[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
A PATH FORWARD ON POSTAL REFORM
=======================================================================
HEARING
before the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
JULY 17, 2013
__________
Serial No. 113-49
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas MARK POCAN, Wisconsin
DOC HASTINGS, Washington TAMMY DUCKWORTH, Illinois
CYNTHIA M. LUMMIS, Wyoming ROBIN L. KELLY, Illinois
ROB WOODALL, Georgia DANNY K. DAVIS, Illinois
THOMAS MASSIE, Kentucky PETER WELCH, Vermont
DOUG COLLINS, Georgia TONY CARDENAS, California
MARK MEADOWS, North Carolina STEVEN A. HORSFORD, Nevada
KERRY L. BENTIVOLIO, Michigan MICHELLE LUJAN GRISHAM, New Mexico
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Stephen Castor, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
C O N T E N T S
----------
Page
Hearing held on July 17, 2013.................................... 1
WITNESSES
The Hon. Adrian Smith, A Representative in Congress from the
State of Nebraska
Oral Statement............................................... 8
Written Statement............................................ 10
The Hon. Patrick Donahoe, Postmaster General & CEO, United States
Postal Service
Oral Statement............................................... 13
Written Statement............................................ 16
Mr. Joel Quadracci, Chairman, President & CEO, Quad Graphics
Oral Statement............................................... 30
Written Statement............................................ 32
Mr. Cliff Guffey, President, American Postal Workers Union, AFL-
CIO
Oral Statement............................................... 39
Written Statement............................................ 41
APPENDIX
A Letter from Senators Coburn and Carper, Submitted for the
Record by Chairman Darrell Issa................................ 94
Letters to NAPS, NAPUS, NARFE, (EEC UC), Submitted for the Record
by Rep. Cummings............................................... 95
The Hon. Elijah Cummings, Ranking Minority Member, Opening
Statement...................................................... 122
Follow-up Questions and Answers for Patrick Donahoe by Rep. Pocan 124
A PATH FORWARD ON POSTAL REFORM
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Wednesday, July 17, 2013
House of Representatives,
Committee on Oversight and Government Reform,
Washington, D.C.
The committee met, pursuant to call, at 1:40 p.m., in Room
2154, Rayburn House Office Building, Hon. Darrell E. Issa
[chairman of the committee] presiding.
Present: Representatives Issa, Mica, Duncan, Chaffetz,
Walberg, Lankford, Meehan, Farenthold, Massie, DeSantis,
Cummings, Maloney, Tierney, Clay, Lynch, Connolly, Speier,
Pocan, Duckworth, Kelly, Davis, Cardenas, and Lujan Grisham.
Staff Present: Ali Ahmad, Communications Advisor; Alexia
Ardolina, Assistant Clerk; Molly Boyl, Senior Counsel and
Parliamentarian; David Brewer, Senior Counsel; Daniel Bucheli,
Assistant Clerk; Drew Colliatie, Professional Staff Member;
John Cuaderes, Deputy Staff Director; Linda Good, Chief Clerk;
Tyler Grimm, Senior Professional Staff Member; Christopher
Hixon, Deputy Chief Counsel, Oversight; Krista Boyd, Minority
Deputy Director of Legislation/Counsel; Kevin Corbin, Minority
Professional Staff Member; Elisa LaNier, Minority Director of
Operations; Lucinda Lessley, Minority Policy Director; Safiya
Simmons, Minority Press Secretary; and Mark Stephenson,
Minority Director of Legislation.
Chairman Issa. Good morning. The committee will come to
order.
The Oversight Committee mission statement is that we exist
to secure two fundamental principles. First, Americans have a
right to know the money Washington takes from them is well
spent. And second, Americans deserve an efficient, effective
government that works for them. Our duty on the Oversight and
Government Reform Committee is to protect these rights. Our
solemn responsibility is to hold government accountable to
taxpayers, because taxpayers have a right to know what they get
from their government.
It's our job to work tirelessly, in partnership with
citizen watchdogs, to deliver the facts to the American people
and bring genuine reform to the Federal bureaucracy.
Let us be very clear today: The United States post office
is in crisis. The American people lost in the range of $16
billion last year. They never wrote a check, the appropriators
never had a meeting and authorized anything. And this committee
was unable to take effective action.
Last summer, the United States post office defaulted on $11
billion in payments required by law, and every day they lose
$25 million, as we speak
The situation is both unacceptable and as much Congress and
the administration's fault as any of the hundreds of thousands
of workers at the post office. Ultimately, we have kicked the
can down the road, first in 2006 by not doing enough, and then
every year since then. In 2006, I don't think anyone was
predicting an additional 25 percent reduction in postal volume
in just 6 years.
The post office will and has continued to make some
adjustments. Attrition has been a primary tool, but less people
in large, out-of-date facilities is not the answer. Real
reorganization, fundamental restructuring, rightsizing
facilities, and being allowed to innovate new products is
essential.
Today, we will hear from two panels. Those two panels are,
in fact, essential to us. We have an obligation--and,
Representative Smith, I appreciate your being here today--we
have an obligation to 50-State and all the territorial
delivery. We have a universal delivery system that is at the
heart of what the post office does that no private sector
company is tasked to do. And we're proud of that, and the post
office has been proud of that for 200 years. But to preserve
delivery to every point in the globe and every point in the
United States by the U.S. Postal Service requires real change,
including the retiree health care plan.
We will hear today from the second-largest postal union,
which believes Mr. Cummings, my ranking member, does not go far
enough and does not entirely do away with the retiree health
care funding. Now, you will notice I didn't say prefunding,
because if you stop making the payments, ultimately, you will
not be able to make those payments.
Mr. Cummings knows that, I know that, and it's the reason
that any bill that comes from this committee will restructure
to the greatest extent possible, but recognizes that those
bills will come due and they must be addressed by this
committee if we're to be realistic about reforms that will
guarantee a post office well into the next century.
We can discuss plenty of reforms here today, but the truth
is reforms are going to come primarily from us enabling the
system to work properly. Congress must reduce or eliminate the
kinds of preconditions we have put on whenever possible, while
maintaining our requirement of universal service.
Our commitment is bipartisan. Our need for a bill is
urgent, and we intend to do it in the coming weeks. Among the
most important cost savings that can no longer be overlooked is
shifting the Postal Service from 6 day to 5 day. This was once
opposed almost universally, but as time has gone on we have
found more and more of the major shippers recognizing that the
alternative of higher cost is more unacceptable than having to
adjust when you ship a package so it arrives at the time that
the customer needs it.
But let's understand, going from 6 to 5 day, even if it
achieves the $2 billion a year savings, is but a small down
payment. We must look at every possible savings, and those
savings must not be on the back of longtime workers. They
cannot be on the back of those who have given their careers. We
must find acceptable ways to offer retirement and rightsizing
to postal workers, and I believe we can do that.
At the same time, postal unions must join with us to work
together to make the kinds of efficiency increases that allow
high pay, good benefits to be earned now and in the future
while delivering a product that can meet the requirement of the
customer. I believe we can do that. I believe we will do that.
I would like to take a moment to thank my ranking member
who has worked hard on as far as we have gotten. I will not say
that his vision of the bill and my vision of the bill are yet
identical. But our teams have worked together and we have
worked across the dome. As a matter of fact, I will now ask
unanimous consent that a letter signed by both the chairman and
ranking member, Senator Carper and Senator Coburn, be placed in
the record. Without objection, so ordered.
Chairman Issa. We in the House, we in the Senate must get
together and we must do it this year if we are going to begin
to have the post office make the changes now, with the money
that we are currently losing being the money we invest in no
longer losing in the future.
And with that, I recognize the ranking member for his
opening statement.
Mr. Cummings. Thank you, Mr. Chairman. I want to thank you
for your words of bipartisanship. I am reminded that towards
the end of last year we were working feverishly trying to come
up with a bill, and I think we got about 85 percent there. And
so I do believe we will be able to accomplish that, and I
pledge to you we will work hand in hand to achieve that.
So I thank you for convening today's hearing, and I thank
you for agreeing to my request to invite Mr. Cliff Guffey, the
president of the American Postal Workers Union, to be with us
today. During our April hearing we were able to hear from the
letter carriers, and I'm pleased that today we have a chance to
hear from officials who represent the men and women who work in
our postal facilities. So, I have said repeatedly, the Postal
Service is a vital link that binds our Nation together. Our job
in Congress is to enact comprehensive legislation that will
strengthen those links by ensuring that the Postal Service
offers products and services that meet the changing demands of
consumers while operating an efficient and effective network
that provides all customers with timely and convenient access
to these vital services.
The financial challenge facing the Postal Service is
familiar to us all. Last year, the Postal Service reported
losses of approximately $16 billion--that is with a ``B.''
Losses have continued this year, and the Postal Service has
borrowed all of its $15 billion it is authorized to borrow from
the Treasury. Obviously, these losses are simply unsustainable.
Unlike any other agency or business in the Nation, however,
the Postal Service faces the legal burden of prefunding 100
percent of its future retiree health costs, and this
requirement is a key contributor to its losses. The Postal
Service has taken numerous steps to reduce its costs, including
offering buyouts to employees, reducing operating hours at
thousands of post offices, and closing dozens of mail
processing facilities.
And let me say this. I have said it in private and I have
said it in public and I say it again today. I want to thank the
unions for working hard trying to help us get to where we can
have a bill that makes sense and the unions for bending over
backwards trying to make sure and understanding that the postal
system has changed and therefore there has to be changes with
regard to the number of employees that we have.
But the Postal Service cannot do this job alone.
Congressional action is essential to put the Postal Service on
a sustainable financial path. Although I am glad that the
committee is poised to consider postal reform legislation and
it must, I am disappointed with the draft legislation
circulated by the chairman. The chairman's draft legislation
would end 6-day mail delivery immediately and end most door
delivery in this Nation by 2022.
Rather than returning the overpayments made into the
Federal employment retirement system to the Postal Service, the
chairman's bill would burden the Postal Service with yet more
debt by increasing its borrowing authority, something the
Postal Service has repeatedly said they simply do not want. The
chairman's bill includes an extreme provision that would
abrogate existing union agreements and require that they be
renegotiated to include provisions allowing the Postal Service
to unilaterally lay off or dismiss employees, including those
who have decades of service.
The chairman's bill would also remove postal workers from
the existing Federal worker's compensation system and establish
a postal-specific system that would reduce benefits below those
provided under current law.
There is a more sensible alternative to this approach. This
morning I introduced the Innovate to Deliver Act, which has
cosponsors, to enable the Postal Service to operate more like a
business it was meant to be. My legislation would give the
Postal Service increased operating flexibility while ensuring
that revenue meets expenses. Specifically, my bill would create
a new chief innovation officer in the Postal Service charged
with leading the development of products and services that
enable the Postal Service to capitalize on new business
opportunities.
My legislation also would amend the schedule for retiree
health payments, recalculate the Postal Service's pension
surplus using postal-specific characteristics, return the
surplus to the Postal Service, and provide key tools to
rightsize the Postal Service workforce in a compassionate
manner that respects and honors these employees' dedicated
service over the years.
If we reject extreme measures that harm postal workers,
increase the Postal Service's debt, and destroy existing
services, I believe we can identify commonsense provisions that
provide common ground solutions. It is possible to develop and
finalize legislation that we can all support, and I urge the
chairman to choose this path.
With that, Mr. Chairman, I ask for unanimous consent to
enter into the record the statements of testimony from the
following: the National Association of Postal Supervisors, the
National Association of Postmasters of the United States, and
the National Active and Retired Federal Employees Association.
Chairman Issa. Without objection, so ordered.
Mr. Cummings. And with that I yield back.
Chairman Issa. I thank the gentleman.
Chairman Issa. And before I recognize the chairman of the
subcommittee, I just wanted to take a liberty here with the
ranking member.
Pursuant to our practice of posting legislation and draft
legislation on the site, and because your draft was circulated
to us, the following are at Leg Counsel right now for
redrafting in the bill. So for purposes of discussion today I
hope that people will be aware the bill in its original form
will include a chief innovation officer, something the ranking
member had suggested. It will have a higher experimental
product test cap added to it. It will have travel reporting for
postal governors in the PRC. It also will, by popular demand,
eliminate the requirement for any reopening of collective
bargaining agreements related to reductions in force. It will,
however, require that those be placed or harmonized with the
rest of the Federal workforce at time of new contracts, but in
no way effect current contracts for the life of those
contracts. And it will have a workforce-specific pension
assumptions.
Now, I realize it's unfair, since I don't have specific
language, but I wanted to make sure that those, particularly
the ones that the ranking member had included in his draft
legislation, will be employed.
I recognize the ranking member.
Mr. Cummings. Okay. Thank you very much, Mr. Chairman.
I just want to make sure I understand what you just said
and that is what I was asking my staff. So you are saying that
the things you just named are what? What are those?
Chairman Issa. Those are being placed before the bill comes
to the committee, those are being placed into the base text of
the bill.
Mr. Cummings. I see.
Chairman Issa. Because we circulated draft legislation and
it has been up on what is called Madison, we have had public
comment in addition to yours. So I wanted to make sure the
committee understands that, as you said, we were 85 percent
last year with the Senate even though we had to start over. We
want to get as close to that 100 percent as we can before it
comes to the committee. So all of those will be changed prior
to coming to the committee lest there be any need to offer
those. Obviously, there are additional items that both sides
will probably want to offer in amendments.
Mr. Cummings. Thank you very much, Mr. Chairman.
Chairman Issa. Thank you.
We now go to on the chairman of the Subcommittee on Postal,
Mr. Farenthold.
Mr. Farenthold. Thank you, Chairman Issa, for allowing me
to make an opening statement.
As the chairman of the Subcommittee on the Federal
Workforce, U.S. Postal Service and Census, Ranking Member Lynch
and I have held hearings with the Postal Service itself, its
customers, suppliers, and workers.
Today's hearing will focus on the big picture, postal
reform, finding ways for the United States Postal Service to
stand on its own two feet, to work harder and smarter for the
future, and not to become a burden on taxpayers. It's all about
finding innovative solutions that will make the United States
Postal Service fiscally sound.
The Postal Service, this committee, and all of Congress
cannot bury our heads in the sand, ignoring billions in
deficits, technology changes that are lowering demand, and
increased competition and huge liabilities for future
employment benefits.
Even without the contractual prefunding contract, the
Postal Service is losing in excess of $5 billion a year. They
are getting closer to not being able to meet the payroll and
provide for retiree benefits. Moving to a modified Saturday
delivery and cluster boxes alone could save as much as $8
billion annually, and these are only two of the simple and
obvious changes that need to be made when mail volume continues
to decline.
I am hopeful that together we can use what we have learned
from past mistakes and work in a bipartisan manner to identify
ways that will make the Postal Service a more successful and
viable service for the 21st century.
Thank you very much.
Chairman Issa. The gentleman yields back.
We now recognize the gentleman from Massachusetts, the
ranking member of the subcommittee, Mr. Lynch.
Mr. Lynch. Thank you, Mr. Chairman. I want to thank the
ranking member as well, and including Representative Smith and
the other witnesses who have come before us to help us with our
work.
Mr. Chairman, the United States Postal Service and our
dedicated postal employees have long stood as a shining example
of essential government service. Year after year, when polled,
the American people have voted postal clerks, our mail
handlers, letter carriers, and supervisors as among the most
trusted and most appreciated government employees.
Importantly, the Postal Service is not defined by
partisanship or politics, but rather embodies our core
governmental mission to ensure the free flow of information,
communication, and commerce. Towards that end, the agency
delivers mail 6 days a week to over 152 million residences,
businesses, and post office boxes nationwide, across every one
of our congressional districts. And even in the face of
dangerous events that threaten to halt mail delivery and upset
the stream of commerce, our mail handlers, our letter carriers,
our postal clerks continue their commitment to safeguarding the
continuity of the mail processing and delivering operation.
It is out of respect for the vital national role of the
United States Postal Service and its exceptional workforce that
we must ensure that our most trusted government institution
does not fall victim to customary partisan gridlock. Instead,
the viability of the Postal Service depends on our willingness
on both sides to set partisanship aside and work together
towards the enactment of meaningful and commonsense postal
reform legislation.
Regrettably, however, the discussion draft of the Postal
Reform Act of 2013 that was recently circulated by the chairman
fails to reflect the widespread consensus that exists among
postal stakeholders and this Congress regarding certain
practical steps that we could take to place the Postal Service
on more solid financial ground. Notably, right off the bat, in
measuring the Federal Employee Retirement System surplus, the
chairman's draft bill would not require the Office of Personnel
Management to consider the unique position, salary growth, and
demographic characteristics of postal employees when
calculating the Postal Services' Federal Employee Retirement
System surplus.
In December of 2012, the Office of the Postal Service
Inspector General estimated that the use of that postal-
specific, rather than government-wide assumption would result
in a $12.5 billion surplus, which the Postal Service could then
apply to pay down its Treasury debt and satisfy other
outstanding obligations.
This approach to postal reform has received the strong
support of our postal unions, associations and mailers, and my
own legislation, H.R. 961, to require the use of postal-
specific formula when recalculating the postal FERS surplus has
received the support of over 130 Members of Congress, including
nine brave and exceedingly wise Republicans.
I'd also note that this language is also included in H.R.
2690, the Innovate to Deliver Act, the thoughtful postal reform
legislation that our ranking member, Mr. Cummings, introduced
last night, of which I am a cosponsor.
What Chairman Issa draft does mandate, however, is a series
of drastic, far-reaching, and unnecessary changes to postal
operations that I strongly believe would only serve to send the
agency further into the red. It would compromise delivery
standards and undermine our postal workforce. In particular,
the proposed bill would immediately reduce mail delivery to 5
days per week and eliminate an essential Postal Service
competitive advantage.
The bill also seeks to phase out another key Postal Service
feature by replacing door-to-door delivery in favor of curbside
delivery and even contemplates a shift to so-called
neighborhood cluster boxes. Moreover, the chairman's draft
would significantly expedite the review process for
consolidating and closing and therefore further limiting the
opportunity for the meaningful community and stakeholder input.
And the bill would even require the abrogation of existing
collective bargaining agreements that contain reduction in
force provisions, despite the fact that these contracts are the
end result of extensive and hard-fought negotiations in which
the unions agreed to very, very, very modest increases in wages
and benefits. And those were negotiated between postal
management and employee representatives.
Mr. Chairman, while I appreciate the opportunity to discuss
your draft legislation in greater detail prior to next week's
business meeting, I do not believe that the bill in its current
form would set the Postal Service on a path towards financial
stability. Accordingly, it is my hope that today's hearing will
also allow us to focus our collective attention on those areas
of postal reform that can form the basis of a truly bipartisan
postal reform package for the sake of the Postal Service, our
postal stakeholders, and the American people.
Thank you, Mr. Chairman, and I yield the balance of my
time.
Chairman Issa. Thank you. Although you took 16 seconds
over, I know you did the best you could. And hopefully you did
recognize that two of your points we are changing and those
will be incorporated. So for the remaining ones that's what
markups are for.
We now go to our first panel--and, Adrian, you're called a
panel here--the Honorable Adrian Smith, who represents
Nebraska's Third District. Although the committee's rules
require that witnesses be sworn in, we do not require Members
to be sworn in.
So, Congressman Smith, you're recognized for 5 minutes.
STATEMENT OF THE HON. ADRIAN SMITH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEBRASKA
Mr. Smith. Thank you. Good afternoon Chairman Issa, Ranking
Member Cummings, and members of the committee. Thank you for
the opportunity to participate in today's hearing on the future
of postal reform. We certainly need solutions.
I come before you today as Nebraska's Third District
representative to discuss the importance of the United States
Postal Service to our rural communities. The Postal Service
continues to face a severe fiscal crisis, losing $25 million
per day. Congress needs to ensure the Postal Service continues
to uphold its mission to serve all Americans while addressing
its long-term challenges.
Throughout rural America, the post office is the center of
the community and a link to the rest of the country, and even
beyond. Every day I hear from constituents who are concerned
about losing access to basic mail services. Those in my
district are among the most reliant on the Postal Service. I
myself reside just a short walk from my local post office in
western Nebraska and I know firsthand the impact the Postal
Service has on small town Americans. To us, the Postal Service
is not just a convenience, it is a pathway to information,
products, medications, and services which are essential to our
daily work and lives.
Millions of Americans are at risk of being further isolated
without access to mail services. Congress must enact postal
reform which provides certainty for consumers and businesses
alike.
Commercial options already are scarce in rural America.
Arbitrarily targeting the mail in these areas may cause
potential businesses to lay roots elsewhere, limiting consumer
choice and harming rural economies. Two years ago, the Postal
Service announced it was considering for closure more than
3,600 small mail facilities in an attempt to address its budget
shortfall. Included on this list for possible closure were 90
locations in the entire State of Nebraska, with the great
majority in the Third District. Locations across rural America
were disproportionately singled out despite the minimal savings
which would have been achieved by closing these facilities.
In fact shutting down the smallest 10,000 post offices in
the United States only would save the Postal Service roughly 3
percent of the cost of operating its more than 31,000 post
offices nationwide.
As co-chair of the Congressional Rural Caucus, I have spent
the last 2 years closely working with the Postal Service,
stakeholders, and this committee to ensure rural post offices
are not unfairly targeted. Because of the importance of
continuing this bipartisan effort, last week I introduced the
Securing Access to Rural Postal Services Act, H.R. 2615. I
appreciate my colleagues joining me in support of this bill. My
Democratic co-chair of the Congressional Rural Caucus,
Congressman Mike McIntyre, as well Rural Caucus and Oversight
and Government Reform Committee member Congresswoman Cynthia
Lummis, both are original cosponsors of H.R. 2615.
This legislation would cap small post office closures and
consolidations at 5 percent of the total number of closures and
consolidations executed by the Postal Service in any given
year. The bill also would set guidelines for closing or
consolidating any post office to ensure those affected by such
changes would maintain access to the Postal Service.
The Postal Service would be required to provide 60 days
notice of its intention to close or consolidate a post office.
In addition, it would need to survey affected customers to
determine their preferences for alternative access to postal
services. If the Postal Service is unable to provide access
through the alternative chosen by survey participants or if the
preferred option is determined to be cost prohibitive, it would
be required to provide access to postal services through a
different means and give written explanation for why the
surveyed option was not possible.
The Postal Service should focus on changes which provide
the greatest savings with the least service disruption. My
measure allows the Postal Service flexibility to pursue needed
cost-cutting reforms while ensuring rural Americans are not
disproportionately affected. I am pleased the Securing Access
to Rural Postal Services Act will be included in this year's
comprehensive bill, the Postal Reform Act of 2013.
Mr. Smith. I thank the chairman and committee staff for
recognizing this unique set of challenges facing our rural
communities and for their willingness to work with me on this
important issue. I also want to acknowledge the constructive
input I have received from my district over the last 2 years. I
appreciate the many ideas shared with me from industry, postal
workers themselves, and individual patrons of the Postal
Service.
Congress must support a robust, efficient, and dynamic
Postal Service. Without responsible legislation, the Postal
Service will not be able to return to solvency. I am confident
this committee will produce a comprehensive reform bill which
provides universal service standards for consumers, opportunity
for businesses, and stability for the Postal Service. I am
committed to continuing to work with this committee, with
members on both sides of the aisle, to ensure rural Americans
continue to be an important part of the discussion on postal
reform.
Thank you.
Chairman Issa. Thank you.
[Prepared statement of Mr. Smith follows:]
[GRAPHIC] [TIFF OMITTED] T2401.001
[GRAPHIC] [TIFF OMITTED] T2401.002
Chairman Issa. And thanks to the CBO scoring of an estimate
of closing all 10,000 rural post offices saving in the
neighborhood of $300 million, we fully concur that H.R. 2615,
in its entirety, is intended to be folded into the base bill.
We recognize, as you do, that there are literally dozens of
fundamental alternatives to an outright closing of a post
office, including part-time and other techniques that would
allow service at an appropriate level. So the bill is
anticipated to limit to 5 percent, as H.R. 2615 does, the total
number of outright closings.
I have only one question for you, and we don't usually ask
questions, but since you did mention rural, how many door
deliveries would you have in a district like yours.
Mr. Smith. I don't have that number with me.
Chairman Issa. Wouldn't it be approximately zero? Wouldn't
almost everybody in rural Nebraska go down to the curb, go down
to the front, go down to a box, and pick up their mail, isn't
that substantially how virtually all of your residents get
their mail?
Mr. Smith. I wouldn't say all of the residents, but keep in
mind that it's not uncommon that someone would have a five-
mile-long driveway in ranch country, at the end of which would
be their mailbox, and perhaps that is a lot cheaper to have it
out there by the paved road than five miles down the driveway
at the doorstep.
Chairman Issa. You know, it's our intention to make sure
that we do not make that drive one foot further for any of
those residents.
Mr. Smith. Understood.
Chairman Issa. Mr. Cummings, do you have any questions?
Mr. Smith, we thank you. We will see you on the floor in
just a few minutes.
Mr. Smith. Thank you.
Chairman Issa. We will now set up the second panel. It will
be just be a very short break.
[Recess.]
Chairman Issa. I thank all the witnesses for their
patience. Hopefully you've heard from rural America and there
will be no disagreement here, since there seems to be none here
on the dais.
We now welcome our second panel, the distinguished
Postmaster General and CEO of the United States post office,
Mr. Patrick Donahoe.
Mr. Joel Quadraccia?
Mr. Quadracci. Quadracci.
Chairman Issa. Quadracci. Joel, I know you well enough, I
should get the last name right. You are chairman, president and
CEO of Quad Graphics, one of the largest printers and obviously
one of the large stakeholders in anything we do.
And Mr. Cliff Guffey is president of, as previously
announced, the second-largest, the American Postal Workers
Union.
We're very pleased to have all of you. Your testimony is
important. It will be listened to in the markup.
Pursuant to the committee rules, we would ask that you
please rise, raise your right hand to take the oath.
Do you solemnly swear or affirm that the testimony you're
about to give will be the truth, the whole truth? Please be
seated.
Let the record reflect that all witnesses answered in the
affirmative.
I will warn you all that about the time Mr. Donahoe
finishes, there will be a bell. That will let us get through
all three of you and then we will break for a period of time
necessary to take the votes, and unfortunately, the once-in-a-
Congress picture. So members, being politicians, are not likely
to return until after they get their picture taken.
Mr. Donahoe.
WITNESS STATEMENTS
STATEMENT OF PATRICK DONAHOE
Mr. Donahoe. Thank you, Mr. Chairman. Good afternoon. Good
afternoon, Ranking Member Cummings, members of the committee.
Thank you, Mr. Chairman, for calling this hearing today.
Let me begin by thanking the committee for taking on this
important challenge of restructuring the business model of the
Postal Service. The Postal Service continues to face systemic
financial challenges because it has a business model that does
not allow it to adapt to changes in the marketplace. We cannot
pretend that these marketplace changes are not happening or
that they do not require fundamental changes to our business
model. We need comprehensive reform now.
In the past 18 months, the Postal Service reported $19
billion in net losses, has defaulted on $11.1 billion in
retiree health benefits to the Treasury, and without
legislation this year we will be forced to default on $5.6
billion in payments due to the Treasury on September 30th,
2013. Our liquidity also remains dangerously low.
Our financial condition should not obscure the fact that
the Postal Service plays a vital role in American commerce and
delivers great value to its customers. Our package business is
growing and very strong, and our marketing mail will remain
strong for the long term. Unfortunately, declines in first
class mail overshadow the healthy parts of our business and
efforts we have taken to adapt to the lost revenue.
We have taken aggressive steps to reduce costs. Since 2006,
we have reduced our annual cost base by over $16 billion. We
have reduced the size of our career workforce by more than
200,000 employees, have consolidated more than 350 mail-
processing facilities, modifying hours right now in operations
at 13,000 post offices, and have eliminated 21,000 delivery
routes.
We have been able to accomplish these incredible
operational changes because of the tremendous dedication and
effort of our employees. It is to their credit that the
organization continues to provide high levels of service to our
customers and community during such change.
America deserves a Postal Service that can adapt to the
basic marketplace changes and invest in the future. It needs a
Postal Service that can evolve and change over time. The Postal
Service has advanced a plan that can meet these expectations
and it requires fundamental changes in the way that we
currently do business.
Mr. Chairman, we are seeking the authority under law to
control our healthcare and retirement costs. We can completely
eliminate the need for prefunding retiree health benefits if we
can move to our proposed solution. Our goal should be the
elimination, not just reamortization of any prefunding, and
this is achievable. Our employees and retirees will also
benefit from lower premiums and get the same or better health
benefits. Just by pursuing this one element of our plan, it can
reduce annual costs by $8 billion.
We seek the ability to establish a defined contribution
retirement system for new employees. Given the changes that
will occur in our industry in the coming decades, I believe it
is fundamentally unfair to the Postal Service and future
employees to maintain the defined pension system.
With the authority to move to a schedule that includes 6
days of package delivery and 5 days of mail delivery, the
Postal Service can save nearly $2 billion annually. The
American public supports this delivery schedule and it's the
financially responsible step to take.
We require a more streamlined governance model and
flexibility under the law to develop, price, and implement
products quickly. And we are also seeking a refund of
approximately $6 billion in overpayments into the Federal
Employee Retirement System.
If Congress can pass legislation that addresses each of
these areas, we can close a $20 billion budget gap by the year
2016 and operate on a financially stable basis. If we do not
gain that flexibility, our unsustainable losses will continue
and we will risk becoming a significant burden to the American
taxpayer.
There is a simple question to ask about the legislation
this committee is in the process of developing: Does it enable
$20 billion in savings by 2016? We believe our plan meets this
test and provides the most responsible approach for customers
and employees, but we cannot implement it without legislation.
Mr. Chairman, we are quickly moving down a road that leads
straight to a large financial chasm. The postal legislation can
be a bridge over that chasm. If we build the bridge properly,
the Postal Service can have a bright future. It can adapt and
better serve the changing mailing and shipping needs of the
American industry and the American public, and it can be a more
powerful engine for economic growth and be profitable and
operate without burdening the American taxpayer.
However, we can't get to that future if we don't build that
bridge, and we need a bridge that gets all the way to the other
side. Half measures are about as useful as a half bridge. We
need legislation, together with our planned changes, that
confidently enables the Postal Service to save that $20
billion.
I strongly urge this committee to pass comprehensive reform
legislation that effectively grants us the authority to operate
the Postal Service in a financially responsible manner and
creates a fiscally sustainable model for the next decade and
beyond.
Let me conclude by thanking this committee for its
willingness to address these tough issues and to pass
comprehensive postal legislation this year. The Postal Service
is a tremendous organization and needs your help. Thank you.
Chairman Issa. Thank you.
[Prepared statement of Mr. Donahoe follows:]
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Chairman Issa. Mr. Quadracci.
Mr. Quadracci. You're getting closer.
Chairman Issa. You know, you'd think with a name that gets
messed up as often as my four letters that I'd be better.
Thanks.
STATEMENT OF JOEL QUADRACCI
Mr. Quadracci. Thank you, Chairman Issa and Ranking Member
Cummings and distinguished committee members, for the
opportunity to discuss Postal Service and its impact on Quad
Graphics and the printing and mailing industries.
I am encouraged that both Chairman Issa and Ranking Member
Cummings are taking leadership roles in pursuing reforms that
would lead to the financial stabilization of the Postal
Service. In some key respects, the drafts are quite close. In
others, there are disagreements. But it is my hope, and the
printing and mailing industry will lend strong support to any
effort to earn bipartisan approval of the necessary reforms.
My company, Quad Graphics, has grown over the past 40-some-
odd years into one of the largest printers of magazines and
catalog and retail inserts. We employ about 20,000 American
workers in the United States, 58 plants, plus dozens of other
support facilities across 28 states. And I want to be clear
that we are believers in print. We do believe that print is
here to stay, but it is evolving, and we have worked with the
Postal Service on innovative ideas that entail things like
mobile devices, QR codes, interactive print to make print a
much more viable part of the multichannel world. And so print
is here to stay, and we have to make sure we have the ability
to deliver it in an efficient manner.
So what's at stake here is that the Postal Service is a $65
billion business supporting a $1.3 trillion industry that
provides 8.4 million Americans with family-supporting jobs, all
of which accounts for 9 percent of the U.S. gross domestic
product. So it really is about deciding whether or not we want
to have the post office self-funding and sustainable or whether
we want to offload the problem onto the taxpayers.
In terms of the decline in volume and excess capacity that
exists, pricing back in 2007, the significant increase that
happened then, along with the recession, has led to a permanent
reset within the printing and mailing industry. The last great
increase before the CPI cap was implemented in 2007, which was
double digit in size, led to double-digit decrease in volume.
On the heels of that rate case, the great recession continued
the erosion of volumes to the combined impact of about 25
percent out of the volume of not only the post office, but our
industry.
This, we believe, has become a permanent reset because
people have figured out how to be more efficient as well as
have used things like the internet and tablets to take the
place of some of that spend.
The reality is the USPS and private industry must rightsize
to the demand as price increases will not provide additional
revenue, but will lead to further erosion of demand. Excess
capacity and costs are the problem and it must be fixed. The
Postal Service has the capacity to produce approximately 300
billion pieces of mail; however, the projected volume in 2013
is closer to 150 billion. This is an unsustainable fact that
leads to costs far outweighing the actual demands. If excess
cost were removed, the costs of delivering the products would
be much closer to being aligned.
Quad Graphics has a lot of experience in rightsizing,
unfortunately. When the great recession happened and the
industry lost its volume, because we had a strong balance sheet
and a strong business, we were able to take advantage of it. We
are about a $1.7 billion company. We acquired a $3 billion
competitor who had gone through bankruptcy and lots of issues.
We knew that the opportunity was consolidation because we knew
the industry had to. There was excess capacity. We took on the
hard work of closing over 21 plants throughout our network to
make sure that the remaining business, the resulting business
of this combination would be sustainable on into the future.
The private sector economic activity is at risk unless
Congress acts to ensure the Postal Service is sustainable. The
Postal Service reform cannot wait until the last minute as it
hurdles towards insolvency. The crisis of confidence is already
costing the industry customers and volumes as marketers decide
how best to spend their advertising dollars. Fear of more large
increases in pricing will scare volume away.
Our industry changes rapidly. Quad, our customers, and the
Postal Service need to be nimble and flexible, and the Postal
Service must be allowed to make the business decisions that are
necessary without artificial constraints in order to allow that
to happen.
For reform to be legitimate and effective, we believe there
needs to be six key provisions in this. Assuring the Postal
Service has the authority to streamline its operations to
rightsize the capacity. Maintain a postage rate structure with
a CPI cap. Change in the delivery schedule to 5 days, something
the industry hasn't been clear on, but I think we feel that, in
conjunction with the rest of the reforms, we are willing to
support 5-day delivery and can adjust to it. Return to USPS its
overpayments to the Federal Employees Retirement System.
Reamortize of payments for prefunding retiree health benefits
from 10 years to 40 years without impacting what is due to the
employees. And also provide the USPS the ability to go out and
shop different healthcare benefits, something that Quad
Graphics has experience at doing, and our cost happens to be 20
to 30 percent lower than all industry. And so there are options
out there not only to shift where things are paid, but actually
to reduce how much has to be paid.
So I thank you, Mr. Chairman, for the time, and I urge you
to move this along as we are at a stage where our customers are
concerned. Thank you.
Chairman Issa. Thank you.
[Prepared statement of Mr. Quadracci follows:]
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Chairman Issa. Mr. Guffey.
STATEMENT OF CLIFF GUFFEY
Mr. Guffey. Thank you, Chairman. I want to thank you for
adopting some of senior member Cummings' proposals right up
front, especially the using the postal demographics. I think
that's a huge step forward
The Postal Service was not broken in 2006 when Congress
passed the PAEA. As a consequence of that legislation, it is
nearly broke. But it still is not broken. Even today it
delivers mail to every address in the United States and
delivers 6 days per week at less than half the cost of mail in
other industrialized nations. As a matter of fact, I think we
looked at England. England's is 0.6 of a pound, so it's a
dollar a letter there, and there are no discounts. I think the
discounts in this country are appropriate, they are well, but
taken in a whole with the whole Postal Service, everything is
operating properly and there needs to be some adjustments to
save this grand institution.
Congress needs to legislate to remove the burden of health
benefits prefunding. With that and a few other changes, the
Postal Service can continue to provide excellent and universal
service to the American public. Individual mail-processing
plants and post offices should not be judged in isolation. They
are a necessary part of the universal service network. I would
like to point out that probably over 250 plants have already
been rightsized, and we are to the point now where the more
rightsizing that we get, the more that the mail is delayed.
In other words, if the mail is delayed 2 or 3 days by going
to other plants and getting to the point where it loses its
value to the customers and we lose the opportunity to keep the
customers that we have now if we keep rightsizing. Rightsizing
is not wrong, it's not inappropriate as long as it doesn't
damage the product. And the product needs to be universal
service, overnight or 2 days at maximum.
Small offices where the mail is going is just as important
as large offices where the mail begins. Without the network,
none of the network pieces will work. All the pieces fit
together. Cutbacks due to financial pressures have caused a
severe cut in service. The situation will only get worse if
postal management is forced or permitted to continue it present
course.
The network consolidation plan the Postal Service announced
on May 17th, 2012, is really a plan for dismantling and
weakening the Postal Service. After reviewing that plan, the
PRC concluded that the net savings from all these cuts in
service could be as little as $46 million. Although this may
sound like a great deal of money, it is only about 0.06 of 1
percent of postal revenues. More optimistic cost-savings
projections are built on ridiculously high assumed productivity
increases.
I am sure the members of this committee have seen numerous
press accounts, as I have, that report strong complaints from
postal customers about delayed mail because of the network
consolidations. We received an article today about the fact
that Fastenal Corporation's finances have been damaged by
delayed mail. Their accounts receivable are not receiving the
moneys in a proper timeframe.
Mail is being delayed more than the Postal Service thought
it would be. When a mail processing facility is closed, mail is
sent to a distant facility for processing. It is very common
for delays to occur and for mail not to be transported back to
the original processing area for an on-time delivery.
In many places, postal mangers have tried to address this
by requiring mailers to mail before the end of the business
day. When mailers cannot do that, such changes cut off mail and
delay it a full additional day. These unintended delays are
compounding the effects of the Postal Service reduction in
delivery standards. Where the Postal Service is intended to
delay mail 1 or 2 days, the actual effect is greater. The
Postal Service now plans to deliver Tuesday's mail on Wednesday
or Thursday. Often it does not get delivered until Friday. Mail
intended for delivery later in the week is not being delivered
until the following week.
These are unnecessary cuts in service to the public.
Congress should require the Postal Service to provide overnight
delivery of first class mail in local delivery areas and prompt
delivery of first class mail elsewhere.
Congress also must recognize that solving this problem will
require an increase in postage rates. The Postal Service should
be permitted to raise rates to increase postal revenue as long
as the increases are consistent with the market for postal
services. The CPI cap should be repealed. The situation facing
the Postal Service is dire. It is important for the Congress to
refund Postal Service overpayments to CSRS and FERS. Postal
Service payments to CSRS and FERS should be recalculated on the
basis of Postal Service employees' experience.
Congress should reject proposals to create a new class of
business mail. Further, the Congress should not require to make
some of the changes that the Postmaster General is asking, but
should allow it. The unions and management can work together to
create a better Postal Service for all of the employees of the
Postal Service. I think the unions are willing to do so, it's
necessary, but do not require that which could be allowed to
happen. Thank you.
Chairman Issa. Thank you.
[Prepared statement of Mr. Guffey follows:]
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Chairman Issa. I'm going to try and squeeze in a first
round of questions, try to minimize the time you have to wait.
Mr. Quadracci, you listened to the head of the second-
largest union say that a rate increase fixes the problem. What
does a rate increase do to the customers that you serve, which
represent in flat mail probably more than any other single
group?
Mr. Quadracci. Well, I think it would be devastating. I
mean, selfishly I should want it because I'd have fewer
competitors at the end of the day, but I don't think that's
what we want to do here.
We saw in 2007, when our customer base had a significant
increase, we saw a direct correlation to the drop in count.
Remember, for people like catalogers, people who are using the
mail to sell product, there is two lists. There is the customer
list, people they already have captive, but then there is the
prospecting list where they're trying to get more customers,
and the problem is, there's a response rate. If the response
rate isn't great enough to offset the cost, they drop that and
they find other ways to prospect. So we will see a devastating
reduction in volume from our customer base if that were to
happen.
Chairman Issa. Thank you.
Mr. Donahoe, you have exigent authority to raise rates, so
in a sense you could do what Mr. Guffey is asking. You have to
balance those. What do you think would happen if, without
reducing most of the loss through other means, if you simply
sort of wrote a rate increase of 20 percent roughly across the
board, roughly, what would be needed to balance the books,
right?
Mr. Donahoe. If I wrote a rate increase of 20 percent, Mr.
Quadracci would faint.
Chairman Issa. But you'd lose how much business? Let's say
$4 billion, what would you be----
Mr. Donahoe. It would be more than 20 percent. More than 20
percent. In our plan----
Chairman Issa. And what would that do to the efficiency of
the system if that much volume dropped off?
Mr. Donahoe. We already have a substantial amount of
overcapacity. Our plan calls for no rate increases over the
CPI. It's predictable, customers can plan on that. They're
planning budgets right now for what they're going to mail next
year. That's why we are so careful and that's why we are
pressing hard for the legislation now. Let's get this done.
These guys can plan on what they're going to put in the system.
We're getting some growth back. We don't want to hurt that
growth
Chairman Issa. Now, if we did do this increase and we lost
20 percent volume, in a sense, we would have 20 percent of the
letter carriers idled. In other words, there would be, even
though it's not allowed under the current collective
bargaining, 20 percent of letter carriers would have nothing to
do if 20 percent of the volume went away. Wouldn't that be
true?
Mr. Donahoe. If we lost 20 percent of the volume, it would
be devastating to our finances.
Chairman Issa. I just want to understand from a labor
standpoint. If we want to maintain the maximum number of
efficient, effective postal workers in the processing centers,
in the retail operations, and carrying the mail to every point
in the Nation, the maximum number of people being used
efficiently is based on the maximum volume. Isn't that true?
Mr. Donahoe. That's true
Chairman Issa. So volume drives the question of employment,
assuming people are efficient and effective, right?
Mr. Donahoe. That's correct.
Chairman Issa. Mr. Guffey, one of my questions, one of Mr.
Cummings' ultimate questions, too, is don't we need to get the
maximum level of efficiency, use attrition and other means to
help reduce the workforce to match the current volume and keep
the price low or as low as possible to maintain the maximum
volume and thus the maximum employees for your union and all
the other trade unions?
Mr. Guffey. Of course, and that's what's been going on for
the last 10 years, the reduction and the productivity
increasing and consolidating the plants.
Chairman Issa. Okay. So when you sort of sneered a little
bit, just a little, about these money savings, if I understand
correctly, what you're really saying is you'd like to have an
active role in whether something pencils out or not, but you're
not objecting to the Postmaster finding ways to deliver the
same amount of mail with lower total labor, lower total costs,
and maintaining that volume.
Mr. Guffey. Well, it might be done with lower labor and
additional lower costs, and we have done a lot of that in our
last contract. We saved the Postal Service $3.8 million. When I
talk about raising the rates, I'm not talking about a 20
percent raise. I think I would faint just as much as----
Chairman Issa. I just want to look at $16 billion of loss,
or even if you did all the maneuvering you could do under
current law, it would still be, you know, on $64 billion in
revenue, you're losing more than $12, sans these readjustments
of retirement. To me that's 20 percent. You got to get it from
somewhere, and if you don't get it from the American Lung
Association's mailer, you've got to get it from somebody else's
mailer to get more.
Mr. Guffey. There are reductions that we're talking about
here in refinancing the long-term health insurance for the
retiree.
Chairman Issa. Right----
Mr. Guffey. We are talking about many things.
Chairman Issa. Right. And all of that's on the table.
Absolutely, all of it's on the table
Mr. Guffey. So that would not throw all of the cost savings
into a rate increase.
Chairman Issa. Okay. I just want to understand that--and
the point that I was making, and hopefully all three of you are
going to agree, is the least desirable part of any reform is
the rate increase that inherently drives down volume. Is that
agreed across the board? That that's the last thing you really
want. If you can find savings without, including healthcare
cost savings, if you can find savings without reducing those
things which drive people to use your service, that's the best
solution, right?
Mr. Guffey. Correct, but that would also include the fact
not slowing the mail down because that will also drive them
away.
Chairman Issa. This committee is very concerned about
quality of service, quality of service, and we want to define
it and we want to make sure our final legislation provides the
guidance that is going to assure quality of service.
Now, understand, I flew to Alaska, and I understand that
their needs are for a certain type of delivery. They are less
concerned about speed, while others are more concerned about
time perhaps than whether they can get a can of Coke
delivered--or case of--actually a pallet of Coca-Cola
delivered.
Mr. Ranking Member, I think it would be fairer if we pick
you up when we come back. I want to thank you all, and we'll
stand in recess until after that last vote.
[Recess.]
Chairman Issa. Okay. While we wait for others to get back,
I'm going to use the fact that I sprint better than some of the
other old guys.
Two quick things. Mr. Donahoe, when you talked about the
savings of about $8 billion in your opening statement, I was
intrigued because you and I have had this discussion before,
and I've been very willing to give you that jurisdiction if we
can, although we are working on a government-wide attempt to
save quite a bit in healthcare cost.
The question I have is, if we were--and again, Mr. Guffey
will be back in a minute, I'm sure--but if we were to give you
that authority, allow you do it, and essentially give you back,
quote, your prefunding, would the Federal Government be off the
hook? And if so, how would we eliminate the contingent
liability if, let's say, 20 years from now there wasn't enough
money and ultimately people, retired postal workers, looked to
the Federal Government as the bailout? You might remember the
railroad retirement.
Mr. Donahoe. Mr. Chairman, we've put together a proposal on
the healthcare. What we proposed was that we would take our
plan over Postal Service wide. The key to success with that
plan, we'll also be able to cover the retirees.
Now, we have had discussions with the unions. There has
been some suggestions from Mr. Rolando, as you remember at the
last hearing----
Chairman Issa. Yes.
Mr. Donahoe. --that we try to organize that under FEHB
because there was been a concern from the employees of not
moving away from FEHB. From our perspective, we're okay to
wait, as long as we get the savings. The savings are what's key
to us. If I could put a chart up here.
Chairman Issa. Sure, if they have it.
[Slide]
Mr. Donahoe. Yes. If I could explain, this chart is the key
to the $8 billion savings. If you look on the far left, you'll
see a $10,700 column. What that is, that represents the average
healthcare cost for a 65-year and older postal retiree on
average. The Postal Service retiree pays that. We pay 70
percent. They pay 30 percent.
Chairman Issa. Right.
Mr. Donahoe. So, if you take a look at the concurrent bar
on the right, the largest bar, that represents where we are
from a prefunding perspective right now. We've got about $49
billion in the bank, with another $46.9 billion on the hook.
It's $96 billion prefunding.
Now, we are required to make these payments because this is
the most affordable plan that you can get existing in the
system right now, the FEHB system. The next chart, the next
column over, you can see it says, ``With Medicare A and B'' in
the blue. The second one to the left.
[Slide]
Chairman Issa. I'm going to cut you short in one sense. It
is at least under consideration to move the entire Federal
healthcare benefit to one that would put Medicare in first
position as you were talking about doing.
Mr. Donahoe. That's excellent
Chairman Issa. So if we do that with the entire Federal
workforce, including postal workers, if I understand correctly,
that will take a substantial portion of the $8 billion you hope
to save in addition to the amount would be saved within the
Federal system.
Mr. Donahoe. If you require A, B, and D. We pay for
everything now. The mailers pay for it. It's postage money.
What's happens is, the farthest right-hand column, you can see
we in fact would have a small surplus. We would have completely
prefunded everything we needed.
Chairman Issa. Okay. We'll follow up more on that. I wanted
to make sure I understood it because our committee, of course,
controls the entire Federal workforce's benefits, and we are
looking specifically at--and if the ranking member were here, I
know he would chime in positively--we are looking at making
sure that Federal employees do not pay, and the Federal
Government on behalf of Federal employees do not pay more or
less than Lockheed Martin, IBM, or any other private sector
company.
Currently, as you've said to us, and we fact checked it,
the Federal Government is more generous to the savings, not of
the Federal worker necessarily, but of Medicare, which means
we're not properly saving. And of course, as you know, since
the mid-1980s, your postal workers and all Federal workers have
paid into----
Mr. Donahoe. Yes.
Chairman Issa. --the system so, they're fully vested.
Mr. Davis, are you ready to go?
Mr. Davis. Yes, sir.
Chairman Issa. Then it is my distinct pleasure to recognize
the ranking member in presence, Mr. Davis.
Mr. Davis. Thank you very much, Mr. Chairman. And let me
thank you and the ranking member for moving us to the point
where we have actually got legislative initiatives to take a
good hard look at. I want to thank all of the gentlemen for
being here and testifying.
We talk a great deal about the quality of service that is
provided, and we've talked a great deal about universal
service. Let me ask you, Mr. Donahoe, could universal service
be maintained when the service standard requirements are
degraded through unilateral and/or arbitrary reductions in the
workforce or by realignment of the network, that is the mail
network? And, you know, there is the claim that we lose $25
million a day. Is that an assessment that we are pretty
comfortable with?
Mr. Donahoe. Thank you, Congressman. Let me first off on
the service standards. We measure everything. We measure first
class mail, commercial first class standard mail and
periodicals. Our people are doing a tremendous job. And right
now everything we measure is showing us at all-time service
levels. And that's from taking the mail all the way through
delivery. And so with all the consolidations we've been doing,
the people have been doing a very good job with that.
One of the things that we're weighing for next year, we are
looking at the system right now to figure if there is a way
that we can maintain current service standards and continue to
make the consolidations to absorb in the excess capacity that
we have. That's a balancing point. No final decision has been
made on that right now. But we think that as we have run
through the first sets of consolidations, we find the service
levels have held very high and we do check this with our
customers, both those who send mail through the blue mailboxes,
as well as the commercial mailers.
As far as the $25 million a day, that's a number that we
have used based on the fact that we have not only had operating
losses within the system, but we've had the loss that's been
associated with the prefunding. I think if you check today,
this year, we are going to finish our finances approximately,
this is approximately, about a billion dollars better than we
said in the beginning of the year because we've had revenue
increases, especially in the package business, we have been
able to absorb those in. We have also been able to work and
take advantage of negotiated contracts with Mr. Guffey and our
other union leaders and be able to reduce the rate of pay with
the employees. So that's helped. So it's a little less than the
$25 million a day right now. Thank you.
Mr. Davis. Thank you. Let me ask you a little bit about the
5-day delivery discussions that we've been having. Have you
asked the PRC for an updated advisory opinion on the savings
from moving to a 5-day modified delivery?
Mr. Donahoe. The last time we had an official discussion
with them was last year when they came out with the savings
statement of $1.7 billion. We think it's a little bit higher.
There have been some other adjustments we've made, as you know,
because we've said we would deliver packages, especially
medications, on Saturday, too.
Mr. Davis. Are we currently losing money on Saturday
delivery?
Mr. Donahoe. Well, when you take a look at universal
service, you could look at pretty much by address. Some places
you are always going to make money Monday through Saturday, and
other places, just by as hard as it is to get to the places,
you're going to lose.
So from a fairness perspective, that's why we've made the
pitch around Saturday because it's the lightest day of the
year--or lightest day of the week. It's a day of the week where
you have fewer business open. So we've always tried to figure
out in order to maintain universal service to, you know, hard-
to-reach places across the country, we would just go with
Saturday as the standard for everybody.
Mr. Davis. Well, let me just quickly, Mr. Guffey, given the
continuous decline of mail volume, do you think that
eliminating the postal monopoly on access to the mailbox would
create a serious disadvantage for the Postal Service?
Mr. Guffey. I think it would create a serious disadvantage
for the American public. Keeping the monopoly on the mailbox is
what keeps the Postal Inspection Service able to follow through
and investigate problems with lost mail and what have you. If
other people have routine access to postal mailboxes, I think
that would deteriorate.
The Postal Service, to have its universal service, needs
that right, and if it doesn't have that right, then universal
service will deteriorate very fast in this country.
Mr. Davis. Thank you, gentleman, very much.
And thank you, Mr. Chairman. And I yield back
Chairman Issa. I thank the gentleman.
We now go to the gentleman from Texas, the subcommittee
chairman, Mr. Farenthold.
Mr. Farenthold. Thank you very much. I appreciate you all
being here.
I'll start with Mr. Quadracci. Did I get that right.
Mr. Quadracci. Quadracci
Mr. Farenthold. Quadracci.
Chairman Issa. Quadracci. Couldn't you get it right on the
15th time the way I finally did?
Mr. Quadracci. Here, everybody together, Quadracci.
Chairman Issa. Quadracci.
Mr. Farenthold. Quadracci. All right.
There was some testimony earlier on--and I'm sorry, I
forget who made it--that as a result of some of the
consolidations--and maybe it was just part of a question--there
have been substantial delays in getting product delivered. Have
you noticed that within your experience and for your customers?
Mr. Quadracci. I would say in our experience over the last
2 years, the performance has been better than it's ever been. A
couple of years ago, the post office put in a system to really
help monitor performance throughout the network.
Now, I want to be clear I'm speaking about catalog,
magazine, and direct mail. We have not seen those disruptions
as they've realigned things. And we have better visibility to
when there are disruptions, we can contact them very quickly
and resolve the issues. So it's actually been quite good.
Mr. Farenthold. Thank you.
And, Mr. Donahoe, we're talking a lot about giving the
Postal Service the flexibility to do what they need to do to be
competitive in the 21st century. The bill, the draft
legislation you've seen, did we go far enough? Did we give you
what you need to do that?
Mr. Donahoe. I think that, as I've stated before, it's our
intention to continue to press for comprehensive legislation.
We think that what the bills do in terms of the reamortization
helps, it gives us some breathing space, but as the chairman
said, you would be looking at overall healthcare of the Federal
system. I would strongly encourage that. I would strongly
encourage a good deal of competition in those systems and bring
the prices out, because we know we're paying way too much now.
So from that perspective we think it's good. We like the
fact that there's this 6- to 5-day considerations in there, and
we would also like to encourage the continuation on flexibility
with governance in pricing.
Mr. Farenthold. All right. And just so we get it in the
record, and I know we've talked about this in subcommittee
hearings, I do want to make sure it's clearly in the record,
can you explain to us why mail volume is going down and whether
or not you see any way of turning that around?
Mr. Donahoe. Let's break it down into three categories--
first class, commercial standard, and packages. Packages are
growing. We are seeing double digit growth. It's been great,
mainly tied in----
Mr. Farenthold. Even with competition from private
carriers?
Mr. Donahoe. Yes. And we compete with FedEx and UPS. We
also work with FedEx and UPS, as well as Newgistics, DHL. We
provide a lot of last-mile delivery for them, so it's been
growing in leaps and bounds very good.
From a standard mail, advertising mail, Mr. Quadracci can
tell you it's stabilizing. There's a lot more technology being
applied in that area. So it gives the customers the ability to
match up digital and physical, use it for advertising. We think
that there is a nice growth opportunity.
Where we're seeing dropoffs is first class. Single piece
mail, we've lost 60 percent of it in the last 10 years. People
pay bills online. It's cost us about $14 billion in today's 46-
cent stamp, if we had that. The other area that we're worried
about, it's been fairly stable, but that's commercial first
class, bills and statements. We've done a lot of work to try to
keep people in that mail.
Mr. Farenthold. And with respect to some of the proposals.
A chief innovation officer, you think that's probably a good
idea, too?
Mr. Donahoe. I think that's a great idea. We pride
ourselves on a lot of the innovations we've been doing now. I
think that we work very well, listen to our customers. Our
people, from a craft perspective, come up with a lot of good
suggestions, too. I think it's a great idea.
Mr. Farenthold. And we talk about the drop in volume of
first class mail. Do you think it would be a more substantial
or quicker drop in that if the standards of the service dropped
where, for instance, if I dropped--you know, put a piece of
mail in the mailbox at my house, put the little red flag up,
now it gets to wherever it's going within Corpus Christi the
next day. If that went to 2 or 3 days within the city, do you
think that would accelerate that drop substantially?
Mr. Donahoe. It certainly would if it was 3 days, and we're
looking at that now to try to figure how, as we continue to
shrink the network down, we can try to maintain some level of
overnight service. But, you know, we've got to see where we're
at in that.
Mr. Farenthold. All right.
And I want to ask Mr. Guffey, do you see some areas for
cost savings in innovation, specifically, that we need to
address above and beyond the obvious issues of prefunding and
the stuff we normally talk about? Do you see some efficiencies
we can find and some ways we can go that you and your folks
could get behind?
Mr. Guffey. I think that----
Mr. Farenthold. Microphone, please, sir.
Mr. Guffey. I think there are some opportunities at this
time to work with the Postal Service on some of the healthcare
issues. It's something that--we recognize the problem, and the
whole country has the problem.
We think there is opportunities to sit down with the Postal
Service and do something about the cost to the Postal Service
for the retirees. In other words, it's not fair for the Postal
Service to pay a full boat, the full cost of a health insurance
plan for a person who's going to get most of his services from
Medicare.
Now, that is a tremendous cost to the Postal Service, we
recognize that, but because they pay that much money for the
retiree, that money goes into the healthcare system for the
current employee. So, you know, in this dynamics, there's going
to be some shift of cost to the Medicare and there's going to
be a lot of shift to the current employees.
Meeting that fine balance is something that we think we can
do. I think all the unions can get together and work that out
with the Postal Service. It's something we don't want to be
required to do but allowed to do.
Mr. Farenthold. Well, I see my time has expired. I
appreciate you all's coming before the committee and testifying
today. Thank you.
Chairman Issa. I thank the gentleman.
And, Mr. Donahoe, when I was explaining what we were doing
with the health care, we were also doing the one-, two-family
that you had proposed. So that was one of your other savings.
Both of those would be included, which I think is another----
Mr. Donahoe. Thank you very much. That would really help.
Chairman Issa. Thank you.
We now go to the gentleman from California, who was one of
the first back, for 5 minutes, Mr. Cardenas.
Mr. Cardenas. Thank you very much, and boy am I tired.
Thank you, Mr. Chairman. I tried to rush back, and I guess it
paid off.
Chairman Issa. You need to know the shortcuts.
Mr. Cardenas. I'm learning, I'm learning. Thank you very
much. And I'd like to thank the panel for being here and
answering our questions.
My first question is, according to the Congressional
Research Service, Postal Service employees are the largest
single pool of workers within the Federal Employees
Compensation Act program, otherwise known as FECA. In its
report, the CRS noted that, and I quote, ``Postal workers are
injured on the job at rates disproportionate to the rest of the
Federal Government. Postal employees make up almost 22 percent
of the Federal workforce but they account for almost 40 percent
of the cases recorded in 2012.''
Mr. Donahoe, do these figures sound correct to you?
Mr. Donahoe. Yes, sir.
Mr. Cardenas. Okay. Could you explain why the Postal
Service accounts for such a large percentage of Federal workers
compensation cases?
Mr. Donahoe. Yes. Number one, the Postal Service--the work
that our people do is hard work. If you think about today, in
Washington, D.C. or anywhere up the east coast, you've got
letter carriers out in 95-degree heat delivering mail. If you
go into our processing plants in the evening where Mr. Guffey
represents the people, that's a hard job. You're on your feet 8
hours a night, you're putting mail in a machine and taking mail
out.
We are very proud of the fact that in the last 10 years the
Postal Service, working with the unions and working with OSHA,
have been able to reduce workplace accidents as measured by
illness and injury rate by 50 percent. And if you take a look
at what's happened over that time, there has been a lot of work
with ergonomics and whatnot. We still have a high injury rate.
Any accident is unacceptable. But we're proud of the fact that
we have been able to push those rates down.
Mr. Cardenas. So, basically, so that everybody understands,
even in our most automated times that we've ever seen in the
world and in this country, the Postal Service is still very
manual intensive in the sense, like you mentioned, postal
workers walk door to door, they don't electronically meet
people at their front door. In addition to that, we still have
people who are actually, such as in warehouse-type situations,
where they're moving goods, et cetera?
Mr. Donahoe. Yes.
Mr. Cardenas. Okay. So in general, I would assume that
organizations who are still doing an intense amount of that
kind of work have injuries in their workplaces more than
perhaps maybe in an office setting in general?
Mr. Donahoe. Yes, I think that's true.
Mr. Cardenas. Okay. So also my next question is, does
having a higher than normal injury rate reduce overall
productivity and efficiency within the Postal Service?
Mr. Donahoe. Yes, that's why we focus so hard on making
sure that we reduce the rates. Because an accident is something
that, you know, has a cost in the short term, but what we also
worry about is long-term injury to employees. You can get
injured at work and carry a back injury for the rest of your
life. So that's why we focused on trying to reduce this.
Mr. Cardenas. And you mentioned earlier about the ways in
which--or the methods that you've taken advantage of as a
department such as ergonomics. Can you condense for that what
exactly does that mean? It sounds kind of foreign.
Mr. Donahoe. Well, if you think about on a nightly basis a
person would go and work on a certain machine. There's work
that we've done to help people learn to stretch better so that
when they lift things or move things that they don't have a
tendency to hurt themselves. And then you can also employ
various--a piece of equipment, some back support, and things
like that. These are all the things we've learned over the
years to try to reduce the accidents.
Mr. Cardenas. And they have been reduced, right?
Mr. Donahoe. Yes, 50 percent down in 10 years.
Mr. Cardenas. Okay. I think it's important for the
taxpayer--excuse me, the ratepayers to know that.
In your April testimony before this committee, you asked
Congress to reform the workers' compensation program and
specifically you requested that the Postal Service, ``be
provided with the ability to settle Federal workers'
compensation claims. This would allow the Postal Service and
the employee to agree on a settlement, sever ties and end the
employee's receipt of FECA benefits.'' Why did you make that
request and is it practical? And do you still believe that we
should give you that authority?
Mr. Donahoe. Yes. We believe it is. What we'd like to see,
there is a bill presently being sponsored and being discussed,
I don't know where it is exactly right now between the Senate
and the House, that talks about changing some of the retirement
requirements for people on FECA to move to, you know, move
people off FECA, onto retirement. We support that.
We would also like to have the ability to have a buyout
process like the States do where a person could take a buyout
and go on with their lives. We have 17,000 people as we speak
on the periodic rolls right now. It's going to cost us, we
estimate, about $16 billion in liability. We think that we
could reduce that, let a person get on with life, they could go
work somewhere else and they would be off our rolls.
Mr. Cardenas. Okay. Thank you very much.
My time has expired. I yield back. Thank you.
Mr. Farenthold. [presiding] Thank you very much.
We'll now recognize the gentleman from Florida, Mr. Mica,
for 5 minutes.
Mr. Mica. Thank you.
Well, I guess a lot of your costs, Mr. Donahoe, are related
to labor, something like 80 percent of the costs?
Mr. Donahoe. Yes, 79 percent.
Mr. Mica. And how about benefits like health care and stuff
like that? You seem to have a lot of issues with this so-called
prepayment, but what percentage are the benefits?
Mr. Donahoe. In terms of benefits, benefits make up 48
percent of all postal salary and benefit costs.
Mr. Mica. Now, you know the President is delaying, I guess,
the employer mandate. What if we opened up for savings purposes
the postal employees to join--well, actually just put them on
Obamacare? What would you think of that?
Mr. Donahoe. Well, we have actually gone out and solicited
in the private market and secured private insurance outside the
Federal system for our noncareer employees.
Mr. Mica. So you wouldn't object if I have an amendment to
open it up? What about a mandate?
Mr. Donahoe. I would like to open it up for free
competition. We'd like to go out and bid, get everybody to bid
and give us the best price for health care. We don't do that
now.
Mr. Mica. How about you, Mr. Guffey? Would you like to
either have a mandate or to open it up to Obamacare?
Mr. Guffey. I think Obamacare was written in such a manner
that a person could keep their current insurance, and we're
very happy with our current insurance, thank you.
Mr. Mica. Well, we are shifting some of the employees, I
think Members of Congress and also staff. And 40 percent of his
cost. And it seems to be touted as such an economy saver for
maybe reducing some of their costs. Maybe I could look at that
and work on an amendment with you all when we get the bill up.
Let's see. How many employees do you now have, Mr. Donahoe?
Mr. Donahoe. Currently we have 492,000 career employees and
119,000 noncareer.
Mr. Mica. And how many would be--are sort of mandated by
your union agreements, labor agreements? All of those
positions?
Mr. Donahoe. No. No. We've got about 50,000 people in the
organization on the career side, that would be the Postmaster,
supervisors, administrative people in that, and they are not
mandated by union agreements.
Mr. Mica. Okay. So you could go down--I mean, you have,
say, 440,000 that are mandated?
Mr. Donahoe. Yes.
Mr. Mica. Do you have vacancies?
Mr. Donahoe. We have vacancies. We continue to absorb the
vacancies.
Mr. Mica. So you're not filling them?
Mr. Donahoe. No. We have absorbed 200,000 people under our
system in the last 6 years.
Mr. Mica. Right. And to get to sort of a break-even is
there any projected, is it going to be 300,000, 400,000?
Mr. Donahoe. Right now if we were in a 5-day delivery mode
with the downsizing of the network we think we would be able to
support about 400,000 career employees and about 65,000 to
70,000 noncareer. That would equate to around an operating
expense with noncareer of about $62 billion a year.
Mr. Mica. I noticed the different proposals to try to
increase your revenues. I support the 5-day service. But there
could be the availability of a special service. Is that
anticipated? Or pay a premium to get mail on a Saturday?
Mr. Donahoe. One of the things we've looked at, of course,
is to provide package service on Saturday. There is an option
if we sort, because we will be sorting mail for post office
boxes on Saturday, so there could be an option if somebody
wanted to pay----
Mr. Mica. But you could have a method and also increase
your revenue, I think.
Mr. Donahoe. That is an option.
Mr. Mica. I pay sometimes for Saturday delivery extra with
some package carriers, I think.
And you said you're a billion dollars better off than you
were, you've had some reductions. So what's the loss, is it
from $16 to $15, or $15 to $14?
Mr. Donahoe. No. NO. The loss this year was projected to be
$7.6 billion. We're thinking--and this is not, you know, it's
not 100 percent firm at this point--somewhere between $6 and
$6.4. So it's a little better than a billion better.
Now, here is the reason why. Operationally, we are probably
going to be fairly close to a billion dollars better. The
health care costs are fixed and we'll have a little bit better
of a rate change with the interest rates, which help us in the
long-term liabilities for workers' comp, so we get some credit
on that.
Mr. Mica. Finally, the unfunded liability. The report I got
says about $100 billion in unfunded liabilities. Is that
correct?
Mr. Donahoe. High $90s, yes.
Mr. Mica. Okay. Thank you.
Yield back.
Mr. Farenthold. Thank you very much, Mr. Mica.
We'll now recognize Mr. Clay for 5 minutes.
Mr. Clay. Thank you, Mr. Chairman.
And according to a recent press release, the APWU's 2010-15
collective bargaining agreement saved the Postal Service almost
$3.8 billion over the lifetime of the contract.
Mr. Guffey, considering those savings, would you say that
Postal Services' financial condition was taken into
consideration when you negotiated that agreement?
Mr. Guffey. Definitely. Definitely. Every negotiation and
every arbitration the information about the status of the Post
Office and the problems they're having is under consideration.
Mr. Clay. Thank you for that response. And the draft bill
released by the chairman would require the abrogation and
renegotiation of any existing collective bargaining agreements
prohibiting the use of reduction in force authority. Instead,
this bill would require provisions allowing the Postal Service
to unilaterally fire employees.
Mr. Donahoe, has your legal department reviewed this
provision? And if so, have they provided you with an opinion on
what the consequences of abrogating existing contracts might
be?
Mr. Donahoe. Well, we haven't looked at that, and I'm not
so sure that today that whenever the chairman spoke, I wasn't
sure if he changed some of that. So I think there might have
been a change afoot. But we have not looked at that.
Mr. Clay. I would suggest that your legal counsel look at
it and----
Mr. Farenthold. If the gentleman would yield for a second.
Mr. Clay. I'm sure it's not too far off from what was
initially proposed.
Mr. Farenthold. We've agreed to take the mandatory
renegotiation provision out of the final bill. It is at Leg
Counsel being drafted now.
Mr. Clay. Okay. I would hope their legal counsel would look
at it.
Mr. Farenthold. Right. And we intend to take that out.
Mr. Clay. The more eyes the better.
Mr. Guffey, did the APWU's 2011 agreement have a provision
prohibiting the use of RIF authority?
Mr. Guffey. There are specific provisions that go into if
you do conduct a RIF, and those provisions are spelled out in
article 6 of our contract. The danger has been, and I don't
think it's really a danger because the Postal Service and the
unions are both very concerned about the employees and we've
been able to manage the downsizing of our organization by
almost 200,000 employees by attrition/buyouts and excessing
people to other crafts or to other functions. And I would
caution that the repeal of the contracts or to prohibit
negotiating of these things is not necessary.
Mr. Clay. Would a new collective bargaining agreement
require the consent of your members?
Mr. Guffey. Yes.
Mr. Clay. Okay. And, Mr. Donahoe, is there a particular
reason why the Postal Service has chosen not to try to
renegotiate RIF authority in its existing collective bargaining
agreements?
Mr. Donahoe. Not that I'm aware of. As Mr. Guffey said,
we've worked very hard over the last number of years to try to
make what we call for soft landing for people. As a matter of
fact, in the latest negotiation we were able to reach an
agreement to expand the number of noncareer people. We've got
about 30,000 on the rolls. And they would be used if we needed
to as a buffer for any big loss in volume. They're hired with
the idea that they are only temporary. So we've tried to figure
out how to give the Postal Service the flexibility if workload
changes.
Mr. Clay. Also the chairman's bill would replace the
current conventional arbitration process with a last best final
offer process. This process establishes a set timeframe within
which an arbitration board must select a final offer.
Mr. Guffey, as the president of APWU, do you think the
current arbitration process moves too slowly?
Mr. Guffey. It definitely moves too slowly, but the goal of
the union and management both is to negotiate agreement, get to
an agreement. There's been few times in our history where we've
had to go to arbitration. In those panels right now there is
always a neutral, there's one person from the unions and one
person from management on those panels to determine what the
final outcome would be.
Mr. Clay. And, Mr. Donahoe, would the Postal Service
benefit from a structured process as required by this
provision?
Mr. Donahoe. I think that the timing would help if we would
resolve things faster. But I like the idea of having a little
bit more flexibility in terms of what we do now. We have used
what's commonly referred to baseball arbitration, and it can be
a little bit worrisome, it's a lot less predictable.
Mr. Clay. Thank you both for your response.
I yield back.
Mr. Farenthold. Thank you very much.
We'll now recognize the gentleman from Kentucky, Mr.
Massie, for 5 minutes.
Mr. Massie. Mr. Donahoe, in talking about the partnership
with UPS in a press release called ``Brown and Blue Make
Green,'' you said that, ``It's a great template for how posts
and private enterprises can work together to better serve our
customers, the planet and the bottom line. We hope our
partnership can serve as a model for others to work together in
new ways, whether they are competitors, collaborators,
customers or all of the above.''
Is it a template for how the U.S. Post office can implement
more partnerships with private industry to deliver a better
package at a lower price?
Mr. Donahoe. We work very strongly right now with private
industry in many different ways. If you would take a look at
the volume of mail, we have a $65 billion revenue base, it
would probably be a good $15 billion to $18 billion more in
just revenue alone if we didn't have work-share partnerships
with companies like Quad Graphics. Mr. Quadracci's company
produces mail, sorts it. At the same time, it is very
efficient. He can drop it into our system and our clerks sort
it and letter carriers deliver it.
So that's been a very good working relationship. I think
that opportunities to work with companies like FedEx UPS, DHL,
Newgistics has been very good, especially for the paying
customer, because they're able to get the best price, the best
value and very timely service.
Mr. Massie. What about in the area of first class delivery?
Is there an opportunity to do something similar to what you did
with UPS with other companies to deliver first class mail?
Mr. Donahoe. We do what we call first class presort now
where a lot of companies actually produce the mail and sort it
and then bring it into us. So that's a pretty active process
now.
Mr. Massie. How about in the delivery of it, the final
delivery?
Mr. Donahoe. Final delivery to a large extent we've got a
great delivery force out there, and we do what's called post
office Delivery Unit drop ship where a lot of packages and mail
come in at that point and then we deliver the final mail.
Mr. Massie. How about some innovative ways to deal with the
problem of keeping up the rural service to rural areas? What
are some reforms you've implemented? But more importantly, what
are some that you've thought about that you haven't yet?
Mr. Donahoe. Well, we're working with our rural carriers
union right now on what we call a new evaluation system. It's
come out of our last arbitration. We think it'll be a good
process to get a good handle on costs for delivery in rural
areas.
Of course there's a lot of work that's been done with both
city carriers and rural carriers on visibility. Our visibility
to package and soon to be mail delivery is going to be very
good, so people know within 10 minutes when they got mail in
their mailbox.
Mr. Massie. How about the services in the rural areas? For
instance, when we have a post office close down, there are
certain services that are no longer provided. Are there
opportunities to work with private organizations there?
Mr. Donahoe. Yes. We're doing what's called the Post Plan,
which is trying to match up the revenues and the workload on
the window services. But we also have opportunities for people,
like in a small store, to have what's called a village post
office. We've got about 350 of them now with another 100 on the
way. If you own, let's say, a small gasoline station in a rural
area, it's a little bit extra revenue and it creates foot
traffic, too, where people come in and mail a package or buy
stamps at their local store.
Mr. Massie. So far is that a model that you think could
work or is working?
Mr. Donahoe. Yes. Absolutely. There has been a lot of
interest and we'll continue to expand in that area.
Mr. Massie. So what is your overall plan for addressing the
financial crisis?
Mr. Donahoe. Financial crisis pretty much boils down to
this: We've got to resolve the healthcare issue. As I was
saying to the chairman when people came back in, it is worth $8
billion. We strongly advocate exactly what he has mentioned
about moving out, taking a look at the entire Federal system.
We overpay substantially for our retiree health benefits, as
Mr. Guffey mentioned. On average we pay $10,000 for a post-65-
year-old retiree when, in fact, that post-65-year-old retiree
should be paying $3,300. Very inefficient. Big changes there.
Six to five-day delivery, we keep Saturday delivery of package.
We're looking for some other changes in structure as far as
some of the opportunities for new growth.
Mr. Massie. But there are still opportunities available to
partner with private industry and you found that to work so
far----
Mr. Donahoe. Absolutely.
Mr. Massie. --in rural areas----
Mr. Donahoe. Absolutely. Rural, cities, across the entire
gamut. Yes.
Mr. Massie. Okay. Thank you very much.
I yield back, Mr. Chairman. Thank you.
Chairman Issa. [presiding.] Thank you.
We now go to the ranking member of the subcommittee, the
gentleman from Massachusetts, Mr. Lynch.
Mr. Lynch. Thank you, Mr. Chairman.
Mr. Donahoe, I just want for the record just to express my
disagreement with you on going to 5-day. I think America is on
a 6-day schedule now. And we've had this conversation in
private, you're a good man, we just disagree on this. I just
think that America's business and America's workers, America's
families live on a 6-day schedule. And I am very concerned that
by stopping delivery on Saturday, which is pretty much the
consensus day that will be dropped off, we would basically
enhance or exacerbate the downward spiral of the Postal Service
and we would lose a lot of volume. Our problem right now is we
don't have enough volume of mail. And I think by eliminating
Saturday we're going to exacerbate that problem, we're going to
have less volume, and it's going to be a self-fulfilling
prophecy.
And I could just picture myself as a consumer and I'm about
to mail something on a Wednesday or a Thursday, and if I know
it's not going to get there by Friday and it's closed on
Saturday and it's closed on Sunday, well, wouldn't it make more
sense for me to call UPS instead of putting it in the mail. I
just think you're going to invite a further decline. But that's
me. That's my schtick.
But I want to talk to you about door-to-door delivery. And
I have great sensitivity to the rural community. I do. I
understand a lot of the rural communities consist of a gas
station, a post office, maybe a grocery store, and that's
downtown for a lot of those small towns. So losing a post
office is a big thing, it's a big deal, it could be very
damaging to rural communities, especially given the fact that
you might have to drive another 200 miles to find another post
office. So I am very sensitive to their needs. And we've got to
figure out a way to hold them harmless if possible. And I
appreciate Mr. Smith's testimony earlier.
But I also see a proposal in the chairman's bill that says
that, well, for instance, right now, according to your folks in
our briefing, they said you provide door delivery to about 37
million--a little bit more than 37 million homes and
businesses. And the chairman's plan is to eliminate 30 million
of that in door delivery. And that's largely urban. And the
idea is to replace that with cluster boxes or some other means
of delivering mail.
Now, I come from a very thickly settled, densely settled
urban neighborhood where the houses are basically attached.
There's no open space, there's no place to put a cluster box.
And you're talking about basically eliminating door delivery
for urban residents.
I don't see how this works. And I'm not just speaking for
south Boston or for the city of Boston, I'm talking about New
York, Chicago, Los Angeles, Houston, Baltimore, you know. And
on top of this you're going to have to buy land or find land
and then construct these cluster boxes. I don't understand how
you're making money on that, instead of having somebody just
deliver it the way they have been for the past 80 years.
Mr. Donahoe. Let me comment on a couple of those. First of
all, on the small post offices, we have the Post Plan, so
there's no plan on closing small post offices. So those towns
that have just got the gas station and whatnot can rest
assured. We may have fewer hours there, but we'll keep them
open.
In terms of 6- to 5-day delivery, my biggest concern is, as
we lose volume, we do not want to raise prices to make up the
difference, so we've got cut some infrastructure out. That's
what's driven. We certainly aren't excited about moving in that
direction, but our fear is if we don't doing something from an
infrastructure standpoint it'll push price.
Let's talk about cluster boxes. Cluster boxes are an
interesting proposal because if you look at what customers say
when you make changes, probably the biggest thing that upsets
customers. So as we move into that area there's definitely an
economic opportunity, it costs about $161 per year for delivery
at a cluster box versus $353 for a door-to- door.
But what we're looking at is, is there a way to make this a
win-win, so that if you put a cluster box, say, in a street in
Boston or Baltimore or northern Virginia, could you set it up
in a way that's designed differently than we have today? Today,
see, we've got two slots for packages and 10 or 12 slots for
letters.
Mr. Lynch. What I'm trying to say is, though, you have to
knock a house down.
Mr. Donahoe. Well, there's ways of looking at this. We've
been looking to try to figure out how you'd have a freestanding
unit that you can put packages in as well as mail, so that if
you were worried about having to come home and then go to the
post office to pick a package up that you ordered on eBay or
Amazon, we could put it right in your box. So what we're
thinking is, is if we can design these things in a way that you
can fit more than a couple of letters in, people may start to
like them. And what we would try to do would be to work with
neighborhoods to test them out and see what the feedback looks
like.
I've had door delivery in my house, I've had cluster box,
I've had street box. With a cluster box it's pretty good once
you understand how they work. And I think the key thing for us
to is to make sure that customers see it as a win and not
taking something away from them.
Mr. Connolly. Mr. Chairman?
Chairman Issa. Yes, the gentleman from Virginia.
Mr. Connolly. Would you allow just one observation as a
Bostonian by birth?
Chairman Issa. As long as the voters of Virginia do not
mind.
Mr. Connolly. They know.
Chairman Issa. I will give you that 1 minute. But
understand it could be at your own peril, especially if you the
if you talk about the Red--the White Sox.
Mr. Connolly. Red Sox.
Chairman Issa. Red Sox, White Sox, those non-Yankees.
Mr. Connolly. Mr. Lynch is talking about the lack of land.
My family lives in West Roxbury in Mr. Lynch's district. There
is no land to put in boxes. There's none. It's not a matter of
what shape the box would be or what you put in it, there is no
common land at all. The urban set backs are such----
Chairman Issa. I thank the gentleman.
Mr. Donahoe. We understand that. Thank you.
Chairman Issa. Mr. Chaffetz, you're recognized. Could I
have 15 of your seconds?
Mr. Chaffetz. Absolutely.
Chairman Issa. Mr. Donahoe, isn't it true that the highest
density area practically you can name is New York City, and in
New York City cluster boxes are a reality of high rises? So
isn't it true that some of the noncurb, nonchute is in fact
apartment houses where there's whole rooms the size of a post
office. So at the end of the day, isn't it true that if you do
it where you can and do it the way you can, you save money?
Mr. Donahoe. Yes. And what we're trying to do in New York,
too, is put a lot more package boxes in so we can----
Chairman Issa. So we can protect the kind of thing you're
delivering more of.
Mr. Donahoe. Yes.
Chairman Issa. I thank the gentleman.
Mr. Chaffetz. And thank the chairman. I appreciate this
piece of legislation, the good work that's gone into it. It's
not perfect, but it is a move in the right direction. I think
everybody understands and knows that we have to engage in some
postal reform.
One of the things that I'm deeply concerned about, we've
heard the mention of rural multiple times. I have a county in
my district that's larger than the size of Connecticut. It has
15,000 people in it. And I do hope that one of the strongest
considerations we have as we look at how to deal with the rural
markets is proximity. That should be the case as it is in the
density of Boston or south Boston or Cape Cod where they just
have a ridiculous number of post offices, as opposed to maybe
some of the other areas where you literally could go 100 miles
before you see the next one. I think proximity is that key
metric that we need to look at.
At that same time I would encourage, Chairman, that we need
the ability to have some flexibility and actually close some
post offices from time to time. Now, I happen to come from a
high-growth area. We had a situation in one of my largest
cities in my congressional district where there was a major
fire. It just so happens with this post office there is no
longer access from the north end of this facility. Nor can you
get access to this postal facility from the eastern side. No
longer can you access it from the western side. Only from the
south side, with no sidewalk, can you actually get to this post
office. We have been begging and pleading with the Postal
Service to look at the extenuating circumstances, make a change
for the betterment of the community, which is a reflection of
the postal workers, they're going to be on the brunt end of the
criticism that the Postal Service is negligent and reluctant to
make this change. And we're hamstrung because deep within the
bowels of your organization everybody's scared to death of
making a change.
And somehow, some way, Mr. Chairman, there has got to be
some flexibility. We had a fire. We're closing in on a year
here and our people are not served yet, but they keep saying,
well, we've got to keep waiting because there's postal reform
and there are some Senators that don't want any post offices
closed. We have to do more. We have to do better that way.
The other thing that I would encourage, Mr. Chairman, is we
have this opportunity, and I've said this many times before,
the great opportunity in my mind for the Postal Service is to
become more relevant in people's lives. And the balance that we
have to find is to make sure that we don't cannibalize into
some of the private sector.
And so my question, which is a long one here, long time
coming, is what are we doing to galvanize other government
agencies and be the conduit and the opportunity to be the face,
if you will, the access point for other government services.
When I think of passport services, for instance, Mr. Chairman,
it's great, that appears to be a great success. When I think,
hey, I got to renew my passport, got to go to the Post Office.
FEMA, we've talked about for a couple years, is spending
untold millions of dollars trying to recreate and remap the
entire United States, but it's the postal worker who knows if
that sign gets blown down in a hurricane, they know where that
street, they probably know how many people live there.
There are other services that wouldn't cannibalize the
private sector but would open up an avenue and a conduit, if
you will, so that people can actually access government
services. I think in my rural district I would love to have the
State government do the Department of Motor Vehicles through
the post office. What a great place to come do that. And yet it
would be a good revenue source for the Postal Service.
So my question about the bill is the flexibility, but also
making sure that we're being innovative but without
cannibalizing the private sector, so that little mom and pop
who's selling coffee doesn't suddenly have to compete with a
post office that suddenly wants to sell coffee and T-shirts and
other things that they're doing. You have 15 seconds, so good
luck.
Mr. Donahoe. Pass comprehensive legislation and it will get
people away from being fearful that the Postal Service cannot
meet their needs. Get it behind us, and I guarantee you'll see
plenty of that spring up because that's what people are looking
for. Thank you.
Mr. Chaffetz. Yield back.
Chairman Issa. Thank the gentleman. Johnny on the spot, on
the button, zero.
We now go again to the Bostonian, the third member from
Massachusetts on the top of the dais, the gentleman, Mr.
Connolly.
Mr. Connolly. And by the way, Mr. Chairman, there are three
of us from the Virginia delegation from Massachusetts,
including my good friend Bob Goodlatte, who loves being
reminded he is from Massachusetts.
Chairman Issa. You know, there were three of us from the
same high school at one time. Two are gone. I'm the lone
survivor from Cleveland Heights High. But I do not make it a
point of talking about growing up in Cleveland with those
sidewalks and those chutes and those doors on those homes
produced before 1974 as though that was the only solution to
mail delivery. I just wouldn't do it.
Mr. Connolly. Well, my parents appreciate my advocacy.
Mr. Donahoe, we had Walt Francis before this committee
talking about your proposal to pull out of FEHBP. Now, Walt
Francis is probably the living walking expert on the Federal
health program. He writes an annual book analyzing every single
plan and option in great detail, his checkbook, and he looked
at your claims, which seem a little vague. He said, you say you
can better manage health insurance than OPM? Highly unlikely,
extremely unlikely, he says. You say FEHBP fails to match other
employee benefits; KFF data on private employer insurance shows
no such disparity. USPS says it can offer the same and possibly
even better health care choices; he says extremely unlikely and
inconsistent with claims to offer more understandable set of
choices by USPS.
You say FEHBP fails to provide health promotion and
wellness incentives, chronic condition and disease management
programs. Absolutely false. They most certainly are offered by
FEHBP.
And then finally, he says you say, it can communicate
benefits to enrollees more effectively. Well, that's
interesting because every employee group I've talked to with
the Postal Service is utterly confused about what it is you're
proposing and quite anxious about it. I think we heard Mr.
Guffey say, as the president of a union, we have our options
with FEHBP and we're happy with them.
Is that true, Mr. Guffey?
Mr. Guffey. More or less, but we would be willing to sit
down and negotiate with the problems.
Mr. Connolly. But I'm looking at what USPS has posted, the
so-called healthcare proposal. It's two pages. And it's utterly
lacking in detail in terms if you're an employee wanting to
know, well, is this a better deal than I'm getting currently
right now, if I'm an annuitant over 65, if I want to look at
how it folds in with Medicare, if I want to know what my annual
out-of-pocket deductions might be, what about prescription
drugs, there is no specificity.
So, Mr. Donahoe, how would you answer Mr. Francis' rather
profound critique of this proposal to pull out of FEHBP.
Mr. Donahoe. Let me ask if we can put the slide back up
there. Can we put that slide back up with the charts?
[Slide]
Mr. Donahoe. Here is the way I'd answer Mr. Francis. If you
look at the far left, that $10,000 healthcare plan is what a
post-65-year-old Federal employee has to pay, period. That's
the average pay that we all pay, any Federal employee. If
you're in the private sector where you have Medicare wrap-
arounds, A and B, you pay on average $4,500. If you have A, B,
and C, which we feel we have every right to, you pay $3,000.
Why in the world would we ever tolerate spending three
times the health care for our retirees in an FEHBP plan when
they don't compete it, when they don't offer wrap-around, when
they don't offer single plus one? That's the way the rest of
the Federal Government has worked. In 1962, back when the OMB
was created, FEHBP was a wonderful plan. That was 40, 50 years
ago. We need to update it.
Mr. Connolly. Mr. Donahoe, can you commit to providing
specific data----
Mr. Donahoe. I can give you----
Mr. Connolly. --and dollar amounts?
Mr. Donahoe. I can give you a specific--what you've got in
your hand I'm not so sure where you got that from. But I can
give you a much more detailed presentation in person and we'll
go step by step and cover every detail.
I would state on the record that it is in the best
interests of the Federal Government, not just the Postal
Service, to compete these plans. There's money to be saved. We
should not as Federal employees be subsidizing everybody else
like I've showed you on that chart.
Mr. Connolly. Well, I'll look forward to the data. By the
way, this was handed up by your congressional relations in
meetings with our staff.
Mr. Donahoe. I'll get you an updated one.
Mr. Connolly. With specificity so we know--we can compare.
Real quickly, have you--why haven't you signed an MOU with
the Department of Labor with respect to disclosure of FECA
records? You're looking at a new FECA process for the Postal
Service, but you have not yet agreed to their privacy
standards, and they're concerned that that could lead to
violations of the Privacy Act.
Mr. Donahoe. We're stuck between a rock and a hard spot on
that one because for years, as I mentioned earlier, we've been
working to bring people back to work from workers' comp. We've
got 16,000, 17,000 people in the periodic rolls.
What we do now is, is when we have discussions with the
people at the DOL we share that information electronically with
the unions as required by our contract. What we think is, is if
we have to go to the manual process that they're suggesting and
a more restricted electronic process, we won't be able to share
the information with the unions, and that becomes a Labor
Department issue on the other side.
So it's kind of, we'd like to get this thing worked out,
matter of fact I've written a letter that's gone over to the
Acting Secretary to sit down and see if we can figure this out.
Mr. Connolly. Thank you.
And, Mr. Chairman, I know my parents thank you for the
extra time.
Chairman Issa. You're most welcome and your parents are
welcome.
With that we go to the gentleman from Oklahoma, Mr.
Lankford.
Mr. Lankford. Thank you.
Mr. Donahoe, you have a tough job in a lot of ways, you
know that full well, because we need significant reform, you're
waiting on the House and the Senate to get its act together to
be able to help provide that. You're trying to do stuff in the
meantime. And across America people say over and over again,
that's my post office, whether they like or don't like or
disagree on how many days it took to get there this time or
whatever it may be, they set their drive home from work based
on a certain drive route to stop by to get to their box and be
able to check in at a certain time in the morning. There's a
tremendous sense of ownership. So I do not envy that task. And
thanks for what you're doing, and for all of you and what
you're doing. There are a lot of folks that don't get a lot of
thanks that are out there in the heat today. And so we do
appreciate that.
Mr. Guffey, let me ask you a question. You've made some
proposals and some different ideas that have come up. What
cost-saving proposals would you support that are efficiency
structures or that are labor related or that are the way the
post office does its business? You kind of live and breathe,
you're around it. The people are experts that are there. I
interact with some of the union folks at our military base that
do civilian work. They know better than anyone where the
efficiencies are, where they can do reductions and such.
Where do you see cost savings?
Mr. Guffey. We are trying to work with the post office
right now in saving and transportation of mail. We think we can
work with the post office----
Mr. Lankford. Give us a couple of those ideas. What does
that look like?
Mr. Guffey. Redoing the routes and making routes more
efficient so that a truck can take more than one or two, three
stations at the same time to different locations, making sure
that the facilities can handle a certain size truck, and if it
can handle a bigger truck we'll make a bigger truck so that
truck can go to two or three locations. There's a lot of things
we're getting into it, and those are in negotiations and I
can't speak on them too much.
I said we are willing to talk about doing some more
efficient things with the health plan inside FEHB, want to
aggressively look at those approaches and everything.
There are other things that happen on different types of
containers. We talk about on-the-job injuries, and we think
there are a lot of containers that are within the post office
that shouldn't be utilized when they're utilized, not that they
can't be utilized but there's areas that they're utilized that
they shouldn't be utilized, which by themselves can cause on-
the-job injuries.
There's a myriad of things that we're looking at in
rotations and how to get more flexibility. We negotiated more
flexibility with the post office in this last negotiations by
giving them noncareer people, but we also went away from the
traditional five 8-hour days to allow the post office to
schedule in such a manner that without paying overtime they
could keep post offices open later. We did a lot of things that
we could do to work together with the post office to provide a
workforce that was more conducive to them providing services to
the American public.
Mr. Lankford. Okay. Are we at the right size as far as
total workforce?
Mr. Guffey. It's hard to say yet. The volume is constantly
changing. Our concerns on the consolidation is when it hits the
point where it delays the mail. And when I say delay the mail,
we could have instances--I'm from rural Oklahoma, too, I
graduated with 32 kids, so I know what we're talking about. But
you have situations where mail was processed in office A and
now it's going to be processed in office B, which may be 80, 90
miles away or something. The mail that was taken to office A to
be processed was in 5 or 10, 20 different cities around that
area, and it would go to office A and turn around and get back
and delivered the next day.
Well, now to get it to office B many times they have to
change the dispatch times in these one, two, three, four, five,
six, seven, eight offices to 1 o'clock or 2 o'clock in the
afternoon. In Grove, Oklahoma, now I think it's like 1 o'clock
in the afternoon to make the dispatches so it can get to Tulsa
or Oklahoma City to be turned around and worked back. Well,
that means the businesses in Grove, they can no longer can put
the mail on their counter for the mailman to pick up because he
may not get back to the post office until 5. And if he doesn't
get back until 5 that means the mail doesn't get dispatched
that day. It sits there until the next day.
Now, scales of economy are important, and what can happen
in these offices, it's going to vary. And I think if the
Postmaster General has the tools to get things done properly, I
think we'll get it done. We can work together. I mean, I have
said several times to Postmaster General we are going to solve
this problem. We've got to solve the problem in the long run.
And I think we can if the post office gives us the ability--not
the post office, but the Congress gives us the opportunity to
do certain things, we'll do our best to work through the
problems. It's not in anyone's interest to destroy the post
office.
Mr. Lankford. Oh, no, it's not ours either, nor is that the
goal there. As Mr. Quadracci can tell you, there are a
tremendous number of private sector jobs that are affected by
what happens to the post office by rates, by times, by
scheduling efficiencies, all these things are all built in. So
this is very important to you, it's important to us, it's
important to the private sector as well. So it's got to be
right. But I do hope there is a way to be able to get together
and everybody look for efficiencies and find a way to be able
to resolve it.
So with that I yield back.
Chairman Issa. I thank the gentleman.
We now go to the gentlelady from New York for her round.
And you are from New York, not Boston.
Mrs. Maloney. I am. But I have relatives in Boston.
Chairman Issa. Yeah, but you're not rooting for anyone with
sox in their name, right?
Mrs. Maloney. No.
Chairman Issa. Okay. Just check.
Mrs. Maloney. Well, first of all thank you to the ranking
member and to the chairman for holding this hearing and to the
distinguished panel. I also recognize in the audience the
former chief of staff to the committee here, Ron Stroman.
Very good to see you, Ron. Congratulations on your new move
to be Deputy Postmaster General. That's great. But it's good to
see you and we miss you. So good to see you. I just noticed
you.
Mr. Chairman, I really truly want to thank you for holding
this hearing. We all know that postal reform is something that
needs to happen, and I hope we can work on this in a bipartisan
way to make it happen.
I have some very serious concerns with the discussion draft
of the Postal Reform Act of 2013. As it stands, the current
discussion draft requires a dramatic downsizing of the Postal
Service, reduces customer service by moving to a 5-day
delivery, and guts collective bargaining agreements.
I deeply and greatly oppose these kinds of initiatives that
hurt seniors, businesses, and take a major step back in the
rights of hardworking letter carriers. These kinds of
initiatives not only hurt seniors, rural areas, and low-income
urban areas, but many businesses and postal workers will be
hurt.
I do, however, want to commend the chairman for including
in his discussion draft the underwater classes provision to
address the problem of mail classes whose rates do not always
cover their costs, such as magazines. Too many magazines are
going out of business. This provision prevents a seriously
negative impact on the magazine publishing industry, which
employs a great number of people in our country, much of which
is headquartered in my congressional district, including Time
Inc., Hearst, and Conde Nast.
The draft takes a sensible approach on this issue, delaying
the implementation of any rate increase on periodicals and
other so-called underwater classes of mail until the Postal
Service has time to remove excess costs from the system. After
2 years of reforms at the Postal Service, if periodicals do not
cover 90 percent of their true costs, a reasonable rate
increase of 2 percent would go into effect. I think this
approach makes sense, and I hope it is included in whatever
final postal reform bill this committee considers.
Mr. Donahoe, I know that there's a review of postal
services across the country and I want to know your criteria,
specifically in closing post offices, if you look at cost-
benefit. Are the post offices making money? Regretfully, I've
had some cases where the post offices are making money,
literally a profit, which is what we want, in fact the
competitors are opening up stores across the street or next
door to them hoping that people will come to them instead of
staying in the lines at the post office. But even when they are
making money, they are sometimes slated to be closed. And I'd
like to know what is your criteria for closing post offices and
why is not the cost-benefit analysis or a productivity. I would
think we want to a strong post office, those that are making
money we should be keeping because that's going to cover the
costs.
Mr. Donahoe. Yes, I agree with you. We have a process for
large cities all the way down to the smallest rural office that
we do review if we do propose any closures. We have really
moved away from that to a large extent as we put changes into
place to change hours mainly in the smaller offices.
In a big city like New York what we've run into, and I
think there's been a couple in your district, where we've
unfortunately lost the lease on the building that we were in
and then we've had to move. So I know that we've been actively
seeking some retail space in your area because some high rises
are being built and buildings that we were in probably for the
better part of 30 or 40 years we're now forced out of.
We are looking at relocating in some cases. Other cases,
whether its stamps online or being able to pick postage up at a
local drugstore in the city, we're moving in that direction,
too.
So I think the key thing for working with your people in
the upper Manhattan area is to make sure that we do a good job
to find the retail space close so that we don't have to move
too far away from the places where we lost our lease. So you've
got my commitment to work with you on that.
Mrs. Maloney. Thank you very, very much. And I want to
commend the postal workers. They work in really terrorist
conditions. Anthrax has been discovered in the mail in several
offices in the great city of New York and they have responded
with great courage and devotion to their jobs.
Mr. Donahoe. Thank you.
Mrs. Maloney. So thank you.
Chairman Issa. I thank the gentlelady.
We now go to the gentleman from Tennessee, Mr. Duncan.
Mr. Duncan. Well, thank you very much, Mr. Chairman.
Mr. Donahoe, I see that one of your recommendations, and
you have mentioned this, is to reform workmen's compensation.
And I see notes that said some employees have been on workmen's
compensation, some postal employees, since before the Postal
Service was established in 1971. You said you've got 17,000
employees drawing what you refer to as periodic payments?
Mr. Donahoe. Periodic rolls, yes, yes.
Mr. Duncan. How would you reform workmen's compensation,
and have you done a wild estimate or guess as to how much you
could save if your reforms were put into place?
Mr. Donahoe. Well, it's been a multistep approach. Number
one, we've been working this issue for a number of years, and
the key thing first was to reduce accidents so people didn't
end up on workmen's comp. So we've been very aggressive with
vehicle accidents and illness, injury. We have seen nice
reductions there.
Mr. Duncan. And I've read there is a big reduction in the--
--
Mr. Donahoe. We still have people on workers' compensation.
Some people we would like to have the ability to have them
retired out of the system and there is legislation I know
that's afoot here both in the House and over in the Senate. We
would support that. That would address people who have been on
workers' comp since 1981--or 1971. The problem with that in
some cases is that they make more money on workers'
compensation than they do going into retirement, so we've got
to figure out how to resolve that issue.
The other approach, and it's for a much larger group, is to
either help to get them back to work or actually buy them out
like a private sector company would do. On the back-to-work
efforts we have worked very closely with Mr. Guffey, we have
insourced some work in which we have employed--reemployed
people off the periodic rolls, and it's been helpful because it
helps us pull that large liability down. We still have a long
way to go as far as getting people back to some active duty.
We think that probably there's about 10,000 people who one
way, shape, or form would to be able to get back to work.
That's what we're looking at. And then the other 6,000 to 7,000
probably would either have to be retired or have some kind of a
buyout.
But the key thing here is we have a liability of about $17
billion that is part of the chairman's note, that we're sitting
on almost $100 billion worth of liability. We've got to resolve
that.
Mr. Duncan. Let me ask you this. Another one of your
recommendations is the right to have appeals of EEOC class
action decisions to Federal Court. Do you have a large number
of those----
Mr. Donahoe. What happens, it's a small number but it's an
extremely expensive process. I'll give you an example. And this
is something--this is not what we would normally see in an EEOC
type of complaint. We're proud of the fact that the EEOC
complaints have dropped over the years we've focused on that,
but we have some situations where class actions come about. We
just settled one for $17 million and the class action was, I
didn't get overtime while I was on workers' compensation. If
you're on workers' compensation you shouldn't get overtime. And
we had to pay out $17 million to settle that. And there's no
point--we couldn't go anywhere from a plea bargain up to say--
I'm sorry--an oversight up to the courts. What we're asking for
is give us the opportunity, if we disagree with some of these
big class actions, to take them to court to have somebody
impartially look at them.
Mr. Duncan. All right. Mr. Guffey you said a while ago your
employees are happy with their present health plan. Do you
think they would be willing to go under Obamacare and would you
be willing to recommend that they do that?
Mr. Guffey. I would not be willing to recommend they go to
Obamacare. Obamacare allows them to stay in their own insurance
and that's what we recommend that they do.
Now, we are willing to sit down with the Postmaster General
and negotiate on a different type of health care within the
FEHB family. I'm a single-payer type person. I think you take
out all the costs and overhead of all the different plans, the
CFOs and the CEOs and all these different people, and the
boards and different people that these different health plans
have to pay. For the same amount of money I think we can
probably come up with a health plan that will deliver services
to the membership and to the post office and can come up with
something.
But that is something, I think, the type of insurance that
our people go into is something that's negotiable, and we're
more than willing to negotiate on it.
Mr. Duncan. Have you seen the letter that the three unions
recently sent objecting to the provisions--or the requirement
that they go under Obamacare and give up their so-called
Cadillac health plans?
Mr. Guffey. I would sign it today.
Mr. Duncan. You would sign that same letter?
Mr. Guffey. Yes.
Mr. Duncan. All right.
Chairman Issa. I thank you, Mr. Duncan.
If I can just clarify the record. Are you saying that from
a union position--I know you can't speak for all the members--
but that if a comprehensive reform eliminated, if you will,
sort of the letter carriers' bidding within the system and went
to a larger group with less overhead, that as long as the
unions had some form of representation in that process, they
would be supportive if it lowered the cost. Because right now
the Federal employee health care plan has specific grandfathers
for letter carriers and so on, if you will, for these special
groups. Is that what you were saying? I wanted to make sure I
understood, because those have separate overhead costs that
could be eliminated.
Mr. Guffey. We could come up with a health plan, I think,
that we could tell our members that this is the health plan
that you will get your matching funds from the post office for,
and it's going to be within FEHB. We could come up--maybe we
could. I think there's an opportunity, a real opportunity to
negotiate that, to take out all those other costs.
Now, having said that, I think the real savings for the
Postal Service is in not paying the full freight for the same
type of health insurance for the retirees.
Chairman Issa. Right, and we're working on that.
Mr. Guffey. But if you do that, and save the money for post
office there, it throws additional costs back to the current
employees.
Now, working on a plan, a universal type plan which would
give our membership what they have wanted, to change the
benefits would have to go through OPM, we could probably come
up with a lower cost that would also save the post office money
and prevent the costs from going up.
Chairman Issa. And I don't want to take more time today,
but I would invite you and the other union representatives to
engage with our staff, we have working groups on both sides,
because we control, if you will, that question for the entire
Federal workforce and we are currently working on a reform,
sans the Postmaster's leaving the system, that is intended to
achieve several of the areas the Postmaster has put forward.
But if there's a willingness to give us additional
opportunity that would come specifically out of changes as to
how we deal with postal to the benefit of all the workers, we'd
love to work with you on it. We'd like to make sure you see
what we're proposing for the Federal workforce.
Mr. Guffey. I understand, but our position is, we will
provide you some information and what have you, but we believe
our position is negotiate with the post office and not with the
committee. You understand what I'm saying?
Chairman Issa. No, no, we're happy to have your input.
Mr. Guffey. Right.
Chairman Issa. To be honest, you don't get a vote.
Mr. Guffey. I understand that.
Chairman Issa. Currently, the committee's position--and it
has to be for now--is we're making a decision on behalf of the
Federal workforce. The post office is part of the Federal
workforce and so therefore we'd like to have that large section
of current and retirees have input into it just as I would any
other Federal worker. Like I say, the Postmaster and I are
discussing whether or not there is a cost savings in departing.
The problem we have--and I hope Mr. Tierney will
understand, I'll give him all his time of course--but is that
we cannot get a CBO score that supports the Postmaster's
position. If we can't get that, that makes legislation
difficult. And that's why we're trying to work on things which
we know will score real savings for the post office and put it
into a comprehensive health care reform, and we certainly would
welcome union input in addition. Of course the Postmaster has a
seat at the table.
Thank you.
Chairman Issa. Mr. Tierney, why don't you take about 7
minutes, because I owe your side that.
Mr. Tierney. Well, I appreciate that, but I don't think my
time will take all of that time.
Mr. Donahoe, I just really wanted to finish on the thought
that Mr. Connolly started about the Federal Employees
Compensation Act. You had not signed the memorandum of
understanding. That's your answer to him, right?
Mr. Donahoe. Yes.
Mr. Tierney. So the Department of Labor says that these
FECA records really require protection under the Privacy Act.
Do you agree with that?
Mr. Donahoe. Yes.
Mr. Tierney. Okay. Do you, or does the Postal Service ever
disclose the FECA records, and if you do, in what
circumstances?
Mr. Donahoe. I'll have to get back to you. I don't know
what we do with those other than share information, talk with
the doctors. And there may be some time, if there is a
grievance filed, that some information would be shared with the
unions, but I cannot tell you that for certain. I'll have to
follow up on that.
Mr. Tierney. You'll follow up with the committee and give
us that?
Mr. Donahoe. Yes.
Mr. Tierney. Thank you. So let me ask you this. Has the
Postal Service ever used the FECA record to discredit an
employee when that employee was before the EEOC or the Merit
System Protection Board?
Mr. Donahoe. I'm not aware of that, but I'd have to get
back to you on that.
Mr. Tierney. Would you do that as well, check as many
instances as that happened?
Mr. Donahoe. Sure.
Mr. Tierney. As a general matter of policy, would you
generally commit that you would not use them that way?
Mr. Donahoe. Absolutely we wouldn't want to do that, no.
Mr. Tierney. The Department of Labor went to the Justice
Department's Office of Legal Counsel to get an opinion
concerning your dispute.
Mr. Donahoe. Right.
Mr. Tierney. They reported back that they thought the
Office of Legal Counsel agreed with them on the matter. And
you, however, wouldn't participate in those conversations. Why
not?
Mr. Donahoe. Me, personally?
Mr. Tierney. Or the Postal Service. Why wouldn't the Postal
Service----
Mr. Donahoe. I'm not aware of that. I would have to get
back to you on that, too.
Mr. Tierney. Okay. So what the Department of Labor said the
Office of Legal Counsel determined was that the Department has
exclusive authority over the FECA records on that.
Mr. Donahoe. Right.
Mr. Tierney. Following that, they then told this committee
that they no longer provide access to the FECA records to the
Postal Service.
Mr. Donahoe. Yes.
Mr. Tierney. Has that caused you problems in any way?
Mr. Donahoe. It hasn't caused problems in the short term,
but it will cause problems in the long term because you turn
the whole process into a manual process.
I think there is a win-win in here somewhere. Like I told
Mr. Connolly, we don't want to end up with a situation where we
end up violating agreements we have with the unions because of
other agreements that we've made. So we've got to figure that
out.
Mr. Tierney. So when you report back to the committee, will
you be able to share with us the reasoning behind your
reluctance or the Postal Service's reluctance to sign that
memorandum of agreement?
Mr. Donahoe. Yes.
Mr. Donahoe. The other thing, as I mentioned, we've sent a
letter up for me to go up and speak with the Acting Director so
that we can--or Acting Secretary--so that we can get a common
area where we might be able to work together on that.
Mr. Tierney. Okay. Barring Mr. Lynch or the ranking member
having any other questions, I'll yield back. I yield back.
Chairman Issa. I thank the gentleman.
We now go to the gentleman from Mr. Pennsylvania, Mr.
Meehan.
Mr. Meehan. Thank you, Mr. Chairman. And, Mr. Chairman,
just as a matter to make sure that we correct the record as a--
--
Chairman Issa. You're not a Bostonian?
Mr. Meehan. Well, you know, I've got to tell you, as
somebody who suffers--is a suffering Red Sox fan for all these
years, Yaz, Carl Yastrzemski would pass out in front of the
Green Monster if he thought Congress believed that he actually
played for the White Sox. So as long as we can----
Chairman Issa. You know, I'm a Cleveland Indians fan
through and through.
Mr. Meehan. My condolences.
Chairman Issa. You know, they were once a professional
baseball team, and they still have a great ballpark. So you
know, as we run down your clock, I just want you to remember
you started this.
Mr. Meehan. I appreciate that.
Mr. Donahoe, I appreciate the work that's being done by you
and all the organizations and the tough choices that have to be
made and the spirit of collaboration that everybody has to work
on to try to define resolutions. And I find myself looking for
the right ways to help support the post office in making their
calculations and decisions. But I also live and work with, you
know, my neighbors who work for the post office, and sometimes
I get very frustrated with the process that we've gone through.
And you and I have discussed some of this.
But let me just say that it's very difficult, as we're
getting to the end of some of these issues, and I'm talking
about the whole question of consolidation that has been pushed
forward, and I've seen a process, and to walk through it, you
know. We began with the identification that there was going to
be a consolidation that was going to be proposed, and they
suggested that there was, you know, a line of savings. And so,
right from the outset, the Southeastern facility in my region
was slated to be closed and projected a $16 million savings.
We looked at the thing and realized that they didn't even
calculate within the four corners of the letter correctly, and
we asked for a recalculation of that. It went to--and a GAO
study to confirm that it was being done appropriately. The GAO
came back and said, well, based on the information that you had
given to them, they could see how a decision could be made.
They didn't weigh in, just how a decision could be made, so to
speak.
Then we find that during this process, that there is a
second consolidation that's being considered in which, even
though we've asked for a stay while this is being studied, that
mail that was supposed to go to Philadelphia under the process
that was being proposed to keep Philadelphia open was actually
being diverted to Delaware. It was being diverted to Delaware
because there was an overflow, and we really began to question
the efficiency of that, finding that there is then a second
study that's being done during the period of time that we all
believe that the first consolidation is still being considered.
Come back the second time and say, okay, they are actually
going to consolidate everything down in Delaware now, which
makes no sense to me because I've got a big city between
Delaware and Southeastern, and this has an impact not just on
the Postal Service, but businesses that use the Postal Service
and rely on it for its efficiency.
So now we begin to see that there is a proposed savings of
$13 million by closing down the Southeastern facility as part
of plan B, but we found out it's being consolidated and pushed
even quicker.
So the bottom line in the process is, how can I have
confidence that the decisions and calculations that were made
were accurate and corrected in the best interest of the Postal
Service and not due to some other kinds of issues which, quite
frankly, I can't understand because the logistics don't make
sense to me, that you would close Southeastern and keep a
Delaware and Philadelphia facility within a short distance of
each other open at the same time, as well as one in New Jersey,
right across the river.
Mr. Donahoe. Let me comment on the--first of all, the
history of Southeastern came about because of the overflow in
Philadelphia. We built a new facility in Philadelphia in the
mid-2000s and right before the mail volume loss, we've lost 27
percent of our volume, and a substantial portion of that was
what we would consider outgoing mail, which we processed in
Southeastern.
The idea was to originally move everything from
Southeastern into Philadelphia. As we looked, there were some
opportunities to move the 193 ZIP Code area down into
Wilmington because of the geographical proximity. From what I
know, all of Southeastern, with the exception of 193, is still
going into Philadelphia. The Wilmington will get the far south
193 portion and will split the mail up.
We've already started that move. We've made these moves
because financially we are in a desperate situation. You know,
we've been trying to keep our head above water. We've got 8
days of cash on hand. And I know, you know, it hurts whenever--
it hurts when it happens to a local facility, but we've had to
make these changes across the country.
There will be no service degradation because Philadelphia,
Wilmington, and Southeastern are all considered overnight
service. That will not change. And we'll watch that like a
hawk, you've got my commitment. But we've got to make these
changes. We just have too much capacity, and we've got to take
the capacity out of the system. We can eliminate the building
in Southeastern, we'll be able to find jobs, landing spots for
the people. Most of them are within that area anyway. And we'll
continue to make sure we provide great service.
Mr. Meehan. Let me ask you about some of those employees
right now. What kind of job security is there for those who are
at Southeastern? Is there an assurance that they are going to
continue to receive work within the area?
Mr. Donahoe. We have eliminated in the last 6 years 200,000
jobs. In the last 13 years 314,000. We've never laid anybody
off, never. I have been fanatical about holding jobs, using
overtime, noncareer people, we always find a landing spot. Mr.
Guffey and I worked together to eliminate the need to excess
people for farther distance than 50 miles. That makes us even
hold ourselves more to account to try to find landing spots.
Because when you start moving people all over the country,
it's bad for them personally. Economically, it's a disaster.
And so you've got my commitment that we will find landing spots
for the people at Southeastern. We know that. I know that for a
fact as I sit here.
Mr. Meehan. All right. Well, thank you.
Mr. Chairman, just one last question for Mr. Quadracci.
The company prints all kinds of different mail, and in my
region as well, including standard flats and magazines. And I
have heard from some of those who do that in my area that
aggressive postage rates increases for their mail can sometimes
be devastating.
Can you tell me, from your experience, what happened to
your business with the postal rate increases once you began to
have to deal--whether in the end it was really more cost-
effective, that you might lose more business by virtue of the
rate increase? Tell me how you were impacted by that.
Mr. Quadracci. Well, 2007 would be the last example where
it was the last time they could raise prices beyond the cap and
there were double-digit increases, you know, to many of my
clients, and we saw double-digit decreases in volume as people
pulled back. And I was explaining before that a lot of it has
to do with, you know, there is different files that people mail
to. One is a prospecting file where they're trying to get new
customers, and that one is very delicate based on response
rates. And so if you get a rapid spike in pricing on postage,
you'll see them cut that way back, and we saw it. In fact, the
whole industry saw it.
You know, we ended up consolidating a couple of businesses
that couldn't make it because of this, much larger than us.
Some of them in your district were a part of that. And as a
part of that, we closed over 21 plants to rightsize the
infrastructure. And it was tough. I mean, I know it's important
to try and save jobs, but in the private sector we had to
release jobs. Very tough for us to do as a company, but to be
sustainable we made the tough decisions.
Let's put this into perspective. Since 2001, postal rates
went up 50 percent. Since 2001, print prices went down 33
percent. And we've had to make tough changes every part of our
business to stay profitable and we've been able to do that.
And so, you know, when you talk to the private sector and
you're dealing with a declining situation, you have to get
ahead of the curve, you have to make the tough decisions to do
it. You know, it's challenging but it's real. Those price
increases beyond CPI have devastated this industry and it will
devastate it again if we let that happen.
Mr. Meehan. Well, thank you for your indulgence, Mr.
Chairman.
Chairman Issa. I thank the gentleman.
We now go to the gentlelady from Illinois, Ms. Duckworth.
Ms. Duckworth. Thank you, Mr. Chairman, and thank you for
holding this very important hearing.
Mr. Quadracci, I want to sort of follow up a little bit. It
would seem to me that some of the mail that's going out in the
standard flat rate, catalogs specifically, are generating more
mail, and mail that actually generates more revenue. So when
people decide to purchase something, and now that has to be
delivered via package mail. Do you keep--does your industry
keep any data, statistics on that, how much subsequent mail is
created out of the catalog mail?
Mr. Quadracci. I'm not sure if we have some of that data.
Some of the organizations might. But there has been a decline
in catalog mail through this timeframe. We're seeing some
stabilization, but there is still a decline. It does generate
package products, you know, through the post office, which is a
good thing.
Ms. Duckworth. Mr. Donahoe, do you have any data on it at
all in terms of how much follow-up mail at a higher rate, such
as package mail, is generated by the catalog mail delivery?
Mr. Donahoe. There are some statistics, and we can get that
for you, from the industry. To Mr. Quadracci's point, some
catalogs, a lot of times, will generate first class mail and
then packages, too. So there is a multiplier effect, and I can
have our marketing people get in touch with you on that.
Ms. Duckworth. That would be great. Thank you.
Ms. Duckworth. Mr. Donahoe, the second quarter of this year
the Postal Service reported having approximately 616,000
employees, of whom 498,000 were career.
Mr. Donahoe. Yes.
Ms. Duckworth. Is it correct that this is the smallest
workforce of the U.S. Postal Service since 1966?
Mr. Donahoe. Yes, it is.
Ms. Duckworth. Could you explain why labor costs continued
to represent such a large portion of your overall costs?
Mr. Donahoe. Labor costs are high in terms of total for two
reasons. Number one, we are a people-intense organization. A
lot of times we're compared to FedEx and UPS. They're both
great companies, but they run air systems--they run airlines, I
should say--large trucking firms. We contract a lot of that
type of work out.
The major driver for our costs are the benefits costs. As I
mentioned before, it's 48 percent of our cost, a large chunk
with the prefunding, but we also think there are some
efficiencies that we can get, working with the unions and with
everyone here, around the health costs for the current
employees.
Ms. Duckworth. So under the chairman's bill, postal
employees receive lower employer contributions to their health
benefits and life insurance than they do now, requiring that
the employees contribute more. That seems to me to be a pay cut
for the current postal employees.
Mr. Donahoe. We're working through that right now. In the
course of the last 3 years we have moved management employees
to--we'll be very close to the Federal rate, I think, in 2014.
It's been a part of our union negotiations that will start back
up in 2015, and of course we'll ask to continue to move that.
Ms. Duckworth. Thank you.
Mr. Guffey, did APWU's most recent collective bargaining
agreement with the Postal Service include any concessions to
incrementally increase your members' share of these costs?
Mr. Guffey. Yes, we moved, I think, 3 to 4 percent so much
per year. Like I say, these things were won sometimes in the
past based on the wages then. We took less wages to get more
pay for the health benefits. And now the post office is
negotiating to take it back, and that's why we don't believe it
belongs in legislation to require us to go there because it's a
negotiation issue. They're not in the same legislation. They're
not trying to give us back what we gave up to get that. And we
think that's imperative, and when you have a labor organization
dealing with management, it's a give and take, quid pro quos,
and what have you, and to take back our quid pro quo for
something that we gave up years ago we think is not right.
Ms. Duckworth. So how would the chairman's bill affect the
agreement that I was just talking about with the concessions to
incrementally increase your share. Are you saying that this
bill would actually do that?
Mr. Guffey. We haven't seen the final bill and everything,
but we believe that anything that deals around labor relations
and negotiations should not be legislated. It should be
allowed, maybe, under the bill, but not required. And that's
what I was talking about earlier, dealing with the Postmaster
General on a whole realm of issues that, we can work through a
lot of issues if we have the ability to do so.
Ms. Duckworth. Thank you.
I'm out of time. Thank you.
Chairman Issa. Would the gentlelady yield just for a
colloquy?
Ms. Duckworth. Yes.
Chairman Issa. So the gentlelady understands, the intent of
the bill is at the expiration of their contracts they would
harmonize with the rest of the Federal workforce. However, the
intent, and clear intent, and I want to make sure it's
understood during the markup, too, is that that allows 100
cents on the dollar to be moved back into pay or other benefits
not covered by Federal harmonization.
So the intent was to be able to say once and for all that
the Federal workforce has, based on category, substantially the
same reimbursements, benefits, retirements. That was more a
matter of comparing apples and apples, because for this
chairman's time there has always been, well, you know, they
make less but they do this, but they don't do that. And quite
frankly, our employees here in the House, employees over at the
White House and so on, we wanted to make a statement that if
you're a Federal employee, to the greatest extent possible, the
benefits, which are not ordinarily negotiable, in other words,
Federal workers cannot negotiate benefits as part of their
collective bargaining, the union can, but to be honest, it
created a different interpretation of what a fair reimbursement
was to a Federal worker.
So although it's open to amendment, and we're certainly
happy to take your input, the intention in the bill was to not
reopen negotiations. We're clearly saying that it simply would
be harmonized when they renegotiate their new contracts. And
the intent is that any givebacks would then be passed on so
that it would translate into higher pay, but a different
benefit for current employees, and obviously it has no effect
directly on retirees.
We now go to the ranking member of the full committee, who
has been patiently waiting for his first round.
Mr. Cummings. Let me ask you--first of all, let me say that
we got to resolve this. Mr. Donahoe, I've said that if we can
send somebody to the moon, seems like we ought to be able to
resolve this. And I think that our constituents have sent us
here to work through problems, and I think our constituents are
getting more and more frustrated when we fail to do so. We have
a limited amount of time. We do not--we hold these positions
for a temporary period, and this is our watch.
Mr. Guffey, I insisted that you be here, and I want to
thank the chairman for making sure that happened. I want you to
tell me what is it, what in a bill--we're going to do a bill--
what must you see in a bill that would make you feel
comfortable supporting it? Can you give me the elements, the
things that you must see? Is that a fair question?
Mr. Guffey. I think it's fair. I think, personally, and I
think my organization would like to see something that took
care of the prefunding issue with the long-term health
insurance. I think we would like to see something done with the
overfunding of the retirement plans. I think we would like to
make sure, and I think I heard Chairman Issa say that they will
be using postal-only calculations to take care of the overages
in the different accounts.
I think we would like to see more opportunities for the
post office to do more things in other government agencies.
We'd like to see them do more, have the postal management have
the greater flexibility to deal with agencies or mailers to
generate income to the Postal Service.
We would like to make sure that the issues that need to be
done in collective bargaining remain in collective bargaining.
But there are some things that maybe need to be changed in the
law to allow certain things to happen. Part of that might be
part of the health insurance issues.
There are a myriad of things that we would like to see, but
the main thing we'd like to see, I think, is just a viable post
office for the future.
Mr. Cummings. Now, Mister--were you finished?
Mr. Guffey. Sure.
Mr. Cummings. Mr. Donahoe, what issues do you have with
regard to anything he just said?
Mr. Donahoe. I think the, you know, the key for us is
resolving the health care. I think that we're in 100 percent
agreement with that, so I don't think that there is any issues
there.
I think that probably the difference between where the
unions are and the Postal Service is, is the degree and speed
of change. I think that we're all in agreement that we have to
make some changes. So when we're pushing for the 6- to 5-day, I
understand why Mr. Guffey and Mr. Rolando are a little more
reticent, because their members are worried about that. So
those type things.
I think we're both in--we're in full agreement with FERS
refund, Federal Employee Retirement, and getting the payment
set right. We still continue to overpay, and that's money
that's coming out of our pocket, the ratepayer's pocket. Those
are some things.
I also think that we're in full agreement on opening up for
new products. You know, there's discussions around other
government services, even shipments of things like wine, beer,
and spirits. There's a big business in that. We think we'd do a
great job. So there is a lot of points of agreement that we
have.
Mr. Cummings. Did you have something else, Mr. Guffey?
Mr. Guffey. No. I think as long as the service standards.
We just want to see a viable Postal Service, you know, whatever
that is in the future.
Mr. Cummings. Now, Mr. Chaffetz, a little earlier talked
about the cannibalism of the private side. I remember
cannibalism. I know you remember that. I don't remember all the
rest of what he said. But what he was referring to is that he
didn't want, when we go into the innovation piece and trying to
make money through the Postal Service, that we not interfere
with the private side. He listed something about passports and
some other things, and you just mentioned wine shipments and
whatever.
I guess, you know, I'm trying to figure out where we draw
the balance. On the one hand, you know, in my bill we talk
about this innovation officer to come in and bring as much
innovation as possible to the table, but on the other hand, you
have folks who are saying, oh, no, no, no, no, no, no, no,
don't step on this, don't step on that, don't step on this. And
by the time you start eliminating the private things you could
get into, there's nothing left, and it's talking out of both
sides of our mouths.
So, Mr. Donahoe, you mentioned wine. Can you think of other
things?
Mr. Donahoe. Sure.
Mr. Cummings. Other than passports, and I think you
mentioned a few other things.
Mr. Donahoe. I think the thing that we should challenge
ourselves with is build things or perform work that helps not
only the Postal Service, but others. I'll give you an example.
We're working through this whole digital approach now. We think
that we can fill a very important role in the space on secure
digital messaging, authentication, things that really can't be
done by the private sector because there's always a concern of
lack of trust or, you know, who's got what information, that
from a Postal Service perspective we think that we would be
able to fit in that spot.
What that does then, that allows other people to grow. I
mean, if you think about the group of us sitting here. We have
an excellent infrastructure network of plants and processing
centers and retail and delivery that Mr. Quadracci can bring
volume in that he prints for thousands of customers. So if we
can replicate a lot of that same thought going out into the
future, I think there is a real win for us, and we don't end up
tramping on toes of people who, you know, would claim foul,
that we're government and not private sector.
Mr. Cummings. Mr. Chairman, I would just ask for unanimous
consent. The Chairman has taken all kinds of time. I just want
to make--I want to just have 3 more minutes and I'll be
finished. I've been here. I see you reaching for your gavel. I
just thank you very much.
Mr. Lankford. [Presiding] You've got 3 minutes there.
Mr. Cummings. Thank you very much.
Let me ask you this. You know, I believe, you know, if
given the proper tools, the Postal Service could expand its use
of new technologies to offer new products and services. I also
believe the Postal Service should be given expanded authority
to offer non postal services such as check cashing, warehousing
and logistics and facility leasing.
Let me you this, Mr. Donahoe. How much of the space in the
Postal Service existing facility for print is vacant? Do we
have a lot of space?
Mr. Donahoe. There's a number. I'd have to get back to you
on that because it kind of varies by facility. We've squeezed a
lot of that out in the last year or so, but we probably still
have some space available.
Mr. Cummings. So the Postal Service could lease that space
out or collocate it with other agencies?
Mr. Donahoe. Yes. We've talked to other agencies, we've
talked to other firms that would like to move into space that
we have and actually use our facility as a fulfillment site
because they can operate a little warehouse right there and
hand it across to us and we can get it delivered.
Mr. Cummings. So make sure that we understand this. You all
are doing things right now that are in the pipeline that would
yield substantial funds that you just haven't gotten to yet? In
other words, you haven't--the deal has not been sealed? Is
that----
Mr. Donahoe. I would say from a digital perspective, yes,
we've been careful because we didn't want to get ahead of
legislation----
Mr. Cummings. Right, right, because that was my next
question. Are we hindering you from going where you're trying
to go?
Mr. Donahoe. As fast as we can get legislation----
Mr. Cummings. You didn't answer.
Mr. Donahoe. As fast as we can get the legislation passed,
that helps us.
Mr. Cummings. So in other words, you're out there and
you're going toward some things and you're kind of worried that
you don't want to reach a deal or you can't reach a deal or
you're sitting down with somebody to reach a deal, but you're
so worried that the Congress has not caught up with where you
are. And so you, even if you were able to reach a proposed
deal, you couldn't carry it through right now.
Mr. Donahoe. That's in some cases, and in some cases the
opposite, where customers are a little afraid to do deals with
us because they're afraid that we would have some problems with
our finances. So it goes both ways.
Mr. Cummings. All right. Thank you, Mr. Chairman.
Mr. Lankford. Thank you for being here very much.
With that, this hearing is adjourned.
[Whereupon, at 4:55 p.m., the committee was adjourned.]
APPENDIX
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Material Submitted for the Hearing Record
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