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U.S. POSTAL SERVICE IN CRISIS: PROPOSALS TO 

PREVENT A POSTAL SHUTDOWN 

HEARING 

BEFORE THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

SEPTEMBER 6, 2011 

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

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 

(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

MARK BEGICH, Alaska 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JERRY MORAN, Kansas 

MICHAEL L. ALEXANDER, Staff Director 

LAWRENCE B. NOVEY, Associate Staff Director and Chief Counsel for Governmental Affairs 

KENYA N. WILEY, Counsel 

NICHOLAS A. ROSSI, Minority Staff Director 

J. KATHRYN FRENCH, Minority Director for Governmental Affairs 

SCOTT R. SLUSHER, Minority Professional Staff Member 

TRINA DRIESSNACK TYRER, Chief Clerk 

PATRICIA R. HOGAN, Publications Clerk 

LAURA W. KILBRIDE, Hearing Clerk 

(III) 

C O N T E N T S 

Opening statements: Page 

Senator Lieberman ........................................................................................... 1 

Senator Collins ................................................................................................. 3 

Senator Carper ................................................................................................. 5 

Senator Begich .................................................................................................. 19 

Senator Pryor .................................................................................................... 21 

Senator Coburn ................................................................................................. 24 

Senator McCaskill ............................................................................................ 28 

Senator Brown .................................................................................................. 30 

Senator Akaka .................................................................................................. 33 

Senator Moran .................................................................................................. 36 

Prepared statements: 

Senator Lieberman ........................................................................................... 57 

Senator Collins ................................................................................................. 59 

Senator Levin .................................................................................................... 62 

Senator Akaka .................................................................................................. 63 

Senator Carper ................................................................................................. 65 

Senator Brown .................................................................................................. 68 

Senator Moran .................................................................................................. 70 

WITNESSES 

TUESDAY, SEPTEMBER 6, 2011 

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

U.S. Postal Service ............................................................................................... 8 

Hon. John Berry, Director, U.S. Office of Personnel Management ..................... 10 

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

Accountability Office ............................................................................................ 12 

Thomas D. Levy, Senior Vice President and Chief Actuary, The Segal Company ....................................................................................................................... 14 

Cliff Guffey, President, American Postal Workers Union, AFL–CIO .................. 39 

Louis M. Atkins, President, National Association of Postal Supervisors ............ 41 

Ellen Levine, Editorial Director, Hearst Magazines, Hearst Corporation .......... 43 

Tonda F. Rush, Chief Executive Officer and General Counsel, National Newspaper Association ................................................................................................. 44 

ALPHABETICAL LIST OF WITNESSES

Atkins, Louis M.: 

Testimony .......................................................................................................... 41 

Prepared statement .......................................................................................... 133 

Berry, Hon. John; 

Testimony .......................................................................................................... 10 

Prepared statement .......................................................................................... 87 

Donahoe, Hon. Patrick R.: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 71 

Guffey, Cliff: 

Testimony .......................................................................................................... 39 

Prepared statement .......................................................................................... 115 

Herr, Phillip R.: 

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

Prepared statement .......................................................................................... 94 

Page

IV 

Levine, Ellen: 

Testimony .......................................................................................................... 43 

Prepared statement .......................................................................................... 138 

Levy, Thomas D.: 

Testimony .......................................................................................................... 14 

Prepared statement .......................................................................................... 113 

Rush, Tonda F.: 

Testimony .......................................................................................................... 44 

Prepared statement .......................................................................................... 143 

APPENDIX 

Prepared statements for the Record from: 

Donna Harman, President and CEO, American Forest & Paper Association ................................................................................................................. 157 

Fredric V. Rolando, President, National Association of Letter Carriers, 

AFL-CIO ........................................................................................................ 160 

Robert Rapoza, National President, National Association of Postmasters 

of the United States ...................................................................................... 174 

National Postal Mail Handlers Union ............................................................ 179 

Jeanette Dwyer, President, National Rural Letter Carriers’ Association ... 185 

National League of Postmasters with an attachment ................................... 189 

Responses to post-hearing questions for the Record from: 

Mr. Donahoe ...................................................................................................... 197 

Mr. Berry ........................................................................................................... 212 

Mr. Guffey ......................................................................................................... 222 

Mr. Atkins ......................................................................................................... 228 

(1) 

U.S. POSTAL SERVICE IN CRISIS: PROPOSALS 

TO PREVENT A POSTAL SHUTDOWN 

TUESDAY, SEPTEMBER 6, 2011 

U.S. SENATE, COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Committee met, pursuant to notice, at 2:02 p.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Joseph I. Lieberman, Chairman of the Committee, presiding. 

Present: Senators Lieberman, Akaka, Carper, Pryor, McCaskill, 

Begich, Collins, Coburn, Brown, and Moran. 

OPENING STATEMENT OF CHAIRMAN LIEBERMAN 

Chairman LIEBERMAN. The hearing will come to order. I thank 

everyone for being here, and I wish you a good afternoon. We are 

here to consider a very serious question, which is whether the U.S. 

Postal Service (USPS), an iconic American institution since the 

18th Century, can survive in the 21st Century. 

It is hard to believe that it has come to this, but it has. So much 

of our Nation’s progress is interwoven with the history of the Postal Service. If you look at some old maps of America, you see that 

a lot of the roads that we use today started out as colonial-era Post 

Roads. As our Nation pushed west before the railroads were built, 

the Post Office created the Pony Express to keep America connected with its frontiers. And the Post Office’s subsidies for air 

mail in the early days of aviation helped jump start that fledgling 

airline industry. 

Through parts of four centuries now, the Postal Service has actually helped make us a Nation, connecting the American people to 

one another, moving commerce and culture coast-to-coast and to all 

points in between. 

The Postal Service has also bound individual towns and neighborhoods together, with the local post office often serving as a center of civic life. 

Over the years, the Postal Service has grown very large. Today 

the U.S. Postal Service is the second largest employer in the 

United States, second only to Wal-Mart. And with 32,000 post offices, it has more domestic retail outlets than Wal-Mart, Starbucks, 

and McDonald’s combined. 

Sadly, these impressive statistics belie a troubled business on the 

verge of bankruptcy. 

Business lost to the Internet and more recently, of course, to 

America’s economic troubles have led to a 22-percent drop in mail 

2 

handled by the Postal Service and a gross revenue decline of more 

than $10 billion over the past 5 years. 

This year the Postal Service is expected to have a deficit of ap- proximately $8 billion, maybe more, for the second year in a row. The Postal Service will also soon bump up against its $15 billion 

credit line with the U.S. Treasury, which could force it to default 

on a $5.5 billion payment into the health care fund for its retirees, 

which would normally be due at the end of this month. 

The bottom line here is that if nothing is done, the Postal Service 

will run out of money and be forced to severely slash service and 

employees. And that is the last thing our struggling economy and 

our country need right now. 

Despite its shrinking business, the Postal Service still remains a 

powerful force in America’s economy and American life. It still delivers 563 million pieces of mail a day. Even with the rise of e-commerce, most businesses do not send bills and most families do not 

pay those bills, except through the U.S. Postal Service. 

While magazine deliveries are down, also because of competition 

with the Internet and the recession, 90 percent of all periodicals— 

that is about 300 million paid subscriptions a year worth billions 

of dollars to the publishing and advertising industries, and bringing about the employment of millions of people—are still delivered 

by the Postal Service. And only the post office will go that ‘‘last 

mile’’ to ensure delivery throughout the country, to everyone’s address, even using burros in the Grand Canyon and snowshoes in 

Alaska. 

Last year, just to show the diversity—and the American people 

know this—the Postal Service processed 6.7 million passport applications. Right now, there is no other Federal agency with the national presence that is really ready or able to take on that task. 

Now, why are we here today? Before the Governmental Affairs 

Committee became the Homeland Security and Governmental Affairs Committee, it was called the Government Operations Committee and in that capacity has long had jurisdiction over the U.S. 

Postal Service, and that is why we are convening this hearing here 

today. 

We are going to hear several proposals this afternoon about what 

can be done to create greater efficiency, close the Postal Service 

deficit, and give it the flexibility and tools it needs to survive and 

thrive in America’s future. 

Postmaster General Patrick Donahoe recently offered a plan he 

believes would save $20 billion and return the Postal Service to solvency by 2015, and that plan is the immediate impetus of this 

hearing—to both give him the opportunity to explain, describe it, 

argue for it, and to give others the opportunity to comment on it 

and, indeed, to oppose it, which some will do. The proposal includes: Eliminating Saturday delivery; closing approximately 3,700 

post offices; shrinking the workforce by as much as 220,000; pulling 

out of the Federal Employee health care plan to create a separate 

Postal Service employees health plan; doing away with a defined 

benefit retirement plan for new employees and transitioning to a 

defined contribution plan; and asking that $6.9 billion in overpayments to the Federal Employees Retirement System (FERS) be returned to the Postal Service. 

3 

These are self-evidently bold, tough, and controversial proposals. 

As for myself, I do not feel I know enough about them yet to reach 

a conclusion, and that is why I look forward to the testimony of the 

witnesses today. But I do know enough about the real crisis the 

Postal Service is in to appreciate Postmaster General Donahoe’s 

courage in making these proposals. 

I am also grateful that Senators Collins and Carper have been 

leaders on behalf of this Committee in dealing with Postal Service 

problems and indeed were the architects of a postal reform bill that 

passed a few years ago. Each of my colleagues, Senator Collins and 

Senator Carper, has now introduced legislation to deal with the 

current postal crisis, and I am encouraged to learn that President 

Obama will soon offer an Administration plan to respond to the 

Postal Service’s fiscal crisis. 

So I have an open mind on the various proposals that have been 

made, but to me the bottom line is that we must act quickly to prevent a Postal Service collapse and enact a bold plan to secure its 

future. 

The U.S. Postal Service is not an 18th Century relic. It is a great 

21st Century national asset. But times are changing rapidly now, 

and so too must the Postal Service if it is to survive. 

Senator Collins. 

OPENING STATEMENT OF SENATOR COLLINS 

Senator COLLINS. Thank you, Mr. Chairman. 

First, Mr. Chairman, let me thank you for holding what is truly 

an urgent hearing to examine possible remedies for the Postal 

Service’s dire and rapidly deteriorating financial condition. The 

drumbeat of news about the accelerating losses at the Postal Service underscores the need for fundamental changes. 

The Postal Service is seeking far-reaching legislation to allow the 

Postal Service to establish its own health benefits program, administer its own retirement system, and lay off its employees. This is 

a remarkable turnabout from its previous proposals. I appreciate 

that the Postal Service has now come forth with several ‘‘big picture’’ ideas, although many of the details remain unclear. 

As we search for remedies, we must keep in mind a critical fact: 

The Postal Service plays an essential role in our national economy. 

If the Postal Service were a private corporation, its revenue 

would rank just behind Boeing and just ahead of Home Depot on 

the Fortune 500 list. But even that comparison, or the one used by 

the Chairman, understates the economic importance of the Postal 

Service. The Postal Service directly supports a $1.1 trillion mailing 

industry that employs approximately 8.7 million Americans in 

fields as diverse as direct mail, printing, catalog companies, paper 

manufacturing, and financial services. Many of these businesses 

cannot return to readily available alternatives. They depend on a 

healthy, efficient Postal Service. 

But as vital as a stable Postal Service is to our economy, its current financial status is abysmal. The most recent projections are 

that the Postal Service will lose some $9 billion this year. That is 

$700 million more than the deficit that the Postal Service was projecting just at the beginning of this year. This hemorrhaging comes 

4 

on top of $8.5 billion in red ink last year and $3.8 billion lost in 

2009. 

Unfortunately, there is little cause to believe that an improvement in the overall economy will stop this slide. The fact is that 

Americans are unlikely to abandon email and text messaging and 

return to First-Class Mail. The Postal Service’s own projections 

now assume declining revenue all the way out to the year 2020. 

The losses in mail volume are even more dramatic. Last year, the 

Postal Service handled 78 billion pieces of First-Class Mail. That 

number is now projected to fall to 39 billion pieces in 2020. This 

represents a 50-percent decline in First-Class Mail volume over 10 

years. 

I want to give the new Postmaster General great credit for coming forth with more creative proposals to stem this crisis. At times, 

however, the Postal Service’s responses in the past have been inadequate and even counterproductive. Some would cut directly into 

the revenue that the Postal Service so desperately needs, while 

leaving customers with diminished and insufficient service. Consider, for example, the debate over post office closings. Now, let me 

be very clear. There are undoubtedly some post offices in Maine 

and elsewhere that can be consolidated or moved into nearby retail 

stores. But this simply is not an option for many rural or remote 

areas. In some communities, closing the post office would leave customers without feasible alternatives and access to postal services. 

That would violate the universal service mandate that is the justification for the Postal Service’s monopoly on the delivery of FirstClass Mail. 

Let me give you a couple of examples from my home State of 

Maine. The Matinicus Island and Cliff Island post offices in Maine 

are good examples. Matinicus Island is 20 miles off the coast of 

Maine. It receives mail 5 rather than 6 days a week, and only in 

good weather. Closing this post office or moving it into a large retail facility is simply not realistic. 

For the residents of Cliff Island, closing their post office would 

mean more than a 2-hour round trip by ferry in order to send parcels or conduct all but the most simple of postal transactions. The 

fact is that maintaining all of our Nation’s rural post offices costs 

the Postal Service less than 1 percent of its total budget. That is 

not where the problems lie. That does not mean that there should 

not be consolidations, and, indeed, I believe that closing some post 

offices and moving them into the local grocery store or pharmacy 

would work very well. 

Similarly, the Postal Service’s plan to move to 5-day delivery is 

not without significant downsides. It would harm many businesses 

unless the Postal Service can mitigate the impact. It would force 

industries ranging from home-delivery medication companies to 

weekly newspapers to seriously consider other options. And once 

these private firms leave the Postal Service behind, they will not 

be coming back, and the Postal Service will suffer yet another blow 

to its finances. 

The major solution to the financial crisis should be found in tackling more significant expenses that do not drive customers away 

and lead to further reductions in volume. 

5 

Two actuarial studies have found that tens of billions of dollars 

have been made in overpayments by the Postal Service to the Federal retirement plans. Regrettably, to date the Administration has 

blocked the bulk of this repayment. I proposed last year a new, 

more gradual amortization for the Postal Service’s annual payments to reduce the unfunded liability for retiree health benefits, 

but that too is no longer adequate. 

More than 80 percent of the Postal Service’s expenses are workforce-related. The failure to rein in these costs threatens not only 

the viability of the Postal Service, but also the livelihoods of the 

Postal Service workers themselves. The worst possible outcome for 

these workers would be for the Postal Service to be unable to meet 

its payroll—and that is a very real possibility next year if we do 

not all act together to achieve reforms. In my judgment, the most 

recent contract agreement with the Postal Service’s largest union, 

by and large, represents a missed opportunity to negotiate a contract that reflects the financial realities facing the Postal Service. 

The Postal Service has to preserve the value and the service it 

provides to its customers while significantly cutting costs and 

streamlining its operations, and that is no easy task. Senator Carper and I have each introduced our own bills to try to avert this 

crisis, but I am the first to admit that worsening conditions clearly 

require far more significant reforms. 

So, again, Mr. Chairman, thank you for calling this hearing. We 

do face an urgent task and that is to save this icon of American 

society and this absolute pillar of America’s economy. 

Chairman LIEBERMAN. Thanks very much, Senator Collins. 

Senator Carper, because you have done such extraordinary work 

on behalf of this Committee regarding the Postal Service, I wanted 

to invite you to make an opening statement if you would like at 

this time. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. Thanks very much, Mr. Chairman. To our witnesses, welcome. Thank you for joining us. And, Mr. Chairman, 

thanks for holding this hearing and breaking from protocol to allow 

me to deliver an opening statement. I am appreciative to you and 

to Senator Collins for the attention that you and your staffs have 

paid to this vitally important economic issue. 

For some time now, my Subcommittee and I have been sounding 

the alarm about the dire financial situation facing the Postal Service. Unfortunately, while a number of bills have been put forward, 

Congress—including this Committee—has been unable to reach 

consensus on the kind of dramatic and likely painful reforms that 

will be needed to avert a looming Postal Service shutdown. In addition, the proposals put forward by the Administration to date have 

been insufficient. 

Today, just a few weeks after narrowly avoiding the first-ever default of the Federal Government, we may be just a few weeks away 

from the first-ever default of the Postal Service. That default, if 

permitted to happen, would be embarrassing and dangerous. In 

fact, it would pave the way for postal insolvency by this time next 

year, if not sooner. 

6 

While the Office of Management and Budget (OMB) unfortunately declined to testify at this hearing to discuss the Administration’s plans for preventing the Postal Service from failing, it is my 

hope that the discussion we have here today will jump-start the 

process of developing a bipartisan, bicameral consensus around the 

reforms necessary to restructure the Postal Service’s finances and 

transform its operations to reflect the uncertain future that it 

faces. 

Postmaster General Donahoe will testify today that the Postal 

Service’s finances continue to deteriorate. He is projecting a yearend loss for the Postal Service of some $10 billion—nearly $2 billion more than he projected when our Subcommittee last held a 

postal oversight hearing, I think, in May. It will not be able to 

make the $5.5 billion retiree health payment due on September 30. 

Come October, it will have exhausted its line of credit with the 

Treasury and will only have enough cash on hand to get by. Then, 

under what is likely the best-case scenario, cash will be completely 

exhausted by next summer, and the Postal Service—absent any 

lifeline from a Congress and Administration that are short on lifelines these days—will likely be forced to close its doors. 

If the Postal Service were to fail, the impact on our economy 

would be dramatic. As Postmaster General Donahoe and others 

have pointed out time and time again, the Postal Service operates 

at the center of an industry that employs millions of people. These 

men and women do not just work at the Postal Service. They work 

at magazines, at banks, at printing companies, and in businesses 

large and small across America. They work in every State and congressional district in the country, and as Senator Collins has said, 

they generate more than $1 trillion in sales and revenue each year. 

Given the challenging economy facing our country, we cannot afford to put those jobs and that kind of productivity in jeopardy. In 

fact, it is our job to do what needs to be done to save this industry, 

even if doing so involves making decisions that might be difficult 

politically. 

Like it or not—and in a number of ways I do not like it very 

much myself—the Postal Service needs to re-size to reflect the decreasing demand for the products and services it offers. It needs to 

shed employees. It needs to downsize its network of processing facilities to reflect the fact that there is less mail to process and that 

technology has made getting mail to its destination easier to do. 

And the Postal Service needs to be able to close, relocate, or collocate some of the post offices that are provided in communities 

across America. 

The Postal Service has put forward a plan to eliminate a further 

120,000 positions on top of some 100,000 that will be lost through 

attrition. They have also begun studying some 3,000 post offices 

out of about 33,000 across the country, for closure or for collocation 

with other businesses. The Postal Service is expected to propose 

similarly dramatic changes to its processing network in the next 

week or so. 

We are rapidly reaching the point, however, at which the Postal 

Service no longer has the authority under current law to do what 

it needs to do to get by. That is why I have introduced legislation 

that aims to clean up the Postal Service’s finances and help it imVerDate Nov 24 2008 13:01 Feb 28, 2012 Jkt 072477 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 P:\DOCS\72477.TXT SAFFAIRS PsN: PAT
7 

plement the ambitious reorganization plan it announced last 

spring. The main provision in my bill—the Postal Operations 

Sustainment and Transformation Act—aims to permanently address the various pension and retiree health-related issues that 

have plagued the Postal Service for years. 

The Postal Service, the Postal Service’s Inspector General (IG), 

the Postal Regulatory Commission (PRC), and two independent actuaries—one of whom is actually represented here today—have all 

come to the conclusion that the Postal Service has overfunded its 

obligations to the Civil Service Retirement System (CSRS) by some 

$50 billion to $75 billion. In addition, numerous observers and even 

the Office of Personnel Management (OPM) have pointed out that 

the Postal Service has paid $7 billion more than it owes into the 

newer Federal Employees Retirement System. 

My bill, and I think the bill that Senator Collins has introduced, 

would give the Postal Service access to the funds it has overpaid. 

It would be able to use them to make its required retiree health 

pre-funding payments, taking upwards of $5 billion off its books 

each year for the next several years. And once those payments are 

satisfied, the funds this bill would free up could be used to pay 

workers’ compensation obligations and to retire debt owed to the 

Treasury. 

These reforms, or something very similar to them, can be a vital 

part of any effort to improve the Postal Service’s financial condition 

in both the short and long term. But stopping with these reforms 

and avoiding further, potentially more difficult changes will simply 

not be enough. To anyone taking an honest look at the numbers, 

it should be clear that more will need to be done. That is why my 

bill takes important steps towards giving the Postal Service the 

flexibility that those of us in Congress always say we want to give 

the Postal Service to adapt to the new realities and operate more 

like a business. 

No business facing the kinds of difficulties the Postal Service 

faces today would survive for very long if it were told how many 

retail outlets it should have and where they should be located, or 

if it was prevented from making operational changes or taking full 

advantage of the resources and expertise it has at its disposal. Yet 

that is what Congress does to the Postal Service. 

My bill aims to address these problems and to take Congress out 

of the day-to-day management of the Postal Service. Assuming that 

the Postal Service can continue to build on its recent cost-cutting 

efforts, these changes could help set the Postal Service on a more 

solid footing in the years to come. 

But I do not just focus in my bill on cost cutting. The bill also 

aims to give the Postal Service new authority to leverage for its nationwide retail, logistics, transportation, and delivery network to 

attract new business. In addition, it gives the Postal Service more 

flexibility to work with existing customers to keep them in the mail 

and to partner with State and local governments to find new, potentially profitable uses for the retail facilities that it needs to 

keep. 

I mentioned at the beginning of my statement that there have 

been a number of bills introduced this Congress to address the 

Postal Service’s financial condition. Susan Collins has one. She and 

8 

1The prepared statement of Mr. Donahoe appears in the Appendix on page 71. 

I have worked on these issues for years, and my hope and prayer 

is that we will do it again, this time to good effect. Congressman 

Darrell Issa has another approach. And there are parts of both bills 

that I do not agree with, but also parts of the bills that I support 

or that overlap with some of the provisions in my own bill. Starting 

with this hearing, we need to focus on the areas of agreement and 

from there, with input from the Administration, from the key 

stakeholders, build a package that can prevent postal default and 

insolvency and set the Postal Service on the road towards stability 

and profitability. 

In conclusion, Mr. Chairman, and Senator Collins, especially, let 

me just say this: The Postal Service is an enterprise. It is a business enterprise. It is an enterprise that has more people than it 

needs. It needs to reduce its head count. They have tried to do that 

humanely, and they would like to continue to do it humanely. We 

need to let them. We have more post offices than we need, and the 

key is not just closing post offices. The key is to try to provide better service to postal customers in communities across America by 

collocating the services in drug stores, supermarkets, department 

stores, and the like. 

And, finally, they have more processing centers, probably twice 

the number of processing centers that they need around the country. They need to reduce the number of processing centers. And as 

they do those things, we need to get out of the way. There is not 

a bailout that is needed here, but in large part, what we need is 

to let the Postal Service act more like a business and then to come 

up with even more great ideas like flat-rate boxes and last-mile delivery, that kind of stuff. And if you do that, and if we do our job, 

I think the Postal Service is going to be here for a lot longer. 

Thanks so much. 

Chairman LIEBERMAN. Thanks, Senator Carper. 

Postmaster General Donahoe, we will go to you first. I thank you 

for being here. It probably does not need to be said, but the fact 

is that you have made some tough proposals here, but I think everybody listening or in the room should know that you are not 

some sort of executive that was brought in from outside to coldly 

go through the post office. You have spent your whole career in the 

Postal Service, beginning as a clerk 35 years ago in Pittsburgh. 

Having had that experience, from my perspective, you remain remarkably youthful. Whether I can say that at the end of the next 

year or so remains to be seen. [Laughter.] 

Anyway, thank you for being here, and we welcome your testimony now. 

TESTIMONY OF HON. PATRICK R. DONAHOE,1 POSTMASTER 

GENERAL AND CHIEF EXECUTIVE OFFICER, U.S. POSTAL 

SERVICE 

Mr. DONAHOE. Mr. Chairman and Members of the Committee, 

good afternoon and thank you for scheduling this important hearing. I appreciate the opportunity to testify about the financial state 

of the Postal Service and about the proposals to improve its business model. 

9 

America depends on a financially strong Postal Service. The 

Postal Service provides a vital national delivery platform that is 

part of the bedrock infrastructure of the American economy. It supports a $1 trillion mailing industry that employs over 8 million people. Every American residence and business depends on regular, 

secure, and available delivery of mail and packages. This will always be so, even in an increasingly digital age. 

Nevertheless, the Postal Service is at the brink of default. Without the enactment of comprehensive legislation by September 30, 

the Postal Service will default on a mandated $5.5 billion payment 

to the Treasury to pre-fund retiree health benefits. Our situation 

is urgent. The congressional action is needed immediately to avoid 

this default. 

Mr. Chairman, the Postal Service requires radical changes to its 

business model if it is to remain viable into the future. The Postal 

Service is in a crisis today because it operates with a restrictive 

business model. As a self-financing entity that depends on the sale 

of postage for its revenues, the Postal Service requires the ability 

to operate more as a business does. This applies to the way it provides products and services; allocates resources; configures its retail, delivery, and mail processing networks; and the way it manages its workforce. Unfortunately, the Postal Service today has a 

limited flexibility to respond to the changing marketplace. 

Since 2008, the combination of weak economic conditions and divergence to electronic forms of communication have resulted in unprecedented declines in the use of First-Class Mail and a weakness 

in the use of standard mail. In response, we have reduced our annual costs by more than $12 billion and our workforce by 110,000 

career employees in just the last 4 years. As impressive as these 

cost reductions have been, we must accelerate the pace of cost reduction over the next few years. 

Based on current revenue estimates, the Postal Service must reduce its annual cost by $20 billion by the year 2015 to become profitable and to return to financial stability. Mr. Chairman, we do not 

have the flexibility in our business model to achieve these cost reductions. To do so requires the enactment of comprehensive, longterm legislation to provide us with needed flexibility. Short-term 

stop-gap measures will not help. Our long-term revenue picture 

dictates developing a long-term comprehensive approach. The 

health of the Postal Service and the mailing industry that we serve 

depends on it. 

The Postal Service has made a number of policy proposals that 

merit consideration. These include: Giving the Postal Service the 

authority to determine its delivery frequency and transition to a 

national 5-day-a-week delivery schedule; allowing the Postal Service to restructure its health care system and make it independent 

of Federal programs and eliminate the mandatory annual $5.5 billion retiree health benefits payment with this action. 

We need to accelerate workforce reduction by as many as 220,000 

employees, and we are asking Congress to consider that reductions 

in bargaining unit employees be governed under the reduction-inforce provisions that are applicable to the Federal competitive service employees. 

10 

1The prepared statement of Mr. Berry appears in the Appendix on page 87. 

We are also seeking the authority to provide a defined contribution plan for new hires rather than today’s defined benefit plan. We 

are seeking the return of $6.9 billion in Federal Employees Retirement System overpayments. That will help our cash situation. And 

we are also seeking to streamline postal governance models to 

speed pricing and product decisions. 

We have advanced these and other proposals to provide the Congress with a range of legislative options, and we are also aggressively doing things that we can do within our own business model. 

Indeed, by 2015 we intend to capture more than $11 billion in additional cost reductions by optimizing our delivery network, our retail 

networks, reducing our mail processing footprint by more than 300 

processing facilities, and by taking advantage of negotiated workforce flexibility. These are aggressive steps and they are necessary. 

America deserves a financially strong and independent Postal 

Service that can meet the evolving mailing and shipping needs for 

generations to come. We require the flexibility to operate more as 

a private sector business would. This would enable the Postal Service to return to profitability and sound financial footing. This would 

also enable the Postal Service to properly fulfill its mission since 

the 1970s, which is to operate on a profit-and-loss basis and to 

function independently of all taxpayer support. 

Let me conclude by acknowledging the great commitment and 

dedication of our employees. During these very difficult times, even 

as we have consolidated facilities and made substantial workforce 

reductions, they have delivered at record-high service performance 

levels. 

Mr. Chairman, thank you again for giving us the opportunity to 

testify here today. I look forward to answering any questions that 

you might have of me. Thank you. 

Chairman LIEBERMAN. Thank you, sir, for your testimony. We 

appreciate it. 

We will go now to John Berry, who is the Director of the U.S. 

Office of Personnel Management, directly to testify to this subject 

matter as it relates to OPM, but insofar as he is able, to speak on 

behalf of the Administration as well. 

TESTIMONY OF HON. JOHN BERRY,1 DIRECTOR, U.S. OFFICE 

OF PERSONNEL MANAGEMENT 

Mr. BERRY. Thank you, Mr. Chairman, for the opportunity to testify regarding the financial challenges facing the U.S. Postal Service. 

I have met with the Postmaster General several times recently, 

and the Administration is committed to exploring ways that can be 

helpful to the Postal Service. Both the President and I know of the 

critical importance to our Nation’s economy that the Postal Service 

provides, and we are grateful to the men and women of the Postal 

Service for the important work that they do for our country. 

The President’s fiscal year 2012 budget proposed ways to provide 

Postal Service financial relief, but since those proposals were offered, the financial situation of the Postal Service has deteriorated 

further. In response to this situation, the Administration plans to 

11 

release a proposal in a few weeks that will ensure a sustainable 

future for the Postal Service. This proposal will be included as part 

of the broader $1.5 trillion deficit reduction package that the President has promised to submit to the Congress. 

In the interim, the Administration supports delaying for 90 days the Postal Service’s $5.5 billion pre-funding retirement health payment that is due on September 30. This will allow the Congress, 

the Postal Service, and the Administration the time to carefully 

work through the details of a proposal. 

We believe that the Postal Service and its employees and retirees 

are well served by the existing health benefits program and the retirement system. The Postal Service proposes reducing costs by discontinuing participation in Federal health and retirement benefits. 

This is a very complex proposal, and it will require further study 

and analysis to determine if the Postal Service can achieve significant cost savings from these proposals. As such, the Administration 

does not have a formal position on this proposal at this time. 

OPM expects that a withdrawal of the postal population would 

not have a significant impact on the Federal Employee Health Benefits Program (FEHBP) as a whole. In addition, the overall cost of 

the FEHBP program would be minimal and would not impact the 

integrity of our FEHBP program. However, it would have a significant impact on health plans with a large postal population such as 

Rural Letter Carriers or the American Postal Workers Union plans. 

If these plans chose not to participate in the FEHBP any longer, 

it could have a significant impact on the number of choices that are 

available to our enrollees and overall competition in the program. 

The Postal Service’s proposal to withdraw its annuitants and employees from CSRS and FERS would pose very significant challenges because Postal and non-Postal Service are integrated in the 

same retirement system. As such, many employees have creditable 

CSRS and/or FERS service both in Postal and non-Postal employment, and the Federal Government will have a legal obligation to 

pay those benefits. Any proposal to remove the postal population 

from Federal employment health and retirement systems, again, 

would be complex, and more analysis is required. 

As I mentioned earlier, the President’s budget proposes improving the Postal Service’s financial condition by approximately $5 billion in both 2011 and 2012. 

First, we do propose returning to the U.S. Postal Service its surplus in the FERS retirement fund, estimated by OPM now at $6.9 

billion. The budget also proposes restructuring the specified retiree 

health benefits at an estimated cost savings of $4 billion in temporary relief in 2011. Additionally, the President’s budget proposes 

streamlining FEHBP pharmacy purchasing benefits, and we believe this could save the Postal Service an additional $300 million 

over the next 5 years. 

Last, I would like to address a number of reports questioning 

whether the Postal Service has overpaid its obligations into CSRS. 

Moreover, I would like to clarify that the term ‘‘overpayment’’ has 

been used by those who implied that there should be a change to 

the current allocation that is mandated in the law. OPM applies 

the method established in the current law for apportioning responsibility for CSRS costs between the Postal Service and the TreasVerDate Nov 24 2008 13:01 Feb 28, 2012 Jkt 072477 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 P:\DOCS\72477.TXT SAFFAIRS PsN: PAT
12 

1The prepared statement of Mr. Herr appears in the Appendix on page 94. 

ury. After careful review by the Office of Personnel Management’s 

General Counsel, our Inspector General, and our Board of Actuaries, they have all concluded that OPM does not have the administrative authority to make a reallocation of these CSRS costs 

based on the 2006 Postal Accountability and Enforcement Act. 

However, if Congress determines that another methodology is more 

appropriate and explicitly establishes another allocation method, I 

pledge that OPM will quickly and fully implement those changes. 

We look forward to working with the Committee and the Postal 

Service to develop a solution to this problem and in addressing 

these fiscal challenges. Thank you for your time, and I will be glad 

to answer any questions. 

Chairman LIEBERMAN. Thanks very much, Mr. Berry. I think you 

made some significant statements on behalf of the Administration, 

both in terms of a plan regarding the Postal Service coming forward in the next few weeks which will be submitted simultaneous 

with the recommendations of the President to the super committee, 

the Joint Special Committee of 12, and that if we give you the authority to return the money that the Postal Service believes is an 

overpayment to the CSRS fund, OPM will implement that rapidly. 

I appreciate that. 

Next we are going to hear from Phillip Herr, who is the Director 

of Physical Infrastructure Issues at the Government Accountability 

Office (GAO), our independent watchdog/oversight group, but specifically here because under that general title he is GAO’s expert 

on the Postal Service. Thank you for your testimony. 

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

Mr. HERR. Chairman Lieberman, Ranking Member Collins, and 

Members of the Committee, thank you for the opportunity to discuss the serious financial crisis facing the Postal Service. 

As mail volume has declined, the Postal Service simply has not 

generated sufficient revenue to cover many of its obligations. Critical decisions by Congress, the Administration, and the Postal 

Service are needed to help put it on a path to financial solvency. 

First, by most measures the Postal Service’s financial condition 

is grim, as noted earlier, with a cumulative net loss of nearly $20 

billion over the last 5 fiscal years, a projected net loss of about $9 

billion this fiscal year, and reaching its $15 billion borrowing limit, 

while not making its mandated $5.5 billion retiree health benefits 

payment this year. 

The Postal Service has released several proposals to address its 

problems. One proposal is to withdraw from the Federal Employee 

Health Benefits Program and create its own program using the 

$42.5 billion fund that has been set aside for future retirees’ health 

benefits. This proposal should be carefully reviewed as it is not 

clear whether the Postal Service can achieve its planned cost savings or what the implications are for employees, future retirees, 

and the Federal budget. 

13 

1The table referenced by Mr. Herr appears in the Appendix on page 102. 

Currently, about 1.1 million postal employees and annuitants 

participate in the Federal Health Benefits Program, and 300,000 

employees are eligible to retire over the next decade. This is a significant obligation. Several legislative proposals would defer prefunding Postal Retiree Health Benefits Fund as a way of providing 

financial relief, as seen in Table 1 of my statement.1 However, deferring payments increases the consequences should the Postal 

Service not be able to make future payments if its core business 

continues to decline as expected. This increases risk to the Federal 

Government, taxpayers, and possibly future retirees. 

GAO believes it is important that the Postal Service continue to 

pre-fund its retiree health benefit obligations to the maximum extent that its finances permit. We acknowledge that this will be difficult until its business model is updated to reflect current realities, 

however. 

Some key questions to consider regarding the proposal to create 

a separate Postal Health Benefits Program include: How will the 

Postal Service acquire the expertise needed to manage health benefit programs? What would be the budgetary impact of transferring 

$42.5 billion from the Treasury-held fund to a postal-administered 

program that, as proposed, could seek higher returns in the market 

with potential risks? Can savings realistically be expected from restructuring its health benefits program? Would such a change 

lower fees compared with those available through OPM? And if it 

defaults on funding or benefit payments to employees or retirees, 

or changes them significantly, as is possible, what would be the 

Federal Government’s obligation to 1 million-plus beneficiaries? 

The Postal Service has asked for legislation to access its FERS 

annuity surplus, estimated to be about $7 billion. What is discussed less often is that the Postal Service also has an unfunded 

CSRS liability estimated by OPM to be about $7 billion. In June 

2011, the Postal Service stopped making its payments for the defined benefit portion of FERS, meaning that the FERS surplus has 

already been reduced by about $800 million. 

The Postal Service has also proposed making new employees ineligible for a FERS annuity, raising the question of whether other 

options have been considered. For example, flexibilities within 

FERS now accommodate different accrual rates for certain employees. 

The Postal Service also seeks to accelerate network and workforce downsizing. We agree that postal networks need to be realigned in light of decreased demand. Frankly, network realignment is overdue and necessary, whether or not actions are taken 

on the pension and health proposals. When fully implemented, the 

Postal Service estimates savings from the proposed changes could 

total $11 billion. Several key areas where savings are expected include: Saving $3 billion by reducing processing plants from 500 to 

under 200; $3 billion by reducing delivery from 6 to 5 days; reducing delivery costs by $2 billion through route consolidation; and 

saving $1.5 billion by selling postal services through private businesses and closing up to 12,000 post offices. 

14 

1The prepared statement of Mr. Levy appears in the Appendix on page 113. 

Realigning the vast postal network will require tradeoffs, and the 

Postal Service has asked for legislation to eliminate the layoff provisions it has negotiated in collective bargaining so it can reduce 

its workforce by an additional 125,000 career positions. As Congress considers possible changes, some questions include: Is 6-day 

delivery still appropriate given the changed use of mail? What 

changes to delivery standards are needed to realize the cost savings 

derived from network optimization? Are statutory or regulatory 

changes needed to permit quickly restructuring postal operations 

while assuring appropriate oversight? 

In closing, the stark reality is the Postal Service’s business 

model, which until 2006 relied on continued growth in mail volume, 

is broken. The gap between its revenues and the expense of maintaining its network has become unsustainable. Difficult choices 

must now be made, and it is time to decide its future. 

Chairman Lieberman, Ranking Member Collins, and Members of 

the Committee, this concludes my statement, and I am happy to 

answer questions. Thank you. 

Chairman LIEBERMAN. Thanks, Mr. Herr. Unfortunately, I think 

you have summed up reality pretty well, that the business model 

which worked for a long, long time for the Postal Service is now 

broken, and we have to help the Postal Service fix it. 

Mr. Levy, thanks for being here. 

Mr. Levy is the Senior Vice President and Chief Actuary at The 

Segal Company, which has done some work that is relevant to our 

hearing today. Please proceed. 

TESTIMONY OF THOMAS D. LEVY,1 SENIOR VICE PRESIDENT 

AND CHIEF ACTUARY, THE SEGAL COMPANY 

Mr. LEVY. Thank you, Mr. Lieberman. I was the principal author 

of Segal’s 2010 ‘‘Report to the Postal Regulatory Commission on 

Civil Service Retirement System Cost and Benefit Allocation Principles,’’ and I am here today with the encouragement of the Postal 

Regulatory Commission to discuss Segal’s recommendations with 

respect to this important issue. And apropos of Mr. Berry’s comment, let us make it clear. Our assignment was to look from the 

current point of view at what is fair and equitable, not whether 

OPM, in fact, implemented the 1974 legislation correctly. I have 

not heard anything in our studies to suggest that they have done 

otherwise. So we do not suggest overpayment in the sense of not 

following Congress’ direction. To the extent that I may use that 

word or our report may, it is using a standard of ‘‘fair and equitable’’ in 2010–2011. 

When the U.S. Postal Service was established as an autonomous 

Federal entity effective in 1971, an important issue was the allocation of Civil Service Retirement System costs between the Federal 

Government—for workers’ service in the Post Office Department 

(POD)—and the USPS. OPM has consistently done this allocation 

in accordance with Public Law 93–349 in 1974. Essentially, that allocates to the Federal Government the cost of a frozen pension benefit for each worker as of June 30, 1971, based on service, rate of 

compensation, and the CSRS benefit formula at that time. The enVerDate Nov 24 2008 13:01 Feb 28, 2012 Jkt 072477 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 P:\DOCS\72477.TXT SAFFAIRS PsN: PAT
15 

tire balance of that worker’s pension, over and above that frozen 

amount, has been charged to USPS. Because the benefit design of 

CSRS has more generous benefits in the later years of a worker’s 

career, and since the USPS was always the second employer, the 

benefit accrual charged to USPS for a year of service was usually 

higher than for POD service. Because the CSRS benefit is based on 

the high 3-year average salary for all years of service, POD or 

USPS, USPS was, in fact, paying for the impact of post-1971 salary 

increases on pre-1971 POD pension accruals. In a report for the 

USPS Office of the Inspector General dated January 11, 2010, actuaries for The Hay Group concluded that this allocation was inequitable in both respects. They estimated that an equitable allocation, 

accumulated with interest, would have resulted in the USPS’ share 

of the CSRS assets being lower by $75 billion for past payments, 

with about $10 billion of savings anticipated in future years. USPS 

requested PRC’s opinion on the fairness and equity of the OPM 

method. And, after taking competitive bids, The Segal Company 

was selected by PRC to analyze and make recommendations. 

We met with the stakeholders and reviewed the actuarial and accounting standards, and we concluded that the most relevant 

benchmark was the accounting standard applicable to private companies. This was the only one that had as a primary objective the 

matching of revenues—in the Postal Service’s case, selling postage—with the labor costs to produce those revenues. That was our 

assessment of the appropriate basis for evaluating the fairness of 

the CSRS cost allocation. The accounting standard provides clear 

and nondiscretionary direction. With regard to plans such as CSRS 

that provide non-uniform benefit accruals—in this case, higher accruals in the later years of employment—the expense charge requires following the plan’s accrual formula, as OPM was doing. But 

it also requires that the cost allocation to a time period for a final 

average salary plan like CSRS must reflect the anticipated future 

salary at termination or retirement and may not be limited to the 

cost based on the compensation at the time the work is done. Reflecting future compensation increases in the POD allocation was 

not part of the OPM methodology. 

Based on this analysis, we concluded that the preferred method 

to allocate CSRS benefits to the Federal Government was to reflect 

post-1971 salary increases with respect to pre-1971 service, but 

otherwise to follow OPM’s methodology. We indicated that we did 

not believe that the omission of future salary increases with respect to POD service was fair and equitable. In effect, what that 

did was that gave the Federal Government a lower cost because of 

the establishment of USPS than it would have had had the POD 

continued to operate unchanged. And we did not see anything to 

suggest that one of the objectives of establishing the USPS was to 

reduce past postal pension costs. But that is, in fact, what the law, 

as OPM has applied it, has done. 

We also noted that a pro rata reduction of benefit accruals that 

did not follow the CSRS accrual formula was within the range of 

fair and equitable alternatives, but it was not our preferred methodology. We did not do any calculations of our own, but roughly estimated that our recommended allocation would result in accumulated savings of $50 to $55 billion for past allocations compared to 

16 

the OPM methodology, with an additional savings with respect to 

future payments of $6 to $8 billion. 

Mr. Chairman, that completes my prepared testimony. I would 

be pleased to answer any questions. 

Chairman LIEBERMAN. Thanks, Mr. Levy. 

We will now go to questions, and let us do 6 minutes since there 

are a number of Senators here, and I want to give everybody a 

chance to question the witnesses. 

Postmaster General Donahoe, you mentioned in your testimony 

that without some change, by the end of this month the Postal 

Service would have to default on that $5.5 billion payment to the 

health fund. Mr. Berry indicated that the Administration will seek 

legislation to delay that by 90 days. But assuming that is taken 

care of—well, let me ask the question another way. What I am 

really wondering is, if nothing happens, if you receive none of the 

relief that we are talking about providing, by what date do you 

think the Postal Service will not just have to default on that health 

payment but will begin to find it impossible to carry out its normal 

responsibilities, such as delivering the mail? 

Mr. DONAHOE. Here is what we think, Mr. Chairman: Probably 

next August-September time frame. What we are looking at is even 

if we push the payment off for the 3-month time period, we have 

a payment for the Department of Labor (DOL) of $1.2 billion due 

in October. 

Chairman LIEBERMAN. What is that? 

Mr. DONAHOE. That is for workers’ compensation. 

Chairman LIEBERMAN. Workers’ compensation, Department of 

Labor, right? 

Mr. DONAHOE. We pay the Department of Labor $1.2 billion. 

Then we have a couple of payrolls in October, too. So we will be 

very close, even not paying the pre-payment of the $5.5 billion. 

Now, over the course of the winter, if mail volume picks up, we 

will be able to pick up a little revenue there. But we think that by 

the August-September time frame next year, given no action, we 

will be out of cash to pay employees and to pay contractors. 

Chairman LIEBERMAN. And if for some reason you do not get the 90-day delay on that $5.5 billion, what is the consequence of that? 

Mr. DONAHOE. We are not going to be making that payment. If 

they delay it, it makes October a little bit more bearable. 

Chairman LIEBERMAN. Right. So you are saying here—and I 

know you have said this before—that there is no way you will have 

the capacity to make the payment that is due by the end of this 

month. 

Mr. DONAHOE. I will not. 

Chairman LIEBERMAN. You have made what we have described 

as controversial proposals, reducing the deliveries to 5 days a week, 

closing over 3,000 post offices, reducing the number of distribution 

centers, and ultimately asking for authority for reductions in force 

comparable to what exists for other Federal employees up to 

120,000, or you would probably use it for that. Help us understand 

the basis of those requests in this sense: Why are you confident 

that the result of those cutbacks will not lead to a further drop in 

business for the post office? In other words, why do you think those 

changes will not only save money but will really put the post office 

17 

back on the road to being balanced fiscally or even slightly in surplus? 

Mr. DONAHOE. Here is the way we look at this: There are two 

major things happening right now. One is the decline of First-Class 

Mail, and I think that we could cut the price in half and not be 

able to slow it down all that much. 

Chairman LIEBERMAN. Well, that is really important. It is all the 

Internet, right? It is email? 

Mr. DONAHOE. It is the technology. Sixty percent of Americans 

pay bills online today. That is not going to change. That will continue to move in that direction. As a matter of fact, what we are 

seeing now are a number of companies requesting payments to 

have a hard-copy statement mailed to one’s house. 

Chairman LIEBERMAN. That is right. 

Mr. DONAHOE. And banks are now starting to charge for checks. 

You get five checks for free. After that you have to pay. So all of 

these things will continue to push the First-Class Mail volume 

down. So we think that is something that we will try to slow, but 

it is going to continue. 

Where we see our business strength going forward is in two direct areas. One is standard mail. We had the drop-off with the 

economy, but standard mail has leveled off pretty well. And I will 

tell you, standard mail for the most part is an excellent investment—— 

Chairman LIEBERMAN. Define standard mail for us. 

Mr. DONAHOE. Advertising mail. 

Chairman LIEBERMAN. Right. 

Mr. DONAHOE. What happens is companies tell us over and over 

again that they get the best return on investment because it gets 

in front of a customer’s eyes, unlike the Internet, unlike even radio 

or TV. When it gets in your mailbox, a customer sees it. So we 

think there is strength in there, as long as we can keep the price 

relevant. We cannot let the price get too high. 

The second thing we know we have strength in is the package 

business. With e-commerce, we are seeing in our Parcel Select— 

which is the offering that we make along with FedEx and the 

United Parcel Service (UPS). We are like the final mile for them. 

Chairman LIEBERMAN. You are doing the last mile for FedEx and 

UPS. 

Mr. DONAHOE. We see double-digit increases over the last few 

years, and we will continue to see that. Our infrastructure is great. 

Our people do a great job. It is very affordable. So we will see nice 

growth there. 

The third area that we think we will see some growth is potentially in the digital area, and that whole area is open for the Postal 

Service. We are not talking so much about bill payment as you see 

being done for free today, but we think there are some opportunities to provide secure digital messaging. It is not going to make up 

for the First-Class difference, but those are three areas. 

So given that, we have plotted out volumes and revenues over 

the next 10 years. We are using that revenue line as a governor 

of our business. We do not want taxpayer money. We have to get 

our finances in order to provide good, dependable service. I think 

if we provide good, dependable service, which we have an excellent 

18 

history of doing, on standard mail, on remaining First-Class Mail, 

and on packages, our business will be fine. We will not have people 

moving away from us just on account of these changes that we are 

making. 

Chairman LIEBERMAN. Thanks. My time is up. Senator Collins. 

Senator COLLINS. Thank you, Mr. Chairman. 

Mr. Berry, the failure of the Postal Service would be devastating 

to our economy. I see you are nodding in agreement. It would pose 

a threat to the jobs of millions of Americans. Today you have heard 

the Postmaster General describe a crisis. He says that the Postal 

Service is on the brink of default, a year from now will not be able 

to meet its payroll and carry out its operations. Yet this afternoon, 

you come to us and tell us that the Administration does not yet 

have a plan. You have opposed several of the fundamental reforms 

that the Postmaster General has put forth as far as a separate retirement system and changing to a defined contribution system. 

You have asked for more time to study it. You have asked for a 

90-day delay in the $5.5 billion. You have not mentioned your position on relief from the no-layoff provisions that are in the union 

contracts. You really have not come forth with a plan other than 

to take a position in opposition to the repayment of the $55 billion 

to the CSRS system that our actuary here has described. 

I just do not understand why the Administration does not have 

a concrete plan to put before us today given the dire straits that 

we are in. Senator Carper and I have had bills out there for many 

months. They are not perfect, and, frankly, I think they have been 

overtaken by the rapidly deteriorating crisis that we face. But why 

doesn’t the Administration have a plan for us today? 

Mr. BERRY. Senator, first, there will be a plan, as I testified. The 

White House will have that submitted with the deficit reduction 

package within the next few weeks, and the President will meet his 

promise to give that to the Congress. 

Also, I just want to correct—the Administration has not taken a 

position on the Postal Service’s proposal on withdrawal from 

FEHBP or the retirement systems. So I am not here in opposition 

to those. 

Senator COLLINS. But you are not supporting it either. 

Mr. BERRY. Well, all I did was explain that it will require further 

study, but there is no formal Administration position of opposition, 

so I want to be clear on that point. 

The other is something we are supporting, and it is in the President’s budget, and I think it is reflected in a number of the pieces 

of legislation, and that is the surplus payment in the FERS retirement fund of what we estimate to be the $6.9 billion. And the Administration does support returning that to the Postal Service. It 

will require legislation to do that, but we are supportive of that relief. And I think that will go a long way in terms of helping some 

of the challenge that I know you all are wrestling with that we 

want to help. 

Senator COLLINS. But, Mr. Berry, that $6.9 billion pales in com- parison to the $55 billion that Mr. Levy described, and you said 

that you do not have the authority. I have gone back and forth 

with OPM on this. I wrote the provision of the 2006 act that gives 

you the authority in Section 802(c)(2). It says that the Postal ReguVerDate Nov 24 2008 13:01 Feb 28, 2012 Jkt 072477 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 P:\DOCS\72477.TXT SAFFAIRS PsN: PAT
19 

latory Commission can hire an actuary—that is what they did—to 

take a look at it, and it gives you complete authority to then 

change the formula. 

So I just do not understand why the Administration continues to 

say that it does not have the authority. 

Mr. BERRY. Senator, I am not an attorney, and I have to defer 

to my General Counsel, my Inspector General, and my Board of Actuaries. And in their reading of the law—and I know there is a disagreement in this. But with due respect, they advise me I do not 

have the authority to determine fair and equitable, as Mr. Levy 

testified. That authority rests with you and you alone, with the 

Congress. 

I am not here testifying against the Segal report. In fact, we find 

a lot of value in the Segal report and believe it might be a good 

basis for the Committee, for the Postal Service, and for us to have 

our actuaries and staff to work with you to help determine what 

is fair and equitable. But the Congress needs to set that in the law, 

and that is where I am stuck. 

Senator COLLINS. Mr. Postmaster General, my time is expiring 

rapidly, but you did not mention the need for reforms in the workers’ compensation program. This is an enormous expense. It is supposed to be a safety net for workers who are temporarily out of 

work, and yet the Postal Service, as the IG has pointed out, has 

something like 2,000 individuals over age 70 who are receiving 

workers’ comp. Mr. Postmaster General, those people are not coming back to work. 

Mr. DONAHOE. We agree with you 100 percent. We need reform 

with workers’ compensation. The proposals that you put forth make 

a tremendous amount of sense to us. We would like to have that 

included in comprehensive legislation going forward. 

Senator COLLINS. Thank you. 

Chairman LIEBERMAN. Thanks, Senator Collins. 

For the information of Members, according to our normal custom 

of calling on Members who arrived before the gavel in order of seniority and after the gavel in order of appearance, if they are here, 

we will call on Senators Akaka, Moran, Begich, Pryor, Carper, 

Coburn, Brown, and McCaskill. 

Senator Akaka is not here, Senator Moran is not here, so we go 

to Senator Begich. 

OPENING STATEMENT OF SENATOR BEGICH 

Senator BEGICH. Thank you very much, Mr. Chairman. 

If I can follow up, Mr. Berry, I understand the $6.9 billion, you 

do not question that. You want to give it to the post office, sooner 

than later. We all agree on that. The $50 billion, give or take, do 

you agree on that number? Because I understand you have the 

process all convoluted between both sides here. So do you agree on 

the number? 

Mr. BERRY. We would need to get the actuaries of all of the parties in a room together to narrow down the exact number. 

Senator BEGICH. But you said you had actuarials do the work. 

Mr. BERRY. We are following the law because that is what has 

driven our interpretation, applying the standard of the law. The 

law has us do this on an annual basis and not look forward in 

20 

terms of the issues that you heard Mr. Levy discuss on fair and equitable. 

Senator BEGICH. So let me try it again. The work that your actuaries did, did they indicate any overage payment, any payment 

above—$1 million, $10 million, $30 billion, $50 billion, any number? 

Mr. BERRY. We would agree there are many ways to accomplish 

the goal of a fair and equitable—— 

Senator BEGICH. That is not the question I asked you. Let me 

ask you this. Can you provide to us the study that your actuaries 

did in regards to this issue? 

Mr. BERRY. Absolutely. 

Senator BEGICH. I know we received a letter from you about your 

legal interpretation, from your counsel to you to then us, but I 

would like the legal analysis that was given to you. 

Mr. BERRY. Absolutely. 

Senator BEGICH. So we will get the actuary’s documentation 

which will show how they did their analysis on this question of the 

money—not the process, on do they believe or not. Are we clear on 

that? 

Mr. BERRY. Yes. And, Senator, if I could, because I am not trying 

to avoid your question—when you look into the future, you have to 

make certain assumptions. 

Senator BEGICH. I understand. 

Mr. BERRY. On inflation rates, on morality rates, on the difference between genders—all of these other things that need to be 

accounted by actuarial, and that is where—— 

Senator BEGICH. I understand that part. I will tell you, as a 

former mayor I had to revamp several retirement programs—police, fire, our whole system, all of it. So I just want to make sure 

I understand you will have a basis of assumptions that will differ 

from the union’s assumptions, everybody’s assumptions. But I want 

to see if there is a number and how you got there. 

Mr. BERRY. Absolutely. 

Senator BEGICH. Then we can argue over assumptions—inflation 

rates, return on investment, all that stuff. 

Mr. BERRY. And knowing of the importance of this—and with 

Senator Collins, the Chairman, and the whole Committee—and appreciating the criticality of this issue, I can pledge to you our actuaries stand ready to be here to help inform your judgment on what 

is fair and equitable. 

Senator BEGICH. Great. I will tell you, in all my years of having 

to deal with this issue from a smaller perspective, still in the hundreds of millions of dollars, it took many years to resolve these 

issues between the unions and the individuals as well as the retirees who were out of the system because there was no group representing them. The list goes on and on. So I am very familiar with 

how this works. I just want to see your assumptions. 

Mr. Levy, were you about to say something in regards to this, 

also? 

Mr. LEVY. Yes, I just wanted to make a quick comment. The $50 billion to $55 billion relates entirely to past payments. It has no 

actuarial assumptions. It is the $6 billion to $8 billion for the future that has actuarial assumptions involved. 

21 

Senator BEGICH. Well, do you want to respond to that? Because what I care about, the $6.9 billion, no one disagrees with that. 

Right? You are just going to pay it at some point if we give authorization. What I am interested in is the $50 billion. 

Mr. BERRY. The $50 billion number, in 2003 you all determined 

on past behavior—— 

Senator BEGICH. I was not here. [Laughter.] 

Mr. BERRY. But there was a determination by the Congress— 

Senator Collins was here then—that there was an overpayment of 

$73 billion. You directed us to pay it, and we paid it back. 

In 2006, you did the exact same with military service credit, a $28 billion credit, and it was a determination of the Congress that 

it would be fair and equitable to have that paid by the Treasury, 

not the Postal Service. It is reasonable that the Congress might decide in this circumstance that a fair and equitable solution would 

require a new determination of that number, and if it determines 

it, we will quickly implement it and pay it. 

Senator BEGICH. Mr. Donahoe, let me ask you, if I can, in regard 

to eliminating Saturday service, as you know, we have sent you a 

letter. We are concerned about this for a variety of reasons, the 

rural component but also as a small business person, how it will 

impact a small business owner who really depends on as much delivery time as possible. They are not corporate. They do not have 

mail runners to go package up their stuff and ship it over to the 

post office. The owner has to do it, and they have to go do it, and 

small businesses depend on delivery as well as making sure that 

they get their mail coming in for supplies and what-not. 

How do you respond to that small business owner—and I am 

talking small, 15 and under employees, not 200 employees, not as 

the Small Business Administration (SBA) defines it. 

Mr. DONAHOE. Again, as we have looked at what would be the 

best day, if any, to eliminate delivery, Saturday is it. Generally the 

volume is about 10, 15 percent lower on Saturday than the rest of 

the week. We will keep post offices open on Saturday so people 

would have access to our 30,000-plus post offices. 

Senator BEGICH. For shipping packages and so forth. 

Mr. DONAHOE. Bring them in and ship them, right. And we 

would be able to provide that service. 

Now, we will not be running what we call outgoing mail that 

night, so that mail would go out on Monday. But they would have 

the access to our services. 

Senator BEGICH. My time has expired, but I have several other 

questions. I will just submit them for the record and then go from 

there. Thank you very much. 

Chairman LIEBERMAN. Thanks, Senator Begich. 

Previously, somebody mentioned a $3 billion figure of savings annually for eliminating Saturday delivery. Is that your number also? 

Mr. DONAHOE. That is our number, Mr. Chairman, yes. 

Chairman LIEBERMAN. Next, Senator Pryor. 

OPENING STATEMENT OF SENATOR PRYOR 

Senator PRYOR. Thank you, Mr. Chairman. 

Mr. Donahoe, let me start with you, if I may, with some questions about the Federal Employee Health Benefit Plan. I am curiVerDate Nov 24 2008 13:01 Feb 28, 2012 Jkt 072477 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 P:\DOCS\72477.TXT SAFFAIRS PsN: PAT
22 

ous about what you think you could save if you left the FEHBP 

and went to something else. You probably covered some of this in 

your opening statement, but tell the Committee once again about 

how much you think you could save. 

Mr. DONAHOE. Here is what we did, Senator: We have been frustrated at the inability to resolve this retiree health benefit payment 

going forward. Truthfully, like I said in my opening statement, any 

other company would have been bankrupt. So what we have done 

is we have gone back and taken a different look. What we did was 

we sat down and thought, well, rather than arguing about whether 

or not we can get the money back from the OPM, we will present 

a different approach. That approach was: How do you eliminate the 

need for pre-payment by changing the costs in your health benefit 

program? So we looked at what any other company would do, and 

this is the way it breaks down. 

First, we think with 1 million people in that plan we could pull 

costs down, our experts have told us, somewhere between 8 and 10 

percent. I will write a check this year for $7.2 billion for health 

care without the pre-funding money. With the pre-funding money, 

it is almost $13 billion. So you pull the cost down 8 to 10 percent. 

The second thing is Medicare. We are one of the largest contributors to Medicare in this country. We do not require our people to 

use Medicare A nor B. We have about an 80-percent usage for 

Medicare A, about 75 percent for B. We know that current retirees 

and future retirees using Medicare will pull those numbers down 

to the tune of around $20 billion over the course of time. 

The third part of our proposal is changing the way that we provide health benefits to current retirees. We would not take anything away from current retirees, but we would freeze them at a 

certain level, and we would increase the money going to them to 

pay retiree health benefits based on the costs for our plan. So we 

would have very good control over it. 

The fourth thing would be for people like me, capped payments 

going forward, so when I retire I will not have that same percentage that you see in the Federal Government, the 72 percent. It 

might be 60 percent, it might be 55 percent. The way we have 

worked through this, we have been able to completely eliminate the 

need for pre-funding—it is about $46 billion—and at the same time 

pull our overall cost down. 

Senator PRYOR. But as I understand your proposal, you would actually leave the FEHBP? 

Mr. DONAHOE. That is our proposal. 

Senator PRYOR. And do you know what impact that would have 

on the rest of the FEHBP? 

Mr. DONAHOE. I would have to leave that up to Mr. Berry. 

Senator PRYOR. Do you know, Mr. Berry? 

Mr. BERRY. Yes, Senator. I testified that in terms of dollar impact it would not be significant. 

Senator PRYOR. And what about on Medicare? Tell me, Mr. 

Donahoe, again about the impact you think you would have on 

Medicare. 

Mr. DONAHOE. We will add about $1.1 billion to the Medicare 

fund this year. We have spent, since 1985, about $24 billion. We 

23 

know it will increase Medicare, but it is our feeling that we are 

paying into Medicare now and we should have full benefits of it. 

Senator PRYOR. OK. And let me ask about workers’ compensation. I think that is an important issue that sometimes gets overlooked. Do you have some ideas on workers’ compensation reform? 

Mr. DONAHOE. We are in agreement with what is being proposed 

by Senator Collins. We would also like to explore what a lot of the 

States do. If you compare us to FedEx or UPS, we are very proud 

of the fact that over the last 10 years we have improved our safety 

rates. We are the No. 1 voluntary protection plan by the Occupational Safety and Health Administration (OSHA) as far as we have 

had more of our facilities certified, and our accident rates have 

gone down. The problem is our costs have continued to go up. So 

we need some way to control those costs. But Senator Collins’ proposal would be very helpful. We would like to be able to take a 

wide look, just like we have been looking at the health care. How 

does the private sector do it? That is the way we would like to do 

it. 

Senator PRYOR. My one bit of warning there would be that you 

have to always remember when you are doing workers’ compensation reform, which States and the Federal Government should do 

from time to time, that the goal of workers’ compensation is to compensate injured workers. 

Mr. DONAHOE. Absolutely. 

Senator PRYOR. And sometimes in an effort to try to find a lot 

of savings, the workers can get left out. 

Mr. DONAHOE. Key for us is safety. Improve the accident rates, 

improve the ergonomics, do the right thing. That reduces the accidents, and then hopefully we will have fewer people that would 

ever have to go on workers’ compensation. 

Senator PRYOR. And it sounds like you have had a fair amount 

of success in reducing your accident rate. 

Mr. DONAHOE. Yes, I think we have done a great job, we have 

a lot of good programs, and we are very proud of that fact. And I 

think from an employee standpoint, it is a great thing. When you 

have a person come to work every day, you want them to go home 

to their family healthy every day. 

Senator PRYOR. Mr. Donahoe, I know that we have been going 

through this in Congress, looking at how to find savings and how 

to cut our spending, and part of this is to make sure that every single thing is on the table, that there are no sacred cows. Senator 

Coburn has been very adamant about this, as well as Senator 

McCaskill. 

Mr. DONAHOE. Yes, sir. 

Senator PRYOR. And from your standpoint, is everything on the 

table? 

Mr. DONAHOE. Everything is on the table. 

Senator PRYOR. Including executive items as well as facilities, vehicles, and so forth? 

Mr. DONAHOE. We are going to be implementing reductions in 

health care contributions for our executives. We will be at the Federal rate in 3 years, 10 percent a year, and that was one of the recommendations made where we could cut executive pay. 

24 

Senator PRYOR. And I know that there was a news story about 

relocation expenses for employees. Have you taken care of that? 

Mr. DONAHOE. Yes, sir. 

Senator PRYOR. Thank you, Mr. Chairman. 

Chairman LIEBERMAN. Thank you, Senator Pryor. 

Now we will go to Senator Carper and then Senator Coburn—unless Senator Carper would like to yield. 

Senator CARPER. I would be happy to yield. We are probably 

going to ask some of the same questions. Do you want to go ahead? 

Senator COBURN. That is all right. I will submit my—— 

Senator CARPER. No, go ahead, Senator Coburn. 

Chairman LIEBERMAN. Please, go ahead. I know Senator Carper 

is in this for the long haul. [Laughter.] 

OPENING STATEMENT OF SENATOR COBURN 

Senator COBURN. ‘‘Haul’’ is the operative word. 

Some things that I have heard today I just want to put back: Restricted business model. I sit here and think about we are talking 

about actuarial changes of $55 billion over 40 years. How did it 

take us 40 years to figure out we were $55 billion off in terms of 

what was compensated? The absolute stupidity of Congress and 

what we have done to the Postal Service is just totally amazing to 

me. 

The other thing that I have heard today—and I have had this 

discussion with every Postmaster General since I have been in 

Congress—is the revenue estimates. The revenue estimates we 

have for 2020 are absolutely an exaggeration. That means 400 

First-Class pieces of mail 9 years from now will go to every household in this country. I do not believe it. I do not believe it is half 

that. So unless you are going to double the rate on First-Class 

Mail, the revenue estimates are totally bogus. And every revenue 

estimate that I have heard over the last 12 years has been bogus 

coming from the Postal Service. 

And so we are sitting here working with numbers of 39 billion pieces of First-Class Mail and I would bet you $1,000 right now, 

Mr. Postmaster General, that it will not be half that 9 years from 

now with the technological changes that are coming. And unless we 

anticipate, we are going to be here 6 years from now doing the 

same thing again. 

The third point that I would raise is standard mail and parcel 

service is important to your business, and I know you are worried 

about the impact of pricing on that business. But the realization 

is First-Class Mail is going away. And unless the business model 

adapts to that, it does not matter what we do in either Senator Collins’ or Senator Carper’s bills, it is going to be a short-term fix, it 

is going to be short-lived. And so I would just caution us to challenge the assumptions that are being made, like Mr. Herr did, and 

when we think we have figured it out, then go two or three measurements again before we cut to make sure that we are not like 

we were in 2006. 

And I will remind my colleagues, in 2006 I predicted we would 

be back here. I actually voted against the postal reform bill because 

we did not fix what we knew were the problems. As a matter of 

fact, GAO said we did not at the time. And so here we sit 5 years 

25 

later not having fixed the problem because we did not measure 

three times and then cut. 

I am not blaming anybody for that. It is because the assumptions 

changed, because the scenarios that we laid out were too rosy. We 

fixed a lot of things, and things would have been much worse had 

we not done it, but now we find ourselves here again. And so just 

as you said, taking the economy out of the equation, First-Class 

Mail is going to go away, anyway, regardless of the recession. It is 

the technological changes. 

So I would just caution us. I think we are going to come together 

with great bipartisan agreement on how we offer the things that 

are needed. I do not see a partisan issue in front of us. But I think 

we certainly need to think way down the road, and we certainly 

need to provide the Postal Service with the effective means of running a business that allows them to make changes based on dynamic changes that they are going to experience in their business. 

And if we do not do that, we will not have fixed the problem. 

With that, I will yield and will submit questions for the record. 

Chairman LIEBERMAN. Thank you, Senator Coburn. Senator Carper. 

Senator CARPER. One of the great inhibitors to economic growth 

in our country today is the lack of certainty and predictability. A 

great deal of uncertainty. 

A couple of years ago, when a lot of folks thought the auto companies—Ford, Chrysler, and General Motors (GM)—were going to 

go out of business, people stopped buying cars. At least they 

stopped buying their cars. And the first question I would ask, Mr. 

Postmaster General, is: Given the kind of uncertainty and unpredictability about whether the Postal Service is going to be around 

a year from now or even 3 or 4 months from now, what kind of impact do you think that lack of certainty and predictability is having 

on your business and the ability to book more business or new 

business? 

Mr. DONAHOE. I think that uncertainty has a tremendous impact. 

Just this weekend I got an email from my chief marketing officer, 

and he was asking about a couple of customers who were worried 

about doing business with us in the small package area. And I told 

him, ‘‘I will call these two companies and reassure them myself 

that we will be OK.’’ Your point is absolutely critical. We have to 

get stability in our systems, and we have to address these issues 

long term. 

To Senator Coburn’s point, I agree 100 percent. This cannot be 

a short-term fix. We have to not only look at revenue through 2020; 

we have to look at revenue out beyond that and make sure that 

from a Postal Service standpoint we resolve this issue now and give 

the Postal Service the business flexibility to manage going out into 

the future. 

Senator CARPER. I would just say to my colleagues, what we need 

here is not more process; what we need here is not to deal just with 

the symptoms of the problem. What we need to do is solve the 

problem. And as dire as this situation is, I certainly believe that 

this is not a hopeless situation. This is a problem that can be fixed, 

and there is certainty that can be provided, to some extent by you 

and the folks who work with you at the Postal Service, but maybe 

26 

to a great extent by the Congress and the Administration, and 

working with you and with the other stakeholders. 

I am going to go back and talk about the auto industry just for 

a moment and maybe use some comparisons. It is not a perfect 

comparison, but there are some points that are relevant. 

One, the auto industry 2 or 3 years ago had more workers than 

they needed given the demand for their product. 

Two, the wage/benefit structure for the folks that were working 

for them was really too rich, too high. 

And, three, they had more plants than were needed. 

You know, a lot of people think we gave a Federal bailout to the 

auto industry. Actually, as taxpayers, we are getting back just 

about every dime that we invested in Chrysler and GM, maybe 

even with a profit. We are not talking about a bailout here of the 

Postal Service. What we are talking about is whether or not the 

Postal Service is going to have access to $50 billion or $60 billion 

that it appears to have overpaid into the Civil Service Retirement 

System and into the Federal Employees Retirement System. It is 

not a bailout. 

Should the Postal Service have access to that money? This is 

money which a lot of people, including some very smart people 

from Segal and the Hay Group, believe, arguably, could be drawn 

back and returned to the Postal Service, allowing the Postal Service to pay down their very conservative retirement schedule for retiree benefits. Very conservative approach. 

I have said this before. Just like there are three things the auto 

industry needed to do, there are three things that the Postal Service needs to do. Are we going to let them? And I am not interested 

in laying off tens of thousands or 100,000-plus postal employees. 

But you have reduced your workforce, your head count, by about 

a quarter over the last 6 or 7 years. That is a lot of people. It is 

200,000 or so people, roughly. You have about another 100,000 

folks that will probably leave through attrition, for the most part 

people who retire and just say, ‘‘That is enough. I am ready to go 

on with my life.’’ And you have about 120,000 or so people who, if 

incentivized, if encouraged to retire, would actually retire. 

Are we going to make sure that you have the resources that you 

need? You do not have the cash right now to incentivize those people. But if you just run the numbers, think about this, for what it 

would cost to incentivize 120,000 people to retire, we could probably look at the auto industry, and they actually had a lot more 

people who took early retirement than they expected. They met 

their quotas a lot more easily than was expected. But if you offer 

retirees $20,000—maybe $10,000 over a 2-year, 3-year period of 

time—to take early retirement, if they are eligible for retirement, 

how much would that cost? If you are trying to get 120,000 people 

to take early retirement, that works out to about $2.4 billion. The 

overpayment to FERS is about $7 billion. So what we are talking 

about is using one-third of the overpayment to the Federal Employees Retirement System that would enable you, arguably, to reduce 

your head count by another 120,000 people beyond the 100,000 that 

are going to attrition. And that would bring your head count down 

to—if I am not mistaken here, closer to 400,000 people. And my 

27 

sense is that would probably enable you to be an ongoing enterprise, much as the auto industry is going forward. 

The other thing the auto industry has done is put on their thinking caps. They figured out how to innovate, how to come up with 

great-looking vehicles, energy efficient vehicles, and electronically 

just much smarter vehicles. One of your points, your last point, I 

think, in your testimony, where you talked about how to use digital 

approach. You were talking about digital and things that would enable you to actually capture some new business. 

My friend, Senator Coburn, who is gone, talks about First-Class 

Mail going away, and it is, and it will probably continue to do so. 

Are we smart enough at the Postal Service to come up with new 

products or innovations? And are we smart enough in the Congress 

to let them market those and use them when they come to work? 

Let me ask our friends from GAO, if I can. The people from The 

Segal Company also have been drawn into this, and, Mr. Levy, 

thank you very much for coming today. I am glad you were able 

to come on very short notice. When I was governor and treasurer 

of Delaware, we used The Segal Company a lot. Great outfit, and 

thank you for that service, and for this service as well. 

Mr. LEVY. Thank you. I was actually in charge of it at that time 

for the State. 

Senator CARPER. Thank you. We used the Hay Group a lot in 

helping us with a lot of our personnel issues in the State of Delaware, too, and obviously they are one of the other companies along 

with Segal. 

So here we have two independent sources, I think both highly regarded, Segal and Hay Group, and we have the Inspector General, 

I think, from within OPM who has a different view of has there 

been this overpayment. Senator Collins and colleagues, we have 

not asked GAO. Would you take a look at this? Or would you take 

a look at the work that Segal and the Hay Group has done, or the 

work that has been done by the auditors from within OPM? Is that 

the kind of thing that you would be willing to do? 

Mr. HERR. We would be happy to work with the Committee and 

the staff on that question. 

Senator CARPER. That is an offer we might want to take advantage of. 

Mr. Berry, have you had any opportunity to meet with the folks 

from Segal and the folks from Hay Group to understand what their 

assumptions are? 

Mr. BERRY. I know our staff has, and there has been a lot of 

great communication not only with them but the other studies that 

have been done. But, again, we would welcome GAO’s participation 

in this and with the Committee staff in helping the Committee to 

decide what that fair and equitable standard should be. 

Senator CARPER. All right. Mr. Postmaster General—how am I 

doing on time? I am over. Let me stop and say thanks so much for 

giving me a few extra seconds here. Thank you. And thanks for 

your responses. 

Chairman LIEBERMAN. Thank you, Senator Carper. Senator 

McCaskill. 

28 

OPENING STATEMENT OF SENATOR MCCASKILL 

Senator MCCASKILL. Thank you. 

Mr. Donahoe, we are in the middle of hearings in Missouri on the 

167 post office closings that are being proposed in my State. 

Eighty-five percent of those are in counties of less than 50,000 residents. I spent a lot of time in my State going around outside of the 

urban areas over the last month, and I guess I am most worried 

about the transparency of the process. The last time that you testified before us, Senator Pryor asked a question. To my knowledge, 

that question has not yet been fully answered. Have there been 

times that places have been removed from the list following public 

hearing and comment? Has the public hearing and the comment 

process ever had any impact on the decisions, the initial decisions 

to close? 

Mr. DONAHOE. I am sure that there have been cases, but I will 

double-check and get back to you. 

Senator MCCASKILL. If you would, get back to us on that. 

Mr. DONAHOE. Absolutely. 

Senator MCCASKILL. I want to make sure that this is not just a 

dog-and-pony show for these folks. Some of their hearts are breaking over this, that their post offices are going away, and I want to 

make sure this process is fair and transparent. 

The other thing I want to talk about is 5-day delivery. First of 

all, we have received several numbers about the savings. As you 

know, there has not been a consistent number. You quote one number, but the Postal Regulatory Commission said it was half that. 

And I am somebody who is worried about the death spiral of a 5- 

day delivery. It is a marketing advantage that the Postal Service 

has, 6-day delivery, and it seems to me that we ought to be focusing on how to take better advantage of that marketing advantage, 

that niche we have in the market that no one else has. That Saturday delivery is something that nobody else can offer up. 

Have you consulted with the newspaper and magazine folks 

about the impact that 5-day delivery will have on their business 

models? 

Mr. DONAHOE. Yes, we have spoken to both newspaper and magazine industry representatives. There is some concern on their 

part, especially smaller-town newspapers that have Saturday delivery, generally one day a week. 

Senator MCCASKILL. The other thing is—and I know this may 

sound corny and naive and Pollyanna-ish and all of that, but I had 

the opportunity not too long ago to go through a box of letters that 

my mother had from my grandmother’s house that were my letters 

I sent to her in college. And as we went through these letters, I 

remembered how many times in history courses I had taken that 

gaps in history were filled in with letters. We have a lot of bestselling books out there that are just letters between everything 

from our Founding Fathers to soldiers on the battlefield. And I am 

not sure that there has been a marketing campaign about the 

value of a written letter and what it means, how it is preserved, 

and what it means to families. My kids are in college now. I do not 

have a box like that. In fact, I had to impose a rule: You cannot 

get money by text message. [Laughter.] 

Mr. DONAHOE. Make sure they write for that. 

29 

Senator MCCASKILL. We were not even having conversations. I 

was getting like this gibberish spelling, ‘‘Need money 2day.’’ You 

know, it is ridiculous. So I really think that there is a longing out 

there right now, especially in these uncertain times, for some of the 

things that have provided stability over the years. And just as we 

have this place in our hearts about the reliability of the Postal 

Service, there is also something special about that piece of FirstClass Mail, knowing that it has come from somebody you care 

about, knowing that it is bringing you news. And I think that while 

you guys have done a great job with your flat-rate delivery—I 

mean, I am sick of that guy. [Laughter.] 

Mr. DONAHOE. We like him. 

Senator MCCASKILL. ‘‘One price, one price, one price.’’ I think it 

has worked. 

Mr. DONAHOE. ‘‘If it fits, it ships.’’ 

Senator MCCASKILL. And has your business model shown that it 

has worked? 

Mr. DONAHOE. Absolutely. 

Senator MCCASKILL. And have you not really increased the 

amount of packages that you guys are handling on that one price? 

Mr. DONAHOE. Absolutely. 

Senator MCCASKILL. So I really believe that if somebody would 

begin to market the value of sending a written letter to someone 

you love, you might be surprised what it could do for your Christmas season. I know the cards are going to help. Christmas cards 

are still part of our culture in this country that we all value. But 

I really think to give up—I disagree with Dr. Coburn. I do not 

think we should give up on the notion that we are going to sit 

down, write a letter, and put in it thoughts, prayers, and hopes for 

somebody we care about and that we are going to just be electronic 

from here on out. I just refuse to let go of that, and I do not want 

you to let go of it. And I think if you do that, you might be surprised by how you could stabilize some First-Class Mail. It is more 

than bill paying. 

Mr. DONAHOE. Absolutely. We agree 100 percent. Let me just 

say, moving away from any of the traditions that we have, the 6- 

day delivery, the small post office, these are all terribly hard decisions because we do, we touch American lives every day, 6 days a 

week. We have programs. ‘‘We Deliver’’ is one that we run in 

schools where we try to teach the kids how to write letters. It has 

been successful, but it is something we have to keep pushing on because a lot of times schools are interested in teaching kids computer skills versus writing skills. But I will take that under advisement and continue to push on that. 

One other thing, we will be advertising mail this fall. We are 

going to put some advertisements on TV talking about the value 

of mail, the physical connection, the fact that somebody comes to 

see you every day and there is a lot of value in that. 

The unfortunate thing we do face, though, is just the technology 

behind the bill payment and bill presentment. First-Class Mail 

pays so much of our overhead. It pays so much of what we do every 

day. And I think if we do not look at all these changes, we will 

never be able to recover financially. 

30 

Senator MCCASKILL. And I get that, and I know we have to make 

some painful decisions here, and I understand that. I just think it 

is very important that we continue to look at the processing network and maybe moving to the curbside or cluster box delivery. I 

mean, that is a huge amount of savings that has been estimated 

also. 

Mr. DONAHOE. We agree. 

Senator MCCASKILL. I would rather eliminate everything we can 

that is realistic before we get at the essence of the 6-day delivery, 

and I feel strongly about that. I know others disagree, but I wanted 

to go on record that I feel strongly about 6-day delivery. 

Mr. DONAHOE. Thank you. 

Senator MCCASKILL. Thank you, Mr. Postmaster . 

Chairman LIEBERMAN. Thanks, Senator McCaskill. We are open 

to all suggestions, and yours is wonderful. We should be writing 

more passionate letters to those we love. 

Senator MCCASKILL. Maybe we could get them done around here. 

Speaker John Boehner—— [Laughter.] 

Chairman LIEBERMAN. I was going to suggest you should take a 

first step and send one to Senator Brown. Then you could move to 

Speaker Boehner. 

Senator MCCASKILL. I think Speaker Boehner knows how I feel 

about—— [Laughter.] 

Chairman LIEBERMAN. I think he probably does. Senator Brown. 

OPENING STATEMENT OF SENATOR BROWN 

Senator BROWN. Well, thank you, Mr. Chairman, and I do have 

great respect for Senator McCaskill. [Laughter.] 

Just so you know, that was meant to be positive, actually. We 

had a great time last Congress in our Subcommittee. The Arlington 

National Cemetery bill was something we worked on and I have 

great admiration for your efforts there. 

I do not know if it was mentioned—I have been wrapping up 

some meetings in my office, but I think it is important to thank 

the dedicated postal employees for the work that they do every day. 

They seem to be getting a little bit lost in this whole mess. I think 

it is important to note that we have a lot of hard-working people. 

In my home town of Wrentham, Massachusetts, I know every person there. I have known them for 22 or 23 years. I have been to 

many retirements. I have been to other communities and seen new 

postmasters coming in. They are so thrilled to go up through the 

chain and ultimately be the head of something very special. I do 

not want that lost in everything we are trying to do. 

I understand the challenges. Everybody here that is involved in 

this, we have met in my office about the very real fiscal challenges, 

and it is unfortunate. It is kind of sad, and I feel a little bit melancholy in that we have an institution like the Postal Service going 

through these changes. But here we are. 

And that being said, I am wondering, Mr. Donahoe, if the 2015 

deadline that you have given yourself to make a lot of these 

changes is too ambitious or you feel it is just about right. And what 

type of pushback do you think you will be getting along the way? 

Mr. DONAHOE. Well, first of all, let me just comment on your 

statements about our employees. They do a great job. If people 

31 

would have looked just in the past couple of weeks with Hurricane 

Irene—Irene came through and we had people the next day in offices with no power making sure the mail got delivered and processed. They did it through the winter in a bad winter this year. So 

I appreciate your comments, and it is something we take very seriously. 

From a standpoint of our plan, we have laid out a plan that includes changes, both operational changes as well as some changes 

in compensation and benefits. It is an aggressive plan. What we 

are looking at, Senator, is trying to get profitable by 2013. When 

I say ‘‘profitable,’’ it may be by $1 billion, maybe by $2 billion, but 

what that does is that allows us to start paying debt down and allows us to eventually get in a position where we’ll be able to make 

some very important investments. I need to do something about vehicles. The last time I was here I told you that, and there are some 

other investments we need to make. 

But probably more importantly than that is the fact that we 

want to stabilize our finances. A good, stable Postal Service, as I 

testified earlier, is critical for the American economy. It is critical 

for the way people feel about the Postal Service. Every quarter I 

have to report losses, and every quarter I go through the same discussion. They cannot get their head above water; they are antiquated; they have bad management; the employees do not do a 

good job. None of that helps because it potentially scares business 

away. 

So I am very focused on getting profitable, getting these changes 

made in our networks, getting changes made in our flexibility with 

employees. It is critical that we get to that point as quick as we 

can because the revenue line will continue to go down. So it is important we get to a point where we get stabilized and then continue 

to work going forward from that point. 

Senator BROWN. I have only been here about a year and a half 

now, and I have appreciated the thoughtful approach—I have 

asked a lot of tough questions privately in our offices with folks 

that have come in and gotten some very direct answers—and it is 

really important to have those tools to understand the problem and 

really get up to speed so we can make a proper decision here. 

Do you think a lot of these changes such as eliminating Saturday 

service will prevent a death spiral or just such a reduction in consumer usage that it will kind of get out of control and you will not 

get to that profitability point or that break-even point? 

Mr. DONAHOE. I think that failure to act on a number of these 

issues to get stable will result in a death spiral. I think that if we 

continue to just try to make incremental changes without going in 

with one fell swoop and making some big changes, we will cause, 

again, every year we will be in a situation where we are reporting 

losses. So you have to make those cuts and move on from there. 

Senator BROWN. And, Mr. Herr, if I could, thank you for coming 

today. How do you view the Postal Service’s proposed plans? Are 

they in line with getting its workforce right-sized and competitive, 

do you think, based on the volume of mail, etc.? 

Mr. HERR. Right, we have been talking about the need for network realignment for several years now, and I think that is an imVerDate Nov 24 2008 13:01 Feb 28, 2012 Jkt 072477 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 P:\DOCS\72477.TXT SAFFAIRS PsN: PAT
32 

portant step. The proposal to cut plants from 500 to 200 is a very 

noteworthy step. 

Senator BROWN. Is the time frame appropriate in terms of aggressiveness that you wanted? 

Mr. HERR. It is going to be tough, I think, by 2015. You have a 

lot of stakeholders involved. You have a lot of plants. It will take 

a plan. It will take everybody coming together and saying we think 

this is important and we are all going to get behind it. 

Senator BROWN. What type of time frame—and anyone can chip 

in on this—do you think we need to move? I mean, no offense. I 

have been here, as I said, a year and a half. I am kind of disgusted 

at the way things are done here, the lack of bipartisanship and camaraderie. It has gotten better with certain people, but all in all 

we should be doing a lot better. What is the time frame? Because 

I do not see us moving too quickly lately on a whole host of things, 

and I am hoping it does not come down to, ‘‘You know what? Tomorrow the Postal Service is shutting down.’’ And we are going to 

be then, at the 11th hour, trying to ram something through that 

does not make sense. Do you have any indication, either Mr. Chairman or the Ranking Member or anyone here? What is your time 

frame that you need to get this done? 

Mr. DONAHOE. As we have proposed, we would love to see longterm, comprehensive legislation by the end of September. We have 

asked for the ability to let us take over those health care benefits. 

We can resolve the pre-funding issue that way. Let us move from 

6-day to 5-day. It is a tough decision, but it has to be made. Let 

us move to get the FERS money back. It will stabilize our finances. 

I am operating right now with a week’s worth of cash in a business 

that is a $65 billion business. Nobody would be doing something 

like that. That is what we need, action now. 

Senator BROWN. So you need Congress to move by the end of this 

month. 

Mr. DONAHOE. Yes. 

Senator BROWN. So, Mr. Chairman, whatever we can do, I mean, 

we have to figure this out. I am tired of waiting until the very last 

second to get everything done. I am hoping we can work in a bipartisan, bicameral manner and in a manner that the President will 

sign the bill to get this done. I mean, come on, this is a no-brainer, 

folks. Thank you. 

Chairman LIEBERMAN. Thanks, Senator Brown. Of course, I 

agree with you. I do not know that we can meet the schedule that 

the Postmaster General has given us, that is, to have that comprehensive legislation by the end of September. I do not think we 

can. And I am interested what Mr. Berry has said in his testimony 

that the President will submit a plan to meet the Postal Service’s 

fiscal crisis along with his recommendation to the Joint Select 

Committee on Defecit Reduction. I still would like our Committee 

to mark up a bill that responds to both what the Postmaster General has proposed and other proposals because I think we have, 

particularly with Senator Collins and Senator Carper, as much or 

more expertise than most people in the Congress do, and I know 

you are the Ranking Member on Senator Carper’s Subcommittee. 

So I am committed to moving this along. I mean, the Postmaster 

General has been very clear that even assuming that he defaults 

33 

on his $5.5 billion to the health fund—and assume nothing else 

happens, by next summer, 2012—he is not going to be able to deliver the mail. What I am saying is I agree with you. This fall we 

should get together on legislation, pass it, and give you the tools 

in plenty of time before that so you are not at the point where we 

are saying tomorrow the mail is not going to be delivered. 

Senator BROWN. Mr. Chairman, are we going to fight about the 

post office, too? 

Chairman LIEBERMAN. I hope not. 

Senator BROWN. I know that you agree. You are one of the guys 

I was talking about who is trying to work together, as well as the 

gentleman and lady to my left. There are others here that feel that 

way. So we need to push our colleagues and leaders to make this 

a priority. Thank you. 

Chairman LIEBERMAN. Thank you. 

Senator Akaka, I know you had another hearing, and I appreciate that you have been able to return to ask some questions of 

this panel. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Thank you very much, Mr. Chairman, and I will 

say a few words before going to questions. 

In 2006 Congress passed bipartisan legislation to modernize the 

Postal Service. Now, as the entire economy faces continued financial challenges, a nearly $5 billion per year pre-funding payment 

required by the 2006 law threatens the Postal Service with insolvency. 

The core of any proposal to save the Postal Service must address 

the pre-funding issue by eliminating or offsetting the payment. 

Other reforms likely will be needed, some of which are under the 

Postal Service’s control and some which we may need to enact 

through legislation. 

I have expressed my concerns over some past proposals, including delivery reductions, arbitration changes, and facility closings. 

As Chairman of the Subcommittee on Oversight of Government 

Management, the Federal Workforce, and the District of Columbia, 

I also have concerns over new proposals released by the Postal 

Service on health and retirement programs and layoffs. Congress 

must be cautious with any proposal affecting contracts negotiated 

in good faith. 

The House Oversight and Government Reform Committee has 

also released legislation. However, I do not believe it is a responsible way forward. Placing one of our Nation’s largest employers 

into receivership by stripping postal management of its authority 

will not address the fundamental problems. The Postal Service 

needs more flexibility, not more bureaucracy. 

The Postal Service is now operating on borrowed time because 

Congress has not yet acted on any proposals. A failure on our part 

to enact meaningful legislation could have negative consequences 

for the larger mailing industry, affecting our Nation’s economic recovery. 

I remain committed to ensuring a viable future for the Postal 

Service and look forward to continuing to work with my colleagues 

to craft legislation to achieve those goals. 

34 

I have a longer statement, Mr. Chairman, which I will submit for 

the record. 

Director Berry, in 1980, six Federal agencies had their own 

health insurance plan available to employees in addition to 

FEHBP. At least four of these agencies eliminated their plans, 

most notably the Federal Deposit Insurance Corporation (FDIC) in 

1998. The FDIC had to pay millions of dollars to OPM to bring employees back into FEHBP after they found the independent plan 

was more costly. 

How feasible is breaking postal employees off from FEHBP? And 

what would be the consequences if they ever wanted to come back? 

Mr. BERRY. Mr. Chairman, thank you for your questions, and it 

is always good to be with you, sir. The FDIC was one of the agencies that you described that broke away from FEHBP and then 

came back and found that, in fact, the savings that they had projected were not to be had. This is one of the reasons why the Administration is proposing we move extremely cautiously and carefully in this area. 

The administrative overhead costs for FEHBP are 0.08 percent. 

We provide choices and plans in all 50 States and including urban 

and rural areas to provide health care, and currently the co-payment cost share for the Postal Service is less than provided by Federal employees for the exact same plan. So that is negotiated, but 

it is a 10-percent differential. In other words, the Postal Service 

pays 10 percent more than the Federal Government pays. The employees in the Federal plans pay a higher co-pay percentage. 

And so when you look at all of those choices, I think we need to 

move very carefully before we would remove—we have over 9 million employees in our market pool now in the Federal plan. Each 

year we consistently deliver a rate increase that is below the market rate increase in the country, and we will do that again this 

year. 

I do not see how with 600,000 to 1 million employees going off 

on their own with an age that is higher than the FEHBP pool they 

are going to achieve the savings that the Postmaster General, with 

all due respect, has projected. And so I think we need to move extremely carefully here and be very cautious and study this extremely carefully before we would recommend moving forward. 

Senator AKAKA. General Donahoe, the Postal Service also considered leaving FEHBP in the 1990s but never left. Why didn’t the 

Postal Service leave at that time? And would those reasons apply 

today? 

Mr. DONAHOE. Thank you, Senator. In the 1990s we looked at 

leaving, but there was a decision not to leave. I think it was pretty 

much the same situation that happened to the Financial Accounting Standards Board No. 106 accounting rules would have required 

us to put the health care costs on our books. Since then, the fact 

that we are pre-funding, that issue is no longer the issue that it 

was back then, and what we have decided to do with exploring the 

options would be to see if we would be able to take costs down 

through our own plan. 

I do not disagree at all with Director Berry. This is something 

we have to study carefully, but I also think that we have to study 

it fairly quickly because what we are proposing is not unlike what 

35 

any other large corporation does when you go out into the open 

market and get the best price for a health care plan. 

Let me assure you of this: I certainly do not want to do anything 

that would have a negative effect on either our employees or our 

retirees. We want to do the right thing, and we are trying to figure 

out how to manage costs going forward, and this is one of the ideas 

that we had. 

Senator AKAKA. Thank you. I know, Mr. Chairman, my time has 

expired. I have one more question, if it is—— 

Chairman LIEBERMAN. How could I say no to you, Senator 

Akaka? [Laughter.] 

Senator AKAKA. Thank you. 

Mr. Herr, your testimony once again brought up the issue of 

modifying the collective bargaining process to require that arbitrators consider the financial health of the Postal Service. The Congressional Budget Office’s analysis of S. 1507, a bill in the last Congress containing this provision, did not project any savings on this 

issue. My understanding is that arbitrators routinely consider the 

Postal Service’s finances. 

Has GAO done any analysis suggesting there would be cost savings from this change to the arbitration process? 

Mr. HERR. Actually, I did not refer to it in my statement today, 

but in our business model report issued a year ago, we said that 

would be an issue for Congress to consider as it thinks about collective bargaining agreements, what is affordable for the Postal Service, and situations where contracts go to arbitration, to ensure that 

would be put on the table, because, clearly, the precedent in the 

past has been that there has been mail volume and revenue to pay 

for cost increases and things of that nature. 

We are looking at a very different scenario now, and as the Postmaster General testified and as has been discussed here today, the 

look forward is not a bright one. It is possible that there will be 

a letter-writing campaign and people will begin to write more letters. But the fact is many bills are being prepared and distributed 

electronically, and that has been really the life blood of the Postal 

Service, and a lot of the financial literature as well, the checks and 

things of that nature from the banks, those are all moving 

digitally. So it was in that spirit that we made that suggestion for 

Congress to consider. 

Senator AKAKA. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman LIEBERMAN. Thanks, Senator Akaka. Finally, Senator 

Moran. 

Senator MORAN. Mr. Chairman, thank you. I know that you are 

disappointed I returned to the Committee. [Laughter.] 

Chairman LIEBERMAN. It is always a pleasure to see you. 

Senator MORAN. You are so kind. 

Chairman LIEBERMAN. I cannot speak on behalf of the witnesses 

in the second panel who have been waiting 2 hours, but we are 

glad you came back. 

36 

OPENING STATEMENT OF SENATOR MORAN 

Senator MORAN. Mr. Chairman, I have been to an Appropriations 

Subcommittee hearing on homeland security, and I do want to ask 

the Postmaster General a couple of questions. 

First of all, I would like to commend him for his efforts to find 

solvency in the U.S. Postal Service. I want to be an ally in working 

with him to do so. I hope that he is asking his staff at all levels 

of the Postal Service for their suggestions about efficiency. Many 

times I think the best and brightest ideas come from the people 

who will work at the Postal Service for their suggestions about how 

to improve the bottom line. 

Thirty-seven hundred post offices is certainly something that 

caught my attention. One hundred thirty-four of them are in Kansas, and I do not want to be overly provincial here, but I always 

want to make certain that rural America does not get forgotten in 

decisions that are made in our Nation’s capital. 

My concern, among others, is that while there are lots of community meetings going on—and I have Senate staff at almost every 

one of those 134 meetings in our communities—I am still unclear 

as to the criteria. My experience in these community meetings is 

the Postal Service comes in, explains the plan, and in many instances encourages the audience to contact their congressional delegation to encourage us to vote for some of the things that you have 

outlined in your proposal today, particularly related to the refunding of the insurance and health benefits. Not that I mind that, but 

what I would love to know is if there are things that community 

members can say, evidence that can be garnered, facts that can be 

told that would then alter the decision made by the Postal Service 

as to whether or not this particular community’s post office is going 

to continue to be in existence. And my impression in visiting with 

many people who have attended those meetings is almost without 

exception that the Postal Service has already made up their mind. 

They are going through the motions. They are in our town to pretend to listen to us, but we never get any indication that there is 

anything we can do that would cause them to reach a different conclusion than closing the post office. 

What are they missing or what am I missing? 

Mr. DONAHOE. I think the key thing is to make sure that our 

people understand exactly what the community would face with 

change. I think that when you look at what we have proposed, our 

criteria for these studies is offices that have less than 2 hours of 

work on a daily basis, and generally it is under $20,000 in revenue. 

One of the things that we have to keep our eye out and make 

sure that we do not do is make access impossible for people in 

States like Kansas because you do not want to have two or three 

post offices within a certain area that get changed, become a village post office or get consolidated, and then have people having to 

drive, say, 20 or 30 miles to get postal services. So that is a key 

thing. 

I think your constituents need to make sure that whatever we 

are proposing is reasonable for them, and reasonable meaning a 

couple miles, a 3, 4, or 5-mile drive to a post office. We take universal service very seriously and want to make sure that we are 

not shutting our customers off. 

37 

The other thing I would encourage is that if customers have 

ideas, we are all ears. We have been encouraging businesses to step 

up and say, we will write a contract with you to provide service. 

What we found with the village post office concept is a lot of times 

we can provide access 7 days a week where they may only get a 

couple hours a day in a regular post office. So those are a couple 

of things I would encourage. 

Senator MORAN. Well, if there are written criteria, a checklist 

that when your postal employees come back from the community 

meeting, that this community met this criteria but not this criteria, 

I would love to see what that criteria is so that there is an opportunity for the communities to make the case that matters to the 

Postal Service. And as you and I visited before this hearing started, 

I am an ally of yours in finding that win-win combination in which 

there is a village post office sharing space and personnel with a 

community grocery store, a drug store, or pharmacy. Those things 

matter a lot to the community. 

I wrote you a letter, Postmaster General, on August 10. You have 

responded and I thank you for that. But one of the things that I 

wanted to again raise that I did not understand or did not see the 

answer to is the U.S. Code provision that says, ‘‘The Postal Service 

shall provide maximum degree of effective and regular Postal Service to rural areas, communities, and small towns where post offices 

are not self-sustaining. No post office shall be closed solely for operating at a deficit, it being the specific intent of Congress that effective postal service be ensured to residents at both urban and rural 

communities.’’ 

When you are out having these hearings on the list of 3,700 post 

offices, my experience in 14 years as a Member of the House and 

just 8 months as a Member of the Senate has been that the post 

offices that I worry the most about is when I walk in and discover 

the postmaster is about to retire in a small town or the building 

has deteriorated. 

What is the criteria now? What do you expect to be able to do 

with this legislative language? And I guess one of the things you 

might be asking for us is to eliminate that legislative language. 

But in the absence of that elimination, how do you still see that 

you can close 3,700 post offices? 

Mr. DONAHOE. Well, one of the things we do not want to do is 

ask you to make changes in that language just because there are 

post offices out there that lose money that are very large post offices and serve thousands and thousands of people. Most of our offices do lose money. But what we are looking to do from a standpoint of reviewing offices is to come up with a very fair and standard criteria. That was the idea of post offices that have less than 

2 hours’ worth of business, that have less than $20,000 worth of 

business coming across the counter. When you have that criteria, 

then you can look at it very objectively, and then you can look at 

it like we mentioned earlier. What is the geography? Is there a 

place we can consolidate? Is there a store out there that we could 

contract with? And that is the way we want to approach it. 

What we do not want to do is have a situation where a postmaster is afraid to retire because we are going to close the post office. I will tell you, in the past we did some things like that. We 

38 

would rather have a much more transparent criteria so that anybody out there that is facing these kinds of changes knows exactly 

where we are coming from. 

Senator MORAN. I will conclude, Mr. Chairman. I just came, as 

I said, from an Appropriations Homeland Security Subcommittee 

where we are worrying about the relief of people who are suffering 

from disaster. Reading, Kansas, is a town that was struck by a tornado. Never on your list of 3,700. Now that the building was damaged, they are having a community meeting. This to me is the 

wrong kind of message to tell a town that is trying to figure out 

how it recovers from significant damage in a tornado that now because we suffered this natural disaster, the Postal Service is now 

contemplating closing our post office. I would appreciate you taking 

a look at that. 

Mr. DONAHOE. Absolutely. I will look into that right away. 

Senator MORAN. Thank you, sir. Thank you, Chairman. 

Chairman LIEBERMAN. Thank you, Senator Moran. Thanks for 

returning. 

Senator Collins, do you want to make a brief statement before we 

move on to the next panel? 

Senator COLLINS. Thank you, Mr. Chairman. 

I know all of us have so many more questions, and we have a 

panel that has been waiting for hours. I just wanted to make a 

comment and also give another assignment to Mr. Herr. 

First, I think it is important for everyone to realize that if the Postal Service defaults on the $5.5 billion payment for the retiree 

health benefits fund, that unfunded liability does not go away; 

that, in fact, there is an unfunded liability in that fund that I believe is in the neighborhood of $56 billion. And I think that is important because even if we restructure—and I really salute the 

Postmaster General for his sweeping proposals. I think they are 

very constructive. Whether I agree with them all or not, they are 

very constructive in what they need. But the fact is that the Postal 

Service has huge unfunded liabilities, and I can see general agreement with that. 

So my assignment or request to you, Mr. Herr, is: If we were reinventing the Postal Service from scratch, a de novo approach, how 

would we structure it? Would we have it joined with the Federal 

Government’s retiree health programs, employee health programs, 

and pension programs? Would we give it access to borrow up to $15 

billion from the Treasury? Which is obviously an advantage that 

private enterprise does not have. Would we give it carte blanche in 

setting rates and deciding who it delivers to? 

I would like you to help us figure out what would be the ideal 

while still ensuring that we providing this absolutely vital linchpin 

to our economy—a linchpin that is not only important to the 8.7 

million people who work in the mailing industry, but also helps to 

bind us together as a country. After all, that is why the Constitution mentions the Postal Service. 

So I would like your ideas on if we were starting from scratch, 

how we would set forth this vital institution. 

Thank you, Mr. Chairman. 

Chairman LIEBERMAN. Thanks, Senator Collins, and I join in 

that request to GAO. 

39 

1The prepared statement of Mr. Guffey appears in the Appendix on page 115. 

Mr. HERR. OK. 

Chairman LIEBERMAN. Thanks to the panel. You have been very 

informative and very stark, and I want to say it again: There is a 

clock ticking. You are going to default on $5.5 billion the Postal 

Service owes to the retiree health benefit fund. You are not going 

to be sued because of who you owe it to. But even allowing that, 

you have told us very clearly today that by next summer, if nothing 

else is done to help the Postal Service, you effectively have to stop 

delivering the mail. And that should get us all working, even 

across party lines. Thank you very much. 

The second panel, please come to the table: Cliff Guffey, President of the American Postal Workers Union; Louis Atkins from the 

Postal Supervisors; Ellen Levine; and Tonda Rush. 

[Pause.] 

We will ask the room to come to order, and we appreciate very 

much not only the presence, but at this hour, the patience of the 

excellent second panel we have, and we look forward to hearing 

your testimonies now. We will begin with Cliff Guffey, who is the 

President of the American Postal Workers Union (APWU). I want 

to just say for the record that, in the interest of not having a marathon hearing, we had to make selections among people who represent workers for the Postal Service, people who are in management, and mailers, etc. We will invite the opinions of others, but 

have confidence that you will generally—though maybe not totally—reflect the points of view of people who are in the comparable sector that you are, comparable stakeholders in the postal 

sector of our economy. 

So, Mr. Guffey, thank you for being here, and we welcome your 

testimony now. 

TESTIMONY OF CLIFF GUFFEY,1 PRESIDENT, AMERICAN 

POSTAL WORKERS UNION, AFL–CIO 

Mr. GUFFEY. Mr. Chairman, there are very good reasons to support legislation that will provide financial relief to the Postal Service. Senator Carper and Senator Collins have both introduced legislation that would do that. Representative Stephen Lynch has introduced similar legislation in the House that also has bipartisan support. We strongly support that approach for reasons we have explained in our written testimony. 

The mailing industry is vital to our economy. It continued to 

grow even during the recession. From 2008 to 2010, sales revenue 

grew 10 percent to $1.1 trillion and jobs grew by 16 percent, an astonishing 1.2 million new jobs to a total of 8.7 million jobs. The 

mailing industry now accounts for 7 percent of the gross national 

product and 6 percent of all U.S. jobs. Ninety-one percent of mailing industry jobs are in the private sector. 

Most important to this hearing is the fact that 75 percent of the 

8.7 million jobs in the mailing industry are in firms dependent 

upon the Postal Service infrastructure. The Postal Service is the 

critical heart of this industry. The Postal Service needs access to 

the overpayments it has made to the retirement programs in order 

to pre-fund future retiree health benefits and pay other liabilities 

40 

to the Federal Government. This will provide the Postal Service the 

capital it desperately needs. 

It is counterproductive for the Postal Service to cut its infrastructure to the point where it has to eliminate services and decrease 

service standards. Newspapers that depend on the Postal Service 

for delivery will have to radically change their mission or go under. 

Medicines that are now mailed will have to rely upon more expensive delivery alternatives, raising the prices we pay for drugs. Eretailers may not be able to satisfy their customers with a decrease 

in service standards. 

The Postal Service needs a presence in communities. The poor 

and other disadvantaged groups will be the most hurt by many of 

the proposed retail closures because they have the least access to 

alternatives. Entire communities will be hurt by the loss of jobs, 

the loss of the community focal point and identity, and the loss of 

service caused by post office closings. 

For many communities, the post office is where the flag flies. It 

is the face of the government to the people. Senator Carper’s bill 

wisely authorizes and encourages the Postal Service to expand 

services. None of the bad things that are happening to the Postal 

Service and its customers are necessary. With access to its excess 

retirement fund contributions, the Postal Service will be better able 

to redesign its retail and delivery networks, modernize and optimize its mail processing networks, and offer new services to increase revenues. 

Postal networks are an important part of the infrastructure of 

our country. They should be supported and improved. Proposed 

service cuts would be self-defeating. If they go forward as planned, 

more cuts will have to follow as business is lost. 

We were asked today to testify about the recent Postal Service 

proposals to abrogate our collective bargaining agreement by withdrawing from Federal health insurance and retirement programs 

and eliminating no-layoff protections for postal employees. These 

proposals are outrageous, illegal, and despicable. 

On May 23, the Postmaster General and I signed a new national 

agreement. The Postal Service estimates the agreement will save 

the Postal Service $3.7 billion. We worked very hard with the Postal Service to take care of the needs that they asked us about. Our 

people are not getting raises for 3 years—no raises whatsoever for 

3 years. We gave lower entry costs. We provided new entry levels 

and flexibility in that even our full-time employees could be scheduled in a different manner. If they only need 6 hours a day, we allowed them to post jobs that are 6 hours. We worked very hard to 

allow the post office to adapt as quickly as they can, and we did 

that in exchange for certain things, including keeping our health 

benefits the way they are, even though we are going to pay more 

for it. We also wanted to stay in the Federal retirement system. 

The no-layoff clause, all these things were talked about, and we 

achieved this collective bargaining agreement by giving up certain 

things, and now they want to come to the Congress and say, ‘‘Oh, 

we got this part of the deal. Give us this part back.’’ We think that 

is totally improper. 

The attempt by the Postal Service to keep what it gained from 

our bargaining and to unilaterally abrogate what the APWU 

41 

1The prepared statement of Mr. Atkins appears in the Appendix on page 133. 

gained is in utter disregard for the legal requirement to bargain in 

good faith. Imagine the thoughts of the letter carriers, the mail 

handlers, and rural carriers as they sit across the bargaining table 

now from the Postal Service. It is impossible to negotiate if you 

know the party you are dealing with will feel free to accept your 

compromises and then attempt to abrogate their own. 

The Postal Service claims its proposal to lay off 120,000 employees would not impact veterans because veterans would still have 

the protections of the Veterans Preference Act. This is misleading. 

The closing of the facility could result in a layoff of everyone in 

that facility. The veterans are the last to go, but if everyone goes, 

the veterans are laid off. More than 25,000 veterans could be 

among the 120,000 laid off. 

The future of the Postal Service is in Congress’ hands. We support proposals by Senator Carper and Senator Collins to give the 

Postal Service access to its excess retirement funds, and we oppose 

the proposals of the Postal Service that would permit them to withdraw from the Federal health insurance and retirement programs 

and lay off 120,000 workers. Thank you. 

Chairman LIEBERMAN. Thanks, Mr. Guffey. We look forward to 

continuing the conversation. 

Mr. Atkins, we appreciate your presence here, and we invite your 

testimony now. 

TESTIMONY OF LOUIS M. ATKINS,1 PRESIDENT, NATIONAL 

ASSOCIATION OF POSTAL SUPERVISORS 

Mr. ATKINS. Chairman Lieberman, Ranking Member Collins, and 

Members of the Committee, thank you for the opportunity to appear before you today. My testimony represents the views of the 

three management associations that represent the 75,000 managers, postmasters, supervisors, and other non-bargaining unit employees of the U.S. Postal Service. 

Without question, the U.S. Postal Service is in a desperate financial situation. It has never reached this state of affairs since its creation as a self-supporting government establishment in 1991. It is 

only weeks away from not being able to meet the 2006 financial obligations that Congress and the Administration imposed on it. 

How did the Postal Service reach such dire straits? A weak economy since 2008 has prompted businesses to send less mail through 

the postal system, causing revenues to rapidly decline. But undoubtedly, the most important cause has been the statutory mandate established by Congress in 2006 requiring the Postal Service 

over 10 years to set aside $55 billion to satisfy its future retiree 

health care obligations beginning in 2016 and continuing over the 

next 75 years. 

Meanwhile, the Postal Service over the course of four decades 

has overpaid as much as $75 billion into the Federal retirement 

system for its employee pensions. 

Remarkably, those in Washington who oppose a refund of its 

pension overpayment and a fair approach towards its retirement 

obligations to the Postal Service label it as a ‘‘bailout.’’ Our response to this characterization is simply this: In the real world, 

42 

when you overpay a bill or overpay your taxes, you deserve a refund. Why should it be any different for the Postal Service? 

There is overwhelming support throughout the postal community 

for a fresh review of how much the Postal Service has really paid 

into the Federal retirement system, and if a surplus is found to 

exist, to apply that surplus to the Postal Service’s retiree health 

pre-funding obligations. We applaud the legislative proposals of 

Senator Carper, Senator Collins, and Congressman Lynch that 

would require OPM to initiate such a review process, using modern, well-accepted principles of accounting and to require the Postal Service to use any surplus to satisfy its remaining health prefunding obligations under the 2006 law. 

In the longer term, the Postal Service will need to continue to reduce costs and innovate to better serve America’s communication 

and logistics needs. Over the past 4 years, the Postal Service has 

achieved over $12 billion in cost savings. During that time three 

workforce restructurings have trimmed over 5,000 management positions. These were difficult steps that have streamlined the organization. 

Recently, the Postal Service has announced sweeping proposals 

designed to dramatically cut costs. These have included reducing 

delivery frequency, closing thousands of post offices, consolidating 

hundreds of mail processing facilities, and curtailing next-day delivery of mail. The Postal Service also has proposed withdrawing 

from the Federal employee retirement and health benefit programs, 

presumably to cut costs through the reduction of employee benefits. 

The three management employee organizations oppose many of 

these proposals primarily because they are self-destructive and premature. 

We also are deeply concerned by the Postal Service proposals to 

withdraw from the Federal employees’ retirement and health benefit programs. The Postal Service’s expectation that a postal-only 

health plan will have greater leverage on the health care market 

than FEHBP is highly speculative. 

Congress and the President should respond to the crisis by dealing with the root causes. The USPS pension overpayment should 

be returned for its use to satisfy its retiree health obligations. And 

to the extent necessary, Congress should realign the Postal Service 

retiree health pre-funding schedule to a larger time period consistent with what the Postal Service can afford. 

In addition, we urge the Committee to intensively scrutinize 

Postal Service plans to reduce access to comprehensive postal services through the planned reduction of its retail network, including 

the closing of post offices serving small towns and rural communities. 

Thank you for the opportunity to present these thoughts. I will 

be happy to take any questions from the Committee. 

Chairman LIEBERMAN. Thanks very much, Mr. Atkins. 

Next is Ellen Levin, who is the Editorial Director of Hearst Magazines, Hearst Corporation, and a legendary figure in the business—at least that is what my staff says. [Laughter.] 

And really quite remarkable, being involved in conceiving and 

launching a series of magazines, including O: The Oprah Magazine. 

So we welcome your testimony. Nice to have you here. 

43 

1The prepared statement of Ms. Levine appears in the Appendix on page 138. 

TESTIMONY OF ELLEN LEVINE,1 EDITORIAL DIRECTOR, 

HEARST MAGAZINES, HEARST CORPORATION 

Ms. LEVINE. Thank you very much, and thanks to your staff. As 

you said, I am Editorial Director of Hearst Magazines, one of the 

world’s largest publishers of monthly magazines, and in this role 

my job is to help strengthen current titles, develop new titles, and 

evaluate opportunities for brand extensions. 

In 1994, as remarkable as this may sound, I became the first 

woman to be named editor-in-chief of Good Housekeeping since its 

first edition in 1885. And as you mentioned, I develop new titles 

such as O: The Oprah Magazine, and actually in the depths of the 

first recession in 2008, we launched a magazine called Food Network, which has proven that, in fact, magazines really can do well 

even in tough times. Both O and Food Network magazines are 

doing very nicely. I have also served two terms as President of the 

American Society of Magazine Editors. 

While membership of the Association of Magazine Media (MPA) 

is diverse, we share one common objective: Ensuring that we have 

an affordable and reliable universal postal system. 

I am happy to report that magazines and their titles and readership have actually grown over the last decade. While most consumer magazines are also on newsstands, subscription copies, more 

than 5 billion each year, account for about 90 percent of our circulation, and almost all of these are delivered by the U.S. Postal 

Service. Magazine publishers need the Postal Service and the Postal Service needs magazines. 

The economic bond connecting the Postal Service, magazine publishers, and retail commerce is strong and broad, not only affecting 

the subscriptions we sell and the advertising dollars we get, but 

the sales of goods and services promoted on the pages of our 

brands. For this reason, the MPA has worked with the Postal Service, this Committee, and your House colleagues for many years. 

As my fellow witnesses have detailed, the Postal Service is now 

in a precarious situation. Mail volumes have plummeted and losses 

are projected to grow. But these volume declines need not be a 

doomsday scenario. The Postal Service must adapt, as mentioned 

before, to the reality of lower volume and quickly become smaller, 

more efficient, and less costly to operate. Incremental improvement 

is simply not enough. 

The Postal Service has made several proposals to adjust and reduce its workforce, which I understand represent most of the postal 

costs. Although I am not an expert on Postal Service operations, 

taking advantage of technology to produce cost savings should be 

supported. 

The MPA reaction to the USPS proposals is colored, again, by 

our dual needs from the Postal Service: Affordability and reliability. Postage is a large expense, and it can account for 20 percent or more of the cost of producing a magazine. Service levels are 

also crucial. Weekly magazines aim for a consistent delivery day. 

For monthlies, our subscription business model depends on being 

able to deliver a new issue to mailboxes before those issues hit the 

newsstand. 

44 

1The prepared statement of Ms. Rush appears in the Appendix on page 143. 

Two of the proposed operational changes could affect us: One, 

shrinking the mail processing network; and, two, 5-day delivery. 

We encourage the post office and Postal Service to match its processing and delivery capacity to current and future volume levels, 

but to avoid hurting current mail volume, the USPS should work 

closely with the mailing industry to guarantee that acceptable services are maintained. 

The magazine industry has yet to take a formal position on 5- 

day delivery, but because we know that the Postal Service must reduce costs—our industry will make the necessary changes should 

this happen to adjust to 5-day delivery if it is part of a comprehensive plan to promote financial vitality. 

The Postal Service suggests it may need to lay off employees. I 

do not know if this will be needed, but I do know that, like all industries, the Postal Service will have to do more with less. They 

have to retool, re-engineer, and find a way to stay viable with a 

smaller network and, yes, fewer employees. 

I also understand that the Postal Service is considering ways to 

reduce benefits. Again, many industries, including ours, have had 

to do this in recent years. I do think the Postal Service and Congress should evaluate various proposals to lower these costs. 

Finally, many experts believe that the Postal Service has overfunded its pension obligations. If true, they should be allowed to 

use this excess contribution to pay off debts and obligations, but 

this remedy alone is not enough. The Postal Service must make additional measures to reduce costs and infrastructure. 

Thank you for allowing me to speak today, and I am very happy 

to answer any questions that you might have. 

Chairman LIEBERMAN. Thanks very much, Ms. Levine, for that 

testimony. 

And, finally, we go to Tonda Rush, Chief Executive Officer and 

General Counsel at the National Newspaper Association, which is 

an organization of community newspapers. You have a great dual 

background in both law and journalism. I note most significantly 

on your biography that you owned and managed community newspapers in Kansas from 2004 to 2009 during which time, I presume, 

those papers were kind and gentle to our own beloved Senator 

Moran. [Laughter.] 

Ms. RUSH. Thank you, Chairman Lieberman. Unfortunately, we 

were not in Senator Moran’s district at the time. We would have 

been kind and gentle. 

Chairman LIEBERMAN. OK, good. Please proceed. 

TESTIMONY OF TONDA F. RUSH,1 CHIEF EXECUTIVE OFFICER 

AND GENERAL COUNSEL, NATIONAL NEWSPAPER ASSOCIATION 

Ms. RUSH. Thank you. I am Chief Executive Officer and General 

Counsel of the National Newspaper Association (NNA) now, having 

come back into that role from a period of time of being out of that 

service. We are in our 125th year. We serve 2,300 newspapers— 

weeklies, small dailies, mostly family-owned. They serve small 

communities, urban neighborhoods, and the suburbs. 

45 

Our industry and our communities will be gravely injured if 

these changes ahead are not carried out without customers in 

mind. NNA’s newspapers use the mail for their primary distribution. Our mail is entered at a local post office. It is presorted for 

delivery the next day, sometimes even the same day if the bundles 

are dropped at a dock overnight. We believe our periodicals and 

standard mail are profitable for the Postal Service. 

As you know, a delayed newspaper is useless. Newspapers use 

their Web sites to update breaking news, but there is no viable economic model for a digital newspaper, so we need the mail. 

I have provided in my testimony some examples of newspapers 

that have already lost subscribers because the copies destined for 

small towns near the entry point are being delayed because mail 

now travels so many miles for sorting. 

We have the deepest respect for Postmaster General Donahoe 

and the challenges he faces. The need for a cost-efficient, customeroriented Postal Service is compelling and urgent. We share the 

views of many that the Postal Service has been unfairly burdened 

with the way the benefit structures have been created. And we do 

not inflexibly oppose the direction of restructuring. We have not yet 

opposed any post office closing. We agree the mail processing network carries excess capacity. But the Postal Service’s solution cannot be to push mail out of the system. 

We part company with the Postal Service where an inflexible, 

one-size-fits-all solution leans heavily into serving very competitive 

urban areas and fails to take into account the smaller communities 

and small businesses and others who rely upon universal service. 

Often, smaller, flexible, and low-cost solutions are needed instead 

of large industrial ones. 

For example, we believe closing smaller and efficiently managed 

sectional center facilities so that the larger metropolitan facilities 

can be stacked up with mail to run on a 22-hour basis may not 

make sense. If the sole purpose is to eliminate jobs and run the 

machines longer, it does make sense. But if it causes diminished 

service standards and undependable service, then this change becomes an expense and not a savings. 

It makes no sense to transport newspaper bundles from a small 

town into an urban flat sorting center only to bring them back sorted pretty much the way they were sorted in the first place. It just 

makes our service completely fall apart. 

Closing some small post offices is necessary, although the transparency and the community involvement needed are still inadequate. But when looking at post offices with revenues even under 

$100,000, it is not clear how the Postal Service is taking into account newspapers that are entered in those post offices, even if the 

newspaper postage might be enough to carry that office’s revenue 

over a threshold. 

When the local offices do close, village post offices or whatever 

takes their place should be required to receive newspaper bundles 

for the customers they cover because that is part of the community’s need. If the Postal Service plans to close an office where a 

newspaper is entered, we need an alternative entry option in that 

community. 

46 

Finally, Senators, it is well known that NNA opposes the end of 

Saturday residential mail delivery. In addition to losing delivery of 

our newspapers, we believe that the loss of First-Class remittance 

mail will create cash flow disruptions for our businesses and other 

small businesses in the communities, and that it will cost the Postal Service a profitable mail stream that will go away and will never 

return. Many of our small daily newspapers would happily abandon 

their own carrier force for the mail, but they will not do it in a 5- 

day mail environment. 

I have also made it clear if the Postal Service will not deliver our 

newspapers on Saturdays, we need the help of Congress to make 

sure we can do it ourselves. 

NNA understands that the need for change is urgent. We seek 

the assistance of Congress in making our Nation’s postal system 

sustainable. A successful Postal Service must, like all businesses, 

put its first emphasis on the needs of customers, and it must not 

abandon small-town America. In the years ahead, the Postal Service is going to need the support of citizens, including those in small 

towns, to adapt to a new economy. We would urge Congress not to 

let the Postal Service abandon those who need it the most. 

Thank you very much. 

Chairman LIEBERMAN. Thank you very much for that testimony. 

Let us go to the questions, and, again, we will do 6-minute rounds. 

Mr. Guffey, you made a point which I wish we had asked the 

Postmaster General—and I will ask him in writing and have him 

submit an answer for the record—which is: Why was the agreement signed in May and then the request for this action is being 

made now which seems certainly to be inconsistent with the agreement? I am curious—since he has made these proposals, particularly about the layoffs—whether you have asked him that question 

and what his answer is. 

Mr. GUFFEY. We have regular meetings based on what is going 

on in Congress. All of us recognize that we want to save the Postal 

Service. It has been a good livelihood for all of our members for 

years and what have you, and we try to work together as close as 

we can. We feel a little betrayed. I can understand the pressure the 

Postmaster General is under. I wish he had stayed with the original actions in supporting Senator Collins’, Senator Carper’s, and 

Congressman Lynch’s approach to this. 

I have no idea. I feel, like I said, betrayed. To think that he did 

not think that this might happen before we signed the agreement, 

I cannot address that and I will not address that. 

Chairman LIEBERMAN. OK. 

Mr. GUFFEY. I do know that since then, though, we have been 

working together on other things to help reduce the number of employees. We are still working and will continue to work together. 

Chairman LIEBERMAN. Well, I admire that. In other words, notwithstanding how upset you are about at least one of these proposals you continue to work on other issues. 

Mr. GUFFEY. We are definitely going to, and I think the other 

unions want to, too. I think it always seems like union and management are not always considered a family affair, but I think in 

the postal realm it almost is a family affair. We are trying to work 

together to save the Postal Service. 

47 

Chairman LIEBERMAN. I want to go for a moment to the question 

of the repayment from the retirement system to the Postal Service. 

I support that and I will support legislation to do that. But I do 

want to say a word of caution here that troubles me, which is that 

the position of the Administration is not quite clear yet, and the 

extent to which they are going to be prepared to fight for that legislation, I do not know. I can see opposition, some in the Senate and 

certainly a significant amount in the House, on the theory that 

somehow that is a bailout. 

If we cannot pass that authorization, we are going to have a really tough time and really have to pull together on it. 

Mr. GUFFEY. I agree. 

Chairman LIEBERMAN. But let me ask you, what is your response 

to the allegation that is a bailout? 

Mr. GUFFEY. Well, my response to that is all these funds came 

from the postal patrons, the people who use the Postal Service. The 

employees earned the money. They have processed the mail. They 

did everything right, and there was enough money created to put 

that money off to the side for their retirements and for their health 

insurance. Now, if you lay 120,000 off, who gets that money? It is 

there for them. It was earned by them. It was put there by the 

Postal Service on their behalf. Now, if you lay off 120,000 people 

who will not be eligible for these future retiree benefits, who gets 

that money? Does it just become part of the general fund? 

I understand if you take our funds out of the health insurance, 

they are left with 20 percent funded. They are grossly underfunded, the rest of the government. That is why they do not want 

to take the postal patrons’ money out and give it back to the Postal 

Service, because it will show how underfunded the rest of the Federal Government is. 

Chairman LIEBERMAN. Ms. Levine, you said in your testimony 

that if the Postal Service does implement 5-day delivery, the magazine industry would really need an adequate period of time to prepare for the change. So give us a little more detail about what is 

an adequate amount of time and what other information you would 

need to prepare if that happened. 

Ms. LEVINE. In general, this shift would need to be rolled out 

over a period of time, a base minimum of 6 months, perhaps longer 

in certain instances, to avoid negatively impacting both our industry and the rest of the mailing industry in the United States. For 

example, baseline magazine publishers would need to change printing contracts. We would need to encourage the advertisers to buy 

on a different time schedule. Editorial deadlines would have to be 

shifted as well as all kinds of reporting schedules. 

For a colorful illustration, we would have to ensure that Super 

Bowl winning photos could get on press magazine much quicker 

than it might have in the past; otherwise, it will not make the 

mailbox. So at a very baseline, those are examples of time management changes that would be needed. 

In addition, these changes come at a significant increased cost so 

we will be financially invested, and would probably need time to be 

able to figure out what the increased costs are and how to pay it 

and perhaps off-lay some of it. 

48 

The Postal Service needs to engage the mailers to work out the 

time and the details, and for this there would also need to be flexibility. As both you, Mr. Chairman, and Senator Collins have mentioned, flexibility needs to be built into the schedule so certain 

products that come by mail are not slow to be delivered to people 

who really need them. 

Chairman LIEBERMAN. Thank you. That is helpful. My time is 

up. Senator Collins. 

Senator COLLINS. Thank you, Mr. Chairman. 

Ms. Rush, it is my understanding that the Postal Service intends 

to reduce its service standards, moving deliveries out by a day or 

two. Wouldn’t that impose even more pressures on newspapers? 

You made a comment that a daily newspaper delivered late is really of no value. If the Postal Service is going to loosen or lower its 

delivery standards, what would be the impact on the newspaper 

business? 

Ms. RUSH. I think the impact would be devastating, and it is true 

for weekly newspapers as well. A typical weekly newspaper would 

be printed on a Thursday night, deposited Friday morning for a 

Friday delivery, and into some communities on Saturdays. So we 

are already in jeopardy if we lose Saturday mail delivery. If we lose 

one-day delivery, I do not know how most newspapers would stay 

in the system. It would be impossible for them to get out the news 

and the advertising information. It is coupons, it is small businesses’ promotions. There is a lot at stake in a timely delivery, and 

we are hoping very much to work with the Postal Service to see 

to it that overnight and even same-day delivery is still possible if 

we can drop in the local post office. 

What we are more concerned about, frankly, is that we lose that 

local post office where our mail is entered, and then we are really 

just in a world of hurt. 

Senator COLLINS. Well, I am very concerned about what the impact would be on weekly newspapers in particular. A lot of daily 

newspapers use carriers for their delivery, but most weekly newspapers are delivered through the mail. If you do away with Saturday delivery and you have a Monday holiday on top of that where 

there is no delivery, then it seems to me that the newspaper is 

completely out of date by the time that it arrives, and advertisers 

are going to stop using it because if they are doing a sale that 

weekend, they have lost the opportunity to reach their customers. 

What does the Postal Service management say in response to 

concerns like that to your organization? 

Ms. RUSH. Senator, you have the instincts of a newspaper publisher. That is exactly what we are concerned about. We have not 

had a good response from the Postal Service on the Saturday mail 

delivery issue. In 2009, when the Postmaster General announced 

that they wanted to make this change, it was admitted at the time 

that a lot of small newspapers would be damaged, and I would say 

that the response has been, ‘‘Well, it is too bad, but we cannot help 

it.’’ 

We have more daily newspapers in the mail than many may realize in smaller communities. One of the witnesses that testified before the PRC is, in fact, a 6-day paper in Michigan, and it is not 

a question for him of shifting off Saturday mail. He loses his most 

49 

profitable issue if he does not have Saturday mail delivery. And 

many that do have Saturday editions cannot shift to Fridays because they may not be able to get printing time. Printing press capacity has been dramatically reduced in this country during the recession. 

So it is just an impossibility. I think that the reality is that some 

of them would go out of business. Some would have to convert to 

a carrier delivery if they could, although it is very difficult for a 

weekly newspaper to find a carrier force for one day a week. 

We have tried to work with the Postal Service to explore some 

alternatives. We have asked about other days besides Saturday, 

and we have asked whether there could be a boutique carrier force 

that would deliver those newspapers, and we have really gotten nowhere. 

Senator COLLINS. In my State, where we have a large summer 

population that subscribes to the weekly newspaper year-round, a 

carrier system just does not work. It is not as if it is just a local 

community that you are serving. So I think your points are very 

well taken. 

Mr. Atkins, I want to ask your opinion about an issue involving 

smaller post offices. It is my understanding that bulk business mail 

revenues are not considered as part of the revenue stream in the 

screening process for determining which post offices should be considered for closure, that the line is drawn at post offices with revenues of less than $100,000. So, for instance, the business coming 

to a post office from a local community newspaper or a local grocer 

advertiser would not count toward the revenue stream for that post 

office. 

First of all, am I correct about that, if you know the answer to 

that? And, second, if I am correct, would it provide a more accurate 

assessment of the revenues of a post office, the value to the Postal 

Service’s bottom line, if those revenues were, in fact, included? 

Mr. ATKINS. Senator, from my understanding you are correct, 

and it would be a better engaged financial judgment if we used 

both the destinating and originating value. Granted, the originating value is basically walk-in revenue that they use. But coming 

from Baton Rouge, Louisiana, we never determined the value of the 

mail that we got from New Orleans. And I use that example because I am a Louisianan. But that value was never determined and 

has never been used to my knowledge of determining the post office 

revenues. 

Senator COLLINS. Thank you. 

Chairman LIEBERMAN. Thanks, Senator Collins. Senator Akaka. 

Senator AKAKA. Thank you very much, Mr. Chairman. 

President Guffey, I am concerned over the negative consequences 

to the collective bargaining process if Congress were to legislate 

changes to existing contracts by altering your layoff provision and 

health and retirement benefits. If any of these proposals were implemented, could unions and the Postal Service go back to the collective bargaining table to renegotiate these contracts immediately? 

Mr. GUFFEY. I do not believe so, and I believe the Postal Service 

would say, ‘‘We got what we got. Your name is on this thing. Congress changed the rules for us over here.’’ Unless Congress changed 

the other rules. 

50 

One of the examples I would like to elaborate on, we gave them 

20 percent non-career workforce, which means 20 percent of the 

people will not have a retirement. If you give them the right to pull 

out the retirement funds and they say they will have matching 

funds, will that include these non-career people? They are not 

going to come back and say, ‘‘We are going to give these things to 

this other group of people that we agreed to give them,’’ unless you 

all tell them they have to. We do not believe the Congress should 

be in the middle of the negotiating process. When the Postal Service has problems, they talk to us. We work through those problems 

as best we can. And I am sure the other unions will do the same 

thing, as well as the management organizations. 

Senator AKAKA. Thank you. 

President Atkins, to follow up on my question to Mr. Guffey, as 

a non-bargaining employee group, how would these proposed 

changes impact your consultations with the Postal Service? Should 

a new consultation process happen if any of these proposals are implemented? 

Mr. ATKINS. Aloha. 

Senator AKAKA. Aloha. 

Mr. ATKINS. Senator, we are presently in consultations with the 

Postal Service on our pay agreement, and the thought process that 

our members are going through right now is the integrity of the 

agreement that we would sign. And, in fact, we presently represent 

31,000 National Association of Postal Supervisors members. A total 

of 75,000 non-bargaining members are in consultation right now. 

And in view of what just happened, there is a lot of skepticism 

about what we need to do and how fair is it that they get what 

they want and get to go back and change the rules. We experienced 

that back in 2009. We had a pay consultation agreement about how 

we would go through the process of receiving our increase in salary, work pay for performance, and about 4,500 of our members— 

and I do not know the exact numbers of the postmasters—their rating was changed. It was supposed to have been very objective ratings dealing with hard-core numbers and then those numbers were 

there saying that you had a rating that, for instance, you got a 4- 

percent raise. Well, they said, no, you are only going to get a 1- 

or 2-percent raise. And right now we still have not settled that, or 

they have not given us a good reason why they do not go back and 

pay us because that was our agreement, and hard-core numbers 

were there to dictate to our members that they deserve a better 

raise than what they got, and that was for fiscal year 2009. 

Senator AKAKA. Thank you. 

Mr. Guffey, as I am sure you know, I have been a critic of the 

arbitration language inserted into several versions of various postal 

bills. While I do not believe this language is appropriate, it seems 

there is disagreement over the current arbitration guidelines. Do 

you believe that arbitration favors either unions or management 

under current law? 

Mr. GUFFEY. I do not believe so, and if everyone understood the 

nature of arbitration—a lot of the arbitrators are conservative because they are certain occupations, let me put it that way. I have 

been involved in about five of our interest arbitrations over the last 

30 years. I guarantee you there is no one in here that would want 

51 

to sit through the painful 2 or 3 days when Harvard Law economists from the Brookings Institution talked to Harvard Law economists from the Cato Institute and debate the finances of the union. 

That happens in every arbitration that has ever occurred, whether 

or not there is money there to do certain things and whether it 

should happen or it should not happen. 

Now, since 2006, the limitations that were put on us in 2006 is 

the Postal Service cannot raise their rates beyond inflation. Even 

though we started out with a rate for postage that was well below 

the rate of inflation from 1970, we could not go above the rate of 

inflation. That in itself is a huge block in negotiating our contracts 

because the USPS does not have the money—we cannot project beyond the rate of inflation, and if gas prices go up or anything goes 

up in the general economy, that limits what the postal workers can 

get because the Postal Service by law now is restricted from raising 

the rates yearly beyond inflation. 

Senator AKAKA. Thank you, Mr. Guffey. Thank you, Mr. Chairman. 

Chairman LIEBERMAN. Thank you, Senator Akaka. Senator Carper. 

Senator CARPER. Thank you, Mr. Chairman. 

To our panelists, thank you all very much for joining us and 

sticking in here. You are worth the wait, and we appreciate very 

much your testimony and your responses to our questions. 

I want to come back to the issue of 6-day delivery. The Postal 

Service tells us they need to go from 6-day to 5-day delivery in 

order to save what they think is about $3 billion a year. We have 

had other estimates that are a bit less than that, maybe as low as 

$2 billion a year. I think the Postal Regulatory Commission said, 

no, it is more like $2 billion a year. But it is somewhere between 

$2 and $3 billion a year. 

One of the things I have discussed with the current Postmaster 

General, the past Postmaster General, and the heads of some of the 

postal unions is whether or not there is a way to continue to provide 6-day-a-week delivery similar to the auto industry, where the 

United Auto Workers agreed to change the mix of wages and benefits for folks, some of the new hires. And I am not sure if there is 

a way to structure through negotiations, not mandated by the Congress but through negotiations between the Postal Service and organized labor to find a way to continue 6-day-a-week delivery and 

at the same time save real money. And it will not be $3 billion a 

year, but it could be somewhere between $1 and $2 billion a year. 

And I am not smart enough here on the fly to figure out if the 

folks that would be delivering the mail on Saturday would be like 

how we use our interns that come to us and work throughout the 

year. We track them. The ones that do a really good job, when we 

have an opening, we hire them. We bring them in at entry-level positions. I do not know if there is a possibility for the Postal Service 

to say to the folks that work on Saturday, maybe work for a little 

bit less money, a little less generous benefits, then they are part 

of, if you will, the team that we go to recruit for full-time jobs later 

on. 

Mr. GUFFEY. I really hesitate to answer for the letter carriers 

and rural letter carriers. 

52 

Senator CARPER. Who are the unions for the letter carriers 

and—— 

Mr. GUFFEY. And the rural letter carriers. The rural letter carriers have that now. They have reliefs who are non-career, and 

they work on Saturday. The carriers have career employees who rotate through the different various days of the week, and so that is 

a negotiable item with the letter carriers. 

The people that we represent—and I am sure the postmasters do, 

too—we deliver to 20 million post office boxes, and that will continue on Saturdays, according to the Postmaster General. So there 

is that opportunity for more people to get post office boxes, which 

is not convenient for everybody. Do not get me wrong. We also have 

a job description, and we have new lower levels and stuff like this 

that they could reinstate special delivery for things like priority 

mail, express mail, parcels, and drugs and medicines that have to 

be delivered on Saturday. We can do that at a lower rate. I am sure 

by the time the USPS gets through negotiating with the letter carriers, they will attempt to do the same thing. 

I am just saying within the postal community we can discuss and 

take care of a lot of the problems ourselves. The post office does 

need its freedom to take care of its pricing problems and immediately to be able to compete. 

Senator CARPER. Let me interrupt you, because I am going to run 

out of time, but thank you very much for what you just said. 

In talking with the Postmaster General, one of the points he 

makes—and I made this before and I will make it again—three 

things that the Postal Service needs to be able to do in order to 

be a viable ongoing enterprise in the future: First, they just have 

more people than they need on active duty, if you will; second, they 

have more post offices than they need, and they would like to be 

able to collocate services in a number of communities to provide 

better service, not less service; and, third, they want to be able to 

close some of their distribution sites. 

In talking with the Postmaster General, I do not hear any great 

appetite for laying folks off. I do not hear him say, ‘‘We are asking 

for that as an authority.’’ I think that would be their last choice. 

And the relationship between management and the postal unions 

actually has been pretty good over the years. You all have been 

very constructive partners in trying to find ways to do more with 

less. 

But let me just ask you all to comment on incentivizing early retirements. We have a bunch of people who are at retirement age 

not retiring, folks who are close to retirement age and do not give 

any indication they are going to retire anytime soon. Tell us about 

the attractiveness of using that approach as compared to some 

other approach, including the layoff approach. Mr. Atkins, Mr. 

Guffey, I would be pleased to hear from either of you. 

Mr. ATKINS. Yes, my understanding, Senator, is that we have 

about 150,000 employees right now that are eligible to walk out the 

door. Within the next 5 years, we have another 153,000, so there 

is a great opportunity to reduce the workforce by offering an incentive. The economic times are against that. I have kids that are 

coming back to live with me because they lost their jobs. So we 

need to make sure that the job situation becomes more of a 

53 

strengthening factor in our daily lives, and that is going to be difficult to do. That is what Congress needs to focus in on a lot. But 

incentives are there, and there will be some people to take the incentive. There are various types. Years of creditable service can be 

added, there is always the monetary incentives, and then there are 

other incentives, like we can offer a retiree the chance to come back 

and work a certain amount of time, maybe 8 hours a week or 16 

hours a week, to reduce the effect on their lower income. So there 

are different ways that we can do it. 

Senator CARPER. Thanks for that. 

Mr. Chairman, can I just proceed just a little bit longer? What 

Mr. Atkins is saying reminds me of something that we did in State 

government. We had a tough time getting people to come in and 

be substitute teachers, and the quality of our teachers as substitutes was just way below the quality of full-time teachers. And 

we talked to a lot of retired teachers and said, ‘‘Why don’t you come 

back and be a substitute?’’ And they would say, ‘‘Well, we do not 

want to come back and be a substitute. We would like to, but if we 

come back to substitute, then you take off dollar for dollar and reduce our pensions.’’ 

So what we did was we said, ‘‘All right. Come back and substitute. We will pay you to be a substitute’’—not a lot but a reasonable amount of money—‘‘and it does not affect your pension.’’ So 

there might be a germ of an idea there that—— 

Mr. GUFFEY. I believe, Senator, that the law has already been 

changed that we can do that. 

Mr. ATKINS. It has been changed to do that. They are able to do 

that now. 

Senator CARPER. All right. Well, we might want to make greater 

use of that. 

Mr. Chairman, I would just add this in closing, if I could just 

close out with this thought. Eighty percent of the costs of the Postal Service is people. Eighty percent is people. I think everybody on 

this Committee and certainly folks on the panel, we would subscribe to the Golden Rule: Treat other people the way that we 

would want to be treated. And as we seek to reduce the head count, 

to right-size the Postal Service in line with the demands for their 

product in the 21st Century, I think we need to be humane. We 

need to put ourselves in the shoes of the folks that would be affected and their families. And I want to do that. I think I speak 

for all of us in saying that we want to do that. 

There is a way to do this that is, I think, humane and is fair and 

just, and at the end of the day, to actually take to heart what they 

were able to accomplish in the auto industry. We had a GM and 

a Chrysler plant in my State. I never thought they would be able 

to offer incentives and get people to take early retirement and step 

down, but they did. And I think maybe the same thing could happen here if we would give it a shot. 

And the last point that I would make is this: I am pleased today 

that we have learned that the Administration is going to come to 

us with their proposal. At least they said here today that the Administration believes that we ought to at least make sure that this 

$5.5 billion, $6 billion obligation due on September 30, 2011, 

should be delayed until the end of the year. 

54 

What I do not want to do is for us to sort of surrender the responsibility for dealing with this issue to—I call them the 12 apostles—the Joint Select Committee on Deficit Reduction that has 

been agreed to come back to us around Thanksgiving with their 

proposals for further deficit reduction. I hope we go well before 

that. 

I asked the Postmaster General, Mr. Chairman, ‘‘How is this uncertainty and lack of predictability affecting your business?’’ And 

he said, ‘‘It is not very good because a lot of customers are basically 

saying, ‘We are not sure you are going to be around a year from 

now.’ ’’ They need certainty, they need predictability, and we need 

to try to provide that for all of them. 

And the last thing I would just say is the situation is dire. I 

think a number of people have used that word. The situation is 

‘‘dire.’’ But I would just add it is not hopeless. There is a way not 

just to get through this—again, a couple of years ago, people would 

say, ‘‘We are not going to have a domestic auto industry in this 

country. We are not going to have a Ford, Chrysler, and GM, the 

Big Three.’’ And you know what? They are back. Not as strong as 

ever, but they are back strong, making great vehicles a lot of people want to buy. 

There is a way to do this that makes sense, and we can learn 

lessons from that industry as well as from others. And my hope is 

that we will, I guess as they say at Nike, ‘‘Just do it,’’ that we will 

seize this opportunity that is before us. And I have spoken to Senator Collins today in a sidebar conversation just before she left and 

asked if we might get together and start thinking and talking at 

the staff level and the Member level to find common ground. 

Our friends, Senators Ted Kennedy and Mike Enzi, served for 

years as the Ranking Democrat and Ranking Republican on the 

Health, Education, Labor, and Pension Committee—a very productive Committee for many years. And I once asked Senator Enzi, 

one of the most conservative Republicans in the Senate, ‘‘How have 

you and Ted Kennedy been able to reach agreement on so many 

issues?’’ And he said, ‘‘Ted Kennedy and I agree on 80 percent of 

the stuff. Maybe 20 percent we do not agree on. And what we focus 

on is the 80 percent on which we agree.’’ 

My hope is that in today’s hearing we maybe have expanded the 

50 percent or so that we agree on to maybe closer to 70 or 80 percent, and what we need to do is to focus on that and get this show 

on the road. Thanks, Mr. Chairman. 

Chairman LIEBERMAN. Thank you, Senator Carper. I share your 

view that though the situation is dire, it is not hopeless. It is actually full of hope, and it is full of necessity, because as the testimonies of Ms. Levine and Ms. Rush indicate, there are a lot of people who are really important in our economy and our culture who 

depend on the Postal Service. And there are a lot, millions of jobs, 

really, that are dependent on the businesses that are dependent on 

the Postal Service. So we have to find a way out of this. It is not 

going to be easy, and I repeat what I said before, that although I 

support legislation authorizing and mandating a return of the socalled overpayment from the Postal Service to the retirement fund, 

that is not going to be a slam-dunk here in this Congress. So we 

have some work to do, and if that does not happen, then we really 

55 

have to put our heads together in the spirit that we have been 

speaking about today. 

I know, Mr. Guffey, you said in your testimony that you thought 

that the Postmaster General—to put it this way—was focusing too 

much on service cuts and not enough on efficiency. And I think 

that is going to be the challenge to us because even if we could 

pass the authorize to compel the return of the billions of dollars 

from the retirement fund to the Postal Service, that is not going 

to solve the problem for the long run because we have these enormous changes occurring around us, particularly with email. 

On the other hand, I go back to what I said at the beginning. 

The Postal Service is a great national asset. It has an irreplaceable 

national network that you have already found creative ways to 

make money from by covering the last mile for FedEx and UPS, 

for instance. We have a lot of hard work to do together because the 

status quo is not going to work, and the loss is going to be our 

country and our economy, which we cannot afford now. 

So I am very committed to having this Committee play a leadership role on this. We have a good tradition, a history of involvement in this subject matter, and we have a healthy tradition of bipartisanship. And I would like to give the Administration a couple 

of weeks anyway to tell us where they are on this before we go to 

markup, but sooner than later, I would like this Committee to go 

to markup to try to bring out a bill that has some bipartisan support to take it to the floor of the Senate, and hopefully to have it 

receive a fate other than death in the House of Representatives. 

I thank the four of you for your testimony, for your concern about 

our Postal Service. We are going to leave the record of this hearing 

open for 15 days for any additional statements or questions that 

you or Members of the Committee would like to add. 

With that, I thank you very much. The hearing is adjourned. 

[Whereupon, at 5:12 p.m., the Committee was adjourned.] 

(57) 

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