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52–713 PDF 2009

MAKING SENSE OF IT ALL: AN EXAMINATION OF

USPS’S STATION AND BRANCH OPTIMIZATION

INITIATIVE AND DELIVERY ROUTE ADJUSTMENTS

HEARING

BEFORE THE

SUBCOMMITTEE ON FEDERAL WORKFORCE,

POSTAL SERVICE, AND THE DISTRICT

OF COLUMBIA

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

FIRST SESSION

JULY 30, 2009

Serial No. 111–17

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

(

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

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

EDOLPHUS TOWNS, New York, Chairman

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

MARCY KAPTUR, Ohio

ELEANOR HOLMES NORTON, District of

Columbia

PATRICK J. KENNEDY, Rhode Island

DANNY K. DAVIS, Illinois

CHRIS VAN HOLLEN, Maryland

HENRY CUELLAR, Texas

PAUL W. HODES, New Hampshire

CHRISTOPHER S. MURPHY, Connecticut

PETER WELCH, Vermont

BILL FOSTER, Illinois

JACKIE SPEIER, California

STEVE DRIEHAUS, Ohio

——— ———

DARRELL E. ISSA, California

DAN BURTON, Indiana

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

BRIAN P. BILBRAY, California

JIM JORDAN, Ohio

JEFF FLAKE, Arizona

JEFF FORTENBERRY, Nebraska

JASON CHAFFETZ, Utah

AARON SCHOCK, Illinois

——— ———

RON STROMAN, Staff Director

MICHAEL MCCARTHY, Deputy Staff Director

CARLA HULTBERG, Chief Clerk

LARRY BRADY, Minority Staff Director

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

COLUMBIA

STEPHEN F. LYNCH, Massachusetts, Chairman

ELEANOR HOLMES NORTON, District of

Columbia

DANNY K. DAVIS, Illinois

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

WM. LACY CLAY, Missouri

GERALD E. CONNOLLY, Virginia

JASON CHAFFETZ, Utah

JOHN M. MCHUGH, New York

MARK E. SOUDER, Indiana

BRIAN P. BILBRAY, California

WILLIAM MILES, Staff Director

(III)

C O N T E N T S

Page

Hearing held on July 30, 2009 ............................................................................... 1

Statement of:

Burrus, William, president, American Postal Workers Union, AFL–CIO;

John Hegarty, president, National Postal Mail Handlers Union; Louis

Atkins, vice president, National Association of Postal Supervisors; Fred

Rolando, national president, the National Association of Letter Carriers, AFL–CIO; Don Cantriel, president, National Rural Letter Carriers’ Association; and Mark Strong, executive vice president, National

League of Postmasters of the United States .............................................. 110

Atkins, Louis .............................................................................................. 121

Burrus, William ......................................................................................... 110

Cantriel, Don ............................................................................................. 137

Hegarty, John ............................................................................................ 115

Rolando, Fred ............................................................................................ 129

Strong, Mark .............................................................................................. 145

Sires, Hon. Albio, a Representative in Congress from the State of New

Jersey ............................................................................................................. 28

Small, Jordan, acting vice president, Office of Accountability and Compliance, Postal Regulatory Commission; John Waller, director, Office of

Accountability and Compliance, Postal Regulatory Commission; Phillip

Herr, Director, Physical Infrastructure Issues, U.S. Government Accountability Office; Art Sackler, executive director, National Postal Policy Council; Jerry Cerasale, senior vice president, Direct Marketing

Association; and Michael Murphy, president, Japs-Olson Co. .................. 38

Cerasale, Jerry .......................................................................................... 84

Herr, Phillip ............................................................................................... 54

Murphy, Michael ....................................................................................... 91

Sackler, Art ................................................................................................ 73

Small, Jordan ............................................................................................. 38

Waller, John ............................................................................................... 46

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

Atkins, Louis, vice president, National Association of Postal Supervisors,

prepared statement of ................................................................................... 123

Burrus, William, president, American Postal Workers Union, AFL–CIO,

prepared statement of ................................................................................... 112

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

prepared statement of ................................................................................... 139

Cerasale, Jerry, senior vice president, Direct Marketing Association, prepared statement of ........................................................................................ 86

Chaffetz, Hon. Jason, a Representative in Congress from the State of

Utah, prepared statement of ........................................................................ 24

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 165

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

statement of ................................................................................................... 117

Herr, Phillip, Director, Physical Infrastructure Issues, U.S. Government

Accountability Office, prepared statement of ............................................. 56

Murphy, Michael, president, Japs-Olson Co., prepared statement of .......... 92

Norton, Hon. Eleanor Holmes, a Delegate in Congress from the District

of Columbia, Congressional Research Service’s July 23, 2009 report ...... 2

Rolando, Fred, national president, the National Association of Letter

Carriers, AFL–CIO, prepared statement of ................................................ 131

Sackler, Art, executive director, National Postal Policy Council, prepared

statement of ................................................................................................... 75

Page

IV

Letters, statements, etc., submitted for the record by—Continued

Sires, Hon. Albio, a Representative in Congress from the State of New

Jersey, prepared statement of ...................................................................... 30

Small, Jordan, acting vice president, Office of Accountability and Compliance, Postal Regulatory Commission, prepared statement of ................... 40

Strong, Mark, executive vice president, National League of Postmasters

of the United States, prepared statement of .............................................. 147

Waller, John, director, Office of Accountability and Compliance, Postal

Regulatory Commission, prepared statement of ........................................ 48

(1)

MAKING SENSE OF IT ALL: AN EXAMINATION

OF USPS’S STATION AND BRANCH OPTIMIZATION INITIATIVE AND DELIVERY ROUTE

ADJUSTMENTS

THURSDAY, JULY 30, 2009

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON FEDERAL WORKFORCE, POSTAL

SERVICE, AND THE DISTRICT OF COLUMBIA,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:22 a.m., in room

2154, Rayburn House Office Building, Hon. Stephen F. Lynch

(chairman of the subcommittee) presiding.

Present: Representatives Lynch, Chaffetz, Norton, Davis,

Cummings, Kucinich, Connolly, and Bilbray.

Staff present: William Miles, staff director; Margaret McDavid,

detailee; Daniel Zeidman and Christina Severin, interns; Dan

Blankenburg, minority director of outreach and senior advisor;

Adam Fromm, minority chief clerk and Member liaison; Howard

Denis, minority senior counsel; and Alex Cooper, minority professional staff member.

Ms. NORTON [presiding]. The Subcommittee on Federal Workforce, Postal Service, and the District of Columbia will come to

order.

The chairman will return shortly. Meanwhile, I want to welcome

the ranking member, Mr. Chaffetz, members of the subcommittee,

hearing witnesses, and all of those attending today.

Today’s hearing is intended to discuss the Postal Service’s recently proposed initiative to study the activities of nearly 3,200

postal stations and branches across the country for consolidation

purposes, as well as to examine the Postal Service’s cost-cutting

and consolidation related efforts, including mail delivery, route adjustments, and related impacts.

The Chair, ranking member, and subcommittee members will

each have 5 minutes to make opening statements and all Members

will have 3 days to submit statements for the record.

At this time, I would like to ask unanimous consent that the

Congressional Research Service’s July 23, 2009 report on postal retail facility closures be entered into the record. Hearing no objection, so ordered.

[The information referred to follows:]

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Ms. NORTON. Ladies and gentlemen, today’s hearing comes on

the heels of the Postal Service, as you may have read, being placed

on the Government Accountability Office’s 2009 high-risk list,

which is largely due to the Service’s abysmal financial condition, an

issue this subcommittee has followed closely.

But even before the Postal Service returned to GAO’s high-risk

list, alarms had already sounded regarding the Postal Service’s revenue generating problems. For the first time in decades, the organization reported a net loss of over $2 billion for fiscal year 2008.

Losses for this year may exceed $7 billion, despite the Postal Service targeting of $6.1 billion in cuts.

While we may be unable to pinpoint whether the recent economic

downturn, the steady diversion of mail to other mediums, or a combination of both is to blame for the current troubles, what we do

know is that mail volume has dropped precipitously, from roughly

213 billion pieces in fiscal year 2007 to a total of 203 billion pieces

in 2008, and projections for this year indicate that the volume will

continue to fall by possibly 28 billion pieces, to a total low of 175

billion pieces.

The writing is on the wall and the Postal Service obviously has

to make some tough decisions if it expects to weather this current

storm. These decisions may involve more across-the-board cuts and

work hour reductions, as well as accelerated consolidations of facilities and operations, which brings us to the subject of today’s proceeding, ‘‘Making Sense of it All: An Examination of USPS’s Recently Proposed Station and Branch Optimization Initiative.’’

Although at first glance the initiative seems to simply be the latest step in the Postal Service’s multi-pronged effort to reduce its

costs by removing excess network capacity, we all know that the

devil is in the details, and that is what we are here to find out this

morning. It is critically important that, even in the preliminary

phases of studying the consolidation of nearly 3,200 station and

branch locations, we all have some level of understanding about

the potential impact such changes could have on costs.

Perhaps more importantly, we need to understand what effect

these proposed changes may have on postal customers, committed

employees, and communities in general. To that end, today’s oversight hearing has been convened. The subcommittee is interested

in having the Postal Service fully articulate its recently proposed

station and branch consolidation initiative. Today’s hearing also is

intended to take an in-depth look at the Postal Service’s efforts to

achieve greater delivery efficiency through the adjustment of letter

carrier routes.

This subcommittee looks forward to learning more about route

adjustments, the impacts associated with these changes, and the

savings achieved from these actions. It is my hope that the testimony and feedback we receive from today’s witnesses will allow us

to gain that knowledge.

Again, I thank each of you for being with us this morning and

I look forward to your participation.

Ms. NORTON. I am now happy to yield to the ranking member,

Mr. Chaffetz, for 5 minutes to make his opening statement.

Mr. CHAFFETZ. Thank you, Madam Chair. I appreciate it.

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On June 24th, the subcommittee amended and marked up H.R.

22, allowing the Postal Service to adjust required payments to future retiree health benefits. The full committee adopted our approach by marking up the bill on July 10th. To this date, it is still

very disappointing that the Democrats have chosen not to bring up

this bill to the floor with such broad bipartisan support.

The U.S. Postal Service correctly advised us at the time that the

legislation, while substantial, would not completely resolve all of

their financial issues. That has certainly turned out to be the case.

Just this week, the GAO announced that the U.S. Postal Service

would be designated as ‘‘high risk.’’ This is sobering news.

In 2006, the Postal Accountability Enhancement Act was passed

in part to help get the Postal Service off the high-risk list, which

it did. Thus, GAO’s renewed designation should serve as another

powerful reason for Congress to act, and act quickly, in passing

H.R. 22, and any other legislation which will help get the Postal

Service out of the financial swamp it now finds itself in.

Consolidating branches is important and complex. Consolidation

can best take place on the merits for the system to work. A primary reason the Postal Service is in trouble right now is because

it lacks some of the flexibility to adapt in a changing environment.

The U.S. Postal Service has experienced the largest drop-off in mail

volume in its 234-year history, greater than the declines during the

Great Depression. A number of major mailers are in financial

straits. Bulk mail volume and advertising mail is down. This is due

in part to the poor state of the economy. Also, the postal monopoly

does not extend to email and Internet advertising, which continues

to grow.

The forecast for the return of these volumes are not optimistic.

The Postal Service must right-size itself to the market it serves.

When looking to make cuts and finding long-term solutions, one

must evaluate the entire operation of the Postal Service. I look forward to discussing the rearranging of delivery routes and other potential structural changes. But even that is not a complete solution.

One of the changes being pondered is an exigency rate increase

of 2.4 percent to be established ‘‘only when justified by exceptional

or extraordinary circumstances.’’ But raising the price of an item

will only reduce sales, in my opinion, not increase them, especially

when demand is clearly decreasing. Thus, the rate increases appear counter to any sound economic logic and will only serve to further complicate the U.S. Postal Service’s woeful financial circumstances. I will not support, nor do I believe we need, a rate increase on postage stamps.

There are those who suggest that the Postal Service is a dinosaur living in a modern world. It is certainly a paper-based, laborintensive service at a time when most Americans are more and

more comfortable with email and Internet communication. However, the Postal Service remains essential, vital, in want of a constitutional imperative. In my own personal opinion, I think the

Postal Service as a whole has done a very substantial amount of

work to decrease the costs associated with it.

Not only do we need to look at cutting the costs; we also need

to look at how to make the Postal Service more relevant in the

modern world. It is vital to our communities; it is vital to business

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interest, and I think we all support and want to see the Postal

Service thrive. I know that is why the gentleman, representative

is here today.

One thing that I would hope that we would explore, Madam

Chair, with the discussion today is the difference between the rural

components and the urban components, because there are factors

that are distinctly different in the rural areas, for instance, in my

district, than some of the urban issues, and I want to make sure

that we explore those in the discussions today.

With that, I will yield back.

[The prepared statement of Hon. Jason Chaffetz follows:]

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Ms. NORTON. I thank the ranking member.

Are there other members of the committee who wish to make an

opening statement? Mr. Connolly.

Mr. CONNOLLY. I thank the chairlady and I thank Chairman

Lynch for holding this hearing.

I am afraid the Postal Service leadership has leapt to the conclusion that the only way to keep the Postal Service solvent, in addition to passing H.R. 22, is to cut back on hours, and even days, of

operation. I believe that any short-term steps must be taken in the

context of consideration of the long-term business model for the

Postal Service. Short-term cuts and service will have long-term impacts on utilization of the Postal Service.

We must learn how the Postal Service intends to remain solvent

during future cycles of economic growth and contraction. Cuts in

hours and service for post offices represent a major loss of service

for northern Virginians, for example. Without operating in the

evening, most residents are not able to use their post office due to

the length of commutes in our region. Bristol, Prince William

County, had the longest commute in the United States. Unfortunately, changes in hours have been executed in the past without

coordination or even notification of elected officials. This examination is particularly important in light of GAO’s recommendation

that USPS consider restructuring to address its current and longterm financial viability.

Efficiencies that can be derived without loss of service or jobs

should be considered first, before employees or consumers are

asked to make those sacrifices. The Postal Service should identify

all the savings that can be realized through area mail processing

consolidations and network distribution center closures, and make

every possible effort to avoid layoffs associated with those closures.

I appreciate the opportunity, Madam Chairwoman, to explore

these issues and look forward to hearing about the protections the

Postal Service must employ to protect their consumers and their

employees. In the final analysis, however, USPS must move to a

new business model, one that takes cognizance of vigorous competition and the impacts of technology on the traditional rain, snow,

sleet, or hail model that has provided exemplary service to the Republic for over two centuries.

I thank you and yield back.

Ms. NORTON. Thank you, Mr. Connolly.

Mr. Kucinich.

Mr. KUCINICH. I thank the gentlelady.

I am a strong supporter of the Post Office and I am deeply concerned about the USPS’s financial condition, and I appreciate the

magnitude of the task that is ahead for the Postal Service to ensure that it continues to be a postal service.

On July 16th, the Postal Service announced 16 Post Office

branches in the Greater Cleveland area would be reviewed for possible consolidation. After reading the testimony and the GAO report for this hearing, and after hearing from my constituents, I

have many concerns. I am concerned that final decisions regarding

each branch under consideration for consolidation will be made

without full community participation and input.

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I am concerned that people in my community and communities

across the country will face a significant and unnecessary reduction

in access to crucial services. I have concerns about the private sector taking over services that these facilities provide, because privatization of a public need like the Postal Service would be a disaster.

And I think this committee ought to be very wary of privatization

being an undercurrent in the Post Office. I can tell you, as chairman of the Domestic Policy Subcommittee, the general topic of privatization is something that we are looking into.

I just want to say that this review process has to be done at the

local level and must consider the unique demands on each individual facility to ensure that the concerns of the community, customers, postal workers, and the effects on the local economy are

fully considered.

Madam Chair, beyond the serious local concerns that I have

about Cleveland, look what is happening in our country right now.

Over the last few decades, we have seen a de-industrialization, insurance redlining, mortgage redlining, the subprime loan fiascos,

the foreclosures, bankruptcies, high unemployment, business closings, even churches and schools closing. And look at the communities that are affected the most, exactly the communities that

have the highest need for postal service. Start closing some of these

branches, you are talking about creating ghost towns.

I have concern about the finance of the Post Office, but it is very

interesting. When you talk about maintaining universal postal

service, which is really a right in a democratic society, good people

say, well, how are you going to pay for it? Where was that question

when the TARP came out, how are you going to pay for it? Seven

hundred billion dollars thrown away to Wall Street. Trillions of dollars given to big banks, banks parking money right now at the Fed;

Fed paying banks not to loan money to businesses in our community. How are you going to pay for it? Three trillion dollars, at

least. How are you going to pay for it? No one really asks that

question.

When it is the Postal Service, something that everyone uses, how

are you going to pay for it? It is the same kind of crummy debate

that is going on right now over universal health care, where the

insurance companies are hovering over Washington like a flock of

vultures, just waiting to see what they can pick up from the taxpayers. How are you going to pay for it?

If we are committed on universality of service, then we are going

to take a stand on behalf of the Post Office. If we are committed

to university of service, then we are going to take a stand on behalf

of postal retirees, who the U.S. Postal Service right now is looking

at cutting into their retirement benefits. If we are going to take a

stand on behalf of universal service, then we have to do it and challenge those who somehow believe that if the Government has to

pick up an increased cost here, then somehow that is anathema.

Well, we have to ask what is the Government for, is it just for

war? Is it just for being a gas station for wealthy special interest

groups? Or are we a Government of the people, as Lincoln prayed?

We are about to find out.

Mr. LYNCH [presiding]. The Chair now recognizes the gentleman

from Maryland, Mr. Cummings.

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Mr. CUMMINGS. Mr. Chairman, I want to hear the witnesses, and

I would associate myself with my colleagues’ statements. With that,

I yield back.

Mr. LYNCH. The Chair recognizes the gentleman from California,

Mr. Bilbray.

Mr. BILBRAY. Yes, Mr. Chairman.

In the spirit of transparency, I want to admit and announce that,

yes, the James Bilbray on the Postal Commission is my first cousin, the former House Member, as the delegate knows. But I have

to sort of reflect, again with my colleague from Cleveland, that

there are a whole lot of things this town does and a whole lot of

money that the Federal Government spends that has no nexus to

the constitutional responsibilities.

Postal Service is one that is specifically enumerated in the Constitution; it is specifically a responsibility solely of the Federal Government. It is not an incursion onto States’ or local rights; it is not

an expansion beyond the founding fathers’ intention for us to maintain and enhance the Postal Service. So I think this is one place

that Republicans and Democrats should finally find a middle

ground we can cooperate and agree on.

I yield back.

Mr. LYNCH. I thank the gentleman.

In full disclosure as well, I have mentioned this on numerous occasions, but I think at last count I have 17 members in my family,

extended family—cousins, in-laws, uncles, aunts, sisters, mom—

who are either actively working for the Post Office or are retirees.

So, that much being said, it gives me great pleasure to welcome

Representative Albio Sires from New Jersey, who was the sponsor

of a piece of legislation that is coming before the committee and I

want to recognize him for 5 minutes.

Actually, it is the custom of this committee to swear witnesses

who are to provide testimony before it, so could I please ask you

to stand and raise your right hand?

[Witness sworn.]

Mr. LYNCH. Let the record reflect that the gentleman has answered in the affirmative. And the gentleman is recognized.

STATEMENTS OF HON. ALBIO SIRES, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF NEW JERSEY

Mr. SIRES. Thank you, Mr. Chairman, ranking member, members

of the subcommittee. Thank you for allowing me to testify before

you today regarding my experience with a post office closing in my

district and the need to properly inform and involve the public in

the closing process.

I am very concerned about the Postal Service’s recent announcement to consider closing more than 3,000 retail post offices. I understand that the Postal Service’s financial problems are daunting.

I know they are having problems operating. But no amount of financial stress should relieve them from providing a transparent

closing process with significant community involvement.

Post offices are an important part of communities. I witnessed

this firsthand. My experience with the closing of a Postal Service

in the Lafayette Station in Jersey City, with almost no notification

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to the public or public officials, the reason given was that it was

security reasons, that it was not safe.

Well, the community became upset, very upset. They had a demonstration in front of the main post office in Jersey City. They responded by putting a mobile station where the post office was. A

few weeks later, again, the mobile station was removed; no reason

given other than security. And there was very little notification to

the community. The closing of the post office was hard on seniors

around this particular post office.

I was able to involve the other two Members of Congress, plus

the two Senators, in this post office closing. Very little information

came forward from the Postal Service regarding the reason why

this post office was closed. And when you think of two Senators

and three Congressmen not getting information, to me, that is just

not the way it is supposed to be. I don’t think even the President

could have saved this post office.

To me, it showed a lack of compassion and a lack of sensitivity

to communities, and we finally, after many, many months, find out

why, the reason of the closing of this particular post office, and it

was financial. This is the reason why I introduced my bill.

Basically, the bill limits the effect of financial reason on closing

of the post office. It doesn’t eliminate it, but it is not the main reason for closing a post office. It eliminates the dual system and

makes one unified closing process. Right now, if you have a main

post office, there is a process established by Congress for the main

post office, but the satellite post office they can close at any time,

without any reason.

I am not an expert on post office, but I know at least in the

urban area—I don’t know outside the urban areas and suburban

areas, but usually there are one main post office with many satellite post offices. That this bill does, it increases the notification

to the public and it extends the public comment from 60 to 90 days.

It is my hope that to make the closing transparent and inform

the people that are going to be affected by the closing of a post office. I have more than 80 Members that have signed on to this post

office bill and I do hope that in the hearings that you have in the

future, that you recognize that finances are important, but I think

community, what it does to an area, access to people who do not

have the ability to drive, seniors, that you take all those into consideration, because, like it was stated here before, in the Constitution, it does state that this is one of the services that we have to

provide.

So I thank you for allowing me to testify here today and I do

hope that, in the end, we can make this Postal Service a little more

responsive. Thank you very much.

[The prepared statement of Hon. Albio Sires follows:]

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Mr. LYNCH. I thank the gentleman.

Do any Members have any questions for Mr. Sires?

Mr. CHAFFETZ. Thank you, I appreciate it.

We were talking about this before. How can we distinguish the

difference between the urban components and the rural components? I mean, this is a real concern. They both have issues, but

they are both different issues. How do you see us addressing that?

Mr. SIRES. Congressman, I have to admit I am an urban person.

[Laughter.]

I live in a community that is 1 square mile. I have 50,000 people

in my community. I love to sit down with someone that is not an

urban person and talk about these issues.

Mr. CHAFFETZ. So just addressing the urban component, what

are the issues? You talk about, in general, in the bill, about there

are community issues, you have a large elderly component. Kind of

list out off the top of your mind what those issues are that you

have to deal with in the urban component.

Mr. SIRES. Well, access. Seniors do not have the ability to walk

a mile away in Jersey City to deal with the post office. Seniors do

not use computers. Seniors do not have computers. Seniors that I

deal with can barely pay their electric bill. So basically it is access

to the postal services, which I am sure that is also in your areas.

This is the main concern of many of the people in the area, plus

the fact that it was just closed from 1 day to the next. There was

no plan other than say, well, there is a post office a mile away; deal

with that post office.

Mr. CHAFFETZ. How are we ultimately going to make these decisions? My guess is, if you were to ask all 435 Members of Congress,

nobody wants to have a post office closed in their district. Yet,

clearly, we have to do some sort of consolidation. Certainly, there

are some criteria by which we need to consolidate some of the facilities. The number may or may not be right. What are those criteria? How are we ultimately going to come to that decision?

Should it be a BRAC-like process? How do you see this happening?

Mr. SIRES. I don’t think that is such a bad idea, something like

that, or in terms of what else can we do for the Post Office, whether we have to—I know you don’t believe in giving them more

money, but if this is a service that must be provided, I am not opposed to that.

Mr. CHAFFETZ. Well, I actually think there is probably more justification for using Federal funds to help fund the Postal Service,

given its constitutional designation, than probably most every other

thing that we do in this Government. So I am not necessarily, out

of hand, just opposed to supplementing what is happening there.

Mr. SIRES. I agree with you on that issue.

Mr. CHAFFETZ. Specifically about that review process, that open

comment process, how do you see that happening? Because the difference between 30 days or 60 days or 60 days to 90 days, if the

process itself doesn’t allow for the dialog to happen and true consideration of maybe some of the other factors that go into how important that post office is in that community. Help me understand

how that process should work, in your viewpoint.

Mr. SIRES. Well, in my viewpoint, there should be notification

through the newspapers that this is taking place. The local elected

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officials should be informed that this is happening. I think that

there should be some sort of announcement by the Post Office long

before that. The reason I extended it to 90 days is to get more participation in this process.

To me, it is just plain wrong to go in there and close the post

office without giving any reason why. I mean, there has to be a better reason than just finances to close a post office, and that is what

I tried to do with this bill.

Mr. CHAFFETZ. Thank you, Mr. Chairman. I yield back. Thanks.

Mr. LYNCH. Thank you. Just claiming a few minutes of time.

I do, as well, represent an urban district, mostly urban, although

I have suburban. I have 19 towns that are more suburban in nature, but I represent a significant part of the city of Boston and the

city of Brockton, which are clearly urban. I just want to say I agree

with the gentleman’s observation that these post offices and stations and branches are intensely local institutions. They are not

only commercial centers; they are also social centers.

And I think we remember that when we ask the general public

to grade public employees, they consistently grade their postal

workers, their mail handlers, their letter carriers, postal supervisors and postmasters the highest of any public employee. So

those relationships between the communities and the Post Office at

that local level is intensely personal.

And when we see the disruption that is created by a closing, it

has very real and dramatic impact on the people that we represent,

so it creates a real dilemma for us, and we need to figure out a

way to be able to guide the community when something like this

has to happen.

Someone once said there is nothing more disruptive to the

human condition than the power of a new idea. People just hate

change and, unfortunately, we have seen 9 billion pieces of mail

taken out of the system last year; 23 billion projected out of the

system this year because of the economy and people moving to electronic media like email and electronic payment systems. We clearly

have to reconcile our revenues with the size of our system, so that

is going to be a very delicate process.

I do agree with the gentleman that whole process needs to be

more inclusive with the community and with the representatives

who are responsible for those areas, and that is our task, that is

part of the responsibility of this hearing, and we really appreciate

your bill.

I do have to say that I don’t know where the Post Office turns

if they can’t right-size their system based on cost. It leaves them

with very little opportunity. They have very limited power right

now, very limited flexibility. And this is a challenge not for the

Post Office alone, it is for all of us; it is for the employees, for the

unions.

Our task is to preserve high quality, affordable, universal service

through the Postal Service, and we need to bring the Post Office

into the next century, the next iteration to compete with all of

these new technologies. So we have a task here of preserving that.

Otherwise, either we are going to have a big bailout, and I don’t

know if the Nation and the taxpayer are going to entertain another

bailout, this time for the Post Office.

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I am just very leery about the changes that collapse, we are on

the verge of somewhat of a collapse here in terms of the funding

mechanism, and what that might bring. It might bring a lot of

changes that none of us, the customer, the unions, the users, the

mailers, none of us want. I just don’t want to see us, by default,

allow the economic forces to define what the Postal Service will

look like in the future.

The Chair recognizes the gentleman from northern Virginia, Mr.

Connolly.

Mr. CONNOLLY. I thank the Chair.

Mr. Sires, your bill, as I understand it, does not preclude the

closing of branch post offices, it addresses the need for notification

to the community and elected officials, is that correct?

Mr. SIRES. Yes, and financial reason is not the only reason for

closing a post office.

Mr. CONNOLLY. So it requires some proffer of the rationale for

why the consolidation?

Mr. SIRES. Yes.

Mr. CONNOLLY. But in and of itself, your bill does not preclude

the contemplation of such consolidation?

Mr. SIRES. No.

Mr. CONNOLLY. Does your bill also address the issue of changing

the hours of operation?

Mr. SIRES. No.

Mr. CONNOLLY. Let me just suggest to you that certainly in my

urban area, that is as much an issue as how many branches there

may or may not be. Particularly with long commutes, evening

hours are very important for people to access postal services and

to do their business, and I would just suggest to you that we may

want to think about adding that to the notification procedures to

local officials and the community. It may or may not be necessary,

but to do it without any notification is terribly disruptive and has

impacts that start to rival those of closure itself.

Mr. SIRES. Thank you, Congressman Connolly.

Mr. Chairman, I certainly agree with all the comments that you

said, and I would just end by saying that this is not my first encounter with the Post Office. I couldn’t even get response from the

Postal Service when they removed a mailbox in Elizabeth, NJ.

Mr. LYNCH. You need to call me, then. When you have problems

like that, you need to call me. That is unacceptable.

Mr. SIRES. I am looking for responsiveness; I am looking for sensitivity. I am looking for some sort of compassion from the Postal

Service.

Mr. LYNCH. Let me just say that I think what the gentleman is

looking for here is notice so that he is able to represent the people

who elected him, which is a very basic right and obligation, a right

in terms of the people to be represented and an obligation on the

gentleman to do his job. But, to do that, he needs notice and he

needs to know what the rationale, the reasoning is for any proposed closing. He needs a fair opportunity to address that.

He needs to know what the factors are that have been placed behind this decision and he needs to have and the people that he represents need to have a part in this process so that essential services are not eliminated and that the employees here, the letter carVerDate 11-MAY-2000 13:14 Dec 01, 2009 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 U:\DOCS\52713.TXT KATIE PsN: KATIE
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riers, the mail handlers, the clerks, the postal supervisors and

postmasters are treated fairly during this process and they are not

just blind-sided by this.

I actually think if that type of conduct were to be the norm that

you experienced, it would stop; it would basically stop any changes,

because we can’t have it done that way, and that simply cannot be

tolerated.

But I want to thank the gentleman for offering his thoughtful

legislation.

The Chair recognizes the gentleman from California, Mr. Bilbray.

Mr. BILBRAY. Thank you, Mr. Chairman. I know you want to

move on, but I just have some questions for the author.

When you talk about notification in the paper, you are not talking about legal advertisement, are you?

Mr. SIRES. Yes.

Mr. BILBRAY. Congressman, how many of your constituents—I

know there are some that do that, but wouldn’t a news release, a

media communication that ends up somewhere on the front page

or on one of the pages that people read be a so much better way

of informing the public than putting it back and basically—and,

let’s face it, it is a financial situation for papers to put it in the

legal notifications, but I will tell you something, being a mayor,

being a county worker, I just found that legal notifications were the

worst way to notify the public of anything.

Mr. SIRES. Well, I was a mayor for 12 years; I know exactly what

you are talking about. But I still say that is just not the only reason, through the news, to inform the public. There are some type

of ads that are not as expensive, but I think it gets the message,

at least from what I experience.

Mr. BILBRAY. Well, wouldn’t you find out that in most communities where the media was directly notified that, look, we are considering closing the local post office, that would not carry enough

of a story to be able to allow the public to know that the media

would respond to that kind of notice?

Mr. SIRES. Sure, the media would respond, but that is a 1-day

story, maybe a 2-day story. But how do you follow it up?

Mr. BILBRAY. OK. I still say that I just think that it is fine if you

want to do a legal notice, but the fact is the public doesn’t read

legal notices. That is a way we finance papers. And I know papers

are the next crisis that we are all talking about.

Mr. SIRES. I don’t necessarily mean the legal notice that you are

talking about, the small section in the back, but there are other

ways of noticing it.

Mr. BILBRAY. OK. And your issue of it shall not be solely for finance, what other conditions would be required to close a station?

I think of Mr. Connolly’s—in fact, I know he already has his memorial post office picked out there at Mt. Vernon, which is a trailer.

I assume Mt. Vernon makes money for the Postal Service because

it is right there at Mt. Vernon. But what are the other conditions

that would be required under your bill before they can close it?

Mr. SIRES. Well, in my particular district—not other districts—

I have four senior citizens’ buildings around this post office, large

senior citizen buildings. They need access to the post office. Basically, they come down, they walk a block or two, and they are at

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the post office. That could be a consideration, access to the most

needy. Also, you have people doing business, small businesses,

mom and pop shops that need some of this post office nearby. Time

is money.

Mr. BILBRAY. But you haven’t enumerated examples of what, in

your bill, would also be required besides the financial; you just basically say financial cannot be the sole.

Mr. SIRES. There is a bill already in Congress that takes into

consideration a number of issues before closing a post office. I just

don’t want, in my bill, the financial aspect to be the only aspect.

The other ones that are in the bill are fine also.

Mr. BILBRAY. OK. Thank you.

I yield back, Mr. Chairman.

Mr. LYNCH. I thank the gentleman.

We thank you for your thoughtful testimony and coming forward

and helping the committee with its work, and we appreciate it.

There may be questions for you from other Members who aren’t

here right now, and we will just ask you to respond to those in

writing.

Mr. SIRES. I want to thank you, Chairman. I want to thank all

the Members. Thank you very much for your interest.

Mr. LYNCH. Thank you.

The Chair will now welcome the second panel. Good morning. It

is the customary practice of this committee to swear all witnesses

who are to provide testimony. Can I please ask you to rise and

raise your right hands?

[Witnesses sworn.]

Mr. LYNCH. Let the record reflect that all of the witnesses have

answered in the affirmative.

As you may notice, there are two small boxes in front of you. The

practice here is to allow each witness 5 minutes. It will show a

green light while your testimony is being given. When that light

turns yellow, it means you have 1 minute to wrap up, and when

it shows red, it requires you to stop speaking.

What I would like to do is just offer a brief introduction of our

second panel of witnesses.

Mr. Jordan Small is acting vice president, Network Operations

for the U.S. Postal Service; Mr. John Waller is director of the Office

of Accountability and Compliance at the Postal Regulatory Commission; Mr. Phillip Herr is Director of Physical Infrastructure

Issues at the Government Accountability Office; Mr. Jerry Cerasale

is senior vice president of the Government Affairs for the Direct

Marketing Association; Mr. Arthur Sackler is the executive director

of the National Postal Policy Council; and Mr. Michael Murphy is

president of the Japs-Olson Co., a printing and logistics company

in St. Louis Park, MN.

Thank you all for your willingness to come forward and help the

committee with its work. I now recognize Mr. Small for 5 minute

for an opening statement.

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STATEMENTS OF JORDAN SMALL, ACTING VICE PRESIDENT,

OFFICE OF ACCOUNTABILITY AND COMPLIANCE, POSTAL

REGULATORY COMMISSION; JOHN WALLER, DIRECTOR, OFFICE OF ACCOUNTABILITY AND COMPLIANCE, POSTAL REGULATORY COMMISSION; PHILLIP HERR, DIRECTOR, PHYSICAL INFRASTRUCTURE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; ART SACKLER, EXECUTIVE DIRECTOR, NATIONAL POSTAL POLICY COUNCIL; JERRY

CERASALE, SENIOR VICE PRESIDENT, DIRECT MARKETING

ASSOCIATION; AND MICHAEL MURPHY, PRESIDENT, JAPSOLSON CO.

STATEMENT OF JORDAN SMALL

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

subcommittee. I am here to talk to you about the steps the U.S.

Postal Service has taken to make mail delivery as efficient as possible, our future operational plans to continue to improve delivery

efficiency, and the station and branch optimization initiative.

As you are well aware, the financial situation of the Postal Service is grave. It would be far worse were it not for the aggressive

actions we have implemented. For example, since 2002, we have reduced cost by more than $1 billion annually. These efforts are particularly impressive when you consider that our delivery network

continues to grow at a rate of about 1.2 new delivery points each

year. In effect, we are delivering less mail to more addresses, which

means we receive less revenue per address served.

Cutting costs in deliveries is particularly challenging because a

substantial portion of delivery costs are fixed. Our carriers must

deliver to each address whether there is one piece of mail or several. Within these constraints, we have embarked upon several initiatives that have improved delivery efficiency. The first initiative

is the historic interim alternate route adjustment process that we

have agreed to with the National Association of Letter Carriers,

NALC, in 2008.

This agreement enabled us to jointly conduct evaluations on

some 93,000 routes and rapidly eliminate approximately 2,500

routes. Realizing that additional process improvements could be

made, both parties jointly agreed to a new modified agreement in

April 2009. The cost savings are estimated to eliminate approximately 25 million city delivery work hours, or some $1 billion over

fiscal years 2009 and 2010.

One consolidation activity that is underway is the review of station and branch locations in larger cities where we have a number

of offices in close proximity. We began the review with some 3,200

locations that handled the most retail transactions and the most

deliveries. We anticipate that out of these 3,200 locations, less than

1,000 will be considered as viable candidates to study further.

Changes in mail processing technology have reduced the amount

of space needed for carrier operations at many stations and

branches. As a consequence, opportunities exist to consolidate carrier operations into fewer locations without affecting service. Many

stations and branches were established at a time when first class

mail volume growth was robust. There were few means of alternate

access to postal services and virtually all retail revenue came from

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window transactions. Today, about 29 percent of retail revenue is

generated through alternate access channels, such as our Web site,

USPS.com, and automated postal centers.

As local management undertakes the station and branch review,

they will consider factors such as customer access, service standards, cost savings, impact on employees, environmental impact,

real estate values, and long-term postal needs. We are taking all

of these actions to use our resources wisely and position the Postal

Service to survive this financial crisis, while continuing top-quality

service to the American public.

Along this line, I ask Congress to support the Postal Service’s efforts to operate in a business-like manner as we make necessary

decisions. As you know, the Postal Service has alerted stakeholders

that mail volume levels can no longer sustain 6-day-a-week delivery. In prior testimony, the Postmaster General asked Congress to

consider allowing a change in delivery frequency. At the same time,

the Postmaster General tasked postal management with undertaking an internal review of 5-day delivery so we have sufficient information and data to share with stakeholders.

We are in the process of finalizing our study and have targeted

the next months to share the results with our stakeholders and to

begin a series of community outreach meetings. We plan to share

this study with employees, customers, mailers, and Members of

Congress. Moreover, we will be asking the Postal Regulatory Commission for an advisory opinion.

In closing, I would like to thank this subcommittee and the Oversight and Government Reform Committee for their action on H.R.

22. I hope in the near future the House will be able to quickly

move retiree health benefit legislation. Finally, I would like to reiterate our commitment to continuing to make mail operations as efficient as possible while maintaining our excellent levels of service

to the Nation.

Thank you and I would be pleased to respond to your questions.

[The prepared statement of Mr. Small follows:]

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Mr. LYNCH. Thank you, sir.

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

STATEMENT OF JOHN WALLER

Mr. WALLER. Thank you, Chairman Lynch, Ranking Member

Chaffetz, and members of the subcommittee. Thank you for the opportunity to testify on plans to adjust the retail and delivery networks.

On July 2nd, the Postal Service requested a Commission advisory opinion on Postal Service station and branch optimization and

consolidation initiative, the subject of this hearing. Docket N2009–

1 was quickly established and the public was notified through the

Federal Register, the Internet, and press releases.

This morning the Commission held a conference with persons interested in this consolidation to identify expectations for the docket

and all procedural concerns. With this input, the Commission will

shortly establish the agenda for examining the initiative and addressing all the issues. To ensure a wide range of public input, the

Commission is considering holding hearings outside of the Washington, DC, area.

What the Commission is being asked to do is determine if this

consolidation initiative will generate changes in the nature of Postal Service on a nationwide basis and, if so, issue this advisory opinion that the consolidation process would result in closure decisions

which will preserve levels of service consistent with the policies of

postal legislation; in short, that the process will in fact achieve answers to a lot of the questions that members of the committee have

raised that should be addressed. We are looking at that process to

make sure that all these issues, community input, etc., are in fact

applied.

Now, the process has been around for several years and nearly

100 closures have occurred. Some of these have been addressed

here. One will occur tomorrow in Washburn, IA. The new initiative

will significantly accelerate that process. It began in May of this

year with the prescreening for discontinuance of all stations and

branches that reported to postmasters of 24 pay grade level or

higher. This covers approximately 3,200 stations that are primarily

located in urban and suburban areas.

With this request, there was some certainty in the sense of the

guidelines were given that were supposed to be followed by the

Postal Service, but they did not specify the number of offices to be

discontinued, did not quantify the potential changes in the nature

of any affected postal service, and has not estimated the expected

financial savings. Questions are being asked in the Commission’s

docket that hopefully will clarify these facts and other aspects and

criteria that will be used in the decision process.

The Commission recognizes that, under the PAA, the Postal

Service has the flexibility and authority to make rational adjustments to its operations and networks to meet its business needs

and create cost savings and efficiencies. This is especially important in these stressful financial times. But the Postal Service must

be, by law, accountable and transparent to all postal customers, be

sensitive to the needs of the community at the local level that it

serves, and make changes in a strategic manner.

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In its most recent report on universal postal service and postal

monopoly, the Commission found that access to postal service is a

fundamental aspect of the universal service. A 2008 Commissionsponsored study found that households tend to utilize their local

post office extensively. Over half the respondents reported that a

member of their household visited a post office in the last 7 days;

an additional 25 percent reported visiting within the last 30 days.

The Postal Service is obligated, under past and current statutes,

to provide for thorough public notice and input into post office closure decision. The statute further gives the Commission authority

to hear customer appeals on such decisions. The Commission has

long held that a post office is any retail location staffed by Postal

Service employees, which obviously includes stations and branches.

Yet, notification of the public’s right to appeal to the Commission

is not part of the Postal Service closure process being examined.

Questions are being submitted, have been submitted on this issue

in the docket, and it is likely to receive a thorough review in the

Commission docket.

Now, the appeal process is simple, it is a letter submitted to the

Commission by postal patrons in that area saying, we weren’t notified, we weren’t whatever it has to do with the procedures weren’t

followed. It is not a complex, go to court, procedure.

I see I am out of time, so I will conclude my oral statement and

welcome the opportunity to answer any questions.

[The prepared statement of Mr. Waller follows:]

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Mr. LYNCH. Thank you, sir.

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

STATEMENT OF PHILLIP HERR

Mr. HERR. Thank you. Chairman Lynch, Ranking Member

Chaffetz, and members of the subcommittee, thank you for the opportunity to participate in this hearing. Today, I will first provide

updated information on the Postal Service’s financial condition and

outlook; second, discuss GAO’s decision to place the Postal Service’s

financial condition on our high-risk list this week; and, third, discuss the need to restructure postal mail processing, retail, and delivery networks.

The Postal Service’s financial condition has deteriorated sharply

over the past year. Mail volume is projected to decline 28 billion

pieces this fiscal year, leading to some sobering statistics: a net loss

of $7 billion, an increase in outstanding debt by the annual statutory limit of $3 billion, and an unprecedented $1 billion cash shortfall that will threaten the Service’s ability to make its mandated

annual payment of $5.4 billion for future retiree health benefits.

The outlook for fiscal year 2010 is even more challenging, as the Service is projecting its outstanding debt to increase to $13.2 billion, just under its $15 billion statutory limit. The Postal Service

urgency needs to restructure to address its current and long-term

financial liability.

This week, GAO added the Postal Service’s financial condition to

our list of high-risk areas needing attention by Congress and the

executive branch. We have called for a broad restructuring plan

that addresses key timeframes, and the plan should address both

short and long-term challenges. These include realigning postal

services to reflect changes in the use of mail; better aligning costs

with revenues; optimizing its operations, networks, and work force;

increasing mail volumes and revenues; and retaining earnings to finance needed investments and repay debt.

The restructuring plan should also include a strategy for optimizing its networks to eliminate growing excess capacity, maintenance

backlogs, and reduce costs. Stakeholders need to recognize that

major changes are urgently needed. Such action would also set the

stage to reduce its work force through attrition. In the next 4

years, a total of 300,000 employees are eligible or will be eligible

for regular retirement, close to half of the career work force. The

Postal Service has taken some actions toward realigning its network, and I would like to point out several of these.

In the retail areas, as discussed today, the Service recently began

a national initiative to consolidate some of its roughly 37,000 post

offices branches and stations. Specifically, operations at over 3,200

retail stations and branches located in urban or suburban areas are

looking at for opportunities for consolidation, and decisions are expected starting this October. In terms of mail processing, the Postal

Service has taken actions to close smaller facilities and consolidate

other mail processing and transportation operations. However, only

one of approximately 400 major processing facilities has been

closed.

With regard to delivery operations and the report being released

today to this subcommittee, the Postal Service has over 350,000

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carriers, and delivery costs represent the Postal Service’s largest

cost segment. There are two efforts underway to enhance delivery

efficiency. One, realigning city routes is expected to generate about

$1 billion in savings annually through the elimination of work

hours and routes, reduced space needs, and more consistent delivery.

Through realignment, about 4,300 routes have been eliminated

to date, so there is some good progress. A second delivery-related

initiative focuses on the $1.5 billion flat sequencing system that

will automatically sort large mail pieces such as catalogs and magazines into delivery order. On routes covered by the new machines,

city carriers, on average, will manually sort nearly 500 fewer flatsized pieces of mail each day, allowing them to spend more time

delivering mail.

In closing, while we recognize that the Postal Service will face

resistance in realigning its networks on several fronts, we believe

broad restructuring is imperative to help the Postal Service achieve

sustainable financial viability. For realignment to succeed, the

Postal Service must use a transparent process that is consistently

applied; engage with unions, management associations, the mailing

industry, and political leaders; and it must also demonstrate results.

Mr. Chairman, this concludes my prepared statement, and I am

pleased to answer any questions you have. Thank you.

[The prepared statement of Mr. Herr follows:]

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Mr. LYNCH. Thank you, sir.

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

STATEMENT OF ARTHUR SACKLER

Mr. SACKLER. Thank you, Mr. Chairman. Good morning to you,

Ranking Member Chaffetz, and members of the subcommittee. The

National Postal Policy Council greatly appreciates the opportunity

to present its views on the station and branch initiative.

In a nutshell, our members support this initiative to help address

the current financial contraction facing USPS and, in the larger

context, of providing the Postmaster General and his team true

flexibility to manage.

NPPC is the trade association for large business users of letter

mail, primarily in first class. Before the downturn, our approximately 30 members collectively mailed about 39 billion pieces and

contributed some $9.5 billion in postage every year.

At the outset, let me say that the acceptance of the need for

meaningful change in the postal system has been growing in recent

days. Through no fault of its talented management team or its

truly dedicated working men and women, the Postal Service is experiencing a catastrophic decline in volume, volume that won’t

come back robustly and for years. Grappling with the thorny issues

of managing USPS to its actual volume has become essential for

preserving a bedrock institution still essential to commerce and

communications in the United States in the 21st century.

So, as one aspect of change, we are pleased to be able to discuss

this initiative, for it is necessary not only in the short-term, but in

the longer term. NPPC has not undertaken a scientific survey of

its members, but the consensus view is that, when the economy

comes back, mail will not follow. There should be some recovery in

standard, but first class, which is the most lucrative for the Postal

Service, as you know, will continue its decline, albeit at a slower

rate. We support the initiative because the current system of post

offices and other facilities grew up haphazardly with population

growth and shifts.

An orderly rethinking of the system is long overdue and efficiencies in services are very likely to be obtained.

Second, the initiative will help streamline a system built for far

more mail volume than it has or is likely to have for the foreseeable future.

Third, a carefully planned and thought-through effort to close or

consolidate facilities should yield some cost savings.

Fourth, the closings and consolidations will occur largely, if not

exclusively, in metropolitan jurisdictions. This should lead, we

hope, to a less emotional public reaction than in some smaller communities. And given that there are other post offices or facilities

nearby, there should be continued easy access for the public.

Fifth, and most importantly, NPPC believes that the Postmaster

General and his team need to have as much flexibility to manage

the system as possible, to run it like a business. Over this decade,

Postmaster General Potter, Deputy PMG Donahoe and their management team have demonstrated tremendous ability to drive costs

out of the system. They have done so while improving service and

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reducing the work force, without alienating the unions and management associations.

In fact, it has been an intense cooperative effort. Because of that

outstanding track record, the senior postal management team

should be granted broad latitude to manage the system, including

optimizing stations and branches.

The urgency animating this plan and much else from USPS is

the daunting financial challenge it confronts. You know very well

that it is projecting 175 billion pieces of mail this year, off some

37 billion from its peak just 2 short years ago, with a $13 billion

drop in revenue. So, Mr. Chairman, NPPC is grateful to you, Ranking Member Chaffetz, Chairman Towns, Ranking Member Issa,

and the members of the full committee for rapidly reporting out

H.R. 22. We are particularly appreciative of the prime sponsors,

Messrs. McHugh and Davis. We urge H.R. 22’s passage by the entire House at the earliest opportunity.

But, regrettably, USPS is going to need further financial attention to right itself. When H.R. 22 was introduced last winter, it

seemed to give USPS enough relief. Unfortunately, the accelerating

loss of volume since has simply overwhelmed the relief offered

through H.R. 22.

We don’t pretend to have the solution. Many possibilities have

been raised in this subcommittee and elsewhere. In general, we believe that any long-term solution should be balanced and call on all

postal stakeholders to make equivalent sacrifices to maintain the

system. However, we feel constrained to note that one possibility,

an exigent rate increase, would be profoundly counterproductive.

We know neither the Postal Service nor Members of Congress have

called for such an increase, but others in the postal community

have raised it.

So let us be direct. Mailers simply cannot afford an increase.

They are doing everything they can to restrain costs as their own

businesses severely decline in recession. The number of layoffs in

the postal-based industries is, at minimum, in the hundreds of

thousands. There are also mergers and bankruptcies. Budgets for

all items in these industries very much, including postal, are under

tremendous pressure. Even a small increase may have a significant

adverse reaction. But an increase large enough to address USPS

losses would virtually guarantee a large volume drain. Postal budgets simply would not stretch to meet higher prices.

Thank you once again for this opportunity to present our views.

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

[The prepared statement of Mr. Sackler follows:]

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Mr. LYNCH. Thank you, sir.

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

STATEMENT OF JERRY CERASALE

Mr. CERASALE. Thank you, Mr. Chairman, thank you, subcommittee, for giving us the opportunity to be here. DMA wants to

thank you, Mr. Chairman, the subcommittee, and the entire committee for H.R. 22. We all need a postal service, a financially viable

one, and the short-term—sadly, it is now short-term—help that

H.R. 22 gives us imperative.

The financial condition of the Postal Service is precarious and,

sadly, it is not improving at this point in time. The Postal Service

has to grow volume; it has to become more efficient. But, at the

same time, mailers are facing the same financial conditions. The 22

percent drop in standard mail advertising reflects that fact.

As the economy comes back, some of this mail will come back.

But, sadly, we don’t think all of it will come back. Mailers cannot

shoulder another rate increase. As a matter of fact, that rate increase may in fact prove fatal, both for it and the Postal Service.

We therefore support the summer sale the Postal Service has put

together in trying to increase mail volume. We hope that this will

be duplicated in the future with more advanced notice and will be

taken greater advantage of to try and get mail back into the system.

Looking on the cost side, everything has to be on the table. As

our group, mailers, we are willing to talk about everything to try

and reduce cost. The things you are looking at here today, looking

at the delivery route adjustments, they have been going on for my

entire lifetime. My time up here as an employee in the House, one

of the complaints that I always had at the Committee on Post Office and Civil Service was my mail is not coming at the same times

it used to; complaints from businesses as well as individuals, and

that, in fact, has happened all the time as the demographics, the

geographic distribution of the American population has changed.

Right now we have to look at it from the point of view of decreased volume, decreased revenue to afford the route system that

we currently have, and the good thing is that the Postal Service is

working with the NALC on looking at these route adjustments. But

these have been happening before. Sadly, the economic times are

forcing this to happen more rapidly at this point in time.

But I think, from our view, the Postal Service is doing the right

thing and working with their employee groups to try to get this

right. Now, it hurts some of our members, because they are not

going to get the mail at the same time they received it before, but

that is one of the things that we are all working together to try

to keep the Postal Service strong and viable.

Looking at the stations and branches, it is our understanding

that the Postal Service is looking at not at rural offices. They are

looking at the proximity of other stations and branches to the one

that they are thinking about closing; looking at the retail trends at

that branch; looking at the impact on the employees, the impact on

the community, which is very important; they are looking at the

savings, the net savings. If you close this facility and you have to

move employees and carriers come out there, there is more time.

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The net savings has to be there. And then the ability of other stations and branches to handle the traffic that is being closed. So

those are the things.

I think the setup that the Postal Service has put together, they

are looking at the right things; they are asking the correct questions. And there is always the point of a PRC, Postal Regulatory

Commission, appeal. As the Postal Rate Commission in 2006, the

PRC, in an opinion, did say that if this closed, the only postal retail

service in a community, even if it wasn’t specifically a post office

with a postmaster, but a station and branch that they had jurisdiction. Not everyone agrees, but that ability stays and this effort by

the Postal Service doesn’t change that factor.

We all need the Postal Service, and we all have to chip in. All

of us have to chip in for its survival. We appreciate the fact that

you are aware of that, you are looking at that, and we are here to

try and help and do our part as well. Thank you.

[The prepared statement of Mr. Cerasale follows:]

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Mr. LYNCH. Thank you, sir.

STATEMENT OF MICHAEL MURPHY

Mr. MURPHY. Mr. Chairman and members of the committee,

thank you for allowing me an opportunity to appear before you

today to discuss some of the challenges facing the mailing industry

and the Postal Service.

My name is Michael Murphy. I am the president of Japs-Olson

Co., located in St. Louis Park, MN. We are a family business that

has been in operation for more than 100 years. Our business is

printing and mailing. We will produce more than 600 million pieces

of mail this year for all types of customers across the country.

I am here today also as chairman of the Board of the Mailing

and Fulfillment Service Association. MFSA is the only association

solely representing the mailing industry. We have approximately

600 members, which are comprised of printers, mailing service providers, product fulfillment companies, as well as suppliers to the

trade.

Needless to say, the Postal Service is a vital partner in our businesses. Therefore, we believe it is important that the Postal Service

have the complete support of Congress to manage its networks efficiently and to scale its infrastructure in proportion to its business

needs. Our company and MFSA members urge the Congress to

allow the leaders of the Postal Service to do their jobs and to manage their public institution with the same goal of efficiency as that

of private industry.

The Postal Service’s Board of Governors, the Postmaster General,

and the agency’s senior executives must be given the latitude to

make the decisions necessary to return the postal system to profitability. Those decisions include the necessary measures that are essential to control cost and, in turn, postal rate control.

We hear some suggest that many of the messages carried by the

Postal Service can be diverted to electronic distribution. To the extent that this is true, it could result in hundreds of thousands of

jobs lost in the industries that depend on this distribution system.

In just the current recession, thousands of jobs have already been

lost in the supply chain that relies on the mail.

Our association’s experience over the past 18 months suggests

that, from just those companies that have gone out of business, we

have lost 1,500 jobs. Extrapolating that to the industry as a whole,

we believe that the industry has lost no less than 15,000 permanent jobs during that same period.

Even with the challenges we have been facing, there are still

more than 8 million people whose employment is affected by the

postal system. We owe it to these people to ensure that the postal

system is on firm financial footing and will be a viable public service in the future.

Thank you.

[The prepared statement of Mr. Murphy follows:]

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Mr. LYNCH. Thank you, sir.

I yield myself 5 minutes.

May I start with Mr. Small? What I would like to avoid is the

situation that we had with the AMPs, what is it, the mail—area

mail processing facilities. All these acronyms.

We had a situation with the mail handlers out in Atlanta, I think

it was, where they identified one of their stations for closure, one

of these AMPs, and they gave the employees the opportunity to relocate to Oklahoma City as part of that closure. Obviously, that

sent the employees through the roof, and I don’t think it was a

thoughtful process.

While I admit that the finances here are very grave, as a number

of you have pointed out, there is the need, nevertheless, to conduct

ourselves with, I think, a thoughtful approach to this consolidation

and do it in a way that causes the least bit of disruption and with

all respect to these communities and to the employees that are affected; and I think it is possible. We have 37,000 post offices out

there, and I am sure that there are some that are close to each

other and that we can work this out.

But I have to ask you what are the criteria? You are making

these decisions. You have, what, 3,200 that you have identified?

Mr. SMALL. Correct.

Mr. LYNCH. And there are, you think, probably 1,000 out there

or a little less than 1,000 that might actually be eligible for closure?

Mr. SMALL. Less than 1,000 that require further review.

Mr. LYNCH. OK. Well, I know that the rural post offices are off

the list because, if you close one of those, you have somebody driving 200 miles to a post office; and I understand that. So we have

a hold harmless provision for those post offices that says even

though they are not making enough money to sustain themselves,

we are going to leave them in there because we have to provide essential services. Yet, you have another post office in an urban area,

maybe a poor minority area in an inner city that is not generating

enough revenue to sustain itself either, and we are going to close

that; and I think Mr. Sires’s testimony was on that point.

What are you using as the standard here? What are the criteria?

Can we figure that out? Do you have that laid out somewhere?

With 37,000 facilities here, we would like the opportunity to be

able to explain to our constituents what the process was. It needs

to be transparent, it needs to be fair, it needs to be consistent; and

hopefully it will make sense, it will make sense economically, consistent with your goals, while at the same time providing adequate

access.

So what are the factors you look at in determining whether

somebody is eligible on the 3,200 list? How are they determined?

Mr. SMALL. Thank you, Mr. Chairman. As I stated and you stated, we are looking at, now, less than 1,000 offices, because, out of

the 3,200, the 2,200 were immediately eliminated for consideration

for various reasons, which I will go into as part of the criteria.

Part of the criteria is what is the proximity of nearest services;

what are the mailing habits and consuming habits of the American

public with the Postal Service within those areas. We have found

that we have seen close to 5 percent less activity at our retail

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units, while the percent of the American public going to our Web

site at USPS.com has increased.

Customers also go to various other means of alternate access. So

we look at the proximity of the nearest services; we look at is there

adequate parking at the nearest services; we look at the mailing

habits of the public in that area where a station and branch is

being served.

Mr. LYNCH. OK. Well, I think my time has just about expired,

so I will do a followup later on, maybe in the second round.

The Chair recognizes the gentleman from Utah.

Mr. CHAFFETZ. Thank you.

I appreciate you all for being here and sharing your comments

and expertise. I would like to start with the GAO, if I could.

How many agencies or government entities are currently on the

high-risk list? I am just trying to get a perspective.

Mr. HERR. Twenty-nine, sir.

Mr. CHAFFETZ. Twenty-nine?

Mr. HERR. Twenty-nine, yes.

Mr. CHAFFETZ. At one point, the Postal Service was taken off the

high-risk list.

Mr. HERR. That is correct, yes.

Mr. CHAFFETZ. Just to highlight again—I know you talked about

this in your testimony, but the top reasons on why the urgency. I

think I understand the financial needs, but is there something else

above and beyond the financial peril that they are in?

Mr. HERR. There are two different ways we look at the high-risk

list. In the one we used with regard to the Postal Service is areas

or agencies that we think are in need of broad transformation. So,

in this case, the Postal Service met that criteria. I think the other

thing is we tracked the financial condition over the past year and

we looked at those numbers deteriorating. That made the case

more compelling. If you add in the mail volume drop, it suggests

that a broad look at this was needed and we, therefore, made that

decision.

Mr. CHAFFETZ. I would like to hear about the 5-day delivery. Is

that something, Mr. Small or Mr. Waller, that has definitively been

decided? You are thinking about it. Is that something that you

think would happen week in, week out?

Mr. SMALL. We haven’t concluded the study. We should be finished with the study in the next couple of months, but——

Mr. LYNCH. Mr. Small, is your mic on?

Mr. SMALL. Yes, sir.

Mr. CHAFFETZ. Maybe a little closer, just a little closer.

Mr. SMALL. We have yet to complete the study. The study should

be completed shortly, and we view it as the only viable option right

now——

Mr. CHAFFETZ. Can you give me a specific date?

Mr. SMALL. I don’t have a specific date, but I will provide one for

the record.

Mr. CHAFFETZ. That would be great.

And who is participating in that study? We have a lot of organizations, unions, whatnot, that are here. Who is participating or,

more importantly, not participating in the input that will go into

that study?

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Mr. SMALL. We are working with the various stakeholders to get

their feedback; our customers, the PRC, and also the unions. We

have talked to the unions about these tough issues associated with

5 day delivery. Members of Congress. So we are making sure that

we talk with all of our stakeholders to understand what potential

issues they would have by going to 5 day delivery.

Mr. CHAFFETZ. And those of you that represent the use of the

Postal Service from more of a customer standpoint, can you give

me—maybe starting with Mr. Murphy—your perspective on what

would happen with 5 day delivery, as opposed to 6?

Mr. MURPHY. Well, we would support 5 day delivery in the sense

that it is a big area to control cost, and we feel that is very, very

important, overall, for this system to be pegged to what is happening in the marketplace. So I would rather not have it, but it is one

of those items that is on the table and will be valuable.

Mr. CERASALE. Our membership is somewhat divided. Some of

them——

Mr. CHAFFETZ. Five and a half day delivery?

Mr. CERASALE. Right. Some of them 5 day delivery would not be

a major impact. The Postal Service is talking about Saturday. Saturday delivery is very important for them.

But I think all of them are looking at what are the tradeoffs. The

savings from 5 day delivery, what other things are going to happen

to try and improve the Postal Service? One of the things we have

to worry about is dramatic reduction in service and raising rates.

That really doesn’t come out to a very good solution. So those are

the things that we are looking at. We are waiting to take a look

at an entire plan and we are hoping to see what the study the

Postal Service comes up with is.

Mr. CHAFFETZ. Mr. Sackler.

Mr. SACKLER. Mr. Chaffetz, we are in a similar position to Jerry’s

members. We are not so much divided. I think the sentiment generally is we wouldn’t want to do this. We need to have 6 days of

delivery, but, again, what are the tradeoffs? How do you get to a

position where you resolve the Postal Service’s difficulties? So as

part of a larger solution, I think it could be something that could

be seriously entertained, and if it were done, it would be a sacrifice.

Let me just give you one example. We have quite a few banks

and financial institutions in our group, and for them remittances

flowing 7 days a week are vital. But it is not just that. If there is

a day of delivery that is taken out, then it takes longer for bills

to get there in the first place; there are changes to float and, therefore, to business practices, to financial viability, to responsibilities

to shareholders, and so forth. It is not an uncomplicated situation.

So our view is, if it is done, it has to be part of a larger long-term

solution.

Mr. CHAFFETZ. Thank you. I see my time has expired.

Thank you, Mr. Chairman.

Mr. LYNCH. I thank the gentleman.

Who seeks recognition? The Chair recognizes the gentlelady from

the District of Columbia, Ms. Holmes Norton, for 5 minutes.

Ms. NORTON. Thank you very much, Mr. Chairman.

First, let me go to get something clarified. Mr. Herr, the GAO report, with this title, could have been written, at least this title, any

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time in the last, I don’t know, 10 years. Broader restructuring

needed to address deteriorating finances. Why was the Postal Service taken off the high-risk list in 2007, please?

Mr. HERR. There are a couple of things factored into that. At that

point, the Postal Service didn’t have outstanding debt. The other

thing is Congress had taken action to pass the PAEA Act and we

thought that would lay some of the groundwork going forward.

Ms. NORTON. But it would still have needed across-the-board restructuring, would it not?

Mr. HERR. Well, the other thing is mail volumes have dropped

precipitously since that point. We have seen, just this year——

Ms. NORTON. But, of course, that was predictable in 2007 as well.

I ask this question because the only thing I can think of that is

worse than collapse of the constitutionally mandated Postal Service

is for it to do what it is doing now, falling apart piecemeal before

our very eyes; and when that happens, it is the element of surprise

and clear absence of planning.

My question really goes, I suppose, to Mr. Small initially. Here

we are still talking about a 5-day week. Even though almost 70

percent of the American people say that they would favor a 5-day

week, we are still talking about it. We have been talking about it

now for a very long time. I noted in your testimony you talked

about flat sequencing, indicating the Postal Service did understand

that sometimes you have to invest in order to, if I may use the

word, right-size. Only now are we talking about consolidation in

any kind of meaningful way.

Is there a plan for right-sizing the Postal Service so that we do

not come to these hearings to hear of various economies and efficiencies that one would expect from a business that has to do what

many have to do now, which is simply take some efficiencies pending something? I don’t know what is pending here except collapse,

and I don’t hear that there is a right-sizing plan of any kind that

the Postal Service is engaged in, seeing all the handwriting on the

wall that I think even the average American can see right now.

What right-sizing plan do you have or do you intend?

Mr. SMALL. Well, I think if you look at the cost-cutting and efficiency gains that we have employed this year, we are on track to

save over $6.1 billion. The major components of future right-sizing

of the network, the big issue to provide significant systemic response to the problem, and that would be 5 day delivery. The second issue, we have undertaken the transformation of our BMC

network——

Ms. NORTON. Are you moving toward erasing deficit, Mr.

Small——

Mr. SMALL. By cost-cutting——

Ms. NORTON [continuing]. So that you can operate the Postal

Service without a deficit, inasmuch as the Treasury is not open to

you?

Mr. SMALL. The network change and the changes in improvements in efficiencies are working toward reducing the deficit.

Ms. NORTON. Could I ask if any of you know what your competitors, the private post offices, what kind of shape they are in, the

FedExs, UPS? UPS might be a good example because it is a union

company. You are competing with these various privatized version

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of much of what you do. They don’t deliver the mail, but you have

gotten into their business. Have you looked into those businesses

to see how your competitors are faring and whether or not there

is anything that they are doing that you could benefit from? Yes,

sir.

Mr. SMALL. Yes. We are in constant communication with our

competitors. Matter of fact, we have ventures with our competitors,

such as FedEx, using their air network to fly our product. Also,

both FedEx and UPS use us as their last mile for many of their

products.

Ms. NORTON. I think we need to hear more about that, in terms

of right-sizing the post office.

Now, look, I am going to ask you a question. This is not a

NIMBY question; I will not object. And Members have to understand that if you are more transparent about it and if it is part of

right-sizing, we have to be prepared to defend what you have to do

with respect to postal services. Having said that, are there any post

offices in the District of Columbia, or postal stations, under review

for closing? See, that is something that any Member ought to be

able to ask and get an answer to.

Mr. SMALL. I believe that a list was submitted to this committee

yesterday. Offhand, I couldn’t personally tell you if there are or not

stations in the District of Columbia, but I would be happy to provide you with a copy for the record.

Ms. NORTON. I would appreciate it. This is what I think needs

to happen. The Postal Service is just too slow. You are going to

have to reach out to communities. You are going to have to get

feedback. You are going to have to hear all the protests. Transparency begets protests. You are moving so slow that I think that

you are not ahead of the decline and, forgive me, fall of the Postal

Service unless you can hasten this process with the kind of rightsizing that puts it all before us so we know what has to be done.

Thank you very much, Mr. Chairman.

Mr. LYNCH. Thank you. Just to clarify, we did get the list yesterday. I notice there are six Washington, DC, post offices that have

been identified for full study, and I notice in my district there are

three suburban post offices that have been identified for full study

as well.

The Chair recognizes the gentleman from northern Virginia, Mr.

Connolly.

Mr. CONNOLLY. I thank the Chair.

Mr. Herr, is there some concern, should there be some concern

that, with the best of intentions, some of the cost-cutting measures

being contemplated or undertaken could prove to be counterproductive? When I listen to some of the measures we are looking

at, I am struck by the parallel with the newspaper industry.

Declining advertising accelerated in the recession, some of which

won’t come back; advertising gravitating toward online newspapers

that are free, but not enough to make it a viable business model,

at least not yet; giving away newspapers free at Metro stations,

further accelerating the loss of paid subscribers, because why

would I pay for a newspaper I can now get for free; consolidating

offices; closing bureaus, downsizing constantly, and, yet, it doesn’t

seem to have righted the ship of state, if you will.

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In the case of some of the actions being contemplated, we are

looking at consolidation so there are fewer points of entry on the

system, which may be a very prudent thing to do, but I am struck

that the competition has points of entry all over the place. Not full

offices, necessarily, but very convenient drop-off points if I want to

participate in their system.

I think that the competition is available for 6 if I want to pay

for it. Raising fees, as has been stated by Mr. Sackler, there is

probably some upper limit to how much we can get away with that

without making ourselves less viable and driving away even more

customers.

So I am just wondering. There is no implicit criticism, necessarily, of the steps, but have we looked at the risk of unintended

consequences by way of counter-productivity like cost-cutting measures?

Mr. HERR. Congressman Connolly, thanks for that question. It is

an interesting point. In looking at this, one of the things we are

suggesting is that the Postal Service needs to articulate the plan.

It talks about how it can take action, but you mentioned, say, differing entry points for mail. That is why it would be important to

coordinate with the folks in the mailing industry about how that

would roll out, so it could be done in a way that people understand

what that change would entail. The Postal Regulatory Commission

may have a role in terms of reviewing some of those cases as well.

There are a lot of different pieces that go into maintaining universal service throughout the country. I understand that some distribution centers from Maine to Arizona, from Florida to Alaska, to

do that you would require a network of processing facilities. In

terms of the retail side, one of the things that we noticed, there are

37,000 facilities, but 30 percent of the retail revenue is not coming

through post offices, it is coming from alternatives; grocery store

sales, things of that nature.

In talking with folks at the Postal Service about this retail initiative, one of the things I was struck by is there is somewhat of a

qualitative assessment at the community level, trying to ensure

that if there is a senior citizen community or groups that are being

served, that would be factored into that decisionmaking.

So there are tradeoffs, but the other side of it is that there is also

a great decline in the amount of mail going through the system.

And one of the bedrock principles that the Postal Service has been

operating under is being self-sustaining. So factoring those things

into consideration and these changes, we think a restructuring

plan, Congress, the administration looking at that would be an important step.

Mr. WALLER. A couple of things I would like to say first in regards to the list of post office stations and branches under consideration, at the meeting I mentioned this morning that occurred at the

Commission, the Postal Service promised to give a list of the 677

facilities that are going to be studied. When they file that, that will

go up on the PRC.gov Web site immediately, and that will be available to all people in the country through that to look at whose and

where, etc.

This issue of looking at it as a whole thing is also of concern as

we look at a process like this. Last time we did an advisory opinVerDate 11-MAY-2000 13:14 Dec 01, 2009 Jkt 000000 PO 00000 Frm 00104 Fmt 6633 Sfmt 6633 U:\DOCS\52713.TXT KATIE PsN: KATIE
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ion, it was on the processing facilities and the Postal Service’s plan

for looking at that, and found quite a few problems that existed in

the planning process at not looking at how many real savings were

going to be achieved through that process and what backlashes

might occur in productivity.

Second, in the work the Commission has done so far looking at

the route reduction from 6 day to 5 day, one of the things the Commission included in its analysis was an estimate of the drop-in volume that might occur, and that is about a $600 million impact. So

looking at all these issues and not looking at it too narrowly is extremely important.

Mr. CONNOLLY. Thank you.

Mr. Chairman, I see my time is up. I would just say if Mr. Clay

were still here, I know he would want to ask that going beyond

short-term measures to return ourselves to solvency, what is the

long-term business model we are confident is viable. But, of course,

Mr. Clay is not here to ask that.

Mr. LYNCH. Maybe Mr. Davis wants to ask that question. The

Chair recognizes the distinguished gentleman from Illinois, Mr.

Davis, for 5 minutes.

Mr. DAVIS. Thank you very much, Mr. Chairman. Let me thank

you for calling the hearing. I also want to thank all of the witnesses for appearing.

I think that some of us have known pretty much that we were

going to be at this juncture probably for quite some time. I think

we were hoping against hope that we would not really get to this

point. So let me just say, first of all, Mr. Small, I don’t envy Mr.

Potter and yourself and other members of the staff and the Board

of Governors as you try and wrestle with this problem and figure

out what is the fairest, most effective, most efficient way of making

sure that our Postal Service remains solvent, recognizing the economics and the status of our economy.

I know that there is the study underway relative to 5 day delivery. What other cost-cutting proposals did you consider before

reaching the point of sort of settling on the reorganization of facilities plan?

Mr. SMALL. I think if you look at our cost-cutting efforts and

what has been able to enable us to achieve $6.1 billion this year

in cost savings, we have reduced overtime; we have minimized the

use of the supplemental temporary work force; we have adjusted

routes, both city and rural; we have currently implemented a network structure change transforming the bulk mail centers into network distribution centers, consolidating package and standard operations to realize economy’s scale and efficiency in processing, and

reduced redundancies in transportation.

We have also embarked upon, as was referred to before, the AMP

effort, where we have consolidated outgoing operations to better

utilize equipment in certain plants, as well as compressed tours to,

again, take advantage of the unprecedented drop-off in volume and

being able to provide a more efficient means of utilizing our equipment within our plants.

Mr. DAVIS. So one could really say that you are down to the point

where you don’t have many options left; you don’t have many other

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places to go. Or I guess we would say you are between a rock and

a hard place.

Mr. SMALL. The last big option is, unfortunately, the need to go

from 6 to 5 day delivery. That is the one big piece out there that

would add to helping us maintain liquidity and be viable.

Mr. DAVIS. Thank you very much.

Mr. Herr, let me ask you. I know that GAO has taken the position, before now, time and time again, that there were some other

cost savings, cost-cutting approaches that the Postal Service perhaps could have taken sometime before now. How do you feel in relationship to what they have done and the plan that they have put

together?

Mr. HERR. I think at this point we have been looking over the

past year, at some of the low-hanging fruit in terms of overtime

and things like that have been taken into consideration; the route

adjustment process that Mr. Small referenced. We have a report

that came out today that talks about that initiative. And I think

if volumes continue to decline, there will be additional opportunities there.

We still believe that there are opportunities in terms of the

broader facilities. We talk about that in terms of the processing

network. We know there are some consolidation studies that are

still underway, but we think that this broader plan that is referenced in our high-risk report would be a next starting point to

help achieve some consensus about where this might go going forward, sir.

Mr. DAVIS. My time is about to expire, but let me ask you, Mr.

Small, did the Postal Service apply for any of the economic stimulus money?

Mr. SMALL. No.

Mr. DAVIS. Is there a reason that you didn’t?

Mr. SMALL. I think that question would be better answered or is

outside of my scope of being able to answer that question.

Mr. DAVIS. All right, I understand that. Thank you, very much.

And thank you, Mr. Chairman.

Mr. LYNCH. Thank you, sir.

The Chair now recognizes the gentleman from Utah for 5 minutes.

Mr. CHAFFETZ. The gentleman brings up a great point about we

are spending all these trillion dollars and here we have a constitutionally mandated service that truly does benefit and service every

single American. It does seem that it would be appropriate that

while I would have voted and have voted against the stimulus

money, that some of those moneys should have been allocated to

this service, which not only benefits individuals, but businesses

alike. I think we should explore that a little bit more if there are

opportunities moving forward.

A question for you about the 3,200 or so post offices that are

closed. What is the estimated savings by doing that?

Mr. SMALL. This is a bottom-up approach, and since we have reduced and we are continuing to the next days beyond the preliminary study with the less than 1,000 offices that we are going to——

Mr. CHAFFETZ. Do you have some sort of range of dollars?

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Mr. SMALL. No, we won’t know until the beginning of October

when we continue——

Mr. CHAFFETZ. But the other 2,000 or so, you don’t have any understanding what——

Mr. SMALL. The whole cost center, if you look at the entire cost

center of those 3,200 offices, that includes carrier operations,

which, of course, would not be eliminated; rent; ownership of facilities; operations. That whole cost center is worth $16 billion.

Mr. CHAFFETZ. So if you break out the labor component, certainly

there has to be some estimation of what the number is, is there

not?

Mr. SMALL. Well, I think the reason why we cannot give you an

estimate until October is because we have not taken a cookie cutter

approach or set targets for how many would need to be eliminated.

And only those that are in close proximity, provide ready access to

the community would be under consideration, and we just don’t

know that number until the study is fully completed.

Mr. CHAFFETZ. Have you all taken a position on the bill H.R. 658

that we heard testimony in panel one on?

Mr. SMALL. Yes, and we don’t agree with it.

Mr. CHAFFETZ. Why not?

Mr. SMALL. Due to our dire financial deteriorating situation, we

have had this process in place for stations and branches for 40

years that seems to work. We have to be able to react quickly and

rapidly to this financial situation.

Mr. CHAFFETZ. So if you gave them an extra 30 days, you think

that would be unacceptable?

Mr. SMALL. I believe that the rules as they are currently applied

are adequate.

Mr. CHAFFETZ. Mr. Herr, is there anything that you could add

to what I was asking about previously, about the elimination of

some of these facilities? Are the any cost estimates? There are several proposals that are floating around the Postal Service; 5 day delivery, consolidation of routes, those types of things. Has the GAO

looked at what is realistic in terms of actual cost savings?

Mr. HERR. We have seen the two estimates that have been provided. The other thing that we have called for in prior testimony

before this committee is that a study should be done and it should

be made public so people can see and understand what those assumptions are. I know the PRC has one estimate for what 5 day

delivery would result in, about $2 billion, John, is that correct, or

$1.9, and the estimate from the Postal Service was significantly

higher, about $3.5 billion. So once that comes out, we are very interested in taking a hard look at that and we would be happy to

work with the committee on that if that would be of help.

Mr. CHAFFETZ. OK.

Mr. HERR. Your other question, we also asked about and one

thing that has been a bit of a source of frustration is getting estimates about what savings might be achieved. We have noted in

prior reports on the retail network that there are a lot of places

that are in disrepair, so there is real maintenance backlog. So we

think there could be cost savings there as well. It is not just moving folks, but some of these places have really fallen in derelict.

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Mr. CHAFFETZ. Mr. Waller, it looked like you wanted to comment

on that.

Mr. WALLER. Yes. This issue is one that already we are starting

to push on in the docket, is what are the exact savings and can you

bound it in some way. If you look at the way costs are accounted

for in the Postal Service, retail clerks, which is what we are talking

about here, and then if you add on all the extra costs, the space

they take up and stuff like that, you are talking about $4.1 billion

for all post offices, all stations and branches.

This is not a big cost item. So if you narrow it down just to station and branches, which I think is very important to come out in

this hearing that the Commission has underway, to narrow it

down, what is really the even potential savings.

Mr. CHAFFETZ. Thank you, Mr. Chairman. My time is up. I

would just say that while we continue to talk about cuts and elimination, we also obviously need to look at relevancy and marketing

and how we make the Post Office more relevant in the services;

and I think one of the things that we need to spend more time on

is the cross functionality that can happen. I was very pleased that

you co-signed with me the potential of the Postal Service helping

to conduct and do the enumeration portion of the census.

I think there are other creative ideas that we can do that can inject some cash sooner, rather than later, and make the Postal Service, again, increasingly relevant in people’s lives. We have such

great real estate facilities, people, all these assets are in place, and

yet I don’t believe our other elements within our own Federal Government are paying attention to those. It is so frustrating when

you have the Federal Government utilizing services outside when

we have these services internally. So I think we need to continue

to explore that, and particularly the timing with the census, which

I think would be a great asset.

I will yield back the remainder of my excess time. Thank you.

Mr. LYNCH. I recognize myself for 5 minutes.

Let me ask Mr. Small a hypothetical situation. We talked earlier

about this desire to look at going from 6 to 5 day delivery. As you

know, the Appropriations Committee, the subcommittee has again

mandated that we retain 6 day delivery, but let’s just entertain it

hypothetically. Suppose I had a brother-in-law that delivered mail

on Saturdays right now, a letter carrier. What happens to the letter carrier, he and others, when we shift to a 5-day delivery cycle?

Mr. SMALL. We certainly understand that change is difficult and

are aware of changes that would occur with our employees. That

assignment would basically be eliminated. The way carriers are

structured, we deliver for 6 days a week. You have a regular carrier on a route for 5 of the 6-days and then you have a carrier who

performs the regular carrier’s duties on their day off.

We have a negotiated agreement with the National Association

of Letter Carriers for a supplemental work force of 15,000 transitional employees, plus an annual attrition rate of approximately

11,000 carriers a year. We are very proud of the fact that we have

never had to lay employees off and that we will continue to try to

place any employee that is affected. But there is cushion available

through the temporary work force and attrition to try to ensure

that there is not a dramatic effect on our employees.

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Mr. LYNCH. So you are saying that there are no layoffs or what

are you saying here?

Mr. SMALL. I can’t say or guarantee that there wouldn’t be layoffs. If we look at it or the timeframe by which we would have to

get this done, there is a possibility that we will be able to assume

some of the affected employees through the attrition of 11,000 carriers and also the 15,000 that are temporary employees.

Mr. LYNCH. Is there a hiring freeze right now?

Mr. SMALL. Yes.

Mr. LYNCH. OK, let me ask you, going back to the consolidation

of facilities. I know that the Postal Service owns some buildings

and then, in other cases, we actually rent or we have long-term

leases and options and what-not.

When you are looking at a potential closure—and I know, representing a city with fairly high rental space downtown, those expenses, to maintain facilities like that of any considerable size, it

is a pretty expensive option. Do you have a way of balancing

whether or not you close a facility based upon whether it is Post

Office owned or leased?

Mr. SMALL. I think it would be determined by which facility can

absorb the gaining facility. We have to weigh the balance of customer input and affect assets and services provided. I could think

about—and I know you mentioned it on Fox News yesterday—offices that are close, a block away from each other.

In my former district, I can think of three examples right now

where we had stations, three groupings of stations within a block

of each other. Those are the types of facilities we would look at,

and we would have to determine, if two facilities were consolidated

into one, which facility had the adequate space, which facility had

the adequate parking, and then make the determination based on

whether it is a leased or an owned facility.

Mr. LYNCH. OK. Looking ahead, I think there is a system in Finland or Sweden. It is actually being replicated here in the United

States. I think they call them Zumboxes or something like that,

where a person can go online and see their mail, and they see what

potentially could be delivered, and if they want to toss it, they

can—if they want it delivered, they can click on it, and if they don’t

want it, if it is junk mail, they can get rid of it by clicking on it

and putting it in the trash can. That will greatly reduce the volume

of mail because people won’t have to get their junk mail.

I know it doesn’t make the mailers happy, but have you looked

at anything like that for the Postal Service going forward? Is that

the new model? Should we be preparing for that?

Mr. SMALL. I particularly do not have much knowledge of

Zumbox, but I know there are folks who are studying it within the

Postal Service. We are always looking for new products to bring out

to the market. I think on the panel we heard earlier about the

summer sale. We have also introduced the flat rate box and an advertising campaign around the flat rate box, which has been a huge

success so far this summer. So we are always looking at new products to be able to go to market with to enhance our situation.

Mr. LYNCH. Thank you. My time has expired.

I am going to recognize the gentleman from Illinois, Mr. Davis.

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Mr. DAVIS. Thank you very much, Mr. Chairman. I only have two

brief questions.

Let me ask you, Mr. Small, does this plan, that is, the facilities

postal station reorganization, will it necessitate or cause any layoffs?

Mr. SMALL. This effort by itself, no.

Mr. DAVIS. So attrition would basically take care of those individuals who would have to go, and then there would be an opportunity

to shift other employees to other facilities?

Mr. SMALL. The employees would be moved in compliance with

our collective bargaining agreements.

Mr. DAVIS. The other question that I have is actually for Mr.

Cerasale. Mr. Cerasale, I know that we are always trying to make

sure that we take into consideration the needs of as many stakeholders as we possibly can, and it seems as though, if we get

backed up against the wall, you don’t have any choice, you have to

decide something. If your members and associates were to decide

what hurt them the most, would it be 5 day delivery or would it

be reorganization of stations?

Mr. CERASALE. Five day delivery. Of those two, 5 day delivery

would hurt more of my members than the reorganization of the stations.

Mr. DAVIS. All right. Thank you very much.

Thank you, Mr. Chairman.

Mr. LYNCH. Thank you, Mr. Davis.

The Chair recognizes the gentleman from Ohio, Mr. Kucinich, for

5 minutes.

Mr. KUCINICH. To Mr. Small, welcome. We have had the opportunity to work together in Cleveland years ago, and I appreciated

that and I appreciate your commitment to the Postal Service. So

don’t take personally any questions I am about to ask you. [Laughter.]

How does the Postal Service ensure community participation in

the decisionmaking process?

Mr. SMALL. For the station and branch consolidation effort, we

have basically three different means with which we communicate

with the public, depending on the size of the community. We either

send a questionnaire seeking their input to their residence or we

post at the local office, local station for a period of time seeking

their input. All P.O. box holders get a hard copy form within their

P.O. box soliciting their feedback. And we also will post community

notices within newspapers for 5 days to seek the community input.

Part of the process that we encourage is community meetings.

Mr. KUCINICH. Well, let’s talk about the community meetings. Do

you have any knowledge of how many community meetings you

may have held in, let’s say, 44111?

Mr. SMALL. No, I don’t have that information. I can surely provide it to you.

Mr. KUCINICH. I haven’t heard of any, and I know there is talk

of consolidation there. So I think it is important to have community

meetings. Would you be able to let this committee know what kind

of community meetings you are talking about? I mean, do you actually send a letter to everybody in a certain zip code saying we are

going to have a meeting at the Gallagher Post Office to talk about

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postal consolidation, and here is what it could mean to the community and we want your input; here is the time and the place? I am

not aware of meetings like that. And I think that considering the

gravity of this, you owe it to your customers to do something that

would be no less than that.

Mr. SMALL. Again, I would be happy to provide the committee

with a copy of the template that we send to the local districts for

dissemination to the community. Of course, each community is different and the makeup is different, so we ask the local offices to

just use that as a template and tailor the feedback, the surveys,

and the way they conduct the community meetings to their own

community’s needs.

Mr. KUCINICH. Thank you, Mr. Small, but that is theoretical. You

haven’t really given me a practical explication or explanation of

how this works in reality. I would like to have that with respect

to Cleveland Cuyahoga County so we can get into the nitty gritty

about what you have sought in terms of public input.

I look at this. Mr. Chairman and members of the committee, here

is my concern. My concern is that you are actually dismantling a

service infrastructure, thousands and thousands of mailboxes out.

No one asked me about that. I am a member of this committee. I

don’t know how many other Members were asked about that. Just

take mailboxes out of communities; gone.

Now, if you are in marketing, it seems like you want to show the

flag somewhere. How does taking mailboxes out help a service delivery? And then you are talking about closing branches. So how

does that help with service delivery if we are talking about universal service? And even in main post offices there are services that

are being switched off.

So what I see happening here—make your economic justification,

fine. But what I see happening is the dismantling, a slow and

steady dismantling of the infrastructure of the U.S. Postal Service,

starting with mailboxes in neighborhoods, postal branches, changes

at branch offices, changes at airport post offices, post offices across

this country.

And you are actually doing that piecemeal and right under the

nose of Congress because you wave the dollar bill, we don’t have

enough money. Oh, is that right? That passed for anything over

here; that is a shortcut to debate here.

I don’t think you are going to be able to answer this question,

but I will just conclude, Mr. Chairman, by saying that there is a

stench of privatization about this whole thing, and I am not going

to diminish the service of you, Mr. Small, or anybody else in the

U.S. Postal Service, but there is another game going on here that

really is about taking this public wealth of universal Postal Service

and carving it up and handing it out to special interest, and I see

the slow and steady dismantling of the postal infrastructure as

being an inexorable move in that direction.

That’s all I have to say. Thank you.

Mr. LYNCH. I thank the gentleman.

The Chair now recognizes the gentlelady from the District of Columbia for 5 minutes.

Ms. NORTON. Mr. Chairman, I have just one more question, and

I thank you for getting this list to me. And I am not objecting to

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the list, as I said before. Indeed, I think I have some understanding, but I am not sure I do. Remember, my concern is the slow

walk to collapse.

I certainly appreciate the need for study. I do think one has to

be careful to look at all the factors. I am having a hard time understanding why we are just studying some of these matters, such as

the station branches identified ‘‘for full study.’’

Going back to what I said to Mr. Herr, they got taken off the

high-risk list, I don’t think that was of service to them, frankly. I

think they need to see the handwriting on the wall before their

eyes as much as possible, and as tough as the GAO normally is,

I can’t imagine the fact that there have been some tiny baby steps

taken here that should have removed them.

But, Mr. Small, I need to know now—I know from your testimony at page 5 what you will be looking at considering such factors as customer access, service standards, cost savings, impact on

employees, environmental impact, real estate values. All of this

makes sense. What I don’t know from your testimony is how you

chose the particular stations or branches to look at for those factors

in the first place.

Mr. SMALL. OK, I would be happy to explain. As mentioned in

Mr. Waller’s testimony, he talked about EAS–24 and above offices,

so let me explain what an EAS–24 and above office is.

An EAS–24 is the lowest level potential office we are looking at.

Typically, EAS–24 has a post office where a postmaster is resident

and the chief administrator for postal services, as well as subordinate stations, generally at 24 there may be three or four stations.

As you get larger, through 26 and then to PCs, what we call PC

post offices, such as Miami, where you have 50 stations.

So we are looking at large groups of stations where you have offices that are in close proximity to each other that mailers’ habits

and consumers’ habits have told us that they no longer go to the

retail unit, that there has been a decline in retail activity, and that

there has been an increase——

Ms. NORTON. So will these tend to be smaller stations or

branches?

Mr. SMALL. I am sorry?

Ms. NORTON. Will these tend to be smaller stations or branches?

Mr. SMALL. They could be larger, depending on whether they

have adequate space to absorb a neighboring station which is in

close proximity. They could be two smaller stations, where one has

adequate workroom floor space to consolidate. We won’t know until

a complete and thorough review is performed on all those offices

on the list we provided.

Ms. NORTON. Now, you say, again on page 5, we do not anticipate

this review process to generate any changes this fiscal year, which

ends September 30th. When did this begin, this study begin?

Mr. SMALL. It began in approximately May.

Ms. NORTON. Well, Mr. Chairman, this is what I mean. I really

don’t think this is rocket science. And the notion that we are beginning in May to look at what offices are too close to one another or

may have to consolidate is what I mean by slow walking the Postal

Service to collapse and what I mean about facing the right-sizing

model earlier rather than later.

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And, Mr. Herr, that is what I mean when I say you can take

them off the list all you want to, but I can’t imagine why they

haven’t been on the high-risk list for 10 years. To say that something in the extreme position of the Postal Service that we have

seen now for years has not been at high risk makes me wonder

what in the world is at a high risk. I can think of no major entity

in the United States at higher risk than the U.S. Postal Service.

Thank you, Mr. Chairman.

Mr. LYNCH. Thank you.

Well, I think this panel has suffered enough. [Laughter.]

I want to thank you. Seriously, I want to thank you for your willingness to come before the committee to help us with our work.

There are, as always, several hearings going on at the same time,

so I would just caution you that there may be Members who would

like to submit questions in writing, and, if that is the case, I would

ask you to respond within 7 days, if you could. Thank you very

much. Have a good day.

At this time, I would like to welcome our third panel. I know we

are expecting votes around 12:30, so we might be able to get everyone seated and begin with introductions, at least. Thank you.

Good afternoon. It is the custom of this committee to swear all

witnesses who are to offer testimony. Would you please rise and

raise your right hands?

[Witnesses sworn.]

Mr. LYNCH. Let the record show that all the witnesses have answered in the affirmative.

I think all of you are aware of the lighting system here. Green

means you are free to give your 5 minute address; yellow light indicates you have to wrap up, you have about a minute left; and then

a red light indicates you should cease offering testimony.

Let me offer some brief introductions, although many of the

members on this panel have been frequent witnesses. Let me begin.

Mr. William Burrus is the president of the American Postal

Workers Union; Mr. John Hegarty is president of the National

Postal Mail Handlers Union; Mr. Louis Atkins is executive vice

president of the National Association of Postal Supervisors; Mr.

Fred Rolando is the new president of the National Association of

Letter Carriers. Welcome. Mr. Don Cantriel is the president of the

National Rural Letter Carriers’ Association; and Mr. Mark Strong

is executive vice president of the National League of Postmasters

of the United States. Welcome all.

Mr. Burrus, I welcome you to make an opening statement. You

have 5 minutes.

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STATEMENTS OF WILLIAM BURRUS, PRESIDENT, AMERICAN

POSTAL WORKERS UNION, AFL–CIO; JOHN HEGARTY, PRESIDENT, NATIONAL POSTAL MAIL HANDLERS UNION; LOUIS

ATKINS, VICE PRESIDENT, NATIONAL ASSOCIATION OF

POSTAL SUPERVISORS; FRED ROLANDO, NATIONAL PRESIDENT, THE NATIONAL ASSOCIATION OF LETTER CARRIERS,

AFL–CIO; DON CANTRIEL, PRESIDENT, NATIONAL RURAL

LETTER CARRIERS’ ASSOCIATION; AND MARK STRONG, EXECUTIVE VICE PRESIDENT, NATIONAL LEAGUE OF POSTMASTERS OF THE UNITED STATES

STATEMENT OF WILLIAM BURRUS

Mr. BURRUS. Thank you, Mr. Chairman. Mr. Chairman and

members of the subcommittee, thank you for convening this hearing and providing me the opportunity to testify on behalf of the

dedicated employees that the American Postal Workers Union is

privileged to represent.

In response to the dramatic reduction in mail volume, the Postal

Service has initiated many programs intended to reduce costs. The

station and branch initiative is the most recently announced service reduction. Others include the elimination of Saturday delivery,

consolidation of mail processing facilities, delivery route adjustments, and realignment of the bulk mail network. These programs

are based on a twofold management analysis: that savings must be

achieved and that mail volume will never return to previous

heights.

Until very recently, postal executives have asserted that the decline in volume was caused by the conversion of hard copy mail to

electronic communications. I have long been skeptical of that claim

that individual consumers’ increased use of email and the Internet

has placed the Postal Service in jeopardy.

It is imperative that postal decisionmakers correctly identify the

cause of the reduction in volume and the trends that will drive future communications. Precious time has been lost as attention was

focused on an illusory cause. Even now decisions are being made

with scant appreciation of what will cause volume to increase or

decrease.

I have concluded that the decline in hard copy and communications has been less affected by electronic conversion than by the

Nation’s economic downturn.

The facts are it is important to note that our Nation’s mail volume was highest in 2006, when the use of electronic communication was already widespread. We must also keep in mind that the

mail stream is and will continue to be dominated by business-related communications, which is especially sensitive to the economic

environment.

Analysts generally separate mail into household mail and nonhousehold mail, and review the interactions between these groups.

In 2006, of the 213 billion mail pieces, 190 billion involved nonhousehold communications. Only 2.9 percent, or 19.4 billion pieces,

constituted household-to-household mail.

The business community has explored other means of communications and will continue to do so. But these marketing decisions

go far beyond the evolution of personal communications.

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To date, there is no general agreement among analysts about the

future of commercial messages. Television, radio, newspaper, email,

and online advertising are all receiving mixed analyses of the prospect for growth; and there is no conclusive evidence that the Postal

Service will fail to be as competitive in the future as it was in

2006. One respected analyst, Magna, predicts that between now

and 2014 mail will grow 2 percent annually. Yet, postal management is betting that mail will cease to be relevant. I disagree.

Mail has unique advantages over other commercial messaging,

including targeting, attention and retention. I predict that hard

copy mail will be competitive far into the future. I admit I have no

crystal ball, but neither does the Postmaster General or the Board

of Governors. If they are wrong and I am right, the initiative presently underway will leave the Postal Service ill equipped when

mail volume does return.

Station and branch closings and 5 day delivery schemes will unquestionably have a negative effect on the postal monopoly and will

impede the Postal Service’s ability to compete. These are acts of

surrender, when the outcome of the battle is still in doubt.

Nonetheless, the Postal Service must respond to the recent declines in mail volume, and I commit the cooperation of my union

in sensible and effective efforts.

Regrettably, the alleged state of reform in 2006 has been a major

contributor to the Postal Service’s current financial predicament.

Major mailer associations, management associations, the Postmaster General, the Board of Governors, some labor organizations,

and some Members of Congress have, through their support of the

PAEA, forced the Postal Service to make payments of $14 billion

over the last 2 years for future retiree health care liabilities. Those

who supported the legislation share in the responsibility for the

Postal Service’s current financial debacle and the drastic actions

undertaken in response.

I have been consulted by postal management on the subject affecting service and the impact on my members. On the closing of

stations and branches, I reminded postal management that the

APW-USPS collective bargaining agreement, which remains in

force through November 20th of next year, includes the following:

‘‘The parties agree that all existing retail operations will remain

within the installation of which they are a part and all future retail

operations established within the jurisdiction of an installation

shall become a part of that installation.’’ I personally negotiated

that language and know what its intent was at the time of negotiations.

I expect that postal management will fully comply with this contractual agreement, and I thank you, Mr. Chairman. I would be

pleased to answer any questions you may have.

[The prepared statement of Mr. Burrus follows:]

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Mr. LYNCH. Thank you very much, Mr. Burrus.

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

STATEMENT OF JOHN HEGARTY

Mr. HEGARTY. Good morning, and thank you, Chairman Lynch,

Ranking Member Chaffetz, and the other members of the subcommittee, for inviting me to testify here today.

Let me take this opportunity to thank you and all members of

the subcommittee for your diligent efforts on H.R. 22. We look forward to working with you as that legislation and the recently introduced Senate bill S. 1507 work their way through the legislative

process.

As requested, my testimony today will focus on the current realignment efforts of the Postal Service dealing with the closing and

consolidation of facilities and the realigning of stations and

branches. I will also discuss the impact of such decisions on the

flow of current and future mail, and the resulting impact on mail

handlers, postal customers, and communities.

As you know, mail handlers work primarily at the large processing facilities. At the same time, however, we represent approximately 1,000 mail handlers who are situated at the larger stations

and branches. While they may be employed at smaller facilities,

some of these mail handlers actually are assigned to a larger facility as part of their postal installation.

As we have previously discussed, the Postal Service is proceeding

to realign its network of mail processing plants by conducting Area

Mail Processing studies. I will not repeat prior testimony here, but

I think I should note that, as I have said in prior testimony, our

concern is, a, that the process is accomplished uniformly and within the established guidelines; and, b, that the future postal network

is not cut too severely such that the Postal Service will not be prepared to provide universal service and low cost service when mail

volumes recover.

Our solution to a rational closing and consolidation approach is

to review such changes on a case-by-case basis, following a careful

analysis of the facts presented in each situation. Where the proposal makes economic and logistical sense, where service standards

will not be negatively affected, where major mailers in the area

will not be inconvenienced. Where all negotiated requirements with

the unions have been complied with, then the Mail Handlers Union

will not simply oppose a closing or consolidation simply for the

sake of opposition. Conversely, the Postal Service should not be

closing and consolidating facilities just so the agency can say that

it is closing and consolidating.

The impact on mail handlers is varied, depending on the circumstances, but some of the affected employees have had their

hours of work or work location drastically altered, thereby severely

disrupting their family life. Employees have had to scramble to

make alternate child care arrangements, to get their kids to school,

or their spouses have had to adjust their work schedules to juggle

the various responsibilities.

Many employees have been faced with the almost impossible task

of either moving their families hundreds of miles away to remain

employed by the Postal Service or to give up their postal careers

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altogether, and I think you highlighted that in your opening statement, Mr. Chairman, outlining the situation that we talked about

at the last hearing, where employees were offered jobs, some of

them, 400 miles away from their current duty station.

The impact on the customers will also vary, depending on the circumstances. Our concern is that we may end up losing business because a major customer decides it is just as easy to use a competitor, and they abandon the Postal Service altogether. We also need

to factor in the individual customers who need and deserve access

to postal services.

The impact on communities should also be factored into any final

decisions on consolidation. What will be the impact if a large plant

is closed and the employees then are moved to another plant to

work in some other community? How about local businesses like

restaurants and other retail establishments, who used to cater to

this large factory that employed so many people?

Many of the other topics on which the subcommittee is seeking

input really need to be answered by the Postal Service before we

can weigh in on them, but, as always, I would be happy to answer

any questions that you might have, and, again, thank you for inviting me to testify.

[The prepared statement of Mr. Hegarty follows:]

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Mr. LYNCH. Thank you, President Hegarty.

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

STATEMENT OF LOUIS ATKINS

Mr. ATKINS. Good morning, Chairman Lynch, Ranking Member

Chaffetz, and other distinguished members of the subcommittee.

My name is Louis M. Atkins. I serve as executive vice president of

the National Association of Postal Supervisors. We are recognized

by the U.S. Postal Service as representing over 35,000 current and

retired management employees of the Postal Service.

I am honored by your invitation to appear before you and to provide our organization’s feedback on the Postal Service’s plan to examine the potential closure or consolidation of many postal stations

and branches that comprise the national retail network.

Over the years, the Postal Service has continually made minor

adjustments in the location of its retail operations to improve the

efficiency of the mail service and its service to the American public.

The scale of these changes have been relatively small in comparison to what lies before us. But now the efforts of consolidating up

to 3,100 facilities across the country, some in your own congressional districts, will significantly impact our customers and your

constituents.

We have concerns and reservations about the underlying review

process and its likely resulting consequences. I wish to share those

concerns with you right now.

The Postal Service’s review of approximately 3,100 customer

service operations is focused on areas located primarily in urban

centers, large cities, or in highly developed suburban communities.

No matter where you go across the country, Postal Service retail

operations are a business anchored to the communities they serve.

Businesses that share the general location with the Postal Service

benefit from the Postal Service retail presence in the community.

My organization’s fundamental aim is to support the efficient operation of the Postal Service. But the scope of the Postal Service’s

review and potential consolidation could impact nearly 10 percent

of the facilities that serve urban and highly developed communities. The repercussions of a move that large could be modest in

terms of dollar savings and considerably negative from a customer

service standpoint. Let me explain why.

Since the targeted facilities and operations are in urban areas

and developed suburban communities, many residents rely on their

local post office as being within walking distance, especially those

who are elderly or without a car. Today, many of our customers in

urban areas enjoy the convenience of walking to their local post office to conduct their postal-related business. If the Postal Service’s

plans are implemented, these customers will face a distance to the

nearest post office that will be greater than the current one, a distance the would not likely be able to walk.

The elderly, who are less likely to connect to the Internet, rely

more heavily on their local post office retail unit and will feel a

greater loss of convenience and connection to their post office.

When packages cannot be delivered by the letter carriers and the

customers need to go to their local post office, customers will have

a further distance to travel to retrieve their mail.

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These are some of the impacts that will be felt by customers who

lose their local post office.

In addition, the financial savings from consolidation may not be

as large as first appears. In a facility that serves both delivery and

retail, the relocation of a carrier unit to another facility will mean

that the portion of the building devoted to carrier floor space will

become vacant and only the curbside potion of the building devoted

to retail operations will continue to be used.

Should the post office determine that it is best to separate the

retail and carrier operations in their present location, keeping only

the retail operation in place will not necessarily present savings if

the post office is leasing the facility and obliged to continue to pay

a long-term lease for the entire space.

Due to the requirements of Postal Service operations, the empty

space may not lend itself to subleasing to another business entity.

In facilities owned by the Postal Service, the same problem will

occur in attempting to lease out the empty space resulting from

movement of the carrier operations to another location. This dilemma will ultimately result in a move by the Postal Service to

eliminate the retail operation in the location, and this would negatively impact customers, as I explained earlier.

The Postal Service leases nearly 85 percent of the facilities that

house processing, delivery, and retail operations, so the cost of leasing facilities presents a tremendous burden on the Postal Service.

Considering the high percentage of the leased facilities operated by

the Postal Service, and the underlying and substantial long-term financial obligations they represent, it would be difficult for the Postal Service to achieve significant savings through the consolidation

or closing of its leased properties.

Where the Postal Service owns the real estate that houses its

carriers and retail operations, the consolidation or closure of delivery or retail operations at those properties may also be problematic

when the sale of that property is attempted, given today’s depressed commercial real estate values. The closing of a local post

office will also result in an additional vacant storefront in an already depressed local economy.

Our organization supports the efforts of the Postal Service to

maintain its viability in these trying times. The Postmaster General deserves credit for his efforts to reduce costs and improve efficiency. Our greatest concern is that, in a rush to consolidate and

close as many as 3,100 retail or delivery units, significant savings

may turn out to be a mirage and that customers may suffer. We

cannot continue to disenfranchise customers of the Postal Service

who live in urban areas and not burden those who are least able

to bear the cost.

This concludes my testimony, and I am prepared to respond to

any questions you may have.

[The prepared statement of Mr. Atkins follows:]

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Mr. LYNCH. Thank you, Mr. Atkins.

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

STATEMENT OF FRED ROLANDO

Mr. ROLANDO. Thank you. Good morning, Chairman Lynch,

Ranking Member Chaffetz, and other distinguished members of the

subcommittee, Ms. Norton. My name is Fred Rolando. I am the

president of the National Association of Letter Carriers, which represents more than 300,000 active and retired letter carriers nationwide. Thank you for inviting me to testify.

I have seen the Postal Service thrive and I have seen it struggle

through some very difficult times, but I have never seen a crisis

like the one we are facing now. Volume is expected to drop by 30

billion pieces this year, the worst decline since the 1930’s. When

you couple the economic crisis with the grossly unfair policy advanced by the previous administration to require the Postal Service

to pre-fund a massive 75-year liability for future retiree health benefits over just a 10-year period, it should come as no surprise that

the Postal Service faces a crisis of its own.

The Postal Service is responding with service cuts and

downsizing. Its branch and station optimization program and the

5-day delivery study are part of that response. As Congress reviews

these developments, it should ensure that the Postal Service does

not make structural decisions that will do more harm than good

over the long run. Downsizing to meet depression-level demand

without considering the long-term impacts on the ability of the

Postal Service to meet new demands when the economy recovers

would be shortsighted. Short-term savings that undermine the

Postal Service’s capacity to offer new services and to take advantage of future growth opportunities would be self-defeating.

NALC has a long history of working with the Postal Service to

improve efficiency and to adjust to change, and we have continued

that tradition in this crisis. We developed a special expedited route

adjustment process to help the Postal Service adjust to the fluctuating mail volume. These adjustments, along with the initiatives

for flat sequencing systems, have reduced the number of city carriers by more than 11,000 during the past year and will save the

Postal Service billions of dollars over time.

Looking ahead, it will be just as important to boost postal revenues as it will be to reduce costs. We believe the uses of our unmatched delivery network could be expanded to provide a whole

range of valuable services, like the one proposed by the leaders on

this subcommittee to use letter carriers to conduct the next census.

That is why we must be careful with branch and station consolidations and reject drastic proposals like the elimination of Saturday

delivery. The cost of lost opportunities from service cuts and other

operational changes must be recognized.

The Postal Service and its employees are doing all that they can

to respond to this crisis, but Congress can also help to both minimize the short-term pain of the recession for the Postal Service, its

employees, and customers, and to maximize the long-term potential

of the Postal Service. It can do so by reforming the retiree health

pre-funding provisions in the law. The current schedule of prefunding payments is unaffordable and unreasonable. Moreover, the

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actuarial methods adopted by OPM to implement the pre-funding

policy discriminate against the Postal Service and significantly increase its costs.

While both H.R. 22 and the legislation developed by the Office

of Management and Budget offer similar short-term relief for the

Postal Service, and while we have given our support to both proposals, they simply do not provide a long-term solution. Comprehensive reform is needed to address the Postal Service’s financial situation and future viability. Overhauling the pre-funding policy and reforming OPM’s policies with respect to the Postal Service

must be a part of this reform if the Postal Service is to continue

to provide affordable, universal postal service.

The Postal Service is the Nation’s oldest and most trusted government agency. It would be a tragedy to sacrifice its future viability because of unfair and questionable policy decisions made by

OPM that are fossilized into current law because CBO scoring rules

prevent their reconsideration. My members hope that this subcommittee and the full House of Representatives will not let this

happen.

I want to thank you for this opportunity to testify—it is my first

time; I hope it is not my last time—and I would be happy to answer any questions.

[The prepared statement of Mr. Rolando follows:]

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Mr. LYNCH. I don’t think you have to worry about this being your

last time testifying. [Laughter.]

You will be a frequent flyer here. Thank you, Mr. Rolando.

Mr. Cantriel, would you please take 5 minutes for an opening

statement?

STATEMENT OF DON CANTRIEL

Mr. CANTRIEL. Thank you. I would like to ask that my full testimony be submitted for the record.

Mr. LYNCH. Without objection.

Mr. CANTRIEL. Chairman Lynch, Ranking Member Chaffetz,

members of the subcommittee, my name is Dan Cantriel, and I am

president of the National Rural Letter Carriers Association, which

represents 123,000 bargaining unit letter carriers. Our members

work in rural, suburban, and urban areas throughout the United

States and function as a post office on wheels because rural letter

carriers offer postal customers all of the services performed over

the counter at a post office.

Mr. Chairman, first and foremost, I would like to thank you and

Representatives John McHugh and Danny Davis for your leadership on H.R. 22. I would also like to thank the chairman of the full

committee, Representative Ed Towns, for his dedication in getting

this important legislation passed at the full committee level. While

H.R. 22 will not solve all the Postal Service’s problems during this

financial crisis, it is a step in the right direction.

We are living in a challenging time. Our country is in a deep recession and the Postal Service is a bellwether of the Nation’s economic well-being. Mail volume is down 11.9 percent in the first half

of this year and the Postal Service is expecting to lose approximately $7 billion.

The decline in mail volume has hit the rural carrier craft extremely hard. Rural carrier pay is based on the evaluated compensation system, which is unique not just to the Postal Service,

but to American industry in general. In our evaluated compensation system, each rural carrier is paid an annual salary based upon

the estimated amount of time it will take to deliver the mail on his

or her individual route. This evaluation of the individual route is

based upon an annual mail count whereby over 30 separate elements are counted, timed, or measured.

The most recent mail count earlier this year was devastating to

our members. For the second straight year, our members have been

hit hard in the pocketbook. The average rural route lost just over

2 hours of valuation per route, which equates to more than $3,400

a year in annual salary.

As a result of this year’s mail count, rural routes were reevaluated and adjusted. Prior to the 2009 mail count, over 42,000 rural

carriers delivered on routes 10 out of the 12 days each pay period.

After the mail count, the number of rural carriers who delivered

this kind of route dropped to just over 27,000.

Meanwhile, the number of carriers who delivered 11 out of the

12 days each pay period and still others who delivered 12 out of

the 12 days each pay period increased significantly. In order to

avoid significant salary reductions, thousands of rural carriers

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opted to work an extra day just to keep the same salary they were

making prior to the mail count.

The annual mail count directly affects rural carrier salaries and

schedules, but there are other concerns we have about our very

livelihood. If the Postal Service were to consolidate the operation

of retail stations and branches into nearby postal facilities, that

would only compound what has, for rural carriers over the last several years, become a serious problem.

If post offices begin to disappear, our carriers will have to travel

greater distances to work and our customers will increasingly feel

isolated from the Postal Service. During these economic times, paying close attention to customer service is a key, and we would expect a public outcry if post office stations and branches across the

country are closed.

Customers, especially in rural areas, will be particularly inconvenienced and some will unfortunately decide it is simply not

worth doing business with the Postal Service. We will be sending

the wrong message if offices across the country begin to close their

doors. Our customers and communities need to know that the Postal Service is here to stay.

I would like to say a few words about the Postal Service’s interest in reducing Postal Service delivery days. Instituting 5 day delivery would likely mean further salary decreases for thousands of

carriers, not to mention massive job losses. It could mean salary

cuts and layoffs for workers employed by businesses in the mailing

community. If 5 day delivery were implemented, our evaluated

compensation system, which is often praised by the Postal Service

for its efficiencies, would need to be re-engineered and the rural

craft could lose 50,000 rural carrier associate jobs.

Mr. Chairman, that is 50,000 jobs added to the national unemployment rate of almost 10 percent, and that is just from one of the

four postal unions.

Mr. Chairman, I know that times and finances are tough right

now, but, in my opinion, moving from 6 to 5 day delivery would not

save the Postal Service, it would only hurt the business model and

make other delivery operations more attractive to our customers it

so desperately needs to attract and retain. This would be a terrible

course to chart and, as many observers have noted, could very well

do much more harm than good.

Thank you for allowing me the opportunity to testify before the

subcommittee today. I would be happy to answer any questions you

or your fellow Members may have.

[The prepared statement of Mr. Cantriel follows:]

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Mr. LYNCH. Thank you, Mr. Cantriel.

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

STATEMENT OF MARK STRONG

Mr. STRONG. Thank you. Chairman Lynch, Ranking Member

Chaffetz, members of the subcommittee, thank you for inviting the

National League of Postmasters to testify before you today.

Founded in 1887, the League is a management association representing the interests of tens of thousands of postmasters

throughout the United States. My name is Mark Strong and I am

the executive vice president of the League. More importantly, I am

a level 24 postmaster in Sun City, AZ, an unincorporated area in

the Phoenix metropolitan area. I have served in that capacity since

1992.

The League would like to thank the subcommittee and the full

committee for reporting H.R. 22 without amendment. The action

has operated as a catalyst and started the legislative ball rolling.

With your permission, Mr. Chairman, I would like to request

that my written testimony be entered into the record and proceed

to briefly summarize my testimony.

Mr. LYNCH. Without objection.

Mr. STRONG. A post office, and its station and branches, has a

primary responsibility in a given geographic area for collection, delivery, and some processing. In addition, post offices and their stations, branches, and finance units serve a vital function as a network to access points, retail sales points, and final delivery points

for post office box holders, a key element of our customer base.

The League strongly supports consolidation of collection, delivery, and processing functions where appropriate. We are quite concerned, however, that panicked consolidations could lead to consolidating functions in a way that would cost, rather than save, the

Postal Service money, or negatively affect service. There is often a

good reason why carriers are disbursed throughout a community at

stations and branches, and this reason has to do with urban congestion and traffic, rather than mail volume.

Looking at my communities, if the carriers from one of my

branches were consolidated to another branch or my main post office, the heavy traffic in the Phoenix metropolitan area would add

almost an hour additional time per day to each carrier route. I

would have to compensate for that time or service would suffer;

and to compensate for that is expensive. This has to be taken into

account.

There are also questions of sufficient space in a given facility to

take new carriers into that facility. In my case, I don’t have any

to spare. In terms of space, I have been adding in my post office

almost 800 deliveries per month for years, which means I have

been adding carriers. That number has decreased significantly over

the past few years and it is now at about 80 new delivery points

per month. However, last month there were more building permits

issued in my area than were issued in the prior 12 months put together. Thus, I anticipate that my 80 new delivery points per

month will start to grow quite rapidly in the not too distant future.

I have to start thinking about that now, which puts me in an expansion mode, not a contraction mode.

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While the League supports the notion of consolidating carrier

function, it has more fundamental concerns about consolidating retail functions. Service has to be our prime consideration when looking to the future. Without good service, we have nothing to offer.

Having many retail outlets in the communities allows us to provide

better service, and closing any significant number of them will hurt

service, and we can’t do that.

The strongest argument for caution in consolidating retail facilities lies in the area of post office boxes. Today, the reality of carrier

delivery is that businesses tend to get their mail very late in the

day, far too late to process and deposit checks the day they are received. As businesses have complained about this for years, we

have told them that the answer to their problem is to rent post office boxes, where mail is available no later than 11 a.m. By renting

a post office box, small businesses can pick up their mail, process

their checks, and deposit them the very same day at the local bank

with a minimum of hassle.

This is a widespread practice and the quick access to checks that

post office boxes provide plays a central role in the financial health

to hundreds of thousands of small businesses across the country.

Removing quick access could have a devastating effect on our business customers and their float. Time means money for our customers and it is up to us to serve them, not to have them serve

us.

There are also a fundamental question of how we can consolidate

one set of boxes from one post office into another. Generally, there

simply isn’t sufficient room in the second post office to accept the

boxes from the first, unless more boxes are built in the second office. Building more boxes would tend to create traffic problems in

the second post office, since most of these post offices were constructed with a formula for parking that took into account the

number of existing boxes. We are the Postal Service, and service

does not mean forcing a customer to drive 5 miles in urban traffic

to pick up one piece of mail, to encounter a 5-minute wait to park,

and then a 20 minute wait inside.

In conclusion, I do not want to suggest that no consolidation of

carrier and retail functions could occur. Intelligent consolidation is

also a good idea. However, efficiency, service, and the needs of the

local small business and our customers must come first, and that

determination should be a local one.

Thank you for considering our views, and I would be pleased to

answer any questions that you may have.

[The prepared statement of Mr. Strong follows:]

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Mr. LYNCH. Thank you very much.

By way of a procedural announcement, they have just informed

us that there will be votes beginning now, basically, on the House

floor. There are 15 votes, and it could involve about an hour and

half, at least of delay. The problem is that what will happen is that

our 2 o’clock hearings begin shortly after that series of votes.

So what I am going to suggest is while the ranking member and

I have more than a few questions to ask you, what I would suggest

is that I could, rather than have you stay here for several hours

waiting for us to come back and get in another hearing room, I

could submit these questions to you in writing, but I would have

to have them back in 10 days in order to get the questions and answers on the record. If there is not an objection from you, then I

would like to handle it that way.

The other opportunity would be to bifurcate the hearing and call

you in on another date and ask you questions orally on the record.

So I can do either way. The problem is that we are running into

the August recess, so any oral hearing would have to wait until

September. If it is all right with you, I could submit the questions

to you in writing. There are some questions we would like to ask

right now. Since no one seems to be objecting, I am going to take

that as a yes.

You want to get something on the record?

Mr. CHAFFETZ. Yes.

Thank you for your patience, and our apologies for this schedule;

I wish it wasn’t the case, but we appreciate your testimony and

being here.

I just wanted to make sure, Mr. Chairman, that the Congressional Research Service [CRS] Report, Post Office and Retail Postal

Facility Closures Overview and Issues for Congress, dated July 23,

2009, was in the record. If it has not already been included, I

would ask unanimous consent to have it included in the record.

Mr. LYNCH. Without objection.

Let me ask, and I will try to leave enough time for the ranking

member to ask as well.

Mr. Rolando and Mr. Cantriel, you are presidents of letter carrier

unions, and what we are looking at right here is not only the consolidation of postal facilities, stations and branches, we are also

trying to get a sense of what is involved and what the impact of

route consolidation is. I have less of a grasp of that. I think everybody understands when a post office is closed, what impact that

has.

But I would like to ask you each just to take a minute and describe, I guess in the urban sense and then in the rural sense,

what it means and how the route consolidation process has gone,

whether or not you have been actively approached by the Postal

Service to participate and to have your input. How has that all

gone? Mr. Rolando.

Mr. ROLANDO. Thank you. With respect to the consolidation, we

haven’t been approached regarding the adjustment of routes, but

we have been involved in the joint process of adjusting the routes,

anyway, due to the fluctuating volume. We have been working with

the Postal Service for a couple of years to find a more efficient way

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to jointly adjust our routes, which, of course, has been necessitated

by the drop in volume.

Traditionally, we have had volume growth. As we started our

studies from our collective bargaining agreement, we had to pretty

much stop in our tracks and find a way to adjust to the falling volume. The idea, of course, is the efficiency and having 8 hours work

for 8 hours pay. So we have been working together. We are in our

second of third rounds to do that. To adjust to the volume we are

doing two this year.

I can tell you, with any consolidations that do occur, it would just

be an extension of what we are doing to adjust the routes. Obviously, it would affect travel time to get to and from the route if you

are going from a different station, but the idea would be to jointly

get on top of it as it happens and keep everything adjusted to the

volume and the location and any adjustments that have to be

made.

Mr. LYNCH. Let me ask you. I know there are, I think, about

350,000 letter carriers? That is probably both unions, is that right?

No?

Mr. ROLANDO. Between us.

Mr. CANTRIEL. Well, 400 and something. You have 300? We have

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Mr. ROLANDO. We have just over 200,000 active letter carriers.

Mr. LYNCH. OK. And there is a hiring freeze on right now, right?

Mr. CANTRIEL. Not for us.

Mr. LYNCH. Not for the rural?

Mr. ROLANDO. How come they let you hire?

Mr. CANTRIEL. Because we have a contractual provision that

calls for one leave replacement for each route. Although we made

some concessions in the last contract that allowed for TRCs, there

is still the provision there, and we have some others, carriers that

sub for more than one route and had career status, and that reduced the number. But, contractually, we are entitled to a leave replacement for each route, which makes it a little more difficult for

them to put a freeze on hiring.

Mr. LYNCH. Well, let me ask you basically the same question. I

know, Mr. Cantriel, the rural post offices are exempt, I think, from

this closure process.

Mr. CANTRIEL. That is not entirely true, because we are experiencing, especially in the Wisconsin-Minnesota areas and up

through Michigan, that we have seen carriers move from one office

to another, because we had several calls complaining. I don’t know

if the office was necessarily closed, but the delivery function was

consolidated and they are driving considerably longer just to get to

work, and then to go back, drive that same distance to go out and

deliver their route. So we are not completely immune to it, although we haven’t seen, or even been asked about, some of the

more urban offices that we have and what kind of effect we would

have.

As far as adjustment, I want to address that just a little bit.

Mr. LYNCH. Sure.

Mr. CANTRIEL. We have been in that process since our existence

because we are evaluated, and when we are evaluated each year,

depending on the volume of mail, whether it is going up or down,

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our routes are adjusted accordingly. We actually have a cap on how

large the routes can grow, which, when they exceed that, they

would be adjusted.

We don’t have much of a bottom end, and that is why, in my testimony, we have a lot of carriers now working all 12 days during

a pay period because their routes have dropped below 40 hours. We

don’t have a guarantee, it is by the actual volume and what the

count shows that the route would be, so we will have some 36, 37

hour routes. And we have gone through those adjustments for

years and years, so it is really not anything new for us.

What is new is, because of the drop in volume, we are seeing

more consolidation of routes even in the more rural areas, where

the routes have gone so small that it just makes, when someone

retires, to consolidate.

Mr. LYNCH. OK. I think my time has expired.

Madam Chair, you are more than welcome.

Ms. NORTON. I have to go too, because there are Committee of

the Whole votes, but if I could just ask a few questions before I go.

Mr. LYNCH. That will be fine.

Ms. NORTON. I do get to vote on the floor on some things, so you

can imagine that I take those opportunities.

I want to take this opportunity to commend the employee representatives of the unions before us, because it is clear that you

have done what you could and what you can to pitch in, and I

think it is a perfect example of why unionization is a benefit to the

public as well as to management; you have orderly process going

on here.

Could I ask if any of you have experienced layoffs, straight out

layoffs so far? So far this downsizing, or whatever you want to call

it, has occurred without notices of layoff in the traditional sense.

Mr. BURRUS. All of our contracts contain provisions governing

layoff of employees. In 1978, a national arbitrator, when all the

parties were negotiating jointly at the time, imposed conditions

that we all share equally regarding layoffs. In our bargaining units,

an employee that achieves 6 years of continuous service is protected for a lifetime against layoff. The only employees that are exposed to the possibility of layoffs are employees that have less than

6 years of continuous service.

Ms. NORTON. Have any of those been——

Mr. BURRUS. No. There are also other legal impediments to layoff, because you must merge the RIF procedures with the layoff

procedures, because the employees with less than 6 years of service

who are veterans have a special process that must be used in order

to effectuate layoffs. So it would be a very complicated process.

Ms. NORTON. Well, that is very important to have on the record.

I am going to have to go in a moment.

Mr. HEGARTY. I would like to jump in on that one, too, if I could.

We haven’t had any mail handlers laid off, but we have had de

facto layoffs. What I mentioned earlier was a mail handler in Memphis, TN who is offered a job in, say, Oklahoma City, 400 miles

away.

Ms. NORTON. Oh, yes, we have heard about those. And that is

a de facto.

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Mr. HEGARTY. They have a choice, either quit their job with the

Postal Service or move, so in effect they may be laid off. The second

instance is with our part-time flexible employees who have no fixed

schedules and no guarantee of work hours. In many areas of the

country now, they are only working 4 hours a pay period, which is

2 hours a week, so they are, in effect, laid off.

Ms. NORTON. See, the reason I am glad to have this on the record

is because I am most concerned about some kind of orderly process.

I expressed earlier the kind of surprise notion, precipitous layoffs

or, for that matter, precipitous transfers. Same difference, as far as

I am concerned. I have looked closely at this 5 day week largely

because it is one of the few things I think the public is not going

to throw their hands up at.

You can bet if some of those post offices or branches in the District of Columbia have to be closed, I am going to be besieged with

people saying, ‘‘oh, please, whatever you do, don’t close that postal

service.’’ So I was interested that people have already acclimated

themselves to the possibility of 5 day week, which, after all, they

are on as well, and they have looked at what has happened to the

post office.

But, Mr. Burrus, Mr. Rolando, Mr. Cantriel, you are pretty clear

you did not want to see that happen. I agree with Mr. Burrus that

watch out for calling the decline and fall altogether of the Post Office. Constitutional Post Office, nobody up here. The Post Office has

an allegiance up here that nothing else I know has. Nevertheless,

just as you warn about structural changes, there are structural

changes occurring to you and, yet, very little of what we have

heard, at least until today, involved structural responses right

back.

Mr. Hegarty went through a list that interested me, because he

said case-by-case basis, facts in each situation, economic and

logistical sense, negatively affects employees, negotiated requirements complied with. Now, remember, that is going to take time,

and should take time, and I just think the unions’ involvement in

whatever happens early is going to be necessary.

And I have to ask you once again, the 5-day week, given the fact

that it is going to be hard just to lay people off. Some of these people are leaving because they are aging out, because they can retire,

and the rest, and given Mr. Hegarty’s list, or a similar list, would

you really think the 5-day week should be off the table, when it is

not off the table for the general public?

Mr. ROLANDO. I would like to say that obviously it has an effect

on my members, but this isn’t about my members or anybody else’s

members; it is about the institution. It is about the Public Service.

Ms. NORTON. The public is going to be hurt one way or the other,

and the question is can there be some kind of a sense of how to

get hurt the least, Mr. Rolando. I am going to be looking for advice

from people on the ground. Those are the people I respect most.

When service went down in the District, I then traveled with my

postman, as he was. I saw amazing things like people who saw no

one everyday except the postman. I saw the great allegiance they

had. I saw how hard the work was.

And when you have some hard choices here, I would rather have

employee buy-in than to have what we are seeing the post office

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do now; they come each time with, ‘‘oops, we have to do this,’’ as

if they couldn’t have seen that 3 years ago or 4 or 5 years ago. So

that is what I am putting to you. If that one is not something we

can agree upon, it is going to be hard for me to understand what

it is that we can get some kind of consensus on to happen in time

to save what is the core and route of the service.

Mr. ROLANDO. I believe, again, that is a shortsighted response,

the 5-day delivery. I think they are going down a totally dark road

to respond to the crisis. What we need to do is expand the business. You can look at going from 6 to 5 days, and if you need some

money next year, you can go to 4 days to 3 days to 2 days. It is

just dismantling the company is what it is doing.

Ms. NORTON. And I think that might happen, Mr. Rolando. I

think that could happen.

Just let me say this, as somebody who saw a whole city go down,

the longer you wait, the greater the damage and the more management is empowered to make the decisions. I would like to see the

kind of collaboration that you have already begun to try to save the

Postal Service. I don’t think it can be saved except with employee

collaboration. You have in place such a strong collective bargaining

system, they are going to have to come to you. You can delay the

thing, and the question is how to preserve what you think is in the

best interest of all of you and of the Postal Service.

I have to go vote. Thank you very much for hearing me out.

The Service is now—I mean the hearing. Not the Service, for

God’s sake. [Laughter.]

The hearing is now adjourned. Thank you all for attending.

[Whereupon, at 1:20 p.m., the subcommittee was adjourned.]

[The prepared statement of Hon. Elijah E. Cummings and additional information submitted for the hearing record follow:]

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