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THE FUTURE OF THE U.S. POSTAL SERVICE 

HEARING 

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

OF THE

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

APRIL 22, 2010 

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

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 


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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

ROLAND W. BURRIS, Illinois 

PAUL G. KIRK, JR., Massachusetts 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

JOHN MCCAIN, Arizona 

GEORGE V. VOINOVICH, Ohio 

JOHN ENSIGN, Nevada 

LINDSEY GRAHAM, South Carolina 

ROBERT F. BENNETT, Utah 

MICHAEL L. ALEXANDER, Staff Director 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY 

THOMAS R. CARPER, Delaware, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

MARK L. PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

ROLAND W. BURRIS, Illinois 

JOHN MCCAIN, Arizona 

TOM COBURN, Oklahoma 

GEORGE V. VOINOVICH, Ohio 

JOHN ENSIGN, Nevada 

JOHN KILVINGTON, Staff Director 

BRYAN PARKER, Staff Director and General Counsel to the Minority 

DEIRDRE G. ARMSTRONG, Chief Clerk 


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C O N T E N T S 

Opening statements: Page 

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

Senator Coburn ................................................................................................. 4 

Senator Akaka .................................................................................................. 5 

Prepared statements: 

Senator Carper ................................................................................................. 37 

Senator McCain ................................................................................................ 40 

Senator Coburn ................................................................................................. 42 

WITNESSES 

THURSDAY, APRIL 22 2010 

Phillip Herr, Director, Physical Infrastructure Issues, U.S. Government Accountability Office ................................................................................................ 7 

Hon. John E. Potter, Postmaster General and Chief Executive Officer, U.S. 

Postal Service ....................................................................................................... 9 

Hon. David C. Williams, Inspector General, U.S. Postal Service ........................ 11 

Hon. Ruth Y. Goldway, Commissioner, Postal Regulatory Commission ............. 12 

ALPHABETICAL LIST OF WITNESSES

Goldway, Hon. Ruth Y.: 

Testimony .......................................................................................................... 12 

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

Herr, Phillip: 

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

Prepared statement .......................................................................................... 44 

Potter, Hon. John E.: 

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

Prepared statement .......................................................................................... 54 

Williams, Hon. David C.: 

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

Prepared statement .......................................................................................... 65 

APPENDIX 

Vincent Giuliano, on behalf of the Association for Postal Commerce 

(PostCom), prepared statement with an attachment ........................................ 84 

Questions and Responses for the Record: 

Mr. Potter .......................................................................................................... 95 

Mr. Herr ............................................................................................................ 107 

Mr. Williams ..................................................................................................... 131 

Ms. Goldway ...................................................................................................... 137 


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THE FUTURE OF THE U.S. POSTAL SERVICE 

THURSDAY, APRIL 22, 2010 

U.S. SENATE,

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT,

GOVERNMENT INFORMATION, FEDERAL SERVICES,

AND INTERNATIONAL SECURITY,

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS,

Washington, DC. 

The Subcommittee met, pursuant to notice, at 3:32 p.m., in room 

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

Chairman of the Subcommittee, presiding. 

Present: Senators Carper, Akaka, and Coburn. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. The Subcommittee will come to order. Welcome 

to each of our witnesses. Welcome to the folks who have shown up 

and who are sitting in the audience today. 

We have some good news. There are not going to be any more 

votes today, so we are not going to be interrupted, and we will have 

a chance to have a full discussion, and you will have a chance to 

give all of your testimonies, and we will have a chance to ask questions. That is the good news. The bad news is sometimes when we 

have no more votes today, some of my colleagues like to head for 

the airport, and they head back to their own States. So I would not 

look for a full house here on our side. But these are very important 

issues, as you know, and a couple of my compadres will come in 

and join in the questions. 

But we are grateful that you are all here. This hearing is the latest in a series that this Subcommittee has held over the past several years as the Postal Service struggles to adapt to an evolving 

mailing and communications industry and more recently to a deeply troubled economy—an economy which I am pleased to report, at 

least from my own perception, is coming back. Go back a year ago, 

our economy was shedding 600,000 jobs a month, and last month 

I think we added about 150,000 jobs. A year ago, our GDP was 

down by 6 percent. The last quarter we reported on, it was up by 

6 percent. And big companies especially are making money, investing in capital investments, so I think better days lie ahead. And 

it may not be fast, but I think better days are coming back. Even 

the Troubled Asset Relief Program (TARP) money, all the TARP 

money that we gave away to the banks and to GM and all this, is 

actually being repaid. And things are just actually more encourVerDate Nov 24 2008 13:45 Dec 01, 2010 Jkt 057329 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 P:\DOCS\57329.TXT SAFFAIRS PsN: PAT

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aging on a beautiful day here in April, Earth Day, so welcome to 

this hearing on Earth Day. 

As we all know, our economic crisis that our country has faced 

over the past 18 months has impacted just about every family and 

just about every business in our country. I would argue, however, 

that it has damaged the Postal Service and some of its customers 

more, maybe far more than most. 

The Postal Service releases its financial data I believe every 

quarter, and I have grown used to reading disappointing news in 

those reports, as have many of you. Not always. You can go back 

a couple years ago, and it was not that long ago that the Postal 

Service actually paid down its line of credit to the Treasury and 

had right-sized the organization and found a lot of ways to trim 

costs. But the last year and a half has been very challenging. 

The latest report is for the first quarter of fiscal year 2010. The 

latest report is largely more of the same, at least more of the same 

we’ve seen over the last couple of years. And in a period that coincides with the holiday season, usually the Postal Service’s most 

successful quarter, mail volume was down compared to the previous year, resulting in a loss of just under $300 million, and that 

is in a quarter where the Postal Service usually makes money. It 

is sort of like a lot of our retailers in this country make money. 

That is where they make their money in that quarter, as we know. 

And even those dismal results are unfortunately slightly better 

than many observers had feared. 

The Postal Service tells me that while some sectors of our economy have shown signs of recovery—and I spoke to that earlier— 

businesses and the public at large are not yet rushing back to 

hard-copy mail, at least not yet. During the depths of the recession, 

the Postal Service hired three highly respected consultants to look 

at its business model and the future of the mail. Their findings 

make it clear, at least to me, that we should not count on growing 

mail volume in the coming years to fix the Postal Service’s financial difficulties. 

According to data released in early March by the Postal Service, 

even after our economy has begun to pick up steam—and it is— 

mail volume is expected to increase only slightly from where it is 

today. However, electronic diversion of the mail is expected to continue to increase over the next decade or so. By 2020, I am told 

that mail volume could be as low as 118 billion pieces. That is 

nearly 60 billion fewer pieces than the Postal Service handled in 

2009 and 95 billion pieces fewer than the Postal Service saw and 

handled in 2006, which I believe was the busiest mailing year that 

you all had experienced to date. This trend, according to the Postal 

Service, will lead to more than $230 billion in cumulative deficits 

between now and 2020. 

Now, I know this is just one group of consultants’ estimates, I 

think very highly regarded consultants, but it is one group of consultants’ estimate of where things are headed for the Postal Service 

or could be headed for the Postal Service. In many ways, it is a 

worst-case scenario because it assumes that the Postal Service will 

not be able to attract significant new revenues through innovation 

or new products or new services. It also assumes that Congress will 


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not act to address certain key issues such as the Postal Service’s 

retiree health obligations. 

These dire predictions, of course, must be analyzed before we 

take dramatic action to fundamentally change the nature of the 

Postal Service. That said, we would be foolish if we were to hesitate and hope for a return to the golden years, if you will, of the 

1990s and the early 2000s. 

We need, I believe, to face the reality of today. As technology advances, more and more Americans will take advantage of e-mail, of 

electronic bill pay, and other innovations to communicate, conduct 

business, and even read periodicals that once arrived in their mailboxes. 

In addition, we need to realize that the day of reckoning for the 

Postal Service may not come in 2020 or some other distant date. 

It could come next year. I understand that if the Postal Service 

does not receive some sort of assistance from the Congress in the 

very near future, the Postal Service could run out of cash and borrowing room at some point in 2011 as they bump against their line 

of credit with the Treasury. This would put the Postal Service’s 

ability to meet payroll and deliver the mail our Nation counts on 

in great danger. 

So I believe it is imperative that the Congress, the Administration, the Postal Service, and other stakeholders work together in 

the coming weeks and months to develop a package of reforms and 

adjustments that can get the Postal Service through its immediate 

crisis while setting the stage for longer-term changes. In doing this, 

we must set aside the old biases and parochial interests that influenced and in some cases hindered previous postal reform efforts. 

Instead, we must concentrate on preserving the service that postal 

employees provide to the American people. 

Some of the changes we would make or we should make are, I 

think, plain common sense. For starters, we should restructure the 

aggressive front-loaded retiree health pre-funding schedule that 

was included in the 2006 postal reform bill. That payment schedule 

was developed when mail volume was high, and it was written into 

the law long before the current recession began and at a time when 

electronic diversion of the mail was expected to progress more slowly than appears to be occurring today. 

We should also carefully examine the Postal Service Inspector 

General’s contention that the Postal Service has significantly overpaid its obligation to the old Civil Service Retirement System. If 

his findings are accurate, fixing this error alone could go a long 

way toward addressing the Postal Service’s current and future 

challenges. 

I must point out, however, that addressing these retiree health 

and pension issues will not end our work. The savings that would 

be generated by those fixes would cover only a portion of the Postal 

Service’s long-term deficits. It would be irresponsible for them to 

ignore or significantly delay the more difficult changes that will 

need to occur. 

One of these changes could be the elimination of Saturday delivery, which the Postal Service formally proposed at the end of last 

month. According to the Postal Service, moving to 5-day delivery 

could save the Postal Service more than $3 billion a year. We need 


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1The prepared statement of Senator Coburn appears in the Appendix on page 42. 

to spend some time examining the details of what the Postal Service has put forward, but I am not aware of any changes, structural 

or otherwise, that would save this much money and help the Postal 

Service preserve the quality of service it does provide throughout 

the rest of the week. 

The other difficult change that could come in the future is the 

transformation of the Postal Service’s network of retail facilities. 

The Postal Service currently maintains more than 36,000 post offices and other retail units. Postal management envisions replacing 

a number of these facilities with alternate retail options. This could 

involve increased Internet sales and the use of unmanned postal 

kiosks. It could also involve providing postal retail access in grocery stores or other businesses that are open longer hours and are 

more likely to be located in areas where postal customers and potential postal customers conduct their business and live their lives. 

I think that is an interesting proposal which, if executed well, 

has the potential to actually expand retail access while maybe saving some money, too. 

Both of these efforts—the move to 5-day delivery and the restructuring of the Postal Service’s retail network—will be hampered, unfortunately, by a roadblock that the Congress places in the Postal 

Service’s way. I have stated any number of times that Congress 

does not always do a good job behaving like a 535-member board 

of directors for the Postal Service. In the 2006 postal reform bill, 

we tried to give the Postal Service, if you will recall, the ability to 

operate more like a business, including allowing the Postal Service 

to adjust delivery speed and frequency over time in response to 

changes in the market. 

We on this side of the dais need to do our oversight and be certain that the Postal Service is on the right path, or at least be as 

certain as we can. But it is long past time for us on our side, on 

the legislative side, to largely get out of the way and allow postal 

management to take the steps that it needs to take in order to adjust to the new realities that the Postal Service faces. 

We have been joined today by a couple of my colleagues, including a fellow with whom I have discussed these issues, and from 

whom I have learned a lot from over the last 6 or 7 years, as we 

tried to figure out a path forward, and I am happy to yield to Senator Coburn and then to Senator Akaka. Welcome. 

OPENING STATEMENT OF SENATOR COBURN 1

Senator COBURN. Thank you. I would ask that my opening statement be made a part of the record. 

Senator CARPER. Without objection. 

Senator COBURN. I agree with a lot of what Senator Carper said, 

but we cannot just fix the pension and we cannot just fix the 

health care payments. The business model is broken. The generation below me does not want you, does not use you, does not need 

you. Until we figure out a way to create a revenue stream for the 

Postal Service, everything we are going to do is going to be futile. 

So what I would propose is that we rethink things: How do you 

allow the Postal Service to contract with the State of Oklahoma to 


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do driver’s licenses or to do car tags or to do voter registration? In 

other words, give them the ability to create a revenue stream with 

the great employees that they have so that their skills are utilized 

as the volume goes down. 

I think the Postal Service has done a great job on parcel. I think 

we have seen good change there. I think they are very competitive. 

But until we figure out a way to increase the revenue stream—and 

the others are false. I mean, they are going to come, but they are 

going to come out of other areas of the Federal Government. So the 

net savings to the Federal Government is zero, even though we 

transfer that back to you all. It is still a cost to the American taxpayers. And it is probably a fair cost. 

The point is we have got to have some creative thinking as you 

downsize to meet the demands of First-Class Mail, and that means 

you, the workforce, us, and your customers, especially your bulk 

mailing customers. There has to be a business plan. I have looked 

at the one that has been presented. It does get you out of the hole 

because it does not change the revenue. I still think the projections 

are low. I told General Potter last year at this time that his projections were too rosy, and my projections were better than your projections on First-Class Mail. You cannot keep hoping that it is 

going to improve, because it is not. It is going to continue to decline 

because we have had a cultural shift in the usage of First-Class 

Mail. 

I have grown daughters from 40 to 32, and none of them mail 

anything. 

Finally, I would say to you—and, Senator Carper, help me on 

this—as we go into labor negotiations, the financial health of the 

Post Office has to be a consideration as you move forward. It cannot be ignored even though it was stripped out by the House in the 

conference. It is ludicrous—it is like shooting yourself in the foot 

by saying, well, we are not going to think about what the long-term 

viability of this organization is as we negotiate labor agreements. 

With that, I have said enough, and I look forward to the testimony. Thank you all for being here. 

Senator CARPER. Thank you very much, Senator Coburn. Now for 

Senator Akaka, from the Aloha State. 

Senator AKAKA. Thank you, Mr. Chairman. 

Senator CARPER. You are welcome. Thanks so much for being 

here. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Great to be here with you, and I would tell you 

that what your and our Ranking Member’s statements have mentioned are certainly things that we need to consider. I think these 

are future endeavors that we need to work on. 

We find ourselves today in a very different situation than we did 

after enactment of postal reform in 2006. What looked like a successful new era for the Postal Service has become one of deep financial uncertainty. Mail volumes have steadily declined in the 

wake of the worst economic crisis this country has faced since the 

Great Depression. Americans are not using the mail today as they 

did just a few years ago. The Internet has replaced the post office 


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for many consumers’ communications and business needs. The decline in demand for some postal services is permanent. 

However, as traditional lines of business decline, there are real 

opportunities for the Postal Service to translate new ideas into revenue. I would like to work with the Postal Service and my colleagues to remove any barriers that may be discouraging profitable 

innovation. 

Reducing expenses is equally important. Working closely with 

employees and unions, the Postal Service has made progress on 

right-sizing its workforce. However, workforce cuts can and should 

only go so deep. The Postal Service has requested that Congress 

modify the burdensome payment schedule for pre-funding retiree 

health benefits. Now may not be the time to aggressively pursue 

pre-funding benefits. I support the Postal Service’s request and I 

supported Senator Carper’s bill to adjust these payments. 

Unfortunately, a provision affecting collective bargaining rights 

was added during the committee process which caused me to vote 

against the bill in committee. In the interests of moving forward 

with immediate payment relief, this controversial debate should 

take place apart from this otherwise good legislation. 

The Postal Service has taken the initiative to find other cost reductions to close this budget gap. Its 10-year plan outlines many 

ideas, some more controversial than others. The Postal Service has 

since asked for action on the entire package. However, I am convinced that some of these ideas demand more analysis and debate. 

Five-day delivery, of course, is one of the Postal Service’s most 

controversial recommendations. This would especially impact postal 

customers in more remote areas and could bring about a substantial change in the universal service obligation. While I understand 

that the Postal Service believes this could save $3 billion per year, 

there are differing estimates. I am not convinced that enough 

sound analysis has been done to determine the real savings. Also, 

cutting one day of delivery would eliminate 17 percent of delivery 

service for a projected 5-percent savings. This is a heavy trade-off 

and one that could further reduce customer demand for postal services. 

Recently, the Postal Inspector General raised concerns to the 

Postal Service about potentially overpaid contributions to the Civil 

Retirement System. How this issue is resolved could alter the Postal Service’s finances substantially, and we need to see what happens in that case. 

It is important that we have begun the process of openly discussing financial issues at the Postal Service. Others, including the 

Postal Regulatory Commission, will continue to contribute to our 

understanding of these proposals and their implications. I urge patience and restraint as we undertake this process, while recognizing the urgency for finding relief. It is important to gather information and identify the options that will best serve the interests 

of the Postal Service, its employees, its customers, and the Nation. 

Thank you very much, Mr. Chairman. 

Senator CARPER. Thank you, Senator Akaka. It is great to be 

with you again. 

I am going to go ahead and introduce our witnesses, starting 

with Phillip Herr. We had a little poll up here to see how you realVerDate Nov 24 2008 13:45 Dec 01, 2010 Jkt 057329 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 P:\DOCS\57329.TXT SAFFAIRS PsN: PAT

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1The prepared statement of Mr. Herr appears in the Appendix on page 44. 

ly do pronounce your name, and you are the only one who has pronounced it ‘‘Her.’’ But since that is the way you pronounce it, that 

is the way we will pronounce it. Mr. Herr, we are glad to see you 

again, Director of Infrastructure Issues at the Government Accountability Office (GAO). I understand you have been with GAO 

since 1989, managing reviews for a variety of domestic and international governmental programs since that time. Welcome. Nice of 

you to join us. 

Our next witness is John Potter, the 72nd Postmaster General 

of the United States. And how long have you been our Postmaster 

General? About 6 years? 

Mr. POTTER. Nine years. 

Senator CARPER. Nine years. Does it seem like six? [Laughter.] 

Mr. Potter began his career at the Postal Service in 1978, held 

a number of senior management positions there before being 

named Postmaster General in 2001. 

Next we have David Williams, Inspector General of the U.S. 

Postal Service. Mr. Williams has a breadth of experience in the 

Federal Government serving as Inspector General for a total of five 

Federal agencies during his career. What other ones? 

Mr. WILLIAMS. It involved the Treasury and the IRS, which is 

the Treasury’s second IG; Social Security; the Nuclear Regulatory 

Commission; and while I was at one of those, I simultaneously ran 

the HUD IG for about 8 months. 

Senator CARPER. All right. Thank you for all that. 

Finally, we have Ruth Goldway, who is the Chair of the Postal 

Regulatory Commission. Nice to see you. Thank you for joining us. 

Ms. Goldway is currently serving her third term on the Commission. Before beginning her time there, she had served, among other 

roles, as mayor and city council member in Santa Monica, California, in the State of California’s Department of Consumer Affairs. 

Welcome. 

Ms. GOLDWAY. Thank you. 

Senator CARPER. Good to see you. We would ask that you limit 

your comments to about 5 minutes, and after that, if we get a little 

too far, I will rein you in, but your entire statements will be made 

part of the record. Once you have completed your statements, we 

will start asking some questions. 

Mr. Herr, welcome. Please proceed. 

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

OFFICE 

Mr. HERR. Chairman Carper and Dr. Coburn, thank you for the 

opportunity to participate in this hearing and discuss GAO’s report 

that was released last week. Today I will focus my remarks on the 

Postal Service’s financial condition and forecast and strategies and 

options to facilitate progress toward its financial viability. 

Turning first to the Postal Service’s financial condition, as mail 

volume declined 36 billion pieces in fiscal years 2007 through 2009, 

the Postal Service’s financial viability has deteriorated, leading to 

$12 billion in losses. Current forecasts are that mail volume will 


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decline to 167 billion pieces this fiscal year, the lowest level since 

1992. The Postal Service projects a record loss of over $7 billion 

this fiscal year while adding $3 billion in debt. Its outstanding debt 

will increase to $13.2 billion, close to its $15 billion statutory limit. 

The Postal Service does not expect mail volume to return to its 

former levels when the economy recovers. The continuing shift to 

electronic communications and payments has fundamentally 

changed how mail is used. By fiscal year 2020, the Postal Service 

projects further volume declines to at least 150 billion pieces, the 

lowest level since 1986. First-Class Mail volume is projected to decline by another 37 percent over the next decade, and less profitable standard mail, primarily advertising that is subject to economic fluctuations, is projected to remain roughly flat over the next 

decade. 

Turning to actions needed to facilitate the Postal Service’s financial viability, in July 2009, GAO added the Postal Service’s financial condition to our high-risk list and reported that action is needed in multiple areas for the Postal Service to make progress toward 

financial viability. We identified strategies and options that fall 

into three major categories: 

First, compensation and benefits currently represent 80 percent 

of Postal Service costs, presenting opportunities for cost savings. In 

terms of retirements, about 162,000 postal employees are eligible 

to retire this fiscal year and about 300,000 are expected to retire 

over the next decade. In terms of benefit costs, postal employees 

have about 80 percent of their health benefit premiums paid, 8 percent more than most Federal employees. 

Second, cost savings can be achieved by consolidating processing 

and retail networks given volume declines. Removing excess capacity is necessary in the 600 processing facilities where First-Class 

Mail processing capacity exceeds needs by 50 percent. The network 

of 36,500 retail facilities can also be reduced. Maintenance has 

been underfunded for years, resulting in deteriorating facilities and 

a maintenance backlog. Approximately 30 percent of postal revenue 

currently comes from stamps purchased at non-postal locations 

such as grocery stores, indicating that customers have already 

begun shifting to alternatives. 

Another opportunity is consolidating the field administrative 

structure by reviewing the need for 74 district offices and an additional eight area offices. And because cost cutting alone will not ensure a viable Postal Service, generating revenue through pricing 

and product flexibility is needed. The new Flat Rate Priority Mail 

boxes are an example of how the Postal Service has successfully 

generated new revenues. 

Turning to our report, ‘‘Matters for Congressional Consideration,’’ 

to facilitate progress in difficult areas such as realigning postal operations and its workforce, Congress may wish to consider an approach similar to a BRAC-like commission used by the Department 

of Defense. Congress has previously turned to a panel of independent experts to restructure organizations and establish consensus. We believe a commission could also help ensure that Congress and stakeholders have confidence in resulting actions. 

We also suggest that Congress consider changes in two other 

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1The prepared statement of Mr. Potter appears in the Appendix on page 54. 

tive bargaining to ensure that binding arbitration takes the Postal 

Service’s financial condition into account. 

Another change to consider would be modifying the Postal Service’s retiree health benefit cost structure. We believe it is important 

that the Postal Service fund its retiree health benefit obligations to 

the maximum extent its finances permit. Currently, about 460,000 

retirees and their survivors receive this benefit, and another 

300,000 postal employees are expected to use it by 2020. 

In considering revisions, it will be important to assess what the 

Postal Service can afford, strike a fair balance of payments between current and future ratepayers, and determine how changes 

would affect the Federal budget. 

Mr. Chairman, in conclusion, no single change will be sufficient 

to address the Postal Service’s pressing challenges. The longer it 

takes to realign the Postal Service to the changing use of the mail, 

the more difficult change will be. 

This concludes my prepared statement, and I am pleased to answer any questions. 

Senator CARPER. Mr. Herr, thanks for that testimony. 

Mr. Potter, Postmaster General, please proceed. 

TESTIMONY OF HON. JOHN E. POTTER,1 POSTMASTER GENERAL AND CHIEF EXECUTIVE OFFICER, U.S. POSTAL SERVICE 

Mr. POTTER. Good afternoon, Mr. Chairman and Senator Coburn. 

For the past 2 years, I have testified about the dire financial situation facing the U.S. Postal Service. I am pleased to report that the 

Postal Service has a plan of action to close the growing gap between revenue and expenses. But before discussing our plan, however, I would like to say a few words about our Inspector General’s 

recent audit concerning $75 billion worth of Postal Service overpayments to the Civil Service Retirement System pension fund. This 

is a significant finding and one that could have an enormous bearing on the speed with which we need to make changes. We support 

the IG’s conclusion and urge you to take action on his recommendation. 

Refunding the $75 billion to the Postal Service, however, would 

not eliminate the need for us to take additional actions, but it 

would lessen our immediate financial crisis. 

The Postal Service has to change in light of the recent downturn 

in mail volume and the forecast of additional decline due to diversion of hard-copy mail to the Internet. Our management team, with 

the support and approval of our Board of Governors, has developed 

a responsive, ambitious, and balanced plan that offers a way forward. 

To help close our forecasted $238 billion gap by 2020, our action 

plan has identified $123 billion worth of cost savings that are within postal control. Our actions include lowering costs through continuous improvement and effective working management, adopting 

standardized procedures within our network, and consolidating 

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ating transportation contracts and engaging in new ways to purchase supplies. 

We recognize the need to grow revenue. We are embracing innovation through efforts like a product test with Hallmark for postage paid greetings, Priority Mail contract pricing, and Priority Mail 

cubic pricing, and our successful 2009 Summer Sale for advertising 

mail which we plan to offer again in 2010. 

We are also pursuing growth in areas where we already have a 

presence, like increasing the number of post office boxes available 

for rent and expanding sites where we provide passport transactions. Our goal is to introduce new products consistent with our 

mission and to expand and modernize our retail access. 

Our actions alone, though, will not close the financial gap. We do 

need congressional help in some key areas. Specifically, we request 

your assistance in restructuring the pre-funding of retiree health 

benefits, adjusting the frequency of mail delivery, providing the 

freedom to offer access to the Postal Service in places other than 

traditional post offices, requiring arbitrators to consider the financial condition of the Postal Service, applying the Consumer Price 

Index cap to all market-dominant products as opposed to on a 

class-by-class basis, introducing new products consistent with our 

mission, and, finally, helping us to acquire more streamlined oversight. 

The first two proposed changes will generate the largest and 

most immediate financial benefits and move us toward narrowing 

our financial gap. If Congress is unable to act this fiscal year on 

broader legislation, our projections show that we will run the risk 

of running out of cash early in 2011. Therefore, should there be insufficient time this year to pass comprehensive legislation, the 

Postal Service will request a reduction in our retiree health benefit 

trust fund payment this year similar to 2009. 

We recognize that our agenda is ambitious, and the challenge 

will be finding the right balance between taking actions necessary 

to mitigate our financial crisis while at the same time implementing a smooth transition for our customers and our employees. 

The GAO recognizes the challenges facing us, too. In their recently 

released report on the Postal Service, they do a thorough job of reviewing strategies for long-term structural and operational reform. 

I am pleased that many of the GAO’s findings are consistent with 

the Postal Service’s action plan. The GAO agrees with us that we 

need congressional action to remove some of our current legal and 

regulatory constraints. 

One area where we take exception with the GAO report is their 

recommendation that additional panels of experts or commissions 

be established to develop legislative options. We believe that a sufficient body of evidence exists to help guide the Congress on the 

changes needed for the future, and the time for action is now. 

Our action plan provides us a solid path to ensure that the Postal Service remains strong, healthy, and viable into the future. Our 

challenges are urgent, and I look forward to working with Congress, GAO, the Postal Regulatory Commission (PRC), and the entire postal community in implementing the best choices for success. 

Thank you for your support, and I will be happy to answer questions at the appropriate time. 


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1The prepared statement of Mr. Williams appears in the Appendix on page 65. 

Senator CARPER. Thank you, General Potter. Mr. Williams, 

please proceed. 

TESTIMONY OF HON. DAVID C. WILLIAMS,1 INSPECTOR 

GENERAL, U.S. POSTAL SERVICE 

Mr. WILLIAMS. Mr. Chairman and Senator Coburn, I appreciate 

the opportunity to appear today to discuss the financial situation 

facing the Postal Service. The fiscal condition is serious, and the 

Postal Service has an ongoing aggressive plan to address it. 

A concern of my office is that the plan calls for huge simultaneous actions across a very broad and fast-moving front. These will 

produce significant project management challenges as well as unintended consequences among the initiatives that now include the 

Flats Sequencing System, Intelligent Mail barcode, plant network 

and post office optimization, 6- to 5-day mail delivery, and a major 

transformation of its sales and marketing effort. 

A second concern is that a large portion of the Postal Service financial loss is not a result of the Postal Service business model or 

the Postal Accountability Enhancement Act (PAEA) of 2006. We believe that $7 billion of the expected $11 billion loss this year is a 

mischarge by the Federal Government against the Postal Service. 

In earlier years, the mischarge accounted for all of the losses and 

the absence of profitability anticipated in PAEA. Until the Postal 

Service is no longer bled white by the Federal Government before 

it opens its doors for business, identifying challenges and constructing solutions are highly prone to error. We may be fixing the 

wrong things and learning the wrong lessons. For instance, is the 

Postal Service facing a $4 billion or an $11 billion loss this year? 

Does the Postal Service have a debt to the Treasury or owe nothing? These issues are not difficult to grasp or to correct. While the 

solutions are being found, I do not believe that contributing to benefit funds that appear to be overfunded is prudent during a financial crisis. 

This year, Congress directed the Postal Service, OPM, and OMB 

to develop a fiscally responsible legislative proposal for Postal Service benefit payments. My office has identified three areas for resolution: 

An exaggerated 7-percent health care inflation forecast instead of 

the 5-percent industry standard, resulting in an overpayment of 

$13.2 billion by 2016. 

An excessive 100-percent pension benefit plan pre-funding requirement compared to OPM’s own pre-funding level of 41 percent 

and the S&P 500’s 80-percent rate. Even using the higher 80-percent funding goal would result in a $52 billion surplus. 

Last, the Postal Service pension fund was overcharged $75 billion so that employees could retire at promised levels. When the 

Post Office Department became the Postal Service, employees that 

belonged to the Federal pension fund now contributed to the Postal 

Service. Retirement costs were divided according to the number of 

years employees have belonged to each fund. However, the Federal 

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

aries. The Federal pension fund collected full contributions, but 

paid only partial benefits. 

OPM has explained that these mischarges were in response to 

what they believed to be the will of Congress expressed in 1974 legislation. However, the 1974 language was repealed by Congress in 

2003 when large overpayments were discovered. At the time, OPM 

inexplicably had not detected a 41-percent overfunding error in this 

$190 billion pension fund. Congress directed OPM to use its authority to oversee the reforms using accepted dynamic assumptions 

that include pay increases and inflation. OPM switched to dynamic 

funding for the Postal Service portion, but did not for their share. 

The Postal Service was forced to pay the $75 billion difference. 

Resolving these issues would provide an accurate map of financial challenges that require resolution. The resolution would also 

allow the Postal Service to execute its plan at a safer velocity less 

prone to error and at a pace where unintended consequences can 

be identified and resolved. 

My office does believe that long-term solutions are needed to effectively address a few critical areas. These include the optimization of the network of plants and post offices and changing its rigid 

work rules to match the ebb and flow of customers and mail. In addition, simplified pricing is needed to replace the over 10,000 prices 

contained in the 1,700-page customer manual to encourage new 

customers and improve revenue accountability. This will allow 

Postal Service operations to closely fit business opportunities. 

A significant success factor for leadership through the journey to 

2020 will be fairness and transparency and a single focus on reform. Postal stakeholders have demonstrated they are responsible 

and dedicated, but they deserve assurance that everyone is lifting 

and sharing responsibilities for needed action. It is important to 

understand that the accommodations made outside the interests of 

the Nation can easily become the pebbles that cause a crippling avalanche, halting actions that the Postal Service must take. 

Thank you. 

Senator CARPER. Thank you, sir. And for our final witness, Ms. 

Goldway, please proceed. 

TESTIMONY OF HON. RUTH Y. GOLDWAY,1 COMMISSIONER, 

POSTAL REGULATORY COMMISSION 

Ms. GOLDWAY. Thank you, Chairman Carper and Senator 

Coburn. Thank you for the opportunity to testify on the future of 

the U.S. Postal Service. 

I am pleased to share with you today the Commission’s work in 

matters that are before the Congress as you deliberate on solutions 

for the Postal Service’s future. 

On March 30, we initiated a docket to review the Postal Service’s 

proposal to eliminate Saturday mail service. I want to personally 

assure this Subcommittee that I and each of my colleagues have an 

open mind on this proposal. There is some confusion among the 

press and the public. No decision has yet been made. We look forward to hearing both the evidence offered by the Postal Service and 

any views presented by interested members of the public. The 


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Commission will hold public hearings so that the Postal Service, 

mailers, stakeholders, and the public offer their perspectives and 

insights. Nearly 2,000 public comments have been received thus 

far. We are also scheduling seven field hearings to engage citizens 

across the country. 

On March 29, the Commission released its Annual Compliance 

Determination (ACD) which carefully reviewed the Postal Service’s 

financial problems. I have printed copies with me here today. You 

received e-mail copies earlier. 

As detailed in the ACD, on September 30, 2010, the Postal Service must make a $5.5 billion payment to fund future health benefits, then make payments for worker’s compensation obligations 

and meet payroll. It could run out of cash. 

Two major unresolved issues impact the Postal Service’s finances 

and affect the 5-day delivery issue. The first is whether the Postal 

Service has overfunded its employee pensions by $75 billion, as the 

Postal Service’s Inspector General says. The Postal Service has appealed its current CSRS liability to our Commission, a process established by the PAEA. The Commission will retain an independent actuary to review the pension calculations performed by 

the OPM, by the Postal Service’s OIG, and by any alternative industry best practices. The review will also examine the relevant 

underlying laws. We hope to report to Congress, OPM, and the 

Postal Service in early July. 

The second issue involves the calculation and financing of future 

postal retiree health benefits funds. A recent Commission study 

found that a recalculation could lower the Postal Service’s total liability by $35 billion and reduce payments by more than $2 billion 

yearly, while meeting the original funding goals of the PAEA. 

The Postal Service’s Office of Inspector General suggests that 

even greater reductions are possible. My colleagues and I support 

readjusting the payments to an affordable level, perhaps over a 

longer period of time, and/or tied to the Postal Service’s ability to 

pay. We see this as an essential part of any plan to help the Postal 

Service in the coming decades. 

The Postal Service’s 10-year plan contemplates substantial financial losses. But in response to these potential losses, the Postal 

Service proposes to reduce service to cut costs. Its plan promises 

fewer employees to serve the public, fewer processing plants and 

postal-operated retail facilities, reduced mail collections, fewer collection boxes, as well as eliminating Saturday mail delivery service. 

Those who rely most on the mail—the elderly, the poor, rural 

America, and those who cannot or will not connect to the Internet—will suffer. I do not believe that this vision is the inevitable 

future of the Postal Service. Even in the Internet age, mail has a 

unique power to touch readers and deliver results for senders. It 

can drive sales, touch emotions, deliver votes, and shape important 

personal decisions that affect life and country. 

Despite economic volatility, terrorism, and digital diversion, mail 

has been remarkably resilient. Between 2000 and 2008, First-Class 

Mail declined about 1.2 percent a year, while standard mail actually increased by 1.6 percent. This gradual shift toward a lowermargin mail mix was addressed to some extent in the PAEA which 

allows the Postal Service to compete and earn higher incomes in 


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its shifting services. The recession has cut into the success of these 

ventures. 

On a somewhat positive note, it appears likely that the Postal 

Service will far exceed its own forecast this year. The latest financial report received by the Commission reveals that through the 

end of February, it is nearly $1.2 billion ahead of forecast. The 

turnaround in the economy may finally be impacting the mailing 

industry. 

The Postal Service’s sustained efforts to increase productivity, 

improve processes, and lower its costs are commendable and should 

continue unabated. However, focusing on cost cutting to solve deficits is simply not enough. The PAEA requires the Postal Service to 

continue to provide universal service at fair and efficient rates and 

requires the Commission to carefully monitor both the rates the 

Postal Service charges its customers and the quality of the service 

provided. Reductions in service that affect the value of the service 

to customers and rate increases are really in reality two sides of 

the same coin. It would be helpful if the discussions on postal 

issues also focus on a positive and constructive approach to the future. 

In other words, what does the American public need for its constitutionally mandated communications system? How can we make 

the Postal Service more valuable to the American people? What 

new products does the public need that the Postal Service is 

uniquely positioned to provide? 

The Postal Service is capable of new ideas. I commend the Postal 

Service’s efforts to build upon its Website, expand customer access 

via the Internet, and increase sales of stamps at supermarkets. The 

Service has expanded its competitive Flat Rate Priority Mail program, has begun offering Hallmark cards, and has launched volume-incentivizing sales and advertising initiatives. The Commission approved the Postal Service’s only experimental product filed 

under the PAEA. More innovation should be developed by the Postal Service as soon as possible and, where appropriate, submitted to 

the Commission for review. 

In my written statement, I have outlined a number of ideas that 

emphasize value to the customer and revenues rather than volume 

losses, and that I believe could be transformative, positioning the 

Postal Service to survive and thrive in the coming decades. 

Thank you. That concludes my testimony. 

Senator CARPER. Thank you very much for that testimony. 

Senator Coburn has to be out the door around 4:30, and I am 

just going to yield to him for however long he would like to question the panel. 

Senator COBURN. Thank you. I will try not to abuse that privilege. 

Senator CARPER. Go ahead. Abuse all you want until 4:30 p.m. 

Senator COBURN. I have to comment on Senator Akaka’s remarks. Eighty percent of the cost in the post office is labor. You 

cannot fix this problem without looking at all the costs. To say that 

we should not consider in terms of the labor input in solving this 

problem means we will never solve it. So I want to move that off 

the table right away. I say this with no disrespect to our postal employees. But to say that the post office, as an independent service, 


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does not have the right to not pay if it is supposed to pay based 

on what it can afford to pay. It is either a private company or it 

is not. We need to figure out which way we are going to go. 

Postmaster Potter, what is the status of the Flats Sequencing 

system (FSS) system and the Intelligent Mail barcode (IMb) system? Because, really, a good question has been raised here. If you 

cannot implement those two systems, how can you implement all 

the other things you want to do to reform the post office? 

Mr. POTTER. The Intelligent Mail barcode system is being—it has 

been deployed. The number of mailers that are using it is growing 

by leaps and bounds every day. We have had billions of pieces of 

mail deposited using the full Intelligent Mail barcode. So that is 

well on the track to achieving what we expected. 

When it comes to the Flats Sequencing System, we have had 

some issues regarding the quality of the equipment. They have not 

passed muster. We are working with the vendor. We believe that 

within a couple of months we will be back on schedule. But we are 

not going to pay for a piece of equipment that is not performing. 

Where we do have the equipment running, we are capturing the 

savings that we expected to get out of that machine. 

Senator COBURN. OK. In GAO’s report in April and in their testimony today, they make several recommendations regarding actions 

that Congress and the Postal Service must take to ensure the longterm viability of the Postal Service. Do you agree with their recommendations? 

Mr. POTTER. I agree with all of them but one, and the one I have 

a concern about is that if we continue to study, we are just going 

to dig a deeper hole. I am of the opinion that we need to take action and do it as quickly as possible. 

Senator COBURN. Part of those recommendations is that any 

binding arbitration include the financial health of the Postal Service as a determining factor in the outcomes of labor contracts. Do 

you agree with that? 

Mr. POTTER. I fully support that. It is built into my testimony, 

both oral and written. 

Senator COBURN. Mr. Williams. 

Mr. WILLIAMS. I do, sir. 

Senator COBURN. Ms. Goldway. 

Ms. GOLDWAY. I do not think I can speak for the Commission on 

this. 

Senator COBURN. Well, then, speak for you, if you would. 

Ms. GOLDWAY. What I believe is that there certainly should be 

more flexibility built into union work rules in the future. 

Senator COBURN. No, that is a different question. Should the financial health of the postal system be part of the consideration as 

we set the labor contracts for the Postal Service? 

Ms. GOLDWAY. I do not think that I really know enough about 

that to answer that question. 

Senator COBURN. OK. Eighty percent of the costs of the post office are labor or associated with labor costs. And the fact that it 

is running a deficit, a projected deficit, even in spite of the recommendations we have from the IG here, it is still going to have 

a deficit. How do you run an organization if you are going to ignore 


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the financial consequences of what is getting ready to happen to 

the organization? 

Ms. GOLDWAY. I am not sure that it is the financial arbiter’s role 

to make that decision. I would like to see the Postal Service and 

its employees really focus on creating a flexible workforce that I believe will save the Postal Service a great deal of money in its future 

labor costs. 

Senator COBURN. Well, that is one of the considerations, is their 

financial condition is one of the reasons that they want to have a 

flexible workforce. They become more efficient. 

Ms. GOLDWAY. I think they should have a flexible workforce in 

addition to provide better service to the American public. I think 

that is part of it as well. 

Senator COBURN. Ms. Goldway, you say it is unfair for somebody 

not to get mail on Saturday? 

Ms. GOLDWAY. No, I do not think that is what I said. 

Senator COBURN. But you said there will be harm generated by 

somebody not getting mail on Saturday. Please explain to me why 

somebody is going to get harmed by not getting their mail on Saturday. 

Ms. GOLDWAY. Well, we have had testimony from small newspapers in rural parts of the country that deliver mail on Saturday. 

Their major strategic advantage in having a newspaper and a business in the community when they report on the Friday evening 

football scores of all the high schools, and if they cannot get that 

newspaper to their subscribers on Saturday, they are either going 

to fold their newspapers or they are going to go to their Walkman, 

and the money will be lost—— 

Senator COBURN. The same thing is happening to the newspapers that is happening to the Postal Department. 

Ms. GOLDWAY. In some cases, yes, it is true. But interestingly, 

in the rural areas—— 

Senator COBURN. And we also have this Marconi device called 

the radio where you can get the scores, which was invented some 

time after the Guttenberg press. So the fact is there is absolutely 

no net long-term damage for us delivering something on Saturday 

that we, first of all, cannot afford to do. I guess the other way to 

ask the question, I would argue, is: What is the net benefit economically to the country and economically to the post office of delivering Saturday mail? When you look at that, I think you are 

going to get a different picture. The economic benefit is most of the 

businesses are not operating on Saturday. If you look at activity 

other than retail activity, everything else drops down in this country except retail activity. I just think when you are looking at the 

kind of losses the Postal Service is facing, I think there is a legitimate question to ask, why, when you reduce the service by 17 percent, you only get 5 percent savings. That is a much more important question for us to be asking, and I think that is one you ought 

to have to answer. 

Ms. GOLDWAY. Let me assure you that the Commission’s process 

will be to ask all of the questions that you point out. We will look 

at the harm that is caused to some people and the great benefit 

that may be provided in other areas. And it is exactly the cost/benVerDate Nov 24 2008 13:45 Dec 01, 2010 Jkt 057329 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 P:\DOCS\57329.TXT SAFFAIRS PsN: PAT

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efit analysis that we will try to provide to get all the information 

and all the costs and make it—— 

Senator COBURN. Well, I would love for you to send me how you 

calculate those football scores into that cost/benefit analysis. 

Let me ask one other question of General Potter. In your 10-year 

plan, you describe numerous actions that are needed to address the 

financial problems that you see facing the business and an estimated cost savings associated with them. One of those actions includes a more flexible workforce. But you do not associate any savings from that in your plan. Why not? 

Mr. POTTER. Because what we build into the plan is reduced 

work hours, and those reduced work hours are a result of maximizing the flexible workforce that we anticipate. 

Senator COBURN. How many work hours are you paying for now 

that you are not getting benefit from? 

Mr. POTTER. We have, we will call it, standby folks, folks who are 

not productive. We are down to about 1,000 people who are in that 

status. We identify people because of the fact that we do not want 

them to just kind of gravitate into the woodwork and find things 

to do. We have reduced that number from 16,000 down to 1,000 in 

the last 6 months. And so it is a matter of, again, identifying people and then using our contracts to move them to productive work. 

But we do have 1,000 folks who are not gainfully employed right 

now. 

Senator COBURN. OK. What about some of Senator Carper’s recommendations about the flexibility of more areas, greater penetration in nontraditional postal reception and service? 

Mr. POTTER. We have asked for that freedom as part of our plan. 

What we have not done, though, is we have not identified any specific area where we would make an investment. We worked with 

Accenture, and we looked at activities that are being done by posts 

around the world, for example, banking, selling cell phones, a number of other businesses, logistics that other posts have gotten into. 

And Accenture’s response to us was, yes, there is a potential profit, 

but it requires risk because not every post that makes investments 

has a return, and we do not have the capital right now to make 

those investments. 

And so their suggestion to us was that we should pursue the 

freedoms, at some point in the future pursue those. 

Senator COBURN. So if you could contract with the State of Oklahoma where the Postal Service, would manage all the tags, would 

you support that? 

Mr. POTTER. We would embrace that. We think that any identity 

card in America, whether it is a license or a passport or anything 

that has to do with identification—there is even discussion of future cards for health benefits. We believe that as the Federal Government, with our footprint, that we would be an ideal agency to 

provide that resource to the Federal Government. 

Senator COBURN. You could contract voter registration, for example. 

Mr. POTTER. Exactly. 

Senator COBURN. All these things that are being done, you could 

contract with States on a per State basis to do those facilities. 

Mr. POTTER. Yes. 


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Senator COBURN. Can you do it cheaper than they are doing it 

now? 

Mr. POTTER. That is a good question, and it is one that with our 

current labor rates might be challenging. 

Senator COBURN. Yes, OK. The other question goes back to Senator Akaka’s statement. Why isn’t there more than 5-percent savings with a 17-percent reduction in service? 

Mr. POTTER. That is a good question. I will explain it on a very 

high level. First of all, we do not deliver to every address on Saturday that we do the rest of the week. So businesses that are closed 

Saturday, we do not deliver to those addresses. Our routes reflect 

that. We have stations in New York City, for example, that are literally closed on Saturday because there is no delivery. 

Second, one of the big differences is that we use non-career employees on rural routes on Saturdays, and so there are no savings 

associated with that. 

Senator COBURN. Why are there no savings with a non-career 

employee who is not going to deliver on Saturday? 

Mr. POTTER. There are savings, but they are about half of what 

they would be during the rest of the week because they do not get 

benefits. 

Senator COBURN. All right. They are contracted employees? 

Mr. POTTER. Well, they are part of our workforce. They are called 

non-career, but they are represented by the union. So when you 

look at those, there is an explanation for why you do not get the 

full savings out of them. 

Senator COBURN. We would be very interested in seeing your 

analysis to explain why you have a 17-percent reduction in service 

but yet only a 5-percent savings. You have given several excellent 

reasons. 

Mr. POTTER. The third thing that is major is that we are assuming that there will be some reduction in revenue, and we do offset 

the savings with a reduction of revenue. So the savings are actually 

higher than that, and we dropped them down as a result of the revenue. 

Senator COBURN. I live on a rural route or almost a rural route, 

and the mail I would have mailed on Saturday, am I not going to 

mail it on Monday? 

Mr. POTTER. You are going to mail it on Monday. 

Senator COBURN. So why is there a reduction in the revenue? 

Mr. POTTER. Because of examples of folks like Ms. Goldway just 

described, newspapers that mail on Friday for Saturday delivery 

will not mail that Saturday paper for Monday delivery. And there 

are advertisers who target mail for Saturday delivery have told us 

that they would draw down. 

Senator COBURN. So is there a better day? 

Mr. POTTER. No, there is not because we have analyzed that. 

That is our lightest-volume day of the week, and it is much easier 

to explain to the American public that we are not delivering on 

Saturday. We have businesses that are closed so it makes the most 

sense. If we pick a Wednesday, then we would not be delivering to 

businesses, and 90 percent of our revenues come from commercial 

entities. We want to continue to deliver to those businesses. 


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Senator COBURN. Ms. Goldway, in your most recent release, Postal Regulatory Commission’s Annual Compliance Determination Report, you note that 14 postal market-dominant products do not 

cover their attributable costs to the tune of an annual cost of $1.7 

billion. Does the PRC have the authority to raise these rates to 

cover these costs? And if yes, why wouldn’t you raise those rates? 

Ms. GOLDWAY. That is a very important question. It is $1.7 billion when you include the market-dominant rates and the contributions from periodicals, etc. They are all included in that. 

The difficulty is there is a real contradiction in the PAEA. On the 

one hand, it says that all rates must cover its costs, and the Postal 

Regulatory Commission should assure that the Postal Service does 

that. On the other hand, it says that all rates cannot go up more 

than the rate of inflation, the CPI, and especially in the last 2 

years, the Consumer Price Index (CPI) has, in fact, been a deflation. So if you direct the Postal Service to do one thing, you are 

violating the law in the other relationship. 

What we have been trying to do over the years is to direct the 

Postal Service to improve that ratio so that the costs and the actual 

rates are closer together than they have been. Unfortunately, in 

some areas, like periodicals, that gap has gotten bigger, and what 

we have directed the Postal Service to do is to provide us a specific 

plan no later than next year—and hopefully in the context of any 

rate case they might file—to address that problem and to see how 

we can improve that and reduce that gap. 

Senator COBURN. There is no allowance for your Commission to— 

if they have not had a rate increase for a period of time, even 

though there was inflation, you do not get an opportunity to look 

at what the price was the last time they raised it and the cumulative inflation rate over that period of time? 

Ms. GOLDWAY. There is an opportunity for the Postal Service to 

use its unused Consumer Price Index cap if it has not used it all 

and allocate it to a next year to raise rates more than the CPI. But 

since we are in a period of deflation, that is not possible. 

Senator COBURN. So even though we had 3, 4, and 5 percent inflation 3 years ago, they cannot utilize that if they did not? 

Ms. GOLDWAY. They used almost all of the Consumer Price inflation rate increase that they were allowed to in their last rate—— 

Senator COBURN. Let me ask the question another way, and I 

would love to hear Senator Carper’s take on this. So, by law, we 

have said you cannot raise rates. Your volume is going down, and, 

by law, we do not allow the financial health of the Postal Department to be determined in any labor contracts. Maybe we ought to 

allow them to raise rates to meet the needs of their revenue 

stream. Why would we not change—and I will yield back, and 

thank you for allowing me to go first. 

Senator CARPER. No. I am glad you are here. I appreciate very 

much all of your questions. 

Let me just follow up on that, General Potter, in terms of your 

ability under the 2006 legislation to raise rates above the rate of 

inflation. Do you want to just take a minute and tell us what your 

flexibility is under the law? 

Mr. POTTER. Under the law we have a provision that allows the 

Postal Service to ask for an exigent rate case, and we are looking 


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at that, and that would enable us to raise rates above the rate of 

inflation. 

In addressing some of the concerns that Senator Coburn just 

raised, one of the issues that we do have is that we can only raise 

rates up to the rate of inflation by class of mail. And so with as 

many classes as we have, there is an imbalance over time, so that 

constraints us. 

Senator COBURN. But my point is that is what we need to change 

for you. 

Mr. POTTER. Exactly. 

Senator COBURN. You need the flexibility to make the revenues 

that you can get. 

Mr. POTTER. And that is what we are requesting, Senator. 

Senator CARPER. OK. I want to go back to the testimony of Mr. 

Williams. I am going to read a paragraph out of his testimony, and 

then, General Potter, I am going to ask you a question or two on 

it, if I could. It says, ‘‘Last, in January 2010, my office’’—this is the 

IG—‘‘released a report that illustrates how the current method of 

determining the Postal Service’s CSRS pension responsibility is inequitable and violates accepted accounting practices. These accepted accounting practices require that pension funding calculations 

include inflationary adjustments. As a result, the Postal Service 

has been overcharged $75 billion.’’ 

Since what year would that be? Since 1970—— 

Mr. WILLIAMS. Well, it would begin in 1974. And 2003 was—— 

Senator CARPER. Overcharged $75 billion since roughly 1974. 

‘‘Also, the 100-percent pension pre-funding target being excessive 

when compared to the Standard & Poor’s 500 and the OPM’s 

achieved funding levels.’’ 

Let us assume, General Potter, that the IG is correct in saying 

that the Postal Service has been overcharged by $75 billion in the 

way that you have been funding the CSRS pension responsibility. 

Let us say that is correct. Let us say that the second point here 

is correct also with respect to the 100-percent pension pre-funding 

target is excessive when compared to the S&P 500 and OPM’s 

achieved funding levels. Let us say they are both correct. 

If both of those assertions are correct, how does that change 

what you need to do at the Postal Service and what we need to do? 

Mr. POTTER. Well, we are talking about $120 billion being given 

to the Postal Service. 

Senator CARPER. Those are some big if’s. 

Mr. POTTER. Yes, well, you are talking about $120 billion that, 

let us say in theory, was given to the Postal Service. What would 

we do with that money? Well, first, I think we would pay down our 

debt. We would make sure that Civil Service—— 

Senator CARPER. Debt to the Treasury? 

Mr. POTTER. Debt to the Treasury, which is now at $10 billion. 

We would fund our retiree health benefit system up to the required 

level, the trust fund, which would probably be about—— 

Senator CARPER. Under the 2006 law? 

Mr. POTTER. Under the 2006 law. We would fund that. We would 

have plenty of money to fully fund that. And I think we would be 

in a very solid financial position for at least 5 to 7 years. 

Senator CARPER. OK. Thank you. 


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I want to ask a couple more questions, if I could, of you, General 

Potter. My recollection is this is not the first time that a Postmaster General has raised the possibility of shifting to 5-day delivery, and I am not sure—who was your predecessor? 

Mr. POTTER. Bill Henderson. 

Senator CARPER. OK. One of your predecessors, I think back in 

1980, was a fellow by the name of William Bolger. Did you know 

him? 

Mr. POTTER. I was in the Service when he was the Postmaster 

General, but I cannot say I knew him. 

Senator CARPER. All right. 

Mr. POTTER. I was a clerk at the time. 

Senator CARPER. Fair enough. From a clerk to a king. [Laughter.] 

To the General. But, anyway, I understand that he first formally 

suggested 5-day delivery to the predecessor committee for this 

Committee. It used to be the Governmental Affairs Committee, and 

now it is the Homeland Security and Governmental Affairs Committee. But I am told that in 1980 he raised the possibility, maybe 

even suggested that the Postal Service consider going from 6- to 5- 

day service. At the time he said other ways to save this money are 

not readily apparent, and 30 years later we are hearing pretty 

much—well, it is not exactly the same argument, but we are hearing a similar kind of argument. 

I do not know if he is still alive, but we have gone 30 years and 

the Postal Service is alive, kicking a little bit, but we have heard 

this idea before, and there turned out to be other things we could 

do to keep the Postal Service alive than going from 6- to 5-day 

service. So how is this different—I think I know what you are 

going to say, but how is this different from 1980? 

Mr. POTTER. Well, if you look back at 1980, it was pre-automation, and so the Postal Service has increased efficiency significantly 

by automating mail, having machines that can read barcode and 

sort mail. In addition to that, we have seen significant growth in 

our advertising product, another hard-copy product. We went from 

a very small volume of mail in 1980—I think it was actually in the 

1970s when he was talking about it—to today where it actually 

peaked at over 100 billion pieces of mail, and it is 50 percent of 

the mail. So there was an opportunity to grow revenue. 

What we have facing us right now, Senator, is the fact that hard 

copy is being substituted with electronic communication, and so the 

opportunities to pursue products in the hard-copy arena just are 

not there given the fact that society is moving to do as much as 

it can electronically. And so therein lies the big difference. 

I think that there is some misnomer about, what we could do if 

we kept our retail operations open. At the end of the day, delivery 

still has to be paid for by the mail that we are delivering, and the 

sobering thing for me when I looked at this was that in the year 

2000 we were delivering five pieces of mail per delivery per day. 

Today we are down to four pieces per delivery per day, and our anticipation is that we are on our way to three in the year 2020. And 

the mix has changed from First-Class Mail, and there is going to 

be more advertising. In 2000, we were delivering on average in 

2009 dollars, we were delivering $1.80 to every door every day. 

Today that number is down to $1.40, and in 2020 it is going to be 


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down to $1. And while we can have other sources of revenue generated, the fact of the matter is delivery is not going to pay for 

itself going forward. And that is why the Postal Service Board of 

Governors proposed going from 6- to 5-day delivery, because we believe that delivery has to be able to pay for the amount—the frequency that we provide. 

Senator CARPER. All right. Thank you. 

Again, a follow-up question, if I could, for you, General. Part of 

your plan for the coming year that has received the most attention 

is, as you know, the idea of maybe going from 6- to 5-day-a-week 

delivery. While polling consistently shows that the public at large 

would be supportive of such a move, at least when given a choice 

between it and other maybe less popular cost-cutting efforts, the 

proposal continues to meet some resistance. 

Would you take a minute or so to talk about how the proposal 

you made to the Postal Regulatory Commission on Saturday delivery addresses some of those concerns that have been raised by 

groups like credit card companies, like pharmaceutical companies, 

like post office box owners, and others who have expressed concerns to date? 

Mr. POTTER. Senator, in the last 6 months, we spent a lot of time 

talking to as many stakeholders as we possibly could. When we 

originally drafted our plan for 6- to 5-day delivery, our savings was 

actually above $3.5 billion. But as we heard from constituencies 

and heard their concerns, what we have done is we have made adjustments to that plan, including keeping our network facilities 

open around the clock throughout the country, enabling folks who 

receive payments through the mail to continue to receive those payments on weekends and 24 hours a day, because as mail is processed, we make it available to them. 

When it comes to people who have post office boxes, many of 

whom are remittance type mailers, people who receive monies, we 

have decided that we are going to keep post offices open on Saturday. We are going to continue to sort mail to those post office 

boxes. And so folks who want to receive their mail on Saturday can 

open a post office box, and those folks who currently receive checks 

at those post office boxes will get their mail on Saturday. 

And so, again, wherever we could, we made accommodations to 

assure that people had access, where necessary, to the mail. 

Senator CARPER. OK. Thanks. I would just say as an aside my 

next question is going to be for Ms. Goldway, but a couple of weeks 

ago, I led a congressional delegation to Afghanistan and to Pakistan, and we spent a fair amount of time with our troops up and 

down the country in Afghanistan. I compare their ability to communicate with their families and others back in the United States 

with what we faced in Southeast Asia. I remember during the Vietnam War how much we looked forward to receiving mail from our 

families, from home, and from friends. I lived in California at the 

time, and we deployed to Southeast Asia, but every week I would 

get the Sunday San Francisco Chronicle in the mail. It would come 

maybe 3, 4, or 5 days late, but I would get it. I would get the Time 

or Newsweek magazines. I would get bills. I received letters from 

family and friends. And when I was over in Afghanistan and I 

talked with a lot of our troops—and I just want to say how proud 


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I am of them, there’s high morale, people are working hard to do 

a good job, not just for the folks in Afghanistan but for all of us. 

But it is interesting. They still get some mail, but for the most 

part, they had cell phone service. We could not communicate by 

phone during the period of time when I was deployed overseas. 

They can communicate with their BlackBerrys or by e-mail. Some 

of them have Webcams so they can actually do video back home to 

their families. It is just a remarkable change in people’s abilities 

to communicate. They can get their newspaper subscriptions, their 

magazine subscriptions, do it all electronically. Just a different 

world in a lot of respects. 

Mr. POTTER. They cannot get those home-baked cookies other 

than through the mail. [Laughter.] 

Senator CARPER. And they still look forward to those. 

Ms. Goldway, I think you have made a number of statements recently, including, I think, at a House hearing last week, that appear to me and maybe some other observers to take a position in 

opposition to the Postal Service’s plans to eliminate Saturday delivery and close some post offices. This is a concern to me because we 

expect you as chair of the Postal Regulatory Commission to be objective as you consider these issues. 

Could you just give our Subcommittee your commitment that you 

will be approaching the hearings that your Commission will be 

holding on Saturday delivery and any future proceedings on post 

office closings and other issues with an open mind? 

Ms. GOLDWAY. Absolutely. I believe entirely in the Commission’s 

role to be the objective arbiter on this issue and to provide the 

Postal Service and the Congress with a fair and balanced report, 

to get as much information as we possibly can. 

If I have erred, I think it is because I really did feel that the public was concerned that this decision had already been made, that 

the pronouncements made it seem as though it was a fait accompli, 

and I really wanted to make sure that the arguments, both pro and 

con, were surfaced and discussed before a decision was made. 

Senator CARPER. OK. Thanks very much. 

Let me just follow up with another question, if I could. I think 

you stated in your testimony that the Commission plans to take 

maybe up to 9 months to study the Postal Service’s proposal related to Saturday delivery. It took a similar amount of time, I am 

told, for the Commission to render an opinion on a recent Postal 

Service proposal related to the closure of several dozen post offices. 

I will be real honest with you. That seems to me to be an awful 

lot of time either to consider the closure of a couple dozen post offices or a long period of time, frankly, for the Commission to complete its work, especially when you consider the fact that the 9/11 

Commission came out with its report just 7 months after President 

Bush signed the bill that created it into law, and they had a whole 

lot more to say grace over than the Commission does in either of 

these instances. 

So considering the fact that the Postal Service could literally run 

out of money during that 9-month period of time, and given the 

liklihood that it could run out of borrowing room some time in 

2011, it is important that postal management and Congress really 

hear from the Commission on the advisability of finding savings by 


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going from 6- to 5-day-a-week service. Why do you think it would 

take 9 months to consider the Postal Service’s proposal? And can 

you present for the record—you do not have to do it today, but just 

present for the record, if you would, a detailed timeline of the Commission’s plan for examining this important issue? 

Ms. GOLDWAY. I really share your concerns about how long these 

processes take. Unfortunately, the due process requirements under 

this provision which require us to hold public hearings and take 

formal testimony make it difficult to reduce the timeline very 

much. 

Next week, we will hold what we call a pre-hearing conference 

where we will hear from the participants and get a better sense of 

how many participants there are, how much information they are 

going to request. We have 11 witnesses with significant testimony 

that the Postal Service has presented to us, people who want to 

cross-examine those witnesses, take testimony of their own that 

they want to submit, and then there is time that the public needs 

to review all of those documents that are submitted to us. And 

when we add up the calendar, it seems to add up to a long period 

of time. 

We did the Station and Branch Advisory Opinion in 8 months. 

In part, that took time because there was additional information 

we needed to get from the Postal Service. But in all fairness, the 

original proposal was to close 4,000 post offices. By the end of the 

process, given the public exposure that process had, the Postal 

Service’s recommendation went down to 137. But it was a process 

that I think could not be shortened given the due process requirements of the law. 

We will try our best, and we certainly will report to you after 

next week when we have developed the full schedule for the review, and we will do our best to make it as speedy and as efficient 

as possible given the constraints we have. 

Senator CARPER. All right. Thank you. Again, I might be wrong 

in this, but I think the 9/11 Commission came out with its report 

about 7 months after former President Bush, had signed the bill 

that created it into law. This was a bipartisan Commission—I want 

to say about 10 people—chaired by Tom Kean, former governor of 

New Jersey, and the vice chair was Lee Hamilton. I think they 

came up with 70 recommendations to the Congress and to the 

President that they developed in that period of time. I think they 

did it unanimously, and we ended up adopting 45 or 50 of them. 

So if they can do that much and do it in that short a period of time 

on an issue that difficult, my guess is you all can beat that 9- 

month goal, and I would sure encourage you to. 

Ms. GOLDWAY. We will try. 

Senator CARPER. Thank you. And I look forward to your timeline. 

I am going to have a couple questions for everybody, but before 

I do that, I want to go back to General Potter, if I can. You mentioned a couple of revenue-generating measures that you have already undertaken, and we applaud those. I think you said that 

there are no big revenue-generating initiatives that can help the 

Postal Service make progress in closing its projected budget gap, 

underlining the word ‘‘big.’’ You also note in your testimony that 

other lines of business pursued by foreign posts, such as banking 


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and selling cell phones and actually providing Internet service, will 

not help very much. In fact, I do not think we allow you to provide 

those kinds of services. Those are not generally allowed because 

they are deemed to be competitive with products and service offered by the private sector here in this country. 

But let me just ask, how did you come to those conclusions, the 

idea that there are no big revenue-generating ideas that are out 

there? 

Mr. POTTER. Well, we came to the conclusion, as I said earlier, 

with the help of the three consultants that we had: McKinsey, the 

Boston Consulting Group, and Accenture. And what we asked them 

to do was explore the marketplace and look at opportunities to 

grow the business. There were over 70 different ideas that were 

looked at, and, again, their conclusion was that in the short run 

they are not going to help us significantly close the gap, that in the 

long run we needed the flexibility. But, for example, identification 

cards and other things, there is a whole infrastructure that has to 

be put into place with a huge investment so it would take time, significant time, to build up that business. We talk internally a lot 

about how does growth help the business and what could we do, 

looking at new products. 

So I think if you think about products in the private sector or 

anywhere in the first year if you could generate $200 million in 

revenue from a product, it would be significant. I mean, we are 

talking major products. Profit might be in the neighborhood of $100 

million. So for us to close the gap, we need 70 of those. And they 

just do not happen. As the IG earlier testified, at some point in 

time these things become as much of a distraction as anything, and 

they do tend to divert your attention from what needs to be done. 

So that is why we decided, after hearing from the consultants, we 

were going to concentrate on the mail because both from a revenue 

standpoint that was our biggest opportunity to generate growth in 

packages and advertising mail, and from a cost standpoint that is 

where we have the biggest opportunity to help our financial situation by lowering our costs. 

And so it was not hard to conclude that concentrating on our core 

business was the most important thing that we could do as a management team in the short run. 

Senator CARPER. All right. What percentage of your employees 

are likely to be within retirement age within, say, the next 5 years 

or maybe within the next 10 years? 

Mr. POTTER. Well, as was mentioned earlier, about half of our 

employees are eligible to retire. 

Senator CARPER. Right now? 

Mr. POTTER. Within the next 10 years some 300,000 employees 

will be eligible to retire. We have 600,000, slightly less, about 

593,000 career employees today. We have over 100,000 people who 

are currently eligible, we have another 100,000 who could be optionally eligible, and another 100,000 who will become eligible over 

the next 10 years. 

Senator CARPER. So you have roughly 600,000 employees today. 

Mr. POTTER. Right. 

Senator CARPER. And if you go back 10 years, 8 to 10 years ago, 

how many full-time employees did you have? 


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Mr. POTTER. We had over 800,000. About 803,000. 

Senator CARPER. All right. So the workforce is down by about a 

quarter. 

Mr. POTTER. About a quarter, yes, sir. 

Senator CARPER. OK, good. Let us talk about vehicles that you 

use. You have, I am sure, tens of thousands of vehicles, maybe 

more. 

Mr. POTTER. Over 200,000. 

Senator CARPER. Over 200,000. Some of those are maybe new, 

but most of them are not. 

Mr. POTTER. Most of them are old. Most of them are in the 17- 

to 22-year-old vehicles. 

Senator CARPER. And I presume that some of the older vehicles 

are not especially energy efficient. Maybe they are diesel powered 

or gasoline powered? 

Mr. POTTER. They are gas-powered vehicles that you see on the 

street delivering mail. The bulk of our fleet—about 140,000, 

150,000—of those vehicles are gas powered. 

Senator CARPER. I think you or someone mentioned earlier the 

percentage of your costs at the post office that are attributable to 

labor costs, personnel costs. Was it 80 percent? 

Mr. POTTER. Eighty percent, yes. 

Senator CARPER. Eighty percent. Any idea what percent of your 

total costs could be attributable to the cost of vehicles, purchasing, 

maintaining, and fueling? Any idea what that would be? 

Mr. POTTER. Transportation in general is $6 billion. 

Senator CARPER. And what percentage is that, about 8 or 9 percent? 

Mr. POTTER. Yes, it is up there, right. Out of $70 billion, so it 

is in that neighborhood. 

Senator CARPER. I know you all are looking at some different options with respect to vehicles in the future, and I would just be interested to hear what you are considering there, what are some of 

the opportunities, maybe some of the opportunities that might be 

out there. 

Mr. POTTER. Well, the first opportunity is we have 44,000 alternate-fuel vehicles, and we are working with a couple of the big car 

manufacturers. We found out that they have mapped where those 

alternate fuels are available, and we are repositioning our vehicles 

to take advantage of that today. 

In addition to that, we have a number of tests of electric vehicles 

we just put out for contract with five different manufacturers to 

help us design an electric vehicle that would serve the Postal Service. We have a number of tests that are being done by our engineering division on hydrogen vehicles, electric vehicles, hybrid vehicles. Basically, we are looking at them all. 

Right now there is no one technology that appears to be stepping 

out of the pack, so to speak. We are very much engaged, though, 

in looking at what we use our vehicles for and what might be appropriate. So certain routes we have determined an electric vehicle 

would be fine, where we would come in and recharge it overnight. 

In other cases, depending on the distance that needs to be traveled, 

we might need a hybrid vehicle to satisfy our needs. 


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One of the things that we have concluded, though, given our history—because we have bought electric vehicles and other types of, 

I will call it, experimental vehicles over time. One of the things 

that we are very cautious about is to make sure that when we do 

make an investment in replacing the current fleet, we buy a commercially available vehicle because by definition a commercially 

available vehicle has 10 years’ worth of parts and support. And we 

have had a number of situations where literally the manufacturer 

has called us up and said, ‘‘Here is your money back. We are out 

of business.’’ And so we have to be very careful that when you 

make an investment, in 140,000 vehicles, a multi-billion-dollar investment, that it is one that will be supported over a significant 

period of time. 

The last time we made investment in vehicles, we have the aluminum vehicles that folks see around the country. We call them 

our ‘‘long-life vehicle.’’ They truly are long life. The bodies on those 

vehicles are still holding up. We are replacing drive trains, chassis, 

and the vehicles are fantastic. Actually, it was Grumman at the 

time who built them, and they are well designed. We want to make 

sure that when we do make the investment, we make as good an 

investment as was made 20 years ago. 

Senator CARPER. OK. I want to stay on this for just a moment. 

You mentioned what sounded like a smart idea, and that is, moving some of your alternative-fuel vehicles to be located at places 

around the country where they can actually get the alternative 

fuels that power them. 

I think we have talked about this before, but have you given any 

thought in your discussions with the auto companies that, given 

the fact that the Postal Service is everywhere, in every community 

across the country, and we are trying to figure out how to do a hydrogen infrastructure for fuel cell-powered vehicles, that there 

might be some way, some intersection there between your presence, 

the Postal Service’s presence everywhere, and the potential need to 

be able to built a hydrogen infrastructure? Has there been any discussion of that? 

Mr. POTTER. There have been discussions, but the major car companies I have spoken to think that the hydrogen vehicle technology 

is years away, and it appears to me that the technology in the 

short run that will be more promising is electric as battery technology improves. 

Senator CARPER. Is there a potential for—— 

Mr. POTTER. And so there has been discussion with some electric 

utility companies around the country. 

Senator CARPER. Talk about that for us, about the idea of vehicle 

to grid and just maybe give us a primer on that and how it might 

pertain to the Postal Service. 

Mr. POTTER. Well, we do have a large fleet, and once—I really 

believe, after having discussed this—this is my personal opinion at 

some point some technology is going to win. And right now part of 

the challenge for someone who is a buyer of the technology is the 

fact that you are not sure which is going to come out. But at some 

point in time, every commercial van in America is going to use 

whatever it is, electric or whatnot. And at that point in time, then 

I think the market will have hydrogen fueling stations. Some of the 


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discussions with the power companies were along the lines of when 

would you charge that vehicle. Could we set it up and time it such 

that they do not ratchet down their generation overnight, that we 

would be able to use it overnight? 

We have even gone so far as to have discussions with people 

about using the batteries in our vehicles to store wind power, windgenerated electricity, and it would be able to not only take energy 

from the grid but also return it. 

Senator CARPER. Sure. Provide the storage. 

Mr. POTTER. Right, and so—— 

Senator CARPER. The wind does not always blow. We are looking 

off the shore of Delaware to deploy a windmill farm in about 2 

years, and hopefully when we gather here maybe 4, 5, 6 years from 

now, we will have windmill farms from North Carolina up to 

Maine. The wind will not always blow every place up along the 

coast, but the idea is to link them all together. And when the wind 

is blowing we need the ability to store the electricity when we have 

more than we can use. So there might be some economic opportunity there. 

Mr. POTTER. I am really excited about what I am hearing. It is 

a very dynamic time, and I believe that we are going to make a 

tremendous amount of progress in the next couple of years. I wish 

it were a little further along so we can make some decisions, but 

I think right now the best tack is to be patient and to just stay 

abreast of everything that is going on. 

Senator CARPER. Well, I am glad to hear you are doing sort of 

like the five project deals. That is good. 

Let me ask a question of Mr. Herr and Mr. Williams, if I can. 

We have let you off pretty easy here, so I will not let you slip out 

the door without asking you a couple questions. 

The Postal Service is depending on, as we know, some very dire 

volume and revenue projections to aid in its planning over the coming years. I understand that these numbers came out of the work 

of a group of consultants, whom we have talked about already, that 

the Postal Service hired in the last year. 

In your view, are the projections—and, that is, the loss of about 

65 billion additional pieces of mail and a cumulative deficit of more 

than $230 billion, is that valid? And is further study needed, in 

your view, before we begin to act on them? Do you want to go first, 

Mr. Herr? 

Mr. HERR. Yes, in doing the work, for our report that was released last week, we met with those consultants. We also did our 

own outreach with folks from the private sector, very broad outreach in terms of leading mailers and groups of that nature. And 

what we heard from the Boston Consulting Group in terms of their 

analysis was consistent with what we had heard from what other 

people are projecting. 

One thing I would note is that their worst-case scenario is about 

118 billion pieces of mail, and their most optimistic scenario is 

about 150 billion. So there is a range, and the lower number would 

reflect a more aggressive adoption of broadband technology and the 

Internet. 

Senator CARPER. OK. Mr. Williams. 


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Mr. WILLIAMS. We looked at the Boston Consulting Group. They 

have a great reputation, and the report was impressive to us, but 

it was a forecast. There is tremendous background noise going on, 

too, because of the economic downturn and then the sort of surprising recovery. So that is tough work trying to peer into the future through that. 

Senator CARPER. What did Yogi Berra say? ‘‘Never make forecasts, especially about the future.’’ [Laughter.] 

Mr. POTTER. I think he might have been right about that. But 

electronic diversion is real. A number of our great partners are also 

being devastated by the digital age that normally provide mail to 

us. Books and music are being downloaded and many other examples. We feel good about the accuracy of that projection. Having 

said that, we tried it ourselves in the context of some other work. 

We thought it would be about 159 and ranging on either side of 

that. So they tended in our minds to prop up against one another, 

and we think, unfortunately, that is good. 

With regard to the projected losses, over $230 billion, I guess my 

thought there is that was an attempt to identify the universe or 

the boundaries of the space in which the action has to occur in 

order to prevent that from happening. And I think it is everyone’s 

hope that we prevent all the losses from occurring. But if there is 

success, it will be inside the space of that $230 billion. 

Senator CARPER. OK. One more quick question for General Potter, and then I would like to come back to you, Ms. Goldway. 

We were talking with—I do not know if it was folks from the Letter Carriers—maybe it was—about continuing Saturday service, 

and to continue it with folks who would be working maybe as 

something other than full-time employees, maybe as part-time employees, maybe people who just work on Saturdays, maybe even retirees, different approaches to bring down the cost to the Postal 

Service of offering service on a Saturday. My recollection is somewhere we may have had a conversation where you all actually 

looked at that several years ago, that option. Is that a live option? 

Is there anything to it? Yes or no, what do you think? 

Mr. POTTER. It is an option that was looked at several years ago 

in negotiations, and it did provide savings to the Postal Service. 

Senator CARPER. I presume it would not be close to $3 billion, 

but would it be $1 or $2 billion? Any idea? 

Mr. POTTER. It would be less than $1 billion a year, so in terms 

of contributions it could make, it would not close the gap as significantly as eliminating Saturday. Now, that in concert with some of 

the suggestions that have been made by Dave Williams and his Inspector General group that would make a contribution to help close 

the gap, but it is not as significant as elimination of Saturday delivery. 

Senator CARPER. OK. Fair enough. Thank you. 

Ms. Goldway, I think you clearly stated in your testimony, your 

view that the Postal Service should not base its efforts in the coming years solely on the forecasts that its consultants have provided. 

You also point to other studies that have shown a continued demand for hard-copy mail, which would be encouraging. 

Tell us, if you will, for the record—or just tell us now, if you can, 

what are these studies that you cited? Can you give us a little more 


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details on how the authors of those studies arrived at their findings? 

Ms. GOLDWAY. Well, I am not sure my testimony pointed to any 

other studies about the continuing demand for hard-copy mail. In 

fact, Boston Consulting and McKinsey indicate that there is a continuing demand for hard-copy mail—not at the same levels that 

there is now, but they certainly do that. I have certainly spoken to 

American Greeting Cards and other greeting card manufacturers 

whose volumes declined only about 2 percent in the last couple of 

years, and they certainly think in their category of mail that there 

is ongoing strong demand for mail. 

My point was that while demand for mail may be diminishing, 

there is still a very strong need to have a communications network 

that provides mail delivery, and that in order to support that delivery network, the kind of mail that is in the system has to be mail 

that pays its own way or, in fact, pays a great deal more, that the 

focus is too much on volume and not enough on value, and that we 

could probably talk about fewer pieces of mail as long as that mail 

contributed more to the system. So packages contribute more to the 

system, and perhaps there is more opportunity to raise prices on 

mail that includes the IMb and additional track-and-trace capabilities. And then there are other revenues that could support the post 

offices or the transportation network separate from the volume of 

mail itself. 

I think what I really wanted to point out was that I felt that the 

worst-case scenario presentation that the Postal Service is basing 

its argument on provides a kind of negative tone, and that if we 

were to focus more on some of the positive things that the Postal 

Service can do—and they are doing many—to create a network for 

the 21st Century, we would be better off. And those customers who 

want to stay in the mail or who use the mail would think better 

of it than simply focusing on the doom and gloom that has gotten 

so much attention in the last month. 

Senator CARPER. Well, we all know that the media loves to report 

good news. [Laughter.] 

Actually, there are some good-news stories in what the Postal 

Service has been doing. I think managing through this diversion to 

electronic media, managing through the economic recession, the 

biggest recession since the Great Depression, and doing it in a way 

that they did not give anybody a pink slip, basically just did it, 

managed it through attrition, and flat-rate boxes and your partnerships with FedEx and UPS, those are good stories. They do not always get the attention that they deserve. 

I have maybe one more for Ms. Goldway, and then maybe one or 

two for the entire panel, then we will break for dinner. [Laughter.] 

Ms. Goldway, you said at one point, I think, in your testimony 

that, ‘‘We believe that the cost-cutting efforts outlined in the Postal 

Service’s plans would result in a decrease in mail volume.’’ Could 

you just go ahead and elaborate? You have spoken a little bit about 

this already, but just elaborate a little, if you could, your concerns 

in this regard. 

Ms. GOLDWAY. Well, if you try to mail a package and you go to 

the Postal Service on a Saturday and the post office is only open 

from 10:00 to 12 Noon and you want to do it at 2 p.m., what are 


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you going to do? You are going to go to FedEx, or you are going 

to figure out some other way to mail your package. You may not 

wait until Monday to do it. And the Postal Service has been reducing hours at some post offices. If you cut mail delivery, as they are 

proposing, 17 percent, there is bound to be some decrease in volume. 

I think the biggest picture is to think of it this way: A decrease 

in volume for a customer—a decrease in service is kind of the 

equivalent of raising the price. You get less for the money. So what 

are you going to do? Are you going to make a decision to go ahead 

and use that service, or are you going to find an alternative? 

So I think there is a general assumption that there is some decrease in volume and usage when you decrease delivery or decrease 

access. The question is the balance, and that is one of the things 

that the Commission does all the time when it looks at rate increases. We say, Well, there is going to be a rate increase, how is 

that going to affect volume? Some amount of volume is going to go 

out of the system when you raise the prices. 

So we do that sort of evaluation now, and the point is that we 

have to because the Postal Service is looking at service cuts, begin 

to look at that evaluation with regard to service as opposed to volume in terms of these issues. Does that make sense? 

Senator CARPER. Yes, I think so. 

Mr. POTTER. If I could just respond to that. 

Senator CARPER. Please. 

Mr. POTTER. I think one of the things that is misunderstood is 

this whole notion of access and the fact that we are talking about 

increased access in our plan. People choose to focus on one aspect 

of access. It is when a post office is open. Well, when you look going 

forward at the projections for mail volume, what we are projecting 

is that mail volume—and, by the way, we use the best-case scenario of $150 billion in our plan, not the worst case. We are projecting that First-Class Mail volume will drop by 30 billion pieces 

over the next decade. The bulk of that mail is single-piece mail, so 

it is people who buy stamps and pay bills. We believe that much 

of that is going to move online. And when you think about a post 

office, 50 percent of what they sell today is stamps. If those stamp 

sales are going away, how do we maintain access to the American 

public and balance the cost problem that we have of keeping those 

places open? Well, the way to do it is sell postage and sell packages 

and other services in other locations that are open, sometimes 24 

hours a day. 

Senator CARPER. Like my supermarket? 

Mr. POTTER. Like your supermarket. You know, is it 14 hours a 

day, 7 days a week? Provide that access in other locations, because 

we believe that is the way of saving revenue. Short of that, Dr. 

Coburn earlier talked about alternate sources of revenue, and we 

would like to embrace that so we could keep post offices open. 

But if those avenues do not work out and if we are not allowed 

to pursue them legally because of competition, potentially unfair 

competition, with the private sector, then we have to look at ways 

to provide access to the American public. And we are doing that 

with a robust effort online—we are improving our Website—kiosks, 

as well as alternate locations that sell—contract postal units that 


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sell everything that we do in the lobby with the exception of registered mail. 

That is the kind of thing that we are talking about. We are talking about expanding access to grow revenue. That is part of our 

plan. 

Senator CARPER. OK. 

Mr. POTTER. Now, the 6- to 5-day delivery, obviously, people will 

perceive that as perhaps less service. But when 70 percent of the 

American public consistently in surveys that are done by USA 

Today, by the Washington Post, by Rasmussen—when they all say 

that that makes sense as a way to go to change a service to keep 

rates affordable and to keep the service going, I think we have to 

listen to the American public. 

Ms. GOLDWAY. If I could just add that the public polls also show 

that even in larger numbers people support wanting to maintain 

their post offices. So it may well be that we need to shift a lot of 

access and expand access in different kinds of services in supermarkets and through the Web. But the American public has a longstanding attachment to its post offices, and I think it would be a 

mistake to ignore the value and the potential they have for maintaining and building a system. 

Mr. POTTER. If I could just add one last thing. 

Senator CARPER. Please. 

Mr. POTTER. Of the 36,000 post offices we have today, 5,000 are 

contract postal units. The people who use those units have no idea 

that they are not in a post office, but they have access, greater access than they do at the current post office. And that is the concept 

we are looking to pursue. 

So I think as the American public learns more about what the 

plan is, I do not think they are wedded to the building; they are 

wedded to be able to go to a location, pick up their mail, visit their 

post office boxes, pay for postage. We just have to change that concept in recognition of the cost factor in terms of our retail costs. 

When you put our presence in other locations, you now have people 

who can share duties. They can do postal work sometimes, and at 

other times of the day they can do other work, whatever that retail 

outlet is, where today in a post office by law we can do one thing: 

We can sell stamps, sell postage. 

So, when you look at retail in general, when I walk into my grocery store, I see a bank, I see a Starbucks, I see the fact that there 

is traffic there and other folks are taking advantage of that traffic. 

Today only 600 people walk into the average post office in America, 

600 people over the course of a week. That is 100 a day. When you 

start to think about the low end of that average, we have a lot of 

time where we have folks that are not that gainfully employed. 

Senator CARPER. OK. Thank you. A couple more questions, and 

these will be for, I think, the entire panel, so Mr. Herr and Mr. 

Williams, put on your seat belts, here we go. 

Perhaps the biggest issue on the table now, as we consider how 

to address the Postal Service’s financial difficulties, is the Postal 

Service’s retiree health and pension obligations. We talked a little 

bit about this, but I want to come back before we close and return 

to it. 


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I think Mr. Williams makes a good case in his testimony that 

Congress and OPM have done the Postal Service and its customers 

a disservice over the years in miscalculating what the Postal Service owes the Federal Government to care for postal retirees. I do 

not know that the Congress actually has done that. I do not think 

we actually calculated or miscalculated what the Postal Service 

owes, but somebody has, and maybe it is OPM. But it is clear that 

on the retiree health side I think we are way too aggressive in asking the Postal Service to pre-fund its retiree health obligations. It’s 

maybe the most conservative approach I have ever seen, pre-funding the health obligations of an employer in this country, private 

sector or public sector. 

I will start with you, General Potter, but let me just ask each 

of you if you agree that further changes, even some painful ones, 

will still be necessary even if we are able to address retiree health 

and pension issues? 

Mr. POTTER. Senator, as I said earlier, depending on what the 

changes are, I believe that ultimately what we have put together 

in our package makes sense for America. If changes are made, significant changes, along the lines of what our OIG has proposed— 

and I have to tell you, I do not always agree with the IG, but in 

this case, I am 100 percent behind him. 

Senator CARPER. I am not surprised. [Laughter.] 

Mr. POTTER. But we could delay some of the changes, frequency 

of delivery and, again, depending on the magnitude of the change 

that is made with CSRS and retiree health benefits. But when you 

look out long term, the type of changes that we have been described in our plan will need to be made by the U.S. Postal Service 

in order to continue to be financially stable going forward. 

Senator CARPER. OK. Thank you. Mr. Williams. 

Mr. WILLIAMS. I think even going into the storm, for a number 

of reasons, some of them were just the fact that the world was 

moving faster and we were becoming more agile—we were way too 

large, even before we entered this economic downturn and the rest 

of the storm. 

Senator CARPER. You think we were way too large, ‘‘we’’ being? 

Mr. WILLIAMS. The Postal Service. My office is just about right, 

by the way. [Laughter.] 

Mr. POTTER. That is an example, Senator, of where we disagree. 

[Laughter.] 

Senator CARPER. We live in a country where about a third of us 

are overweight or obese. Is that where you are going with that? 

Mr. WILLIAMS. I do think we owe it to our customers to have an 

organization that is the proper size, not larger than demand requires, and we certainly owe it to the employees to try to be as 

faithful to them as they have been to us. And I think that if we 

have time to right-size—we definitely have to right-size. And if we 

have time to, we certainly want to make sure that we can rely on 

attrition and shrinkage of things such as overtime to ride out that 

right-sizing exercise, which I am sure is essential. 

We want to be agile. We want to be able to take on the future. 

For every reason in the world, we want to right-size, and we want 

our work rules to look forward into the future. 

Senator CARPER. OK. Mr. Herr. 


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Mr. HERR. To me the basic premise has been that the Postal 

Service is supposed to be self-financing. And so if you think about 

the decrease in revenues, you have to realign how much Postal 

Service there is going to be with the revenues that are coming in. 

Reflecting for a minute on your comment on retiree health care, 

I think Congress made that decision in 2006 which, when we look 

back, was the peak of mail volume. It may be the all-time peak, 

when there was a lot of mail, there were a lot of solicitations. I 

think most of us got multiple credit card solicitations on a daily 

basis. 

Senator CARPER. From Delaware. 

Mr. HERR. Well, from many places. I am not sure. 

Senator CARPER. Some from South Dakota. 

Mr. HERR. I cannot say I recall reading all the return addresses. 

But I think the point was, it was a good idea to pre-fund. It is important. As I mentioned earlier, there are close to 500,000 people 

getting those benefits. So pre-funding made sense, but I think it 

was aggressive. But it was also a time when people thought there 

was some surplus funding available to do that. So we believe it is 

important now to look at what that is, make it more affordable, but 

to continue, as the Postal Service can, to make those payments so 

that those individuals and their families and their survivors will 

have that benefit. 

Senator CARPER. Good. Thank you. Ms. Goldway, I am going to 

ask you to briefly respond, if you will, and then I have at least one 

more question. 

Ms. GOLDWAY. I think we all agree, the whole mailing community is unanimous in that the burden of the health care retiree benefit funding is overly ambitious and should be adjusted. And I 

think what my testimony last week and this week is trying to 

present is that the situation requires—for major changes, requires 

more time and thought than the immediate concerns of this immediate financial issue, and that in order to make the changes that 

the Nation wants and will accept and that really are suitable for 

the 21st Century, we need more time. 

You mentioned that the PAEA limited the amount of opportunity 

the Postal Service had to provide non-postal services because there 

had been a record that they really had not done it very well. The 

introduction of new services had not gone very well in the previous 

10 years. So if they are going to introduce new services, I think 

they need to be carefully reviewed. To the extent they need to be 

reviewed by the Commission, they should be. If they are going to 

reduce service, we have to balance what those impacts are. 

I think all of us want to see a vital Postal Service, recognizing 

that there is lower volume, but given the ability we have to adjust 

the health care retiree benefit fund, I think there is a little more 

time. The economy should be going up, at least for the next 2 

years. Even the Postal Service sees an uptick in volume, and we 

should take that time to make the right decisions. 

Senator CARPER. I have a few more questions to ask. I am not 

going to ask them today, but I am going to submit them in writing 

and just ask you to respond to them, if you will. 

You have been very good with your time today, and we thank 

you for sharing this much of it with us. 


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I want to say again to the folks who work at the Postal Service 

and the folks that you lead, General Potter, our appreciation to all 

of you for serving us, and our appreciation to all of you for serving 

us through difficult and trying times. 

We appreciate, Mr. Williams, the work that your folks are doing 

and maybe pointing to an area where there may be a way to enable 

us to better manage right-sizing this operation and meeting financial challenges, the economic challenges that lie ahead. I hope that 

is true, and we will find out in the weeks ahead as we drill down 

on what you have proposed. 

As always, to the folks at GAO, we appreciate your helping us 

in a whole lot of ways, including this way, providing advice and 

counsel to us. 

And, Ms. Goldway, it is always good to be with you and to hear 

from you. We appreciate your commitment to service and your willingness to chair the entity that you lead. 

I would just close by asking you to please do your dead level best, 

you and those you lead, to beat that 9-month target by a whole lot, 

and we would appreciate it if you could very much. 

Ms. GOLDWAY. As my son says, ‘‘Got it.’’ 

Senator CARPER. All right, everybody. That is it for Earth Day 

2010, and hopefully our Good Earth will be around 10 years from 

now and so will the Postal Service and we will all be in better 

shape. 

Thank you very much. This hearing is concluded. 

[Whereupon, at 5:26 p.m., the Subcommittee was adjourned.] 


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