U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

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

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

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

56–146 PDF 2010

S. Hrg. 111–567 

NOMINATION OF HON. ALAN C. KESSLER 

HEARING 

BEFORE THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

OF THE

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

NOMINATION OF HON. ALAN C. KESSLER TO BE A GOVERNOR, U.S. 

POSTAL SERVICE 

NOVEMBER 19, 2009 

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

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 
(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

ROLAND W. BURRIS, Illinois 

PAUL G. KIRK, JR., Massachusetts 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

JOHN MCCAIN, Arizona 

GEORGE V. VOINOVICH, Ohio 

JOHN ENSIGN, Nevada 

LINDSEY GRAHAM, South Carolina 

ROBERT F. BENNETT, Utah 

MICHAEL L. ALEXANDER, Staff Director 

KRISTINE V. LAM, Professional Staff Member 

JOHN P. KILVINGTON, Staff Director, Subcommittee on Federal Financial Management, 

Government Information, Federal Services, and International Security 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

JENNIFER L. TARR, Minority Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

PATRICIA R. HOGAN, Publications Clerk and GPO Detailee 

LAURA W. KILBRIDE, Hearing Clerk 
(III) 

C O N T E N T S 

Opening statement: Page 

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

Prepared statement: 

Senator Carper ................................................................................................. 15 

WITNESSES 

THURSDAY, NOVEMBER 19, 2009 

Hon. Robert P. Casey, Jr., a U.S. Senator from the State of Pennsylvania ....... 3 

Hon. Alan C. Kessler to be a Governor, U.S. Postal Service ............................... 5 

ALPHABETICAL LIST OF WITNESSES

Casey, Hon. Robert P., Jr.: 

Testimony .......................................................................................................... 3 

Kessler, Hon. Alan C.: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 17 

Biographical and financial information .......................................................... 19 

Responses to pre-hearing questions ................................................................ 37 

Letter from the Office of Government Ethics ................................................. 53 

Responses to post-hearing questions .............................................................. 54 

(1) 

NOMINATION OF HON. ALAN C. KESSLER 

THURSDAY, NOVEMBER 19, 2009 

U.S. SENATE, COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Committee met, pursuant to notice, at 2:32 p.m., in room 

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

presiding. 

Present: Senator Carper. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. The Committee will come to order. Today, we 

are going to be considering the nomination of Alan Kessler to remain a member of the Postal Service Board of Governors. Normally, I would say before I give my opening statement that I would 

like to recognize the junior Senator from the Commonwealth of 

Pennsylvania to introduce our witness, and when Senator Casey 

arrives to introduce our witness, I will yield to him. 

The clock tells us a vote has just begun, the first of three, so 

what I would like for us to do is go ahead and go as far as we can 

on an opening statement from me, an introduction from Senator 

Casey, and maybe get into Mr. Kessler’s comments, and then we 

will break when we have to for three votes in a row, recess, and 

come right back. 

But Mr. Kessler is no stranger to this Committee nor to the 

State of Delaware. He was confirmed by the Senate to serve on the 

Board of Governors in 2000, and over the course of his term on the 

Board, he has served as Vice Chair and Chair and has been an active, dedicated leader at the U.S. Postal Service (USPS) during a 

number of difficult years. 

Mr. Kessler is no stranger to me personally. Mr. Kessler grew up 

in Delaware. He is now our neighbor to the north. Actually, his 

parents were a neighbor to my family in the northern part of the 

City of Wilmington. He grew up in Delaware, graduated from the 

University of Delaware. He is a Blue Hen, not a Mud Hen, and 

now lives in Pennsylvania. He serves as an attorney in Philadelphia and serves as a longtime leader in a number of ways in his 

community. 

I would just say to Senator Casey, I have never seen a nominee 

with a list of references and activities and so forth as long as this 

one. It is amazing. 

I am delighted that the President has decided to renominate Mr. 

Kessler at a time when we know it is very tough sledding for the 
2 

Postal Service. The Postal Service recently filed its financial statements for fiscal year 2009, and the data included in that filing 

showed a decline in mail volume of nearly 13 percent, and that resulted in a year-end loss of some $3.8 billion, up from $2.8 billion 

in the previous fiscal year. 

This loss came despite the fact that the Postmaster General and 

his team, including the Board of Governors, were able to achieve 

more than $6 billion in cost savings over the course of a single 

year, and it would have been significantly higher, about $7.8 billion, to be exact, if Congress and the President had not acted at 

the end of September to reduce the size of the Postal Service’s overly large retiree health prefunding payment. 

The projections for the current fiscal year, frankly, do not look 

a whole lot better than the results for fiscal year 2009. Despite an 

expected recovery in at least some areas of our economy, the Postal 

Service is anticipating a further decline in mail volume. This is not 

as steep as what we have seen in the last 12 or 13 months, but 

a decline nonetheless. That decline is coupled with the fact that 

savings are going to be harder to come by this year. The low-hanging fruit, such as it is, has been plucked. But it is going to result 

in the kind of massive $7 or $8 billion loss that we were expecting 

right up until the end of fiscal year 2009. 

Congress must address this problem by finishing the work that 

we began in the Continuing Resolution and permanently restructuring the Postal Service’s retiree health obligation in a more rational way. The payments the Postal Service is required to make 

under the current law are simply unaffordable, especially during 

such difficult economic times when the Postal Service is already 

losing customers to electronic forms of communication. 

And I will also note that those payments are not related at all 

to what the Postal Service owes to its future retirees. I have introduced legislation, along with some of my colleagues, to address this 

problem. It has been reported out of this Committee, and I hope 

it can be considered in the full Senate, if not this year, then early 

next year. 

Another thing Congress can do is leave the day-to-day management of the Postal Service to the Postal Service. Too often, those 

of us here in the Senate and the House stand in the way of the 

Postal Service’s efforts to streamline operations and remove excess 

capacity, especially when it comes to closing or consolidating retail 

and processing facilities. 

We also, unfortunately, prevent the Postal Service from changing 

delivery frequency to adjust to the changing mailing economy. 

Studies have shown that the elimination of Saturday delivery alone 

could save the Postal Service upward of $3 billion per year, and I 

would note that is not an idea without controversy, so let the 

record show that. But in many ways, I think we need to let Postal 

Service management do what it needs to do to manage its way 

through the crisis it currently faces. 

Mr. Kessler, you have about a decade’s worth of experience in 

making these kinds of decisions as a member of the Board. Your 

tenure started with the financial crisis and coincided with the September 11, 2001, attacks, anthrax in the mail, and now another fi-
3 

nancial crisis, perhaps the worst we have seen in decades. Some 

might say that you just are plain bad luck. [Laughter.] 

I would not say that, but some might say that. [Laughter.] 

So I am pleased nonetheless that you are willing to take that experience and apply it to yet another term, 7 years this time, on the 

Board. I look forward to spending some time with you this afternoon exploring how you would use your experience and knowledge 

of postal issues to continue the Postal Service’s streamlining efforts 

and, perhaps more importantly, help lead the way in efforts to attract new business and retain what is already there. 

And Senator Casey, you have been great to join us, and I would 

love it if you would introduce your friend and mine, Mr. Kessler. 

TESTIMONY OF HON. ROBERT P. CASEY, JR., A U.S. SENATOR 

FROM THE STATE OF PENNSYLVANIA 

Senator CASEY. Mr. Chairman, thank you very much for this opportunity. I am honored to be here today. I know that a vote has 

just started, so I will be brief—as you know, when a Senator can 

be brief like you and I are trying to do, that is hard to do sometimes in the Senate, but we are going to do it. 

Senator CARPER. But we are better at it than most. 

Senator CASEY. Let me say first, Mr. Chairman, thank you for 

your leadership on so many issues. I never had a chance to talk 

to Mr. Kessler about this particular topic, meaning your leadership 

when I started here 3 years ago. Senator Carper has been a great 

mentor to those of us who are new, and now we have two new 

classes here. We are grateful for that. 

Senator CARPER. Let the record show, Senator Casey and I mentor each other. [Laughter.] 

We are support groups for one another. 

Senator CASEY. Thank you very much. I am honored to be here 

to introduce or in large measure to reintroduce Mr. Kessler to this 

Committee and to this continuation of his public service. 

I have known him a long time, and I have to admit up front that 

I do not sit here infused with objectivity because I have known him 

and I have strong feelings for him as a friend, but probably more 

importantly, I know his commitment to public service at a time 

when we need more people who are willing to dedicate a portion 

of their life to service to our country. 

In the case of Mr. Kessler, he served the United States of America, the Commonwealth of Pennsylvania, and the City of Philadelphia, as well as other assignments. I do not want to get into every 

detail of his life, but I do want to highlight a couple of his professional achievements and associations. 

As a partner at the Duane Morris Law Firm, Mr. Kessler has 

handled complex litigation and worked on behalf of a wide range 

of clients, including not only Fortune 100 companies, but also the 

Commonwealth of Pennsylvania, the City of Philadelphia, the 

Philadelphia Housing Authority—that is one I didn’t mention—as 

well as other governmental agencies. He has served as a Township 

Commissioner, that alone merits commendation. Anyone who 

serves in local government is committed and brave at the same 

time. But he has been a member of the Philadelphia Planning 

Commission, a member of the Board of Directors of the Greater 
4 

Philadelphia Chamber of Commerce, the Philadelphia Industrial 

Development Corporation, and the Central Philadelphia Development Corporation. 

He has had a strong commitment, I believe, over all these years 

to the U.S. Postal Service, which is now, over the last decade, as 

the Chairman noted, serving as Governor since November of 2000, 

Vice Chairman of the Board from January 2005 to January 2008, 

and Chairman from January 2008 to January 2009. 

His interest in and experience with the Postal Service, as well 

as his years of service in economic development efforts, serve the 

agency well as it continues to face challenges in a turbulent economy. 

Chairman Carper mentioned those challenges, and I know that 

Mr. Kessler has already demonstrated that he is up to the job. We 

are grateful that he is willing to continue to serve, and I strongly 

and unreservedly am here to commend his work and also to urge 

his prompt, speedy, and expeditious confirmation. 

Thank you, Mr. Chairman. 

Senator CARPER. Senator Casey, that means a lot to me, as I 

know it does to Mr. Kessler, that you are here, by his side, and you 

have these wonderful things to say about him. We thank you very 

much. 

Senator CASEY. Thank you. 

Senator CARPER. I am told by my staff here that we have about 

6 minutes to go on this first vote, so feel free to head for the floor. 

I am going to have Mr. Kessler raise his right hand in just a 

minute. We are going to swear him in and then take a break and 

come back and hold our hearing. But thank you so very much. It 

is great to see you. 

Mr. Kessler has filed responses to a biographical and financial 

questionnaire. He has also answered pre-hearing questions submitted by the Committee. In addition, his financial statements 

have been reviewed by the Office of Government Ethics. 

Without objection, this information will be made part of the hearing record. The financial data, however, will remain on file and 

available for public inspection in the Committee offices. 

The Committee rules require that all witnesses at nomination 

hearings give their testimony under oath, as Mr. Kessler knows. I 

am going to ask you to remain standing and to raise your right 

hand as I administer this oath. 

Do you swear that the testimony you will give before this Committee will be the truth, the whole truth, and nothing but the 

truth, so help you, God? 

Mr. KESSLER. I do. 

Senator CARPER. Please be seated. 

At this time, I had hoped we would have time for you to go ahead 

and give your opening statement and then I would run and vote, 

but I think I will miss my vote if we do that. So I am going to recess the Committee for probably the next 30 minutes. We have 

three votes right in a row. I should be back in about 30 minutes. 

I apologize for that, but sometimes my day job gets in the way of 

these hearings. 

Mr. KESSLER. Thank you, Mr. Chairman. 

Senator CARPER. I will be back shortly. Thanks. 
5 

1The prepared statement of Mr. Kessler appears in the Appendix on page 17. 

In the meantime, the Committee stands in recess. 

[Recess.] 

Senator CARPER. All right. Enough fun. Now back to a hard day’s 

night. 

Well, so far, I have been able to give an opening statement. Senator Casey came by and gave really an uplifting introduction of our 

nominee. We have asked Mr. Kessler to take an oath, and he has 

done so. I think the next thing to do is to call on him to make his 

statement. 

Please proceed and then I will ask some questions. 

Mr. KESSLER. Well, thank you, Mr. Chairman. 

Senator CARPER. Thank you all for your patience. 

Mr. KESSLER. Our staff from the Postal Service says I have done 

a great job so far saying, ‘‘I do,’’ so I am going to try to follow that 

up. 

TESTIMONY OF HON. ALAN C. KESSLER1 TO BE A GOVERNOR, 

U.S. POSTAL SERVICE 

Thank you, Mr. Chairman, and I do want to thank you and 

Members of the Committee for holding this hearing this afternoon. 

I am grateful to President Obama for nominating me to a second 

term as a Governor of the U.S. Postal Service. I appreciate the 

Committee’s actions in taking up my nomination so quickly. 

I do want to add, on a personal basis, that I would like to thank 

the Chairman for your continued accessibility and your very genuine interest and concern for Postal matters. I have enjoyed working with you to address Postal issues and certainly hope to be able 

to continue those efforts over the next several years, so thank you 

very much, Senator Carper. 

I would also like to thank my other longtime friend from Pennsylvania and a great public servant, Senator Bob Casey, for taking 

the time out of his schedule. I know how busy things are these 

days. So although he has gone on to better things, thank you very 

much, Senator Casey, for doing this. 

Mr. Chairman, I have been asked why, given the rather dire financial condition of the Postal Service, I would want to serve a second term, and to that I have a simple answer. In my 9 years of 

service on this Board, I have had experience with challenges, the 

likes of which I never would have anticipated when I was first 

nominated. As you alluded to, at my very first Board meeting, the 

governors were discussing the impending loss of a half-a-billion dollars. Now, I thought they said a half-a-million dollars, and at that 

point I wondered what I had gotten myself into. 

But shortly thereafter, it was the September 11, 2001, terrorist 

attacks and the anthrax attacks, which shook the Nation, the mailing industry, and the Postal Service. A number of challenges have 

followed since then, and those challenges have been significant, but 

none more so than the current fiscal crisis. Quite frankly, I would 

not want to leave the Board in the middle of those efforts, and if 

confirmed, I hope to have a hand in returning the Postal Service 

to solid fiscal health. 
6 

Since 2003, I have served as a member or chair of the Strategic 

Planning Committee of the Board, and I served as vice chairman 

of the Board from 2005 to 2007. I was greatly honored to serve as 

chairman of the Board in 2008. During my tenure, I instituted regular meetings between the Board as a whole and various stakeholders. I reorganized the Board’s committees to have a full standing committee dedicated to government relations to allow for a 

more robust interaction between the Board and Congress. I was 

also the first chairman of the Board to address a convention of one 

of the Postal Service’s major labor organizations. 

As an individual member of the Board, I have spoken regularly 

with individual stakeholders one-on-one to hear their unique perspectives on the many challenges facing the Postal Service and 

their ideas for addressing those challenges. 

The role of the Board of Governors is to set policies and goals for 

Postal management and to provide oversight to management in the 

achievement of those goals and policies. I have used my background as a business lawyer and as a former elected official in reviewing Postal issues and solutions. I have applied my legal experience to analyze the issues, and I have used my government experience to interact with the general public and elected officials and to 

ensure that our stakeholders are fully engaged. 

I believe my 9 years of experience as a governor will be useful 

in guiding the Postal Service forward during this very troubling financial crisis. I am hopeful of having the honor and privilege of 

continuing my commitment to the Postal Service and of helping to 

restore the Postal Service to fiscal stability. In short, I am dedicated to the goals we all share, protecting the immediate and longterm viability of America’s Postal system and the American public’s 

need for universal mail service. 

Again, I thank you very much for holding this hearing, and at 

this point, I will be happy to answer any questions that you have, 

Mr. Chairman. 

Senator CARPER. Thank you very much, Mr. Kessler. 

I will start off by asking you three questions that you have been 

asked before, and they are ones that we ask of all of our nominees 

who come before us. 

Is there anything you are aware of in your background that 

might present a conflict of interest with the duties of the office to 

which you have been nominated? 

Mr. KESSLER. No. 

Senator CARPER. That is the best answer. 

Mr. KESSLER. Thank you. 

Senator CARPER. Do you know of anything, personal or otherwise, that would in any way prevent you from fully and honorably 

discharging the responsibilities of the office to which you have been 

nominated? 

Mr. KESSLER. No. 

Senator CARPER. Do you agree without reservation to respond to 

any reasonable summons to appear and testify before any duly constituted committee of Congress if you are confirmed? 

Mr. KESSLER. Yes, I do, Mr. Chairman. 

Senator CARPER. Thank you. 
7 

I have a number of policy questions. As I think I noted in my 

opening statement, the Postal Service suffered, as you know, very 

substantial losses in fiscal year 2009 and is projected to lose, I 

think, an even greater amount of money this year. If confirmed, 

would you explain for us how you would work with your colleagues 

on the Board of Governors and with senior Postal management, 

and I would add to that labor organizations, organizations representing the Postal employees, to attempt to minimize the financial impact of the loss in revenue that the Postal Service is currently experiencing? 

Mr. KESSLER. Thank you, Mr. Chairman. Let me say that since 

I have been on the Board, we have worked on cost issues, never 

more so than over the last few years. The Postal Service faces three 

main challenges: The continued diversion of mail by electronic 

means; the impact of the worst recession in 70 years; and as the 

Chairman noted at the outset, the impact of the requirement to 

prefund retiree health benefits. 

We have continued to address those problems as well as to work 

with management to find new ways to increase volume, new customers, and retain our customers. We are also looking to identify, 

if necessary, Mr. Chairman, legislative alternatives or remedies to 

this. 

Since I have been on the Board, over the last 8 years, senior 

management has worked well with the Board to identify costs. As 

you know, we have taken $13 billion in costs out of our structure. 

That includes $6 billion this past year alone. We have worked hard 

on the cost side of the ledger. 

And at the same time, Mr. Chairman, it is important that we 

have worked to maintain service levels. You talked about labor and 

our workforce. Because of the great job done by our Postal family 

workforce, we had our highest service levels ever. So at the same 

time we have taken $6 billion out this past year, service levels 

have been high. 

The trick is to continue to cut costs. Our Postmaster General has 

identified over $2 billion in additional costs that we will take out 

over our fiscal year 2010. But we cannot, unfortunately, do it alone. 

Congress was great in helping us through this crisis this past 

year with respect to prefunding our retiree health benefits. That 

was a one-year help. I do not want to go too far afield, and I will 

be happy to talk more about the retiree health benefit issue, but 

in addition to that, we also need to confront and ask Congress for 

authority to move from 6 to 5-day delivery. That is not something 

that any of us, myself included in the 9 years, have gotten to summarily. We have addressed that issue. We have debated it in the 

past. And that is something we are also going to need help on. 

I do not know if that answers your question or if you would like 

me to discuss the labor issue. 

Senator CARPER. Again, the question was focused more on how 

to grow revenues. The Postal Service had a couple of, I think, interesting and successful campaigns, the flat rate box campaign, the 

summer sale and fall sale. I understand that the Postal Service 

may start selling greeting cards in its retail outlets—maybe you 

have already started doing that, I am not sure—which seems to me 
8 

to be a logical extension of what is already part of the business 

strategy of the Postal Service, not inconsistent. 

I understand that the Postal Service may have some interest in 

looking at other commercial ventures which could have the effect 

of raising revenues. I am not sure what they are. I understand they 

may need legislative approval. I am not positive, though. If you 

could cast any light on that—— 

Mr. KESSLER. Sure. 

Senator CARPER [continuing] Without breaking any secrets or 

confidences, I would appreciate it. 

Mr. KESSLER. Well, Mr. Chairman, the reality is that in addition 

to spending a tremendous amount of time on the cost side of the 

ledger, we have also done the same thing on the revenue side. I 

chaired the Postal Service Strategic Planning Committee for a 

number of years, and we have heard on a continuing basis from our 

new President of Mailing and Shipping Sources, Bob Bernstock, on 

ideas, some of which you have already mentioned, that they have 

come up with to help increase sales and volume. It has not, therefore, just been about cuts. It has also been a significant amount of 

time on the revenue side. 

Some of what you have mentioned, the summer sale, and I would 

expect, without divulging secrets or confidences, you will probably 

see the same type of sale on the winter side—— 

Senator CARPER. I would be surprised if we did not. 

Mr. KESSLER. Hopefully, we do. The advertising that you have 

talked about, it seems that everyone in America is talking about 

it. The flat boxes have caught hold. They have been a great jolt. 

The Board’s role is to set broad policies and goals. We are not a 

Board that micromanages. On the other hand, we are a Board that 

wants to know how management attempts to achieve those goals 

and policies and then talks to us about it. We do not meet four 

times a year. We meet almost monthly, and we meet in committees, and we go over these things. We do not micromanage, but we 

do provide oversight, and we want to know what is working and 

what is not working. That includes the Postal revenue side. 

The issue about what other products or services we should offer, 

it is true, we are not going to be able to go forward in the future 

simply on what some might call traditional Postal products. We do 

understand we have to run some of these by the Postal Regulatory 

Commission, and with the greatest respect to the Postal Regulatory 

Commission, it would be helpful if we had a little flexibility there. 

We have talked about a product like stored value gift cards. The 

Postal Regulatory Commission has said, no, that is not a traditional Postal product. If we are not given the flexibility there, then 

I suspect we are going to have to come back to Congress and get 

that flexibility to do those kinds of things. 

I wish I could be a little more specific in terms of the kinds of 

products and services that might be out there in the future. Senior 

management has assured the Board that they are working on a 

study on additional products and services. They will come back to 

us. Hopefully to the extent we can proceed with those without Congressional approval, we will. As I said, I wish I could tell you more, 

but we don’t have that full study at this point. But I can assure 
9 

you that the Board is very interested and diligent in pushing the 

revenue and new product side as much as the cost side. 

Senator CARPER. It is not enough for the Congress to criticize the 

Postal Service for rolling up ever-larger deficits, and to the extent 

that there are reasonable ideas that will help on the revenue side 

or reasonable ideas that will help on the expense side, we need to 

be more open to those than we have been in the past. 

We have already touched a little bit on my next question, which 

deals with the prefunding of future health obligations. I will come 

back to you just briefly and ask you to reiterate for us, in your 

view, how important is it for those of us in Congress to find some 

way to permanently restructure the Postal Service retiree health 

obligation? 

Mr. KESSLER. Well, first of all, Mr. Chairman, let me say that 

when this arose in the 2006 reform discussions and then as law, 

I do not think anybody at that point could have foreseen the recession, the size and the impact that it has had on the Postal Service. 

So now we roll forward a couple of years, and again, we have taken 

$13 billion in costs out, $6 billion in one year alone, and yet in that 

one year that we already took $6 billion in costs, we would not 

have been able to make the payment to the Treasury in September 

if we had not received relief from Congress. 

That is going to continue. I note that I do not know that there 

is another Federal agency, or for that matter a private employer, 

that has such a prefunding obligation. And we are being told now, 

Mr. Chairman, that we expect to lose $7 billion in 2010, possibly 

$11 billion in 2011. It is imperative that everyone know that September will roll around and we will not be able to make that payment unless we get relief. What is envisioned by the Senate bill, 

it is hoped, is not another one-year relief. 

This is going to continue to be something that we are going to 

have to face, and it is imperative that we get this relief. In terms 

of the short-term relief we need and then long-term relief, this is 

No. 1 on the list. 

Senator CARPER. Is it also No. 2 and 3? [Laughter.] 

Mr. KESSLER. It is No. 2 and 3. 

Senator CARPER. All right. A different topic. As you know, the 

Postal Service receives criticism whenever it attempts to close or 

to consolidate facilities. What do you think the Postal Service needs 

to do to address this criticism and, where necessary, eliminate excess retail and processing capacity? 

Mr. KESSLER. Well, these are tough times, Mr. Chairman. Anything that the Postal Service does to address those tough times is 

going to impact somebody. And we can talk about 5-day delivery. 

Whatever we talk about is going to impact stakeholders, and that 

is true with consolidations. 

Again, it is important to note the distinction and the roles. The 

Board sets policies and goals. We do not tell senior management, 

well, you should close this facility or consolidate this facility but 

not that facility. We do get a full briefing. What we do ask for is 

that our stakeholders and our elected officials—Senate, Congress— 

be fully advised and informed and engaged. Engaged means that 

there be a discussion and not a decision and it is a done deal. 
10 

The reality is that our volume has shrunk considerably, and we 

have talked about ways to get that volume up. But our volume has 

dropped 27 billion pieces of mail, from 202 billion to 175 billion. I 

think it would be irresponsible as that volume shrinks to not also 

look for ways to shrink the network, to ask the questions whether 

a facility is absolutely necessary in this economy with that volume, 

and if not, for ways to look to consolidate. 

But there are two questions or two issues there. Is there a need 

to consolidate, and then how are those consolidations carried out? 

Is there a process set up by which there is communication with 

stakeholders and an opportunity to be heard? And I believe there 

is that for most consolidations. 

I should say that, in addition to those discussions involving senior management, our Board is also very much engaged, both in general and in individual decisions. I have told the story often, but one 

of the first consolidations we did was in Western Pennsylvania. I 

do not know how the decision got out, but our Governor of Pennsylvania, Ed Rendell, and Senator Arlen Specter had me on the phone 

within hours. I am one Board member, but I spoke to our Deputy 

Postmaster General. We set up a discussion, not with Senator 

Specter and Governor Rendell, but with three county commissioners that were impacted in Western Pennsylvania by this decision. And it turned out there was a lot of, not surprisingly, misinformation. We went through it, and there was a good discussion. 

At the end of the day, that consolidation took place. But I think 

everybody was pleased with the information they received. 

It just highlights the importance of good communications, not 

just making decisions and having folks like you find out about it 

when it is too late, but having a process in place to engage the 

stakeholders. 

Senator CARPER. Good points. In the past, I have spoken about 

the need for the Postal Service not just to focus on closing facilities, 

but also on expanding access to the services that it offers. This does 

not necessarily mean building new post offices, as you know, but, 

where appropriate, expanding access to alternative retail, such as 

Automated Postal Centers, centers located in places where people 

go everyday, such as our pharmacies or grocery stores. 

I do not know why, but I am always surprised when I am in a 

supermarket and the person in line in front of me not only buys 

their groceries, but also buys their postage stamps there. I should 

get over that surprise, but it occurs fairly regularly. I have not seen 

anybody order and buy stamps in pharmacies, but I am sure they 

do, but certainly in grocery stores. 

What do you think the Postal Service can do? What more can the 

Postal Service do in this area, and you may also use this as an opportunity to talk about purchases online. 

Mr. KESSLER. Well, let me just say that I am right there with 

you. When you are in a supermarket, which I hate to say I do not 

get to that often, we need to make postage more accessible, in more 

places, as long as we are doing it appropriately and under our collective bargaining agreements. 

It is important to note, Mr. Chairman, that what you have seen 

and what you talk about did not just happen by accident. Thirty 
11 

percent of our sales, give or take, is from these alternate retail 

channels. 

Senator CARPER. Let me just interrupt you, if I could. Thirty percent? I am surprised that it is that high. Can you give us some idea 

if it is 30 percent and flat, 30 percent and growing, 30 percent and 

coming down? 

Mr. KESSLER. I believe it is 30 percent and growing. 

Senator CARPER. I see heads in the audience nodding yes. 

Mr. KESSLER. Thank you. Thank you for that support. The important thing to note, Mr. Chairman, is that it did not just happen 

by accident. These are strategic decisions, and again, doing so within the framework of our collective bargaining agreements. And it 

is something that will continue. 

We, as I said before, are looking for a report from staff in terms 

of new products and services that kind of plays into this, but we 

expect that what you saw and what you are looking for are going 

to continue. Hopefully when I come back the next time, the 30 percent will be more like 40 or 45 percent. 

Senator CARPER. Would you comment for us a little bit about 

how the Postal Service uses the Internet to provide services? I 

should know that. I just do not know. 

Mr. KESSLER. I should know that, too. The Postal Service has 

spent a lot of time and thought on the Internet. We had a great 

exhibit a couple of months ago about a new Website design, and 

it is absolutely incredible—the interactive way that the designers 

have engaged those who go online to the Website, by not only making our products available, but by showing the benefit of using 

USPS. 

So I do not know that we have tried out the new Web design yet, 

but it will be great. You can have John show you, or somebody else, 

when we are ready to unveil it—— 

Senator CARPER. You mean John Kilvington, who is sitting right 

behind me? 

Mr. KESSLER. That same John—even for those of us who are not, 

let us say, technical geniuses, we have given it a great deal of 

thought. Obviously, where we are losing most is with the younger 

generations who are not using the mail the way we did. I think 

through this Web design and our focus on the Internet, hopefully, 

we will bring those generations back into the mail. 

Senator CARPER. I am going to ask you to just respond further 

on this point for the record. Can you talk a little bit about what 

is being done now and what is being contemplated in the near future—— 

Mr. KESSLER. I would be happy to do so. 

Senator CARPER [continued] To use that as part of the growth engine for the Postal Service? 

We have talked about this a little bit already, but I want to come 

back to it. One of the biggest issues, in some cases a fairly controversial issue, the Congress and the Postal Service may face in 

the coming years is the question of whether delivery frequency 

should be 6 days a week or whether it should be 5 days a week, 

perhaps by eliminating Saturday delivery. How important do you 

think it is that Congress allow the Postal Service to make the busi-
12 

ness decision to eliminate a day of delivery if doing so is deemed 

necessary? 

Mr. KESSLER. Mr. Chairman, let me say that I know this is an 

issue that does affect stakeholders, some more than others. We 

have had a number of discussions. When I was chair, one of the 

things that I instituted was regular meetings with our stakeholders, that is, our mailers and labor. We had a meeting with a 

number of our major mailers just 2 months ago during a retreat 

that we had, and probably the No. 1 topic, other than whether we 

were going to have another price increase, was 5-day delivery. 

It is a challenging issue and it is one that I have struggled with. 

As I may have mentioned earlier, since I have been on the Board, 

we have discussed 5-day delivery, in addition to the most recent 

discussion, twice in the past. We decided because of the impact on 

stakeholders and for other reasons not to go down that road. 

That was before we took $13 billion of costs out and another $2 

billion this year. I don’t want to say we are at the end of the road 

on taking costs out and further cuts in our workforce, but that 

alone is not going to do the trick. We have to look for different alternatives, whether it is, as we discussed, consolidating facilities. 

In our opinion at this time, 5-day delivery is the only pragmatic 

structural change that will generate the kinds of savings we are 

talking about, $3.4 billion according to our studies. 

Senator CARPER. Say that amount again. 

Mr. KESSLER. Three-point-four billion dollars. Senator, you may 

have seen opinion surveys. USA Today did one. Rasmussen, which 

does surveys, did one. They show that the American public is OK 

with it, at least when compared to other alternatives like price increases, and that the public can live with 5-day deliveries in this 

new economic reality. 

As I said, we did have discussions with mailers. We know some 

it will impact more than others. I am hopeful that we find a way 

to do 6-day delivery for those who absolutely need it, even if there 

is an additional fee or charge involved. 

We know we will lose volume, or we are told we will lose some 

volume. It is possibly up to a half-a-billion dollars, $500 million of 

lost volume. I am not even sure about that, but what I am sure 

about is when you net that out, you come away with $3.4 billion 

in savings. 

We would not be so decided that this is a way to go if it was not 

such a dire financial situation. 

Senator CARPER. Thank you. I may ask you for the record to let 

us know what some other countries are doing in this regard, 5 days 

a week. I will probably ask you for the record whether or not there 

are some countries that may normally do 5-day-a-week delivery, 

but during certain times of the year, they may offer service more 

frequently, maybe six times a week, and if you could respond for 

the record on that, that would be great. 

Mr. KESSLER. Mr. Chairman, I think it is a great question. I am 

unable today to respond, but I think it is a question that I am not 

sure we asked. If we did ask it, I am not sure what the answer 

was. So if we can supplement the record and get back to you with 

our answer—— 

Senator CARPER. That would be great. 
13 

Mr. KESSLER. Thank you. 

Senator CARPER. The last question that I have is the following 

one. The Postal Service receives a fair amount of criticism due to 

the fact that its labor costs are such a large percentage of total 

costs, maybe as much as 80 percent. Where do you think the Postal 

Service and its employees have been successful over time in controlling labor costs and where do you think there might be opportunities for future savings? 

Mr. KESSLER. Mr. Chairman, first, I want to use this opportunity 

to say that in an extraordinarily difficult year where, as I said before, we made $6 billion in cuts, most of those workforce related, 

we had historically our highest service levels ever. That is due in 

no small part to the great job that our workforce has done. 

In looking at labor, 80 percent of our costs, it is important to 

note that, again, we have already taken $13 billion in cuts, and 

much of that has been in workforce and labor. When I went onto 

this Board, the Postal Service had somewhere in the neighborhood 

of almost 800,000 employees, some 780,000 employees. It is now 

down to 620,000 or thereabouts. In this last year alone, we took 

114 work hours out of our—— 

Senator CARPER. A hundred-and-fourteen? 

Mr. KESSLER. A hundred-and-fourteen-million work hours, I am 

sorry. And we have done this while following our collective bargaining agreements. 

We have in place a great mechanism for labor to communicate 

with senior management, and for that matter, for labor to talk to 

the Board. I mentioned the fact that we have regular meetings 

with our stakeholders, including labor. I addressed a major labor 

convention. Our future depends, as we have discussed a number of 

times, not only on cutting costs, but on increasing volume, and to 

that, we have to look to continued good service by our workforce. 

So in the final analysis, labor and management must come together and address these issues in a collaborative fashion in our 

next round of collective bargaining. One of the things that has to 

be discussed—you asked me what other alternatives in addition to 

continuing cuts—we have to continue to address our network realignment, streamlining our network. I am hopeful that both sides, 

the parties will get together and do this as they have in the past. 

I should mention that they have done this; the National Association of Letter Carriers (NALC) has gotten together with management, and they have been able to work out route reduction agreements. 

So our hope is that we can brief you on these kinds of issues and 

do so in a positive way. There are continuing grounds to do this 

and to do it internally between senior management and our great 

unions. As I said, we would want to do this in the way of reporting 

to the Senate and not asking for anything legislatively. 

Senator CARPER. I think that concludes my questions. 

Any brief closing statement you would like to make? 

Mr. KESSLER. No. Again, Mr. Chairman, I—— 

Senator CARPER. I would really like your closing argument. 

[Laughter.] 

Mr. KESSLER. Well, all I can say is that, as I hearken back to 

my opening, when people ask, given the great challenges that the 
14 

Postal Service faces now, why do you want 7 more years, I appreciate what our friend, Senator Casey, said about public service. It 

has been a great opportunity to continue what I do in my day job 

and also do some public service. 

I really did not want to leave this Board in the middle of its 

greatest challenge. I have been engaged. I take it very seriously. 

My great hope is to leave this Board at a time when the Postal 

Service is returned to a sound financial footing and we can look at 

other issues, not financial ones. 

Thank you very much, Mr. Chairman, and I truly appreciate the 

kind things that you have said, your warm friendship over the 

years, and the fact that the Committee, John Kilvington and others, have moved this along as quickly as they have. It will be good 

to have a full complement of Board members, and I thank you very 

much for all the time you spend on Postal issues. 

Senator CARPER. It has been our pleasure. It is important to our 

country and certainly important, I know, to us. 

I think I speak on behalf of all my colleagues, none of whom are 

here, and that is a good thing because if they were all here, you 

would be in trouble—— [Laughter.] 

As would your nomination. But I think I speak for all of us to 

say our heartfelt thanks to you for your service in this vein as well 

in a number of others over the years. 

And thank you for your willingness to continue that service, 

again, as a governor within the Board of Governors. My staff and 

I and others here look forward to working with you. 

We are going to leave the hearing record open until 12 noon tomorrow for the submission of additional questions, and I would ask 

as you receive those questions, including the couple that we have 

talked about here today, that you respond to them promptly. 

I do not know when we will be able to get your nomination reported out of Committee. Looking back at John Kilvington, he said 

he thought in about 2 years. [Laughter.] 

Mr. KESSLER. That is not what he told me earlier, but—— 

Senator CARPER. No, excuse me, he said less than 2 weeks. 

Sometimes we can get bottled up around here over minor things, 

but hopefully that will not be a problem in this instance, and the 

idea is to move it as expeditiously as we can. 

When does your term end? I think you are a one-year carryover. 

Mr. KESSLER. That is right. 

Senator CARPER. But when does that end? 

Mr. KESSLER. December 8. 

Senator CARPER. The day after Delaware Day. The day after December 7, the day that Delaware in 1787 became the first State to 

ratify the Constitution. 

Mr. KESSLER. I know that. 

Senator CARPER. Well, again, we appreciate your being before us. 

Our thanks to your family, as well, for their willingness to share 

you with the people of our country. 

With that having been said, this hearing is adjourned. Thanks 

very much. 

[Whereupon, at 4:14 p.m., the Committee was adjourned.] 
(15) 

A P P E N D I X 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
30 
31 
32 
33 
34 
35 
36 
37 
38 
39 
40 
41 
42 
43 
44 
45 
46 
47 
48 
49 
50 
51 
52 
53 
54 
55 
56 
57 
58 
59 

Æ