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68–048 PDF 2011

ARE POSTAL WORKFORCE COSTS SUSTAINABLE?

HEARING

BEFORE THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

APRIL 5, 2011

Serial No. 112–31

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

(

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

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director

(III)

C O N T E N T S

Page

Hearing held on April 5, 2011 ................................................................................ 1

Statement of:

Giuliano, Louis J., chairman, U.S. Postal Service Board of Governors;

James C. Miller III, governor, U.S. Postal Service; Patrick R. Donahoe,

Postmaster General and Chief Executive Officer of the U.S. Postal

Service; and Cliff Guffey, president, American Postal Workers Union,

AFL–CIO ....................................................................................................... 11

Donahoe, Patrick R. .................................................................................. 19

Giuliano, Louis J. ...................................................................................... 11

Guffey, Cliff ................................................................................................ 23

Miller, James C., III, ................................................................................. 16

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

Burton, Hon. Dan, a Representative in Congress from the State of Indiana, prepared statement of .......................................................................... 85

Donahoe, Patrick R., Postmaster General and Chief Executive Officer

of the U.S. Postal Service, prepared statement of ..................................... 21

Giuliano, Louis J., chairman, U.S. Postal Service Board of Governors,

prepared statement of ................................................................................... 13

Guffey, Cliff, president, American Postal Workers Union, AFL–CIO, prepared statement of ........................................................................................ 25

McMorris Rodgers, Hon. Cathy, a Representative in Congress from the

Washington, prepared statement of ............................................................ 87

Miller, James C., III, governor, U.S. Postal Service, prepared statement

of ..................................................................................................................... 17

Ross, Hon. Dennis A., a Representative in Congress from the State of

Florida, prepared statement of .................................................................... 7

Towns, Hon. Edolphus, a Representative in Congress from the State

of New York, prepared statement of ........................................................... 52

(1)

ARE POSTAL WORKFORCE COSTS

SUSTAINABLE?

TUESDAY, APRIL 5, 2011

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

The committee met, pursuant to notice, at 10 a.m., in room 2154,

Rayburn House Office Building, Hon. Darrell E. Issa (chairman of

the committee) presiding.

Present: Representatives Issa, Mica, Jordan, Mack, Walberg,

Lankford, Amash, Buerkle, Gosar, Labrador, Meehan, DesJarlais,

Walsh, Ross, Guinta, Farenthold, Kelly, Cummings, Towns,

Maloney, Norton, Kucinich, Tierney, Clay, Lynch, Cooper,

Connolly, Quigley, Davis, Braley, Welch, Yarmuth, Murphy, and

Speier.

Staff present: Ali Ahmad, deputy press secretary; Robert Borden,

general counsel; Molly Boyl, parliamentarian; Lawrence J. Brady,

staff director; Steve Castor, chief counsel, investigations; Howard

A. Denis, senior counsel; Gwen D’Luzansky, assistant clerk; Adam

P. Fromm, director of Member liaison and floor operations; Linda

Good, chief clerk; Justin LoFranco, press assistant; Jeffrey Post,

professional staff member; Laura L. Rush, deputy chief clerk; Kenneth John, detailee; Kim Yunsieg and Jordan More, interns; Beverly Britton Fraser, minority counsel; Kevin Corbin, minority staff

assistant; Ashley Etienne, minority director of communications;

Carla Hultberg, minority chief clerk; Lucinda Lessley, minority policy director; Zeita Merchant, minority LCDR, fellow; William Miles,

minority professional staff member; Dave Rapallo, minority staff

director; Susanne Sachsman Grooms, minority chief counsel; Mark

Stephenson, minority senior policy advisor/legislative director; and

Cecelia Thomas, minority counsel/deputy clerk.

Chairman ISSA. The committee will come to order.

Mr. Kucinich.

Mr. KUCINICH. I have a point of order, Mr. Chairman.

Chairman ISSA. Please state your point of order.

Mr. KUCINICH. Under rule 11, clause (b), the use of the committee broadcast system shall be fair and nonpartisan. My point of

order is that since the majority has signs up behind Mr. Cummings

which reflect your point of view and not ours, and since this is

being broadcast and you can see the signs behind Mr. Cummings,

that it would be fine—you know, it is fine with me, and I’m sure

our side, if you want to put all your signs over there that reflect

your point of view, but by having them up behind Mr. Cummings,

it is actually taking a partisan—assigning to him a partisan posiVerDate 17-JUN-2003 12:09 Sep 22, 2011 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\68048.TXT KATIE PsN: KATIE
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tion since the signs are right behind him. And therefore my point

of order relates to rule 11, clause (b).

Chairman ISSA. OK. Noting your point of order, the chair is prepared to rule. Within the committee rules it is—the signs and other

areas of this room are within the discretion of the chair and are

not appealable. However, the gentleman’s point relative to broadcast will be evaluated for broadcast appropriateness. The sign is

not within the scope of the gentleman’s point of order and thus is

not appealable; however, we will evaluate in consultation with the

ranking member as to broadcast procedures, which this doesn’t affect, but which we certainly want to make sure that we stay within

the point of order that you raised, which is again not within the

scope of that sign. However, we certainly would like to have a review of broadcast procedures to see if there are any concerns by the

chair as to broadcast.

With that, we would begin based on another discretion——

Mr. KUCINICH. Mr. Chairman, did you sustain my point of order

then?

Chairman ISSA. No. Actually since it is within the discretion of

the chair, it is not subject to a point of order, and we would be glad

to give you the line that shows that it is a discretion.

Mr. KUCINICH. I hope you are able to work it out, because, you

know, it seems to me that we have a violation of that rule. Thank

you.

Chairman ISSA. Thank you.

I thank all of you here today for your patience. This is a time

in which the committee has been preempted by the discussion of

funding of the government, and nothing ultimately can be of more

importance to the American people than whether or not our troops

in harm’s way continue to be funded after Friday.

With that, it is the discretion and policy of the chair that we

begin by reading our oversight committee mission statement.

We exist to secure two fundamental principles. First, Americans

have a right to know that the money Washington takes from them

is well spent. And second, Americans deserve an efficient, effective

government that works for them.

Our duty on the Oversight and Government Reform Committee

is to protect these rights. Our solemn responsibility is to hold government accountable to taxpayers, because taxpayers have a right

to know what they get from their government. We will work tirelessly in partnership with citizen watchdogs to deliver the facts to

the American people and bring genuine reform to the Federal bureaucracy. This is the mission of the Government Oversight and

Reform Committee.

Today’s hearing is on the U.S. Postal Service, where publicly

traded—oh, sorry, today’s hearing is on U.S. Post Office and the

new contract. Were the post office a publicly traded company, it

would be among the 30 largest in America, having revenues of $70

billion. Its 30-plus thousand post offices exceeds that of Starbucks

and McDonald’s combined.

Over the years the post office has gone from a growing and thriving industry able to sustain positive cash-flow and effectively positive profits. That is now in our taillights. Today members of the active work force enjoy approximately $11,000 worth of legacy burden

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into their pay, meaning that when the post office looks at its cost

of doing business, it, in fact, has legacy costs that very much resemble General Motors’ before its bankruptcy.

The post office cannot and will not renege on its promises to

those already retired. We cannot and will not renege on the obligation that we have to the American people both under the Constitution and under hundreds of years of tradition of the post office.

Every day, 6 days a week, the American people expect that a letter

will be delivered directly to their box in front of their house, down

the street or off into a chute in their door.

The contract negotiated, not yet ratified, is intended to allow the

continuation of a history of collective bargaining, but compromises

sufficient to allow the post office to emerge from what is at best

break even and, by some estimations, a $51⁄2-plus billion loss, and

to get to a positive position able to meet all of its obligations, both

present and legacy costs, in the foreseeable future. This contract

falls short of that goal. It is very clear the intention is good. The

postmaster has worked diligently to get some concessions. However, we will hear today that we, in fact, under current law may

not be able to negotiate the contract that needs to be negotiated.

Additionally, from this position on the dais, we have deep concerns that some of the provisions in the contract might, in fact, be

the wrong direction, toward less flexibility, less ability to trim the

work force, and less ability to make the kind of investments in the

future that we need to make. Having said that, this committee

stands ready to make legislative changes that may be needed in

order to secure for the post office the kind of abilities to reinvent

itself it needs.

Additionally, this committee in the past on a bipartisan basis has

been willing to delay certain required deposits in order to allow the

post office time to regroup. At the same time, the hundreds of thousands of letter carriers and postal workers deserve to—a level of

certainty that allows them to plan their future, a future in which

the post office is able to deliver efficiently a product in a reasonable

cost and, in fact, meet its obligations. To that extent we intend to

hear from all the participants that we can over a period of time.

Today we have four, but I assure you, both at the full committee

and the subcommittee, we will be hearing many, many, many

more.

And with that, I recognize the ranking member for his opening

statement.

Mr. CUMMINGS. I want to thank the chairman for yielding and

for this hearing.

Ladies and gentlemen the U.S. Postal Service is the Nation’s premier mail delivery service, providing universal service to the American people at fair and reasonable rates. Last year the Postal Service delivered nearly 40 percent of the world’s mail, serving 150 million U.S. residences, businesses and post office boxes.

Although the Postal Service generated more than $67 billion in

revenue last year, it faced serious financial challenges recently.

Since 2007, its revenues have declined because of reductions in

mail volume, increasing energy prices and the recent downturn in

the U.S. economy. The Postal Service reported losses of $5.1 billion

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in 2007, $2.8 billion in 2008, $3.8 billion in 2009 and $81⁄2 billion

in 2010.

I’m encouraged that the Postal Service has taken significant and

serious steps to address these challenges. Last year the Postal

Service issued a new 10-year strategic business plan that improves

productivity, cuts costs in operations, uses more cost-effective retail

channels, and consolidates administrative functions. With new

leadership in place, we are beginning to witness emergence of a

smaller, smarter and more nimble organization that is reinventing

itself to become more competitive in an evolving marketplace.

With this in mind, there are some key points I would like to emphasize. First, the Postal Service pays salaries that are comparable

to the private sector. A recent review found that the Postal Service

letter carriers received a standing—starting salary that was slightly more than FedEx carriers and slightly less than UPS drivers,

both on an initial per-hour basis and after several years of service.

I might note that behind me is a chart that says that 80 percent

of the Postal Service money goes into employees, and it is interesting that this very committee, Mr. Chairman, 87 percent of our

money goes for personnel expenses.

Second, the Postal Service has been aggressively reducing its

work force. The current work force is the smallest in 20 years, employing nearly 100,000 field workers in 2008. Since 2000, the Postal Service has reduced its work force by nearly 27 percent. Let me

say that again, 27 percent. And it plans to continue reductions

through attrition and by extending its current hiring freeze.

Third, the Postal Service is actively examining additional proposals to further reduce costs. For example, GAO recently recommended a host of cost-cutting measures, including a legislative

proposal to modify the Postal Service’s mandated requirement to

prefund retiree health benefits. Currently the Postal Service is the

only Federal entity required to prefund retiree health benefits, and

these costs are expected to average, ladies and gentlemen, $51⁄2 billion annually through fiscal year 2016.

Mr. Chairman, as we discuss these proposals today, I would like

to offer a note of caution. More than 200,000 members of the American Postal Workers Union are in the midst of voting on a tentative

labor agreement concluded with the Postal Service on March 14,

2011. This agreement would institute a 2-year freeze, a 2-year

freeze on wages and cost-of-living adjustments, and it is projected

to save approximately $1.7 billion. It would allow the Postal Service to reduce the starting salary of postal clerks even further, from

$40,800 to $35,300, and it would implement one of the recommendations made by GAO by allowing greater use of noncareer

and part-time employees.

While it is appropriate for this committee to conduct oversight of

the Postal Service, we must be very, very sensitive to criticism that

we are using in today’s hearing to improperly shape the outcome

of the impending vote. Both management and the union have negotiated in good faith, and we should allow workers to consider this

tentative agreement without undue congressional intervention.

Finally, Mr. Chairman, I would like to thank all the postal employees for their dedication and for their hard work. For the sixth

consecutive year, the Postal Service, above all other government

5

agencies, continues to be named as the most trusted and reliable

government agency by the American people. That’s a hell of a compliment.

The Postal Service is also one of the largest employers of veterans in our country, with approximately 22 percent, or about

114,000 employees, veterans, having previously served in the U.S.

Armed Forces. Moreover, approximately 40,000 of these employees

are disabled veterans.

I feel strongly that our committee should focus not only on stemming recent losses at the Postal Service, but on pursuing options

to create a healthy and profitable Postal Service for the future. And

a key component of this new organization must be a reasonable

and livable wage for these devoted and trustworthy public servants.

Once again, I say to every single member of the post office community, we thank you for what you do every day, rain or shine, delivering our mail, dogs biting you, the rain, sleet, hail. We thank

you over and over again, and may God bless you.

And with that I yield back.

Chairman ISSA. I thank the ranking member.

By previous agreement we will now recognize the ranking chairman—the ranking subcommittee—the subcommittee chairman and

the subcommittee ranking member.

Mr. Ross, you’re recognized for 5 minutes.

Mr. ROSS. Thank you, Mr. Chairman. Again, thank you for this

hearing.

Today the committee will hear from the Postmaster General and

two of the Presidentially appointed Board of Governors, who will

attempt to lay out their vision for a substantial postal work—substantive postal work force and describe how the APWU contract fits

into that vision. This will be the first time in a decade that multiple USPS governors will appear together at a congressional hearing.

We know that the Postal Service is one of the largest organizations and employers out there. It has more than a half million employees, and that exceeds all of U.S. companies except for WalMart. It has a phenomenal marketing and delivery infrastructure,

where it goes to every consumer—or goes to 150 million consumers

every day.

Unfortunately, due to the ongoing digital revolution, the business

model of the Postal Service is fundamentally broken. It is losing

billions of dollars every year and now stands on the brink of insolvency. This is not just a short-term problem, as the Postal Service

projects growing deficits for the foreseeable future. It is incumbent

upon the USPS to develop and implement a new business model as

soon as possible.

I commend Mr. Donahoe for what he was done, his commitment

to implement strategy that will reduce costs by undertaking major

organizational restructuring, reviewing post office closures, and adjusting delivery frequency. I hope we can empower you to do more.

At 80 cents on every dollar, work force costs make up a disproportionate share of Postal Service costs. These costs must be addressed head on as part of any serious reform effort. Among these

costs are a large postal compensation premium that has been estiVerDate 17-JUN-2003 12:09 Sep 22, 2011 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\68048.TXT KATIE PsN: KATIE
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mated at 34 percent. In fact, in a 2001 arbitration decision, a neutral arbitrator, Stephen Goldberg, stated, ‘‘In concluding that there

exists a Postal Service wage premium, I join a long list of arbitrators in prior USPS interest arbitrations who have reached the

same conclusion.’’

Regrettably, the tentative the contract USPS recently announced

with its largest union, which represents over 200,000 employees,

maintains it expands no layoff protections, guarantees wage increases, and ensures that USPS employees continue to pay a lower

portion of health care premiums than do other Federal employees. USPS claims the contract will save them $3.8 billion over its 41⁄2- year life, but I’m skeptical of that. However, as this chart shows,

assuming that all these savings are achieved, it hardly makes a

dent in projected USPS deficits. Given this, it is unclear how this

deal, which would serve as a template for deals with other USPS

unions, will give USPS the ability to immediately reduce work force

costs and maintain solvency.

One of the Board of Governors testifying today is James Miller,

who is a former head of OMB. In contrast to other USPS executives, Miller has expressed disappointment with the APWU contract, and only endorsed it as the best possible under a broken arbitration system. In a paper Mr. Miller concluded—included with

his testimony today, he also outlined options for reforming postal

collective bargaining and noted econometric analysis has found

USPS employees are paid a significant premium relative to their

private-sector counterparts.

I look forward to hearing from Governor Miller and the rest of

the witnesses.

I would like to thank the chairman for this hearing, and I do

yield back.

Chairman ISSA. I thank the chairman.

[The prepared statement of Hon. Dennis A. Ross follows:]

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8

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Chairman ISSA. And with that, we recognize the ranking member

of the subcommittee Mr. Lynch for 5 minutes.

Mr. LYNCH. Thank you, Mr. Chairman.

I want to thank the witnesses for helping the committee with its

work. A little over a month ago, the Subcommittee on the Federal

Workforce, Postal Service, and the District of Columbia held a

hearing on financial condition of the Postal Service, and the news

at the time, as most of you know, was less than encouraging, although it was a bit better than what we saw last fiscal year.

At the conclusion of this year’s first quarter, the Postal Service had a net loss of $329 million compared to a net loss of $297 million for the same period in fiscal year 2010. However, if you exclude the cost of prefunding future retiree health care benefits, as

the ranking member has pointed out a burden that no other agency

or private business in America is required to carry, and you add

the noncash adjustment to the Postal Service’s worker compensation liability, the Postal Service would have actually ended the first

quarter with a net income of $226 million—a gain of $226 million.

Further, over the past couple of years, we’ve witnessed the Postal

Service and its employees work to improve efficiencies and reduce

costs by over $10 billion. Since 2008, the size of the Postal Service

work force has decreased by over 100,000 employees, which is probably why many observers point out that the Postal Service actually

stands as a model for the rest of the Federal Government in terms

of lowering costs and right-sizing its work force and network.

The tentative agreement recently reached between the Postal

Service and the American Postal Workers Union is the latest example of postal management and its employees working together to

ensure the future viability of an entity that serves as a cornerstone

of a trillion-dollar industry and supports over 71⁄2 million privatesector American jobs.

However, let’s be clear, there are certain aspects of the Postal

Service’s compensation and benefits costs that are out of the organization’s control. Specifically I’m referring to the hardwired health

care benefit payment schedule that forces the Postal Service to

prefund future liability at an overly aggressive rate, again a requirement that no other agency or company in America must

shoulder.

On top of its prepayment obligation, the Postal Service is also

subject to Federal employee pension rules and guidelines, which

have resulted in a potential overpayment of both its Civil Service

Retirement System and its Federal Employee Retirement System.

So in answer to the question are postal work force costs sustainable, which is the subject of this committee, the answer, I guess,

is it depends. It depends if we believe in universal service. It depends if we believe in a reliable manner of delivering the mail. It

depends if costs to the consumer will be reasonable. And it depends

on whether or not this country still respects its workers and is willing to treat them with basic dignity. For this reason I, along with

Congressman Cummings and other Democratic members of the

committee, have introduced H.R. 1351, the U.S. Postal Service Pension Obligation Recalculation and Restoration Act of 2011.

H.R. 1351 directs the Office of Personnel Management to update

the actuarial methodology to be used in calculating CSRS retireVerDate 17-JUN-2003 12:09 Sep 22, 2011 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\68048.TXT KATIE PsN: KATIE
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ment benefit liabilities between the U.S. Postal Service and the

Federal Government in accordance with modern actuarial practices

and accounting standards. Any resulting surplus from the recalculation would then be transferred over to the Postal Service Retiree Health Benefit Fund.

Last, H.R. 1351 will require that the Postal Service’s already agreed-upon FERS surplus of nearly $7 billion also will be refunded immediately by applying the following: $51⁄2 billion toward

the Postal Service’s fiscal year 2011 retiree health benefit payment,

$1.2 billion toward the Postal Service upcoming workers’ compensation payment, and any remaining balance toward paying down the

Postal Service debt. Since it is the job of this committee to find

ways to help ensure the Postal Service remains a valued and viable

entity well into the future, I urge all of my colleagues to consider

cosponsoring this fiscally responsible legislation.

With that said, I look forward to a constructive and honest discussion on this important topic. And I thank all of the witnesses

for coming and providing their input in this morning’s hearing.

Thank you. I yield back.

Chairman ISSA. I thank the gentleman.

All Members will have 7 business days to submit opening statements and extraneous material for the record. Without objection, so

ordered.

We now recognize our distinguished panel of witnesses. The honorable Louis J. Giuliano.

Mr. GIULIANO. Giuliano, very good.

Chairman ISSA. I don’t want to mess that one up—is the chairman of the U.S. Postal Service Board of Governors. The honorable

James C. Miller, III, is a member of the Board of Governors of the

U.S. Postal Service. Mr. Patrick Donahoe is the Postmaster General and chief executive officer of the U.S. Postal Service and a frequent visitor. And Mr. Cliff Guffey is president of the American

Postal Workers Union and critical to today’s hearing.

Pursuant to committee rules, all witnesses are required to be

sworn. Would you please rise to take the oath. My script says to

tell you to raise your right hands, but that usually goes without

saying.

[Witnesses sworn.]

Chairman ISSA. Would the record reflect that all witnesses answered in the affirmative?

Please be seated.

Gentlemen, in order to allow time for hopefully everyone on the

dais to ask you a series of questions, we’d ask that your entire

statements be placed in the record. In some cases you may choose

to work off of them, but if you choose to use your 5 minutes for

other material, you’d be well served, because then you’ll have your

cake and submit it, too.

With that, please try to summarize during the yellow light appearing in front of you, and conclude as quickly as you can when

it goes to red.

During the question-and-answer session, because we have a large

gathering today, I will have a fairly quick gavel. What that really

means is if someone is still answering questions until a few seconds

before the end of the time, I may say that you have to give a very

11

short answer, not anything more than a yes or no, or I’ll reply for

the record.

On the other hand, if you are in the process of making an answer, no matter how long, as long as it is necessary, I will allow

you to continue until you’ve completed your answer so that

incentivizes people up here to quit talking in time for you to have

a full and complete answer.

Additionally, if somebody would like to also answer a question

after the time has expired, it will be the general policy to allow one

additional person to comment afterwards. I hope that allows us to

average 6 or 7 minutes on a 5-minute-per-Member basis, which is

about as tight as we can hold it and be fair to both you and the

Members.

So with that, chairman, you’re recognized for 5 minutes.

STATEMENTS OF LOUIS J. GIULIANO, CHAIRMAN, U.S. POSTAL

SERVICE BOARD OF GOVERNORS; JAMES C. MILLER III, GOVERNOR, U.S. POSTAL SERVICE; PATRICK DONAHOE, POSTMASTER GENERAL AND CHIEF EXECUTIVE OFFICER OF THE

U.S. POSTAL SERVICE; AND CLIFF GUFFEY, PRESIDENT,

AMERICAN POSTAL WORKERS UNION, AFL–CIO

STATEMENT OF LOUIS J. GIULIANO

Mr. GIULIANO. Good morning, Mr. Chairman and members of the

committee. As we’ve talked about, my name is Lou Giuliano. I

serve as chairman of the Board of Governors of the Postal Service.

This is my first opportunity to testify before you, and I thank you

for the privilege.

The Board shares the concerns expressed by members of the

committee about the financial losses at the Postal Service. We also

appreciate the fact that some in Congress are concerned about our

labor costs, and in particular the tentative contract that has been

negotiated with the American Postal Workers Union. For these reasons we feel today’s hearing is critically important, and the Board

of Governors applauds your willingness to explore these issues in

depth.

The tentative contract with the APWU is the best that was

achievable under the existing law. Failure to reach a negotiated

agreement places us in binding arbitration, an outcome that, Mr.

Chairman, we believe would not have allowed us to realize most of

the benefits that we did gain in this contract negotiation. This is

especially true as it pertains to flexibility of the work force.

The tentative agreement provides the Postal Service with three

important things: immediate cost control, a flexible work force and

long-term structural change. The Board unanimously supports the

tentative agreement, which would produce a cost savings of $3.8

billion during its life. We believe that both labor and management

have demonstrated their determination to right this ship in these

negotiations.

We also appreciate the fact that we urge the committee to consider other actions that are necessary to protect the financial viability of this important American institution. On the top of this list

is a retiree health care benefit prepayment program. First let me

be clear, we have been and will continue to pay our fair share of

12

health care costs for our employees and retirees. But the $51⁄2 billion of accelerated payments for future retirees, many of which who

have not even been hired, mandated in the 2006 PAEA are an extraordinary burden that no other organization, neither public nor

private, is required to make. They constitute a hidden tax that is

neither fair nor responsible.

We have been repeatedly told that our prepayments for future retiree health care benefits is a scoring issue. During the last 4

years, in 2007 to 2010, we had total net losses of $20 billion. This

would have been a total profit of $1 billion had we not paid in expense $21 billion of retiree health care benefits. Instead of owing

$12 billion today, we would have $9 billion in the bank.

Only Congress can correct this problem, and I believe it’s in everyone’s interest to do so. If action is not taken to address this situation immediately, the Postal Service will default on our payments

on or before September 30th of this year. Despite the overpayment of almost $7 billion, we continue to have to pay $3 billion per year into the FERS system. We are told

that only a change in the law can fix that.

The workers’ compensation regulations that we work under are

cumbersome, unfair and costly. We have liabilities that no other

company that I’m aware of or organization would have. Workmen’s

compensation represents a $12 billion liability for the Postal Service and cost us over $1 billion in cash last year. We ask you to consider the legislation that has been introduced in the Senate to address this issue. It is a governmentwide problem.

We also require action to create a more flexible delivery schedule.

We would prefer not to have to go to a 5-day delivery schedule, but,

when considering the alternatives, we consider the best. It is the

only way and a significant way to help offset the decline of firstclass mail.

Management has demonstrated the ability to drive significant

improvements in its processes and reduce the size of the postal

work force, while improving service levels and adding new delivery

points every year. The tentative labor agreement negotiated with

the APWU is a solid step to reducing labor costs. We are hopeful

that we will achieve further flexibility in our negotiations with our

other three unions. We are eager to work with Congress to effectively resolve these and other major issues. It is my hope by working together we can enable this venerable institution to reshape

itself to meet the future needs of the American public and leave a

legacy about which we can all be proud.

Thank you. I look forward to your questions.

Chairman ISSA. Thank you.

[The prepared statement of Mr. Giuliano follows:]

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Chairman ISSA. Governor Miller.

STATEMENT OF JAMES C. MILLER III

Mr. MILLER. Thank you, Mr. Chairman.

Good morning, Mr. Chairman and members of the committee. I’m

Jim Miller, and I’m responding to your invitation to testify today.

Chairman Giuliano speaks for the Board, he is chairman of the

Board, and to the extent that my—the views I express differ in any

way from those that Governor Giuliano expresses or expressed by

Postmaster General Donahoe, please list those as my own personal

views and don’t—and they shouldn’t be attributed to any other governor or to the Postal Service management.

While I’m on the subject of Board of Governors, I wish to emphasize it works in a very collegial fashion. There are four Democrats

right now and four Republicans appointed by President George W.

Bush and—or President Barack Obama, but we work in a very

nonpartisan way, and we work very, very hard.

Now, thank you for holding this hearing. As Governor Giuliano

outlined and other—and Members of the Congress have outlined,

the U.S. Postal Service is in dire financial shape. Without some

miracle, as Governor Giuliano pointed out, we will default. We will

be insolvent and default on September 30th. We will default on the

debts that we owe the United States at that—the U.S. Government

at that point. And I respectfully submit that only you can avoid

that fate.

I have submitted, as you have mentioned, Mr. Chairman—or Mr.

Ross of—Chairman Ross mentioned that I have submitted a short

statement and an attached paper. Let me just say that what I—

the point I’m making, that paper in my statement, is, as Chairman

Ross said, the current model for the Postal Service is broken, it is

inapplicable. You have a demand that is shrinking. You have the

high-profit mail, first-class mail, shrinking. And there just isn’t the

opportunity to earn those kinds of profits on the high-class mail to

subsidize all of the other things that we have done.

To survive, the Postal Service needs systemic reform. Financial

relief, in my judgment, is not enough. We need systemic reform.

We need freedom to operate as a commercial enterprise.

Now, I realize that there are—some misgivings have been expressed about the latest APWU agreement. My response is that we

did the best we could under existing law. Our current system, from

all the evidence that we have in times that we went to compulsory

arbitration, is that the system is biased in favor of labor and

against management. The unions know this, and we know this.

And so in our decision to accept the best we could get with our negotiations or go to arbitration, we had to keep this in mind. And

so we accepted this agreement as the best deal we could get. I respectfully submit, Congressmen, members of the committee, that if

you want a better deal, you have to change the law.

Mr. Chairman, thank you for inviting me here today, I look forward to responding to your questions.

Chairman ISSA. Thank you, Mr. Miller.

[The prepared statement of Mr. Miller follows:]

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Chairman ISSA. Mr. Donahoe.

STATEMENT OF PATRICK R. DONAHOE

Mr. DONAHOE. Good morning, Mr. Chairman and members of the

committee. It is an honor to be here to today to testify about the

tentative agreement between the Postal Service and the APWU. I

appreciate the invitation to testify about such an important development for the Postal Service.

For the past several years, the Postal Service has been responding to an unprecedented 20 percent decline in mail volume. We

have been extremely aggressive in managing costs throughout this

period. Since 2008, we have reduced 110,000 employees and $11

billion in costs. We recently announced the reduction of an additional 7,500 managerial positions, a 35 percent reduction in that

group since 2008. Our full-time career complement today is 572,000

employees. We will continue to reduce the number of full-time career employees, thereby reducing our legacy costs. By 2020, the

Postal Service work force will be less than 400,000 people. Through

process improvement and personnel reductions, we have taken the

necessary steps to bring costs in line with declining revenue, and

we will continue to do so.

More than 8 months ago, the negotiating team began bargaining

to shape the labor contract for 202,000 career employees. The parties negotiated long and hard and dealt responsibly with tough

issues. We sought, and we were able to achieve, greater work force

flexibility, immediate financial benefit and long-term structural

changes.

One of the most important aspects of the tentative agreement is

that it provides significant work force flexibility. We will be able

to schedule our employees in ways that makes sense for a variable

work flow business and will be able to increase the use of noncareer employees.

I would like to impress upon this committee that neither side

was willing to take the easy way out or simply roll the dice and

leave our respective fates to a third-party arbitrator. We need the

flexibility to properly schedule our work force, and we achieved

that. Interest arbitration is not going to result inflexibility gains of

this magnitude.

This tentative agreement also provides for immediate financial

benefit by freezing wages for the first 2 years, and leads to a wage

savings of $1.8 billion over the term of the agreement.

We negotiated structural changes that result in a two-tier pay

schedule for new employees that is 10.2 percent below existing

schedules. We also will be able to increase the use of noncareer employees from the 5.9 percent today with restrictions to a totally unrestricted roughly 20 percent. These changes provide a benefit of

$1.9 billion. I look forward to negotiating with our other three

unions to gain similar results.

While it is the nature of negotiations that neither side got everything that they want, I will tell you it is the best possible outcome

that we could have achieved given the legal framework of which we

operate. This is a responsible agreement.

America needs a healthy Postal Service and a healthy mailing industry, and although we have seen declines in the use of mail, the

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mail and physical delivery are extremely important and always will

be.

Mr. Chairman, while this morning we are discussing our tentative agreement with the APWU, it is important to recognize that

our labor agreements are but one element in a larger strategy to

return the Postal Service to profitability. Let me assure you I am

doing everything possible to take costs out of this system as quickly

as possible, and I will continue to do so.

Our business model is inflexible; we need reform in the laws that

govern us. We must get beyond the mandates that require us to

prefund retiree health benefits, to overfund our Federal Employee

Retirement System, and to deliver mail 6 days a week. Congress

plays an important role in our future. The Postal Service is reducing costs, and we want to work with Congress to gain the business

model flexibility that we need to best serve our customers.

Let me close by stating the Postal Service has achieved record

service and productivity levels over the past few years, while absorbing significant volume loss. The credit belongs to our employees. I will never forget for one moment that we are able to deliver

for America, and that is due to the commitment and relentless

dedication of our employees.

We are in the process of changing many things about the Postal

Service to better serve the American public. This contract and your

commitment to continued engagement in postal issues will help us

meet their changing needs.

I will be more than happy to answer any of your questions.

Thank you very much.

Chairman ISSA. Thank you.

[The prepared statement of Mr. Donahoe follows:]

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Chairman ISSA. And the Chair would note that you have added

one very good member of your team sitting behind you that we all

recognize as the leader on this issue Mr. Stroman.

Mr. DONAHOE. Yes, and we are pleased to have him. Thank you.

Chairman ISSA. Ron, next time you get up and testify, we’ll get

you sworn in.

Mr. Guffey is recognized for 5 minutes.

STATEMENT OF CLIFF GUFFEY

Mr. GUFFEY. Mr. Chairman and members of the committee, I am

Cliff Guffey, president of the American Postal Workers Union.

Postal workers are very proud of the fact that we provide an essential service to the American people.

We have faced many challenges over the past decade as a result

of the severe economic recession and a decline of first-class mail.

From 2008 to 2010, the postal work force was cut by approximately

110,000 jobs. Thousands of workers represented by the APWU were

reassigned to jobs far from their homes and families. This resulted

in severe hardships for these workers and their families. Despite

all this disruption and all this hardship, postal workers’ productivity has increased, and on-time service to the American public

has remained at excellent levels.

APWU approached the labor negotiations that prompted these

hearings with one primary test in mind: What will be right for the

employees we represent, the Postal Service and American people it

serves. It is a testament to the value of collective bargaining that

the APWU and the Postal Service have reached a tentative agreement that meets this test. It gives the Postal Service an opportunity to return to postal employees work that has been contracted

out, to save money doing it. Under this agreement APWU would

compete aggressively to return work to bargaining unit employees,

work that is being performed at a greater cost by contractors and

in some instances by higher-paid, nonbargaining unit employees.

The tentative agreement also protects the livelihoods of the people APWU represents, people who have dedicated their working

lives to provide postal services to the public. Postal employment

has been and continues to be an important source of middle-class

employment opportunities. The Postal Service employs more than

129,000 veterans in its career work force. In 2010, these veterans

were 22 percent of the postal career work force; 49,000 of these veterans are disabled veterans, and 13,000 of them, including me, are

rated as 30 percent or more disabled.

In 2010, women were approximately 40 percent of our work force,

and minorities were approximately 40 percent of the work force. I

am proud of the fact that this tentative agreement protects the

livelihoods of these and all career postal workers.

In review of these negotiations, the postal history will show that

since the passage of the Postal Reorganization Act of 1970, postal

wages have closely tracked inflation. Meanwhile, Postal Service

productivity, including labor productivity, has consistently increased. As a result, postal ratepayers have benefited from excellent service at low postage rates. Since 1970, postage rates have

not gone up any faster than the prices in the economy generally.

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If this committee wants to help the trillion-dollar-per-year mailing industry, it should relieve the Postal Service of the burden of

prefunding retiree health benefits and correct the overfunding of

CRSR and FERS. But for the unique and unreasonable and unnecessary requirement to prefund the retiree health benefits, the Postal Service would have had a substantial financial surplus over the

past 4 years instead of a substantial deficit.

No one could expect postal employees or postal ratepayers to

shoulder the costs of paying billions of dollars into a Federal trust

fund unnecessarily. That is a problem that requires a legislative solution.

I would like to add the Congress is again holding hearings on the

symptoms of the problem; holding hearings on Social Security,

which is a symptom of the problem. Holding hearings on unemployed veterans is a symptom of the problem. The problem in this

country is the economy. The economy. The economy that sets up

trillions and trillions of dollars to be shipped overseas, while in

America, on our side of the ledger, we have more unemployment,

underemployment, lower wages and people losing their homes to

mortgages. We have problems—our national deficit, trillions of dollars for people overseas and trillions of dollars of deficit here. You

correct the problems in the economy, and the Postal Service will

take care of itself.

Thank you.

Chairman ISSA. I thank the gentleman.

[The prepared statement of Mr. Guffey follows:]

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Chairman ISSA. I now recognize myself for 5 minutes for a round

of questioning.

Mr. Giuliano, you said several times things along the line in your

opening statement of no company would have to bear this. Isn’t it

true that a company would have to, under law, fully fund its liabilities in real cash transfers for a defined benefits program? Isn’t the

pension law one in which you must pay in advance every day for

what you eventually will pay out for—in retirement and in health

care, if that’s part of your benefits plan?

Mr. GIULIANO. The big different in this case, Congressman, is

that we—no company that I’m aware of would be required to pay

for future retiree health care.

Chairman ISSA. OK. Well, maybe we will go to Governor Miller.

Isn’t it true that every company that has a defined benefit plan

does have to pay for future retirees? Not future employees, which

you said, which we’ll look into. But General Motors I can recall taking a, I think it was, $51⁄2 billion hit one time by a change in the

accounting rules that caused them to have to recognize more into

the defined benefits plan, and ultimately by the time they went

into bankruptcy, that was their greatest cost differential between

themselves and the Japanese was having to pay into the defined

benefit plans. Would you like to comment on that?

Mr. MILLER. Yes, Mr. Chairman, to my knowledge your characterization is accurate.

Chairman ISSA. So maybe the question here today for this committee, which also oversees FERS and so on, is shouldn’t every government entity have to fully recognize at least on paper the legacy

costs they are creating today with employees who will retire in the

future? Is there anyone that disagrees with at least accounting for

that? I understand your concern is paying for it, but does anyone

disagree with the accounting of knowing what the future costs were

going to be? Let me ask——

Mr. MILLER. Mr. Chairman, I think you make an important

point. We are a commercial enterprise, so we have a bottom line.

Most government agencies are not, so it would be an accounting

entry. But to have Congress and everyone else recognize that government agencies, other government agencies, have these liabilities

would be a good idea.

Chairman ISSA. And I think that’s something this committee

needs to look at broadly is the truth in accounting of what our legacy costs would be.

Mr. Donahoe.

Mr. DONAHOE. If I could comment, too, Mr. Chairman. I think

there are a couple of things we have to look at here. No. 1, when

you look at the entire retirement liability that the Postal Service

has, we feel that we are overfunded into the Civil Service Retirement Fund. I know Mr. Lynch has a bill coming up to ask the GAO

and the White House to go back and look at those accounts. Somewhere between $50 and $75 billion, from our estimates——

Chairman ISSA. Mr. Donahoe, the question for you, since the administration, I understand, has already rejected the argument,

you’re asking them to go back and relook at something they’ve already rejected?

Mr. DONAHOE. Yes, sir. Yes, sir.

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Chairman ISSA. OK. I think it was Einstein that said that if you

keep doing the same thing over and over again expecting a different result, that’s the definition of insanity.

Let me take my limited time and go on with just a couple more

things.

Mr. GIULIANO. Mr. Chairman——

Chairman ISSA. No, no, please. There will be plenty of time for

followups.

Mr. Donahoe, you said, and Mr. Miller said, and I think Mr.

Giuliano said that this was the best you could do under existing

law. Isn’t it true that in binding arbitration, two provisions could

not have happened: the provision for insourcing janitorial services

that Mr. Guffey referred to as outsourced at a greater cost—and I

object to it being a greater cost. If it is, then we need to address

that. But that could never have been achieved except through this

agreement, the insourcing. That was not, in fact, a part of the collective bargaining. It became part because it was put on the table.

Also in the case of a change from a statutory approved category

of people that were not eligible to be under collective bargaining to

this new category, who most assuredly will become eligible under

collective bargaining. As I understand it, the provision that you negotiated creates an absolute requirement: If you don’t join the

union, you lose out on $3,000 of free benefits. So isn’t it effectively

that this new category of workers that was estimated be 35,000 at

the end of 1 year immediately costs us at least 3,000 more before

you do a pay raise, so that by year 3 our estimation is this group

will cost you more, not less? Mr. Donahoe, do you want to comment

on that?

Mr. DONAHOE. Yes. A couple things. First of all, we set out in

this agreement to achieve three basic——

Chairman ISSA. I appreciate all of that, and you’ll get plenty of

time on that. But, one, isn’t it true those two times could not have

been done by mandatory arbitration; they couldn’t have ordered

those two changes?

Mr. DONAHOE. In mandatory arbitration it is roll the dice. We

maintain——

Chairman ISSA. OK. Mr. Miller, would you disagree with that?

In arbitration could those have been on the table? They weren’t

part of the collective bargaining agreement. Could they have become part, essentially mandating new union employees and a new

category?

Mr. MILLER. Mr. Chairman, I’m not an attorney, but my understanding is that if a provision is part of the package that the union

was advancing, the arbitrator could take these items and include

it in the final determination.

Chairman ISSA. Historically arbitration is about the pay and benefit of those covered, not those not covered. So the likelihood, at

least from the advice I’m getting, is that there were two things

which increased the number of Mr. Guffey’s union workers, and

that is that you’re substantially insourcing 4,000 people who previously were just contract employees to clean and do other janitorial work, and this category that now will most assuredly be

added to the union and undoubtedly be in the next bargaining contract asking to be treated fairly and equally with their brothers.

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Mr. Donahoe, if you could answer briefly?

Mr. DONAHOE. First off, it’s important to note that we maintained all outsourcing provisions in the contract going forward.

What we looked at in the case of the custodial employees was the

financial benefit to bring the work back into the Postal Service

with newly negotiated, substantially lower wage rates. We did that

with everything we looked at from an insourcing standpoint. We

compared costs, like we do with everything. We always keep our

eye on the bottom line.

Chairman ISSA. My time has expired. I want to be thoughtful of

that.

Mr. Cummings.

Mr. CUMMINGS. Thank you very much.

You know, it is very interesting that when you look at the fact

that since 2008 there have been a reduction of 100,000 employees,

that’s a lot of people, that’s a lot of families.

And as I listen to what has been going on this morning, you

know, sometimes you can begin to cut to the bone. At some point

you begin to cut through the bone.

Last year, the Government Accountability Office released a detailed report on options and strategies that could potentially improve the Postal Service’s future financial viability. A significant

portion of this study focused on reducing the Postal Service’s compensation and benefits cost. For example, the GAO study recommended creating a two-tiered system that would pay new hires

lower wages, while grandfathering current employees under the existing pay system.

Mr. Donahoe, how does the tentative labor agreement reached

between the Postal Service and APWU carry out that recommendation?

Mr. DONAHOE. Thank you, Mr. Cummings.

We have two things that we have been able to reach agreement

with the APWU in terms of flexibility and structural change. The

first is we have been able to negotiate a percentage of each of the

crafts represented by the APWU. Twenty percent of the clerk craft,

which is the largest portion of the APWU, will now be noncareer

flexible employees. We have 10 percent in the motor vehicle and 10

percent maintenance. So that is one large structural change, as you

have noted, with the GAO study.

The second thing we have been able to do is negotiate an entry

wage rate of 10.2 percent less that never changes. It is a two-tier

wage rate going on from now until a person retires from the Postal

Service, again, giving us an opportunity for financial relief and

flexibility going forward.

Mr. CUMMINGS. So you mean that new person coming in will

make 10 percent going through?

Mr. DONAHOE. Forever.

Mr. CUMMINGS. Forever.

Mr. DONAHOE. Forever.

Mr. CUMMINGS. And what impact will that have on the postal

system? I am just curious. With the last piece there.

Mr. DONAHOE. The last piece, what we were concerned about was

long-term structural change. In the short term, in the next 3 or 4

years, we will continue to hire very few career employees. But

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when you get out to 2016 through 2020 and out beyond that, as

you hire career employees, you will be able to save that differential.

Mr. CUMMINGS. GAO also recommended greater use of noncareer

or part-time employees going forward in order to reduce the Postal

Service’s compensation-related expenses. The Postal Service’s 10-

year strategic plan made similar recommendations. What steps has

the postal system taken to accomplish this goal? And I remind you

that this committee itself, this committee, 87 percent of our money

goes to employees. You are at 80 percent. Are you trying to reduce

that further?

Mr. DONAHOE. What we do, being the labor-intensive organization we are, we constantly look to shrink the pie. So you will always be higher from a percentage standpoint. The idea is you are

trying to shrink the total cost. And we have accomplished that

through a number of ways: the productivity improvements that

people have noted, head count reductions, as well as this negotiation.

Going forward, from a flexibility perspective, I mentioned the

percentages before that we have been able to work out with the

APWU. The other big change is the fact that within our regular

employment structure, we are working with the APWU to provide

flexible assignments. Currently you have a number of people that

will work 5 days a week, 8 hours a day on the same schedule. Our

needs change daily. We have been able to work out an agreement

with the APWU that provides flexibility, work hours anywhere between 30 to 48 a week, with changing hours daily. That meets our

customers’ needs.

Mr. CUMMINGS. President Guffey, if ratified, the tentative contract you negotiated will bring the new APWU rehires in at a much

lower pay scale. What does this new pay system say about the

Postal Service and the APWU’s commitment to reducing compensation? Because we keep hearing people banging on public employees,

and it seems to me that this is going a long way. People are literally making less money. I know there has been—there is a freeze,

is that right, Mr. Donahoe, for 2 years?

Mr. DONAHOE. Yes, sir.

Mr. CUMMINGS. So I am just wondering. You are representing

your union. I just want to know how—you know, what does that

say about your union?

Mr. GUFFEY. First, I would like to correct one thing Mr. Issa

said. He said that they would have to join the union to get this

health insurance. Our health insurance plan that we are providing

to the noncareer people is a nonprofit plan that is low-cost, and no

one will have to join the APWU to get the benefit of that plan. In

other words, the parties decided that was—I insisted that these

new people would have to have insurance, and so we would provide

it in the lowest cost. But we cannot require these employees to join

the union to get that insurance.

Having—you know, as part of your followup answer, as a labor

organization we have no desire to destroy the company that we

work for. We entered into these negotiations knowing that the

Postal Service was under dire financial straits by the prefunding

requirements, and that we would have to work our way through it.

And in doing so, we wanted to ensure the future.

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Now, some of the other corrections are that—we discussed inflexibility. The old work rules that were five within eight, that may

not allow the Postal Service to keep windows open, say, to 6, 7

o’clock, and, by doing so, turning away customers. So we allowed

them to do this without overtime. A lot of other issues.

Mr. CUMMINGS. I see my time has expired. It is called shared

sacrificed. Thank you.

Chairman ISSA. I thank the gentleman.

We now recognize the gentleman from Florida Mr. Mack for 5

minutes.

Mr. MACK. Thank you, Mr. Chairman. And I, for one, like the

placement of your signs and hope that Members on the other side,

if you don’t like the signs, then maybe help us craft solutions to

changing the signs.

Last month, Mr. Donahoe, when you were here testifying, you acknowledged labor costs as a large contributing factor to the Postal

Service budget problems, and that your No. 1 priority was to address these costs; is that correct?

Mr. DONAHOE. Yes, sir.

Mr. MACK. So since your last visit, what steps have you taken

to reduce the amount, 80 cents on every dollar, that the USPS

spends on labor costs?

Mr. DONAHOE. As we have been talking here today, Congressman, one of the things that we have focused on going forward is

our overall comprehensive plan which addresses labor costs, among

many other things. We have worked through a very good agreement with the APWU to reduce labor costs in a 41⁄2 year period at a minimum of $3.8 billion. Since the last time——

Mr. MACK. Let me ask you a question, and I will let you continue

on it. So this is the best deal that you could have struck under current law?

Mr. DONAHOE. Yes, sir.

Mr. MACK. But now you are saying that it is a good deal. So regardless of the current law, you think this is a good deal?

Mr. DONAHOE. This is the best deal that we could construct

under the law. We think it allows the Postal Service to continue

to reduce labor costs, while giving us the opportunity to increase

flexibility. That was our goal going into these negotiations.

Mr. MACK. If the law was changed, would you consider a better

deal?

Mr. DONAHOE. I will tell you, if you would change the law, I

would love to see you address retiree health benefits, my FERS

overpayments, and our delivery flexibility. That is where the big

money is.

Mr. MACK. In your negotiations with the American Postal Workers Union, is it true that you extended your policy not to lay off

workers with 6 years of experience, and also guarantee that there

wouldn’t be any layoffs for an additional 7,000 workers?

Mr. DONAHOE. Yes, we did. And I will tell you why we did that.

Mr. MACK. That was my next question.

Mr. DONAHOE. I will tell you why we did that. Our goal in this

negotiation was work force flexibility, immediate cost reduction,

and structural change. We know that you don’t get that through an

arbitrated decision. So we originally approached the APWU at the

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very beginning and talked about the layoff clause. And I will leave

Mr. Guffey to provide his end of the story, but we got the immediate feedback that was a nonstarter. So our feeling was we wanted

to go ahead and get a negotiated contract that achieved our goals.

The other thing you have to keep in mind, when you throw

things into arbitration, you lose time. It could have taken us a year

and a half. And the money that we were able to negotiate out of

these labor costs would have been delayed perhaps a year and a

half, and we would have never got the same kind of a deal that

we got through negotiation.

Mr. MACK. So I heard the panel, as all of you in your testimony,

continue to say the best deal you could get under current law. Have

you asked the committee for changes to current law so you can

strike a better deal with the unions?

Mr. DONAHOE. There have been recommendations made in the

past——

Mr. MACK. In writing to the committee?

Mr. DONAHOE. No, sir, we have not.

Mr. MACK. Well, if you are going to come here before the committee and say, we need changes to the law so we can strike a better deal, then maybe you ought to submit what those are to the

committee in writing so we can have a discussion about what those

changes are.

Mr. DONAHOE. We will submit those, along with the other recommendations to relieve the Postal Service of the mandates that

are really causing this problem.

Mr. MACK. So if you are going to default September 30th, why

is it taking so long to ask for changes to the law so you can strike

a better deal?

Mr. DONAHOE. We have been asking for changes to the law for

the past few years, Congressman, and will continue.

Mr. MACK. But never in writing to the committee.

Mr. DONAHOE. We will followup in writing to you.

Mr. MACK. Not to me. To the entire committee.

Mr. DONAHOE. To the chairman. Thank you.

Mr. MACK. Yes. That would be helpful.

So the last question is, I guess—so I just got a nice little article

on my iPhone here talking about a post office that is going to be

closed on Vanderbilt Beach Road in my district. So wouldn’t it be

better that negotiations with the union would take place in such

a way that people wouldn’t lose their jobs, but we were able to get

some of the costs under control?

Mr. DONAHOE. I would like to answer that question. Here is what

we are looking at from a Postal Service access and convenience

standpoint, and that is what we are focusing on. There are many

different ways that you could provide access to the American public. What we have to do as part of our financial responsibility as

we have laid out in our comprehensive plan is to look at how much

money we spend to provide that access. When you read about closing a post office, what we are proposing to do is take a good look

at each community where we don’t have enough revenue coming in

and perhaps provide that service in another way.

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Mr. MACK. I understand that. But for the unions themselves, it

sounds like the heads of the union would rather see people lose

their jobs than to renegotiate contracts.

Mr. DONAHOE. Part of the NCE, the lower-cost employee that we

have talked about, would help us to maintain post office operations.

What we are looking at is much smaller places where you don’t

even have any union employees, where you are looking at trading

off, say, a postmaster for a contract at a local store where we can

provide better access at a lower cost. Thank you.

Chairman ISSA. The gentleman’s time has expired.

With that, we recognize the former chairman of the full committee Mr. Towns for 5 minutes.

Mr. TOWNS. Thank you very much, Mr. Chairman. And let me

thank you for having this hearing.

And also, let me just sort of commend the Postal Service for the

outstanding job that they have done under these adverse conditions. And let me tell you that they are definitely adverse. No

doubt about it. And to think about the fact that you have already

eliminated 100,000 positions since 2008, I mean, that within itself.

Let me begin by asking, I guess, you, Mr. Miller, in your written

testimony, you mentioned that the Postal Service has taken steps

to strengthen its revenue base by offering more services and acquiring more clients. You also mentioned providing services in response to customers and entering into partnerships with other

service providers.

I am very interested in the concept of offering different services

other than mail delivery as a means of creating a strong revenue

source. Like every other large private entity, the Postal Service

needs to adapt to the changing times in order to remain financially

viable in the future. We know that the Postal Service already takes

passport applications. I would like to see this expanded to other

things. Could you give us some examples of additional services that

can be provided that would result in a reliable income stream for

the Postal Service?

Mr. MILLER. Mr. Chairman, thank you for raising that. When I

wrote that, I had in mind the mailing services, the new mailing

services that we have initiated. For example, the box that you see

advertised on television a lot; it doesn’t matter how much it

weighs, if it fits, it ships. Things of this—click and ship. Things of

this nature.

I think what you are talking about are products that are ancillary to our business. I think, my own personal view, as long as we

have the monopoly on mail, I would be careful about going beyond

that. And as an economic proposition, I would be careful about

going too far.

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For example, there have been people that suggest that we get in

the banking business. I think that is—that would be disaster. But

on the other hand, some things that you were hinting on, like the

passports and thinking of this nature, I think there are other opportunities that we have that perhaps do not fit within the current

legislative definition of permissible services that might be considered. And I would have to discuss that with my colleagues, but I

think that there might be opportunity for us to consider that and

get back to you in writing, Mr. Chairman.

[The prepared statement of Hon. Edolphus Towns follows:]

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53

54

Mr. TOWNS. And let me just say this, too, in that hearings like

this is to sort of get information, get ideas, and to see how we can

work together. It is not about whether you sent us a letter already

or not. It is about what you need to send to be able to move forward from this point on. So I don’t want to get mixed up here. I

want to make certain that we stay focused on what we really need

to focus on. So on that point, Mr. Donahoe, what is it that we can

do here on this side that you think that needs to be done in order

to help you to become viable?

Mr. DONAHOE. The key issue is to address the congressional

mandates around the retiree health benefits, to address the overpayment of FERS, and to allow us the delivery flexibility. Those

are the key things for us going forward.

I will say this. We have been very responsible stewards of this

organization. We take very seriously our requirements for the

American public for service and our requirements for the American

public to provide efficient service, just what the chairman said, one

of the visions of your committee. So we take that seriously. What

we need is your help on these big issues that are beyond our control.

We have excellent employees, we have excellent working relationships with our four unions and our three management associations. We know how to get things done. The things that we can’t

control are the mandates, the $51⁄2 billion in the retiree health benefits. Get those things out of the way, and you will never see us

again. All you will hear about is accolades about how good of an

organization that the U.S. Postal Service is providing service to the

American public.

Mr. TOWNS. Well, let me say this. I think you are serious about

it because you hired one of our best in terms of Ron Stroman. So

I think you are committed.

On that note, Mr. Chairman, I yield back, unless there is somebody that disagrees with the fact that there should be additional

service, or you should not think about additional services. Is there

anybody that disagrees with that? I would like for you to respond

very quickly.

Mr. DONAHOE. I think that, to the chairman’s point, he mentioned all the facilities we have out there. There are plenty of opportunities in our lobbies to provide services for other people to

come in. We are exploring those. There is definitely opportunities.

We know there is still is a ton of value in the mail, and I guarantee

you we’ll work on that.

Mr. TOWNS. Thank you.

Chairman ISSA. Thank you.

We now recognize the chairman of the Transportation Committee

and a long-time member of this committee. No, you are too young

to be senior. Mr. Mica for 5 minutes.

Mr. MICA. That is just using a lot of Just for Men.

I don’t know if our witnesses know this, but the group that has

been feeding dinosaurs from the House of Representatives is no

longer here. And, unfortunately, it looks like the post office is

somewhat becoming a dinosaur. It’s not your fault. Everybody has

one of these, and you get most of your messages. I didn’t send any

letters to my nieces and nephews today; I sent them an e-mail.

55

I notice, from what I read and heard when I was sitting in the

back, you have 572,000 employees, and it should be down to

400,000 just to deal with the kind of traffic that you have now; is

that correct?

Mr. DONAHOE. Yes, sir.

Mr. MICA. And I didn’t see a specific plan on how you get rid of

172,000. I saw the average cost is 89,845 per employee today. You

did mention how you get rid of some of the cost for the 572, but

that still doesn’t help them out. The other thing, you’re $6 billion in the hole this time, right?

Mr. DONAHOE. Yes, sir.

Mr. MICA. And I understand, I asked, well, how are you financing that? And they said you get sort of a line of credit with Treasury for $15 billion. That runs out in September. What is going to

happen in September when we stop feeding the dinosaur?

Mr. MILLER. We don’t pay the Federal Government all that it is

due.

Mr. MICA. So just default?

Mr. MILLER. Yes.

Mr. DONAHOE. We will deliver the mail.

Mr. MICA. Speaking of delivering the mail, Saturday and Tuesday, is that all off the——

Mr. DONAHOE. No. We are still very interested in working with

Congress.

Mr. MICA. Which is it going to be?

Mr. DONAHOE. It would be Saturday. That is the best day.

Mr. MICA. But we have been talking about these things. We talk

about them. Some years ago I had the opportunity—actually, I

went down to the post office. I think—I forget who the Postmaster

General was. I mean, we just about had to buy him Depends at the

time because he had never seen a Member of Congress in his office.

But I was stunned by the vacant desks. And they took me around

and showed me how many people they got rid of.

Usually, if you look at some of the overhead—now, you have a

lot of postal people on the ground, and people do have to do a good

job, and they do good job in delivering, but sometimes you can get

rid of the administrative overhead. Do you have a specific plan for

doing away with that?

Mr. DONAHOE. Yes, sir.

Mr. MICA. How many have you got in the administrative positions?

Mr. DONAHOE. We have been very focused on that. We have administratively about 15,000 people, and that includes everybody

from operations to payroll.

Mr. MICA. How many have we got in Washington, DC?

Mr. DONAHOE. About 1,100. We just are going through a process

of reduction here right now, sir.

Mr. MICA. So I can come down and see a lot more empty desks?

Mr. DONAHOE. I will tell you this. You will see empty buildings.

In the past 2 years, we have taken four buildings, eliminated

leases, moved them into the building we are in now, and we are

downsizing again.

Mr. MICA. That is the big picture. On the local level—and you

hear from Members. I have tried not to contact you on some conVerDate 17-JUN-2003 12:09 Sep 22, 2011 Jkt 000000 PO 00000 Frm 00059 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\68048.TXT KATIE PsN: KATIE
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solidations or take a position, because you have to do your thing.

And it’s tough. Hundreds of people show up at these things. But

I don’t know if you could sit down with Members or others that are

close to the subject. I can give you examples.

I have been trying to—I’ve got a post office in St. Augustine,

Florida. I have been trying for 8 years to get you out of a congested

corridor where you can’t move traffic, where it is expensive to operate. Just the traffic backup in trying to get in and out just doesn’t

make sense. But I don’t have time. I used to be a real estate developer. I could put a deal together in no time.

But you ought to have some people—my observation is the post

office doesn’t initiate anything on the local level to bring about

cost-effective changes. I could put you in a retail center. I have tons

of vacant space. But somebody has to have the brains to put this

together. I have tried peripherally, and I don’t have time to cut

these deals. We did one in DeLand, Florida, years ago, and that

was a huge success. It vitalized the whole center and that side of

town.

I have Daytona Beach. Here is another example. I have gone

from 1,100 bureaucrats in Washington to 15,000 down to smaller

projects. Daytona Beach, you have a post office that is a beautiful

site in downtown and has had the second floor vacant. I tried to

get some folks in there, talked to people about doing something

with it, and it sits vacant. So we produced in our committee a report called ‘‘The Federal Government Must Stop Sitting on Its Assets.’’ I don’t think we had a chapter in there for you, but maybe

we could write one.

Mr. DONAHOE. I would be more than happy to come over and sit

down and walk through all the buildings that we have sold, vacated, land deals we have. We have a couple great ones going on.

Mr. Lynch up in Boston, we are talking with some opportunities

right now. We have a lot of those things done.

Mr. MICA. I applaud you.

Mr. DONAHOE. And I am open to any other suggestions you have.

Mr. MICA. No, I applaud you. And the big ones, fine. We need

a better handle of getting rid of excess property, excess space, excess employees.

And the last thing would be buyouts. What is the status of

buyouts?

Mr. DONAHOE. We do have an option on the table for some of the

people that we are working through right now with the downsizing.

And the buyout provision would be $20,000 that would be paid over

a 2-year period. So that spreads our cash out.

Mr. MICA. For how many?

Mr. DONAHOE. We have the offer up to 8,000 people. We don’t

think anywhere near that will take it.

Mr. MICA. So you are about 160,000 short. Thank you.

Chairman ISSA. I thank the gentleman. And I might note that

you probably haven’t heard in your committee about their sales, because they get to keep the money, unique to the post office, that

they sell and internally use those dollars.

With that, we recognize the distinguished gentleman from the

metropolis of Cleveland Mr. Kucinich.

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

57

In listening to this discussion, what strikes me is that I haven’t

heard the people in charge of managing the post office about the

moral obligation that you have to those who delivered the mail for

20, 30 years or more with respect to their full health benefits and

their full retirement benefits. And people are retired, and they put

all that time in. For the life of me, I don’t understand why they

should have to go begging to the government to assure that all the

things that they worked a lifetime for are going to be there. I keep

hearing this theme.

I had steel workers in my office the other day tell me now they

have to deal with the Pension Benefit Guaranty Corporation; they

are going to be lucky if they get 40 percent of their retirement benefits.

See, what is happening here is—by the way, Mr. Donahoe, is it

your goal to see the Postal Service privatized eventually?

Mr. DONAHOE. No, that is not my goal. My goal is to provide

excellent——

Mr. KUCINICH. Let me ask you some questions. Have you met

with people concerning broader privatization of Postal Service functions? Have you had any meetings about that?

Mr. DONAHOE. I have not.

Mr. KUCINICH. Have you or any of the governors? Mr. Giuliano.

Mr. GIULIANO. Congressman, as part of—approximately 2 years

ago, when we started looking at all the alternatives that we put

into our comprehensive plan, we looked at all the alternatives. One

of those was privatization. Another part of it was other types of

products. The conclusion——

Mr. KUCINICH. That’s all I wanted. I just wanted to see if somebody had some meetings you talked about privatization, because I

think what is going on here is that there’s actually an attack on

this very idea of universal service, because once you privatize, then

you can legitimatize knocking down wages and benefits, cutting

services.

Look, it’s already started. I don’t know about any of you, but in

my neighborhood you see post boxes taken out of neighborhoods,

then you see branches closed. I have seen private delivery service

boxes outside of branches. What is that about?

You’re operating with 100,000 less employees, so jobs are cut,

wages aren’t moving up. And the burden here in these discussions

seems to keep focusing on the workers. I like that Mr. Towns

raised the question about trying to find ways of bringing some income in to assure the Postal Service. But the tone of these hearings

characterizing this service as something that is so much in the past

that it is a dinosaur really belies the fact that millions of Americans rely on this as a service. You might be able to communicate

by e-mail, but not everyone does.

We understand there is a huge social divide in America in terms

of people who use the Internet to communicate and those who do

not, and we want everyone working together. We have to do that.

I am glad to see you are negotiating. And from what I see, it

sounds like it’s in good faith, and you are trying to solve within the

context of the system.

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But, Mr. Guffey, are you concerned that these kind of talks,

these kind of hearings could be trying to set the stage for privatization, broader privatization, of the Postal Service?

Mr. GUFFEY. I believe it is leading to an attack on the labor

movement as a whole, just as the workers in Wisconsin, the firemen, the teachers, and the police, and the State troopers are being

attacked in those States.

Mr. KUCINICH. What about the Postal Service?

Mr. GUFFEY. The same with the Postal Service. I believe that’s

what’s happening.

I’d like to say there is great opportunity. You know, the post office is where the flag flies in every little community across this

country. Opportunities for putting in other government services

into the post office is there. Doing the TSA work, the verification

work that TSA could do could be done in the local post offices.

Mr. KUCINICH. Could you give this committee, through the chair,

of course, the ideas that you presented that can expand the revenue of the Postal Service? Could you do that?

Mr. GUFFEY. Sure.

Mr. KUCINICH. And I just want to add this in my 15 seconds that

are left. You’re right about this broad attack on workers, but it’s

also an attack in the public sphere. If you look at the Michigan bill,

it sets the stage for broad privatization of everything that’s owned

by the public. People pay for it once, and they’ll end up paying for

it again through privatization. And inevitably cost of the service

goes up, quality of the service goes down.

I thank you. I yield back my time.

Mr. WALBERG. The gentleman’s time has ended, and I will take

the opportunity to question now. And I appreciate the panel for

being here. This is an open hearing with a great opportunity.

I would quickly add that I appreciate the fact of having a rural

mail carrier that services in my home, and services not only with

the mail, but in many human ways that add, I think, some real

special additional effects to what a mail carrier can do. And I appreciate the work that is involved there.

I also have a daughter who lives in a Third World country and

works there, and I know for a fact that her mother and I are unable to send her mail with anything of value in it, knowing that

it probably won’t reach her. We don’t worry about that in the

United States. So I applaud you for that, and I thank you for the

service that you provide.

But we also have to understand that we’ve got to make it work

for the taxpayer, too. And I appreciate the efforts, and that is why

these hearings are being undertaken.

I received a letter just recently from a constituent in my district

that operates a family owned mail transportation business and employs 45 people in doing that business. His business performs services at a fraction of the cost of USPS employees, and this tentative

contract, which insources 600 highway contract routes, could have

negative impact upon his small business.

Mr. Miller, as you rightfully stated in your testimony, using contractors helps lower the USPS’s costs. Can you quantify how much

contracting saves USPS overall, and explain how the tentative

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agreement with the APWU that insources at least 4,000 jobs will

help attain fiscal responsibility?

Mr. MILLER. Mr. Chairman, I will be glad to do that in writing.

I haven’t those numbers on the top of my head.

[The information referred to follows:]

[NOTE.—The information referred to was not provided to the

committee.]

Mr. MILLER. On the second part of your question, there was some

give and take in this agreement. We gave a few things the APWU

wanted. We took some things, and they took some things that we

asked for.

As I think the Postmaster General has described this morning—

and if not, we will send you additional information—the unions

have to compete for this insourced work. They have to demonstrate

that they will provide it at least the same cost that we could go

outside and get it. I think it’s very important that we be——

Mr. WALBERG. That’s the same costs at this point in time, but

not dynamically.

Mr. MILLER. At the same costs it could be contracted for at whatever point that it might be.

Mr. WALBERG. But the concern that, as we look at the budget dynamically in the future, that indeed can be a low cost put in now,

taking these jobs away without the incentive in the future because

of the contracting situation.

Mr. MILLER. Mr. Chairman, you are absolutely right, and we

have to be very careful the way we execute that provision. But you

put your finger on something, and that is the importance of our

being able to continue contracting out, and contracting out in some

areas where the service is now provided by postal employees. This

is a way of our lowering costs and keeping a restraint on labor

wage and benefit demands.

And I will come back to a point that in response to Congressman

Mica’s raising about the sale of assets and about relocation, etc. We

have been very troubled, the Postmaster General, the previous

postmaster General, the Board of Governors, by the propensity of

Congress to put riders on appropriations preventing our doing

these things, and that is one reason we haven’t done as much as

we might have. And if there could be a moratorium, like a moratorium on earmarks—if there could be a moratorium on these riders,

I think we could move more swiftly and effectively and efficiently

in the areas that Congressman Mica identified and in the area that

you are identifying, that’s contracting out.

Mr. WALBERG. That’s certainly worth looking at in part of the

process.

But let me just jump here quickly in the few remaining seconds.

We’ve talked about contracts. What would a good contract look like

to you, Mr. Miller? And then I want to jump over to Mr. Donahoe.

Mr. MILLER. A contract would be one in which the service provider would be at least as good as what we’re accustomed to having, and the price would be lower than what we’re paying now.

Mr. WALBERG. Mr. Donahoe.

Mr. DONAHOE. Thank you, Mr. Chairman.

We have 30,000 contracts in the U.S. Postal Service. So we contract everything from using FedEx’s planes—we’re their largest

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customer—all the way down to a number of mom-and-pop contracts

like you talked about. We take every one of those contracts very

seriously.

What we looked at in this negotiation with the APWU, as far as

bringing some work back in, was our ability to absorb work into

the existing framework. The flexibility that we got in truck schedules allows us to schedule people in a much different way than we

had in the past. We used to schedule 5 days a week, 8 hours a day.

The new schedules give us a lot more flexibility. I can absorb in

the 8-hour timeframe smaller contracts with HCR and save me bottom-line money without adding any people at the same time absorbing those costs. That’s what we’ve looked at. We have embraced the process management in this organization across the

board, and we have rooted out numerous costs and identified these

opportunities, and that’s what we pursue.

The other thing that’s important, we did not give up any ability

to outsource. As a matter of fact, the APWU has asked that they

are able to compete on a same basis with any outsourcings going

forward. And I welcome Mr. Guffey to come in with those proposals.

Mr. WALBERG. Thank you, Mr. Donahoe.

My time has expired. We’ll move on to Mr. Lynch.

Mr. LYNCH. Thank you, Mr. Chairman.

And again, I thank the witnesses for your help.

You know, the Postal Service goes into every American business

and every American home 6 days a week, and I think if there was

any illustration of the value of having a public system, having the

current postal system, it occurred on and after September 11th.

As most people know, I have an extraordinary number of people

in my family that work for the Postal Service, my aunts and cousins, my uncles, and my mom, my two sisters who are still there.

My mom is a retiree. But going back to September 11th, which is

the day I was elected in the primary, and after that we had attacks

on the Postal Service, anthrax attacks. And down here at the

Brentwood facility, we lost two brave postal workers from inhalation of anthrax. And I remember talking to some of the local unions

leaders with the American postal workers, and letter carriers, and

mail handlers, and supervisors and the postmasters, and they were

very concerned about going to work, because in many of these facilities, many of these plants, you had the risk of anthrax.

And so the question was posed to the union leadership at the

APWU, and National Association of Letter Carriers, and the mail

handlers; they said: Should we send our people in to work? Should

we send them in to work when we know that there’s—especially

with the Brentwood example—there’s lethal danger? And it was a

very precarious time because we in government were afraid that if

the mail did not get delivered to every American home and business, that the economy would seize up. This is when President

Bush was saying get out there and try to stimulate the economy.

Well, if the American postal worker had not gone to work, it

would have seized up our economy. And I think it was a very proud

moment that the union leaders at the Postal Service asked their

members to go into work. And I know my sisters—one of my sisters

had two young kids at the time, and I know that was a vexing situVerDate 17-JUN-2003 12:09 Sep 22, 2011 Jkt 000000 PO 00000 Frm 00064 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\68048.TXT KATIE PsN: KATIE
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ation for the union leadership and the workers themselves. But

God bless them. They went to work, and they kept the mail being

delivered, and we got through that tough spot.

But with all this talk of privatization, I wonder how that would

have gone if those were private employees for some contractors?

Because they make the same commitment to deliver the mail in a

tough situation. Do they handle the security and the special responsibility that they have with respect to our Nation as do the

postal employees? And I think it’s remarkable, as one of my colleagues noted, that for the sixth consecutive year postal workers

are again rated—I think it is the Pew poll. The Pew Foundation

does a polling on the popularity or the reliability of Federal employees, all employees, in regard to the American people, and they

continue to rate the postal workers the highest 6 years in a row.

But we’re talking today at least in one part about going to 5-day

delivery, and I am wondering if that is just one way of if the Postal

Service isn’t going to deliver on Saturday, then who is? And I think

there will be a private entity that will want to take up that space.

So, Mr. Donahoe, do you have any thoughts on that about losing

market share for the post office by considering going to 5-day delivery?

Mr. DONAHOE. Well, thank you first, Congressman Lynch, about

the excellent comments about our employees. They do a great job.

We are very proud of them. And even this winter up your way, that

mail got through every day in really trying conditions.

The Saturday issue is an issue we’ve wrestled around with, and

it has been a concern. The big concern we have is that there’s a

changing marketplace, and the first-class volume we have lost over

the last few years has really pressed us in terms of revenue for delivery, and that’s why we have looked at making these changes.

The one thing we would do in this process would keep our post

offices open so you could still come in and buy stamps. If you needed to get mail, we’ll have post office boxes open. We’ll be able to

do that. And, of course, we would still be delivering things like Express Mail.

As we examine the demand for mail going forward, it does press

us on some of those choices. We have looked at things like asking

the American public to move their mailbox. We have done some

surveys in that area. People say they don’t want that. We’ve talked

about changing service standards to save us some money there. We

have some feedback there that wouldn’t work. And, of course, we

hear about the post offices.

So it’s an ongoing process. We continue to look at that. But as

we have laid out in our comprehensive plan, we think that just the

nature of the changing demand for mail would force us to move to

a 5-day delivery schedule.

Mr. LYNCH. Thank you.

I see my time has expired. I yield back.

Chairman ISSA. I thank the gentleman.

We now recognize the chairman of the subcommittee Mr. Ross of

Florida for 5 minutes.

Mr. ROSS. Thank you, Mr. Chairman.

And, gentlemen, I thank you all for being here.

62

You know, I take very seriously, as you all do, the issue of the

prefunding of the health care and the pension. And assuming that

we are able to address that, because I believe it’s something that

we need to address, Mr. Donahoe, it doesn’t necessarily, though, resolve the long-term issues of the U.S. Postal Service, does it?

Mr. DONAHOE. No, it doesn’t.

Mr. ROSS. I mean, we still have to make some systemic changes.

Mr. DONAHOE. Absolutely.

Mr. ROSS. We still have to address workers’ compensation.

Mr. DONAHOE. We have to address that. Absolutely.

Mr. ROSS. Overcapacity.

Mr. DONAHOE. And we’re doing that.

Mr. ROSS. Underperforming facilities and labor costs.

Mr. DONAHOE. Yes.

Mr. ROSS. So while we’re able to identify that there’s a big issue

out there, the bigger issue is really the systemic changes we need

to make to the Postal Service for the long-term viability.

Mr. DONAHOE. That’s what we’ve laid out in our comprehensive

plan, and this agreement with the APWU, from one union, helps

us to get in that direction.

Mr. ROSS. Now, you and I have been able to meet several times,

and I appreciate not only you and your staff for the cooperation you

have given me and my understanding for my subcommittee responsibilities. We discussed a pay-for-performance plan that has been

in existence for about 10 years with managers and supervisors, I

guess, about 65,000 of them. Could you briefly describe how that’s

worked?

Mr. DONAHOE. We have established a pay-for-performance plan

in the Postal Service. To your point, we have 65,000 people. That’s

postmasters, that’s supervisors, that’s administrative people, all of

the nonbargaining employees in that.

What we do yearly is set goals. We have national goals on service, on finances, and on people, a balanced scorecard. And we also

have individual goals at the unit level. We have constructed a process that all 65,000 people have an individual rating, and that’s how

they are compensated. So it is strictly a pay-for-performance system. We have no COLA, we have no step increase. All of our managers in this organization are compensated on pay for performance.

Mr. ROSS. And what has been your experience with those managers? Do they like it?

Mr. DONAHOE. They like it. It is competitive, and they are on

that Web site all the time seeing how they do. And it has produced

tremendously good benefits for the Postal Service and, more importantly, for our customers.

Mr. ROSS. Now, translating that mindset to the collective bargaining negotiations that you have, has this type of pay for performance ever been introduced or discussed in a collective bargaining situation?

Mr. DONAHOE. Mr. Guffey and I have had some discussions, and

we talked about what—going forward in that area.

The changes that we have been able to effect with this negotiation are the most we have ever seen. The fact that we have been

able to change flexibility and long-term pay structure indicates that

63

there is a willingness for the APWU to really take into effect our

customers and our business going forward.

Mr. ROSS. But never was it put on the bargaining table, a payfor-performance plan, was there?

Mr. DONAHOE. Well, we had some discussions. But, like some of

the other things, it’s a give and take, and I certainly——

Mr. ROSS. And, Mr. Guffey, you mentioned in your remarks that,

of course, if the economy were to get better, then that would

change things. But, in fact, it’s much more than the economy. I

mean, if it were just the economy always being the driving force,

we may still be riding around in horse-drawn carriages or having

mail delivered by bicycles. But it really has to do with market

changes, with technology. And is it not true, then, that in order to

adapt, the U.S. Postal Service and its employees have to adapt to

changing trends in the market; not only the Internet, but technology as a whole?

Mr. GUFFEY. It’s true that there are some Americans who will

never use the Postal Service again, but they’re not required to pay

for it, because the Postal Service does not receive one dime of taxpayer money. It’s everything, the benefits, the wages, the buildings,

everything is paid for by postage. And while the market, those individuals in the market who will use the Postal Service——

Mr. ROSS. But it’s more than just the economy. In 2006, we had

a good economy, and yet the first-class mail started declining significantly.

Mr. GUFFEY. But we could rebound from the decline in first-class

mail if we didn’t have the $5 billion weight put upon the Postal

Service.

Mr. ROSS. But it’s more than that. I mean, let’s be honest, it’s

a lot more than that.

And let me ask you this now. How do you feel about——

Mr. GUFFEY. We’re both going to be honest?

Mr. ROSS. Sir?

Mr. GUFFEY. I’m going to try.

Mr. ROSS. I’ll ask the questions.

Mr. GUFFEY. OK.

Mr. ROSS. Thank you.

Now, how do you feel about this agreement?

Mr. GUFFEY. I feel like the agreement was a give and take. I feel

like the agreement—we gave some flexibility in exchange for the

security of our people for various things. A lot of talk has been

talked about the no layoff clause.

Mr. ROSS. And you told your employees it’s a pretty good deal,

didn’t you?

Mr. GUFFEY. I have told my people exactly what it is.

Mr. ROSS. And you think it’s an excellent deal so much so that

you are going to pay your members to vote; are you not?

Mr. GUFFEY. I’m not paying anybody to vote.

Mr. ROSS. You’re not paying your members? Have you looked at

your Web site where it says: To encourage participation in the contract ratification process, APWU president Cliff Guffey is encouraging locals to get out the vote. The national union will reward the

locals that are most successful in mobilizing members to vote, with

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the top three locals at each of several categories receiving monetary

compensation to be used on behalf of the local members.

So you are buying their vote; are you not?

Mr. GUFFEY. They can vote no. If every one of them votes no,

they vote no.

Mr. ROSS. In addition to buying their vote, are you not also using

it as a member drive?

Mr. GUFFEY. Sir, that’s an affront to say I’m buying people’s

votes. I realize that’s a common practice on your side of the table,

but it’s not with mine.

Mr. ROSS. Does your Web site not offer compensation to vote?

Mr. GUFFEY. It offers people to encourage people to vote. It encourages locals to vote, not one way or the other.

Mr. ROSS. I yield back.

Chairman ISSA. The chair would suggest that neither side get

into rationale behind somebody’s intention, and I would expect that

on both sides of this debate. And I appreciate that you are both

very interested in getting it right, but I would make that caution.

The chair now recognizes the gentleman Mr. Davis for 5 minutes.

Mr. DAVIS. Thank you very much, Mr. Chairman. And let me

thank all of the witnesses for being here with us.

These are obviously difficult and complex issues and serious

problems. I have always been told that there are no simple solutions to complex problems.

Governor Giuliano, do I understand and did I understand you to

suggest that if we did not have to prefund the retiree benefits for

the Postal Service, they did not have to prefund those benefits, and

although we thought we were putting in some good provisions in

the Postal Accountability and Enhancement Act, that instead of a

deficit we would be talking about profits in terms of the Postal

Service?

Mr. GIULIANO. My statement was, over the last 4 years, that

would be true, Congressman.

Mr. DAVIS. What would be the downsides to not having that requirement? If that requirement was not present, what would——

Mr. GIULIANO. I don’t believe there is any downside. We are

funding on an annual basis to the excess of $2 billion health care

benefits for our employees. We commit to—we have been paying

them; we continue to pay for them.

Private corporations do not have to prefund retiree health care

benefits. They have to account for them on their balance sheet. It

is not a cash output. And, in fact, because that is such a burden,

in 1992—I may not have the year right, but in the early 1990’s,

there was an accounting rule change that said companies had the

option, a one-time option, to cap forever retiree health care benefits, because if they couldn’t do that, if they didn’t do that, they

would have an unbounded liability on their balance sheets, and

there would be no way to be able to tell whether they were a going

concern.

Most corporations in this country took that option and capped

them in 1992. And whether you retired in 1980, 2000, or 2040, the

company has no more responsibility for those health care benefits

than what the cap was in 1992.

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Mr. DAVIS. And while this would obviously not solve the problem

in terms of our long-range conditions, but it would be movement,

and we would not be standing still. We would be moving.

Mr. GIULIANO. It would be significant progress. We have made

progress with the $3.8 billion in this union negotiation; $5.2 billion—$5.4 billion payment per year would make a significant

progress. We also need to move forward with 6 to 5. We also need

to stop overpaying for FERS. These are the drivers.

There’s lots of changes that need to be made. They are all comprehended in our plan. We’ve considered all these things. We’ve offered what we believe to be the most rational choices. We don’t

want to have to do 6 to 5, but considering all the alternatives,

when we polled the American people, when we took our surveys,

when we had outside experts look at that, they said out of all the

alternatives, raising prices, changing delivery standards and a

whole bunch of others, this was the least painful. This was the best

we could do.

Mr. DAVIS. Mr. Donahoe and Mr. Guffey, let me commend both

of you on the tentative contract that has been negotiated. I think

that it is one of the most positive labor-management movements

that I have seen in a long time. And I know that there are efforts

on the parts of some people in our country to diminish the role of

unions, who have fear, but it seems to me that you struck an accord that suggested that both sides understood that it was not a

win-lose situation, but it is a win-win situation for the American

public. And I think that’s where we have to go.

So how would both of you come at briefly relative to being able

to reach that agreement?

Mr. GUFFEY. Just real quickly. I think that American labor and

industry has to come together and work together to bring back industry and commerce to this country. And I hope this is a step to

show other people that it can happen.

Mr. DONAHOE. I would agree with Mr. Guffey. We have great employees in this organization, and they want to do a great job for the

American public, and I think that as we sat down and talked

through things that we needed from a Postal Service perspective

for flexibility and cost-benefits going forward, we were able to

achieve that. And Mr. Guffey was able to achieve what he needed

for his employees, and it was a win-win. And it is a very good thing

for the American public and our customers.

Mr. DAVIS. I commend you both, and I yield back the balance of

my time.

Chairman ISSA. I thank the gentleman.

We now recognize the gentleman from Tennessee Dr. DesJarlais.

Mr. DESJARLAIS. Thank you, Mr. Chairman.

I would like to take just a few minutes and maybe put some

things in perspective. We are facing a tough battle this week on the

budget, and certainly the country right now is hurting in many

ways, and people are scrambling to cover themselves and make

sure that financially they can be as stable as possible. We go back

to districts with high unemployment, 9 percent across the country,

several counties in my district are upward to 20 percent, and times

are certainly tough, and I sympathize with everyone.

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According to committee calculations, the average employee costs for USPS is $89,845 per year, or close to $45 per hour in benefits.

Is the total compensation averaging out more than $80,000 per

postal employee per year including wages and all benefits, including retiree health benefits, Mr. Donahoe?

Mr. DONAHOE. Yes. I would have to double-check those numbers

and get back with you on that. But the way we calculate our costs,

it is wages and full benefits, including retirement.

Mr. DESJARLAIS. So if that is true, then, the average work hour for USPS employee that is publicly reported is about $40 per hour?

Mr. DONAHOE. We consider a fully loaded hour right around

there, yes.

Mr. DESJARLAIS. Do you think that’s generally a fair amount in

terms of trying to keep the Postal Service running when you are

doing these negotiations, talking to employees? Nobody wants to

give up anything. It’s hard to take things away from people once

they have them. But is that as low as people are willing to go to

keep their jobs?

Mr. DONAHOE. I think that, again, to the point we have been

making, when we went into this negotiation, our goal—three goals.

We were looking for immediate financial relief, we were looking for

flexibility, and we were looking for long-term structural change.

And we achieved those.

We’ve got a substantial change in the way that we will be compensating noncareer employees, and that pulls that loaded factor

down significantly, by 53 percent.

The other thing, of course, is the 10 percent differential going

forward. That also will pull those down.

We realize that labor costs are high, and as we worked with the

APWU, they understand where we were coming from.

The other thing that’s important is we also have real opportunity

with the flexibility that we have negotiated in there, so that if you

have a full-time employee, they can now work between 30 and 48

hours a week, which is very different than we have had in the past.

So, Doctor, we are looking at every possible way to provide great

service in an efficient and effective way.

Mr. DESJARLAIS. Can you speak just briefly to the graph that is

behind us here, the private sector versus the Postal Service?

Mr. DONAHOE. It would be interesting to see the numbers, but

it almost looks like the blue line starts going up when we began

to prefund employee health benefits. That is the first thing that I

see.

We have been very—it is critical to understand that the Postal

Service is focused not only on total labor costs in terms of wages,

but we have focused on head count. We have reduced head count

in this organization by 30 percent since the year 2000. That is legacy costs.

Mr. DESJARLAIS. Mr. Guffey, when I go back home and talk to

my folks, it has been mentioned that the Postal Service doesn’t cost

the taxpayer a dime. What is going to happen if you default on

September 30? Who does that burden shift to?

Mr. GUFFEY. Well, I believe Mr. Miller stated it would be a miracle for these things to happen, and, you know, I think Congress

can work together and resolve the problems of our country and the

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post office, and I think that’s what America wants you to do right

now. I think they want their post offices in rural Tennessee. I

think they want to have their mail delivered. I think they want

this sort of thing.

Mr. DESJARLAIS. You had mentioned earlier that you employ

100,000-plus veterans, which I think is great. That’s fantastic.

What do we say to the Active military personnel whose wages are

far less than what we’re talking about here in the $40 per hour?

Mr. GUFFEY. Well, I’m not sure if you take the weighted average

of the military benefits that are involved, their retirement and

their health benefits, which are all provided by the government,

too. If you put it all together, I’m not sure their package would not

be the same.

I’m just saying that, yes, we would like to have good jobs for

these people to have when they do come home. Talking about the

custodial jobs, they were maybe priced a little higher than they

should be, but they were jobs that were reserved for the veterans

so the veterans could come home to these good jobs.

Mr. DESJARLAIS. Well, when you’re talking about concerns about

your employees losing their pensions and their benefits, what do

we say to the private sector who faces losing Social Security and

Medicare benefits?

Mr. GUFFEY. Well, I think they only face the losing of Social Security and Medicare because of the economy, and that our jobs,

like, say, hundreds of thousands of jobs are now overseas, trillions

of trillions of dollars of American money is overseas right now as

opposed to being working in this economy and lifting up this next

generation through the pay, and you broaden your tax base so you

can afford Social Security and Medicare for these people. That’s the

real problem in this country right now, not the fact that public

workers are making too much.

Mr. DESJARLAIS. You don’t think the government spends too

much?

Mr. GUFFEY. There’s a lot of things I think that the government

spends money that they shouldn’t be spending on. Like I said, this

hearing is costing more right now in tax dollars than what the

Postal Service is getting in on tax dollars.

Mr. DESJARLAIS. And that’s a big part of the problem, and that’s

what we are here to solve.

Chairman ISSA. I thank the gentleman.

The chair would note that the graph that was on the screen does

not include the prefunding. That is a pay-as-you-go cost. And I appreciate the gentleman who—by the way, I think we are both on

salary, so I’m pretty sure that whether we show up here for a hearing or not, the cost is substantially the same.

The chair now recognizes the distinguished gentleman from Massachusetts Mr. Tierney for 5 minutes.

Mr. TIERNEY. I thank the chair for that. And I thank all the

members of our panel.

First, let me say that I think that the way that you have collaboratively worked toward a tentative agreement is to be commended.

I think that’s what the collective bargaining process is all about.

And it seems to me from listening to your testimony and reading

it here today that everybody made concessions, which is, in esVerDate 17-JUN-2003 12:09 Sep 22, 2011 Jkt 000000 PO 00000 Frm 00071 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\68048.TXT KATIE PsN: KATIE
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sence, what the American people expect out of public-service employees and employers. When they go to these negotiations, they

want everybody to be reasonable. And I also seem to think there

looks to be downsides for both of you if you decided to push the

button and go on to arbitration. And I think that was a trigger to

getting things done here. So I think that’s at least a positive that

we can take out of this, and knowing that there were constraints

seen by management under—what they perceived to be some legal

constraints, and I think the union’s under—obviously under constraints, not wanting to risk going to arbitration and coming down

with far less than what you got.

But I want to talk about—I’ll leave to the testimony that’s already given and the questions asked about the pension retirement

contributions and how much that would go toward solving the

issues that you have here. When we had a hearing back on April

15, 2010, John Potter, who was then the Postmaster General, was

one of our witnesses on that. And I asked him a little bit about the

privatization and what would be the cost to the American citizens

if the thing was privatized, and he talked—and I’m going to just

synopsis a little bit here. He talked about the fact it would be fair

to expect that you wouldn’t get mail necessarily delivered to your

doorstep. Prices in all likelihood would significantly go up; that not

all areas would, in fact, be served. These would all be—so universal—the service would be threatened. So these would all be decisions that management could make on that.

I then wondered whether or not there wasn’t some price tag, that

what we got in terms of universal service, and a large retail distribution situation, and 6-day mail, and all those things that we get

for having this type of service as opposed to a privatized service,

if somebody hadn’t put a value to that. And Mr. Potter said: We

put a price tag on that of about $4 billion. And then he said smaller—now, in today’s dollars, it is like $41⁄2 billion on that basis.

Do you gentlemen agree with that?

Mr. DONAHOE. That’s the—when the Postal Service was first

formed back in the early 1970’s, there was a universal service option that we could have asked for continued appropriations to actually cover our universal service. And if you look forward, with the

value of money going up or through inflation, it would turn out to

be about that amount.

Mr. TIERNEY. Well, you know, I wondered why we hadn’t gone

forward. But Mr. Potter then said that the—they ended up in very

poor condition in the late 1960’s because of difficulty in getting appropriations, and they were reluctant to ask for it.

Mr. DONAHOE. Our issue has always been one of a self-sustaining

entity. If the government does not pass the budget this week, the

mail will still get delivered. We have been self-sustaining. What we

have been asking for is for Congress to act on these mandates

around the prefunding requirements, the 6 to 5 being the first. As

I said before, if we get those resolved, we know that we will be a

viable, ongoing business. We still provide excellent service for the

American public. That is the help we need from Congress.

Mr. TIERNEY. You look at it another way, though. People—I

think people by and large want the service that they are getting,

the universal service, the 6-day mail, all those things on that basis.

69

So you have a customer out there that owes you about $41⁄2 billion

a year that you are not collecting. I don’t know what kind of business decision, management decision that is.

Mr. Guffey, do you have a comment on that?

Mr. GUFFEY. Well, it would be nice and refreshing to see that the

money was coming from the government to the Postal Service instead of just from the Postal Service to the government.

Mr. TIERNEY. Mr. Donahoe, you are smiling at that. But you do have a customer out there that we put a value of $41⁄2 billion in

services that you render to them without ever collecting a dollar for

it.

Mr. DONAHOE. Well, the reason I’m smiling is because we have

some other bills that have been owed over the years, and sometimes they don’t get paid. So we would like the Congress to feel

that the Postal Service can stand on its own and do a great job for

the American public without any kind of appropriation. That’s

what we are asking for.

Mr. TIERNEY. So I guess it’s all semantics. You can look at it as

an appropriation, or you can look at it as paying value for what you

are getting in return. So you’ve decided, I guess, that it’s not worth

the political hassle to ask the American people to pay $41⁄2 billion

a year for services they’re getting; it’s much easier to try to run

starting with $41⁄2 billion in the hole and try to build around that.

Mr. DONAHOE. Here’s the thing. We have paid into the retiree health benefits $43 billion. What we would love Congress to do is

to take a look and see that $43 billion, along with what the chairman mentioned are ongoing payments—we think when you go

ahead with a 400,000-person Postal Service going forward, we are

already covered with that. So we don’t want any money. We want

no taxpayer money. We just want Congress to remove that burden

that we are being forced to pay. FERS, I owe $6.9 billion—or you

owe $6.9 billion back to me in FERS overpayments. I got a bill last

week from the OPM increasing my premiums. I mean, I’m already

overpaying. Just treat us fairly. We will do a good job for you.

Mr. TIERNEY. Well, I already cosponsored that bill, so let’s see

what we can do with the rest of them. Thank you.

Chairman ISSA. I thank the gentleman.

Mr. Braley.

Mr. BRALEY. I assume you’re referring to Mr. Braley, Mr. Chairman?

Chairman ISSA. I’m sorry. I apologize. I know better.

Mr. BRALEY. No need to apologize.

I’m one of those people who thinks that, in order to know where

you are going, you have to know where you come from. And I think

it’s interesting to note that on July 26, 1775, the Second Continental Congress appointed Benjamin Franklin as the Postmaster

General at an annual salary of a whopping $1,000. Mr. Donahoe,

I am sure a lot of colonists thought that he was grossly overpaid

for that work, but we all know how important it was in the evolution of this country.

In 1808, the Select Committee on Post Office and Post Roads was

established by the House of Representatives, and it was the beginning of a surface transportation program that has benefited this

country ever since.

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One of my wife’s grandfathers was a first-generation American,

whose father came from Germany, and he left to go back to fight

the Kaiser in World War I, the war to end all wars; came back and

became a letter carrier in Dubuque, Iowa, and became president of

his letter carriers local. And when they started renovating the

White House under the Truman administration, the people he

worked with thought so much of him, they spent the whopping sum

of $2 to get some of the timber from the White House to make a

gavel for him that I’m fortunate to have in my possession.

When my father left the small rural community in Iowa that he

lived in to go to Iwo Jima at the age of 18, he got letters from his

mother that I am thrilled to have in my possession that only got

to him halfway around the world because of the hard work and efforts of men and women in the Postal Service and postal delivery

system. That’s why I love letter carriers and postal workers.

My dad came back and became a substitute rural letter carrier.

And I know from growing up in a small town that postal delivery

service was often a lifeline that got you much-needed services that

you needed to do your work and to function in society.

But I am very impressed with the fact, as the ranking member

of the Veterans’ Affairs Economic Development Committee, that

unlike many Federal agencies, the Postal Service has done an extraordinary job of employing veterans. And you brought this up in

your testimony, Mr. Guffey. And here at a time when returning

Iraq and Afghanistan veterans have an alarming unemployment

rate of 22 percent, I am trying to figure out why my friends on the

other side of the aisle want to add to our unemployment problem

by firing veterans, by firing women, and firing minorities, who

make up a large percentage of the Postal Service work force. That’s

a question we all need to be concerned about.

Some of my colleagues have argued that a union would never lay

off a hardworking veteran postal worker. We know that’s not true.

We know that it happens, because that’s the way the Postal Service

has had to make tough decisions. We also know that if we are

going to fire middle-class American veterans that work for the post

office, it’s not going to fix our budget crisis. And that’s why we

have to fix this problem with prefunding, because we know that it

is the low-hanging fruit. It is the most clear, obvious opportunity

we have to make an impact, and that’s what we should be focused

on.

According to two independent offices and an OIG report, the Civil

Service Retirement Service is overfunded by $50 to $75 billion, and

the post office’s FERSprogram is overfunded by $6.9 billion. We

should let the post office transfer that budget surplus to fund their

future health care obligations, and make sure at the same time

that we’re doing everything to promote efficiency.

And, Mr. Donahoe, I remember when my daughter graduated

from high school 5 years ago, and I was thrilled to find out that

I could get customized stamps of her and her friends to give them

as graduation gifts that they were thrilled to receive. So we know

there’s been a lot of innovation going on at the Postal Service to

try to address these market pressures to modernize and to come up

with new revenue streams.

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Can you give us some examples of what other things the Postal

Service is looking at, like that stamp program?

Mr. DONAHOE. Sir, I would like to. One of the things that we

have been focusing on from a revenue perspective is simplicity and

making sure that we can really grow the business to consumer

channels, especially for small business. So we’ve just introduced a

new product out there called Every Door Direct, and the idea is

that in a very simple way, if you’re a small business, you can reach

within a couple of ZIP codes everybody that lives there.

We are also conducting Grow Your Business Days right now at

thousands of post offices across the country all summer long, teaching people how to use eBay, Amazon to grow their small business.

Congressman Mica showed me before he got that e-mail on his

BlackBerry.

One of the products we’re working on right now is the opportunity to show you what’s coming in your mailbox today. We have

that technology. We have that as a product going forward.

So we know that we can do things for small business, we can

also do things for people who like to have a little bit of digital in

their products, too.

Mr. BRALEY. Thank you.

My time has expired. I yield back.

Chairman ISSA. Thank you.

Mr. Mica.

Mr. MICA. Well, first of all, Mr. Guffey, I have to take great exception with you, your comments on this is some sort of assault on

labor, whether it’s in Wisconsin or in—or this hearing.

Mr. Guffey, do you know what the financial differences between

the States and the Federal Government is?

Mr. GUFFEY. Most—the big difference, there is not a whole lot of

difference. The American taxpayers pay the costs for both.

Mr. MICA. The big——

Mr. GUFFEY. You have to have taxpayers employed to pay the

taxes so the payroll can be done.

Mr. MICA. That’s true. And we spent the last several years paying people not to work, rewarding failure and penalizing success,

and we have been great keeping the unemployment up about 10

percent, not to mention other areas that are 20 and 30 percent.

The big difference is the Federal Government, we just keep printing the money. If we go out the door here and go down the end and

go out on Independence, you can almost hear those presses going

day and night printing funny money. We’ve indebted this country

$5.3 trillion in, what, 24, 30 months. We’re borrowing—so the big

difference is that the States have to have a balanced budget. We’re

printing the money, OK? So the States—you call this an assault on

labor, but they’re making the tough decisions dealing with their

biggest cost factor, which is their employee base. It’s not pleasant

for anybody. This is not a hearing that’s intended to do an assault

on labor.

Do you know how much we’re borrowing for every dollar we’re

spending, Mr. Guffey?

Mr. GUFFEY. Way too much.

Mr. MICA. It is about 42 to 43 cents per dollar we’re borrowing,

most of it from foreign sources.

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This is not an assault on labor. You know, I’ve been in the transportation area. We used to have—we kept firemen on trains. Even

though we didn’t use coal or anything, we had the fire for many

years. We had conductors in cabooses even though we had adopted

electronic means of communicating with the train workmen. You’re

aware that it wasn’t an assault on labor when we had to eliminate

some of those positions. Would you say that was an assault on

labor?

Mr. GUFFEY. Well, when you use 70-year-old examples, I don’t

think that—I can’t relate to some of those 70-year-old examples.

Mr. MICA. Again, OK, let’s use a modern example. They’re telling

me they can run the post office with 400,000 people, and I have

572,000. I’ve got to make some changes. Is it just make work? I

mean, more and more is going over this. They’re even going to this.

When they go to this, they’ll need fewer than the 400,000.

Mr. GUFFEY. You can order your medicines over that, but you

cannot get them delivered to your home.

Mr. MICA. That’s——

Mr. GUFFEY. The mail volume is going to change. The type of

mail is going to change.

Mr. MICA. That’s true, and that’s why I usually use FedEx or

UPS.

But this is no affront. I love postal people. George Coleman was

my postman for 17 years. He went on to be the mayor of DeBary.

My postman who came to our home in upstate New York wrote me

a birthday card until the year he died. I can’t think of people I like

better than some of the postal people—workers we know.

Mr. GUFFEY. We try.

Mr. MICA. But this is not an assault on them. This is a change

in the whole dynamics of communication and our society. We

stop—we can’t feed dinosaurs; we can’t afford to do that. So,

again—again, Ben Franklin, you know, was a Postmaster in 1775,

appointed by—in 1775, it was interesting, Ben actually arranged to

have mail delivered from Philadelphia to New York and same-day

service; did you know that?

Mr. GUFFEY. Yes, but he did it as the King’s represented Postmaster, not as the U.S. Postmaster.

Mr. MICA. Yes, I know, but he could still do it. And even though

he had the position, I think his son had the position, they could deliver the mail in the same-day service, which we still can’t do today

in the United States.

But what you have to do is adapt, and the post office is becoming

a dinosaur and will soon be extinct if it doesn’t adapt.

Mr. GUFFEY. And we’re working very hard to adapt with the——

Mr. MICA. The money tree in the back yard died, and we got to

find a better way to deal with $6 billion and your $15 billion credit

limit, or whatever it is, is about to run out, and there’s no more

coming from here.

Thank you. I yield back.

Chairman ISSA. I thank the gentleman.

Mr. MICA. Yield back.

Chairman ISSA. I now go to the gentleman Mr. Yarmuth for 5

minutes.

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Mr. YARMUTH. Thank you, Mr. Chairman. Thank you all for your

testimony. And I’m glad that Mr. Mica brought up UPS and FedEx.

I have a very special interest in this hearing because I happen

to represent the district which is the home of the global hub of

UPS, and UPS is our largest single employer. And I’m also an honorary member of the Letter Carriers Union, and very proud of that.

So I have multiple interests.

Mr. Mica said he likes to rely on UPS and FedEx, and I’m glad

he relies on UPS, but I went back and checked, and the least you

can spend to mail anything or deliver anything with UPS is $5.17.

And the lowest price that FedEx will deliver anything for is $7.22.

Mr. Donahoe, what do you think would be the impact on American business, charities, local governments, utility companies and

so forth if for every piece of mail they had to send out, it would

cost $5.17?

Mr. DONAHOE. We wouldn’t be talking about 1 day fewer delivery. We would be probably talking 1 day a week. It would be very

dramatic. We are very proud of the fact that we have been able to

hold our postage rates down at 44 cents. And we are also very

proud of the fact that we provide excellent package services for

businesses, too. We work well with FedEx and UPS; we deliver a

lot of their packages.

Mr. YARMUTH. This relates to the question Mr. Tierney asked a

while back, and he talked about the 4 billion-plus subsidy essentially that goes to users of the Postal Service. How would you break

down the users of the postal service? What percentage of them are

commercial enterprises? Which percentage of them would be private individuals sending individual personal correspondence?

Mr. DONAHOE. It’s probably close to 95 percent of the mail that

comes into the system is mail by a commercial entity. The customer business—the mail that goes between residences today is a

lot smaller. You know, let me take that back, it’s probably 90 percent, because there is about 10 percent of customers still use the

Postal Service to pay their bills. So me paying a bill or me sending

you a card, that represents about 10 percent of the volume.

Mr. YARMUTH. So essentially what we’re talking about here, whether it’s $6 billion or $3 billion, or whatever it amounts to a

year, forgetting the argument about FERS and the prepayment of

retirement benefits, we’re talking about an enormous subsidy to

American business.

Mr. DONAHOE. I would not say it in those terms because I think

that the American customers enjoy getting what’s in their mailbox.

It’s a great way for people to advertise. It’s a great way for people

to correspond, even if it’s just to say, hey, check my Web site out.

We feel that the Postal Service is very important for the American

economy, the bill payment side, bill presentment. So it’s an excellent platform for all users in this country.

Mr. YARMUTH. I don’t disagree at all about those statements, but

the fact remains that if all those businesses who were sending advertising—and I was in the advertising business as a publisher at

one point, also took advantage of——

Mr. DONAHOE. Thank you.

Mr. YARMUTH [continuing]. The rate given to publications. But

they are sending those advertisements, those solicitations, and

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they’re billing mailings as well at a rate that would be—is far

lower than they could get anywhere in the private sector in a freemarket situation.

Mr. DONAHOE. Yes, but, again, what we’ve been asking for in

terms of the mandates that Congress has with us on the retiree

health benefits, we think that there is a resolution around this

without having any effect on our customers.

Mr. YARMUTH. I understand. You continue to offer that very low

rate, and I’m very proud of that. I don’t want my time to expire.

When we talk about the great Republican Lincoln said the legitimate role of government is to do for the people what they can’t do

for themselves. And essentially I extend that to mean the private

sector can’t do. And the private sector can’t deliver a piece of mail

for 44 cents across the country or around the globe.

Mr. DONAHOE. Probably not.

Mr. YARMUTH. Probably not.

One question quickly, Mr. Guffey, on the issue of retirement benefits. And this is—disturbed me a great deal in light of what’s happened in Wisconsin, and Ohio and Indiana.

The notion that somehow these are overly generous benefits,

when we are hiring, asking police officers, firefighters, mail carriers and the like to embark upon a career which requires a great

deal of physical exertion, and to have basically a shortened career

as opposed to something they might otherwise do, and part of the

tradeoff, part of the way you get people to embark upon those jobs,

is to guarantee that there is a healthy retirement for them. Otherwise you would have police officers—if it weren’t a healthy retirement—police officers at 75 years olds chasing criminals, and 75-

year-olds delivering the mail, and 80-year-olds climbing into buildings. I mean, isn’t this part of the consideration here in order to

get people to do some of the public-service jobs, some of these quasi

public-service jobs in your case?

Mr. GUFFEY. I think that is the pride—I think that is a great

consideration, but there is also a pride in knowledge of serving

America. I’m from that era of John F. Kennedy, you know, see

what you can do for your country. I went to Vietnam, I tried to

serve the country in the Postal Service. And retirement? My retirement I take home $1,600 a month, and I pay my health insurance

$300 or about $250, something like that, out of my own health insurance, my part of the payment. So it is not a huge retirement by

any means, but it is a satisfactory life of serving your country and

your fellow Americans.

Mr. YARMUTH. I thank you for that answer.

Thank you, Mr. Chairman.

Chairman ISSA. I thank the gentleman.

We now recognize the younger of two near identical twins here

and present today. I tell you apart mostly by your ties, both of

which are stunning, but your father, I think, won, edged you out

a little on the ties. Mr. Clay.

Mr. CLAY. Thank you so much. I’ll have to catch up with him on

my haberdashery.

Let me applaud Mr. Guffey for the comprehensive and thoughtful

testimony submitted to this committee for today’s hearing. I think

it shows a serious commitment that the APWU has to work in

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partnership with the U.S. Postal Service to address the challenges

that it currently faces.

I stand firmly in support with working with our families in the

postal unions. And I am committed to supporting the Postal Service’s reorganization to meet the challenges of today and tomorrow.

However, I am very concerned with some of the elements of this

hearing.

This Congress in 1970, through the Postal Reform Act, took action, in essence, to take politics out of the Postal Service. It also

gave workers collective bargaining rights. I’m afraid that some here

today are seeking to return politics back to the Postal Service and

perhaps strip those rights.

This committee certainly has a welcomed responsibility to perform oversight duties for the Postal Service, and I don’t think anyone would question that. I think many here, like you, want to see

the Postal Service succeed. The service that USPS so admirably

and consistently provides personifies the best of America.

What’s disturbing is that some want to use this hearing to attack

something else that best personifies America, a worker’s rights and

the freedom that comes with collective bargaining. I hope I’m

wrong, and I hope that we’re here today to help the Postal Service

and its workers find the right path to sustainability and to success.

I don’t think that involves getting in the middle of the collective

bargaining process, and I don’t see how that helps.

Mr. Guffey, your testimony demonstrates quite clearly that the

Postal Service labor force has made some remarkable gains in productivity in the last few years. In fact, the work force has been reduced by close to 120,000 employees since 2008 to 572,000 employees. This represents a 27 percent reduction since 2000. Total costs

have also been reduced by $11 billion since 2009, including a reduction of $4 billion in labor costs.

Mr. Donahoe, you also mentioned in the written statement that

the post office has achieved record service and productivity levels

in recent years; is that right?

Mr. DONAHOE. Yes, sir.

Mr. CLAY. And yet on the wage side of the equation, Mr. Guffey,

you testified that since 1970, there has been only a fairly modest

increase in straight-time wages in real terms. Do you agree

that——

Mr. GUFFEY. That’s correct, that’s correct.

Mr. CLAY. Mr. Donahoe, do you agree with that analysis?

Mr. DONAHOE. Yes. Our employees have done a great job from

a productivity standpoint, and they have enjoyed raises that have

tracked fairly close to the rate of inflation.

Mr. CLAY. And wouldn’t you say the Postal Service has gotten a

pretty good deal out of their employees over the years?

Mr. DONAHOE. I think the American public has gotten a very

good deal from the Postal Service and the employees. They are very

dedicated. They’ve done great job from a standpoint of productivity

and service.

Mr. CLAY. I thank you. I thank you both for your responses.

Mr. Chairman, I yield back.

Chairman ISSA. I thank the gentleman, and I certainly think

that you do have to keep pace on the haberdashery side. You have

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a haberdashery history with President Truman, and that alone as

a Missourian is critical.

Mr. CLAY. Yeah. We do have something in common. We’re from

the same State.

Chairman ISSA. I thank you.

We now recognize the gentlemen from Vermont for 5 minutes.

Mr. Welch.

Mr. WELCH. Thank you very much, Mr. Chairman. I thank the

witnesses for their excellent testimony.

My view, this is a practical problem to be solved. I don’t see that

we should be coming at this trying to take away wages and benefits, and I don’t see that it should be attacked by trying to take

away delivery services that Americans have really come to rely on.

I’m from a rural State, in Vermont, and I don’t know how the

letters—we a lot of snow this year. I mean, we had a lot of snow

this year. We had 10 feet of snow. In fact, it is snowing now. And

somehow, some way on my 8-mile dirt road, you managed to deliver the mail. So I don’t know who’s responsible for that, but it

wasn’t you guys, I can tell that. It was those people in these little

post offices back in Hartland, Vermont, and Norwich, Vermont. It

is quite astonishing. So there’s been a—I don’t know, a festive atmosphere here talking about what’s good and bad, but the bottom

line is the mail is getting delivered.

The other thing that’s quite amazing is you’re doing it on these

snow days for 44 cents, a first-class piece of mail. That’s a pretty

good deal. And it’s business, and it does personal letters that we

don’t get as many of, but we all love to receive.

And the other thing that is amazing, and I think it has just got

to be acknowledged, it gets sort of swept aside when we get in

these discussions, is that the things that the commercial deliverers

don’t want to provide—to deliver, you guys do. A lot of times it’s

frustrating when we go to our mailbox, and there’s more, quote,

junk in there than we want, but it is a part of commercial life in

this country. So I think those have to be acknowledged when we’re

trying to wrestle with this problem.

The other thing, you’ve pointed out that you’ve had about a 30

percent head count, 100,000 fewer employees since 2008. You

know, Governor Miller, that’s an amazing thing. You know, we sit

up here on the dais and act as though it’s time to change because

it’s a new era. And it’s true that we have to change, but that is

hard. I mean, these are livelihoods. People have built their lives

around a system that we put in place in a way that made sense,

and not just individual employees, but businesses, homeowners. I

mean, I think that’s a significant accomplishment that demonstrates real good faith. I mean, what are your views on that?

Mr. MILLER. I agree with you, Congressman. It’s a remarkable

achievement. It’s something that has been done in a compassionate

way. Most of it has been done by attrition. Some have been reassigned. But it’s a remarkable achievement.

The unfortunate thing is that the volume of mail has contracted

faster when you consider the productivity increases than we’ve

been able to keep up with.

Mr. WELCH. And that’s the new role that we’re in, so further adjustments have to be made. But my sense here is that no one is

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easing off on the gas pedal in trying to make these changes. Would

you agree with that?

Mr. MILLER. Yes, sir, I would. And I think Postmaster General

Donahoe has done a great job. He was in charge of this as Deputy

Postmaster General, and I’m sure that Governor Giuliano or Chairman Giuliano would agree with that and might have something to

add.

Mr. WELCH. Well, thanks. No, that’s all right. Let me go into another one.

You know, one of the issues here is do we go to a 5-day delivery

to save money? And I understand there is some debate about how

much money that we would save, but let me ask you this question.

I’ll ask you, Mr. Donahoe. What would be the impact on losing

market share to your competitors if we went to a 5-day week?

Mr. DONAHOE. FedEx and UPS don’t deliver on Saturday now, so

we don’t think that there would be much of a change. We think

that, again, customers have the opportunity, if they’d like, for the

Postal Service to have a post office box to get their mail in, and

we still would be offering Express Mail service. So Saturdays is our

lightest day. It’s the day that, from an advertising mail standpoint,

that’s the lightest day of the week where advertisers try to hit a

mailbox, because generally people are out and about on Saturday.

Monday through Friday they come home, they look at their mail,

and then they do their shopping on the weekend.

Mr. WELCH. Mr. Guffey, how about you? What’s your sense on

that. I know that on Saturday I have more time on my hands. The

Saturday delivery is something I like.

Mr. GUFFEY. I hate to see any service cut to the American people

unless it’s absolutely necessary. There are other means of—it

would create a situation where private companies, Mail Boxes Etc.

and these places that provide their own boxes would not receive the

mail, which is good for us because then the people who have those

would have to come get post office boxes if they wanted them on

Saturday. But I hate to see any services cut to the American people

when there’s opportunities to keep providing those services.

Mr. WELCH. Chairman Giuliano, you’ve been talking, as we all

have, about the first over—overpayment of contribution, right?

Mr. GIULIANO. Correct.

Mr. WELCH. I mean, this is an amazing situation. You can be

overaggressive or too passive, and it seems like we’re making you

front money beyond what actuarially by any standard should be required; is that more or less the case?

Mr. GIULIANO. That’s my understanding. Congressman, there’s a

pattern behind this. This is not new. In 2003, it was determined

that CSRS was overfunded by—I can’t remember the number, but

it was over $50 billion.

Mr. WELCH. So what’s the problem of changing that?

Mr. GIULIANO. We’re told by OMB and Treasury that it takes a

change in the law.

Mr. WELCH. And that’s it.

Mr. GIULIANO. Well——

Mr. WELCH. Mr. Chairman, we can help solve this problem if we

change that law. Thank you.

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Chairman ISSA. I thank the gentleman, and I trust that in the

President’s budget somewhere hidden, I didn’t see it, he had considered that, but, like I say, I missed that.

We’ll now see the gentlelady from New York for 5 minutes.

Mrs. MALONEY. Thank you very much.

And I would like to ask the Postmaster General Mr. Donahoe the

questions on the wage rates in comparison to competitors. And I

know that some of your private-sector competitors are nonunion,

but it is also my understanding that the wage rates of the Postal

Service are roughly equivalent to the private-sector competitors.

And as the postal magazine study showed, that Postal Service letter carriers start at $15.85 an hour, while the starting pay for a

UPS driver and a FedEx carrier are roughly $16.14 respectively.

And I would like to ask you does the fact that the USPS is required by statute to deliver universal service and to do a 6-day-aweek drive-up, that their compensation costs put them possibly at

a competitive disadvantage, that actually, compared to the postal

magazine, you’re very competitive; in fact, you’re lower than one of

your major competitors. So I would like your comments on that,

Mr. Donahoe.

Mr. DONAHOE. Yes, thank you, Congresswoman Maloney.

We do realize that we have a competitive rate of pay, and that’s

something very important to us. As we’ve sat down and negotiated

with the APWU, the key thing for us was to achieve some shortterm financial benefit from the contract, as well as increased flexibility and some work force structure going forward, and we were

able to do those.

Labor costs do drive costs in this organization because we are

such a labor-intensive organization. I think that we work very well

with this union to come up with some good solutions going forward

to reduce costs and help keep the Postal Service viable for the

American public.

Mrs. MALONEY. Thank you.

And as the majority has pointed out repeatedly, 80 percent of the

Postal Service’s operating costs are related to work force compensation. But just so that we are clear on this point, I am informed that

less than two-thirds of that 80 percent is for compensation of the

Postal Service’s unionized work force; is that correct?

Mr. DONAHOE. That’s true.

Mrs. MALONEY. So the unionized work force of the Postal Service

accounts for roughly 50 percent of the operating costs, not 80 percent, as some would imply; is that correct?

Mr. DONAHOE. In any business you’re going to have wages. We’ve

got wages that—generally and benefits make up about 70—70 percent of our costs. We have another 10 percent of our costs, roughly

9.1 percent, we prefund retiree health benefits. The other 20 percent cover transportation supply services, fuel, like any other company.

Mrs. MALONEY. Well, I think that it’s important that we are clear

about the actual labor costs represented by the unionized work

force, and you have helped us do that. And I would like to open

it up to the other members of the panel to comment on this issue,

if you would, please.

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Mr. GUFFEY. Clearly our bargaining unit only represents about

30 percent of the costs, I think about 29 percent of the costs.

Mrs. MALONEY. Other comments?

Mr. GIULIANO. Congresswoman Maloney, I would just comment

that we think that the percentage of costs is not the issue, it’s how

the total cost relates to our financial position. We think that today’s tentative agreement that we’re talking about makes good

steps to reducing those labor costs in a fair way, while out—while

maintaining flexibility in using that work force.

Mrs. MALONEY. And Governor Miller.

Mr. MILLER. Congresswoman, I think, No. 1, we have to look at

every opportunity for the Postal Service to reduce costs, given our

dire financial straits.

Second, I would think that it would be—frankly, whether we

were in dire financial straits or not, it would be irresponsible for

us not to look at costs at every opportunity for a contract negotiation.

Ms. MALONEY. Well, my time has expired. Thank you very much.

Chairman ISSA. I thank the gentlelady, and we’ll now go into a

second round. Double-check to make sure that no one else came in.

OK. I want to tidy up a few things. The gentlelady from New

York talked about unionized work force. Mr. Donahoe, it doesn’t

matter whether your labor is unionized or not, does it? If it’s 80

percent, it’s 80 percent, right?

Mr. DONAHOE. It’s—it is. It represents 70 percent of our total

costs, yes, sir. The other 10 percent is in the retiree health benefit

cost.

Chairman ISSA. Right. Well, but she actually said unionized work

force, which confused me a little, because you have plenty of nonunion workers, because they are management, and they are represented by associations.

Mr. DONAHOE. Yes, sir.

Chairman ISSA. Second, I think there was a lot of dialog back

and forth, and I want to set one thing clear from the center of the

dais. This is not about the hard-working men and women of the

post office. This hearing is not even about the union negotiations

per se. Our committee’s primary jurisdiction in the area of concern

is is the post office right sized for the future? And one of our concerns, one of my concerns, goes to this, and, Governor Miller,

maybe you can help me with this. In the union negotiation they negotiated a no layoff. Now, the problem is if we go from 6 days to

5 days, and you score savings of 60,000 workers, and you can’t lay

off workers, how do you get the savings?

Mr. MILLER. Well, Mr. Chairman, first the no layoff provision

was an extension of the previous contract.

Chairman ISSA. No, I understand. But just narrowly, you can’t

score savings if you can’t get rid of the people, especially when you

already have 100,000 too many today. I’ve asked my staff to look

at a lot of areas that we may legislate, which would include—and

for the Postmaster General, I know you’re looking for legislation.

I have to tell you, what we probably need to do is bite the bullet

one time and figure out how we’re going to retire people that are

over 55 and have over 20 years of service to help get your number

down. Voluntary departures aren’t working. The fact is you have

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less than 1 percent—slightly more than 1 percent. You have the

lowest attrition; any private company would love to have the attrition you have. Basically, I mean, you still have two people that are

98 years old on the payroll. I mean, people don’t retire, do they,

Mr. Donahoe?

Mr. DONAHOE. They do retire, Mr. Chairman. We have reduced

the head count in this organization by about 215,000 since——

Chairman ISSA. But today you’re carrying over 100,000, almost

200,000 more people than you would need if you started the organization—wait a second, hear me out—if you started the organization

to do the job that you currently need to do, you built the facilities

you needed, and you hired the work force you needed, you would

need between 170,000 and 200,000 less people. You’re shaking your

head no. Governor Miller, if you built from ground up, you’d need

a lot less people, wouldn’t you?

Mr. MILLER. Right. You’re right, Mr. Chairman. And you’re right

on the basic principle. But I will defend, as I understand it, Pat

can correct me if I am wrong, but the $3.8 billion estimate includes

the problems of diminishing the number. So under this contract,

because business is contracted, you don’t realize all the flexibility

benefits right away. But your point is correct if you think about it,

and that is if you’re going to be contracting very fast, how do you

bring down the number of employees as rapidly as——

Chairman ISSA. OK. But I’ve got two more things in the short time remaining. Mr. Guffey, you said you have a $1,600 retirement.

Mr. GUFFEY. Sixteen, seventeen hundred.

Chairman ISSA. Now, that’s your retirement basically from your

military service, right?

Mr. GUFFEY. No.

Chairman ISSA. That is your Postal Service retirement?

Mr. GUFFEY. It’s my Postal Service retirement.

Chairman ISSA. OK. Do you have any other entitlement coming

now or in the future from your service at the post office?

Mr. GUFFEY. No.

Chairman ISSA. That’s it. OK. I just wanted to make sure we understood that.

I’ve got a chart I want to put up very briefly, because this is the

crux of one of our challenges. All of you have been talking about

prefunding and overfunding. When you look at that chart through

2016, which is the end of the prefunding period, it is higher, and

then it drops down. You all see that.

I want us to understand that every year you don’t prefund between now and 2017, you have to add it back on in the later years.

So one of the challenges I’m looking at is if we were to abate today

all your prefunding from now until 2017, although you would drop

down, in 2017 we’d be looking for $9 or $10 billion and every year

going up. So one of the challenges is even if we were to smooth it

out, unless we were to forgive essentially what you’re going to have

to pay, essentially you’re lowering it now, you will be raising it

then. Does anyone disagree with that?

Mr. MILLER. Yes. Because that chart includes a track that would

result in substantial overfunding of the account.

Chairman ISSA. OK. I’m going to ask one exit question here.

Chairman, you talked in terms of private corporations, and you’ve

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been very good on it, so I want to hold you to it. Are you willing

to do what they did in 1992, have Congress statutorily tell you that

if we’re not going to stand behind the pensions; whatever you pay

in, you pay in? Because if what you’re asking to do is to not

prefund, and you want to sort of be there where 1992 made it,

those private corporations, and I believe including United Airlines

who stuck the American people in their bankruptcy and others, basically they limited their contribution, and a default meant that the

retirees got less. If you don’t, as you call it, prefund, and then the

post office continues to drop off to where it’s not able to pay in the

amount because it simply would be too big a burden to have postal

carrying make sense, wouldn’t we ultimately end up with a Federal

responsibility?

In other words, today you’re saying you don’t want to—you call

it prefund, we call it fully fund on our side of the aisle—if you don’t

pay in now, and we were to say, you know what, we’ll give you the

abatement, but we’ll tie it to the default being a default that

doesn’t pay out, how would the letter carriers and others feel if

what we said was, you know, because you don’t want to pay it in,

we’ll do that, but then we won’t stand behind it with full faith of

the American people? How would they feel there?

Mr. GIULIANO. I don’t know how they would feel, but let me——

Chairman ISSA. Oh, you know how they’d feel, don’t you, chairman?

Mr. GIULIANO. Yes, I know.

Chairman ISSA. You’ll hear. You’ll hear unless you say, I know

they wouldn’t like that.

Mr. GIULIANO. I know they wouldn’t like there. But there is some

confusion, Mr. Chairman, I would like to straighten out, in all honesty.

Chairman ISSA. Of course.

Mr. GIULIANO. You’re referring to funding pensions, fully funding

pensions.

Chairman ISSA. But we were talking health care, but you used

the analysis of the pensions earlier on——

Mr. GIULIANO. No, no, no.

Chairman ISSA [continuing]. In health care.

Mr. GIULIANO. I—1992—it might not be the exact year——

Chairman ISSA. All right.

Mr. GIULIANO [continuing]. But close to that.

Chairman ISSA. That’s when General Motors had this huge

hit——

Mr. GIULIANO. That was—that was—that’s right. It was a book

hit, it was a balance sheet hit, it was not a cash hit. They chose

to determine what the liability levels were going to be for retiree

health care benefits, not pensions. Pensions are governed by a

whole different set of pension accounting rules, which for most public companies only require 80 percent funding based upon the upon

the actuarial needs.

Chairman ISSA. And that’s where I came up with what happened

in the case of United Airlines and others.

The fundamental question—my time has long expired, but the

fundamental question, I think, that we’re going to leave unanswered, but anyone can respond for the record, is isn’t it true that

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if we don’t fully fund by some way—not overfund, but fully

fund——

Mr. GIULIANO. That’s it.

Chairman ISSA [continuing]. That we leave the taxpayers of

America on the hook should the post office not be able to pay in

the future?

Mr. GIULIANO. We are paying. We are fully funding. The Postal

Service is fully funded for pensions and—overfunded for pensions,

both FERS and CSRS, and overfunded for retiree health care benefits.

All we’re saying is, as I said in my statement, we’re more than willing to continue paying. Of that $7.9 billion in 2011, that’s $51⁄2

plus $2, plus some other billion dollars that we are paying to make

sure that we’re fully funding the retiree health care benefits on the

actuarial needs.

What we’re concerned about, and what we’re asking for fairness

and a level playing field, is the $51⁄2 billion that came across in the

2006 PAEA that on an accelerated basis required to us prefund.

That’s what nobody else has to do. We want to stand behind these

responsibilities, we have been, we think we can.

Chairman ISSA. And I appreciate that.

I apologize, but I really have exceeded my time.

Mr. Cummings.

Mr. CUMMINGS. Let me ask you this, Mr. Donahoe. You are not

asking to eliminate prefunding, but to pay your retiree health benefits over—on a true-cost basis and spread it over 30 to 40 years

versus tackling the liability in 10 years; is that accurate?

Mr. DONAHOE. What we’re looking to do is get a true accounting

of exactly what we owe. We would not shirk our responsibility.

When we talk about 400,000 employees, that would include a

Postal Service that delivers mail 5 days a week, that has a substantial number of noncareer employees that would be not adding

onto that liability, and we could recalculate everything that we’ve

got going forward. That’s what we need to do, because until we do

that, you don’t really have an idea of exactly what’s owed.

Mr. CUMMINGS. Let me say this to you, Mr. Donahoe. I, too, join

my colleagues in applauding you for—and I say this very, very seriously—for hiring Ron Stroman. He did an outstanding job for us.

Sorry to see him leave. He helped us through our transition. He

was absolutely magnificent. And that means a lot to us to know

that he’s there, and we really do appreciate that.

Mr. DONAHOE. We agree with you. We’re very happy to have him.

Mr. CUMMINGS. One of the things that I wanted—both sides of

the aisle have said that this is not an attack on postal employees,

and it’s not. I don’t want one single postal employee—I have some

in my family, and I know how hard they work. Mr. Guffey, I understand, I really do understand, your emotion. You don’t have to

apologize for that, because you’re representing some people who

have already given a lot. They’ve given a lot.

I think anybody who looks at the fact that we—that 100,000 people—100,000 people, that’s a lot of people—since 2008 are no longer

working for the post office, that’s 100,000 families. I sit, Mr.

Guffey, on the Joint Economic Committee, and, you know, something interesting that I’ve noticed is that when the employment

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rate is 8.8 for the Nation, it’s 15 point something for African Americans, and the Hispanic rate is close behind. And then, you know,

so when you tell me, Mr. Donahoe, that we’ve got 40 percent minorities, that’s very, very significant.

I want to see the unemployment rate come down also, just like

all of us do. And when I hear about women, women, many of them,

I’m sure, single head of households, struggling every day, trying to

make it, many of them have lost their jobs; you know, when we

talk about these loss of jobs, I don’t want it to just be like collateral

damage.

Then we’re talking about veterans. Until I got deeply involved,

I didn’t know the post office hired this many veterans and took

care of the disabled veterans and gave them some dignity, instead

of having them, as I see them in the AMVET center in my district,

many times unable to find jobs and whatever. All of that is very

important. And I—and it would be—I cannot walk out of this room

without telling you all that I’m proud of the negotiations that

you’ve been involved in.

And, Governor Miller, I thank you for what you’ve said. I know

you have some differing opinions here and there. But you said several things. You said we are a collegial body. But you said something else that is so significant. You said, I think, I really believe,

that Mr. Donahoe is doing a great job. And that’s what it’s all

about.

What I’m saying to you is that sometimes—one of the things I

try to do with my kids is I try to be careful that I just don’t say

the negative when they do something wrong; I try to make sure I

compliment them for doing something right. And sometimes I get

a little bit upset that we don’t root for the home team, for the team

that is doing it right.

And you said something to me, Mr. Donahoe, yesterday that I

hope you don’t mind me sharing. You said that if all the unions

work with you like Mr. Guffey’s union worked with you, we could

solve all kinds of problems. And so I just—again, Mr. Guffey, the

reason why I’m talking about this is because I know that there are

people—you have employees who are sitting there saying, you

know, we’re going to get 10 percent; new people saying, we’re going

to get 10 percent less. I know they are sitting there saying, we’re

not going to get a raise for 2 years. They’re sitting there saying,

you know, a lot of our colleagues have already gone for whatever

reasons. But I want them to know that a grateful Congress appreciates what they do every day.

When I look at my mailman in the rain and snow, and although

I was kidding a little bit, I’m serious, seeing dogs run after them—

I don’t know how many Members of this Congress would walk up

and down steps, up and down steps in the hot sun delivering mail,

and then many instances going through all kinds of difficult circumstances. In my neighborhood, I live in the inner city of Baltimore, you may not even find a mailbox to put the mail in. But

some kind of way they do it over and over and over and over again.

They get up and they do it. And I think that we need to take a

time-out and applaud them for what they do.

And I just—I know that public employees are catching hell from

all levels and being constantly told that they are not doing this, not

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doing that, but the fact is they are doing a lot of wonderful great

things. And again, I want to thank you, Mr. Chairman, for calling

this hearing, and may God bless you.

Chairman ISSA. I thank the ranking member.

I would like to thank the witnesses for their testimony.

In closing, I would like to echo what the ranking member just

said. This hearing has said in no uncertain terms hard-working

men and women of the post office, not just this particular union

that we—contract we talked about, but all of the workers—I think

on both sides of the aisle we’ve talked in terms of how do we get

to a fair pay-in for the various future obligations of the post office,

and, in fact, how do we get to the right number of postal workers.

I think we can all be proud on both sides of the aisle. This has

not been about any kind of cheap shots on the post office, postal

workers, who have dramatically improved their productivity, whose

rating by the American people continues to be high for customer

satisfaction, but simply a matter of how do we get to the right

number and the right recognition of obligations now and in the future to meet a mandate that this Congress has voted for and reiterated repeatedly when it came to the self-sufficiency of the post office. The ranking member and I take very seriously our unique obligation to oversee the post office and to, in fact, bring such laws

as may be necessary to incorporate that.

In closing, we did talk about one particular piece of legislation.

I believe that both the Republicans and Democrats here are going

to have to work on a number of pieces of legislation in order to help

the post office control its own destiny, free up the post office to

enter markets appropriately, and, most importantly, to get to the

right number. I can’t from the dais—and I know the ranking member would share this with me—we can’t tell you what the right

number to pay in is. We can’t tell you whether the administration’s

refusal to look at FERS is appropriate or not. But this committee

will hold hearings, we will get—reach out to the experts to try to

find those right numbers, and if those numbers need to be adjusted, you have my assurance, and I believe you have the assurance of every member on this committee, that we will work for

those right numbers regardless of the scoring or other technical

hurdles, because we do want the independence of the post office to

be about your taking responsibility for your costs and us staying

out of your way.

So once again I thank you. You’ve had many questions unanswered. I would invite you to use the next 7 days to revise and extend in any way you see fit, and they will, without objection, all

be included in the record.

We stand adjourned.

[Whereupon, at 12:46 p.m., the committee was adjourned.]

[The prepared statements of Hon. Dan Burton and Hon. Cathy

Morris Rodgers, and additional information submitted for the hearing record follow:]

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