[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
THE U.S. POSTAL SERVICE: 101
=======================================================================
HEARING
before the
SUBCOMMITTEE ON FEDERAL WORKFORCE,
POSTAL SERVICE, AND THE DISTRICT
OF COLUMBIA
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
APRIL 17, 2007
__________
Serial No. 110-44
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
http://www.house.gov/reform
U.S. GOVERNMENT PRINTING OFFICE
40-873 WASHINGTON : 2008
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Washington, DC 20402-0001
COMMITTEE ON OVERSISGHT AND GOVERNMENT REFORM
HENRY A. WAXMAN, California, Chairman
TOM LANTOS, California TOM DAVIS, Virginia
EDOLPHUS TOWNS, New York DAN BURTON, Indiana
PAUL E. KANJORSKI, Pennsylvania CHRISTOPHER SHAYS, Connecticut
CAROLYN B. MALONEY, New York JOHN M. McHUGH, New York
ELIJAH E. CUMMINGS, Maryland JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio MARK E. SOUDER, Indiana
DANNY K. DAVIS, Illinois TODD RUSSELL PLATTS, Pennsylvania
JOHN F. TIERNEY, Massachusetts CHRIS CANNON, Utah
WM. LACY CLAY, Missouri JOHN J. DUNCAN, Jr., Tennessee
DIANE E. WATSON, California MICHAEL R. TURNER, Ohio
STEPHEN F. LYNCH, Massachusetts DARRELL E. ISSA, California
BRIAN HIGGINS, New York KENNY MARCHANT, Texas
JOHN A. YARMUTH, Kentucky LYNN A. WESTMORELAND, Georgia
BRUCE L. BRALEY, Iowa PATRICK T. McHENRY, North Carolina
ELEANOR HOLMES NORTON, District of VIRGINIA FOXX, North Carolina
Columbia BRIAN P. BILBRAY, California
BETTY McCOLLUM, Minnesota BILL SALI, Idaho
JIM COOPER, Tennessee ------ ------
CHRIS VAN HOLLEN, Maryland
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
JOHN P. SARBANES, Maryland
PETER WELCH, Vermont
Phil Schiliro, Chief of Staff
Phil Barnett, Staff Director
Earley Green, Chief Clerk
David Marin, Minority Staff Director
Subcommittee on Federal Workforce, Postal Service, and the District of
Columbia
DANNY K. DAVIS, Illinois
ELEANOR HOLMES NORTON, District of KENNY MARCHANT, Texas
Columbia JOHN M. McHUGH, New York
JOHN P. SARBANES, Maryland JOHN L. MICA, Florida
ELIJAH E. CUMMINGS, Maryland DARRELL E. ISSA, California
DENNIS J. KUCINICH, Ohio, Chairman ------ ------
WM. LACY CLAY, Missouri
STEPHEN F. LYNCH, Massachusetts
Tania Shand, Staff Director
C O N T E N T S
----------
Page
Hearing held on April 17, 2007................................... 1
Statement of:
Burrus, William, president, American Postal Workers Union,
AFL-CIO; William H. Young, president, National Association
of Letter Carriers; Donnie Pitts, president, National Rural
Letter Carriers' Association; and John F. Hegarty, national
president, National Postal Mail Handlers Union............. 140
Burrus, William.......................................... 140
Hegarty, John F.......................................... 188
Pitts, Donnie............................................ 159
Young, William H......................................... 148
Goff, Oscar Dale, Jr., national president, National
Association of Postmasters of the United States; Charles W.
Mapa, president, National League of Postmasters; and Ted
Keating, president, National Association of Postal
Supervisors................................................ 218
Goff, Oscar Dale, Jr..................................... 218
Keating, Ted............................................. 241
Mapa, Charles W.......................................... 229
Potter, John E., Postmaster General/CEO, U.S. Postal Service;
James C. Miller III, chairman, Board of Governors, U.S.
Postal Service; and Dan G. Blair, chairman, Postal
Regulatory Commission...................................... 13
Blair, Dan G............................................. 34
Miller, James C., III.................................... 25
Potter, John E........................................... 13
Williams, David C., Inspector General, U.S. Postal Service;
and Katherine A. Siggerud, Director, Physical
Infrastructure Issues, U.S. Government Accountability
Office..................................................... 61
Siggerud, Katherine A.................................... 89
Williams, David C........................................ 61
Letters, statements, etc., submitted for the record by:
Blair, Dan G., chairman, Postal Regulatory Commission,
prepared statement of...................................... 36
Burrus, William, president, American Postal Workers Union,
AFL-CIO, prepared statement of............................. 144
Clay, Hon. Wm. Lacy, a Representative in Congress from the
State of Missouri, prepared statement of................... 253
Davis, Hon. Danny K., a Representative in Congress from the
State of Illinois:
Followup questions and responses............................. 45
Prepared statement of........................................ 3
Goff, Oscar Dale, Jr., national president, National
Association of Postmasters of the United States, prepared
statement of............................................... 220
Hegarty, John F., national president, National Postal Mail
Handlers Union, prepared statement of...................... 191
Keating, Ted, president, National Association of Postal
Supervisors, prepared statement of......................... 243
Lynch, Hon. Stephen F., a Representative in Congress from the
State of Massachusetts, prepared statement of.............. 7
Mapa, Charles W., president, National League of Postmasters,
prepared statement of...................................... 231
Miller, James C., III, chairman, Board of Governors, U.S.
Postal Service, prepared statement of...................... 28
Pitts, Donnie, president, National Rural Letter Carriers'
Association, prepared statement of......................... 161
Potter, John E., Postmaster General/CEO, U.S. Postal Service,
prepared statement of...................................... 16
Schakowsky, Hon. Janice D., a Representative in Congress from
the State of Illinois, prepared statement of............... 254
Siggerud, Katherine A., Director, Physical Infrastructure
Issues, U.S. Government Accountability Office:
Prepared statement of........................................ 91
Various GAO reports.......................................... 131
Williams, David C., Inspector General, U.S. Postal Service,
prepared statement of...................................... 63
Young, William H., president, National Association of Letter
Carriers, prepared statement of............................ 151
THE U.S. POSTAL SERVICE: 101
----------
TUESDAY, APRIL 17, 2007
House of Representatives,
Subcommittee on Federal Workforce, Postal Service,
and the District of Columbia,
Committee on Oversight and Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:04 a.m. in
room 2247, Rayburn House Office Building, Hon. Danny K. Davis
of Illinois (chairman of the subcommittee) presiding.
Present: Representatives Davis of Illinois, Norton,
Sarbanes, Cummings, Kucinich, Clay, Lynch, Maloney, Marchant,
and McHugh.
Staff present: Tania Shand, staff director; Lori Hayman,
counsel; Cecelia Morton, clerk; Alex Cooper, minority
professional staff member; and Kay Lauren Miller, minority
staff assistant.
Mr. Davis of Illinois. The subcommittee will come to order.
Let me apologize for being a few minutes tardy. I had 45
young people from the Kip Charter School that I had promised to
see. They got caught in traffic and were a little late. But
thank you all for coming.
Let me welcome Ranking Member Marchant, members of the
subcommittee, hearing witnesses, and all of those in
attendance. Welcome to the Federal Workforce, Postal Service,
and the District of Columbia Subcommittee hearing on the U.S.
Postal Service: 101.
Hearing no objection, the Chair, ranking member, and
subcommittee members will each have 5 minutes to make an
opening statement, and all Members will have 3 days to submit
statements for the record.
Ranking Member Marchant, who is stuck in a storm, members
of the subcommittee, hearing witnesses, and the entire postal
community, welcome to the first hearing the subcommittee will
hold on the U.S. Postal Service in the 110th Congress. As I
understand it, this hearing is long overdue. There has not been
an oversight hearing on the Postal Service in close to a
decade, and this will be the first of many.
The U.S. Postal Service performs a valuable national
service. It delivered over 213 billion pieces of mail to over
146 million delivery points in 2006. Almost $72 billion was s
pent in providing these and other postal services required as
part of the meeting of Postal Service needs and the universal
service mandate.
To ensure the financial service of the Service and its
primary function of mail delivery, last year the Congress
passed the Postal Accountability and Enhancement Act of 2006.
The act is a direct result of the postal community coming
together and reaching agreement on work sharing, rate setting,
pricing, flexibility, diversity, and a number of other
provisions to ensure that the Service can compete in today's
marketplace.
To ensure compliance with the act, the subcommittee is
going to conduct aggressive postal oversight and monitoring the
implementation of the Postal Accountability and Enhancement Act
of 2006.
In addition to the act, the subcommittee will look into
mail delivery services in Chicago, diversity in Service's upper
management, and it will engage the postal community in a
discussion about out-sourcing the delivery of U.S. mail.
Highway contract routes, are a long-established and accepted
postal transportation contracts that are used for bulk mail and
delivery services in rural areas. What is less established is
the Service's use of contractors to deliver mail to suburban
and rural areas and whether or not this practice is good public
policy. These issues and others raised during this hearing will
be the basis for future subcommittee hearings.
Before I thank today's witnesses for taking the time to
testify before this subcommittee, I also want to announce that
today Senator Akaka and I will introduce legislation honoring
public servants during Public Service Recognition Week, May 7th
through May 13th. The mail does not get delivered and the
Government cannot function without dedicated public servants. I
am pleased to make this announcement during this hearing,
because the Postal Service, through its employees, ensures
equal access to secure, efficient and affordable mail service,
and they should be commended for it.
In closing, I ask unanimous consent to submit for the
record the statement of Representative Jan Schakowsky, a
Democrat from Illinois, and other Members wishing to submit
statements for the record.
Hearing no objection, those will be submitted.
[The prepared statement of Hon. Danny K. Davis follows:]
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Mr. Davis of Illinois. At this time I would like to extend
5 minutes for an opening statement to members of the
subcommittee. The gentleman from New York, Mr. McHugh?
Mr. McHugh. Mr. Chairman, thank you. I will not take 5
minutes.
This is deja vu all over again for some of us, Mr.
Chairman. I do have a statement that I am going to ask
unanimous consent can be entered in its entirety in the record.
Mr. Davis of Illinois. Without objection.
Mr. McHugh. I would say to you, Mr. Chairman,
congratulations, not just for holding this hearing, although
certainly that is important, but for taking up this gavel. I
look forward to working with you as we have in the past on
these kinds of very critical issues.
It has been 10 years, as you noted. I think that is why we
have a lot of pent-up interest here today. Obviously, this is a
new era based on a new paradigm for the Postal Service. Many,
many folks in this room joined us in working long and hard in
helping to construct the first postal reform legislation in
more than 35 years. I am looking forward to hearing some of the
perspective held by those individuals in the early days of this
new reform.
So, Mr. Chairman, again with my words of appreciation and
anticipation toward our four panels, I would yield back the
balance of my time.
Mr. Davis of Illinois. Thank you so very much. I appreciate
the comments of the gentleman from New York, who has labored
long and hard on these issues. We look forward to working with
you continuously through this session.
Mr. Lynch.
Mr. Lynch. Thank you, Mr. Chairman.
I will take an opportunity to use a brief amount of time. I
would like to thank you and Ranking Member Marchant for holding
this hearing. I would also like to thank today's panelists.
Last year witnessed the enactment of H.R. 6407, the Postal
Accountability and Enhancement Act. That was the first major
reform of the U.S. Postal Service in over 35 years and the
result of a decade-long effort led by the distinguished
chairman of our subcommittee, Mr. Davis, the chairman and
ranking member of our full committee, and Mr. Waxman and Mr.
Davis of Virginia and Mr. McHugh of New York.
However, while this legislation constitutes an important
first step toward addressing the financial challenges faced by
the Postal Service, we must continue to exercise proper
oversight of this institution to ensure the responsible
implementation of the act and safeguard the best interests of
our postal workers, our partners, our greatest asset toward
effecting a meaningful postal reform.
The bravery, dedication, and sacrifices made by our Postal
Service workers was never more evident than in the weeks
following September 11th, during which a series of anthrax
attacks were conducted through the U.S. mail system.
Tragically, two employees of the Brentwood mail sorting
facility, Joseph Curseen, Jr., and Thomas Morris, Jr., were
among the victims of these attacks. At the time, every one of
our postal workers--every clerk, every carrier, every mail
handler--was faced with the very difficult choice between
continuing to come to work under very difficult and dangerous
conditions and staying at home, and thereby risking the
stability of our own economy. It was a special responsibility
and dilemma for our Postal union representatives, who had the
dilemma of sending their members, sending their workers into an
area where we knew there was anthrax contamination.
Behind the scenes on the September 11th attacks and
thereafter, there was much hanging in the balance. At the end
of the day, the postal unions and the postal workers went to
work and the mail kept running; however, not without great
concern.
As we all know, America's postal workers chose to come to
work because they considered it their patriotic duty to do so.
Accordingly, I believe it is our duty to safeguard the best
interests of America's postal workers as the long process of
modernization of the U.S. Postal Service moves forward. To this
end, I welcome the continued input of our postal worker unions,
the American Postal Workers Union, the National Association of
Letter Carriers and the National Postal Mail Handlers Union and
the National Rural Mail Carriers Association in this hearing.
Thank you, Mr. Chairman. I yield back the balance of my
time.
[The prepared statement of Hon. Stephen F. Lynch follows:]
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Mr. Davis of Illinois. Thank you, Mr. Lynch.
Delegate Norton.
Ms. Norton. Thank you, Mr. Chairman. I very much appreciate
that we are having an early oversight hearing on the Postal
Service and that our committee has reincorporated the Postal
Service into this subcommittee. It is very important oversight.
What your chairmanship and the new committee configuration
promises is the kind of continuous oversight that this most
very important service of the United States of America
deserves.
The Postal Service and I have gone through a lot together
because of the trauma at Brentwood and the heroic way in which
both the employees and management faced that extraordinary and
unique situation. There were bumps along the way, but if one
walks into that new facility and to the other facilities here
in the region, one sees the resiliency of postal workers and of
the way in which management and workers have worked together,
not only to recover but to move forward in ways that we believe
provide far greater safety.
The new Brentwood is no longer the Brentwood. It has been
appropriately renamed for the two employees who lost their
lives. I think that the entire country now has come to grips
with the importance of safety first, particularly given the way
in which we all depend upon a vital service like the Postal
Service. So my congratulations go to employees and to
management for the way in which they have come to grips with
this unique and awful crisis.
Mr. Chairman, I heard the piece on NPR this morning. I
don't know if you have mentioned it. I was in the shower this
morning and I heard the melodious voice of our own chairman. It
is a voice that you could recognize anywhere. He was describing
the upcoming hearing. What I was surprised to hear about,
however, was that there had been some slippage since the bad,
old days.
I am not sure what the figures show in the District of
Columbia, but I have very painful recollections of the early
1990's when this region was at the bottom in delivery time, and
I must tell you I have never seen anything like what the Postal
Service in this region did. It went to the very top. So I have
seen what the Postal Service can do. I have seen what the
Postal Service can do in the midst of the worst crisis
imaginable, the anthrax crisis. And I have seen what the Postal
Service can to when this region, in particular, is in the pits
and then rises to the top.
I was concerned that Chicago had not had the same
experience we had, or perhaps you are having the same
experience we had, that you are now below the average and you
yearn to be at least average and perhaps where I suppose we
still are--and I will have to check that out--but where we were
was at the very top.
This hearing comes, I think, in time and with the kind of
oversight that I can tell you that with oversight, with
oversight the Postal Service, in fact, corrected the problem in
this region. With oversight, I have no doubt that the very same
will happen in the Chicago region.
I thank you again for this hearing, Mr. Chairman.
Mr. Davis of Illinois. Thank you very much. I can assure
you that Chicago shall follow the District of Columbia and in
the next hearing we will see tremendous improvements.
Our first panel is seated and I would like to just
introduce them before they testify.
Panel one: John Potter was named 72nd Postmaster General of
the United States of America on June 1, 2001. Jack Potter has
led the Postal Service to record numbers of service,
efficiency, and financial performance.
Our second witness, Mr. James C. Miller III, was elected
chairman of the Board of Governors of the U.S. Postal Service
in 2005. In addition to serving on the Board, he is senior
advisor to the international law firm of Blackwell, Sanders,
Pepper and Martin. The Postmaster General and Deputy Postmaster
General serve at the pleasure of the Governors.
Our third witness, whom we have known in another life, Mr.
Dan Blair, serves as the first chairman of the Independent
Postal Regulatory Commission, the successor agency to the
former Postal Rate Commission. He was unanimously confirmed as
a commissioner of the former Postal Rate Commission on December
9, 2006, by the U.S. Senate, and designated chairman by
President George W. Bush on December 15, 2006.
Gentlemen, thank you very much.
It is our policy that all witnesses are sworn in, so if you
would rise and raise your right hands.
[Witnesses sworn.]
Mr. Davis of Illinois. The record will show that each
witness answered in the affirmative.
Thank you very much.
Of course, your entire statements will be placed in the
record. You have been through this many, many times, so you
know the drill. The green light indicates that you have 5
minutes to summarize your statement. The yellow light means
that time is running down and that you have 1 minute remaining
to complete the statement. Of course, the red light means that
time has expired and we would hope that witnesses would stop.
We will begin with our Postmaster General. Mr. Potter,
welcome and thank you very much for being here.
STATEMENTS OF JOHN E. POTTER, POSTMASTER GENERAL/CEO, U.S.
POSTAL SERVICE; JAMES C. MILLER III, CHAIRMAN, BOARD OF
GOVERNORS, U.S. POSTAL SERVICE; AND DAN G. BLAIR, CHAIRMAN,
POSTAL REGULATORY COMMISSION
STATEMENT OF JOHN E. POTTER
Mr. Potter. Good morning, Mr. Chairman and Ranking Member
Marchant and all the members of the subcommittee. I am honored
to be here as America's postal system enters a new era.
It is appropriate that I am joined by Board of Governors
Chairman Jim Miller and Postal Regulatory Commission Chairman
Dan Blair. Our ability to work together as roles are changing
is critical to the success of the new law. The Postal
Reorganization Act of 1970 converted a heavily subsidized Post
Office Department into a self-supporting Postal Service, one
defined by excellent service, customer satisfaction, and
productivity improvement. Our people have done an outstanding
job.
Unfortunately, significant changes in the communications
and delivery markets have made continued success under the
original law problematic. That is why our Nation is fortunate
that so many have recognized this and acted to preserve
affordable, universal Postal services.
I appreciate the efforts of this committee, both houses of
Congress, Comptroller General David Walker, the administration,
and the President's Commission on the U.S. Postal Service. It
is my hope that 30 years from today a future Postmaster General
will sit at this table and report on the progress made possible
by the Postal Accountability and Enhancement Act of 2006.
Unfortunately, our business model remains broken, even with
the positive pricing and product changes in the new law. With
the diversion of messages and transactions to the Internet from
the mail, we can no longer depend on printed volume growing at
a rate sufficient to produce the revenue needed to cover the
costs of an ever-expanding delivery network.
This is not to say that the new law does not offer
opportunities. We are in a better position than ever to respond
quickly to market conditions, and we will operate far more
nimbly in the expedited and packaged product sectors. Growth is
our greatest challenge, as we shift from a transaction-based
mail stream to one centered on lower-margin marketing and
advertising mail.
People are also finding new uses for their mail. The State
of Oregon conducts elections through the mail, resulting in
greater voter participation. This is encouraging and presents a
unique opportunity for our democracy. We will continue our work
with all mailers and the use of the latest technology to add
even more value to the mail.
One example is the new intelligent mail bar code. It
improves quality, cuts costs, and increases convenience for
mailers and for the Postal Service. The good news is that
marketers have learned that direct mail adds to the value of
campaigns, and that mail complements other advertising media,
including the Internet. Overall, direct mail is among the
fastest-growing and most effective advertising channels in
America today, and that is why I am bullish on the mail. But I
am also a realist. Success under the new law will not be easy.
We have never worked under a fixed rate cap. We have never had
to manage our costs by class of mail. Both, to me, are
extremely challenging.
Because we have little control over some costs such as fuel
and employee retirement and health benefits, we must maintain
an intense focus on managing what we spend. Keeping our rates
under the rate cap, and being able to pay our employees a fair
wage requires us to find ways to remove an additional $1
billion in costs each year. Our preferred path to staying under
the rate cap is to achieve productivity targets consistent with
the needed billion dollars in savings. Management and the
unions can and should work together to increase productivity in
processing, retail, and delivery operations, thus keeping costs
at or about the rate of inflation.
If we do not do that, we will have created a situation that
requires other action such as reducing service or contracting
out. Since the earliest days of America's Postal system,
contractors have transported and delivered the mail safely and
securely. They are screened by the Postal Inspection Service,
and, like career employees, are subject to legal penalties
under Title 18 of the United States Code for criminal
mishandling of the mail.
Procedures governing contracting out are contained in the
labor/management agreements with our unions. They are a product
of complex give-and-take that marks collective bargaining. Let
me assure you that it is not, it is not our intention to take
delivery work performed by Postal employees and contract that
work out. We do contract out new deliveries, but only in those
locations where it makes sense, and in accordance with our
national labor agreements. Of new deliveries, those new homes
and businesses in 2006, 94 percent are currently being served
by U.S. Postal Service city and rural letter carriers. I do not
foresee laying off any carriers as a result of out-sourcing.
That is something I pledge not to do.
I stand ready to work with our unions to secure the future
of our organization, its people, and the people we serve.
In closing, let me reiterate my sincere belief that the
Postal law offers opportunities for the Postal Service and the
entire mailing community. We will take full advantage of these
opportunities in support of our historic mission of providing
affordable, universal mail service to our Nation.
Let me just say, since Delegate Norton brought it up,
Washington, DC, remains the top performer in the country.
Mr. Chairman, you know that I am committed to Chicago and
the folks in Chicago to provide similar results and a similar
turn-around as was seen in Washington, DC.
I would be pleased to answer any questions you may have
after the remaining speakers.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Potter follows:]
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Mr. Davis of Illinois. Thank you very much, Mr. Postmaster
General.
Now we will proceed to Chairman Miller.
STATEMENT OF JAMES C. MILLER
Mr. Miller. Thank you, Mr. Chairman, Mr. McHugh, Mr. Lynch,
Mr. Sarbanes. Thank you for inviting us here today. Thank you
for holding this hearing. We are always looking for ways and
opportunities for improving our service.
I have a statement that I submitted for the record. I ask
it be included in the record.
Mr. Davis of Illinois. Without objection.
Mr. Miller. Thank you very much.
It is a statement on behalf of the Board of Governors, the
entire Board of Governors of the Postal Service. Our message to
you today is that all of us, the Postal Service employees, the
Postal Regulatory Commission, the customers of the Postal
Service, and Members of Congress must all pull together if this
enterprise is to provide the kind of service at reasonable
prices that the American people have come to expect. Yes, we
have made substantial progress in the last few years:
transformation plan, rate increases below inflation, increased
quality, contraction of the labor force, streamlining the
network, overcoming challenges of higher fuel costs, paying off
$11 billion in debt, and 7 years of increased productivity.
However, the centuries-old social compact that has
characterized the Postal Service, where you could defray almost
any level of cost by raising the price on monopoly mail, just
doesn't work any more. That compact is broken. The reason is
that we are in a competitive environment. In the economists'
terms, the demand for monopoly mail is shifting to the left and
becoming more and more elastic as time goes forward from
competitive sources. They just simply can't do that any more.
We have to re-evaluate.
The business model, as my friend Jack Potter has indicated,
is broken. By the way, I am delighted and honored to be here
with Mr. Potter and Mr. Blair and the other panelists that will
appear before you today.
We have to be much more consumer oriented. I have in my
statement an example of where I bought some stamps in Los
Angeles, and the Postmaster came out and thanked me personally
for buying so many stamps, and saying if there is anything else
she could do, she would be glad to do that.
I also gave an example of a letter carrier who complained
about a bunch of mail that I had proffered. Now, it could have
been the other way around. It could have been the mail carrier
had done the customer work, and we have all had mail carriers
that have been delightful and been very solicitous of our
business and postmasters that have not been so solicitous. But
we have to be more solicitous of our customers. We have also
got to listen to the needs of our customers, even anticipate
the needs of our customers. We have also got to be much more
innovative. We need more win/wins, like the forever stamp. The
forever stamp is good for us and it is good for customers.
Automated postal service where you go in and are able to weigh
something, mail it right there, click and ship, grade
innovation. Our Web site, which is visited by a lot of people
every day, very useful. I visit it all the time.
We need better metrics, as the GAO has pointed out. We need
to, as my friend Allen Murton over at George Mason University
said, what gets measured gets better. If we have the right
measures, things will get better.
Even more attention to cost is needed. Flats processing
machines hold potential for substantial savings.
By the way, on the cost side you need to bear in mind that
this new law adds cost to the Postal Service, not just in terms
of the costs that we have had recently announced in February,
but adds cost, Sarbanes/Oxley and other things.
We need to make the structure of rates more closely
approximate the structure of cost. I gave an example in my
testimony. When I was at the undergraduate University of
Georgia I worked at a hardware store, and the manager gave me
the key to reading the little script on there that told me what
the wholesale price was of any big item and authorized me to
negotiate down to the wholesale price. And then after a while I
began to think, if we sold everything at wholesale price there
wouldn't be anything left over to pay the rent, the building,
the light bill, and my meager salary. Now, the Postal Service
can't sell at wholesale rates, either. We have to do better
than that.
I think it is really important, and my colleague over here,
Mr. Blair, and his colleagues at the Postal Rate Commission,
how they establish the parameters of our competition in our
monopoly or non-competitive sector and also in our competitive
sector.
I remember when I was chairman of the Federal Trade
Commission, Chairman John Dingle of the Commerce Committee
emphasized to me, he said, if I am given the choice of writing
the goals of a bill and writing the process, I will choose the
process every time and I will beat you ever time. The process
is really key here.
Members of Congress can help. To ban contracting out is a
very bad idea. As Jack has just said, we don't anticipate
additional contracting out right now. Contracting out is only,
like, 2 percent of our total deliveries. I mean, this is just a
small sliver, but to ban it, to put us in a box and say never
is a very bad idea.
You also need to give us more running room with respect to
the streamlining of our logistics system. Constant restraints
on our ability to streamline is very costly. It costs all of
the mailers.
Mr. Chairman, by the way, we would like to have better
relations with Congress, the Board and the Postal Service
management both. I think it is only that way we can find out
what your concerns are, and also you can find out what our
problems are.
The Postal Service is the 57th largest enterprise in the
world measured by annual sales. It is the 20th largest
domestically. It carries 44 percent of the world's mail. Its
pickup and delivery goes to 146 million homes six times a week.
It is in the top 25 most respected companies in America. It is
the most respected Government agency. All that is a tribute, in
my judgment, to our distinguished Postmaster General, Jack
Potter, and his team at the Postal Service, and to postal
employees. We are proud of the record that we have and we want
to make it even better.
At the appropriate time, Mr. Chairman, I would be happy to
answer and respond to any of your questions.
[The prepared statement of Mr. Miller follows:]
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Mr. Davis of Illinois. Thank you very much, Mr. Chairman.
We now will proceed to Chairman Blair.
STATEMENT OF DAN G. BLAIR
Mr. Blair. Good morning, Chairman Davis, members of the
subcommittee. Thank you for the chance to testify here this
morning. I thank you for the opportunity to appear here on the
panel today with Postmaster General Potter, as well as Chairman
Miller. I also want to give a brief thank you to you for your
interest in the Postal Service over the years, and especially
thank you to John McHugh for your efforts over the last 12
years in bringing this to fruition. I think that your efforts
have paid off, so thank you very much.
I also want to acknowledge my fellow commissioners here
with me this morning, and Vice Chairman Tisdale, Commissioners
Goldway, Hammond, and Acton, who are in the audience this
morning.
The passage of the Postal Accountability and Enhancement
Act represents a profound change in our regulatory functions
and significantly enhances the Commission's authority. As
noted, the Postal Service will have more autonomy in setting
rates, particularly for its competitive products. However, the
ability to increase rates for market dominant products will be
limited ordinarily by increases in the Consumer Price Index.
The act assigns continued oversight responsibilities to the
Commission.
The law equips the PRC with authority to use new
enforcement tools, including subpoena authority; the authority
to direct the USPS to adjust rates and take other remedial
actions; and the imposition of fines in case of deliberate
noncompliance with applicable postal laws.
We will analyze and report on the Service's compliance with
the new law, consider complaints, and report on a regular basis
to the President, Congress, and the public.
The Commission is fully engaged in implementing the
strength and regulatory responsibilities required by the act,
as well as completing pending business in the previous law. We
understand that transforming the Commission into the regulator
envisioned by the reform legislation will result in changes to
our organizational structure and work force capacity. The PRC
is working with an outside expert in this regard.
Regarding old business, on February 26th the Commission
rendered its recommended decision on the most recent omnibus
rate case. This was the first fully litigated case since 2001.
We audited the Service's projected revenue needs and made
adjustments to their initial estimates based on subsequent
Postal Service refinements of these estimates. We also
recommended improvements in the design of rates for many postal
products at the Service's request to align rates more closely
with shape.
Our decision relied on well-established ratemaking
principles, including a reaffirmation of the principle that
work-sharing discounts should be limited to the amount of the
cost savings accrued to the Postal Service, the approach
ratified by the act.
On March 19th the Postal Governors endorsed the
Commission's rate recommendations with tree limited exceptions,
including those for standard rates, flats, mail. On March 29th
the Commission issued an order establishing procedures for
further consideration of these issues and invited comments from
interested parties before the end of this month. Because the
Commission deliberations are ongoing, I hope people will
understand that it is inappropriate for me to address them
specifically at this time.
One of the most critical responsibilities the act assigns
to the Commission is the establishment of a modern system for
regulating rates and classes for market-dominant postal
products. We are moving quickly to develop regulations for the
new ratemaking system.
The Commission published an advanced notice of proposed
rulemaking on January 30th soliciting public comments on how
the Commission can best fulfill its responsibilities and
achieve the objectives of the act. The initial round of
comments was due on April 6th, and reply comments are due May
7th. To date, 32 parties have submitted comments.
Creating a regulatory framework for the establishment of a
more modern rate setting process is only one of the many
actions facing the Commission. The act directs the Postal
Service, in consultation with the Commission, to establish
service standards for market-dominant products and assigns
regulatory oversight to the Commission. The act also directs
the Postal Service and the Commission to consult on developing
a plan for meeting these standards. We look forward to full
consultation, as envisioned by the act, with the Service later
this spring and summer.
A key aspect of the Commission's ongoing efforts is
outreach, soliciting input from postal stakeholders, especially
mail users, in consultation with other Government agencies such
as Treasury, State, the FTC, Customs and Border Protection, the
Postal Inspector General, and the GAO. Appearing before this
subcommittee today and hearing your views and concerns is a
critical part of this process.
Mr. Chairman, the benchmarks established for the Commission
pose some daunting challenges, especially in light of the
Postal Service's opportunity to file one last omnibus rate
request under prior law. There is no question that this final
rate case will divert Postal Service and Commission resources
that, in my view, would be better devoted to developing a new
system of regulatory oversight. Nevertheless, the Commission is
committed to timely performance of all its statutory
obligations, and to doing so in a reasoned and balanced manner.
Mr. Chairman, members of the subcommittee, thank you for
this chance to testify today. I ask that my written statement
be included in the record, and am happy to answer your
questions.
[The prepared statement of Mr. Blair follows:]
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Mr. Davis of Illinois. Thank you very much, Mr. Blair.
We will now move to the question and answer part of this. I
will begin.
Mr. Postmaster General, why don't I begin with you. All of
us are proud of the Postal Accountability Act, which was signed
into law on December 20, 2006, which replaced the Federal body
that regulated the U.S. Postal Service, the Postal Rate
Commission, with the Postal Regulatory Commission, and gave
this new entity greater powers.
My question is: what do you see in the mix of all of this,
and what do you view as the greatest challenges in
implementation of the Postal Accountability Act?
Mr. Potter. Mr. Chairman, probably the initial challenge is
to develop the regulatory process, and what we are doing is we
are working as closely as we can with Dan Blair and his fellow
Commissioners and the Postal Regulatory Commission, as well as
mailers, to make sure that the product of this regulatory
process serves the people that it was intended to, and that is
the mailing community. So we are working very closely to
develop that process. There are some hurdles in the new law
that, quite frankly, as my testimony stated, are going to be a
challenge for us. We have never attempted to manage our cost by
product line, which is what this is asking us to do. We have
always taken a tact of we would make investment that would
produce the biggest return for the Postal Service, not by class
of mail but by bottom line for the Postal Service, and it is
going to have us rethink some of our investment strategy so
that we can meet the tenet of the law, which basically says
keep your rates below inflation by class of mail.
Another issue is going to be the transition and the
establishment of service standards for all classes of mail and
tracking systems for all classes of mail. We do have standards
now that we are working with the Mailers Technical Advisory
Committee on, as well as other mailers, people who use the
mail, but establishment of those standards and goals at the
same time to me is problematic. I believe that we should
establish the standards, we should put measurement systems in
place, but we shouldn't establish a goal until we have some
base of performance, and then, again, establish a goal off of
that base.
But, in addition to that, the law calls for more
transparency under Sarbanes-Oxley, and we are going to have to
work very hard to live up to what the law is asking us to do.
Let me assure you, though, that we are committed to
implementing the law and to taking full advantage of the
flexibility that is built into the law. We understand why
different provisions are put into the law. We are going to
live, again, up to the spirit of that, and we hope to take
advantage of the flexibility for pricing that is built into the
law, as well as take advantage of the fact that we are going to
be allowed to compete for package services, expedited services,
and others as decisions are made along the lines of what is a
competitive product and what is a market dominant product.
Mr. Davis of Illinois. Thank you very much.
On January 23, 2007, the Inspector General's office issued
an internal report concerning Cintas, which is a service
contractor that provides a full range of services from uniform
programs, interest mats, to restroom supplies, and promotional
products. The investigation centered on Cintas adding a
randomly calculated additional charge or environmental charge
to its services. The report ultimately recommended that the
Postal Service consider suspension and debarment of the Cintas
Corporation. Have you, since this recommendation, renewed this
contract? And if so, can you tell the committee why?
Mr. Potter. I am not familiar with that contract.
Mr. Davis of Illinois. Thank you.
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Mr. Davis of Illinois. You recently announced that 100 new
carriers would be brought on board in Chicago.
Mr. Potter. 200.
Mr. Davis of Illinois. 200 new carries would be brought on
board to shore up delivery capability. Overall, we have seen
the number of carriers falling by more than 9,000 in the last 5
years, according to the annual report. We are talking about
across the board. Is there a connection between these
reductions in the carrier work force and the delivery problems
that we are seeing in various parts of the country?
Mr. Potter. The bulk of the reduction in the city carrier
work force is the result of increased use of automation on the
part of--or increased bar coding capability of letter mail for
those carriers. So mail that we can put a bar code on, we are
able to put into walk sequence for the letter carriers, and so
the letter carrier work is more productive.
In the case of Chicago and in a couple of cases around the
country, we have had decisions made by local management not to
hire the authorized carrier levels, and when those come to our
attention, we basically work with the local management to bring
those carrier staffing levels up to speed. So we are monitoring
that from a national level, and Chicago is an example of where
the national authorized staffing for that local area was
allowed to be dropped below what our recommendation would be,
and so that is why we are hiring the carriers.
We now are in the process of checking around the country to
see whether or not other situations like that exist. But the
bulk of the reduction in city letter carriers is a result of
improved productivity.
Mr. Davis of Illinois. Thank you very much.
I see that my time has ended, and so we will go to Mr.
McHugh.
Mr. McHugh. Thank you, Mr. Chairman.
General Potter, you heard Chairman Blair's comments about
his concerns about your filing another rate case under the old
system. What can you say to assuage some of Chairman Blair's
concerns, and I might add some of the concerns I have heard
amongst the mailing community, if anything?
Mr. Potter. Well, I the provision in the law allows us to
file one more time under the old rules, and I think that was a
good provision of the law because it basically anticipated that
it would take some time for the new regulatory body to put in
new regulation, and by law they have to do that by June 2008.
By law we have to make a decision whether to file under the old
rules or the new rules by December 2007. So, being pragmatic,
not knowing what the new rules are, you have to move ahead with
or anticipate that you have to prepare a case as if you were
filing under the old rules. We are hoping that over the course
of the coming months that the Commission will be able to make
some decisions that will give us some guidance as to what the
outcome of their decisionmaking process on the new regulations
is. Certainly that would weigh heavily in terms of how the
Board of Governors might make a decision on whether to file
under the old rules or the new rules.
Mr. McHugh. So it hasn't been a decision made?
Mr. Potter. No. No decision has been made. No new rules
have been promulgated. So we are kind of operating in the blind
right now.
Mr. McHugh. Of course, 18 months is the outside window.
Chairman Blair, do you think you have a chance of doing it
before then?
Mr. Blair. Well, I think we do. Last month we had the
opportunity to engage in what was deemed to be a summit at the
Bolger Center, which we had about 300 folks, and at which the
Postmaster General and I welcomed and talked about this issue.
One of the things that I wanted to throw out there was the
idea that we would get a framework in place by, say, maybe the
fall--October was the date that I mentioned--in order to allow
the Postal Service the opportunity to have a rate increase
under the CPI cap as early as some time next year.
Now, I agree with the Postmaster General that the law
clearly envisions the opportunity for a new rate case filing,
but I think what the law didn't really take into account was
the fact that we just completed one rate case right as the new
law was being enacted, and so the question remains is there a
need for a new base case or can the omnibus rate case that just
took place serve as that base case.
I think there are some issues that still need to be sorted
out, and I think we can sort them out over the next few weeks.
Initially I was going to say over the next few months, but
those 18 months have now dwindled down to 14 months and time is
flying by, and so I think that we really need to make some
decisions and work this out over the course of the next few
weeks.
Mr. Potter. If I could?
Mr. McHugh. Sure.
Mr. Potter. Hopefully my remarks have not created an
impression that we are not working as closely as we can. These
are very complicated issues that deserve quite a bit of debate
when it comes to the regulation. And I am not just talking
about a discussion between the Postal Service and the
regulator; I am talking about the entire mailing community
participating in that process. So this wasn't meant to case
aspersions; it is just, being a good businessman, you have to
sit back and say, all right, keep your options open.
Mr. McHugh. No aspersions cast, or certainly none received.
Trust me, I know a little bit about the complexity of this
bill. I understand the challenges therein.
You spoke about it. Your business model is still broken.
Chairman Miller, you mentioned, underscored that, as well. You
talked about a need for what I believe I heard you describe as
running room to streamline your logistics system.
What kind of broken system are you dealing with? What still
needs to be fixed? Is this a legislative fix or administrative
approaches? What kind of parameters?
Mr. Potter. Well, let me try to clarify what the weakness
is. The weakness in Postal Service going forward is that our
core product, first class mail, is in a state of decline, so
volume is declining. It is a high margin product. It is largely
transaction based--bill presentment, bill payment--business
mail. That product is very weak, or is weakening over time with
competition from the Internet.
So the challenge, from a Postal Service perspective, is to
be able to respond to that weakness in volume and revenue
growth going forward, as well as to change our processes and
our infrastructure in response to mailer behavior. As time goes
on, there has been a consolidation of printing industry, list
processors, logistics companies. They are taking greater
advantage of discounts that are available through the current
rate structure, and as they do what we end up with is under-
utilized aspects of our network.
So our response to that low use of network assets might
mean consolidation of facilities or some other changes,
staffing levels, changes that are necessary to keep the Postal
Service productive and to, again, allow us to operate under the
rate cap.
Mr. Davis of Illinois. Thank you, Mr. McHugh.
Mr. Miller. Could I add, Mr. Chairman, just a moment
please, sir? On the question of a rate case under the old law
versus the new law, first let me say I think it is admirable,
highly admirable, that the Postal Regulatory Commission is
moving forward with trying to establish these parameters. I
appreciate, Dan, your working with us on that.
The Board of Governors has not yet decided what to do. It
is really their authority would be exercised here. I think the
next step is for us to decide what we would like to see in
terms of a rate structure, a new rate structure, and then we
would look at whether we could do that, accomplish that under
the new law with the parameters that the Postal Regulatory
Commission would set forth, or whether we have to do that under
the old law. That depends on what the PRC comes up with, so we
haven't made that determination yet.
I will say to you--I think I am speaking on behalf of the
other Governors--that it is unlikely that in a new rate case we
would have an overall rate increase of anything more than the
CPI. As the new law contemplates, we would anticipate having
rate increases annually, something no more than the CPI by
class, but that determination is one that the Governors are
focusing on, that the staff of the Postal Service is helping us
evaluate, and some outside people are helping us evaluate, as
well.
Mr. Davis of Illinois. Thank you very much.
We will go now to Mr. Lynch.
Mr. Lynch. Thank you, Mr. Davis, Mr. Chairman.
First of all I want to thank Mr. Potter, Mr. Miller, and
Mr. Blair for coming before the committee and helping with this
work. At these hearings I am required to do a little bit of
disclosure. First of all, my Mom was a postal clerk for 30
years, now retired. My Aunts Sis and Kay, her two sisters, also
clerks. My sister Linda is a steward with the American Postal
Workers Union on tour one. My sister Karen is a postal worker
on tour two. My Aunt Pat and my Cousins Danny, Bill, Jimmy,
Marie, and Joe--Joe was a business agent for Letter Carriers
Local 34 in Boston. So when people suggested that fact that so
many of my family are employed at the Post Office might affect
my objectivity here, I must say they are problem right.
[Laughter.]
It is the family business.
First of all, I want to say that I am encouraged by the
statements, Mr. Potter, about trying to work together with your
unions, as well as with the postal supervisors and others, to
solve our problems at the Post Office. I must confess that when
I hear you say that we are all pulling together, I must say
that I think that the postal workers are pulling harder than
anyone, the employees of all of our unions here. They are the
ones that are doing the great work, and they are the ones that
I think are faced with the greatest challenges.
I want to say that, while I see some managerial
improvements, I must also say that in some of my local Post
Offices they have decided to close the Post Office against the
will of the employees and the union at noon hour, where most
people would actually use the Post Office. I scratch my head at
that development.
Second, I just want to say that, Mr. Miller, if you are
truly interested in having a better relationship with Congress,
I would strongly suggest that you need to have a better
relationship with your employees. Those are the people who we
rely on every single day.
You cite quite rightly that the Post Office is recognized
as one of the top 25 most respected institutions in America
today, but I would just disagree that it is due to the great
work of Mr. Potter. I would suggest that it is due to the fact
that the postal clerk when I drop my mail off in the morning at
my local Post Office, because they greet me with a smile and
total professionalism, that is why the Post Office is so well
respected. When my letter carrier comes up my doorstep on time
every day and very reliably and professionally delivers my mail
every day, that is why the Post Office is so widely respected.
When my mail handlers work so hard, depending on wet weather in
the northeast, and does a very professional job, as well, that
is why the Post Office is so widely respected. As well, the
supervisors who iron out the problems when they do arise in
such a big business, those are all the principal reasons why
the Post Office is so widely respected.
I just want to say this: in the history of this country, we
regarded the delivery of the mail as so important to the
national security and to the economy of our country that we
made a decision that we would put a special duty upon our
postal employees that they conduct their business in a
continuous fashion. In order to ensure that, the Government
took away the right to strike from our postal employees, the
very ability to stop work. They cannot stop work. They must
continue working. That was a precious right that they
surrendered to us.
Now I am hearing that this social contract, this agreement
that we made with our workers, is going to be jettisoned, that
we are going to go to privatization, we are going to pay some
employees less. I am wondering, if we are going to tear up that
agreement, that we are going to take away the right to strike
from these employees but we are going to treat them with
respect and dignity, if we are going to tear up that agreement,
my question to the three of you is: are we also going to
restore the right to strike to these employees that we strip
from them when we ask them to submit to their labor? I find it
troubling, this contracting out business.
I just came back last night. I flew in last night from Iraq
and Afghanistan, and I heard continuous concerns from our
civilian and military departments that the contracting out of
their services in Iraq and Afghanistan have stripped them of
capacity, stripped this Government of capacity to perform its
duties, at great cost.
I just ask you, is that what you are suggesting? Are we
going to renege on our agreement with our postal workers? And,
if so, are we going to restore to them the right to strike?
Mr. Miller. Mr. Lynch, could I just respond? When I used
the term ``social contract,'' it was in the context of the
ability of the Postal Service to cover costs by raising price
on letter mail. That was what I meant by the term ``social
contract.'' I didn't imply that we would tear up an agreement
with respect to employees.
With respect to employees, let me say that I want to
congratulate the postal employees because I think there has
been a change in the attitude of so many postal employees. It
is a cultural change that has taken place in the last 10 years.
A member of the U.S. Supreme Court communicated to me his
delight that the attitude on the part of his local Post Office
had changed dramatically over the past several years, and he
attributed this in part to the leadership of Jack Potter, but
also the recognition that we are in a competitive environment
now, and that is one reason.
But I think it is very important, it is essential that
postal employees be part of this effort to be more consumer
friendly and more outgoing and outreaching to customers. We
cannot survive unless we are able to do that.
Mr. Davis of Illinois. Thank you very much.
Jack, did you want to respond?
Mr. Potter. If I could.
First of all, I would like to say I am from the postal
family, as well. My father was in the business for 40 years,
was a letter carrier and then was a member of the unions and
worked his way up in management, and I was a proud member of
the APWU under Bill Burress' leadership and Beau Biller's
leadership, and so let me just say that we cherish our
employees. But we also have a business challenge, and the
hurdles actually got higher with the new law in the sense that
when you look forward you have to keep your rates under
inflation. I would be happy to share with you some of our cost
drivers, because it is really problematic. How do you satisfy
both sides?
If I could just make one statement, though, when it comes
to the notion that our employees do not have the ability to
strike, in exchange for that they got binding arbitration, so
where the Postal Service management and labor organizations,
when they can't reach an agreement through the collective
bargaining process, that disagreement goes to a third party.
Whether it is the grievance process or if it is a national
contract, it goes to a third party to decide, so that binding
arbitration really was the tradeoff for strike.
As far as contracting out, there is a provision in each of
the agreements of our unions that was put in place in 1973 that
was a product of collective bargaining. In exchange for that
provision, management gave up a lot. We really have to be, in
my opinion, true to the collective bargaining process. I am
firmly committed to that. I just wanted to share that
information.
Mr. Davis of Illinois. Thank you very much, Mr. Lynch. I am
pretty sure that both the Postmaster General and the employees
all will accept as many accolades as they can get, no matter
which direction they come from. We just hope that they keep
earning them and that they keep getting them.
We will move now to Mr. Clay.
Mr. Clay. Thank you very much, Mr. Chairman. I thank the
panelists for being here.
Mr. Blair, you talked about an additional rate increase, I
guess coming within the next year. I heard Mr. Potter say that
one of the reasons for that is because of the decline in volume
of the first class mail. I just wondered, what is the
justification for an additional rate increase? Can you tell the
American public while they are watching C-Span if they will
have to pay an additional? We know that May 14th we will go up
$0.02 to $0.41 for first class mail. Will they have to expect
an additional increase? And why?
Mr. Blair. Well, I think, correctly, that the price of a
first class stamp will go up on May 14th. For periodicals mail,
that was delayed until July. But as far as the prospects for a
new rate increase this year, I wouldn't want to speak for the
Governors of the Postal Service within whom is vested the
authority to file a rate increase.
So one of the things that the Commission had posited was
whether or not if we could get a new system of ratemaking up
and running before they would have to raise increases under an
old system. I think that, from our viewpoint, that would be a
good idea, but this is part of the ongoing dialog that we are
having between the Postal Service, the Regulatory Commission,
and the mailing community.
I think it is important to note that we have done quite a
bit of outreach on this issue. I referenced the summit that we
had a month ago in which we had about 300 participants. We also
put out this notice of proposed rulemaking back in January. We
had 32 comments submitted to us early in April on what this new
system might look like.
What is interesting about these comments--and I haven't had
a chance to go through all of them yet--is that there are 32
unique comments. I think that is important and it shows the
work and dedication that those commenters put into putting
forth what their ideas are for this new system down on paper
and submitting them before the Regulatory Commission.
We have given any interested party an opportunity to reply
to those comments. That deadline is in early May. As we sift
through these, I think we will be able to have a better idea of
what this new system might look like, and then I think we can
better engage the Postal Service and help them decide whether
or not they are going to file a new rate case under the old
system.
Mr. Clay. Mr. Potter, give me the additional justification
for another rate increase.
Mr. Potter. OK. If you look at Postal Service's costs, they
go up every year. And the reason that they go up every year is
because our employees get increases in pay, cost of health
benefit grows. That is the biggest cost for the Postal Service
is labor. Labor is 80 percent of our cost. So what I said
earlier, we have other things that drive cost.
Mr. Clay. How about the decline in volume?
Mr. Potter. Well, let's talk about----
Mr. Clay. How does that play into that?
Mr. Potter. Here's what we have. We have two things going
on, Congressman. We have an increase in the number of
deliveries every year, 1.8 million to 2 million new deliveries
every year, and volume is relatively flat, so there is a cost
of $300 million to $400 million to deliver mail to new
deliveries when volume of first class mail is in decline and
other mail is relatively flat. So that means that the carrier
is bringing less dollars to every door every day. That is where
the challenge lies, because if those costs are growing at a
greater rate than inflation, and earlier I said that we have to
save a billion dollars every year, well, it is based on
calculations that our financial people have done that project
what our costs are going to grow by, versus what the rate cap
is.
So the broken wages and benefits and fuel and other things
that we have to spend is growing above the rate of inflation.
The offset to that is to drive productivity up, as well as the
delivery base is going up without commensurate increase in
volume.
Mr. Clay. Thank you for the explanation.
Mr. Miller.
Mr. Miller. Mr. Clay, bear in mind that letter mail has a
markup of something like 200 percent--it depends on the
particular way it is proffered at center--whereas the fastest-
growing mail has a very small markup. So if you are losing out
on the mail that has the big markup and you are growing the
mail that has the little markup, then obviously there is a
problem then. That said, the postal rates overall have
increased less than the cost of living since 1970. We want to
drive productivity even more. There are opportunities that we
have for increasing our sales, increasing innovations, and then
reducing costs. We need the flexibility in order to achieve
those.
Thank you.
Mr. Davis of Illinois. Thank you very much.
Mr. Clay. Thank you.
Mr. Davis of Illinois. Thank you, Mr. Clay.
We will move now to Mr. Kucinich.
Mr. Kucinich. I thank the gentleman.
Mr. Davis of Illinois. I am sorry, Mr. Kucinich, but you
are out of line. I know that you are running for President, but
Mr. Sarbanes is actually next. Mr. Sarbanes.
Mr. Sarbanes. Thank you, Mr. Chair.
First I wanted to associate myself with the comments of
Representative Lynch, which I thought were right on target in
all respects, although I feel compelled to confess that I have
no members of my family that are working in the Postal Service
or have done. Many of my great-uncles and-aunts were in the
restaurant business, but that is not what this hearing is about
today.
I had a visit recently to the main Post Office in
Baltimore, MD, which was fascinating for me. It was my first
behind-the-scenes visit to a Post Office. That one is really
state-of-the-art. It is on the cutting edge in terms of
technological innovation, and really has served as a model in
many respects for a lot of the practices, best practices that
have been brought to bear across the country, from what I
understand.
I want to salute the employees of the Postal Service and
salute, as well, the organizations that represent them so well.
The employees, and in particular those who staff the Post
Offices, as it were, at the front desk and the letter carriers,
are really the face of a service which the American people have
come to trust almost implicitly. It is a wonderful success
story, the faith and confidence that the average person has in
the Postal Service. But in order to preserve that we have to
make sure that the employees that provide the service on the
front line are given the support that they needs, because when
they are under stress that gets communicated and it ends up
undermining the tremendous reputation the Postal Service has.
The other thing which I didn't appreciate and I do now
after the tour that I took is really understanding the Postal
Service as one of the largest distribution systems in the
world, and the implications that has for its ability to respond
and support us in this country in times of crisis. In fact, I
heard stories of how the first people in to help, the first
faces that appeared after Hurricane Katrina were the faces of
the local postal carriers. We need to keep that in mind,
because this is a system that needs to be state-of-the-art and
we need to preserve its stellar reputation.
Two questions. We have discussed a little bit this
contracting out of services. I would like to hear what the
basic criteria are that you use to determine when that makes
sense or not, and we can start with Mr. Potter.
Mr. Potter. Are we talking about the contracting out of
delivery services?
Mr. Sarbanes. Yes.
Mr. Potter. Let's start with that, because we do contract
out highway contract services.
Mr. Sarbanes. Delivery services.
Mr. Potter. So in delivery services if we have an
established route, whether that is a city letter carrier route
or a rural letter carrier route, and there is a new delivery,
generally 20 deliveries or even 50 deliveries within that
route, that work goes to the NALC or the rural carriers,
because we already have a person on that line of travel and
that work goes to them.
The only time that we consider contracting out is when we
have major new developments. So if we have a community that is
being built that has 600 homes, we will consider contracting
that out and using contract employees to do that. why would we
do that? Because of cost. There is definitely a cost benefit to
using contract employees versus using career employees.
Mr. Sarbanes. Well, presumably you have had major new
developments in the past that require new deployment of letter
carriers before this era of contracting out. The decision was
made to have the traditional work force handle that.
Mr. Potter. Well, let me just use data. Today, 2 percent of
all deliveries in America are made by contract employees,
generally highway contract route employees. Last year we had 6
percent of new deliveries went to contractors versus craft
employees of the U.S. Postal Service. Again, when you look at
this as a business model--and I grant that we are a service--
but you also look at cost factors, and now a bar that has been
raised that we have never had, which says that we have to keep
costs under inflation for all classes of mail, bottom line is
we are trying to comply with the new law. So, as part of that
strategy, we have to look at all of our costs, what we pay for
any product, any service that we get, and we have to consider
what is reasonable going forward.
Mr. Sarbanes. I see my time is out, so I just wanted to
followup real quick on one point you made about what happened
in Chicago. You said that the staffing levels were not at the
authorized levels, and that came to your attention. When it
came to your attention, then you moved to respond. I am just
curious why the local manager would have been able to depart
from the authorization mandate on the first instance.
Mr. Potter. Well, we don't operate with--mail delivery is
not an exact science, so the fact that somebody would say hey,
I am going to make an attempt to try to improve productivity,
and that was a rationale for lack of hiring, that is all well
and good if they assess the risk and the risk is to maintain
service, I mean, we will lose service. Once you lose service
then, we stepped in and said hey, you have to bring your
staffing levels up. But, believe me, there is much more in play
in Chicago than just city carrier staffing levels. There are a
whole host of issues that are contributing to the service
decline that we saw, and there will be a whole host of issues
addressed when we turn service around.
Mr. Sarbanes. Thank you, Mr. Chairman.
Mr. Davis of Illinois. Thank you very much, Mr. Sarbanes.
Now, Mr. Kucinich?
Mr. Kucinich. Thank you very much, Mr. Chairman. Thank you
to the panelists. I want to thank all those who are involved in
the Postal Service. I can tell you that in Cleveland, OH, where
I am from, we are very proud of the service that all of the
postal workers give, all those who deliver that mail on time.
The service is excellent, the people appreciate it. I speak not
only on behalf of the people in my area, but I know all across
the country people are grateful for the work that the Postal
Service does.
One of the concerns that I have had brought to my attention
in the last few days relates to what you would know as other
mail and services. According to the GAO testimony that we are
going to receive a little bit later, other mail in this report
includes mail such as magazines, newspapers, and parcels.
According to this chart which has been produced for us by the
GAO, we are finding that other mail provides 6 percent of mail
volume, 22 percent of revenues, and makes an 8 percent
contribution to cover overhead costs.
Now, I understand--and maybe Mr. Blair could be the one to
answer this--that the Postal Service is contemplating a
significant increase in the mailing costs that would affect a
lot of magazines in this country. I am wondering, first of all,
is that true?
Mr. Blair. Well, we recommended a significant rate
redesigned for periodicals class this past rate case.
Mr. Kucinich. When you say ``redesigned,'' is that an
increase?
Mr. Blair. It was an increase. It was an increase. Some
mailers saw decreases in their mail, some saw no increases,
others saw some increases. But it was better reflected to
represent the way that they actually mail and present their
mail today. But you are right that periodicals has been
declining as a part of volume over the last 5 years.
Mr. Kucinich. Now, when you redesign, as you call it, your
rate structure, do you take into account the possibility that
the redesign of that structure could put some of these smaller
magazines that are very price sensitive out of business?
Mr. Blair. We take into account that is part of the fair
and equitable and part of the factors that we consider, so yes,
we do, sir.
Mr. Kucinich. So you are saying you consider it. So then
if, in fact, this could drive people out of business, you have
considered that?
Mr. Blair. Well, we considered that along with the others
that are saying that they can be more efficient. And then if
you have more efficient rates for more efficient ways of
mailing and processing, you want to encourage that, as well, so
we have to balance that against an efficient mail stream, as
well.
Mr. Kucinich. Let me provide some encouragement to you,
sir, as a member of this committee, and that is that part of
the first amendment debates that we have in this country from
magazines and publications of all kinds representing great
diversity of political opinion are enabled and, in effect,
facilitated by access through the mail. To the extent that you
raise the rates and take out of the reach of general
circulation these magazines because of high pricing, you are
proceeding in a way that is actually contrary, I would think,
to the spirit of the Postal Service and to the spirit of the
first amendment which relies on the Postal Service.
I would like your comment.
Mr. Blair. I think that you are right that we should and we
do take into effect the editorial content and the need for
diversity in the periodicals class, but we also take into
effect that the law requires that mailers pay their fair share
cost and that other mailers should not be cross-subsidizing. So
it is a balance of the equities in this case, but we certainly
take into account the factors that you mentioned.
Mr. Kucinich. Well, Mr. Chairman, we well know that there
are cross-subsidies that always go on with respect to the mail
service, and the gentleman has recognized that they are aware
of the effect that their rates would have on some of these
smaller magazines.
Mr. Chairman, I am appealing to you as a member of this
committee to hold a separate hearing on this issue, because
this does relate to the capacity of a free and open debate that
takes place in the diversity of magazines that are out there. I
think it would be interesting to be able to have, as part of
that discussion, the internal communications of Mr. Blair's
office so we could see how this philosophy is reflected that he
has just talked about, is reflected in the workings of their
office, Mr. Chairman.
Mr. Davis of Illinois. Thank you very much, Mr. Kucinich.
Let me assure you that the Chair is, indeed, sensitive to the
issue that you raised, as well as the issue of special classes
of mail, such as mail that is prepared by organizations like
the National Federation of the Blind that is having some
difficulty now with rates or with having to change the
configuration of their packaging. So I would agree with you
that a full hearing on this matter is, indeed, appropriate, and
the committee would be pleased to accommodate your request.
Mr. Blair. And, Mr. Chairman, could I just--
Mr. Kucinich. Excuse me. I am having a colloquy here with
my Chair, if I may. Mr. Chairman, I want to let you know how
much your response is appreciated, not only by me but by people
all across this country who are so concerned that their
particular relationship that they have with a publication that
relates to their political philosophy, and understanding this
could be quite a diverse mix, is going to find an opportunity
for expression before the Chair's committee and at the Chair's
grace. I want to thank you very much for indicating a
willingness to pursue that. Thank you.
Mr. Davis of Illinois. Thank you very much, Mr. Kucinich,
and thank you for raising the issue.
Mr. Blair.
Mr. Blair. Yes, Mr. Chairman and Mr. Kucinich, I think it
is important to note that periodicals as a class I think
receives the lowest markup of any of the classes out there, and
so the Commission has gone to great pains to make sure that we
keep rates and rate shock as ameliorated as possible for that
group.
Mr. Kucinich. I thank the gentleman. And I want to thank
the Chair for his response. Thank you.
Mr. Davis of Illinois. Thank you very much.
We shall now move to Mr. Cummings.
Mr. Cummings. Thank you very much, Mr. Chairman. I, too,
want to thank you for this hearing.
I want to associate myself, since I didn't hear all of the
comments of our panel, with the comments of my distinguished
colleague from Maryland, Mr. Sarbanes. Our main post office
just so happens to be in my District in Baltimore. So often
what has happened is that Democrats have been accused, Mr.
Chairman, of being anti-business, and that nothing upsets us
more than that. Speaking of business, I just want to pick up
where Mr. Kucinich left off.
One of my constituents, who is a businessperson who is
doing an outstanding job, wrote me a letter. I just want to
read part of it to Mr. Blair and others that may want to
respond to this, because I think it brings the issue of
businesses staying in business to the forefront. I, too, want
to thank all of our postal employees for the job that they do
every day. We take it for granted. We take our postal system
for granted, and we should not do that.
According to this letter, which is dated back on October 5,
2006, it says: ``The United States Post Office has proposed
doubling the rate to deliver our product, a product that we
have mailed for 20 years. This increase will devastate our
business and will cause a substantial portion of our 220
employees and 150 temporary employees to lose their jobs. The
United States Postal Service is a monopoly and by law has no
competition. Its business practices are highly questionable.
The United States Postal Service utilizes a piece of equipment
that was designed to pass boxes through regular mail streams.
it allows our box product, boxes holding CDs and others, to be
priced as regular mail instead of a parcel delivery. In the
latest rate case, they have called for removing the equipment
and the favorable rates associated with using it. Our product
has been in the regular mail stream since the 1980's. This
raises multiple questions.'' I am just going to point two out.
``How is it possible that new equipment for sorting mail
cannot meet the U.S. Post Office's specifications for 10 years
ago? Who determined the specs for the equipment? Isn't the Post
Office the largest purchaser of machines that would sort
mail?''
The other question is: ``What other business facing their
well-known troubles would eliminate a line of business?
Included with our boxes is the elimination of CDs and DVDs in
their current packaging. The U.S. Post Office needs more
business and more mailings to cover their fixed costs, not less
business.''
Could you just comment on that, Mr. Blair?
Mr. Blair. I am not aware of the specific case that you
mentioned.
Mr. Cummings. I don't want you to, not necessarily the
specific case, the general--and I do want to hear your answer--
so often what happens is we make our rules in these lofty
places, but the people who are really affected are the people
who have to deal with the rules that we make from day to day.
We go off to Wonder-Wonder Land, but there are businesses that
are still struggling, trying to make it, and it is not easy to
be in business today. So we are trying to figure out how do we
keep our businesses not only surviving but thriving.
You can go on.
Mr. Blair. I think that what you need to realize, and I
think this underscores the fact for need for postal reform. The
current cost of service pricing that we do is intended to
generate revenues that cover the cost for buying that level of
mail service. So maybe for the writer of that letter that you
got the Postal Service's costs may have increased that
dramatically that it costs the Postal Service that much to
carry those packets of CDs or those parcels of CDs. That would
just be my idea at this point. But basically under a cost of
service pricing you ask for the rates that cover those costs.
But under the Postal reform legislation that was recently
enacted with attempted to decouple rates from costs and say
that the Postal Service would be capped at what they can raise
their rates for that class.
I think that will go a long way toward addressing these
problems in the future. While it doesn't do much for your
constituent today, I think in the future it will say that you,
as a businessman engaged in the mail stream, a businessperson
in the mail stream, that you can have usual and predictable
rate increases in the future.
I am not sure that really answers your question suitably,
but it gives you an idea for what the efforts were over the
last decade and where we are going to be moving forward.
Mr. Cummings. Always remember that anybody who has been in
business--I have been in business--a businessperson will tell
you that the most important thing they need is predictability.
They need to be able to figure it out because it affects
everything they do. It affects their budget, how many employees
they take on, the whole bit. And so one of the interesting
things, as I see my time has run out, when we contacted the
Postal Service and said what can we do to help this
constituent, they told us to just tell him to change the
packaging. Well, he didn't have enough time to do that. In the
meantime he sends, and many people, hard-working Americans who
get up at 5 every day, working hard, may very well lose their
job.
Mr. Davis of Illinois. Thank you very much, Mr. Cummings.
We do want to get to our next panel, but I need to ask at
least a question, Mr. Potter.
I mentioned just a moment ago about these categories and
classes of mail, and of particular concern do I have about the
Federation of the Blind, that for a number of years has been
able to get its mail out to its membership and to a category of
individuals who have a certain kind of need, and we have not
been able to work out to their satisfaction, I don't believe,
or to my satisfaction, the ability to assist the continuation
of a process for them. I think part of the problem has been
that it is so specialized until some kinds of adjustments have
to be made.
Mr. Potter. If I could just comment and maybe put
Congressman Cummings' issue into perspective, yes, businesses
need predictability, and that is one of the things I think we
want to make sure that we work out in the new law is work out a
schedule of rate adjustments that would enable them to build
changes in cost, whether up or down, into their budget process.
What happened with this last round of rates was the Postal
Service made a proposal to the Postal Rate Commission at the
time, now Regulatory Commission, and a lot of people budgeted
against those new rates. Using a strict costing model, the Rate
Commission increased the rates for a lot of mailers, and I
believe the nonprofit mailers that the chairman and Congressman
Cummings are talking about are those where they increased the
rates beyond the Postal Service's proposal. They were not
prepared to react. I think they were prepared to mail at our
proposed rates, but not at the increased rates.
So our effort has been to try and keep everybody in the
mail. We don't want people to walk away from the mail, but we
have limited ability to appeal the rates that were given down,
and so that is why we are attempting to work with the mailers
to take what are many times greeting card boxes and convert
them into a flat rate and put them into the mail stream.
The other thing that you are referring to I believe, and I
don't know the specifics, but I will just describe to you what
is going on. We have two different types of machines that sort
flat rate mail, and flat rate is an oversized envelope or a
magazine. We have one that is automated, called an automated
flat sorter 100, that is very productive, and then we had a
machine called the flat sorter 1,000, which was less
productive. Over time, people got a greater discount for making
their mail compatible with the more effective machine.
So what has happened is the mail for the other machine, the
1,000, has dried up. We have gotten our full benefit from that
machine, but as that mail stream declines we are trying to move
people into the more efficient mail stream.
The new equipment that we are planning, the FSS, the one
that will walk-sequence mail, will accommodate that mail, but
in the interim it doesn't, and the rates reflect that change.
So I hope that is a little fuller explanation of what I believe
is going on.
I feel like you, that I am very concerned for those mailers
and I wish we could have known in advance so that they could
have made the adjustments necessary for this fall mailing
season. I recognize the fall is their biggest opportunity to
get vital funds that run a lot of these very, very important
organizations for our society.
Mr. Davis of Illinois. Thank you very much.
Yes, Mr. Cummings?
Mr. Cummings. Fifteen seconds? One of the things, even with
all that has been said, this constituent said, you know, I will
bend over backward, I will lose money, just get them to give me
some time to make this adjustment. Basically, the answer was
no. I mean, you just sat there and said how much you all want
to work with our folks and whatever, and you can bet your
bottom dollar it is just not my constituents and a constituent
in Baltimore. There are business people all over this country.
In some kind of way we have to help these folks, because they
have employees who have to feed families, got to send kids to
school. They have to make a dollar. If there is any way you can
give these folks an incentive, here's a guy who says I feel
like I am getting screwed, but at the same time I will do what
I can to try to work with the Postal Service, and he still gets
a no.
Mr. Potter. I am in your camp. Let me just say, in the
discussion about whether or not we could do that and take
individual classes or people who are most affected by rate
changes--some people got up to a 300 percent increase in rates.
I mean, could we discriminate for them? If we didn't have a
sound reason to delay the rates, I was told it was illegal to
do so.
Mr. Blair. The law would prevent it.
Mr. Potter. So I feel handicapped. Chairman Blair referred
to the new law. That gives us a lot more flexibility to not be
bound by some strict cost regimen and to take into account the
needs of businesses and to transition rates in a graduated form
and to signal to people that these changes are necessary to
maintain our efficiency. What the Postal Service proposed was a
movement to get more money where our costs were greater, but
not the levels that some people experienced.
Again, we were advised by counsel that we had no legal
ability to delay certain rates because of the level of
increase.
Mr. Davis of Illinois. Thank you very much, Mr. Cummings.
Just so I can go home this weekend in peace, Mr. Potter,
could you just outline those plans for Chicago and
recommendations that you have made personally?
Mr. Potter. I have been to Chicago twice, as the chairman
knows, and I have walked the floor. What we are intending to do
is, first of all, make sure that our staffing levels are up for
the requirements so that we can deliver mail in a timely
fashion. We are overhauling every piece of equipment in Chicago
because some of it, unfortunately, was not well maintained. We
are in the process of going station-by-station to look at our
physical plants. Where they are not up to speed for our
customers and our employees, we are in the process of doing
that. In addition to that, we are looking at the exchange of
mail between the multiple facilities in the Chicago metro that
exchange mail for Chicago residents. It is largely a busy hub,
Irving Park Facility at the airport and downtown Curtis Collins
facility, all new facilities, state-of-the-art, and ones that
we need to reconfigure in order to serve the people better.
In addition to that, we are going on the street with 75
people who are going and checking our address data base to make
sure that what is in our system will enable us to sort mail
properly and in the right order for our city letter carriers.
Those are just kind of the higher-level things we are
doing, but, bottom line is we are going to reconfigure that
network, we are going to put fixes in place that will not just
have a flash in the pan for Chicago. I was asked by a reporter
when do you think Chicago's service will begin moving up, and I
said 6 months, but the true test is 2 years from now, not 6
months from now. We are not going to walk away from Chicago. We
are going to get it fixed.
I was the manager of Capital Metro operations when
Baltimore was fixed, when Washington, DC, was fixed, so I
believe I know a little bit about how to get this done, and you
have m you personal commitment that I am going to be there
until it is fixed.
Mr. Davis of Illinois. Thank you very much. I have taken
some time, so, Mr. McHugh, do you have any final questions?
Mr. McHugh. That is very gracious, Mr. Chairman, but we do
have three other panels and any other questions I believe we
can submit for the record.
Mr. Davis of Illinois. Thank you very much.
I want to thank all member of the panel. I would just end
this discussion by indicating that I am somewhat concerned
about the new concept of contracting out and what that is going
to really mean and how we defined it and some of the rationale
that has been explained for it. I am sure that is something we
will have further discussion about and try and see if we can't
reach an amicable conclusion to it.
Thank you, gentlemen, very much. We appreciate your being
with us.
And I would like to ask if our second panel will come and
be seated, Mr. David Williams and Ms. Katherine Siggerud.
We want to apologize to all of those who have come to
participate and couldn't find a seat. We will see if we can't
make absolutely certain that when room assignments are made
that everybody around here will know that postal issues have
come front and center, and that we have to make additional
space.
Mr. David Williams was sworn in as the second independent
Inspector General for the U.S. Postal Service on August 20,
2003. He is responsible for a staff of more than 1,100
employees located in major offices nationwide that conducts
independent audits and investigations, a work force of about
700,000 career employees, and nearly 37,000 retail facilities.
Ms. Katherine Siggerud is a Director in the Physical
Infrastructure Issues Team at the Government Accountability
Office [GAO]. She has directed GAO's work on postal issues for
several years, including recent reports on delivery standards
and performance, process and network realignment, contract and
policies, semi-postal stamps, and biological threats.
We thank you both. Of course, as the usual custom is, we
swear all witnesses in.
[Witnesses sworn.]
Mr. Davis of Illinois. The answer is in the affirmative,
yes, and we thank you so much.
You know the normal approach, and I won't necessarily go
through that, but we will go right to Inspector General
Williams and proceed.
STATEMENTS OF DAVID C. WILLIAMS, INSPECTOR GENERAL, U.S. POSTAL
SERVICE; AND KATHERINE A. SIGGERUD, DIRECTOR, PHYSICAL
INFRASTRUCTURE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
STATEMENT OF DAVID C. WILLIAMS
Mr. Williams. Thank you, Mr. Chairman and members of the
subcommittee. I appreciate the opportunity to appear today to
discuss the work of my office and my assessment of Postal
Service challenges.
When I came to the Postal Service in August 2003 the OIG
lacked the confidence of the Postal Service and Congress and
the public. The past 3 years have been years of progress and
accomplishment in restoring confidence by fundamentally
strengthening planning and engaging stakeholders in clarifying
our statutory role. We are now a performance-based organization
aligned to mirror postal functions.
Our audit resources now focus on network optimization,
revenue assurance, cost reduction, mail delivery operations,
and data systems reliability. Our investigative resources focus
on contracting, false disability claims, internal mail theft,
and embezzlement. These changes have resulted in substantial
increases to productivity.
Since I arrived, the audit staff has increased monetary
benefits by 500 percent to over $441 million. During the same
period, our investigators increased arrests from 6 to 277, and
administrative cases referrals from 8 to over 1,900, with cost
avoidance and fines of over $110 million. Last, new
jurisdictional responsibility and resources were transferred
from the Postal Service to the OIG.
The Postal Accountability and Enhancement Act represents
the most significant modernization of postal governance in 35
years. Much is needed for the successful implementation of the
act, and I assure you that my office is prepared to fulfill its
new responsibilities.
From my comprehensive statement, I would like to focus on
two areas. The first is the network optimization plan, which is
going to be challenging, given the ongoing electronic
communications revolution and the unpredictable ways mail
volumes and mix are changing. Some mail is declining, some is
increasing, and some is establishing a symbiotic relationship
with electronic mail.
Streamlining efforts are occurring inside an environment of
significant change. The Postal Service is on the edge of a $600
million annual savings opportunity with the new flats
sequencing system, set to repeat the significant advance made
when letters were first sorted by carrier route.
The Postal Service is also aggressively seeking cost
opportunities with mailer discounts to keep large amounts of
mail outside of upstream processing plants.
Stricter submission requirements will better align mail
with postal equipment.
Last, we must consider enterprise resilience in the event
of major disruptions. Natural disasters or acts of terrorism
highlight the value of maintaining some redundancy if
operations are disrupted or destroyed.
These variables, working alone or in combination, require
an agile streamlining effort, classic models for large-scale
projects that feature elaborate sequencing and require
thousands of alterations when the model changes may not work
well. The planning model needed is not that of a static
blueprint, but what one might expect from an order of battle
plan. The Postal Service needs to prepare and plan as best it
is able, while understanding the change will occur the moment
they step on to the field.
Once the build-down begins, it is essential that it
continue its philosophy to avoid protracted, anemic staffing of
an oversized network.
Financial viability is the second area I would like to
focus on. In the last 4 years, Postal Service actions have
taken it from over a $600 million net loss to a $900 million
surplus, while retiring $11 billion debt. The success of the
Postal Service's transformation efforts and savings from
unnecessary CSRS payments are responsible; however, total labor
costs are continuing to increase, from over $51 billion in 2001
to over $56 billion in 2006, despite significant staff
reductions.
The Postal Service needs to continuously pull excess work
hours from its mail processing plant as it introduces more
automation and more work share discounts. Cross-reduction
opportunities in delivery are available, also. Most delivery
work hours are spent on the street without direct supervision.
Management and control efforts have been expensive and not very
effective. The Postal Service should seek new work rules that
incentivize performance and that are self-policing.
The act imposes some transition costs. In particular, the
Postal Service must make substantial yearly payments to the
Retiree Health Benefit Fund. These payments will help secure
long-term financial viability, but they are large expenses in
the short term.
The new law also provides increased pricing flexibility,
but to keep prices below the new caps aggressive efficiencies
must address network streamlining and labor costs.
My office stands ready to support postal efforts and we are
cognizant of our responsibility to continue to keep Congress
fully and currently informed.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Williams follows:]
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Mr. Davis of Illinois. Thank you very much.
We will go to Ms. Siggerud.
STATEMENT OF KATHERINE E. SIGGERUD
Ms. Siggerud. Thank you, Chairman Davis and members of the
subcommittee. Thank you for your invitation to testify at this
first oversight hearing for the U.S. Postal Service since the
postal reform law was passed.
To begin, I want to recognize the Congress' efforts in
passing this law that provides tools for establishing an
efficient, flexible, transparent, and financially sound Postal
Service, one that can more effectively operate in an
increasingly competitive environment.
My remarks today will focus on four areas: first, why GAO
recently removed the Service's transformation efforts and
outlook from GAO's high-risk list; second, the Service's
current financial condition; third, opportunities and
challenges facing the Service today; and, finally, issues and
areas for continued congressional oversight.
First, when we placed the Service on our high-risk list in
2001, we stated that a structural transformation was needed to
address the financial, operational, and human capital
challenges that threatened its ability to deliver on its
mission. We use this list to bring attention to issues that we
think need action by the administration and the Congress. We
decided to remove the Postal Service from the high-risk list
because of significant changes that occurred. Specifically, the
Service issued a transformation plan in 2002 and demonstrated a
commitment to the plan by cutting costs, improving
productivity, downsizing its work force, and improving its
financial reporting.
The 2003 law reduced the Service's payments for pension
obligations, allowing it to achieve record net income, repay
debt, and delay rate increases.
Elements of the 2006 postal reform law that are responsive
to our concerns include: first, a framework for modernizing the
ratemaking process; second, an opportunity to preserve
affordable universal service by reassessing customer needs and
identifying efficiencies; third, recognition of the Service's
long-term financial obligations by pre-funding retiree health
benefit obligations, resulting in short-term costs but long-
term benefits; and, fourth, enhanced transparency and
accountability.
The Service's financial condition will be affected by the
postal reform law and the upcoming rate increase. The law has
better equipped the Postal Service to control its costs and
operate on a financially sound, businesslike manner than at any
time since the Service's inception. It places the Service on
the path to eliminating multi-billion-dollar retiree health
obligations, which in turn provides an opportunity to better
position the Service financially in the long term.
Changes to Postal Service finances this year, besides the
pre-funding I have already mentioned and the transferring of
the military pension, include expending escrow funds and
eliminating future escrow payments and eliminating certain
annual pension funding requirements.
The position expects to lose $5.2 billion this year,
largely due to a one-time expending of the $3 billion escrowed
last year and then transferred this year to the Retiree Health
Benefit Fund, and the additional contribution to this fund the
Service must make. The Service plans to borrow $1.8 billion,
$600 million more than it had originally planned for this year.
Nevertheless, other expenses and revenues have tracked
closely to projections. Factors that could still affect the
Service's finances are the impact of the recent rate increase,
changes in fuel prices, and resolution of certain labor
agreements.
Although we removed the Service from our high-risk list,
there are continuing and new challenges. These include:
generating sufficient revenues to cover costs as the mail mixes
changes; controlling costs, particularly for compensation and
long-term health benefits; and improving productivity while
operating under a price cap structure; promoting the value of
mail while providing affordable, quality service; and
establishing mechanisms to measure and report performance;
providing useful and reliable financial data; and managing the
Service's infrastructure and work force to respond to
operational needs and financial challenges.
The reform law provides opportunities, tools, and
flexibilities to address these challenges. A series of new
regulations, frameworks, and studies over the next few years
for both the PRC and the Service will be key to implementing
this law.
Finally, with regard to potential areas for congressional
oversight, two particularly important areas are ensuring the
Service's future financial condition remains sound and ensuring
that the new legal and regulatory requirements are carried out
in accordance with the intent of the postal reform law.
Other areas that warrant continued monitoring include:
first, the impact of the upcoming rate increases on mail
volumes, mailers, and the Service's financial condition;
second, actions to establish the new price-setting framework;
third, the Service's ability to operate under a price cap,
while some of its cost segments are increasing above the rate
of inflation; fourth, actions to establish modern service
standards, monitor delivery performance, and the Service's plan
for meeting those standards; and, fifth, the Service's ability
to provide high-quality delivery service as it takes actions to
reduce costs and realign its infrastructure and work force.
The successful transformation of the Postal Service will
depend heavily upon innovative leadership by the Postmaster
General and the chairman of the PRC and their ability to work
effectively with their employee organizations, employees, the
mail industry, Congress, and the general public.
Mr. Chairman, this concludes my statement. I am happy to
answer any questions the subcommittee may have.
[The prepared statement of Ms. Siggerud follows:]
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Mr. Davis of Illinois. Thank you very much. I thank both of
you for your testimony.
Mr. Williams, you indicated that there had been a
significant increase in the number of arrests. I believe you
said from 6 to now more than 200?
Mr. Williams. Yes, sir.
Mr. Davis of Illinois. To what do you attribute this
increase? What is causing it?
Mr. Williams. We enlarged the emphasis on enforcement upon
my arrival. As I said, the office, as I took it over, was not
particularly productive either on the audit side or the
investigative side, so that was one of the factors. We then
received a substantial amount of new jurisdiction, and I think
that is probably the major cause for the enlargement of the
program from the Postal Service. That was as a result of a
long-term transition that had been occurring from the
Inspection Service to the Office of the Inspector General for
things such as mail theft. Of course, mail theft is probably
the prime example.
Mr. Davis of Illinois. So you are saying that one can
actually expect, when there are allegations of wrongdoings,
that there is going to be an investigation and a finding and in
all likelihood something could and most likely will be done?
Mr. Williams. Yes, sir. We think the level of
accountability for misconduct has substantially increased, so I
would agree with that.
Mr. Davis of Illinois. Thank you.
On October 20, 2005, I, along with 58 of my colleagues,
sent a letter to the Director of OPM supporting Medicare
subsidies for the Postal Service. The Center for Medicare and
Medicaid Services in December 2005, denied the request of the
Postal Service for receipt of the Medicare Part D retiree
prescription drug subsidy authorized under the 2003 Medicare
prescription drug modernization law. The CMS stated that its
denial was based upon its belief that OPM, as the administrator
of the Federal employee health benefits program, was the
sponsor of the Postal Service's retiree prescription drug plan,
and that the Postal Service was not entitled to the subsidy.
The value of the prescription drug subsidy for the Postal
Service is significant. It is approximately $250 million
annually. Of course, it would help to reign in operating
expenses, which are financed through postal rates.
I give that background information to ask this question:
what requirements does the Postal Accountability and
Enhancement Act impose on your office, and how are you prepared
to meet those requirements?
Mr. Williams. Thank you, Mr. Chairman.
First of all, on the background material that you supplied,
we were very much in agreement with your office and the other
Congressmen. We think there was a basis, and we think that the
Postal Service, in many ways, needs to and welcomes being
thrust into an arena ruled by market forces, but we think that
if they are not given an opportunity because their arms are
pinioned at their side by regulation, we really don't have a
chance. And so we did not feel that was a very positive finding
on the part of OPM and my office.
With the coming of the act, we received several new
responsibilities. Probably the one that is going to take the
most of our time is auditing data systems that produce figures
used by the Postal Service and by the postal regulator to
establish rates. There have been some problems with those in
the past, and we are trying to focus on the ones that we know
are problematic first. That is going to require a new body of
work. There is a single audit on workplace safety and accident
reduction that comes to us, and we also are looking at some
reforms that were made to the administration of rate deficiency
assessments.
Last, the responsibilities that come to our office are
significant with regard to Sarbanes-Oxley. We will be joining
with the external auditor in a substantial additional amount of
work to bring us into compliance with section 404 of the
Sarbanes-Oxley Act.
Mr. Davis of Illinois. Thank you very much.
I see that it was very timely, because my time has just
expired.
Mr. McHugh.
Mr. McHugh. Thank you, Mr. Chairman.
Welcome to both of you. Thank you for being here.
Mr. Williams, just to kind of expand a little bit on what
the chairman's last inquiry was directed toward that, is your
new role under the new regulatory system. Do you have any
concerns or complaints? I understand the challenges, as you
describe them, both in response to the chairman and also in
your testimony, but as you have taken your first steps into
this new process what troubles you, if anything?
Mr. Williams. I have a high level of confidence. I would
have been very troubled a couple of years ago. We have had some
years to get ready. The act has some really beneficial
provisions. We are anxious to play our part in that. I don't
have any concerns about resources or the skill levels to
address our portion, and we are anxious to begin.
Mr. McHugh. And so far so good. That is great.
Let me flip over here to your network optimization plan. do
you have a time table for the implementation of that?
Mr. Williams. I believe the act requires that the Postal
Service present a plan within 18 months.
Mr. McHugh. That is the limit.
Mr. Williams. Yes, sir.
Mr. McHugh. Are you configuring yourself within that, or is
that what you plan to use?
Mr. Williams. I am uncertain as to what the Postal Service
intends to do with regard to bringing a plan together. We are
working daily in advance of that to conduct efficiency reviews,
to look at one of the enabling studies for the plan is the area
of mail processing plans. We have begun looking at those to try
to examine how well they work and to make improvements to those
as one of the primary tools to right-sizing the network. But I
have not been advised as to the completion dates for their
plan.
Mr. McHugh. OK. Thank you, sir.
Ms. Siggerud, the GAO has a long and very productive
relationship with this subcommittee and with the process of
postal reform, of which I know the chairman and all of us are
greatly appreciative. When you placed the Service on your watch
list, that was a big deal.
Ms. Siggerud. Yes.
Mr. McHugh. I have no doubt you did not go about that
easily.
As I reviewed your testimony, the report at least by my
reading seems awfully darned positive in that the concerns that
you had seem for the moment to have been met. Was this a--this
is not a good phrase to use in this town right now, but was
this a slam/dunk decision in your view, or was it a position
that you felt continues to concern you deeply?
Ms. Siggerud. Mr. McHugh, it certainly was not a slam/dunk.
We had a lot of in-depth discussions internally in GAO before
making the decision to take the Postal Service off the high-
risk list.
Let me just mention a few things that tipped the balance
for us. As I mentioned in my short statement, really an
important purpose of the high-risk list is to galvanize action
by the agency that is put on the list, as well as by the
Congress, in paying attention to the issue. The fact that the
transformation plan did happen and the Postal Service stuck to
it was important action from the agency's point of view. Both
the 2003 and the 2006 acts, which provided a different
financial footing for the Postal Service, were also very
important.
So the fact that we saw action, both by the Congress and by
the Postal Service, along with a significant change in the
financial situation of the Postal Service, for example, with
regard to cash-flow and with regard to debt levels, along with
the very important commitment that management made to reducing
costs and improving productivity, that is what really tipped
the level for us. However, we think there are a number of
concerns that the committee needs to continue to provide
oversight on, as I outlined in my statement. Certainly, if they
continue or if financial problems do reappear, we would
reconsider the decision.
Mr. McHugh. Thank you.
Maybe I can squeeze one more in here on the yellow light
here. Your written testimony, on page 3, talks about the
Service's plan to borrow $1.8 billion this year, which will
push its outstanding debt to $4 billion. You didn't
characterize that orally. Is that a concern? I mean, that is a
lot of money and it is of concern--
Ms. Siggerud. Yes.
Mr. McHugh [continuing]. But would you consider that within
the parameters of normal operating procedures, or is this a
particularly troubling aspect for you.
Ms. Siggerud. It is a slightly troubling aspect. We do
consider it generally within what the Postal Service can afford
to borrow, but it is an issue to watch going forward as the
Postal Service continues to, as the PMG so ably explained, face
both revenue and cost challenges.
Mr. McHugh. Thank you both.
Thank you, Mr. Chairman.
Mr. Davis of Illinois. Thank you very much, Mr. McHugh.
Mr. Sarbanes.
Mr. Sarbanes. Thank you, Mr. Chairman.
This might have been a better question for the last panel
or the ones to come, but if you were here you heard that I am
intrigued by the role that the U.S. Postal Service can play in
times of crisis, in terms of being part of a response effort. I
mean, if you are the Department of Homeland Security you are
looking around for a delivery system, a distribution system, a
people-to-people system that can be there in a time of crisis.
There it is, I mean, really, in a structure that you can't
compete with, I mean, there is nothing else out there like
that. I know that DHS and other departments are working with
the Postal Service to get that kind of perspective forwarded.
I would just like to get your perspective on that, and I
would like to get your perspective on, I mean, we talk a lot
about how the rate structure needs to cover the cost and the
Postal Service, but I would imagine that, as this other
dimension of what the Postal Service can provide is more
fleshed out, that there ought to be an expectation of resources
that can be brought to bear. I don't know if that is something
that you have talked about, thought about, have any reaction
to, but I would be interested in the response.
Mr. Williams. There were a number of instances in Hurricane
Katrina where the mail carriers were just on their own the
lifeline for a number of residents that were isolated and
terrified. Those were very all-American stories, and they did
prove what a powerful set of muscles can be flexed by such a
large distribution system, and one that is so familiar to the
American public.
I know that there have been some discussions. I am unaware
of whether some of them are classified or not with regard to
the role that the Postal Service could play in the event of
further natural disruptions or acts of terrorism, but it is a
very good point and it is a very powerful recommendation.
Mr. Sarbanes. Ms. Siggerud.
Ms. Siggerud. Yes, Mr. Sarbanes. We have looked at this
issue from a couple of different perspectives. They are sort of
narrow, but all might add up to an overall picture.
We did, in the course of preparing the Comptroller General
for some overall testimony on Hurricane Katrina, look at what
the Postal Service was able to do, both in preparation for the
hurricane, and then in response to it, and I think that the
Postal Service came out looking very good in that particular
instance.
We have also looked at the Postal Service's role in
responding to the bio-threat issues, the response to anthrax,
as well as a recent attack that occurred. We have made some
recommendations to the Postal Service in terms of improving
both its training of employees and managers, as well as its
response. The Postal Service has acted on those
recommendations.
Our most recent work actually looked at a false anthrax
attack that happened at the Department of Defense in 2005, and
our report--to some extent the Postal Service was involved in
that because it was believed that this anthrax had come through
one of the processing plants right here in the District of
Columbia. The Postal Service's response, when it did finally
get that news, was timely, it was exemplary, and it was useful,
put the Department of Defense to shame in comparison.
Mr. Sarbanes. Thank you. My question is, in part, a caution
because if, over time, the Postal Service and the employees of
the Postal Service are viewed as offering an opportunity to be
part of a kind of response network, then it is critical that
not just be lain on top of the existing work force without the
resources to support it and the training. I am sure that the
organizations who represent those employees will be quite
insistent on that point.
Thank you, Mr. Chairman.
Mr. Davis of Illinois. Thank you very much, Mr. Sarbanes.
Mr. Cummings.
Mr. Cummings. Thank you very much, Mr. Chairman.
Ms. Siggerud, am I pronouncing that right?
Ms. Siggerud. Siggerud. Yes.
Mr. Cummings. Siggerud. Ms. Siggerud, you note in your
testimony that several unanswered questions remain with regard
to the growing number of career employees that will be leaving,
retiring in the next 5 years, 113,000.
Ms. Siggerud. Yes.
Mr. Cummings. What do you recommend that the Service do to
address that issue? That is a major issue?
Ms. Siggerud. Well, it is a major issue, and it is one that
I will confess we haven't looked at in great detail, but I
think it would benefit. I would be glad to work with the
subcommittee on that issue.
I think the real opportunity to address it comes in the
fact that the Postal Service must prepare a plan and provide it
to the Congress within the next 18 months having to do with
work force realignment issues. The Postal Service has a
complement planning approach. It has a succession planning
approach. I think that the plan will offer the Postal Service
the opportunity to explain how it will use those tools, and
perhaps other tools, to respond to the very issue that we raise
in our testimony.
Mr. Cummings. One of the things that our overall committee,
Government Reform, has tried to address over the 11 years that
I have been on the committee is how do we get young people to
come into Government. We created a program where we pay back
some of their student loans and just trying to figure it out.
We offer those people who are within ridership distance of the
Capital certain incentives, passes or what have you, to get to
work, or whatever. But certainly we are talking about the
entire country here.
I am just wondering, this is not going to sneak up on us,
because we know it, but for some reason so often what happens
in this country is we know so, and it still sneaks up on us,
and then we are caught in a situation where we are just in bad
shape. When I think about 113,000 people, that is a lot of
folk.
Ms. Siggerud. Yes.
Mr. Cummings. So I am just hoping that this will be like a
super-top priority so that we can make sure that people are
replaced, but there is another piece to that, too, and
certainly that is retention, trying to make sure we keep folks.
I remember a few years ago there was a concern about the
climate in our postal system that perhaps some postal employees
did not find the climate to be one that made them feel happy. I
can't think of a better way of saying it. I am just wondering
if we have looked at those issues at all or if we are going to.
Ms. Siggerud. Some of my colleagues in the Government
Accountability Office, specifically those who look at the
Federal work force issues, have identified the very issue that
you are talking about, Mr. Cummings. It has, on occasion, taken
the Federal Government too long to hire young folks. It is
complicated to hire the kind of young employees that you are
talking about. I think that some of the glamour perhaps of
Government service has waned in the last few years, and there
are a number of efforts underway in agencies across the country
to try to deal with those issues.
I will have to admit that I am not familiar with exactly
how the Postal Service is dealing with those issues, but I
would certainly be glad to submit some of those other reports
that I mentioned to you and your staff to see if they are of
use.
[The information referred to follows:]
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Mr. Williams. In addition, Sir, my office does quite a bit
of work with regard to concerns expressed about hostility in
the workplace or hostile workplace or harassment occurring
inside it. We try to evaluate those as best we can and then
work to assure that management takes action and advises us of
that action and we evaluate it.
When it is particularly serious, outside third parties are
brought in to evaluate and to conduct a get-well plan, and it
is typically that where it is serious we go in after that has
had a time to work and assure that it has taken hold.
Mr. Cummings. Do we ever get to a point where we figured
out, I mean, was there ever a threat that sort of ran through
these incidents since you have done some investigating and
whatever? I guess I am looking more at certain things that you
can't prevent, but certainly, I mean, did you ever conclude
that maybe there were certain climates, certain specific work
conditions, things of that nature that might bring about those
kinds of incidents?
Mr. Williams. The ones that come to mind have not had a
kind of golden thread that run through them. They have been
personality based, and they have involved a senior manager, a
set of senior managers that needed to either be removed or
undergo very serious alterations in their conduct and behavior.
There are instances in which very strong action was taken in
response to those, but beyond that I haven't found anything
thematic as I have heard about that have occurred before my
arrival. I haven't seen evidence of anything since I have been
there.
Mr. Cummings. Mr. Chairman, I see my time has run out, but
I just have one question.
My office receives quite a few complaints from woman and
minorities about moving up.
Mr. Williams. Yes.
Mr. Cummings. I am just wondering how we are doing, and how
do you all monitor that. Just curious.
Ms. Siggerud. Mr. Cummings, we have done work with this
committee in the past, but I will tell you that work is old and
was toward the end of the 1990's, so I don't have updated
figures for you.
Mr. Cummings. In other words, you don't have them here
today or you don't have them?
Ms. Siggerud. I am sure it is something that we could
obtain. It is not something that we are doing current work on,
so I don't have them.
Mr. Cummings. I would appreciate it if you would get that
information for me. The reason why I say that is we are in a
diverse society.
Ms. Siggerud. Yes.
Mr. Cummings. I want to make sure that something like the
Post Office, that we have everybody at the table--women,
minorities. How soon do you think you could get me something
updated as to say where we are?
Ms. Siggerud. I am assuming we could request this
information from the Postal Service fairly quickly, Mr.
Cummings. I would want some time to analyze and make sure that
we can understand it.
Mr. Cummings. OK. Well, I would appreciate it if you would
let me know when you can get it to us so that I can hold you to
it.
Ms. Siggerud. OK. We will be in communication.
Mr. Cummings. All right. Thank you.
Mr. Davis of Illinois. Thank you very much, Mr. Cummings.
I might just add that our next hearing on May 10th is going
to be on diversity within the Postal Service, and so we will be
looking with you for that information.
Mr. Cummings. Would the gentleman yield?
Mr. Davis of Illinois. Yes.
Mr. Cummings. Do you think we could get it by then, May
10th? That would be wonderful.
Ms. Siggerud. Mr. Cummings, we will do our very best. I
believe that, in fact, the staff of the subcommittee has been
in contact with other GAO staff who are part of this Federal
work force issue to discuss this very issue, so what I would
like to do is go back to my office and understand exactly what
they are doing and what they have agreed to supply for that
hearing.
Mr. Cummings. Yes. Mr. Chairman, the only reason why I
raise that is that when you have been around here for a while,
what happens is you try to figure out how do you get the most
out of these hearings.
Ms. Siggerud. I understand.
Mr. Cummings. I would hate for that report to come, like, 3
days after the hearing, when we could have it in our hands. It
may very well be that the things that are being provided may be
the very items that we are talking about. I don't know.
Ms. Siggerud. I see the subcommittee staff nodding back
here.
Mr. Cummings. OK.
Ms. Siggerud. So my colleagues have been in contact with
them about providing some information in preparation for that
hearing.
Mr. Cummings. All right. Thank you.
Mr. Davis of Illinois. Thank you very much.
Delegate Norton, did you have questions?
Ms. Norton. Thank you, Mr. Chairman.
We have had huge issues that have come to light now that we
have begun to do oversight as to contractors, huge and horrible
issues raised apparently because nobody has figured out how to
hold contractors accountable in the same way that you hold
agencies accountable. If they could figure that out, maybe
these controversies wouldn't continue to arise.
I actually have two questions. One has to do with this
notion of contracting out letter carrying services. I need to
know to what degree that is happening, whether we are going to
get the same kind of complaints that we do about people working
side by side in Federal agencies without cost accountability
because they are contracted out and we don't do the same kind
of oversight, at least no one has ever shown us that they do.
To what extent is that happening that if it is a ``new delivery
area'' it can be contracted out? I mean, that way I could see,
with the way in which we build suburbs, you could contract out
half the Post Office. What effect would that have on the
continuing Postal Service that we now have? Is that what we are
looking at now? Is that the way we are going to save money?
That is one question.
The second question would be what I cannot figure out and
what I hope somebody looks at, and that is what, at bottom, the
real problem of the Post Office is. Is it the rapid increase in
technology or does it have anything to do with rate increases
that, of course, periodically occur?
First, would you educate us on contracting out? Is it now
beginning of ordinary letter carrying services? To what extent?
If it is to save money, how would accountability be built in so
that this committee isn't faced with what the overall committee
has been faced with? Where is it occurring? Who is looking at
it? Who is keeping track of it? And who are the contractors?
Mr. Williams. The previous panel provided a lot of the
statistics with regard to the current picture. It sounds as
though there wasn't much contracting occurring to date with
regard to letter carriers that delivered mail.
With regard to their accountability--
Ms. Norton. Could I ask you, as experts, given the fact
that we have seen the Federal Government claim that you save
money by contracting out, all without any accountability on
where the money is saved, with huge controversies concerning,
in fact, the savings, I need to know whether or not the Post
Office is headed toward--after all, it is in trouble. It has to
find ways to modernize. Is it going the way of Federal agencies
to do more and more contracting out, in your opinion, and would
that, in fact, be one way the Postal Service might say it is
saving money?
Mr. Williams. I think that is a very large topic. A good
place to begin might be that I do believe that the cost for the
small number of delivery contractors has been lower than the
cost of careerists, but I believe that we are getting a false
signal on that, because they are in very rural areas. I think
that if we begin contracting in urban areas we would discover
that much of that disappears.
Ms. Norton. Mr. Inspector General, are you or anybody else
keeping track of the actual cost of contracting out this
service versus the cost of the in-house service?
Mr. Williams. We have reviewed the cost data, and it shows
that, in the area that I just described, we are getting a
reading that it is less expensive, but I believe most of that
is accounting for the fact that they are in areas that are very
rural and the cost of living is very low.
Ms. Norton. So if, in fact, it were brought, let us say, to
suburban areas around the District of Columbia where there are
many new developments, where you could collar new development
and contract it out, do you expect that there would be any
differences?
Mr. Williams. We are operating in unknown territory with
that regard. A contract has never been offered and responded
to, but I am of the suspicion that the cost of living is going
to cause a lot of the savings that we have seen disappear when
it comes to urban areas.
Ms. Norton. Do you have any opinion on that?
Ms. Siggerud. Ms. Norton, I think your first statement was
exactly right. You said you are seeking facts, and what we have
heard today from the Postmaster General is that this
contracting out procedure is a routine business matter that
provides important flexibility. But I have also seen the press
from the employee organizations saying that this contracting
out concept is increasing and that there are certain negative
consequences from it.
I think until we get in and actually look at those data and
understand the extent to which this is happening and what the
implications are, I can't provide you an overall view on this.
Ms. Norton. Mr. Chairman, if I may say, this provides us
with a rare opportunity before contracting out becomes a
settled cultural matter to, in fact, ask the appropriate
officials to report to us on the effect of it so that if it is
to be done, contracting out is the way Government operates more
and more, so I am certainly not here to say that the Postal
Service, which already does a fair amount of contracting out,
shouldn't do it. What I am here to say is that we have seen
horrendous, horrific, once insight began to be done,
information of waste of taxpayers' funds. And exactly what you
said was said to us, it costs less, so what are you worried
about.
One of the ways to, in fact, perhaps reform that process as
it begins is to get regular reports on its accountability.
Finally, I just want to know. I worry about the Postal
Service. I know it has to have rate increases in order to keep
up with what is expected of it. I also see technology, and it
is hard for me to understand how businesses can somehow stay
ahead of the technology, and then I see businesses that are
direct competitors of the Postal Service, and obviously more
facile because they are private businesses, and wonder whether
or not we are in a race against time with rate increases
perhaps turning people in to other forms of communication, or
if there is some real way to head that off so that they stand
on at least the kind of parallel footing that the Congress
would envision. Is technology the problem for the Post Office?
Is rate increases the problem for the Post Office? Is there any
way for the Post Office to truly compete with private business,
which, in fact, rapidly gets a hold of this technology, or
other people not even in the Postal Service business whose
technology is then used by the general public while, of course,
we insist and will always insist that the mail be delivered
every weekday out there.
I just want your honest assessment if we are in a holding
action here or whether this is the kind of service that can
keep up with the changing technology.
Mr. Williams. I am fairly optimistic with regard to the
ability of the Postal Service and the Postal Service working
with its customers and unions and management associations to
remain financially viable. I think the Congress has also done
some to help that.
The greatest need we have now, in my view, is the right-
sizing of the network. It is much too large. It is going to be
complex to build down because it is a very changing
environment, but a lot of promise in savings remain there.
With regard to technology, I think there is some very
important technology that has been deployed and that is about
to be deployed that is going to serve the bottom line in the
Postal Service very well for the coming years.
I am not pessimistic, but I do believe that we do need to
right-size the network, and that has begun. There has been some
progress and some of it has been impressive, but it needs to
continue and complete itself.
Mr. Davis of Illinois. Thank you very much, Delegate
Norton.
Mr. McHugh. Mr. Chairman.
Mr. Davis of Illinois. Mr. McHugh.
Mr. McHugh. You have been very gracious with your time, and
I was wondering if I may impose upon that grace.
Mr. Davis of Illinois. Yes.
Mr. McHugh. Ms. Siggerud, did I understand you to say that
you are going to be looking at this issue of contracting out?
Ms. Siggerud. We do not currently have a request from a
Member of Congress to do so, but would, of course, respond to
one if we received one.
Mr. McHugh. Mr. Chairman, if I may, this is a very complex
situation. I don't want to suggest I know the answer here, but
you clearly have established highway contract routes. As
someone who lives in an area where those are common, they are
wonderful. Those folks do a great job. And to the extent those
need to be expanded, I definitely think we should.
I think the issue here, though, is there is a new
contracting out process, contract delivery services, and they
are not always in the traditional less-urban areas. They may be
fully justified. There are some, or at least one I know in New
York City in the Bronx. I just think, as we have heard other
panel members suggest, that it is an important issue. There are
provisions in the contract, the basic labor agreement, which do
apply to this and have been around for a long time, but maybe
times have changed again.
I just think, if I may suggest respectfully, Mr. Chairman,
in this subcommittee's oversight capacity it might be helpful
to bring some clarity and perspective as to what the
circumstances are, what, if any, new trends are out there, and
what that means, so that we can conduct a proper oversight and
so that decisions can be made that are the best for the postal
customer, the best for the Postal Service, but I would argue,
as well, serve the men and women that work so hard to make this
Postal Service work appropriately, as well, if I could just
suggest that, Mr. Chairman.
Mr. Davis of Illinois. Let me thank you for your
recommendations and suggestions, Mr. McHugh. I think all of us
recognize that this is a contentious issue and it is one that
the committee will thoroughly explore. We looked at what has
already been put into agreements relative to collective
bargaining, relative to areas of work, and any time there is a
new thrust, then I think that has to be scrutinized very
carefully.
I am one of these individuals who believe that we all have
certain kinds of rights, that labor has certain kind of rights,
management has certain kind of rights, but I also believe that
my rights end where the next person's rights begin, and that we
have to do everything in our power to protect and promote those
of all aspects of our society. I think that is what we will be
doing as we wrestle with this issue. So I appreciate your
comments and recommendations.
I have no further questions for this group of witnesses. I
want to thank you very much for coming before us. We appreciate
your being here. We will move to our next panel.
Mr. Williams. Thanks, Mr. Chairman.
Ms. Siggerud. Thank you.
Mr. Davis of Illinois. Mr. William Burrus, Mr. William
Young--a lot of William's in this group--Donnie Pitts, and John
Hegarty.
As we are switching places, I will proceed with the witness
introductions.
Mr. William Burrus is president of the American Postal
Workers Union [APWU]. The APWU represents the largest single
bargaining unit in the United States, which consists of more
than 330,000 clerk, maintenance, and motor vehicle employees
working in 38,000 facilities of the U.S. Postal Service.
Mr. William Young is the 17th national president of the
National Association of Letter Carriers, the 300,000 member
union representing city letter carriers employed by the U.S.
Postal Service.
Mr. Donnie Pitts is president of the National Rural Letter
Carriers' Association [NRLCA]. He has over 37 years of
experience with the Postal Service at both the State and
national levels.
And Mr. John Hegarty was sworn into office as National
Postal Mail Handlers Union [NPMHU], national president
effective July 1, 2002, and was re-elected to that position by
acclamation of the delegates to the Union's national convention
in 2004. More than 10 years prior to becoming national
president, he served as president of Local 301 in New England,
the second-largest local union affiliated with the NPMHU.
Gentlemen, as you know, it is the tradition that we always
swear in witnesses.
[Witnesses sworn.]
Mr. Davis of Illinois. The record will show that each
witness answered in the affirmative.
Your entire statement will be included in the record. Of
course, all of you have done this many, many, many times. We
will begin with Mr. Burrus, and we would expect you to give a
5-minute statement, after which we will have time for questions
and responses.
Mr. Burrus.
STATEMENTS OF WILLIAM BURRUS, PRESIDENT, AMERICAN POSTAL
WORKERS UNION, AFL-CIO; WILLIAM H. YOUNG, PRESIDENT, NATIONAL
ASSOCIATION OF LETTER CARRIERS; DONNIE PITTS, PRESIDENT,
NATIONAL RURAL LETTER CARRIERS' ASSOCIATION; AND JOHN F.
HEGARTY, NATIONAL PRESIDENT, NATIONAL POSTAL MAIL HANDLERS
UNION
STATEMENT OF WILLIAM BURRUS
Mr. Burrus. Thank you, Mr. Chairman.
Mr. Chairman and members of the committee, on behalf of the
American Postal Workers Union, thank you for providing me this
opportunity to testify on behalf of the more than 300,000
dedicated postal employees that we are privileged to represent.
I commend the committee, through your leadership, Mr.
Chairman, fulfilling your responsibility of oversight of this
important institution. We begin a new era in the long and proud
history of a Postal Service that predates the founding of our
country. Over the past 4 years we have debated the future of
the Postal Service and now the long struggle to achieve reform
has been concluded. We now turn our attention to its
implementation.
As you may recall, our Union opposed postal reform because
we viewed it as a veiled effort to undermine collective
bargaining through regulatory restrictions and rate caps. We
did not prevail, but we now lend our best efforts to making it
work.
In this new world of postal reform, each institution must
now find its rightful place. You legislate, unions represent,
managers manage. When these responsibilities overlap, and they
sometimes do, the system can break, and more often than not
service and workers suffer.
As inviting as it may be, when you are asked to intervene
with legislative action in areas best left to the parties, I
request that you resist the temptation to do so.
Let me be clear. I welcome your intervention in collective
bargaining matters if you can assure me that your decision will
be on the side of the workers in each and every instance. Of
course, you cannot afford me that assurance. Therefore, to
borrow a phrase from postal critics, we ask with deep respect
that you stick to your knitting and leave collective bargaining
to the parties.
In debate preceding the passage of postal reform, the
record was littered with forecasts of gloom and doom for hard
copy communication. Predictable rate increases within the CBI,
coupled with regulatory oversight, were declared essential to
save the U.S. Postal Service. After much legislative give and
take, we are now proceeding with the implementation of a new
business plan, but none of the uncertainties that were cited to
justify postal reform have been resolved.
The gloom and doom scenarios were never reflective of
reality, and the uncertainty that prompted these dire
projections remain unaffected by reform. Although the record is
closed and the bills are now law, on behalf of the APWU members
I assert that we will never accept as fair the changes included
in the legislation that limit compensation for injured postal
employees. This was an injustice and our Union will not rest
until it is reversed.
Your overview of the U.S. Postal Service is occurring at a
watershed moment in the history of this vital institution. The
Postal Service is now facing challenges, including working
within the rate cap and finding a way to support itself by
managing services that compete directly with private sector
companies.
The Postal Service faces these challenges under rules that
have yet to be written by the Regulatory Commission, a newly
created body with awesome powers and responsibilities.
A recent decision by the Commission regarding the USPS
request for rate adjustments is a positive sign. It indicates
that the Commission intends to serve as an independent reviewer
of the postal rate structure. Under the leadership of Chairman
Blair, Commissioners gave careful consideration to the record,
and they arrived at fair conclusions. I commend the
Commissioners for their thoughtful and just decision to
recommend the first class rate unburdened by excessive work
share discounts.
The American Postal Workers Union is proud that we were the
only intervener to propose a $0.41 first class stamp rather
than the $0.42 sought by the U.S. Postal Service, and we are
pleased by the Commission's decisions.
The Board of Governors and the Commission are also
commended for conceiving and approving the forever stamp. The
very concept is a reflection of new and innovative thinking.
We applaud the Commission for rejecting the radical
proposal referred to as ``de-linking'' which would separate the
rate for single first class letters from the rate for first
class work shared letters. This proposal, if adopted, would
have set the stage for a continual decline in the uniform rate
structure.
The Commission must also be watchful far into the future
and resist demand to erode the very foundation of our mail
system, universal service and uniform rates. The British postal
system has recently announced a plan to begin zone pricing that
could lead to higher rates for delivery to rural areas. Such a
disparity would not be tolerated in America.
Throughout the debate on postal reform, the American Postal
Workers Union was a vital critic of excessive work share
discounts, and we applaud the recent recommendation of the
Commission to initiate change. This is a start, and we hope to
work with the Commission in the appropriate review to determine
their relationship to the cost of what is standard.
My Union has a long history of engagement in the USPS
effort to consolidate the processing network, and in
communities throughout the country we have called upon the
elected public officials to join with us. I am not aware of a
single congressional representative who has rejected our
appeals to require the Postal Service to seek meaningful
immunity input prior to making a final decision.
The record is clear. With your help we have been successful
in preserving service, protecting local postmarks, and
defending community identity.
The APWU has also been a consistent advocate for postal
efficiencies. We did not appeal for your assistance when postal
officials engaged in massive investment in automation designed
to enhance productivity. More than $20 billion has been
invested in the automation of mail processing, and as a result
of this investment the number of craft employees has been
reduced by more than 80,000 employees. But there is a line
between deficiencies and service. Highly publicized experiences
in Chicago, Boston, and New Mexico demonstrate that postal
management has not yet found the right balance. This chase to
the bottom for savings cannot justify denying the American
public a service that is required by law. Our Union and our
Nation's citizens reject the Circuit City business model as one
to be copied for mail services. We shall need your oversight to
hold the Postal Service accountable.
APWU members are proud to be a part of the most efficient
Postal Service in the world, and we intend to be a part of a
team effort to preserve this legacy, including working with
this committee.
In closing, Mr. Chairman, I want to take this opportunity
to speak directly to the committee about a unique matter
pending before the Postal Service and to seek the committee's
assistance in its resolution.
For many years I have been advancing that the Postal
Service issue a commemorative stamp honoring the millions of
slaves whose work in bondage contributed so much to building
this country. I have made some progress in these efforts, and
the Postal Service has agreed that a stamp will be issued in
2008 honoring those human beings who suffered so much for so
little reward.
Unfortunately, we may be in disagreement over the image to
be depicted. The Stamp Committee is proposing to depict the
ship transporting slaves across the ocean, and I simply ask do
we honor the oppressed or the oppressors. Tens of millions of
human beings completed their life journey without notice, and
this stamp presents an opportunity to display their image, to
tell their story in a stamp. After 400 years, it is the right
thing to do.
I thank you, Mr. Chairman, for your leadership and that of
the members of this committee. As we embark on the future under
a new business model, we shall need your attention and your
wisdom. Thank you for your efforts.
I will be pleased to respond to any questions the committee
may have.
[The prepared statement of Mr. Burrus follows:]
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Mr. Davis of Illinois. Thank you very much, Mr. Burrus.
We will proceed to Mr. William Young.
STATEMENT OF WILLIAM YOUNG
Mr. Young. Thank you, Chairman Davis.
Before I begin, I want to thank you, Mr. Chairman, for your
leadership over the past several years as Congress debated
postal reform legislation. Thanks to the bipartisan partnership
you and Chairman Henry Waxman established with Tom Davis and
John McHugh, Congress enacted a reform bill in December that is
largely positive and fair to all concerned.
I have submitted an extended statement for the record that
touches on the need for additional reforms, but for the moment
I want to focus on a single issue that I believe is a serious
threat to the future of the U.S. Postal Service, the
contracting out of letter carrier jobs.
In its dealings with the NALC and its management training
programs, the Postal Service has signaled its intention to
promote the out-sourcing of mail delivery to new addresses
whenever and wherever it can. I am here today to sound an alarm
on this penny-wise but pound-foolish policy and urge Congress
to put a stop to it.
Contracting out an inherently governmental function like
the delivery of mail is misguided and it is wrong. It runs
counter to the Postal Service's basic business strategy, and it
violates both the intent and the spirit of the Nation's postal
laws.
The Postal Service's key asset is the trust and confidence
of the Nation's mailers. Employing part-time, low-wage workers
with no benefits will lead to high turnover and poor service
over time. This will break the trust that Americans have
developed with the Postal Service through their long-term
contact with dedicated career letter carriers.
Out-sourcing core functions is rarely successful business
strategy. Uniformed career letter carries and clerks are the
public face of the U.S. Postal Service. They represent the
brand, so to speak. Out-sourcing your brand might save you
money in the short term, but it is sure to backfire over the
long run. As the quality and trust in the system declines, mail
volume and mail revenue are bound to fall, wiping away any real
savings. Beyond that, the Postal Service's strategy to employ
intelligent mail technologies in the future will require an
even more dedicated and better skilled letter carrier, a need
that will not be met through the widespread use of contractors.
Out-sourcing letter carrier mail also contradicts the basic
policy outlined in the Nation's postal law, which specifically
grants collective bargaining rights and calls on the Postal
Service to place particular emphasis on opportunities for
career advancement for its employees and to support their
achievement of worthwhile and satisfying careers in the service
to the United States.
Yet, the Postal Service appears to be dead set on a policy
of out-sourcing new deliveries across the country. Although a
very small percentage of total deliveries are contracted out
today, with the addition of 1 to 2 million new deliveries each
year, it will not be long before a two-tier system of delivery
begins to undermine the trust and quality of the Postal
Service.
Congress should act to stop the cancer of contracting out
now, before it spreads and undermines the most affordable and
efficient Post Office in the world. If this is not stopped now,
in 10 to 15 years there could be tens of thousands of
contractors out there. When your constituents begin to
complain, they won't be calling me, they will be calling you.
Now, the Postal Service would have you believe that
contracting out the final delivery of mail is nothing new and
no big deal. I am sure you read the document sent to every
Member of Congress last week, the paper entitled, ``Contracting
Out by the U.S. Postal Service, Not New.'' The central claim of
this misleading document is simply not true. Yes, the Postal
Service has long used contractors on so-called highway contract
routes to transport mail between post offices and to do
occasional deliveries en route in rural areas, but using
contractors to deliver mail in urban and suburban settings is
something totally new.
The fact is the Postal Service has embarked on a radical
expansion of out-sourcing in the delivery area, following the
same misguided practice used by many private companies to
suppress wages and destroy good middle-class jobs, replacing
them with lower-paid, contingent, and part-time positions.
In 2004 and 2005 Postal Service headquarters initiated an
HCR--that is highway contract route--enhancement and expansion
program. I have provided for the record a copy of the
presentation used by postal management trainers to explain this
new program. Its goal was to broaden and transform the use of
HCRs to include not just the traditional transportation of mail
but also the delivery of mail, as well.
Of course, the Postal Service knew that its new policy
would be controversial. Look at the last slide on its training
program. The Postal Service saw congressional influence as the
No. 1 obstacle or barrier to success of that program. They had
good reason to worry about congressional opposition. In the
summer of 2005, the House of Representatives voted 379 to 51 to
oppose an amendment offered by Representative Jeff Flake to the
postal reform bill which was eventually adopted to experiment
with the privatization and alternate forms of deliveries in 20
cities across the country. I note that the current members of
this subcommittee opposed that amendment by a vote of 10 to 1.
In 2006, despite the express views of Congress, the Postal
Service went even further. It began advocating contract
delivery as a growth management tool and it introduced contract
delivery service [CDS], routes for new deliveries in urban and
suburban areas. Such routes are to be considered for all new
deliveries. That is their training program. Of course, these
CDS routes bear no relation to the traditional highway contract
routes. Although the contractors do receive the same low pay
and no benefits, their main duties involve delivery work, not
mail transportation.
Why is the Postal Service doing this? According to another
management presentation used recently in Seattle, which I have
also provided for the record. Contract routes are ``the most
cost efficient, because they provide no health insurance, no
life insurance, no retirement, and no tie to union
agreements.'' They call that efficiency. I call it an assault
on middle class living standards.
Mr. Chairman, what the Postal Service is doing is not
business as usual. The CDS routes it has established in recent
months in urban areas like the Bronx or suburban areas outside
of Fresno, CA, or Portland, OR, cannot be truthfully described
as ``nothing new.''
I urge this subcommittee to consider legislation to block
the Postal Service from taking the low road that far too many
employers in this country have adopted. The Postal Service
should not contribute to wage stagnation and add tens of
millions of workers without health insurance or adequate
pension protection. Indeed, the Postal Service has been and
should remain a model employer. It has combined decent pay and
wages with ongoing innovation to keep Postal Service rates low
and affordable. It does not need to join the race to the bottom
with respect to employment standards, and it should not gamble
with the trust and support of the American people.
Before I finish let me address one final issue. You may
have heard from postal management that subcontracting is a
bargaining issue and that Congress should stay out of labor
relations that are currently underway. NALC, like the APWU,
does not want Congress to get involved in our collective
bargaining. However, what we do want is for Congress to ensure
that there is collective bargaining for all postal employees
who deliver the mail. By assigning new deliveries to contract
workers, the Postal Service is seeking to avoid collective
bargaining. Whether they out-source the core function of its
mandate is a legitimate public policy issue. You can and should
weigh in on this issue. You can start by enacting H.R. 2978, a
sense of the House resolution to oppose postal out-sourcing.
I know that you did not work dozens of years on postal
reform only to see the Postal Service turn around and throw it
all away. Neither did I.
Thank you again, Mr. Chairman, and thanks to all the
members of this committee for my opportunity to testify.
[The prepared statement of Mr. Young follows:]
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Mr. Davis of Illinois. Thank you very much, Mr. Young.
We will proceed to Mr. Pitts.
STATEMENT OF DONNIE PITTS
Mr. Pitts. Thank you, Mr. Chairman.
Before I start, I would ask that my remarks be included in
the record, the written remarks that I have provided.
Mr. Chairman and members of the committee, my name is
Donnie Pitts and I am president of the 111,000 member National
Rural Letter Carriers' Association. I want to thank you, Mr.
Chairman, for holding this oversight hearing.
Back in 1985 I had the pleasure of testifying before the
House Ways and Means Committee as vice president at that time
of the Alabama Rural Letter Carriers' Association. It is an
honor to be invited to testify again before Congress, this time
as president of the National Rural Letter Carriers'
Association.
Rural carriers serve more than 75,000 total rural routes.
We deliver to 37.4 million delivery points, driving a total of
3.3 million miles per day. We sell stamps, money orders, accept
express and priority mail, collect signature and/or delivery
confirmation pieces, and pick up registered, certified mail and
customer parcels. Our members travel everywhere every day,
serving America to the last mile.
Mr. Chairman, the most important issue affecting our craft
at this moment is the contracting out of delivery service by
the Postal Service. Delivery is a core function of the Postal
Service, and out-sourcing this function is contrary to the
mission of the agency. The practice jeopardizes the security,
sanctity, and service of the Postal Service. I ask that
Congress fulfill its duty of oversight and take immediate steps
to halt the continuation of this practice.
Delivery managers have been encouraged to favor CDS, or
contract delivery service, using contract employees over
delivery by city or rural letter carriers for all new
deliveries based on cost savings. Contracting out is reported
to save roughly $0.15 per delivery point, but at what cost.
When the Postal Service started the contracting out of
deliveries, they were still tasked with paying billions of
dollars into an escrow account and covering the cost of postal
employees' military pension obligation. With the passage of
postal law 109-435, the Postal Service was relieved of both the
$27 billion obligation for military pensions and $3 billion
annual payment into the escrow account, and new laws allow the
Postal Service to retain a profit, and a banking provision
allows any unused rate authority to be saved for use at a
future time.
There remains an opportunity to file one last rate increase
under the old law. The Postal Service has not given the new law
which this committee wrote and passed a chance. If the Postal
Service had lived under the new law for 5 to 10 years and then
found they were running huge deficits, perhaps we could
understand cost cutting measures, but it has only been 4 months
since the bill became law. Why does the Postal Service see the
need for even more cost savings?
Security has become one of the most important concerns
facing Americans today. Following the terror attacks on
September 11, 2001, and anthrax attacks that fall, the White
House, Department of Homeland Security, and Department of
Health and Human Services, working closely with the Postal
Service, the NRLCA, and the NALC developed a plan to call upon
letter carriers to deliver antibiotics to residential addresses
in the event of a catastrophic incident involving a biological
attack. Why us? Because citizens trust us. Star route carriers
aren't even involved in this service, and now CDS carriers.
Many contractors subcontract their routes. Letter carriers
are Federal employees who are subject to close scrutiny of
their character, background, and criminal history, if any. What
kind of scrutiny are subcontractors subjected to? Does a
contractor take the same care in screening a subcontractor
employee as the Postal Service takes?
Sanctity of the mail stream is one of utmost importance.
Sensitive materials are mailed every day. Financial documents,
credit cards, Social Security checks, medicine, passports, and
ballots must pass through the mail.
A contract carrier in Benton, AR, stole a person's credit
card identity, and he was caught by the police. A Bridgeport,
PA, contract employee threw away 200 pieces of first class
mail. His postal record indicated he should never have been
hired. In Appalachia, VA, a contractor pleaded guilty in an
election rigging scheme where absentee ballots were forged or
votes were purchased with bribes. Are these the kind of people
we want delivering the mail?
Service is the reason that USPS ranks as the most trusted
agency in the Federal Government. Letter carriers are the most
trusted part of that equation, according to customer
satisfaction surveys. All new rural carriers are required to
attend a 3-day training academy which instructs them on all
aspects of their job. This training academy, staffed by
experienced rural carriers, serves as a clearinghouse for the
rural craft. There is a direct connection between our training
academies and customer service satisfaction. Contract carriers
don't have the training academies, and any training they may
receive is inferior to the training developed by the Postal
Service and the NRLCA.
There is a lack of accountability and no clear chain of
command for supervision. Neither customers nor the Postal
Service will know who is responsible for service problems or
delivery concerns. The Postal Service sites as a general rule
that public interest, cost, efficiency, availability of
equipment, and qualification of employees must be considered
when evaluating the need to contract. After evaluating contract
delivery service, I ask is this cost savings worth the risk.
The answer is obvious.
Mr. Chairman and members of the committee, I thank you for
inviting me to testify today. If you have any questions of me,
I will be glad to answer them.
[The prepared statement of Mr. Pitts follows:]
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Mr. Davis of Illinois. Thank you very much, Mr. Pitts.
We now will proceed to Mr. Hegarty.
STATEMENT OF JOHN HEGARTY
Mr. Hegarty. Good afternoon, and thank you, Chairman Davis
and members of the subcommittee, for inviting us to testify.
The National Postal Mail Handlers Union represents almost
57,000 mail handler employees employed by the Postal Service. I
have submitted written testimony and would ask that it be
included in the official record.
There is one crucial and overriding point that I want to
emphasize at this hearing. From all indications there is a
subcontracting virus pervading Postal Service headquarters, and
not just in delivery services. I will apologize in advance if
some of my comments are similar to my colleagues', but I think
those points need to be re-emphasized. This is extremely
unfortunate, not only for mail handlers and other career postal
employees, but also for postal customers and the American
public.
From my perspective, contracting our work out to private
employees who receive low pay and even lower or no benefits is
effectively destroying any sense of harmonious collective
bargaining and productive labor relations. The parties have
freely negotiated wages and benefits for career mail handlers
for more than 30 years. To subcontract out work solely to
undermine the results of collective bargaining without any
justification other than saving money is directly contrary to
the purpose of those negotiations and to the policies set forth
in various Federal statutes.
But subcontracting is even more dangerous and more
unjustified when it is viewed from the perspective of the
American public. We believe that privatizing the processing or
delivery of mail jeopardizes the very core of the postal system
that is the cornerstone of the American communication system.
First, using subcontractors to process and deliver the mail
jeopardizes the sanctity and security of the mail, raising
important concerns about who is handling the mail and precisely
what might find its way into the postal system. Especially
after the terrorist attacks of September 11, 2001, and the
anthrax attacks of October 2001, postal handlers and other
career postal employees are better able to deal with the
Homeland Security issues surrounding terrorism and other issues
than privately contracted employees.
Mail handlers are hired after written exams, entry and
background testing, and often with extensive experience in the
military under veteran preference laws. Mail handlers are hired
for a career job, and therefore have a greater stake in
performing their job well and in the success of their employer.
Private employees certainly are not trained to protect the
mail or the American public from the dangers of biohazards or
mailed explosives, just to name two of many security concerns.
If maximizing our Homeland security is an important goal,
then career mail handlers who are properly trained and
experienced are better able to handle the potentially dangerous
situations that may arise in and around the Nation's postal
system.
Using private employees to process and deliver the mail
also raises a host of other concerns that should give pause to
any subcontracting plans by the Postal Service. To pose just a
few items of concern that deserve the attention of this
subcommittee, subcontracting will increase the dangers
associated with identity theft. Subcontracting will defeat the
very purpose of veteran preference laws and eliminate all of
the benefits that are meant to accrue both to employees and to
the Postal Service when the agency is encouraged, if not
required, to hire our Nation's veterans. This is especially
important today with our service men and women returning from
Iraq, Afghanistan, and other duty stations.
Just to preempt a question that I believe comments that
Representative Cummings discussed earlier, how do we get more
young people hired into Government jobs? The first way that you
do that is to have the jobs for them to go into in the first
place.
There are more valid concerns, but there is no reason to
belabor the point. The Postal Service's continuous attempt to
subcontract our work to private contractors follows a
disturbing pattern of privatization for privatization's sake
and is not based on any enhancement of the product or services
being provided.
The dangers of subcontracting have been confirmed by some
recent examples. Approximately 9 years ago the Postal Service
decided to contract with Emery Worldwide Airlines to process
priority mail in a network of ten mail processing sites along
the eastern seaboard. Today the work at those facilities has
been returned to mail handlers, but not before the Postal
Service suffered losses in the hundreds of millions of dollars.
At a meeting of the Postal Board of Governors, one Governor
said publicly that the Emery subcontract was one of the worst
decisions they had ever made as a Board.
A similar story can be told about the out-sourcing of the
mail transport and equipment centers [MTECS]. Several years ago
about 400 mail handlers were displaced from these facilities in
favor of private sector employees working for contractors who
passed their costs along to the Postal Service. The Office of
the Inspector General audited these contracts and concluded
that the Postal Service had wasted tens of millions of dollars
in the inefficient use of these contractors, and that the same
work, if kept inside the Postal Service, would have been
performed more cheaply.
More recently, just 6 months ago in November 2006,
management decided to subcontract the processing of military
mail that was being performed by mail handlers employed at the
New Jersey International and Bulk Mail Center. This is military
parcels and other mail headed to Iraq and Afghanistan, as well
as mail coming back to the States from our service members.
Without exaggeration, this is one of the most outrageous
subcontracting decisions that the Postal Service has ever made.
In May 2005, the joint military postal activity for the
Atlantic area representing the U.S. Army, Navy, Air Force,
Marines, and Coast Guard, issued a formal letter of
appreciation to the career postal employees handling this
military mail, stating that their professional work ethic and
personal contributions from 2000 to 2005 significantly
contributed to the morale and welfare of all of our service
members. They stated, ``Your dedication and honorable service
is appreciated,'' and the letter said, ``May God bless you and
keep you safe.''
One year later, in July 2006, representatives of the
military attended a meeting onsite at the New Jersey postal
facility and again took the opportunity to thank the mail
handlers for their continued dedication, hard work, and support
for the military. But only a few weeks later, in early
authority, 2006, postal management informed the union that this
operation would be contracted out and the work subsequently was
transferred to private employees in November of last year.
If there is a rationale for this subcontracting, it has not
been explained to the Mail Handlers Union. Rather, the career
mail handlers whose dedicated service had ensured that this
mail was being efficiently and timely handled on its way to our
troops were slapped in the face by local postal managers who
decided that saving a few dollars should override the views of
the U.S. military and the needs of Homeland security.
Another recent example concerns the Postal Service's
ongoing consideration of subcontracting for the tender and
receipt of mail at many air mail centers and facilities. Once
again, the Postal Service seems incapable of recognizing that
career mail handlers are part of a permanent and trained work
force, one that is particularly well suited to the additional
security concerns that are presented in and near the Nation's
airports.
The members of this subcommittee will remember that shortly
after September 11th Congress insisted that security workers at
the airports should remain Federal employees. We believe that a
similar requirement should be imposed on postal employees who
may be sorting and loading mail for transportation onto
commercial airlines. In this day and age does the American
public really want a series of low-bid workers handling
packages and mail that is being loaded onto airplanes? Does
Congress really want to allow the Postal Service to contract
out this work simply to save a few dollars? To the Mail
Handlers Union the answer should be a resounding no.
Again, thank you for this opportunity to testify, Mr.
Chairman. If you have any questions, I would be glad to take
them.
[The prepared statement of Mr. Hegarty follows:]
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Mr. Davis of Illinois. Thank you very much, Mr. Hegarty. I
want to thank all of you for your testimony.
I am also pleased to note that we have been joined by our
ranking member, whose plane had been delayed as a result of the
severe weather that we have been having in some parts of the
country. Before we go into the question period, I would like to
ask Ranking Member Marchant if he has any comments that he
would like to make.
Mr. Marchant. Thank you, Mr. Chairman.
I again apologize to the whole group of you. It has been a
crazy couple of days on the northeast. They say that if
anything happens in Dallas, anything that happens in Boston
happens in Dallas about 5 minutes afterwards. My deepest
apologies. I am very interested in this subject and share with
the chairman in appreciation for all of your participation
today.
I have some questions, but I will save them for later.
Thank you, Mr. Chairman.
Mr. Davis of Illinois. Thank you very much.
We will begin with the questions.
Mr. Burrus, the Postal Service has set a goal of reducing
work hours by 40 million this year. In an effort to improve
efficiency and productivity, all of these things are really
important and speak well from an efficiency, effectiveness, and
cost containment point of view.
Do you think that this can be accomplished without causing
real problems in some areas of service and delivery?
Mr. Burrus. It is possible. With the introduction of
technology, particularly in the mail processing network, the
preparation of mail for delivery, that it does not require time
in the office for preparation. There are a number of methods
that the postal workers can undertake that they can achieve
reductions of personnel. There is always friction, though. And
where there is friction, we apply the provisions of our
collective bargaining agreement. We don't come to Congress to
seek your assistance. We apply the collective bargaining
agreement. We have the option of going to arbitration over its
provisions if we are not successful in negotiations, but there
is always tension between the employer and the Union. The
employer's responsibility is to achieve the maximum
effectiveness at the reduced cost, and our obligation is the
absolute reverse, so there is tension there, and the collective
bargaining process is where we meet and resolve those
differences, not always to our satisfaction. I don't suggest to
you that we are always satisfied with the outcome. We have been
wrestling over article 32 subcontracting issues not just
recently, not just in the last year. For 35 years we have
challenged the Postal Service.
I associate myself totally with all the remarks of my
colleagues about the negatives of subcontracting, the impact on
service. But we make those arguments in a different forum. We
make those arguments in a forum where the Postal Service has
the opportunity to respond, and if we are dissatisfied with
that response we go to arbitration.
But yes, there is always tension between your employer and
the union in terms of efficiencies, productivity improvements,
reduction of personnel. We fight those as best we can using the
tools available to us at the time, but we don't come to
Congress and seek your assistance when we fail.
Mr. Davis of Illinois. Thank you very much.
Mr. Young, we heard Chairman Miller, we heard the
Postmaster General vigorously and passionately defend this new
notion of contracting out in a sense. We have also heard about
the difficulty of maintaining service. We look at decline in
first class mail as we look at the competitiveness of the mail
industry in terms of other entities that deliver mail. So they
pretty much indicated that there is a need to do this as a cost
saving function. Are there other ways perhaps that the cost
savings could occur without going to this new service
contracting out that management is talking about?
Mr. Young. The answer is yes, Mr. Davis. Look, I don't want
to get into collective bargaining here, but, just as a for
instance, I offered them a proposal that would save them $20
billion, $20 billion over the next 30 years. They rejected that
proposal because they would rather have the current language in
article 32 which allows them to contract out than the $20
billion in real savings in their pocket. So I get a little
aggravated when they come up here. I listened to Jack Potter
and I listened to Chairman Miller, and they suggest to you that
nothing is new, they have done this forever.
Article 32, as Mr. Burrus said, has been in our contract I
think from the very beginning. There was a need for it to be in
the contract. Nobody quarreled with that. Our Union never
grieved it, never appealed it, never tried to get rid of it
because in rural America, the way they used it initially with
highway contract routes, it made good sense. But now they are
going too far, in our view.
Why I don't think this is collective bargaining,
Congressman, I think this is public policy. The Members of
Congress are going to decide for all of us that work there, all
these people out here that use the mail, everybody else in
America, you are going to decide what kind of a Postal Service
do you want, what kind of services do you want to provide to
the American public.
The risk they run with this contracting out itch of theirs
is if they lose the confidence of the American public to
deliver the mail they are gone.
Now, let me just give you one example. I heard what the
Postmaster said, but he is not being truthful. In Orange, CA,
right in the middle of one of the city letter carrier routes of
people that I represent, they built a shopping center. The
Postal Service decided, rather than letting the regular letter
carrier absorb that shopping center in his route, that they
would contract it out to a private delivery. For 6 weeks it
appears as though the private contractor was performing its
functions I guess correctly, because no complaints were in.
Then 1 day he was told that he had to take a mailing, a full
coverage circular mailing, out on his route. He got nasty with
the boss on the workroom floor. I can't repeat in Congress what
he said. If a letter carrier said it, believe me, they would
have gotten a disciplinary notice, or a clerk said it, or a
mail handler said it, or a rural carrier, they would have been
immediately issued a disciplinary notice. But this guy got
nothing because the boss said look, he's a private contractor,
what do you want.
He started taking the mail home and not delivering it.
Calls started going into the Postmaster in Orange, CA. What do
you suppose he told the people that called? Nothing I can do
about it. It is a private contractor.
What I am saying to Congress is this: when the American
public loses faith in the ability of the men and women that
currently are moving that mail from the factories to their
homes, we will be out of business, Congressman. I think they
risk that with this path that they now go on, which requires
every--and I don't know why they won't tell you that. I gave
you their training programs. They say it. Every new delivery
must be considered for private contractor, not 2 percent, not 6
percent, not 1 percent, every single new delivery is being
given consideration for private contracting.
I will tell the Congress so there is no mystery. Is it
cheaper to use private contractor? The answer is yes. It is
very much cheaper. Why? They don't get health benefits, they
don't get retirement, they don't get annual leave, they don't
get sick leave. There is about a 40 percent roll-up in the
payroll for benefits in most modern companies in America. They
are achieving the 40 percent savings by hiring private
contractors.
Mr. Davis of Illinois. Thank you very much.
We will now go to Mr. Marchant.
Mr. Marchant. I think I would like to ask a couple of
questions about the security issues that arise out of the
contracting out and open that question to the panel.
Mr. Young. If I could just put 2 cents in, when somebody
put anthrax in the mail a number of years ago it was very
difficult, and some of the Members of Congress have already
recognized how bravely the postal employees reacted and behaved
during that process. We still to this day, at least as far as
Bill Young knows, we still don't know who did that. We still
haven't gotten the person that put that deadly virus in the
mail. We haven't brought them to justice.
Think how difficult that would be trying to contain that
if--let's fast forward 10 years. Let's say Congress makes the
decision we are not going to do anything to disrupt this
current contracting out craze that is going on. Now it is 15
years from now we have 30,000 individual contractors out there,
plus the network of whatever is left of us, the four of us that
are sitting here, and we have to try and contain this virus
somehow with all of these tentacles out there.
The members of my Union, Congressman, they volunteered to
deliver vaccinations if, God forbid, we get a biological
attack. We and the rural carriers signed an agreement with
Homeland Security when Tom Ridge was the Director to do that.
Does anybody in this room think private contractors are going
to go to that extent? It isn't going to happen.
Mr. Hegarty. The security issues are quite a few, from our
perspective, especially with the two examples that I cited, the
airport mail facilities and also the military mail.
If you are paying a private contractor who knows what, I
agree with Bill it certainly saves money if they can hire
people as cheaply as possible, but what type of commitment do
they have to the job. And don't you think it would be pretty
easy for a terrorist group who wanted to harm our military
members to infiltrate a low-paid private contractor and have
some people working at that New Jersey bulk mail center and put
some terrorist bombs or whatever they may decide to use in the
military mail to be shipped over to Iraq and Afghanistan? It is
just unconscionable to me that, for the sake of saving money,
you would do something like that.
The delivery of mail, how do you know what these private
contractors are doing once they walk out the door of the Post
Office? Are they opening mail? Are they taking credit card
applications and filling them out in someone else's name? That
is the identity theft aspect of it.
The airport mail facilities, why would you possibly, with
Homeland security--and let me just say this: we are not asking
you to interfere with collective bargaining and we are not
asking you to get involved in collective bargaining. At least I
am not, from the mail handlers perspective. But it is a
different Postal Service after 2001, it is a different world
after 2001, and we are asking you to look at the ramifications
of this subcontracting out in light of the security concerns.
One other point that I want to make. It came up earlier
about the right to strike. The Postal Service yes, we are not
allowed to strike. Our members have to perform their duties.
What do you think would happen if a private company
subcontracted, big on a network of airport mail facilities, and
all of the sudden their employees became disgruntled? A strike
by a private company is not prohibited, and they could shut
down the Nation's airmail system. It is just ridiculous.
Mr. Pitts. I echo a lot of what a lot of my predecessors
have said here. One of the big issues that I see is the
accountability of who is carrying the mail. In our craft, the
rural craft, you have a regular carrier, then you have a relief
employee who backs that person up. On a day-in, day-out basis
the Postal Service knows who is taking care of the mail.
Whereas contractors get the contract, they subcontract to any
and everyone to carry the mail. So I think there is a big risk
out there with people handling valuable documents, as I said in
my testimony, that there is no way you can pinpoint who was
delivering the mail there on a given day, so it is a security
issue and the sanctity of the mails. It is a big-time problem,
and it could really get out of hand.
Mr. Burrus. Security is a major issue with subcontracting,
but I don't want this committee to misunderstand its scope. It
is not just what's here today. All of the mail, most of the
transportation of mail is done by contractors. All the airline
transportation is by subcontractors, not by postal employees.
So the mail is interacting with private citizens who are not
responsible to the U.S. Postal Service every day. So I think it
raises serious security issues. I agree that they are imbedded
in the fact that the Postal Service does not control the
individuals, and they have no allegiance to the system, itself.
But it doesn't just begin and end with delivery. There is
subcontracting in transportation, the processing, with the
equipment, MTEC systems.
We have for years fought this issue in collective
bargaining, in other forums where we could join with the Postal
Service and address them jointly, and we have had some wins.
Priority mail, they contracted the entire system out to the
private sector. We convinced the Postal Service to bring it
back in. Now postal employees perform that function.
We looked at encoding systems, 25,000 jobs. We didn't come
to Congress to ask your intervention on remote encoding. We
went to an arbitrator, convinced the arbitrator that it was not
consistent with our agreement, they brought the jobs back in.
There have been a number of hours reaching agreement with
the U.S. Postal Service in 1996, 1998, somewhere in that
general timeframe, to ban all contracts for a period of 2
years. We reached that agreement at the bargaining table. There
would be no new contractual initiatives. That time has now
elapsed and they are now contracting even more.
But my message is this has been done at the bargaining
table. What I am afraid of, if you get the appetite to decide
issues entirely in the Postal Service, issues that are
mandatory subjects of bargaining, where does it end. Does
another constituency come to you next year on an issue that I
am opposed to an you entertain it because you have broken the
egg, you started to get involved in the process, itself.
I don't want to come before you to defend my no lay-off
cause, my cost of living adjustment, because somebody came and
said ask the Congress to intervene for whatever reasons. They
will dream up their own reasons. But I don't want you to put
yourself in a position that now you have entertained
involvement in the process. Where does it end? Does it begin
and end with subcontracting? Fine. I am onboard if it begins
and ends. But if you can't give me that assurance, I don't want
to return here a year or 2 years from now where I am facing
other issues that I have addressed in collective bargaining and
you have a different view.
Mr. Davis of Illinois. Thank you very much.
Mr. Sarbanes, I believe you are next.
Mr. Sarbanes. Thank you, Mr. Chairman.
I appreciate the testimony of all four of you. Thank you.
And the issues you have raised are ones that are of deep
concern to me.
The notion that contracting services out will lead to more
efficiency is really a philosophy that has been embraced by the
administration we have in place now and many of their friends.
There is plenty of evidence that the efficiencies are not
there. There is even evidence that the cost savings are not
there, although, as you described, if you are going to hire
through private contract and people don't have health insurance
who are low-paid, who are temporary, etc., it is impossible not
to get some cost savings from it.
One of the things that drives me crazy is that the failure
to prove out the notion that private contracting produces more
efficiency actually proves out or fulfills another prophecy
that is at work, and that is to demonstrate somehow that good
government and good government services or quasi-government
services can exist in this world. There is a group of folks out
there that want to debunk the notion of quality service coming
from Government, governmental functions. So even if it doesn't
work out that they can show that contracting out works better,
that is OK, because if it works worse then they can say, see,
Government doesn't function properly, so they get you coming
and they get you going.
The issues you have raised about security, training, other
reasons why it makes sense to have the work force of the Post
Office, the traditional work force of the Postal Service in
place I think are compelling.
As this Congress begins to look across the board at whether
this compulsion to contract services out makes sense, I think
it is very fair for you to push for the notion that the push
back against that ought to start with an organization like the
Postal Service, because I think it is unique. I think its
relationship to the public is unique, and I think that there is
a bond there and a trust, as you say, Mr. Young. Once that is
eroded, it is very hard to get it back. So we have to be very
vigilant about it.
My question is this: can you comment on the impact it has
on the morale of the remaining work force to have these
services contracting out, because that is relevant, too.
Mr. Young. Yes, I can. Before I do that, I would just like
to make two very brief, quick points.
Point No. 1, if I was successful in convincing this
Congress to do what I have asked you to do this morning, put a
ban against contracting out, I do not pick up a single job for
the men and women I represent. The jobs would go to Donnie
Pitts' organization because his craft works somewhat cheaper
than ours, and when they do the cost analysis he will end up
with this work. Bill Young will not end up with the work.
I disagree vehemently with Mr. Burrus. I am not asking you
to get involved in collective bargaining. We are talking about
public policy here now. The Postal Service is a Government
function that is in the Constitution of the United States, and
we are talking about how it is going to be conducted. In the
same way as he has the right to go to Congress and say stop
these big discounts, I don't think they are justified, we have
the right to say is this the kind of Postal Service you want.
It has a tremendously negative effect on the men and women
I represent. Let me show you how, Congressman, and thank you
for asking.
Our Union has been a cooperative Union. When Postal Service
announced that they were going to implement the sortation of
delivery mail with machinery, we went in there and said let us
be your partner, let us do it together, let us help you
together, and we did. We negotiated a series of memos that
established rules that we could use and we tried to make that
process roll out just as easy as we could.
How do I now, knowing what I know in the Postal Service,
what Jim Miller and Jack Potter is going along with for obvious
reasons, what they want to do with the Postal Service, how do I
now go to the men and women I represent and say help the Postal
Service. They are trying to get rid of you. they want your job.
They are going to contract out your job, but help them. Help
them implement this new flat sorter that they have sort of
over-estimated the savings on. And I will say it right here in
this Congress, they will never achieve $900 million worth of
savings with the flat sorter, not because we are going to stop
them. They do the same thing every time. When they go to the
Board of Governors to get approval of a large amount of funds--
and it cost a lot of money to implement those flat sorters--
they overestimate the ROI, the return on investment, and then
we and the managers that sit behind me are stuck trying to
implement this policy and make it work.
Speaking of these managers behind me, there is going to be
an other panel after ours, is there not?
Mr. Sarbanes. Yes.
Mr. Young. Please ask them what they think about
contracting out. If this was an NALC issue, if this was just an
employee issue, why would all these organizations be supporting
us? And it is my information that each and every one of them
support us and think that this path that the Postal Service is
on for contracting out will not serve the Postal Service well
in the future. But you get the information from them. I don't
speak for them.
Mr. Hegarty. If I could answer that, as well, for the mail
handlers, I echo Bill's comments. We have several cooperative
programs that we engage in with the Postal Service. One of the
oldest is the quality of work life process, where mail handlers
and managers get together in quality circles and work on
problems, on the workroom floor to improve service, to
eliminate redundancies in operations. That has been going on
for 25 years.
Most recently, the voluntary protection program, which is a
cooperative effort through our Union, the APW, OSHA, and the
Postal Headquarters, we go into facilities, we make sure it is
a safe place to work. We are saving the Postal Service millions
of dollars and saving our members the heartache and the
physical pain of getting injured on duty.
The same thing with the ergonomic risk reduction program.
We have committed headquarters employees, and I know some of
the other unions have, as well, to go out in the field and
train in the field and put good practices into place in postal
facilities so that our members are not injuring themselves in
repetitive motion type injuries through ergonomic improvements
in the workplace.
You asked how does it affect morale. This is the
certificate of appreciation that the mail handlers received at
the New Jersey International Bulk Mail Center for processing
that military mail. If I got one of these certificates of
appreciation back in 2005, I probably would have framed it and
put it up in my office or in my home and been very proud of it.
But when the Postal Service told me that they were
subcontracting that operation, I probably would have taken it
down and thrown it in the trash. That is how I think it affects
morale.
Mr. Davis of Illinois. Thank you very much, Mr. Sarbanes.
Mr. Pitts. May I add something to it?
Mr. Davis of Illinois. Yes, go ahead, Mr. Pitts.
Mr. Pitts. Our craft, the rural craft, is a little unique
in that we have career employees and relief employees who fill
in, rural carrier associates, some PTFs. The rural carrier
associates are not career employees; however, they do have the
opportunity at some point to become a career employee. You talk
about morale? That is where the problem is for us in our craft,
because you have employees who are working diligently, hoping
some day to become a career employee, and they see these new
developments coming into play, and then what happens? The
Postal Service is trying to contract out this work. It is
territory that under normal circumstances would be added to
either rural delivery or seated delivery, but it impacts our
craft in that morale to have some contractor working right
beside them making a lot less money with no benefits, getting
territory that would have been a route and a career position
for those employees.
So it does have a big impact on morale inside the Post
Office, as well as service to our patrons out there because, as
a rural carrier, when you serve a route you have an extended
family. That is the patrons that you serve out there. They know
who you are, even the relief employees. They are there. They
are dedicated. They work just about every week. But you earn a
trust with those people, because they know you by name. They
come to your house and visit you when your family is sick or
when you have a death in the family. They are your extended
family. So it is a big issue that we need to keep in mind when
the contracting out arrives, because it is not for the good of
the Postal Service. It is to the detriment of all of us.
Thank you.
Mr. Davis of Illinois. Thank you very much.
We will shift to Delegate Norton.
Ms. Norton. Thank you, Mr. Chairman.
It was most interesting to see that this contracting out
theme was, indeed, that, a theme in virtually all your
testimony, when there might have been other things you might
have spoken about. I think we have to take that seriously.
I am not sure that this committee has the answer to it, but
I do want to note for the record, Mr. Chairman, the irony that
maybe the Federal Government has discovered something about
contracting out. This is this morning's business page of the
Washington Post. I couldn't help but notice something that came
up at me about OPM suggesting retirement reforms and suggesting
something we certainly don't do in the Federal sector, whereas
you might have thought that these jobs might have presented
opportunity to contract out.
The kinds of things OPM, this administration, is suggesting
is phasing in retirement rather than having the baby boomers
desert the Federal Government all at one time because they are
afraid of finding replacements. I recognize that the Postal
Service is more like a private business than it is like the
Federal Government, but understand who is the granddaddy of all
users of contractors is the Federal Government.
Instead of saying here's an opportunity now to really go,
here is OPM saying let's try to keep a Federal work force. And
60 percent of the Federal workers will be eligible for
retirement in the next 10 years, and it doesn't say only the
very skilled scientists, it says Federal employees, period. It
says that they want to be able to counter job offers and to
allow people to work on a limited basis and still retain their
full pension. It is just most progressive and interesting, and
it comes from an administration where you might think that this
is an opportunity to do more contracting out.
Now let me say this: contracting out is not a Republican
thing. We have seen that in Democratic and Republican
administrations go full throttle. This is a very difficult
issue now.
If it becomes a culture more than what seems to be a
process already far along, at least in some parts of the postal
service, then we are seeing another granddaddy of all
contracting out controversies, because that is what has
developed.
Now, first, Mr. Chairman, I am concerned about what I can
only call the absence of candor in the management witnesses
here. Did they not know that we would have Union? We always do.
We always balance. I mean, did they think we wouldn't find out
by calling it something else? I am very concerned about that,
and I think we need to call them to account because if they are
not even telling us about the contracting out that is going on
we are already off on the wrong foot on the question of
accountability, which is a primary concern of this committee
when it comes to contracting out.
Now, I also would be very concerned, Mr. Chairman, if our
reform legislation, which ultimately the Unions came to accept,
was a cover for contracting out. If there is to be contracting
out, hey, look, we are big boys and girls. We have seen the
Government do a lot of it. Our major concern with it has been
accountability. But we don't need people to think we don't know
about it and then it springs up.
And when I say springs up, Mr. Chairman, I happen to have
before me a document that surprises me, in light of the fact
that we had very little detail from prior witnesses about
contracting out of the kinds of Postal Services that are
represented by these employee organizations. I am amazed to see
that, as of the end of 2004, the number of routes--city, rural,
all routes--242,342. I would think somebody would tell us about
that. Number of deliveries, 142,319,788. Doesn't sound like a
small number to me.
Apparently, like every important large business, the Postal
Service is in the process of analyzing and expanding
contracting, but it had very little to say about that to us,
even to the point of discussing potential new routes.
Why do I have to get this document not from the witnesses
on the first panel, but I will not tell you how I got it, but I
got it. Why do I have to find out only when I can't cross
examine them, Mr. Chairman, that current delivery routes in the
city, for example, 518. Now, here is their document saying
expected new deliveries in the next 10 years--now, understand
the number, going from 518 to 4,940,000. That is just city.
rural goes from 495 to 12,350,000, and it goes on. Very, very
concerned, this first oversight hearing, Mr. Chairman, to find
that out through a document that did not come as part of the
testimony so that we could up front, just like I asked the
question, hey, look, is this holding operation or is technology
going to overtake us because no amount of raising the amount of
stamps or other costs is going to do it. I need to know it so
that we can think about it.
Now, I must say to you, gentlemen, I have a problem. The
chairman raised some of it in the beginning. I talked about
``right-sizing'' and so forth. I mean, even the IG talked about
right-sizing. And we know that there are planned retirements,
and that is one good way, I guess of right-sizing, as long as
you can keep doing the job, 113,000 or something retirements,
assuming--and that is always a problem--that they will have
people in the right place.
But I understand what Mr. Burrus says about two-tier
systems, because the private sector is spawning them
everywhere. The only real answer I see even coming kind of
online is what some unions and truly large corporations are
trying to do about health care. I mean, with the manufacturing
sector of the United States going out of existence largely
because of health care, people are finally understanding that
if health care is related only to employment and those who
happen to have good unions get good health care, to then be
passed on as a cost of doing because, then that employer is
disadvantaged, it would seem, with the private sector with whom
you compete, and, of course, the unions can't be expected to
say don't do health care. So now you finally have business
getting together with unions trying to figure out a national
health care system.
We need your advice. You have some difference among
yourselves about how we should go at it, obviously, for
contracting out as it exists now. That is, I take it, a
collective bargaining issue. For new services, such as in the
cities and the suburbs, I take it they have a free hand in
that.
How has the Congress gone in this? Well, mostly not, but to
the extent that we are now getting into it, we are concerned
about the issue that the ranking member has raised. In a
particular service are there new issues of security raised
post-9/11 that we can deal with?
The second issue is one that we have never gotten a hold
of, and we saw it boom into a hideous plant after the Iraq war,
and that is accountability. The larger enterprise, the less the
accountability that the Government itself is able to bring or
that even the Congress can bring. Imagine, if you have somebody
employed by you and you know what he is doing every day, he is
accountable. But if, in fact, this unit is outside of you
altogether, unless you are going to be doing the same thing
that you would be doing if he was your employee, which is
keeping track of him every day, then huge parts of what he does
is nothing you are going to know anything about.
I do all that prefacing to say this: in light of the fact
that I can only think about two security issues, one which has
been raised by the ranking member, and I am not sure how they
would deal with that one. In light of the ``right-sizing
issues'' that even in the best of services--and Postal Service
is doing much better now--you face, it does seem to me you have
a run-away problem here.
I think we need to be informed of how the postal service
and perhaps the unions, perhaps the unions by themselves,
somebody has to think it through before it becomes a bigger
hippopotamus in the room than it already is, because I do not
readily see a way for us to control it or for you to control
it, at least for new businesses, some of which you said is
really quite terrifying here. After a while you are going to
find people saying something is new that you never would
characterize as new, so you are going to get into
categorization.
I think the burden on us all is to say if not this, what,
since the way the Congress is likely to go at it is
accountability and security. Meanwhile, it continues to grow.
If not this, if not off-loading benefits, racing to the bottom,
which obviously has affects on the quality of workers, but who
cares. The two-tier work force in the Federal Government has
grown like nothing else. We have people sitting side by side.
If not that, I think the burden on us all who have seen the
monster of contracting out is to say then what, because if we
don't have a then what I believe it is going to continue to
grow.
Mr. Davis of Illinois. Thank you very much, Representative
Norton.
Ms. Norton. I would like to know if anybody has a then
what, just before they go.
Mr. Pitts. I would like to say, Ms. Norton, I feel your
pain because----
Ms. Norton. You are going to feel it even more.
Mr. Pitts. Well, when you are talking about information
from the Postal Service that keeps us up to date, we, too,
struggle with that. Also, I think you heard earlier today
comments made that the CDS routes were put into being because
of postal reform. I am here to tell you that is not the truth.
CDS routes have been here prior to postal reform issues, and
you heard them say that I think the past 5 years the growth in
highway contracts, CDS, is about 2 percent, but in the same
sentence saying that in 2006 it grew from 2 percent to 6
percent, which is 4 percent, so there is a big issue there.
Also, I meant to say a while ago when I was talking about
relief employees in our craft, do you know that the Postal
Service is requiring our RCAs, our relief employees from the
National Rural Letter Carrier Association, to go out and carry
some of these contract routes because they don't have
contractors on them and forcing them to do that, and we have a
national level grievance on that. So they are saying you don't
need the work, but we are going to use your employees.
So it is a big-time issue with us, as well as I know my
counterparts up here, and we are here today to try to come to
some kind of reasoning as to what we can do to stop this. It
was never a problem. The almighty dollar is not the answer to
everything. Service to our people is the big issue. It is
appalling to me to have a letter sent from my home State of
Alabama to Alexandria, VA, to take 10 to 12 days.
Mr. Davis, the letter that you sent to me about this
committee meeting and testimony, I received it yesterday. It
was dated April 5th. I received it on the 16th.
We have to put service back in the Postal Service. You give
the people the product they want and the service they want,
they will pay the price. Give us the service. That is what we
need to focus on, and CDS is not the answer.
Mr. Davis of Illinois. Thank you very much.
We do have a couple of additional panels, and we are going
to try to get Mr. Lynch in now.
Mr. Lynch. I will try to be brief, Mr. Chairman. Thank you
for the opportunity.
President Burrus, President Young, President Pitts, and
President Hegarty, I sincerely wish I had as good a
relationship with every president in Washington as I do with
you folks. [Laughter.]
Let me just say an observation and then a quick question.
One is I think that, as a Postal Service, as a service that
provides such an important service to so many Americans, I
think there is a higher standard that we should hold ourselves
to, and I include the Postal Service in that. It is instructive
when the officials from the U.S. Postal Service talk about the
need to have workers not have health care and that in order to
be competitive they want to pay people as low a wage as is
humanly possible without any regard for the quality of life of
those people, and that the ability to avoid paying pensions and
benefits to those workers is the way to go.
I see what is happening in the Department of Homeland
Security with our screeners where they are doing that, and I
see a continual revolving door in those employees and the
quality of service going down and down and down, and the morale
in that area is just deplorable, and I see the pattern
continuing here in the way the Postal Service is treating its
employees. I think this country will be far worse off if that
is allowed to proceed.
I, for one, will stand in the way and try to defend the
rights of our workers to have a decent wage and decent
retirements and decent health care.
I want to go to the hazmat issue. I was elected on
September 11, 2001. That was my election day, the Democratic
primary. After I got elected, we had the whole problem with the
anthrax in our Post Offices, tragedy here in Brentwood. But I
agreed to go and visit every single Post Office and every bulk
mail facility in my District. It took a few months to do it. I
had no idea how many facilities I had when I said that, but
with the good help of a lot of my folks, some of whom are here
today--I know Kathy Manson from the Norfolk and Plymouth Labor
Council is here. She is a vice president of the AFL-CIO. Lola
Poor with the Boston branch of the APWU is here. Don Sheehan, a
great friend of mine from the Brockton--I represent the city of
Brockton--the Brockton APWU; Bob Losey from the Mail Handlers;
John Casioano from the National Letter Carriers--they took me
personally from facility to facility and introduced me to all
the workers, just trying to get a sense on what changes we
could make to safeguard our employees.
So we went in there, and over the next couple of years we
made some changes at the larger facilities regarding
protection: safeguards first of all for our employees,
safeguards that would protect someone in the event of an
anthrax attack; detection methods at the big postal services,
the GMF in Boston, where my sisters both work. We went and
looked at that. There are also issues of quarantine in the
event that there is an attack, making sure that employees don't
go home and contaminate their families or other workers. And
then, of course, decontamination and treatment.
I just want to know, you have all got workers in these
facilities, and this is something that you are all, from the
rural carrier to the city carriers to the mail handlers to the
postal clerks to our supervisors and our Postmasters, you are
all affected here, and so are the families that you serve.
What is the status right now in terms of that whole process
in our cities and towns?
Mr. Burrus. The comfort level of the employees is way
advanced from what it was following 9/11. The Postal Service
has implemented some safeguards for the employees. The
employees, themselves, are not aware of the holes in those
safeguards. The employees really aren't 100 percent protected
to day, but the comfort level of the employees, themselves, has
increased dramatically. The employees no longer day to day
think about poison in the mail.
Mr. Lynch. Is that because of the passage of time, where
people haven't had----
Mr. Burrus. It is the passage of time and the equipment
that has been installed to provide them some level of
protection. It is not absolute, by any stretch of the
imagination. We are still working at the national level trying
to find ways of providing additional protections, but as far as
the employees are concerned, they are much more comfortable
than they were on 9/12.
Mr. Hegarty. I'd like to thank Congress for approving the
funding for some of the bioterrorism detection equipment that
has been installed in the postal canceling machines in most of
the large and mid-sized facilities so that when the letters
come through this equipment is very highly able to detect
chemical or biological agents.
I also would say that we have worked with the Postal
Service at the headquarters level on a continuing committee
called the Mail Security Task Force, and all of the unions and
management associations have representatives on that task
force. Some of their work obviously can't be shared with the
public, because there are some security concerns.
But I believe the Postal Service has done a pretty good job
developing protocols, training. We have had a number of stand-
up talks, almost weekly, with employees on the workroom floor
with the supervisors telling them what to do in case of an
emergency, not just a biological but also suspicious-looking
packages, parcels, etc., and have developed some tabletop
exercises where they actually physically demonstrate what to do
and what not to do in something like that happening.
That is a long way from the months or maybe even the first
year after the anthrax attacks, when some powder would spill
out on a table and the supervisor--there have been horror
stories that he tasted it and said, ``Well, that is not
anthrax, don't worry about it. Go back to work.'' So we have
come a long way since those days.
Mr. Young. Mr. Congressman, I explain it just a little bit
different. The men and women that I represent, Donnie said it,
they kind of mesh with the community, and they realize that
they live in the world that we live in. I think everybody's
world changed on September 11th, maybe not as dramatically as
yours. I didn't realize that was the day you were elected.
Congratulations. But outside of that, not too much positive
happened on that day, I might also say to the Congressman.
Mr. Lynch. Thank you.
Mr. Young. But, anyway, my point is simply this: the world
changed when that event occurred. The men and women that I
represent, they just take it as their responsibility, because
they are meshed with those communities, to do their share in
regard to that. So it is not like I had to talk people into
going into work. It is not like I had to beg people to go to
work. They got up and they went to work the next morning
because they realized that seeing our members out on the
streets, seeing his members out on the street, seeing the
clerks at the Post Offices brings a sense of normalcy to the
American society. We just feel like we were just doing our
part.
Are they scared? I am sure they are. Do they recognize it
as a hazard? I am sure they do. But they are committed,
dedicated people, which is one of the reasons why I wake up
every morning and try to do my job, because that is my job, to
represent them in a manner that shows favorably upon what they
do for this country.
Mr. Lynch. Thank you.
Mr. Pitts. And I think awareness is a lot better today than
it was prior to 9/11. Even in our craft, especially in the
rural areas with the pipe bombs that were placed in mailboxes,
there is another problem, but the carriers are aware of
situations and they know what to look for today. So I think
overall awareness is a key to it.
But I again echo what Bill said: during the 9/11 crisis and
the anthrax, the people of the Postal Service held this country
together. They brought unity because they were the connecting
person. And the Hurricane Katrina areas down there, you saw
city carriers, you saw clerks, you saw mail handlers, you saw
rural carriers all coming to the office. They may not have had
an office, but they were there doing what they could. Did you
see any contract people there? Probably not.
Mr. Lynch. Let me just say in closing I don't think that
the Postal employees have been ever properly thanked for the
way that they responded to both those crises, and I just want
to say that we in the Congress appreciate the work that has
been done.
I yield back, Mr. Chairman.
Mr. Davis of Illinois. Thank you very much, Mr. Lynch.
I don't think I have any further questions. Mr. Marchant,
do you have any further questions for this panel?
Mr. Marchant. No, Mr. Chairman.
Mr. Davis of Illinois. Then let me thank you gentlemen very
much. We understand. I think we hear you. We hear the passion,
we hear the concern that you have expressed relative to the
contracting out. I can assure you that this committee will give
ample attention to it, very serious attention to it, and we
hope that we will arrive at a resolution, as I indicated
earlier, that is, indeed, amicable.
Let me also just acknowledge, as you are leaving, the
president of the Chicago APWU. I see my good friend Sam
Anderson.
Sam, it is so good to see you.
Also, Mr. Hegarty, my good friend Hardy Williams asked me
to say hello to you if I saw you today. I saw him on Sunday.
Gentlemen, thank you very much.
We will proceed to our next panel. Gentlemen, let me thank
you for your patience and the fact that you are still with us.
Let me just introduce our witnesses. Mr. Dale Goff is in
his 36th year with the Postal Service. He began as a postal
assistant in New Orleans and has been a National Association of
Postmasters of the United States [NAPUS], member and a
postmaster for 26 years.
Mr. Charlie Mapa is president of the National League of
Postmasters. He has been postmaster at Gold Run for 21 years
and is currently on leave from that position to serve with the
League.
And Mr. Ted Keating is the president of the National
Association of Postal Supervisors [NAPS], which represents the
interests of 35,000 postal managers, supervisors, and
postmasters employed by the U.S. Postal Service. Mr. Keating
assumed the presidency of the association in 2004 upon the
death of President Vincent Palladino and was elected to
continue serving NAPS in that capacity in 2006.
Gentlemen, we are delighted that you are here.
If you would rise and raise your right hands, we will swear
you in and we can proceed.
[Witnesses sworn.]
Mr. Davis of Illinois. The record will show that each one
of you answered in the affirmative.
We will begin with Mr. Goff.
STATEMENTS OF OSCAR DALE GOFF, JR., NATIONAL PRESIDENT,
NATIONAL ASSOCIATION OF POSTMASTERS OF THE UNITED STATES;
CHARLES W. MAPA, PRESIDENT, NATIONAL LEAGUE OF POSTMASTERS; AND
TED KEATING, PRESIDENT, NATIONAL ASSOCIATION OF POSTAL
SUPERVISORS
STATEMENT OF DALE GOFF
Mr. Goff. Good afternoon. I am Dale Goff, president of the
National Association of Postmasters of the United States. I
know that the hour is late, and I understand that my more-
detailed statement will be included as part of the official
hearing record, so on behalf of my 40,500 members I am honored
to have the opportunity to summarize the key points of my
submitted testimony.
I know that we have done so previously, but please include
our Nation's postmasters among the many groups who have
congratulated your diligence and success shepherding the new
postal legislation to enactment.
The 2006 law will help steer the Postal Service on a new
course which we believe will benefit the mailing community, the
9 million individuals who work within the postal industry,
including our own postal employees, and the Postal Service,
itself.
The keystone of our collective efforts will be the
preservation, if not the enhancement, of universal mail
services. This goal is predicated upon continued consumer
confidence, residential and business, and the integrity of our
national postal system. Postmasters are the linchpin in
delivering this achievement.
The community-based Post Office is where the product meets
the consumer, either through retail window service or through
management of the countless city and rural routes throughout
the country. Expected regular and universal postal services
with appropriate community input have been the hallmark of our
Post Offices. Failure to meet this criteria is a recipe for
failure.
I must digress a little bit from my words here, but I have
heard many times this morning about Hurricane Katrina. I lived
Katrina. I know what the Postal Service did the day after
Katrina passed and what we did for the customers back at home
and how our employees responded.
Mr. Chairman and committee members, post offices and the
vital services they provide will be condemned to mediocrity or
worse without adequate staffing. Postmasters have been raising
this issue for years. I must comment that this issue of
staffing is not a local decision, as we heard this morning.
Admittedly, in some instances upper level postal management has
responded, more out of a sense of embarrassment and urgency
than of responsibility. For example, please note the pressure
it took for the Postal Service to take remedial actions in
areas such as Chicago and Albuquerque. It should not be so
difficult to make necessary staffing accommodations.
Postmasters with inadequate staffing are left few options:
send carriers out after dark to deliver the mail or deliver the
residual mail themselves, again after dark; close window
service during the hours that may be most convenient for many
of our customers; or reduce window service, resulting in long
wait times.
Moreover, the excessive hours that postmasters dedicate to
serving their customers adversely affects morale and
productivity.
Postmasters believe that Congress has a vital role to play
in ensuring that the intent of the new law, that quality mail
service is fulfilled, and safeguarding the historic mission of
universal, accessible, and affordable mail service.
The Postal Accountability and Enhancement Act will prove to
be the success that most of us hope if we exploit the
opportunities the new law creates, price and product
flexibility, realized only if the Postal Service and the Postal
Regulatory Commission, as they collaborate on implementing
flexible rates and bringing innovative products to market.
These actions will help generate new postal revenue.
Mr. Chairman and members of the subcommittee, when history
renders its grade on Public Law 109-435, it will judge us on
how well we continue to provide postal services which our
constituents expect and demand, nothing more, nothing less.
Thank you. I will welcome some questions afterward.
[The prepared statement of Mr. Goff follows:]
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Mr. Davis of Illinois. Thank you very much.
We will proceed to Mr. Mapa.
STATEMENT OF CHARLIE MAPA
Mr. Mapa. Chairman Davis, Ranking Member Marchant, members
of the committee, thank you for inviting us to appear before
you today.
My name is Charlie Mapa, and I am president of the National
League of Postmasters. I welcome this opportunity to appear
before you today at this subcommittee's very first postal
hearing. With your permission, I would like to submit my
testimony for the record and then proceed to briefly summarize
it.
At the outset, I would like to say how pleased I am that
Congress has seen fit to reconstitute a Postal Service
Subcommittee. Your work is very important, as you can see from
the proceedings before we came onboard.
Mr. Chairman, the first thing I would like to do is to
thank you and all the Members of Congress, including
Congressman John McHugh, for passing the Postal Accountability
and Enhancement Act of 2007. It will save ratepayers billions
upon billions of dollars per year over the next decade.
The League is also pleased that the Postal Accountability
and Enhancement Act did not negatively affect small, rural, or
inner city Post Offices. Local Post Offices are icons in rural
America and not to be tampered with.
While the long march toward postal reform is over, in some
respects the most challenging task lies ahead. With the type of
leadership we have at L'Enfant Plaza today, I am sure we will
continue to make good progress. To this point, the critical
issue in the future is going to be how top postal management
manages its mid-level managers and its mid-level resources,
including most postmasters.
As I detailed in my written testimony, I have two issues of
concern. The first is the negative heavy-handed micro-managing
climate that we see in many districts. As important as that is,
I would like to skip, due to expediency and the fact that
everybody has been here all day long, and talk about another
issue that is very dear to my heart and I know to my colleague,
Dale, in terms of the workload of postmasters. Many districts
ignore the normal work week and expect postmasters to be at
their Post Office 6 days a week, 8 to 10 and sometimes 12 hours
a day, day after day, week after week, year after year, working
45 hours per week constantly is one thing. Working 50 hours a
week constantly is another. Working 60 hours a week is yet
another, and it is something that inevitably leads to burnout.
Seventy-hour work weeks are even beginning to appear.
Why are postmasters working longer? Much of it is because
of the critical staffing shortages that have become epidemic
across our country, and these postmasters are doing the work of
carriers and clerks, in addition to their own work. In the
short term the Postal Service saves money; in the long term,
once the burnout sets in, it does not.
If the Postal Service is going to reach the heights of
higher efficiency that the new postal law envisions, this is
going to have to change.
This concludes my oral testimony.
[The prepared statement of Mr. Mapa follows:]
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Mr. Davis of Illinois. Thank you very much, Mr. Mapa.
We will go to Mr. Keating.
STATEMENT OF TED KEATING
Mr. Keating. Thank you, Mr. Chairman. It is a pleasure to
be here with you today and represent the 35,000 postal
supervisors and managers throughout the country.
Rather than read a statement, since it is late in the day,
I want to concentrate on two issues that we already discussed
here today, the Chicago-type issues of operations and the
contracting out issue.
Today it is Chicago that is in the limelight. A year ago it
was California. Letter carriers in California were delivering
mail at 9, 10, and 11 at night. The Post Office continued to
deny there was a problem until Congress got involved. One year
ago today I attended a convention in California where the vice
president of the Postal Service at that time--he is now no
longer with us--said in his opening remarks, ``We are no longer
going to delay mail in California. We are going to fill
vacancies and hire where needed.'' Miraculously, when they did
that all the problems in California went away.
The issue of staffing, which my colleague has addressed, is
a major concern. I believe I, too, will be going to Chicago at
their request. I believe that is part of the problem in
Chicago, not the only problem, but it is definitely a part of
it.
You have to trace it back to the source. Why would a
manager, as was inferred today, local managers do not hire. Why
would they do that? Why would they not hire when they have the
ability? I think you have to look at our pay system. We have a
pay for performance system in effect, which rewards good
numbers. So if you don't hire, you carry vacancies, your
numbers are going to be better. We are chasing numbers in a pay
for performance system.
My members have benefited from pay for performance. We have
gotten good payouts. But I would ask at what price. Service, in
my opinion, has definitely suffered. What is happening in
Chicago now is going to be somewhere else next month or 2
months from now. As I told the Postmaster General recently,
there are more Chicago's out there; we just don't know about
them yet.
I would ask you to look at the root cause of staffing and
hiring in the Postal Service and relate that back to the pay
for performance system that is in effect. One is really a
direct cause of the other.
The other issue that has been discussed in quite length
here is the issue of contracting out. Like my Congressman from
Massachusetts, I, too, come from a postal family--three clerks,
letter carrier, my father was a railway mail clerk. I am very
proud of my service to the Postal Service. I am going to retire
for 2 years now. I continue on as president because I love what
I do.
I completely agree with the testimony you heard from the
unions here today about the contracting out. It will be the
death knell of the Postal Service.
The letter carrier is one of the most respected people out
in the field. That is what the public identifies with. The idea
of contracting that out to me, as a management person, is of
heart. We need your oversight into that issue, I believe,
because it is not going to change through the collective
bargaining or arbitration process.
I am glad to see these committees brought back. I hope you
will continue the process. I spent most of my career in
finance. When you are in finance you see a lot of things that
go on behind the scenes in the Postal Service. Believe me, from
my 40 years experience this is a company that definitely needs
oversight, and I urge you to continue that role.
Thank you very much.
[The prepared statement of Mr. Keating follows:]
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Mr. Davis of Illinois. Thank you, gentlemen, very much.
I will begin the questioning.
Mr. Mapa, as I listened to your testimony, you made it
sound like the postmasters are working like politicians, 60 or
70 hours a week. I am sure that they are, indeed. But my
question to you gentlemen is the same question that I asked Mr.
Burrus earlier: the Service has set a goal of reducing work
hours. I mean, they are talking about 40 million. How do they
do that or how do we get that kind of reduction without
creating other kinds of problems with service, with delivery?
What is your take on this reduction?
Mr. Keating. As far as reducing work hours, we say more
power to the Postal Service. We want to operate more
efficiently. However, if you look at what is happening with
postmasters and supervisors, can you really say that we are
saving work hours if you are calling a work hour an hour that
is worked. If you are talking about paid hours, yes, you are
reducing those, but in the case of the higher-level or medium-
level postmasters and supervisors, what is happening is they
are taking up the slack. They are stepping into positions where
they are having to do the work of their rural carriers, their
city carriers, and their clerks because they don't have the
staffing. They are working off the clock. At 40 hours and 1
minute, they are not getting any more pay. Any of the craft
employees that you listed to this morning, at 40 hours and 1
minute they are on overtime.
Postmasters don't mind some of that. What is happening is
that the Postal Service is now depending on the fact that the
postmasters are going to be taking up the slack, and so they
just work it into their budget. And they are assuming that the
postmaster will be there to make up for 5, 10, 15, 20 hours
during the week. I know that my friends in the supervisor ranks
are going through the same sorts of things.
Mr. Davis of Illinois. Mr. Goff, let me ask you if you
would respond to that same question.
Mr. Goff. Yes, Mr. Chairman. We heard a little bit this
morning, too, in the testimony from Mr. Potter about the
transformation, and we heard about what we did on the
transformation. That $40 million equates to, if I remember
right, 20,000 career positions in the Postal Service. Sir, I
can tell you now we need those 20,000 positions to day. We are
already short those 20,000 positions, and we are going to need
those in the future as the deliveries grow.
Now, we can do everything we can, and we have for 5, 6, 7
years now, where we have saved money. We lived up to the
transformation. We all buckled up our shoes, tightened our
belts, and we did what we could. But eventually you can't
transform any more. That transformation is starting to lead to
mutation, and that is what is happening.
We can save money in many different ways. Let's look at
some of the other areas that we could save, instead of cutting
the positions where we have to serve our constituents back at
home.
Mr. Davis of Illinois. Thank you very much.
Mr. Keating, I think you were very explicit in your
testimony relative to your feelings about contracting out and
also about performance based compensation. Do you think that
performance based compensation can really work the way that
some proponents say?
Mr. Keating. My personal opinion is no. The Postal Service
has proven that.
Can I expand on what your question to Mr. Goff was, too?
During my 40 year career in finance it is always is this a
budget year or is this a service year. That was always the joke
in finance. You can't continue to reduce and cut and cut year
after year without affecting service.
As we sit here this morning, and it is earlier in Oregon, I
can guarantee you that postal supervisors and postmasters in
Oregon, because of the contracting out issue, postal
supervisors and postmasters are sorting mail and delivering
mail because they will not give that to the NALC or the rural
organization because if they do they will own it. They are
holding it for the contractor. But in that lag time between
when that contractor comes on board there is nobody left to
deliver the mail other than the postmaster or supervisor.
Mr. Davis of Illinois. Well, thank you, gentlemen, very
much.
I will yield to Mr. Marchant for any questions that he
might have.
Mr. Goff. Mr. Chairman, before you move on, on the
contracting out issue, I have supervised contract routes for 27
years now, and I can tell you, to sum it up in one short
phrase, you get what you pay for, and that is just what it is
with the contract routes. You get what you pay for.
I have had contractors walk in on their first day and leave
on the first day. I have had contractors stay 2 days and leave.
But I have also had some great contractors that worked for me.
I had one lady that worked 42 years as a contractor. When Aunt
Mimi calls up and says, can Arlene bring me a gallon of milk,
that looks favorable on the Postal Service. Fantastic person.
She should have had a career with the Postal Service and not
worked all her time carrying her babies until the day that they
were born that she was delivering mail. But also I can tell you
I have had some bad, bad experiences with the contracting.
Mr. Davis of Illinois. Thank you very much.
Mr. Marchant.
Mr. Marchant. Thank you.
I have a couple of questions, but what do you find the
biggest challenge is in the past year that you have encountered
since the postal act has been passed, in your day-to-day life?
Mr. Goff. I guess, since I have been here, not being every
day back at home in the office, one of the challenges that I
see is that we are told that everything is changing because of
the new law that was passed. I was here. I am one of the few
that was here back in 1970 when the Postal Service was created.
We survived that. We not only survived it; we got stronger. I
look for that same vision with the new law that has been
passed. We will survive this. We will get stronger as an
organization. But it is just so many things that we are being
told that, because of the new law, this is what we have to do.
I know the intent of us working with this bill for the last
10 or 12 years was not that when it passed that we would have
this case on us all the time saying the new law says this, you
have to do it this way, you have to do it that way. We have
been doing our job, and this new law is supposed to enhance
that. That has been probably the most troubling part since the
law has been passed.
Mr. Mapa. Now that law passed since I came here in August,
and, like Dale, I have been coming back to Washington with the
National League of Postmasters for 12 or 13 years trying to
enact some law that covered postal reform. Everybody at this
table supported postal reform from one extent to another. We
are very happy to see that postal reform is here. It will
supposedly open up and free the way that the Postal Service can
do business.
We are looking forward to those sorts of things. Some of
the restrictions that were on the Postal Service made it very
difficult for them to compete, very difficult to come up with a
new product, very difficult to move into the 21st century.
That being said, I don't know if anybody from this morning
could have told you or can still tell you what is it going to
really give us. We are anticipating that good things will come
of it. We are hoping that we can minimize the things that we
don't like. But something had to change, and we are very
hopeful that postal reform is the way that we need to go.
Mr. Keating. Well, I have been here 9 years, and you can't
blame postal reform for some of the changes that are taking
place. I think it is a convenient excuse. The staffing issues
that we have been talking about have been here for 4 or 5
years. The issues in California that I talked about, they had
nothing to do with postal reform. It is management. It is
postal management throughout the country that needs to be
changed, and that is what we are trying to do. We are talking
to the Postal Service about what we see as the issues. I will
give them credit. They are talking to us. We are trying to make
some changes. But there is a lot of micro-management going on.
Again, it is attributed, from my perspective, back to a pay for
performance system that rewards those that get the numbers in
this country, regardless of how they get the numbers.
Mr. Marchant. A question for Mr. Goff. In your testimony
you mentioned problems with staffing items. Do you think
complying with section 404 of Sarbanes-Oxley will be a problem?
Mr. Goff. I would say that the more we get into the
staffing shortages and the postmasters, as Mr. Mapa said
earlier, we know they are out there delivering mail, they are
separating mail in their office, and they are doing different
things like that. That takes away their time from the
administrative duties that they are supposed to do. So as they
are doing more of that, yes, they get involved in the Sarbanes-
Oxley and the things that we are supposed to do in our offices
to comply with that. And I know that we are a small part of
that law for the Postal Service, but it will affect us and it
will affect on how we deal with that.
Our primary mission is to deliver the mail, and that is
what we should be doing, and if we are doing that and we don't
have the employees to take and deliver that mail and we are
doing that job for them, then we don't have the time to do
those administrative duties.
Mr. Marchant. And, just as a last comment, I represent a
district that is about 15 suburban cities now that were all
little farming communities before the Dallas-Fort Worth Airport
was built. Now they are all 50,000 or 60,000 people in these
towns. Now some of them have hit their peak and are declining.
As a Congressman, I deal with the issue. Just last Friday I was
in the little town of Cedar Hill, and the mayor confronted me
with the complaints that he as the mayor was receiving about
the service in the Post Office, not the delivery out in the
neighborhoods but the actual staffing and the workload that was
taking place in the actual Post Office.
What we are finding is that, as our parents are getting
older, they like to physically go to the Post Office. I mean,
this becomes a part of their routine. It is part of their life,
depending on when the mail is going to come to the house. So I
think that even in the most regressive of districts, and I have
that, I have growing suburban towns, the Post Office is
something that our cities and communities need. They are
putting new machines in. Some of the older people are afraid of
the machines. They don't know how to use the machines. As
Congressmen, we really are in this as a partnership, because
when the Post Office is not living up to the expectations of
the American people, the first thing they do is pick up the
phone and call their Congressman.
I have had very good luck in sitting down with postmasters
and management and letter deliverers and just sitting down and
working through a couple of specific problems. I appreciate the
willingness to do that. But as Congress looks at this problem,
looks at the implementation of all this modernization, this
Congressman still realizes that the Post Office is a very, very
important part of the American culture. I don't know that my
constituent will know what a contract person is or not, and I
know as postmasters that this issue of a contract person not
having a career, not being part of the organization, and yet
his or her behavior begins to reflect on your behavior.
I am very open to these hearings, Mr. Davis. Mr. Chairman,
I appreciate being included in them. I appreciate your patience
today with all of this.
Thank you.
Mr. Davis of Illinois. Thank you very much, Mr. Marchant. I
want to thank you for coming to participate. We all know the
difficulty that you had getting here, but, nevertheless, you
were able to make it before we ended.
I also want to thank not only this panel but all of our
panelists.
I also appreciate the audience for your tremendous
patience. This has been a rather lengthy hearing. We we also
wanted to get a good overview and a good look at what is taking
place in our Postal Service and what it is going to take to
actually implement the new reform legislation that was passed
last year.
I want to thank all of the witnesses and Members who
attended the hearing today. We expect that we are going to have
the dialog continuing.
The hearing record will remain open for 7 legislative days
for any additional statements or comments.
I want to thank the staff for putting together all of the
extensive information that we have had gathering all of the
statements and for their preparation for the hearing, which has
consumed all of our time up to this point. Now we are ready to
go and do some other things for the rest of the day.
With that, the hearing is adjourned. Thank you all so very
much.
[Whereupon, at 2:32 p.m., the subcommittee was adjourned.]
[The prepared statements of Hon. Wm. Lacy Clay and Hon.
Janice D. Schakowsky, and additional information submitted for
the hearing record follows:]
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