They are on the other side

of the room. So I think if you could provide the question or if you

would like that question addressed, we would certainly put it to

Mr. Burrus and I will provide a response.

Mr. MARCHANT. Thank you, Mr. Chairman.

Mr. DAVIS. Thank you very much.

Mr. Lynch, we have about 10 minutes.

Mr. LINDER. I have a very brief comment and question.

I am particularly concerned about the Universal Service Obligation study, if you want to call it that, just to basically give voice

or amplify the concerns that have been raised here already today

about the objectivity of some of the contractors that have been chosen to conduct this study, this assessment on behalf of the Postal

Regulatory Commission.

I would be willing to—and I am speaking just for myself at this

point, but I would be willing to send a letter just questioning that

whole process and the selection of those individuals. What I am

looking for is, and again I am just speaking for myself, is objective

information, a clear, just fact-based assessment. And the fact that

these contractors have already, you know, exhibited very strong

bias against certain aspects of the way the Post Office works right

now, that is not helpful to me. I need something that is more objective and clean. So, I would probably not find that study very helpful.

So I am going to recommend that they go back, that they pick

some objective, very intelligent and well-informed people, but peoVerDate 11-MAY-2000 14:59 Apr 21, 2009 Jkt 000000 PO 00000 Frm 00079 Fmt 6633 Sfmt 6633 U:\DOCS\48240.TXT KATIE PsN: KATIE
76

ple who will give us a good, objective assessment of the situation

right now. Again, I am speaking for myself.

Mr. Chairman, I thank you for your courtesy. I appreciate the

shortness of time, and I am going to yield back my time.

Mr. DAVIS. Thank you very much.

Delegate Norton will handle the meeting until we get back.

Ms. NORTON [presiding]. Thank you, Mr. Chairman. I vote in this

committee, thank goodness, though not yet on the House floor—any

day now if the Senate version of democracy, which is 60 rather

than 51, is finally understood; and we think we are very close.

So it is important that Members who do have to go are able to

go. I vote in the Committee of the Whole, but I am told this is in

the full House.

As some of you may know from my past interventions in these

hearings, I am fascinated by what it is the Postal Service and its

employees are being asked to do.

One of you mentioned the word ‘‘monopoly.’’ I think it may have

been you, Mr. Reid. That is exactly how you are treated, except, of

course, you are not a monopoly. There are all kinds of new postal

services, if you will, who have cropped up since 1971, when you

were a monopoly and we said, Oh, well, you just do what the private sector does.

There wasn’t no private sector, to speak of. There was no IT,

there was no—essentially, of course, Congress was not clairvoyant,

did not foresee that there would be, essentially, competitors that

were in the self-same business in every aspect of the word.

I just find this a fascinating problem. This is the academic in me

still coming out, that I can’t believe that this can’t work, and yet

I can’t believe that it can. And the only way to do this is to approach it with the straitjacket that is there, and then, because of

the incremental way in which the Congress works, to go step by

step to see whether or not there is anything to be done.

You notice we weren’t very incremental when we decided to essentially paste onto a universal service, without subsidy, a market

system, a rate system and market system practice, while saying,

We double-dare you not to act like a public service, because you remain a public service.

Well, OK, let’s see if that can work.

Well, we have gone through a lot in this committee. The Postal

Service is up and standing. I sometimes marvel at that.

Let me take a tough issue, the issue that troubles me greatly, the

outsourcing issue, because we know that the Federal Government

is sometimes the prime target. And you are sitting here with a subcommittee of a committee that has, since we have been in the majority, just laid out the limitations of essentially contracting out the

government, where the government, frankly, would need to have a

government just to keep track of the contractors, which means, essentially they are on their own.

So we say, you know, you can contract out only things that

shouldn’t necessarily be done by the government. Well, is mail

service one of those? I would have thought so, or else we would

have privatized the mail service ourselves. So we give no subsidy.

I am on another committee and always look for an analogy. The

closest analogy I can come up with is Amtrak, but we subsidize

77

Amtrak. It is falling apart, it is not much of a subsidy, but it is

money that comes out of here annually for Amtrak.

So I don’t really have an analogy. I don’t really have a similar

paradigm. So I use these hearings to think through whether or not

market practices can work. And if they can’t, to what extent does

Congress have an obligation to alter them in any way?

Well, if we contract out, the Federal Government has been contracting out, and we have contracted out a whole war. There are

more contractors in Iraq than there are military. You see what that

got us, Blackwater and the rest. That wasn’t even known until we

got in the majority and began to have hearings.

Some of those abuses, some of the reasons why we can’t keep

track, can’t possibly keep track without having a work force almost

equal in number to the work force out there, keep track of dollars—

in your case, dollars that come from the public; in our case, taxpayer dollars—is really the challenge.

All right. One of the things is, do we do it? Are we stuck with,

we do it with the consequences that we have seen, albeit we have

just gotten into the majority. But it was done under Democratic

Presidents too. So I am fascinated by how long the Postal Service

can resist, particularly since you use collective bargaining, you

have to bargain these things out. And my congratulations, how you

have done so on outsourcing, but that is what you have done.

You have a moratorium on any new contracting. It really distressed me to see that the contracting had moved from the way

Postal Service had always done it and that, apparently, the unions

had taken no exception to it; and that is way-out places where

there was some contracting done in apparently very rural areas

and the rest.

And then we had testimony that in suburban areas and areas,

we even had testimony of parts of cities where contracting out had

occurred. So there was clearly creeping contracting.

We weren’t sure that was being thought through, except in the

usual way. You know, it must cost less if the private sector does

it.

Of course, our own hearings have shown that not to be the case.

And if you want it to be the case, you had better have some folks

in fact monitoring it to see it is the case.

And we have passed 876, we have done a lot of things, and still

haven’t been able to hold the private sector to that standard. We

know we don’t hold them to a quality standard.

You’ve got this moratorium on new contracting. Currently—is it

your testimony, Mr. Young—where it’s been extended. It shows the

strength of collective bargaining.

I have two questions on that. What are the prospects that you

will be able to continue that? And what are the ramifications of

continuing it, given the problems, some of which have been outlined here, of the Postal Service?

Particularly today in a downturned economy, you are very market-sensitive, in that sense. I mean, are there real alternatives to

going the, really, cheap and dirty way without recognizing or caring about the consequences that the Federal Government to a great

extent has done and that apparently some private-sector employers

do?

78

Are there alternatives that the Postal Service ought to be looking

at?

Look, the whole thing is an innovation. Well, is there a way to

look at this public service, to look at its employees, the quality we

get out of them, while relying on you, because that’s all we have

and this is a bargainable issue, to somehow keep outsourcing out?

If not outsourcing, given what they think is savings, what should

they do?

And the other thing, in answering that question whether you

have any better ideas, whether prospects of extending it, at the

bargaining table, do they have to show and are they able to show

savings?

Mr. YOUNG. Let me try to start out with that, if you would,

Congresslady.

First of all, I think you understand that the danger or one of the

dangers of contracting out is, if you do too much of it and the contractors are as bad as some of them have been, it won’t be long

until the public loses faith in the ability of the mail system to privately, efficiently deliver their mail.

Congressman Hayes mentioned this in his opening statement.

Just last week, the Ponemon Institute, for the 4th straight year,

recognized the Postal Service as the most trusted Government

agency of all 74 agencies. And it just keeps happening. We’ve

earned the trust of the American public, and we’ve done it by efficiently and privately delivering their mail. And any attempt to

interfere with that is going to hurt that.

I also want to alert you to something, and I would be happy to

provide your office with this, if you’re interested. Just this week—

I couldn’t have timed it better if I’d have wrote the thing myself—

there is a report from the International Postal Services about the

privatization effort in Europe. And the bottom line of that report

is, it has produced no tangible benefit at all and it’s destroyed universal service in Europe. I think that is something that the Congress would be very interested, at least I hope it is, something that

the Congress would be very interested in doing.

It bothers me, Congresswoman Norton, that the Government

would play a role in destroying the middle class. Postal Service jobs

are not high-paying jobs. They are good, middle-class jobs. I don’t

say no, but why would the Government encourage the Postal Service to contract out jobs?

Potter said they saved 50 percent. There is no magic here. Seventeen percent is your annuity. Private contractors don’t have an annuity; that’s a retirement plan. A certain percentage of that, probably 10 percent or more, is to health benefits. Private contractors

don’t have health benefits. They don’t have sick leave, they don’t

have annual leave, they don’t have family medical leave.

If this is what the Government wants to do, it’s going to produce

a result and some unintended consequences, I believe. And it’s

something that we ought to walk very slowly on.

But more important, probably, to you is what you asked me: If

they can’t do that, they’ve got to do something else; what is it? And

I think you’re right-on again. We have to learn to work together.

Look, just a few years ago, the Postal Service spent $900 million

in 1 year fighting over grievances with their unions. If that’s not

79

total insanity, I don’t know what is. I talk to people in the auto

workers industry, they tell me, yeah, we go to arbitration maybe

five times a year. And my little union is going 2,000 times a year?

That doesn’t make sense.

Now, we have taken the steps——

Ms. NORTON. Why is it? Why do you believe you go so often?

Mr. YOUNG. Well, we don’t now. This was before. This was before

we changed our grievance procedure. We did because we couldn’t

resolve any issues. At the third step of the grievance procedure,

which is the regional level, 40 percent of the cases were being resolved; 60 percent had to be appealed. Today, with the new system

we put in, 88 percent of the cases are being resolved at that level,

and of the 12 percent that go forward, 60 percent of them are settled before the arbitration date.

So I think we’re on to the cusp of some things. Working more efficiently, supporting the Postal Service’s automation programs, encouraging discretionary effort from the members that we represent,

that’s something that all of us at this table can and do do almost

daily. But that has to be in the right environment.

And I strongly suggest to you that it’s very difficult for any elected union representative to try to get discretionary effort out of employees when they believe that the boss is plotting to eliminate

them with lower-paid, nonbenefit workers. That’s a hard sell.

So I think that, allow us to do—Potter was talking about these

increases in productivity. Allow us to continue to do that. Allow us

to work on efficiencies.

John should be congratulated about the efforts they’ve made with

the ergonomics program and reducing injuries. Our craft is also involved in that. I just saw a report from the Office of Department

of Labor where injuries are down significantly in the Postal Service

in the last 3 years, and that’s a credit to what these folks are

doing. That’s an expensive thing. That’s a way of saving money.

My bottom line is this, and I’m sorry it took me so long to get

to it: Allow us to work together.

And then just one last thing, and after this I’ll be quiet. I want

to ask that you seriously don’t tumble. I just got word that FedEx

came up here and told you all that they would deliver the Nation’s

mail ballots for nothing. I’m telling you, they haven’t earned the

trust that the members that I represent have earned for the last

200 years.

If anybody is going to deliver the Nation’s mail ballots, it ought

to be the dedicated postal employees. America trusts us because we

have proven ourselves. We shouldn’t be giving this work. And it

bothers me that the Government uses our competitor services instead of us. This is a quasi-Government agency.

Ms. NORTON. Did we say we would do it? Have we already said

we would do that?

Mr. YOUNG. No. No. Thank God, bless you, no. I hope you never

say you do it. It was told to me that it might be reported out of

a committee, and that didn’t even happen, thank God.

And, look, I congratulate Fred Smith; he’s trying to get his foot

in the door. Congratulations to him. But the fact of the matter is

that if that’s going to happen, that’s sacrosanct in this country.

80

And we should very careful who we turn the trust of the election

and the election of the public officials over to.

And I’d just say, my members have already proved it. We’ve done

it in Oregon for a number of years now. There’s been no issues, no

claims of fraud, none of that. We’ve proven our ability to do it.

And if you want to do it through the mail, and I strongly recommend you do, there’s a win-win. It’s good for the bottom line on

the Postal Service; it’s good for the American public.

This Government was founded on everybody voting. 87 percent of

the citizens in Oregon voted in the last election. That tells me what

I need to know, that’s the best way for people to vote in this country, and I hope you all support it.

Thank you.

Mr. CANTRIEL. Ms. Norton, I’d like to make a little clarification.

I’m afraid you’re under the misconception that the moratorium on

the contracting out has been offered to all the unions. And even

though we’ve been, thanks to Bill Young, asked to join on that committee to look at ways to work out a compromise on contracting

out, the rural carriers have not been offered that same moratorium.

I think you need to realize, and I think Bill will admit, that the

lion’s share of the growth is going to be out in the more rural

areas, and that the potential for contracting out is much greater in

the areas that we serve versus the areas that the NALC serves.

And the Postal Service has been very reluctant to even have very

meaningful talks with us about putting any moratorium on contracting out. The willingness has been with Bill and his group. And

I want to thank Bill publicly for bringing us into that committee

and allowing us to be part of that, because I really think he was

probably the one responsible for that. And we certainly appreciate

that.

And we look forward to working with him on that committee,

and we try to convince the Postal Service to offer us the same benefit of that moratorium until we can work some of these things out.

Ms. NORTON. The difference is that they already had their foot

in the door, didn’t they, with rural areas? And they are expanding

into areas they’ve never been to before with contracting out in Mr.

Young’s areas?

Mr. CANTRIEL. The expansion is also in our area, too, because the

only contracting we had before required that it be in very sparsely

populated areas. And they purposely deleted that language from

the manuals, which allowed them to move into areas where there

are more than 12 deliveries per about one family per mile. And

they have been more aggressive.

And I think you’ve heard over the testimony, the last couple of

times that we’ve been here, that the percentage of contracting out

on the rural areas continues to go up and up in the Postal Service.

Mr. REID. Madam Chairman, I’d just like to say—and I’m sorry

I brought it up so late after Mr. Lynch had left—but like President

Hegarty of the Mail Handlers, we support H.R. 4236, a bill by Congressman Lynch to restrict contracting out in the Postal Service.

In recent months, there certainly have been horror stories about

contracting in Federal jobs. There’s Blackwater, there’s Walter

Reed, you know, any number of instances where contracting out

Federal jobs has been a terrible idea. Legislation has just been

81

passed to stop the contracting out of collection in the Internal Revenue Service. I understand Congresswoman Schakowsky is introducing legislation to cut back on contracting in the intelligence industry. So there are any number of cases where contracting has

just turned out to be a horrible thing.

It seems that the Postal Service is interested in joining the race

to the bottom, the lowest-paid employees, the least efficient service,

and somehow being tagged as the Wal-Mart of Federal agencies.

And we’re certainly opposed to this.

We would hope this Congress would, at some point, pass a total

ban on contracting out of Federal and postal jobs.

Ms. NORTON. And, you know, they should pass one against contracting out their own jobs, as well. I say that to let you know just

how widespread it is.

I think part of the difficulty—I think we would have to find

something to hook it to that is a Federal interest, because the reason is that this is a bargainable issue, apparently. In fact, you’ve

been bargaining over, and so there is the issue of whether or not

the Government would be interfering with collective bargaining.

I’m just putting the issues that will come up on the table, not

to indicate that I don’t think it can be done, but the only way to

get through hard issues is to think, well, if not that, how do you

get through the fact that this is a bargainable issue? How do you

get through the fact that the Government itself is doing it?

Well, for one thing, security—the mail, for goodness sakes. One

would have to make the case about security, about their employees,

about the nature of mail and privacy, in order to overcome what

is also an iron-clad notion of the market system, which is, if it’s

bargainable, the Government doesn’t intervene. So I’m looking for

things like that.

And let me just say, you know the way in which America operates, not just the Congress: You have to have a catastrophe before

somebody says, ‘‘Oh, my God, let’s do something about that.’’

Now, that’s how we got the TSA, the people who look at your luggage that have been contracted out to all the airlines, and they contracted them. And so now all of those are Federal employees. But

look what happened before we decided that. And we were in a minority then. We were able to get the Republicans to go along with

this.

So I’m hearing you. And I know there will be a terrible and serious breach, at some point. I would love to deal with this on a preventative basis. And I think you say there’s a member who’s filed

on the basis of security for at least some matters. Maybe we should

go from there.

I don’t know if any of the rest of you have something to say

about this. I do want to compliment—I mean, I think you’re right

on the money with what you’ve done with grievances. I remember

that came up at one of the hearings before.

This kind of parallels my own experience at the EOC when I

came, and everybody felt they had to file a complaint, had to take

the complaint for 2 years. Except we found that, after 2 years, almost everybody got nothing. So when I came in, I said I’m going

to settle cases early so that only those cases that need and deserve

82

the attention of the Government—‘‘Oh, Eleanor is going to let the

employer sell us out.’’

And what we found out was that the remedy rate escalated to

three times what it was. People who wouldn’t have gotten any remedy got one because it was in the employee’s best interest not to

go through the whole system. Obviously, employers liked it, but

they liked it largely because of the amount of money it cost them

to go 2 years in a system where they were going to come out on

top but having spent a lot of money.

So you all do have some control over that, because you can make

employees understand. The way we made them understand was to

use the investigator at the beginning to bring in, before there was

any formal procedure, let the employer put his best case forward,

give you 5 minutes, give you 5 minutes. Then another investigator

would take them to the side and say, do you want to go forward?

You have some chance of winning, some chance of losing; tell them

what the chances are. They began to settle cases. That’s a very

smart thing to do.

And I must say, I saw all kinds of smart things that the unions

are doing and, for that matter, the Postal Service is doing with its

products, with its discounts. It really is acting like private sector,

to the extent that it can.

I asked staff, no one can tell me this yet, but I need to find out

something that bothered me in the Federal sector, something that

is in Mr. Keating’s testimony. You know, we don’t subsidize, the

employers don’t get any subsidy with the new pharmaceutical, because we are the employer. And he says that doesn’t happen, either, here.

Mr. YOUNG. That was in my testimony.

Ms. NORTON. Oh, that was in your testimony?

Mr. YOUNG. Yes, Congresslady. See, when the Government

passed it, if you read the law, it says anybody that provides the

level of benefits that’s superior to Medicare is eligible. It doesn’t exclude anybody. But all of a sudden, when the Postal Service applied

for those benefits, they were told no, because they’re part of the

FEHB program. And somebody in the administration——

Ms. NORTON. Part of what program?

Mr. YOUNG. The FEHB, the Federal Employees Health Benefits—I’m sorry, we use these acronyms—Federal Employees Health

Benefits Program.

Ms. NORTON. Yes, but for us, it really is an exchange of one pocket to another pocket.

Mr. YOUNG. I understand that. I don’t disagree. But the Postal

Service, because they were off-budget—and that was done a number of years ago—it’s not the same.

Let me show you the irony of it. My union, for the employers

that we hire to work at my union, we give them a FEHB-like program. It’s not FEHB, they’re not part of it, but the benefits are exactly the same. We just administer it ourselves. We got the subsidy. I got a check for X amount of money. I don’t know what the—

it wasn’t insignificant.

Ms. NORTON. The union did?

Mr. YOUNG. The union, yes, for providing the same exact benefits

that Postal Service provides to their employees.

83

So if they’re not on-budget, what would be the rationale for keeping that money away from them? And my economist tells me that

could be $8 million a year.

Ms. NORTON. We, the Federal Government, picks up something

like 70 percent—of course, we’ve been stuck on that forever—of

FEHBP, or whatever program we’re in.

Mr. YOUNG. But not for the Postal Service. The Postal Service

has to pay that themselves.

Ms. NORTON. So you have the same kind of 70/30, but you pay

it?

Mr. YOUNG. Ours is 85/15 at the end of this contract.

Ms. NORTON. You probably get it.

Mr. YOUNG. I don’t know how we got it. It was more. We negotiated a better deal. And now, like one of these representatives

said, we had to step back and take a little decrease this time.

The point I am making, though, is simply this. The Federal Government doesn’t pay a nickel for anybody’s health benefits in the

Postal Service. They do for other Government workers, but the

Postal Service is off-budget now. And the Postal Service and the

employee have to pay 100 percent of those costs.

So my thought is, as long as they’re paying for it, it isn’t the Government paying the Government, and they ought to be eligible for

those subsidies. And I think the law will support me on that, but

I leave it to you.

Ms. NORTON. I’m looking for where money can be found on an

equitable basis. Here, let’s talk equality. You’ve got to pass it somewhere. You can pass it to the postal customer. At some point, somebody’s got to pay. And these are huge costs.

You’re private sector—the union’s private sector, but so is FedEx.

They qualify for subsidies for their retirees, and you do not, for this

new benefit?

Mr. YOUNG. Exactly.

Ms. NORTON. Now, you know, I always try to think, ‘‘Think, Eleanor, what is the argument on the other side?’’ I’m coming up dry

on this one. I don’t understand the argument on the other side for

not, in fact, subsidizing the Postal Service. I understand that the

Postal Service has tried to get it; the Bush administration has resisted it.

Look, it is very expensive, but it is expensive no matter what we

do.

Now, we don’t subsidize you for anything.

Mr. YOUNG. That’s right.

Ms. NORTON. So cutting you off from a subsidy we give to every

other employer in the private sector while treating you as an employer in the private sector, I’m not quite sure I get it.

I have to think of the best argument from their—or, have they

given you an argument? Have they given you a reason? Do you

know of a reason that the Postal Service has gotten—I think the

Postal Service has tried.

Mr. HEGARTY. The only the reason I’ve heard is OPM said that

taking the money from one account and putting it into another account within the Government doesn’t make any sense, and they

didn’t want to do it.

84

But I agree with Brother Young; it’s not taking it from a taxpayer account and putting it into a taxpayer account. It’s taking it

from the taxpayer or OPM and giving it back to the Postal Service,

just like any other non-Government entity would have. And, for

those purposes, we are a non-Government entity.

Ms. NORTON. I don’t find any—we subsidize Amtrak. I asked

staff, give me an example of anything like that. And the best they

could come up with, not subsidy but revenue foregone, for example,

blind. That’s not a subsidy. A subsidy means, here’s some money,

not because you’re doing something we would do. But Amtrak

would say, here’s some money, because the private sector can’t run

a train without some money. And this essentially is what a subsidy

is.

When the chairman comes back, it does seem to me that one

thing this committee can do is look very seriously at the denial of

a private-sector employer benefit for retirees to the Postal Service,

which is treated in every other way as a private-sector employer.

You’ve got to tell me the argument on the other side. I’m sure

that the Bush administration doesn’t need one, but I think that

we’ve got to find one. It’s going to cost some money.

What bothers me about what you said from one pocket to the

other, it’s pockets of customers who are going to ultimately—nobody is going to pay this every year without, at some point, going

to the Rate Commission and saying, we need some more money,

and we need it because the Government says, among other things,

that we’ve got to pay for this new service voted by the Congress.

I will call a recess until those who can vote finish voting. They’ll

be back.

[Recess.]

Mr. DAVIS [presiding]. Let me welcome our third panel.

And they consist of Mr. Dale Goff, who is in his 36th year with

the Postal Service. He began as a postal assistant in New Orleans

and has been a National Association of Postmasters of the United

States [NAPUS], member and a postmaster for 26 years.

Thank you, Mr. Goff, and welcome.

Charlie Mapa has been postmaster at Gold Run for 21 years and

is currently on leave from that position to serve with the League.

Mr. Mapa, thank you.

Ted Keating is the president of the National Association of Postal

Supervisors, which represents the interests of 35,000 postal managers, supervisors and postmasters employed by the U.S. Postal

Service. Mr. Keating assumed the presidency of the Association in

2004 and was elected to continue serving NAPS in that capacity in

2006.

Gentlemen, if you would stand and raise your right hand to be

sworn in.

[Witnesses sworn.]

Mr. DAVIS. The record will show that the witnesses answered in

the affirmative.

Gentlemen, we thank you very much.

Of course, you know that your entire statement will be included

in the record. And if you would take 5 minutes and summarize.

One minute is indicated by the yellow signal, and of course red

means that the time is up.

85

And we thank you very much.

And we will begin with Mr. Goff.

STATEMENTS OF OSCAR DALE GOFF, JR., NATIONAL PRESIDENT, NATIONAL ASSOCIATION OF POSTMASTERS OF THE

UNITED STATES; CHARLES W. MAPA, PRESIDENT, NATIONAL

LEAGUE OF POSTMASTERS; AND TED KEATING, PRESIDENT,

NATIONAL ASSOCIATION OF POSTAL SUPERVISORS

STATEMENT OF DALE GOFF

Mr. GOFF. Thank you, Mr. Chairman. And I do intend to summarize my prepared remarks.

I am Dale Goff, president of the 40,000-member National Association of Postmasters of the United States. It is an honor to once

again present to Congress the views of our country’s postmasters

regarding the implementation of the Postal Accountability and Enhancement Act.

Mr. Chairman, with your permission, I would like to begin by

stressing the importance of a universal postal service. Next year,

Congress will have the opportunity to review recommendations

made by the PRC relating to universal service. Postmasters believe

that Congress, the President and the PRC must view universal

service in a broad social and political context.

Understandably, universal service has evolved over the over–200-

year history of our national postal system. However, postal policymakers have consistently strived to improve the quality of postal

products, make these products more affordable and more accessible.

Indeed, accessibility and consistency are the key hallmarks of the

U.S. Postal Service. These characteristics afford postal products

tremendous value to our customers, a value that would be dealt a

devastating blow should universal service be undermined or the

quality of postal services be compromised.

Moreover, balkanization of the Postal Service through subcontracting intrinsic and historic governmental functions would undercut customer trust in our postal network. In fact, just 1 month

ago, the Ponemon Institute revealed that the U.S. Postal Service

retained its status as the most trusted Federal organization, with

a privacy trust score of 86 percent. This represents a 3 percent increase over the previous year.

Post offices are the bedrock of a universal postal system. They

serve as outposts of commerce and connectivity to countless communities across the American landscape. Towns in rural and isolated regions and residential urban communities and economically

challenged quarters would be underserved without a strong and

governmental universal service obligation.

Service uniformity and accessibility are essential to this obligation. Class-based postal services, where different locales are provided different levels of service from different postal providers,

would be contrary to universal service and undermines confidence

in our postal system.

Mr. Chairman, as postmaster of Covington, LA, I can appreciate

the importance of the Postal Service. As a survivor of Hurricane

Katrina, many, many of our communities back at home would be

86

left awash without postal services. Liberalization of the postal monopoly would irreparably undercut Government engagement during

times of crisis.

For example, Mr. Chairman, when nongovernmental privateers

arrived, allegedly to provide aid, they exploited and profited at the

expense of many Gulf Coast communities. This kind of motivation

is not what America needs within our postal network. A universal

postal service continues to bind devastated Louisiana communities

together to the rest of the country and to the world.

I believe that Congress appreciates the necessity to protect universal service, even in the economically challenging times in which

we now find ourselves.

Public Law 109–435 provides the Postal Service with a greater

degree of flexibility in pricing and products. NAPUS has pledged to

work with the postal headquarters to expand offered services at

rural post offices. There is untapped postal revenue to be realized

in the hills and byways of America. The new law enables the Postal

Service to establish and expand these revenue-producing activities.

With appropriate resources, postmasters would welcome these opportunities.

Congress has a pivotal role in assuring postal quality and steadfast accountability. Unfortunately, staffing shortages continue to

plague post offices across the country. Rank-and-file postal positions, including those dedicated to window service and carrier

routes, remain unfilled or triaged with subpar bandages. Deficient

staffing weakens our service by slashing window hours and inconsistent or late mail deliveries.

Moreover, postmasters are forced to put aside their managerial

functions to offset staffing deficiencies. This phenomenon devastates postmaster morale, diminishes product quality and undermines compliance with a variety of management directives. Overburdening postmasters compromises their administrative functions,

reflects poorly on USPS accountability, and makes it difficult to

live up to the Sarbanes-Oxley Act.

Moreover, the USPS will have great difficulty meeting service

standards consistent with the postal legislation without the necessary and appropriately trained complement of employees.

Mr. Chairman, quality and accountability are what our customers care about. Consequently, NAPUS is attentive to the Consolidated Appropriation Act of 2008, which directs the Postal Service to convey to Congress in writing by June 23rd its efforts to solicit and take into consideration the views of local postal management in the development of appropriate staffing levels to ensure

that postal customers receive the quality mail service that they expect and deserve.

Finally, NAPUS cautions Congress against looking favorably on

State efforts to establish Do Not Mail registries. So far, these initiatives have failed to garner enough support to reach a vote in any

of the 15 States that considered the concept in 2007 or the 9 States

that began this year with such legislation.

Currently, there is no Federal legislation restricting advertising

or nonprofit solicitation mail. Nonetheless, NAPUS is vigilant

against attempts to place a legislative chokehold on mail commerce.

87

These types of postal products are vital to the future of the

American economy and the Postal Service. In 2007, advertising

mail contributed more than $686 million in increased sales to the

U.S. economy, and 300,683 small businesses generated more than

20.8 billion pieces of mail. This volume helps to buttress the Postal

Service against the decline in first-class postage revenue, revenue

essential for postal jobs and universal mail service.

Mr. Chairman, I would conclude my testimony with where I

began: The full potential and success of our national treasure, the

Postal Service, relies on its continued ability to provide universal

mail service to America, to use its available tools to weather economic squalls, to be granted access to the fiscal opportunities as

other employees, and not to be strangled by ill-advised legislation.

Thank you for the opportunity for NAPUS to present its views,

and I will entertain any questions.

[The prepared statement of Mr. Goff follows:]

88

89

90

91

92

93

94

95

Mr. DAVIS. Thank you very much.

And we will go to Mr. Mapa.

STATEMENT OF CHARLES MAPA

Mr. MAPA. Chairman Davis, Ranking Member Marchant, and

members of the subcommittee, wherever you are, good afternoon,

still. My name is Charlie Mapa, and I am president of the National

League of Postmasters. Thank you for inviting us to testify.

With your permission, I would like to briefly summarize my testimony, and ask that my full statement be accepted and entered into

the record.

Founded in 1887, the National League of Postmasters is a management association representing the interests of tens of thousands

of postmasters across the United States. Postmasters are a sizable

portion of our membership, as are retired postmasters.

This afternoon, I would like to address three topics: the overall

state of the Postal Service; the overall state of postmasters today;

and the importance of rural post offices, including the critical obligation to provide universal service.

The Postal Service has been working for some time now to increase its efficiencies and trim costs. We fully support these efforts.

Managing costs, however, is not, by itself, going to be a sufficient

means to ensure the financial viability of the Postal Service over

the long term. If we are to continue to enjoy the wages and benefits

that we all currently enjoy, the Postal Service is going to need to

do things a bit differently in the future.

We have seen a few new developments on the competitive side

of the house. We applaud these efforts and hope they expand. However, we have seen no attempts to innovate on the market-dominant side of the house, and we’ve seen no new NSAs. This is not

good. It is good, however, that the Postmaster General mentioned

in his testimony that is part of stage two.

Besides being one of the best ways to increase our profits and become a more sophisticated company, NSAs are the perfect vehicles

to test-drive the new and creative products that the Postal Service

needs to develop in order to prosper. New and creative ideas are

wonderful things, but they are a dime a dozen until they are actually tried. That is, until they are actually tested. Testing, going out

and actually trying new ideas, instead of just talking about them,

is the key to the development of new and innovative products.

The Postal Service needs to go out and actually try new ideas

without worrying whether they are going to work perfectly or not.

That means making mistakes just to try new ideas. They usually

don’t work right the first time. Having new ideas not work the first

time is part of being innovative.

A critical part of this effort will be the Postal Regulatory Commission having the breadth and depth of vision necessary to understand that the Postal Service must make mistakes in order to

learn. Companies that take no risks and never make mistakes

never innovate. We can’t be afraid to take risks. We can’t be afraid

to make a mistake. We can’t be afraid to learn.

Mr. Chairman, I would like to turn to the state of postmasters.

We have previously come before this committee to express our conVerDate 11-MAY-2000 14:59 Apr 21, 2009 Jkt 000000 PO 00000 Frm 00099 Fmt 6633 Sfmt 6633 U:\DOCS\48240.TXT KATIE PsN: KATIE
96

cern about the workload that is being thrust upon postmasters,

that workload alluded to by my friend, Dale.

We understand that postmasters often need to put in more than

40 hours a week. But there comes a point, and we appear to have

reached it, where often putting in more than 40 hours a week turns

into a 6-day workweek and then some. If this doesn’t stop, there

is going to be massive burnout among postmasters, and the price

that will be paid will be enormous.

We are now even being told that the new postal law requires

that the Postal Service turn a profit, and that the only way to do

so is to turn the job of postmaster into a 6-day, 48-hour-plus workweek.

Tellingly, this is an issue that was very important to postmasters

during the 1950’s and 1960’s, and made it to legislation when Congress finally acted upon the matter and passed Public Law 89–116,

which legally established a 5-day workweek for postmasters. That

was more than 4 decades ago. That bill, as then-President Lyndon

Baines Johnson said, ‘‘culminated’’—and this is a quote from President Johnson—‘‘15 years of efforts by the Nation’s postmasters to

secure what most people have enjoyed all along, a 5-day workweek.’’

I know of no other industry where top management is trying to

turn back the clock on the 5-day workweek, and we wish the Postal

Service would quit trying to do so. It’s not good for postmasters, it’s

not good for the Postal Service, and it’s not good for our country.

Finally, Mr. Chairman, I would like to address rural post offices

and the universal service obligation. The glue that binds rural

America together is our postal system and the local post offices.

However, the importance of rural post offices in rural America

goes far beyond the mere delivery of mail. As I have described in

my testimony, the importance of rural post offices goes to the essence of rural cohesion and to what makes up the notion of community. You can see this in the fact that once a town’s post office disappears, the town often shrivels up and dies, for the cultural, political and economic function of a post office cannot be filled by having the rural carriers sell stamps from his or her car.

Finally, Mr. Chairman, the defining public policy that has guided

the Postal Service from the early years has been the vision of a

universal mail service. Equity demanded that the Government provide postal services to everyone, not just the privileged and wellto-do, including rural and urban areas that some perceive as being

unprofitable.

The League strongly believes that we in the Postal Service

should never lose that orientation. Universal mail service to every

spot in the country every day is the right of every American citizen.

That concludes my remarks. I would be pleased to answer any

questions that you might have.

[The prepared statement of Mr. Mapa follows:]

97

98

99

100

101

102

103

104

105

106

107

108

109

Mr. DAVIS. Thank you very much.

And we will go to Mr. Keating.

STATEMENT OF TED KEATING

Mr. KEATING. Chairman Davis, Congressman McHugh, I’m grateful for the opportunity to appear before you today.

This year marks the 100th anniversary of the founding of the

National Association of Postal Supervisors. My written testimony

will detail some of the challenges faced over those 100 years and

the obstacles that were overcome with the help of Congress. But in

the interest of time, I will move directly to the issues we face

today, because those challenges continue.

While we have made great strides in improving the service and

efficiency of the Nation’s mail system over the past century, new

and unprecedented challenges remain before us. As the economic

focus of this hearing suggests, the preservation of the financial

strength is the paramount challenge to the future of the Postal

Service.

The triple threat of declining mail volume, increased service demands and delivery points, and a weakened economy have not provided a healthy base for the launch of the postal reform law over

the past year.

Weakened economic conditions have disproportionately affected

postal revenues. The financial, credit and housing industries, key

users of the mail, have slackened in their mail usage. And retailers

have reduced their mailings of catalogs and advertising mail.

These conditions underscore my belief, as I noted in my testimony to the subcommittee last year, that the sweeping reforms of

the new postal reform law and the pressures of the inflation-adjusted cap upon price increases in the market-dominant products

will require the Postal Service to become more entrepreneurial, accountable and transparent in the conduct of its business operations.

The Postal Regulatory Commission similarly needs to assure that

the Postal Service retains the flexibility to operate in a manner

that preserves affordable and universal service. And the Congress

needs to exercise oversight to monitor and assess whether the objectives of the postal reform law are being achieved while remaining ready to modify the terms of the law as developments may require.

The new law affords the Postal Service tremendous opportunities

to benefit current users of the mail and to attract new customers.

The Postal Service needs to explore every opportunity to pursue additional revenue through new products and services. This includes

not only the introduction of new and innovative mail products, but

also provide greater accessibility to commercial services within the

network of more than 30,000 post offices.

For example, post office lobbies are underutilized. They should

afford access to bank ATM services and other commercial products.

The availability of ATM in a small post office in rural areas will

be well-received in many communities.

Similarly, the last mile of a USPS delivery provides untested opportunities for expanded courier and delivery services by USPS carriers.

110

The Postal Regulatory Commission has embarked upon and completed an impressive schedule of regulatory initiatives over the

past year, including rules for the rate-setting process for marketdominant products and service standards for the most postal products.

It is now engaged in a study, mandated by the Postal Accountability Enhancement Act, to report to the President and Congress

by December 2008 on universal postal service and the postal monopoly in the United States, including the monopoly on the delivery

of mail and access to mailboxes.

Universal service encompasses postal services and costs that

would not necessarily be provided with the private sector controlling and administering the American postal system. That unacceptable outcome, the deprivation of reasonable access in the collection

and delivery of the mail to some Americans, is why universal service obligation has become a core component underlying the mission

of the Postal Service.

That is also why the mailbox monopoly, the unrestricted right to

facilitate the collection and delivery of letters through exclusive use

of the customer’s mailbox, has become a twin policy requirement to

assure economic viability of the universal service.

The PRC’s responsibility to study the future of universal service

obligation in a report to the President and Congress comes at a

time when declining mail volume and increased service demands

for new households and businesses may strain the economic viability of the universal service as we have come to know it.

This prompted the PRC to declare last month its intent, in preparing the report, to focus on the universal service obligation as

characterized by its geographic scope: product offerings, access to

postal facilities, delivery frequency rates and affordability, and the

quality of service.

The identification of these study areas means that the PRC study

will likely involve examination of a number of controversial proposals: determination of unprofitable delivery routes, the closing of

small post offices, abandonment of the Alaska Air subsidy, the realignment of producing and distribution networks, and the reduction in the number of stops in delivery networks. These initiatives

arguably would reduce Postal Service capital and labor costs, but

also threaten the ubiquity and accessibility of America’s postal system.

To prepare its report, the PRC has contracted with a consultant

team from George Mason University to receive significant assistance in acquiring the underlying research, distilling public input,

and drafting the report due to the President and Congress.

The PRC’s scheme for the consultant’s drafting of this report envisions the GMU team playing a dominant role in the drafting of

the report. The PRC’s request for proposals even envisions the

PRC’s possible adoption of much of the consultant’s draft report as

the final report of the PRC.

Given the significant role of the consultant team and its draft report in shaping the ultimate views of the PRC on the universal

service obligation, we are concerned that the PRC has not provided

for adequate transparency and the opportunity for meaningful public review and comment. We believe the failure to provide for public

111

comment on the consultant’s draft report represents a serious and

perhaps fatal flaw in the PRC’s study.

And my time is running out. Because this has been touched upon

already, let me go right to something else that I wanted to finish

my report with. And I’ll be very quick.

Last year, I brought to your attention the existence of new Postal

Service rules that deny employment protections to military veterans in the management or supervisory positions in the course of

downsizing action. Since then, these rules have remained in place,

and the situation has remained unchanged.

These rules allow the Postal Service to involuntarily transfer supervisors to locations far from their homes without the right of appeal, despite their veterans preference status, in the course of

downsizing or consolidation of a post office. This is clearly contrary

to the spirit of Government-wide personnel law and rules and repugnant to the sacrifices that veterans have made to this country.

In response to the Postal Service’s actions, Representative Stephanie Herseth Sandlin has introduced the Veterans Reassignment

Protections Act, H.R. 728, which prohibits Federal departments

and agencies, including the Postal Service, from involuntary transferring of a federally employed military veteran to another geographic location without the benefit of veterans protection and reduction-in-force rules which guarantee the right of appeal.

This legislation has been referred to the Committee on Oversight

and Government Reform, and I urge the members of this subcommittee to support the consideration in approval of this measure.

While no veterans in supervisory positions have yet been involuntary reassigned, as the Postmaster General testified to earlier,

this is only because of the delay in the Postal Service’s plans to undertake what could potentially become significant realignments in

processing and distribution networks. When the time comes and

those realignment initiatives do in fact begin, veterans preferenceeligible employees clearly will suffer harm if the Postal Service

repositioning rules are allowed to stand.

There is no reason for Congress to wait for that harm to occur.

The rights and protections of our Nation’s veterans, in light of their

continuing sacrifice in Iraq, Afghanistan and other dangerous

lands, should never be compromised.

Thank you for the opportunity to present these views on behalf

of the National Association of Postal Supervisors, and I’ll take any

questions you may ask.

And I apologize if I ran over.

[The prepared statement of Mr. Keating follows:]

112

113

114

115

116

117

118

119

120

121

122

123

Mr. DAVIS. Let me thank all of you for your testimony.

Let me ask each one of you, if you would, to respond. There is

obviously a great deal of conversation continuing to take place

about the economic viability of the Postal Service and making projections for perhaps even a decade.

My question is, what do you see the Postal Service doing now,

or what can it do, to enhance economic viability, making use of the

Postal Reform Act?

Mr. GOFF. I guess I will start first, Mr. Chairman. I think we

have seen that in some of the testimony, or heard that today in

some of the testimony, that the Postal Service, on the competitive

products, we have gone out and started doing some things to raise

different revenue.

I know in meetings with the Postmaster General and other members of the postal headquarters that they have kept us involved in

what is happening with the status of the Postal Service as far as

volume and revenue, and I can tell you, and I think I know these

two gentlemen next to me as well, that we are out there telling our

employees that because of the law and because of the situation that

we are in, the economic times, is that we have to go out and generate revenue.

As I said in my testimony, in the small towns and rural areas,

there is plenty out there that we can go to, the mom-and-pop grocery stores, the people that depend on the Postal Service to bond

their families together and to grow their businesses in the small

towns; that we can go out and help those people with some type

of mail service, with discounts or whatever, to grow the revenue for

the Postal Service.

Mr. MAPA. I agree with Dale on all of those issues, and I think

what the Postal Service really needs to do beyond that, is to look

at what we have. We have the largest network, the largest infrastructure in the country, and the Postal Service has to sit back and

ask itself, are we making the best use of that? I would venture to

say that we are not. I think there are a lot of things we could do.

I know that Dale and I both, and probably Ted, when we go out

to talk to our members, we tell them, look; look for opportunities.

The opportunities are there. Find a way to make use of that infrastructure now as much as you can.

But I think the Postal Service really has to sit back and take a

look at the value that it has, something that nobody else has, and

try to figure out ways to maximize that infrastructure.

Mr. KEATING. While I don’t disagree with my two colleagues, I

take a look at the long-term picture of the Postal Service. I spent

my postal career mainly, 40 years, in finance, and from a financial

perspective I just see that we are on a collision course; that the

revenue, even generating new avenues of revenue, is not going to

be enough to sustain the Postal Service as we know it. And I think

ultimately this is going to end up back in Congress in the years

ahead, whether it is 2 years, 5 years or 10 years, as an issue, what

do we do with the Postal Service once again.

I just don’t think that to sustain the Postal Service, as we know,

I don’t think we have the financial means to do it.

124

Mr. DAVIS. Well, let me ask you. How important do we think that

the concept of universal service is to the Postal Service and its operations?

Mr. GOFF. Mr. Chairman, just as the Postmaster General said,

that is our trademark, universal service. As I said in my testimony,

I was a witness to that during Hurricane Katrina, and being a survivor of that, just what the Postal Service did to get the communities back together and divine them with the rest of the country

after that catastrophe happened.

Without the universal service, and I don’t want to forget about

Chicago and places like that, but we have a vast area of this country that is very rural, and I know Congressman McHugh comes

from a small town there in New York. You know, the Postal Service, to have that universal service, whether they are making a profit or not, is very important to those communities. Without the universal service, we will see many of these communities possibly go

on to eBay and sell their town because they are not going to survive anymore, and people are going to move. So, it is very important that we keep that universal service; not only that, but the monopoly that the Postal Service has.

Mr. MAPA. If we don’t maintain universal services as the U.S.

Postal Service, then we will become what we have been talking

against for years, and that would be the privatizers. We will do the

things that we were afraid they would do. We would go to the markets that we think made the most money and where we can be

profitable. We would concentrate on those markets and cut the rest

out. If that is what we want to do, then we might be smart just

to turn it over to the people that really know how to do it.

I would rather see that we maintain the private express statutes.

I would rather see that we maintain universal service. A post office

to a town means much more than having a place to go pick up a

letter or buy a stamp. It helps to form the fabric of our country.

I don’t have the answer on how to get it done, but if we want

to give up on it now, then we will never find a solution.

Mr. KEATING. I agree completely. The concept of—despite what

the postal reform says, the concept of the Postal Service making

money, quite frankly, and in my personal opinion, is not realistic.

I get a question from my membership often as to what is our future? What is going to happen when the money runs out? And my

usual response is, well, it has been quite a while since Amtrak

made money, but the trains are still running, and I think that is

a comparable future that we see down the road.

Mr. DAVIS. Well, before I go to Mr. McHugh, let me just ask you,

where is Covington, LA?

Mr. GOFF. Where is it? It is 30 miles north of New Orleans,

across that big pond, Lake Pontchartrain.

Mr. DAVIS. That is a great lake, I will tell you. The most frightening experience I ever had in my life, I was there 1 year when

the water was up. I went across that lake with the water up on

the lake and with sandbags, and I was so delighted to get to the

other side.

Mr. McHugh.

Mr. MCHUGH. We are delighted you made it, too, Mr. Chairman.

125

Let me apologize to everybody for not being here earlier. They

had me and 20 of my colleagues locked up as part of the Intelligence Committee markup, and it precluded my being here for the

other two panels. It is good to be here even at this late hour and

see so many familiar faces who have really been so instrumental

in making the Postal Service the great success that it has been and

remains to this day.

I want to commend you, Mr. Chairman, as always, for devoting

this subcommittee’s attention to the oversight and to the hopefully

tender mercies of the House of Representatives in trying to be more

supportive in what I happen to believe is an invaluable national

mission, and that is the preservation of the Postal Service. That

means in my part of the world, as Dale said, universal service to

places like Pierpont Manor, NY, and all points in between.

I listened to all of your comments very carefully. The concern

that has been expressed about the study on universal service is understandable. I was flipping through Myke Reid’s testimony, and

he is pretty explicit about some of the specific concerns that he has

as to the process.

I can only speak for myself at this point. Certainly it was always

our intention that the PRC be the author of the report, and the underlying intent is to better define and, in my judgment, hopefully

better preserve the guarantee of universal service. But there is always uncertainty. I listened to President Keating’s comments about

his concern in lack of input.

Ted, I just want to ask you, is that pertaining to the George

Mason piece of it, or are you concerned about public input across

the board? I know the PRC is having a variety of public hearings.

Mr. KEATING. I think those public hearings, quite frankly, are

premature at this point. I think the hearings should take place

after the consultants come back with their recommendations.

Mr. MCHUGH. To provide—and I am going to state the obvious—

to provide folks like yourselves with the opportunity to comment on

the study piece of that?

Mr. KEATING. That is correct.

Mr. MCHUGH. That is an interesting perspective.

Any other specific concerns about the actual PRC process, including the George Mason study, that you can share with us? I think

it is important for the PRC to hear about these so that where it

is at least possible, some adjustments in the way ahead can be

made.

Mr. KEATING. You refer to Myke Reid’s testimony. I had a chance

to read that testimony earlier, and I agree completely with everything he said.

Mr. GOFF. Congressman, if I could answer that, the PRC, since

it has been in existence under the new law, I know so far they have

involved many of us in working with them and giving input to their

committee. And I would hope, and I have that confidence in them,

even with this, irregardless of the study being done, that they will

continue to come to us.

They have done a great job as far as what they have put out, as

far as their reports. They have been ahead of schedule. But I hope

that they take their time on a universal service study and go to everybody, all of the stakeholders that are involved, and get their

126

opinion input. And I have that confidence in the committee, watching what they have done so far with their work.

Mr. MAPA. I would have to agree with Dale. I know that the National League of Postmasters has a very good working relationship

with the PRC; however, I guess maybe I will have to voice the

same concern. A lot is going on over there regarding universal service, but I think an effort should be made to invite each of our

groups to at least provide some input to that process so that our

concerns are going to be heard.

Who else would be more qualified to talk about post offices in

small towns than the two presidents of the postmaster organizations? If we are not included in that somehow, then the process is

missing a very important piece. And if you don’t invite the president of the supervisors to come talk, then the process isn’t going

to be as all-encompassing as it needs to be.

Mr. MCHUGH. Well, I thank you all for that. We have folks from

the PRC who are monitoring this hearing, and perhaps they will

take your comments back, and we will see some increased opportunities for input. I would certainly hope that happens.

Mr. Chairman, I see we are under the 5-minute rule, and my

time is up. I can ask another question, if I can.

Mr. DAVIS. Go ahead.

Mr. MCHUGH. All right. I had a lot of folks come who are concerned about the Postal Service’s future, as all of you are, who have

come and met with me on a number of occasions about their focus

on and concern with the potential for so-called ‘‘do not mail’’ legislation, particularly at the State level. Based on your presence

throughout all of those thousands of post offices across the country,

I am just curious if you would have any comment on how you feel

‘‘do-not-mail’’ legislation would affect the ability of the Postal Service to maintain its revenue streams, and also if you have heard

anything that we should be aware of here at the Federal level

about movement in that regard?

I know this came up in the Postmaster General’s comments, but

you folks, as you know, are out on the ground. I am just curious

of your perspective.

Mr. GOFF. Congressman, we are not aware of anything at the

Federal level at this time; however, there has been that legislation

in several States last year, and it has already been proposed this

year.

I can tell you, we have been very aggressive. We have had postmasters from those individual States go before the committees that

were having hearings on that issue to give testimony, and I am

proud to say that each time somebody has gone to testify, that legislation has been pulled.

So, it would be devastating, as I said earlier. It is a big industry out there of people that are involved, $680 million in sales, 300,000

small businesses that generate 20 billion pieces of mail. If that

happens, what would happen to us for sure? Amtrak—you wouldn’t

have enough money to support the Postal Service if those people

would go away.

Back when the Postal Service was first formed back in the

1970’s, for those who have been around a long time, we survived

that, and we became stronger as a Postal Service. And I am conVerDate 11-MAY-2000 14:59 Apr 21, 2009 Jkt 000000 PO 00000 Frm 00130 Fmt 6633 Sfmt 6633 U:\DOCS\48240.TXT KATIE PsN: KATIE
127

fident that even with the new law that was passed in 2006, that

we will become stronger as a Postal Service, too. But ‘‘do not mail’’

would just devastate us.

Mr. MAPA. I agree with Dale. ‘‘Do not mail’’ is a horrible thing.

I have actually been to eight branch conventions so far, and I talk

to postmasters at every one of them, and some of them tell me they

have had decreases as much as 30 percent in their volumes. I had

one postmaster tell me that his volumes had gone down 60 percent.

I would say, OK, that is a bad thing. Take a look at what ‘‘do not

mail’’ will do to your mail volumes. If you think your tubs are half

full now, they will be a quarter full. And if we are losing money

the way we are now with a bad economy, throw in a little bit of

‘‘do not mail,’’ and the Postal Service will likely go under.

We need to be able to communicate to the American public that

mail is not invasive. You go to the post office and you pick up your

mail. Before you leave the post office, you can already do what all

good Americans do, and that is recycle. Compare that to telephoning somebody at dinnertime to sell them a windshield. There are

two big differences between those.

The other thing is we need to let people know why people do advertising like that. We watch 10 or 15 minutes of television, 5 minutes of it is punctuated by commercials. So there is a reason for

it, and we need to be able to convince people that mail is a good

thing, and it is not an invasive thing that is going to bother America.

Mr. KEATING. Like my two colleagues, we have been very active

at the State level. We have legislative representatives in every

State in the country. There has been a lot of State activity. But

when we sent people to those hearings and they hear the full story

from us, we have been able to beat back that legislation. So it is

something we have to keep our eye on, and we certainly will.

Mr. MCHUGH. Well, I had a strong suspicion you were actively

involved. Let me commend you for that grassroots approach. I

spent four terms in the State legislature back in New York, and

I know when representatives from communities throughout the

State used to come and talk to me about any piece of legislation,

in this case, of course, ‘‘do not mail,’’ it holds tremendous weight.

And our ability to bring a sense of reason and the postal perspective to these deliberations as they occur are greatly enhanced by

your direct efforts. So, thank you for that on behalf of every American who receives mail, because do-not-mail legislation could take

us a long way down the path to, in fact, of no mail, or at least no

viable Postal Service. I am deeply concerned about that. So thank

you.

Mr. Chairman, again, with words of thanks to you and the subcommittee for your efforts here this day and every day on behalf

of the U.S. Postal Service, I want to yield back.

Mr. DAVIS. Thank you very much, Mr. McHugh.

We certainly want all of you to know, and especially you, Mr.

Goff, that we are concerned about those small communities like

Covington and the town that Mr. McHugh lives in and all of rural

America, as well as urban America. I want to thank you gentleman

for being here and for your testimony.

128

Also, it gives me a chance to mention that one of the long-time

members of the National Association of Postal Supervisors, who

was president of the group in Chicago, Elizabeth Fleming, her funeral was today. So I will just kind of gavel this meeting adjourned

in memory of her, because she was the person who always kept me

abreast of what was happening.

Mr. KEATING. Mr. Chairman, thank you very much for that. I appreciate it.

Mr. DAVIS. All right. Well, thank you all so much. This meeting

is adjourned.

[Whereupon, at 5:36 p.m., the subcommittee was adjourned.]

[Additional information submitted for the hearing record follows:]

129

130

131

132

133

134

135

136

137

138

139

140

141

142

143

144

145

Æ