[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]









        REFORMING THE POSTAL SERVICE: FINDING A VIABLE SOLUTION

=======================================================================

                                HEARING

                               BEFORE THE

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 11, 2016

                               __________

                           Serial No. 114-135

                               __________

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



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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                     JASON CHAFFETZ, Utah, 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
JIM JORDAN, Ohio                     ELEANOR HOLMES NORTON, District of 
TIM WALBERG, Michigan                    Columbia
JUSTIN AMASH, Michigan               WM. LACY CLAY, Missouri
PAUL A. GOSAR, Arizona               STEPHEN F. LYNCH, Massachusetts
SCOTT DesJARLAIS, Tennessee          JIM COOPER, Tennessee
TREY GOWDY, South Carolina           GERALD E. CONNOLLY, Virginia
BLAKE FARENTHOLD, Texas              MATT CARTWRIGHT, Pennsylvania
CYNTHIA M. LUMMIS, Wyoming           TAMMY DUCKWORTH, Illinois
THOMAS MASSIE, Kentucky              ROBIN L. KELLY, Illinois
MARK MEADOWS, North Carolina         BRENDA L. LAWRENCE, Michigan
RON DeSANTIS, Florida                TED LIEU, California
MICK MULVANEY, South Carolina        BONNIE WATSON COLEMAN, New Jersey
KEN BUCK, Colorado                   STACEY E. PLASKETT, Virgin Islands
MARK WALKER, North Carolina          MARK DeSAULNIER, California
ROD BLUM, Iowa                       BRENDAN F. BOYLE, Pennsylvania
JODY B. HICE, Georgia                PETER WELCH, Vermont
STEVE RUSSELL, Oklahoma              MICHELLE LUJAN GRISHAM, New Mexico
EARL L. ``BUDDY'' CARTER, Georgia
GLENN GROTHMAN, Wisconsin
WILL HURD, Texas
GARY J. PALMER, Alabama

                   Jennifer Hemingway, Staff Director
                    Andrew Dockham, General Counsel
 Jeffrey Post, Government Operations Subcommittee Deputy Staff Director
                    Sharon Casey, Deputy Chief Clerk
                 David Rapallo, Minority Staff Director
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 11, 2016.....................................     1

                               WITNESSES

Ms. Megan Brennan, Postmaster General, U.S. Postal Service
    Oral Statement...............................................     5
    Written Statement............................................     7
Mr.Robert G. Taub, Acting Chairman, U.S. Postal Regulatory 
  Commission
    Oral Statement...............................................    24
    Written Statement............................................    26
Ms. Lori Rectanus, Director, Physical Infrastructure Issues, U.S. 
  Government Accountability Office
    Oral Statement...............................................    56
    Written Statement............................................    58
Ms. Jessica Lowrance, President-Elect, Association for Postal 
  Commerce
    Oral Statement...............................................    78
    Written Statement............................................    80
Mr. Fredric Rolando, President, National Association of Letter 
  Carriers
    Oral Statement...............................................    97
    Written Statement............................................   100

                                APPENDIX

Oxford Strategic Consulting G-20 Postal Services 2016, Submitted 
  by Mr. Lynch, can be accessed..................................   160
RESPONSE Postmaster General to Chairman Chaffetz QFRs 2016-06-09.   161
RESPONSE Lowrance-PostCom to Chairman Chaffetz QFRs 2016-06-02...   176

 
        REFORMING THE POSTAL SERVICE: FINDING A VIABLE SOLUTION

                              ----------                              


                        Wednesday, May 11, 2016

                  House of Representatives,
              Committee on Oversight and Government Reform,
                                                   Washington, D.C.
    The committee met, pursuant to call, at 10:02 a.m., in Room 
2154, Rayburn House Office Building, Hon. Jason Chaffetz 
[chairman of the committee] presiding.
    Present: Representatives Chaffetz, Duncan, Jordan, Walberg, 
Amash, Farenthold, Lummis, Massie, Meadows, DeSantis, Buck, 
Walker, Blum, Hice, Russell, Carter, Grothman, Hurd, Palmer, 
Cummings, Norton, Clay, Lynch, Connolly, Kelly, Lawrence, Lieu, 
Watson Coleman, DeSaulnier, Boyle, Welch, and Lujan Grisham.
    Chairman Chaffetz. The Committee on Oversight and 
Government Reform will come to order.
    And without objection, the chair is authorized to declare a 
recess at any time.
    Good morning, and thank you for being here. This is an 
important topic that affects every American, and it is a vital 
part of our commerce in the United States of America. We are 
here to discuss the future of the United States Postal Service 
and to address options for ensuring its long-term viability.
    Each year, more than 40 percent of the world mail volume is 
carried through the United States Postal Service. The Postal 
Service employs more than 400,000 full-time workers spread 
throughout the country. It is also the backbone of more than a 
trillion-dollar mailing industry that employs more than 7.5 
million people.
    However, due to the ongoing changes in the way Americans 
use the mail, the Postal Service faces an unprecedented 
financial crisis. Since 2006, mail volume has declined more 
than 25 percent or about 60 billion pieces of mail annually. As 
a result, the Postal Service has lost money for 9 straight 
years. With nearly a decade of running behind, the Postal 
Service faces mounting long-term financial challenges. The 
agency has $125 billion in unfunded liabilities, including $54 
billion for retiree health care, and has exhausted its $15 
billion statutory debt limit.
    Further, the Postal Service lacks the funds it needs for 
critical infrastructure investments. Chief among those is the 
purchase of a delivery fleet projected to cost roughly $6 
billion. Think about all those millions and millions of postal 
boxes that need somebody to come actually deliver the mail to 
them. It is a miraculous thing, I think, in this country that 
for less than 50 cents you can put a stamp on an envelope and a 
day or 2 or 3 days later, that is going to show up at another 
address within the country. It really is truly amazing. But if 
you are going to purchase new delivery vehicles and prepare for 
the next decade or two, you are going to need some money, and 
it is something that the Postal Service does not have.
    In the meantime, they must manage a delivery fleet of 
vehicles, which on average is 24 years old and costs $1 billion 
a year in maintenance. That is just the maintenance cost. While 
the Postal Service has made efforts to cut cost and streamline 
its operations, it is not enough.
    I think it is important to note that many of the unions 
have been very helpful in actually working with the Postal 
Service and making cuts, but they don't want to keep continuing 
to cut the number of personnel, and neither do I. We want to 
see a growing, vibrant, thriving Postal Service.
    So today, we are going to hear from representatives of five 
key stakeholders within the postal community, including the 
postmaster general, the Postal Regulatory Commission, the 
Government Accountability Office, private industry, and one of 
the more important postal unions. There are a number of postal 
unions. I wish we could have them all up at the same time, but 
we have one here with us today.
    The witnesses will discuss reforms as needed, as well as 
how certain reform proposals would work. One of the things that 
is most critical in dealing with this has to do with Medicare, 
and I look forward to hearing from the Postmaster General 
Brennan and the NALC union President Rolando about a joint 
proposal to require the Postal Service retirees to fully enroll 
in Medicare in order to receive Federal health care benefits in 
their retirement.
    Since 1983, postal workers have paid some $29 billion, $29 
billion they have paid into Medicare. Currently, postal 
retirees have a choice in enrolling in Medicare. As Federal 
retirees, they can continue their sole enrollment in Federal 
employee health care plans, or they can enroll in both a 
Federal plan and Medicare. While three-quarters of retirees 
already enroll in both Medicare and the Federal plan, the 
Postal Service and its retirees could see significant savings 
if all retirees were duly enrolled.
    I look forward to hearing more about this proposal. It is 
one of the most key elements, biggest elements in our drafting 
and coming forward with a reform package that has a vibrant and 
sustainable Postal Service. Let me just say I think it is 
important to note the approach that we are taking here.
    Are there costs to be cut? Yes. Are there things that we 
can do to become more effective, more efficient? Yes. But I 
also do believe that the Postal Service is a vital tool of 
commerce, and a thriving, vibrant, productive Postal Service is 
essential to our economy. We cannot ignore this.
    Think about the world of the internet. Think about the way 
commerce is moving. Think of the way we communicate. Think of 
how we send bills and communicate as nation. You have to have a 
vibrant, thriving Postal Service in order to achieve all of 
that. That is why I think so many people are here today, and it 
is one of the most important things that our committee will be 
addressing and taking care of. That is the goal, and that is 
what we are trying to achieve.
    And thank you all for being here. We should have a good 
hearing today.
    Chairman Chaffetz. With that, I will now recognize the 
ranking member, my good friend Mr. Cummings of Maryland.
    Mr. Cummings. Thank you very much, Mr. Chairman. And I, 
first of all, want to thank you, Mr. Chairman, for your hard 
work and staff on both sides working so hard for a long time to 
try to resolve the many complex issues that Postal Service 
faces. And I want to thank the Postal Service community and all 
of those affected by it because there is a genuine effort to 
try to come to some type of resolution that is a win-win-win-
win for everybody. And I express my appreciation because it 
helps us as we move along.
    I also want to thank our witnesses for being here to 
discuss ideas for addressing the significant challenges facing 
this very critical institution. Since its establishment more 
than 240 years ago, the Postal Service has served as the 
critical link that touches each one of our lives and connects 
us all together, our families, our businesses, and our 
communities.
    Through more than 32,000 post offices staffed by more than 
600,000 people, the Postal Service delivers more than 150 
billion pieces of mail a year to more than 150 million 
addresses. Since the last postal reform legislation was enacted 
some 10 years ago, the Postal Service has encountered deepening 
financial challenges. As a result of the increasing popularity 
of one-line communications and transactions, the volume of mail 
handled by the Postal Service has fallen by more than 25 
percent since 2006, and this trend is expected to continue.
    The cost of the Postal Service's operations have also risen 
in part because the Postal Service is required to provide 
universal delivery service to every address in the United 
States. Every year, about 900,000 new addresses are created in 
this country, and the Postal Service, its network and 
facilities, letter carriers and workers must expanded to 
deliver to every single new address.
    Congress has also imposed substantial burdens on the Postal 
Service that have nothing to do with providing universal 
service. The Postal Accountability and Enhancement Act of 2006 
required the Postal Service to fully prefund its liabilities 
for retiree health care costs, a requirement that no other 
Federal agency or private sector company faces. These 
liabilities, together with unfunded pension liabilities, 
currently amount to about $125 billion, which is almost double 
the agency's annual revenues.
    Since 2006, the Postal Service has instituted many cost-
saving measures, including the following: cutting 200,000 
positions through attrition, cutting work hours by 331 million, 
consolidating more than 360 facilities and 20,000 delivery 
routes, and changing retail operation hours in approximately 
13,000 post offices to match customer demand and reducing the 
number of administrative areas and districts.
    And let me say this. I have said it to their faces; I have 
said it behind their backs. I think the unions have bent over 
backwards trying to work with the Postal Service and have 
done--I mean, of all the committees I have sat on and dealt 
with, I think here we have a genuine effort by unions to 
understand what is going on, to make sure that they do right by 
their members, and at the same time make sure that we have a 
viable and strong postal system. And I want to thank them.
    The Postal Service reports that these initiatives have 
saved the agency some $15 billion a year. However, there are 
significant legal restrictions that limit the Postal Service's 
ability to cut costs and introduce new products to counteract 
its deteriorating financial condition. As a result, despite its 
diligent efforts, the Postal Service has reported a net loss of 
$5.1 billion for fiscal year 2015, its ninth consecutive year 
of losses. The Postal Service projects $5.9 billion in net 
losses for fiscal year 2016.
    Only Congress can modify the nature and the structure of 
the funding obligations imposed by statute on the Postal 
Service's health care and pension programs. Of course, these 
problems are not new, and we have gone far down the road of 
developing reform legislation in previous Congresses. But 
Congress has been unable to reach a final bill. The time now is 
to act.
    And so I want to again thank you, Mr. Chairman, for your 
commitment to working on a bipartisan basis, and it truly has 
been bipartisan with me and other colleagues to develop a 
realistic reform proposal. I am encouraged by our discussion 
and hopeful that we will be able to help put the Postal Service 
on a viable and sustainable path.
    I believe that any postal reform legislation that this 
committee considers should do the following, as I close: 
alleviate the burdensome requirement for prefunding retiree 
health benefits, allow the Postal Service to have separate 
postal-only health plans that integrate fully with Medicare, 
allow the Postal Service to offer non-postal financial services 
such as post-office-to-post-office money orders and certain 
types of gift cards, and require the Postal Service to create a 
new chief innovation officer charged with developing new, 
innovative products, as any other business.
    And so we need to work together to address the problems 
facing the Postal Service, and we need to treat the employees 
of the Postal Service fairly and compassionately. Waiting until 
the Postal Service runs out of cash is simply not an option. 
The Postal Service is an institution on which all Americans 
rely.
    And finally, I want to thank Mr. Connelly and Mr. Lynch for 
their hard work on this effort. We have met many times trying 
to get through this, and we will.
    And so, ladies and gentlemen, we simply cannot fail. We 
simply cannot kick the can down the road. The time to act is 
now, and I do believe that we are well on the road to 
accomplishing that.
    And with that, I yield back.
    Chairman Chaffetz. I thank the gentleman.
    I think it is important to note the good work that Mr. 
Meadows of North Carolina, Mr. Lynch, and Mr. Connelly have put 
into this, and I concur with my colleague Mr. Cummings that if 
we are going to do this and actually pass it all the way to the 
President's desk, it does need to be a bipartisan bill. And 
that is the goal and that is the intention.
    I will hold the record open for 5 legislative days for any 
members who would like to submit a written statement.
    But we would like to recognize our witnesses here today. We 
are honored to have the postmaster general of the United States 
Postal Service, Ms. Megan Brennan. We have the Honorable Robert 
Taub, acting chairman of the United States Postal Regulatory 
Commission. We have Ms. Lori Rectanus, who is the director of 
physical infrastructure issues at the United States Government 
Accountability Office; Ms. Jessica Lowrance, executive vice 
president of the Association for Postal Commerce; and Mr. 
Fredric Rolando, president of the National Association of 
Letter Carriers.
    We welcome you all, and thank you for being here.
    Pursuant to committee rules, all witnesses are to be sworn 
before they testify. If you will please rise and raise your 
right hands.
    [Witnesses sworn.]
    Chairman Chaffetz. Thank you. Let the record reflect that 
all witnesses answered in the affirmative.
    In order to allow time for discussion, we would appreciate 
it if you would limit your oral comments to no more than 5 
minutes. Your entire written statement will be made part of the 
record.
    We thank you for your participation. We will now recognize 
the postmaster general for 5 minutes.

                       WITNESS STATEMENTS

                   STATEMENT OF MEGAN BRENNAN

    Ms. Brennan. Thank you. Good morning, Mr. Chairman, Ranking 
Member Cummings, and members of the committee. Thank you, 
Chairman Chaffetz, for calling this hearing. I'm proud to be 
here today on behalf of the dedicated men and women of the 
United States Postal Service, who work hard every day to serve 
the American public.
    The Postal Service currently operates with a business model 
that is unsustainable. In the past decade, total mail volume 
declined by 28 percent, and first-class mail, our most 
profitable product, has declined by 35 percent. To put this in 
perspective, the annual value of the revenue lost as a result 
of this volume decline is $21 billion per year. Nevertheless, 
the Postal Service is required to maintain an extensive network 
necessary to process and deliver the mail to every address 6 
days a week.
    The cost of that network is largely fixed or growing, 
regardless of volume. However, less volume and limited pricing 
flexibility means that there is less revenue to pay for that 
network and fund other costs imposed upon us by law.
    We continue to make difficult but necessary decisions 
within the constraints of our business model to adapt to our 
rapidly changing marketplace. We have streamlined our 
operations, restructured our networks, and improved 
productivity for 6 consecutive years. As a result of these 
efforts, we've achieved annual cost savings of nearly $15 
billion. We have also been successful in stabilizing marketing 
mail revenues and growing our package delivery business, which 
together enable America's e-commerce.
    However, all of these actions cannot offset the negative 
impacts caused by the continued decline in the use of first-
class mail. Since 2012, the Postal Service has been forced to 
default on more than $28 billion in mandated payments to the 
Treasury for retiree health benefits. Without these defaults, 
the deferral of capital investments and aggressive management 
actions, we would not be able to pay our employees, our 
suppliers, or to deliver the mail.
    Without legislative and regulatory reform, our net losses 
will continue to grow regardless of our ongoing efforts to grow 
revenue and improve operational efficiencies. If allowed to 
continue, this will have a devastating impact on the future of 
the organization and the customers we serve.
    Mr. Chairman, we need legislation now. Over the past year, 
we have been working with postal stakeholders to identify key 
reforms capable of achieving broad support and which would 
return the Postal Service to financial stability. The 
legislation we are seeking reflects the results of these 
discussions and includes the following four provisions: require 
full Medicare integration for postal retiree health plans, 
restore our exigent price increase for market-dominant 
products, calculate all retirement benefit liabilities using 
postal-specific salary growth and demographic assumptions, and 
provide additional product flexibility.
    By enacting legislation that includes these provisions, the 
Postal Service can achieve an estimated $32 billion in combined 
cost reductions and new revenue over the next 5 years. 
Enactment of these provisions, favorable changes to our rate-
setting system by the Postal Regulatory Commission, and our 
aggressive efficiency and revenue initiatives will return the 
Postal Service to financial stability.
    Medicare integration is the most important of the 
legislative provisions we recommend. As the second-largest 
contributor to Medicare, our proposal allows the Postal Service 
and our employees to fully utilize the benefits for which we 
have already paid. By requiring full Medicare integration for 
Postal Service retirees, we will essentially eliminate the 
current unfunded liability for retiree health benefits.
    We are also seeking to restore the exigent rate increase as 
a permanent part of our rate base. In April, the Postal Service 
was required by the PRC to eliminate the exigent surcharge and 
to reduce our prices. This will reduce our revenues this year 
by $1 billion and by approximately $2 billion annually, further 
worsening our financial condition. Reinstating the exigent 
surcharge is critical to the Postal Service's financial 
stability.
    Mr. Chairman, our financial challenges are serious but 
solvable. The proposals we are advancing today are fiscally 
responsible. They enable the Postal Service to invest in the 
future and to continue to provide affordable and reliable 
delivery service. Mr. Chairman, I look forward to working with 
this committee and our stakeholders to restore the financial 
health of the United States Postal Service.
    This concludes my remarks. I welcome any questions that you 
and the committee may have. Thank you, Mr. Chairman.
    [Prepared statement of Ms. Brennan follows:]
    
    
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    Chairman Chaffetz. Thank you.
    Chairman Taub, you are now recognized for 5 minutes.

                  STATEMENT OF ROBERT G. TAUB

    Mr. Taub. Mr. Chairman, Ranking Member Cummings, good 
morning. I'll hit a few key points of the committee's very 
detailed written testimony.
    In 2015, the Postal Service had a total net loss of $5.1 
billion, which is an improvement from 2014. However, this is 
the ninth consecutive net loss since 2007 and has increased the 
cumulative net deficit since then to $56.8 billion. These 
continuing losses have negatively impacted liquidity, requiring 
the Postal Service to use all of its $15 billion statutory 
borrowing capacity and causing total liabilities to far exceed 
total assets by $50.4 billion.
    In the past 5 years, the Postal Service has not made any of 
the required prefunding payments to the retiree health benefit 
fund. This accruing nonpayment into the fund has skewed the 
Postal Service's current liabilities in relation to its assets. 
To reduce its debt ratio to historic averages, the Postal 
Service would have to significantly increase its current cash 
position or investments in capital assets and reduce its 
obligations to the retiree health benefit fund.
    Low liquidity levels in recent years have impeded the 
Postal Service's ability to make capital investments in 
infrastructure. It now operates an aging vehicle fleet, 
increasing the need and consequently the costs for maintenance 
and repair. Also unmet is the need to invest in sorting and 
handling equipment to fully capitalize on business 
opportunities in the growing package delivery markets.
    Total mail volume in 2015 dropped to levels not seen in 
more than 27 years, and the Postal Service anticipates further 
reductions in total volumes for 2016. The continuous decline in 
first-class mail seriously jeopardizes the Postal Service's 
ability to cover its fixed overhead costs.
    Recent increases in revenues and subsequent higher 
liquidity are largely due to the temporary market-dominant 
product exigent surcharge. The additional revenue from 
competitive products, which are mainly parcels, is not 
sufficient to offset the future revenue loss resulting from the 
termination of the exigent surcharge, which was removed April 
10. In order to maintain the operating net income it is 
currently achieving, the Postal Service would have to make up 
the loss of that revenue, which is approximately $2.1 billion 
annually.
    With the growing liability of retiree health benefits, the 
inability to borrow for needed capital investments and the 
continued loss of high-margin, first-class mail revenues, the 
important task of improving the financial condition of the 
Postal Service is daunting.
    Despite the financial news, there is still strength in the 
system. The Postal Service is the one government agency that 
touches every American on a daily basis. It is an organization 
that literally serves 155 million American households and 
businesses on a typical day. It facilitates trillions of 
dollars in commerce. The fundamental problem is that the Postal 
Service cannot currently generate sufficient funds to cover its 
mandated expenses and also invest in critically deferred 
capital needs.
    Where can we look for answers? I would argue the starting 
point is to look at ourselves. What do we as a nation need from 
postal and delivery system and what is its cost? What exactly 
is universal mail service in the United States?
    The Commission has determined that, unlike other countries, 
the universal service obligation, or USO, in the United States 
is largely undefined and instead is comprised of a broad set of 
policy statements with only a few legislative prescriptions. 
The Commission estimates the cost of providing universal 
service to be more than $4 billion annually. When assessing the 
current state of the Postal Service, policymakers should look 
at this fundamental issue and decide exactly what we as a 
nation need from the Postal Service and, most importantly, how 
those expectations are to be funded.
    Mr. Chairman, Ranking Member Cummings, thank you for 
holding this hearing today and shining a spotlight on this 
critical part of our nation's infrastructure. I know you deeply 
appreciate the importance of these issues. There are no easy 
answers, but answer we must, and the Commission stands ready to 
help you in the search for solutions.
    On behalf of all for commissioners and the entire 
hardworking agency staff, thank you for the opportunity to 
testify today.
    [Prepared statement of Mr. Taub follows:]
    
    
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    Chairman Chaffetz. Thank you, Mr. Taub.
    I would now recognize Ms. Rectanus of the GAO. Did I 
pronounce your name properly?
    Ms. Rectanus. Yes ----
    Chairman Chaffetz. Okay.
    Ms. Rectanus.--you did. Thank you.
    Chairman Chaffetz. Thank you.

                   STATEMENT OF LORI RECTANUS

    Ms. Rectanus. Good morning. Chairman Chaffetz, Ranking 
Member Cummings, and members of the committee, I'm pleased to 
be here today to discuss the Postal Service's financial 
challenges.
    The Postal Service is a critical part of the Nation's 
communications system, but its financial situation is dire. We 
placed the Postal Service on our high-risk list in 2009 where 
it remains today.
    Today, I will discuss the factors affecting the Postal 
Service's deteriorating financial condition, the status of 
unfunded liabilities, and choices Congress faces to address 
these financial challenges.
    The Postal Service's financial struggles are well-
documented. Beginning in 2007, expenses began consistently 
outgrowing revenues, and it has lost over $56 billion since 
then. This situation is primarily caused by decline in mail 
volume, particularly in profitable first-class mail 
commensurate with an increase in expenses, largely because of 
salary increases. Increases in compensation and benefits alone 
will add over $1 billion in additional cost in fiscal year 
2016. The gap between revenue and costs continues despite the 
significant efficiency initiatives undertaken by the Postal 
Service.
    Regarding unfunded liabilities and costs, they are a large 
and growing burden on the Postal Service. At the end of fiscal 
year 2015, the Postal Service had about $125 billion in 
unfunded liabilities and outstanding debt, which accounted for 
182 percent of its revenues. Retiree health benefits account 
for $55 billion of the unfunded liability due in part because 
the Postal Service stopped making required payments in 2011 and 
is not expected to make the required 2016 payment.
    Given this history and future events, it is not likely that 
the Postal Service will be able to make its required retiree 
health and pension payments in the near future. Beginning in 
fiscal year 2017, the Postal Service will be required to start 
making annual payments for health benefits on top of annual 
pension payments. Using available data, we determined these 
payments could total about $11 billion. Although this is less 
than what was required in fiscal year 2015, it is about $4.6 
billion more than what the Postal Service paid that year. And 
the expiration of the temporary rate surcharge and the lack of 
major cost-savings initiatives will further stress the Postal 
Service's ability to make these payments.
    Having large unfunded liabilities for postal retiree health 
and pension benefits places taxpayers, employees, retirees, and 
the Postal Service itself at risk. If the Postal Service does 
not adequately fund these benefits and Congress wanted these 
benefits to continue, the Treasury, and hence the taxpayer, may 
need to step in. Alternatively, unfunded benefits could lead to 
pressure for reductions in benefits or pay. For the Postal 
Service, unfunded benefits endanger its future viability by 
saddling it with bills later after employees have already 
retired.
    Postal Service actions alone under its existing authority 
are insufficient to achieve financial solvency. Comprehensive 
legislation is needed. In doing this, Congress faces several 
difficult decisions and tradeoffs in key areas. First, what is 
the level of postal services needed in the 21st century, and 
what are we willing to pay for those services? Given how 
communication is changing, Congress could consider what postal 
services should be provided on a universal basis and the best 
way to provide those services.
    Second, what is the appropriate level of compensation and 
benefits that should be paid in an environment of revenue 
pressures? Congress could consider revising the statutory 
framework for collective bargaining to ensure that the Postal 
Service's financial condition is considered in binding 
arbitration.
    And third, what is the continued viability of the Postal 
Service's dual role of providing affordable universal service 
while remaining self-sufficient? In assessing any alternatives 
to the current structure, Congress should consider costs that 
might be transferred from the Postal Service, which is financed 
by ratepayers, to the Federal Government, which is funded by 
taxpayers.
    In conclusion, we must take a hard look at what level of 
postal services we need in the future and what we can afford. 
The status quo is not sustainable.
    This concludes my prepared statement. Chairman Chaffetz, 
Ranking Member Cummings, and members of the committee, I would 
be pleased to answer any questions you have.
    [Prepared statement of Ms. Rectanus follows:]
    
    
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    Chairman Chaffetz. Thank you.
    Ms. Lowrance, I will now recognize you for 5 minutes.

                 STATEMENT OF JESSICA LOWRANCE

    Ms. Lowrance. Mr. Chairman, Ranking Member Cummings, and 
the members of the committee, thank you for the opportunity to 
speak with you today about postal-related issues facing the 
mailing industry.
    The mailing industry provides over 7.5 million jobs and 
accounts for $1.4 trillion in economic activity. While the 
mailing industry is a vital part of the Nation's economy and 
surpasses in size both the airline industry and the oil and 
natural gas industry, it is one that faces significant 
challenges. Not only are there policies, issues that must be 
considered, but also economic issues that balance the 
infrastructural needs of the American economy and the public 
welfare.
    Mail is and will remain a vital part of the American 
economy and the manner in which the Nation communicates and 
does business. Despite all that has transpired over the last 
several years, market-dominant mail still consists of over 154 
billion pieces or 97 percent of the Postal Service's business.
    The American mail system is a sender-paid service. As 
volume continues to decline, however, the Postal Service is 
pressed to find new ways to help lessen its financial burden. 
From our perspective, there are several fundamental matters 
that need immediate attention, including the need for 
predictable, affordable mail services; complete, accurate, and 
transparent costing of products and services; and reliable, 
consistent mail service.
    At the end of this calendar year, the Postal Regulatory 
Commission, as directed by the PAEA, will be reviewing the 
current system of rate regulation. Although the Postal Service 
has expressed displeasure with the price cap, the CPI-based cap 
has operated substantially as intended to the benefit of all 
postal customers, Postal Service, and the general public.
    For business customers, the cap provides customers with an 
assurance of postal rate stability and predictability, which is 
key to the decision as to whether to continue to invest in mail 
as a business communication and commercial vehicle. For the 
years it has been in effect, this inflation-based price cap has 
served as an effective restraint against abuse of the Postal 
Service's monopoly power. The Postal Service has been required 
to focus more closely on the elimination of postal waste and 
inefficiencies in a manner that would not have happened in the 
absence of the cap.
    Unfortunately, there are obligations such as the prefunding 
mandate and the nonparticipation of postal retirees and 
Medicare that has made operating under such a cap a challenge. 
The need for costing transparency has never been so apparent as 
it is today. The mailing industry has consistently called for 
greater clarity and transparency in the reporting of postal 
costs. This lack of transparency has resulted in other Postal 
Service decisions that have imposed additional cost on mailers 
without creating corresponding efficiencies in the postal 
network.
    The Postal Service, its customers, and the Postal 
Regulatory Commission would benefit greatly by an upgrading of 
postal costs and modeling systems. The Postal Service should 
move without dispatch to an informed visibility-based system. 
This would enable costs to be tracked in an automated fashion 
similar to how it tracks service performance throughout the 
Nation.
    For business customers, the quality of mail delivery is a 
key component of the value of mail. Timeliness, consistency, 
and reliability are extremely important to these users and 
recipients of the mail. The Postal Service's inability to 
provide consistent and reliable service is causing many 
enterprises to look to other means as their preferred method 
for communicating and doing business.
    Legislative reform is just one of the many tools that would 
need to be leveraged in order for the Postal Service to be, and 
remain, fiscally viable. At the very least, mailers urge 
Congress to address those issues that are solely within its 
power to do so. One, fix the mandated prefunding requirements; 
and two, allow for fuller postal employee participation in 
Medicare.
    With the upcoming 10-year review of the current rate 
regulation system, mailers need an accurate accounting and 
understanding of the cost of the products and services they 
receive from the Postal Service. The Commission should not be 
required to judge the performance of the existing system on the 
basis of data that are inadequate for sound decision-making. It 
is imperative that the Postal Service be directed to use the 
many data-driven tools such as the intelligent mail barcode and 
informed visibility to supply the data the Commission so sorely 
needs to make the informed decisions about the current system 
of rate regulation and how to move forward in its review.
    At the end of the day, the mailers need reliable, 
consistent mail service and affordable, predictable prices in 
order to continue to invest in mail for business communication 
and commerce.
    Chairman Chaffetz, Ranking Member Cummings, and the members 
of the committee, this concludes my prepared statement. I can 
answer any questions.
    [Prepared statement of Ms. Lowrance follows:]
    
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    Chairman Chaffetz. Thank you.
    Mr. Rolando, you are now recognized for 5 minutes.

                 STATEMENT OF FREDERIC ROLANDO

    Mr. Rolando. Thank you, Chairman Chaffetz and Ranking 
Member Cummings and members of the committee, for inviting me 
to testify today.
    You've asked me to focus on the urgent need for postal 
reform legislation and the provisions that we believe are 
necessary. I'm pleased to do that today, but before I do, it's 
important that we take a moment to recognize the current 
reality of the Postal Service. It is no longer 2009 when the 
Great Recession sent mail volume plummeting and the prefunding 
mandate crushed the Postal Service's finances, raising doubts 
in some quarters about the viability of the agency. Postal 
employees never doubted the viability of the Postal Service, 
but we worked hard to help the Service to adapt and survive as 
it shed more than 200,000 jobs and we boosted productivity 
dramatically.
    The Postal Service has returned to operational 
profitability, now earning $4.4 billion over the past 2-1/2 
years, our pension funds are healthy and better funded at 92 
percent than most private sector pensions, and we have set 
aside some $50 billion for retiree health when most large 
private companies have not set aside a dime.
    Thanks to the growth of direct mail and booming e-commerce, 
total mail volume recovered and stabilized in 2015, increasing 
the Postal Service's revenue to $69 billion.
    There's no question that the Postal Service remains a vital 
part of the Nation's economic infrastructure. In 2015, we 
delivered more than 150 billion letters, magazines, and 
packages, 6 and even 7 days a week. The Postal Service's 
revenue is just a small part of the $1.4 trillion of the GDP 
accounted for by the U.S. mailing industry, which now employs 
7-1/2 million Americans.
    With an 84 percent approval rating for the American people, 
we believe the Postal Service can thrive in the 21st century 
with the right public policies. Now is not the time to weaken 
this treasured agency through service and delivery reductions, 
especially those that have failed to attract congressional 
support in the past. Instead, this committee should offer 
sensible and targeted reforms that would provide financial 
stability and allow the Postal Service to innovate.
    Specifically, it should address three specific legislative 
and regulatory burdens that severely hinder the Postal Service. 
First, the Postal Service is required to massively fund future 
retiree health premiums decades in advance, regardless of 
financial conditions facing the agency or the country. No other 
public or private enterprise in America faces such a mandate, 
and most firms don't prefund at all. This mandate by itself 
accounts for nearly 90 percent of all reported losses since 
2007.
    NALC has suggested numerous ways to address the prefunding 
mandate over the years. As part of an overall reform effort 
that does not weaken our networks or diminish services to the 
public, we support reforms to the FEHBP program to maximize 
participation in Medicare among eligible postal retirees. This 
would almost eliminate the $50 billion unfunded liability for 
future retiree health while raising Medicare spending by less 
than 2/10 of 1 percent annually. Given that the Postal Service 
and its employees have contributed $29 billion to Medicare, 
this approach is fair and appropriate.
    Second, Congress should consider the policy that requires 
100 percent of postal retirement funds be invested in low-
yielding treasury bonds. Together, the Civil Service and FERS 
postal pension accounts, along with the postal retiree health 
fund, hold nearly $350 billion in treasury securities. That 
makes the Postal Service and its employees the third-largest 
creditors of the U.S. Federal Government just behind China and 
Japan. No other company in America would invest its retirement 
assets in such an unsophisticated way, especially during a 
period when treasuries are yielding 2 to 4 percent annually.
    Starting with the retiree health fund, we should apply 
private sector best practice by investing in well-diversified 
portfolios of private stocks, bonds, and real estate, as well 
as government bonds. Current policy forces the mailing industry 
to give Uncle Sam a low-cost loan instead of sensibly investing 
to cover future health-care liabilities. It makes no financial 
sense to invest in assets that yield less than the rising cost 
of care.
    My submitted testimony makes the case for prudent 
investment change, addresses common objections to it, and 
explains how several independent agencies invest successfully 
in private securities.
    By changing the investment policy, Congress could raise the 
long-term rate of return on the assets, reduce the burden of 
prefunding, offset the cost of postal Medicare integration, 
relieve upward pressure on postal rates, and reduce the 
misguided impulse to slash service.
    Third, in my full testimony I address the postage rate-
making process, which the PRC will formally review in 2017. 
There's a remarkable degree of stakeholder consensus about the 
principles of successful postal reform. All four postal unions, 
the Postal Service, and a wide range of companies and postal 
trade associations have agreed on reform principles for your 
consideration. And these principles were outlined in a letter 
sent to the chairman yesterday, and it urged legislation that 
would mandate postal-specific assumptions, satisfy--not 
eliminate--satisfy the prefunding burden by reforming FEHBP to 
maximize Medicare participation, invest the retiree health fund 
sensibly, permit the Postal Service to provide non-postal 
products in limited circumstances, and adjust the market-
dominant rate base to ensure adequate revenue through the PRC 
review if necessary.
    Our coalition's recommendations are grounded in common 
sense and best practice. They represent the measures on which 
we could agree while remaining confident that they would 
stabilize the Postal Service while allowing it to innovate to 
meet the evolving needs of our country. NALC and our sister 
postal unions remain committed to helping this committee find a 
fair and equitable path forward that does not damage our 
network of universal and affordable service or the employees 
that make that network special.
    Thank you very much again for this opportunity to testify, 
and am happy to answer any questions.
    [Prepared statement of Mr. Rolando follows:]
    
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    Chairman Chaffetz. Thank you. Thank you all. We will now 
start by recognizing the gentleman from Tennessee, Mr. Duncan, 
for 5 minutes.
    Mr. Duncan. Well, thank you very much, Mr. Chairman.
    General Brennan, I have an article here from the Los 
Angeles Times that says, ``after peaking in 2006, total mail 
handled by the Postal Service has declined 27 percent.'' Is 
that fairly accurate, and is mail volume still slowly 
declining?
    Ms. Brennan. That's correct.
    Mr. Duncan. All right. And do you feel like you have taken 
every step you can do thus far to adjust to that decline?
    Ms. Brennan. Congressman Duncan, you're correct in terms of 
the decline in total mail volume. The challenge for us is the 
continued decline particularly in first-class mail, which pays 
the bills, defines our network requirements, hence, our actions 
to right-size the infrastructure and take cost out of the 
system. There are still opportunities, but I think as noted, 
we've reduced our annual cost base by $15 billion.
    Mr. Duncan. I will tell you a little story. About 4 years 
ago they had an article about me and my dad in the Knoxville 
News Sentinel, and I got the nicest handwritten letter from 
Peyton Manning about that article. He said he could tell from 
that article I had the same kind of relationship with my dad 
that he has with his dad. Well, 2 or 3 months later my chief of 
staff saw Peyton Manning one night and told him how much I 
appreciated that, and he said Peyton Manning told him that his 
mother told him once that if you wanted to really make an 
impression on people nowadays, send them a handwritten note or 
letter. Maybe you should try to get more people to follow the 
Peyton Manning method of impressing people because it made a 
big impression on me, I can tell you.
    Ms. Brennan. I would agree with that, Congressman.
    Mr. Duncan. Maybe you should get him to do an ad for you or 
something.
    [Laughter.]
    Mr. Duncan. Let me ask you this. Would it make any 
difference, or how much of a difference would it make if you 
went to 5-day-a-week service?
    Ms. Brennan. We've spent the better part of the past year, 
Congressman, on trying to build consensus with key 
stakeholders, a narrower group of provisions, high value, that 
would generate more than $32 billion in cost reductions and 
savings over the next 5 years. The reality is in my discussions 
with public officials, members of this committee, there's no 
congressional consensus for moving to 5-day delivery.
    Mr. Duncan. Right.
    Ms. Brennan. The Postal Service is looking at, how do we 
leverage our infrastructure, which is an asset? How do we grow 
profitable revenue? How do we look to fill the mailbox and fill 
the truck? That's what we're focused on.
    Mr. Duncan. Many companies in the private sector that had 
pension plans that they saw they couldn't afford anymore, they 
stopped giving those pensions to their new hires. Have you 
considered doing something like that, reducing the pension 
benefits for new hires, and would that make any difference?
    Ms. Brennan. Congressman Duncan, I would say that we have a 
plan forward. There is a way to resolve these legacy costs and 
these liabilities, and that's by permitting the Postal Service 
to integrate with Medicare. It's universal practice. Our 
employees, as noted by the chairman and the ranking member, 
have paid more than $29 billion in Medicare taxes, and we 
should benefit from that opportunity. There is a way forward 
without looking at diminishing benefits to either current or 
future employees.
    Mr. Duncan. Ms. Rectanus, when you looked at this, these 
figures are so staggering. I saw some figure that $56 billion 
in total losses over the last several years or something. What 
did you find or what do you consider to be the most troubling 
aspect of the entire financial condition of the Postal Service? 
What is the worst problem or the biggest problem?
    Ms. Rectanus. Fundamentally, what we have found is the 
Postal Service's business model that relies on revenue to cover 
its costs is no longer working. Certainly, the unfunded 
liabilities, particularly the RHB, have contributed to that, 
but there is a broader problem, and that is the fundamental 
business model of mail volume that the Postal Service has been 
using isn't working anymore. And to their credit, they have 
been trying to right-size their network and make changes.
    But what we would argue is it's even beyond the unfunded 
liabilities. Even if you take those out, the ability of the 
Postal Service to raise its--to reduce its costs to align with 
the revenue, they just don't have the ability to do that right 
now without comprehensive reform. As one example, their 
controllable income, which is what they talk about the income 
before they account for their unfunded liabilities in fiscal 
year 2015 was less than it was in fiscal year 2014 even though 
in fiscal year 2015 they had the exigent for the full year. And 
that's just an example of even when there is an influx of 
money, the operating costs are still growing such that their--
it's harder and harder for them to get ahead of their costs.
    Mr. Duncan. Well, the unfunded liability problem is a 
problem for the entire Federal Government. It is more than just 
the Postal Service. It is staggering.
    Thank you, Mr. Chairman.
    Chairman Chaffetz. Thank you. I will now recognize Mr. 
Cummings for 5 minutes.
    Mr. Cummings. Thank you very much.
    You know, the Postal Service has come up with methods to 
save some $15 billion per year, is that right, Ms. Brennan?
    Ms. Brennan. That's correct, Congressman Cummings.
    Mr. Cummings. And I have always been concerned about making 
sure that we save as much money as possible. At the same time, 
I was hoping that we could find ways to bring in more money. 
So, Ms. Rectanus and Mr. Taub, do you agree that in order to be 
financially viable long-term it is important for the Postal 
Service to develop innovative products and services?
    Ms. Rectanus. We do support the Postal Service's continued 
ability to be innovative and develop products and resources 
that people need. The challenge that you run is trying to find 
that sweet spot between areas in which the Postal Service will 
be profitable since they can't afford to lose money, but you 
don't want them to be able to compete unfairly because of their 
unique status, or conversely, lose money because of their 
unique status.
    Mr. Cummings. And so you end up in a no-spot?
    Ms. Rectanus. We believe ----
    Mr. Cummings. You know, it is kind of hard. On the one hand 
we want them to be able to bring in more money, but then we tie 
their hands and shackle their feet and say we don't want you to 
do this and don't want you to do that. So what do you recommend 
that they do? I mean, what would you--and, Mr. Taub, you 
certainly are--you look like you are anxious to join in on 
this, so I would like to hear what you all have to say because 
it becomes very frustrating ----
    Mr. Taub. Yes.
    Mr. Cummings.--for the Postal Service and for us. So I am 
just wondering what you see there.
    Mr. Taub. Yes. From the--again, this is a cost-and-revenue 
issue. I would say the first ----
    Mr. Cummings. I am talking about things that are going to 
be profitable. I don't want anything that is not profitable, 
and I think Ms. Brennan would--that doesn't even make sense. 
Let's take that off the table.
    Mr. Taub. Right.
    Mr. Cummings. We are talking about profitable things. Let's 
go from there.
    Mr. Taub. Yes. The 2006 law took a very hard line in saying 
the Postal Service could only offer what are defined as postal 
products, what you can think of as traditionally hard-copy 
delivery letters, packages. So clearly, the law would need to 
open that aperture if you're going to move beyond that.
    The Postal Regulatory Commission in 2011 in a report to 
Congress and the President laid out a variety of 
recommendations. One of them was to suggest that if that 
aperture were to be open, the Commission now has this 
experience as the regulator to call balls and strikes and 
ensure fair competition issues, ensure that cost coverage is 
there.
    I would note, though, as I indicated in my opening 
statement that this also is part of that larger question of 
what is it that the United States Postal Service should do as a 
government institution, and I think that's an important 
understanding. What are the boundaries, as opposed to simply 
looking for revenue opportunities that may not be in their core 
competency. But if the financial issue of that fire in the 
house can be put out and the--we can start rebuilding it and 
look in that holistic way.
    Mr. Cummings. Now, Postmaster General, you have been in 
this position for a little while now, and I am just wondering, 
you know, talk about what you all have been trying to do and 
how that has worked out and with a more perfect situation what 
you would like to be able to do.
    Ms. Brennan. Yes ----
    Mr. Cummings. In that regard.
    Ms. Brennan. Yes. If I may just say, sir, we are innovating 
at the core in the mail by giving mail a digital reflection to 
stabilize it and look to grow advertising mail. In the package 
arena we've partnered with large e-commerce retailers to 
customize delivery solutions, same-day, next-day, Sunday 
delivery, delivery of other products, groceries as an example.
    And I think as Commissioner Taub mentioned, it's innovating 
for us at the core. Our core competency is delivery. How do we 
leverage that delivery network? We've partnered with other 
government agencies to do in-person proofing. We did a pilot 
test in Arizona to on-board census workers. We think there's 
some opportunity for us in the future with other government 
agencies to do ID verification whether it's at a local retail 
or on the doorstep with the enhanced technology we have 
embedded in our mobile delivery devices.
    Mr. Cummings. You know, I visited the Amazon plant--as a 
matter of fact, the chairman and I went--in Maryland, and it 
was amazing to hear them talk about the last mile and how much 
they couldn't do their job unless the Postal Service was a part 
of it. How much is that helping you ----
    Ms. Brennan. Very much ----
    Mr. Cummings.--financially?
    Ms. Brennan. I would say this. The growth in package 
volume, Congressman Cummings, over the past year or past 5 
years I'll cite, 49 percent growth in package volume, more than 
1.5 billion more packages in the system. The Postal Service now 
delivers roughly 30 percent of all packages in the country.
    Credit to President Rolando and President Dwyer of the 
National Rural Letter Carriers Association who worked with us 
to enable us to have greater flexibility with the workforce to 
be responsive to the customer requirements of an Amazon and 
others that we're working with.
    Mr. Cummings. I mean, what do you see--what do you project 
in the future with regard to that? Do you see an expansion of 
that? It seems like this online shopping--and I literally go, 
you know, to the mall myself, but apparently that is old-
fashioned now. So do you see that expanding more?
    Ms. Brennan. Yes, Congressman Cummings ----
    Mr. Cummings. Not my thing, I am talking about the ----
    Ms. Brennan. Absolutely.
    Mr. Cummings.--online.
    Ms. Brennan. No, I--hyper growth, hyper growth. But the 
challenge it's a very competitive delivery space. We compete 
for customers every day. It's the value proposition, 
competitive pricing, the transit time, performance, and 
certainly visibility. And the Postal Service has made 
investments in all of those components to ensure we improve our 
competitive standing.
    We need to recognize that while our strength is last-mile 
deliver, we're challenged there. The so-called Uberization of 
package delivery, it's a very competitive space, so we 
recognize we've got to compete for that business.
    The challenge, though, ultimately for us, the package 
growth alone won't offset the losses in first-class volume, 
hence the need to address the legacy costs, specifically 
looking at Medicare integration as the cornerstone of our 
legislative ask.
    Mr. Cummings. Thank you, Mr. Chairman.
    Chairman Chaffetz. Thank you. I now recognize the gentleman 
from Texas, Mr. Farenthold, for 5 minutes.
    Mr. Farenthold. Thank you, Mr. Chairman.
    And I want to follow up on a couple of things that the 
ranking member talked about, Ms. Brennan. You used the phrase 
``give mail a digital reflection.'' What does that mean?
    Ms. Brennan. Yes. Yes, Congressman. We created a catalog 
called Irresistible Mail that imbeds in the catalog new 
technologies well beyond QR codes to include augmented reality 
near-field communications, so you open that catalog, it comes 
to life, so making it more creative and making it more relevant 
to the end consumer.
    Mr. Farenthold. Okay. Super. And I think you also touched 
on the amount of work that you guys do for Amazon, and I think 
that is a great revenue opportunity, but I am afraid it is a 
short-term problem. I imagine there are a lot of people who 
spend their day at Amazon looking for ways to deliver packages 
faster and more efficiently. For instance, here in Washington, 
D.C., I have got about an hour and 5 minutes to order something 
that will be waiting for me when I get home tonight, and that 
isn't you all that are doing the last-mile delivery on that.
    I work on the Transportation Committee. Amazon is talking 
about developing drones to deliver packages. One day in the 
not-too-distant future they are going to say bye-bye to you 
guys, and how are you all preparing for that? I mean, you are 
saying they are 41 percent of your package volume.
    Ms. Brennan. Congressman, I would say this: As I noted, it 
is a very competitive delivery space, so we've got to compete 
for that business. The term ``coopetition'' exists whether it's 
with Amazon, who's a valuable customer as well as business 
partner, or UPS and FedEx who are traditional competitors, also 
business partners for us. So, again, it comes down to 
delivering the best value, and that includes service and price.
    Mr. Farenthold. And let's talk about service and price for 
a second. I live in Corpus Christie, Texas, and we were the 
unfortunate victims of a consolidation of a mail processing 
center. So now, instead of mailing something to my neighbor 
across the street and having it processed in Corpus Christie 
and delivered the next day, it is trucked to San Antonio, 
processed, and maybe delivered in 3 days at the same price. At 
some point, you know, companies like Amazon want it there 
quicker. As you cut the quality of your service, especially on 
your lead program or your lead product, first-class mail, it 
starts to become less valuable and makes email look like a 
better alternative.
    Ms. Brennan. Congressman, the consolidation was in response 
to that decline in single-piece first-class mail, which is down 
more than 35 percent over the last decade. The service standard 
change and consolidation did not impact the delivery of 
packages, which is the growth product. We did the responsible 
thing, which was right-size the infrastructure, address the 
latent capacity, and look at how to better utilize our assets. 
Now, service is foundational and it is key to growth. We 
recognize that.
    Mr. Farenthold. And so we also spent a little bit of time 
talking about some of the--and I think almost everybody on the 
panel had a wish list of postal reforms that would make things 
better. Obviously, you know, shifting people to Medicare where 
it is a taxpayer responsibility instead of a postal 
responsibility makes sense, and it is probably fair, even 
though I hate to see even, you know, what is it a 2/10 of a 
percent increase in the Medicare cost? It is so big anyway, we 
are talking a lot of dollars.
    Postal reform that has been talked about in past Congresses 
included other things, things like cluster boxes, curbside mail 
instead of delivery to the door and, you know, no junk mail on 
Saturdays but maybe the higher revenue packages and the like. 
Why are we still talking about those?
    Ms. Brennan. Why are we still or not talking about ----
    Mr. Farenthold. Or why are we not talking about those?
    Ms. Brennan. Yes.
    Mr. Farenthold. Why did they make sense a year ago ----
    Ms. Brennan. Yes.
    Mr. Farenthold.--yet nobody is bringing them up today?
    Ms. Brennan. Again, Congressman, my approach in the past 
year was to try to build consensus around provisions, high 
value likely to generate broad support.
    Mr. Farenthold. So there is something about--you know, it 
would be difficult for--we will take my family, for example. If 
we don't have the money to do anything, it is hard to generate 
consensus about not taking a vacation, but we are not taking a 
vacation because we don't have the money. I mean, that is just 
an example. So at some point you are going to have to make, I 
think, some hard choices, and you are not going to walk away 
with everyone happy. And I think that is what we were elected 
to do here in Congress not just with the Postal Service but on 
a government-wide basis and say, okay, we can't afford that, so 
let's pick the stuff that is important and to pick the stuff 
that will work and make those hard decisions.
    Ms. Brennan. Congressman, we have made the hard decisions. 
You just noted one, the consolidations. The accelerated pace 
with which we ran was because of our dire financial situation.
    Mr. Farenthold. But you all have stopped the consolidations 
now and are looking at other things. A report says they are 
going to be no more consolidations this year. Is that ----
    Ms. Brennan. Congressman, we deferred the consolidations 
until we stabilized the network because service is our mission, 
and service was not where it needed to be. It has since 
improved and we're showing positive trends in that regard.
    I would offer--your comment about mode conversation, 
cluster boxes, for all new delivery, based on the delivery 
characteristics of that environment, we either effect delivery 
through box-on-post or centralized delivery. And of the more 
than 900,000 new possible deliveries that we added last year, 
over 70 percent were centralized or box-on-post. So we're 
making the right business decisions.
    Mr. Farenthold. All right. I see I am out of time. Thank 
you.
    Chairman Chaffetz. I thank the gentleman.
    I will now recognize the gentleman from Massachusetts, Mr. 
Lynch. Microphone? Thank you.
    Mr. Lynch. Is it working? Oh, I am sorry. Okay. There we 
go. Thank you, Mr. Chairman. I also want to thank Mr. Cummings 
and Mr. Connolly and Mr. Meadows for all their work. We have 
done a lot of work on the side here to try to coordinate our 
efforts up here. And I am very pleased to see that the same 
thing is happening down there. I mean, we have a new postmaster 
general, along with the National Association of Letter Carrier, 
rural letter carriers, mail handlers, the clerks, supervisors, 
and then the PRC, as well as the mailing community and the GAO, 
inspectors general, everybody on the same page. And so it 
troubles me that we can't move this ball forward.
    I do want to focus on one key aspect of this, and that is 
the coordination of benefits between the FEHBP--I hate these 
acronyms--but the Federal Employee Health Benefit Plan and 
Medicare. So, Postmaster General Brennan, the situation we have 
right now, as has been noted by the chairman--and the chairman 
deserves a lot of credit because he has really been the one 
that has brought us all together with the ranking member and 
has us all working together, and it has been completely 
bipartisan and really--we do a lot of work up here, and this 
effort has been really bipartisan.
    But the way this works right now, the Postal Service is the 
second-largest contributor to Medicare, and the largest--and as 
the chairman and the ranking member noted, your people, the 
postal employees paid in $29 billion so far to Medicare. And 
the largest group is DOD, I believe, and they have a TRICARE 
wraparound with Medicare. And they are the largest. But when 
folks come out of the military and go on benefits, they are 
required to use Medicare as their primary insurer, so that is a 
good way to reduce their costs.
    And we don't do that at the Postal Service. We have about 
25 percent of our employees that are relying solely on FEHBP 
and are not using, as they could, as they could because they 
have paid in--they are not using Medicare as their primary 
insurer. This in fact would--and I think President Rolando 
mentioned this in his testimony. It would basically eliminate--
out of that $50 billion in unfunded liability, it would just 
about eliminate all of it, is that right?
    Ms. Brennan. That's correct.
    Mr. Lynch. Okay. And I have been listening closely, you 
know, because you have different groups out there. The only 
criticism that I have heard so far is that postal employees who 
pay into Medicare might actually use it. That is the only 
criticism I have heard, that people who pay into Medicare will 
use it, and some people see that as a negative. But I think it 
is entirely fair and reasonable to expect that people who paid 
in $29 billion might actually use some of those benefits, so I 
really don't see that as a realistic criticism.
    The second opportunity in this--and you have done a great 
job with this proposal, and I think it ought to be adopted, and 
we ought to move this as quickly as possible in the form of 
legislation, more this forward. I really do think--and I 
realize we can't fix everything, but just because you can't fix 
everything doesn't mean you shouldn't fix something. And we can 
help. We can help up here. With a major piece of legislation 
here, we can help the post office immediately. We got other 
problems we will have to deal with, but that is for another 
day.
    The other thing I think that might be done quickly is, 
President Rolando, you mentioned the corpus of our health 
benefit trust fund. And right now, we are required, I believe, 
to hold that in treasuries, which for the past few years has 
been dismal in terms of what it returns, you know, to the fund. 
And I know part of the proposal suggests that maybe 50 percent 
of that fund might be managed by a commission. Could you talk 
about that a little bit?
    Mr. Rolando. Yes. What we were talking about doing is 
having, you know, a board that would govern this that could 
invest 50 percent, up to 75 percent in something like the 
thrift savings plan lifecycle funds.
    Mr. Lynch. Okay.
    Mr. Rolando. We looked at the period going back to 2007 
where we were earning, I don't know, somewhere about 4 percent 
with Treasury securities. Had it been invested in a lifecycle 
fund--and again, keep in mind this would have been through the 
worst recession in 80 years--we would have earned somewhere 
about 7 percent, which would have raised the fund another $10 
billion just as an example.
    Mr. Lynch. Okay. All right. I think we have to be careful 
with that, but I think that is a reasonable compromise.
    Okay. I think my time has expired, and I will yield back. 
Thank you, Mr. Chairman.
    Chairman Chaffetz. I thank the gentleman, and I appreciate 
Mr. Lynch's work and passion on this issue and look forward to 
continuing to work with him on it.
    I now recognize the gentleman from North Carolina, Mr. 
Meadows, for 5 minutes.
    Mr. Meadows. Thank you, Mr. Chairman. Thank each of you.
    As we enter into this, I want to start out, Mr. Taub, by 
saying thank you for your work. It was good to visit with the 
PRC and all the dedicated employees that work there.
    Mr. Rolando, I want to just say I know I was not on your 
Christmas card list. I do appreciate the fact that you have 
been willing to work with me in an open-minded way. That was 
your commitment to me, my commitment to you, and I want to 
thank you.
    Ms. Brennan, thank you so much for being here. Obviously, 
as we look at this, this is an interesting time and so for all 
the postal workers, you know, I just want to say thank you.
    I have been a secret shopper because, you know, I am not 
shy about my criticism either. And so in Spruce Pine just the 
other day, I went into a place--actually, I sent my wife in 
because now I start to get recognized in some of these places. 
And the service that Debbie Calloway gave my wife was nothing 
less than spectacular. And she didn't know who she was, and we 
went in. And so I went back in to thank her for her service. 
And that is what we need to do in terms of service standards.
    As a fiscal conservative, one of the things that you are 
asking me to do is get rid of a prefunding requirement that 
was, you know, part of a previous deal, and so why should I do 
that? Make a very short, compelling case on why I should do 
that.
    Ms. Brennan. First, I would say, Congressman Meadows, it's 
the right thing to do to ensure that our pensions and the 
retiree health benefits is funded. It was the accelerated pace 
of that funding that created a large part of the challenge, but 
now we're beyond that come this fall. The issue now is it's a 
system that's unaffordable for us. And, again, going back to 
we've paid more than $29 billion into the fund. Our employees 
should benefit ----
    Mr. Meadows. All right. So you are saying that you paid $29 
billion, we ought to do that. So I am willing to take the leap. 
Now, we have heard all kinds of different testimony. That 
doesn't get us where we need to go, does it?
    Ms. Brennan. In and of itself, it's not enough ----
    Mr. Meadows. Yes, it is about 2.8, $3 billion of a $5 
billion deficit, so we need some other areas. We can't make it 
up in volume because part of what is concerning me is that it 
indicates that we are just going to raise rates, that this is a 
revenue problem. And at $69 billion, it is not just a revenue 
problem, it is a management problem, so how do we take this 
without raising rates as being the ultimate answer and really 
fundamentally reform it and make it work? Are you in support of 
safe and secure delivery, you know, through cluster box? Is 
that something that you would support wholeheartedly?
    Ms. Brennan. Depending on the characteristics of the 
delivery environment, yes. We currently do affect delivery to 
cluster boxes ----
    Mr. Meadows. Would you support expanding that in a 
meaningful way, understanding that we may have to grandfather a 
lot, but we have been discussing is really looking at safe and 
secure delivery, which you may get some pushback from Mr. 
Rolando and some of those on that side, let's recognize that, 
but we have all got to come together to figure this out. Are 
you supportive of that? Yes or no?
    Ms. Brennan. Yes. And, sir, what I--if I may, the comment I 
made earlier about new delivery and based on the delivery 
characteristics, what we would not recommend is mandatory 
conversion of existing door delivery, of which we have over 
37.5 million businesses and residents that get door delivery --
--
    Mr. Meadows. Well, so let's say if we grandfather some of 
those in and we start to work--because I have been working with 
Mr. Lynch in an area that is different than mine. If we work 
through that, you are asking me to go ahead with the prefunding 
and jump off a cliff, I am asking you, are you willing to work 
with us to make sure that we implement safe and secure delivery 
in a meaningful way?
    Ms. Brennan. Yes. And if I may also comment, management has 
demonstrated a willingness to address operational efficiencies 
and to reduce costs, and we'll continue to do that ----
    Mr. Meadows. Okay. So ----
    Ms. Brennan.--in our ----
    Mr. Meadows. Go ahead.
    Ms. Brennan. I apologize.
    Mr. Meadows. I ----
    Ms. Brennan. If I may, Ms. Rectanus mentioned that we don't 
have any major cost reductions initiatives planned. We do. We 
have more than $5 billion in cost reductions embedded into our 
5-year plan, and we continue to look at opportunity to drive 
operating efficiencies. That's our responsibility.
    Mr. Meadows. But most of the opportunities we have talked 
about actually have been with increasing service, you know, or 
trying to increase a portfolio, whether it is banking or 
anything else, and that just doesn't--I have only got a few 
seconds left, so here is my concern. We are talking about all 
of this, and we are missing out on service standards. It is the 
number one thing that I get calls about, you know, why is my 
meal not being delivered, why are we having a problem?
    And even me, you said, you know, that first-class mail that 
is your bread and butter, and this first-class mail actually is 
all postmarked in December. I got it in April. Now, that is not 
a funding problem. That is a management problem. And it is not 
just here. It is not just in my district because in Peachtree 
City we have the same thing where we mailed actually wedding 
invitations for my son that took 8 weeks to get to another 
Member of Congress.
    And so what we have to do is put this together and make 
sure that we have a service standard that doesn't just increase 
costs, and I am willing to work in a bipartisan way to do that, 
but we have to make sure that we do it in a way that serves the 
best interest of the public. And are you committed to do that?
    Ms. Brennan. I am committed. And if you would, if you'd 
give me those envelopes, I will look at that.
    Mr. Meadows. I don't want to get somebody fired but ----
    Ms. Brennan. No. No, you won't ----
    Mr. Meadows.--we just need to ----
    Ms. Brennan.--because--Congressman ----
    Mr. Meadows. But I will give them to you. Actually, I had 
about 40 different pieces of mail that came to me that had the 
same problem.
    I will yield back.
    Ms. Brennan. Thank you.
    Chairman Chaffetz. I thank the gentleman,
    Mr. Connolly. Mr. Chairman, I just want to note, now I know 
why my wedding invitation wasn't ----
    Mr. Meadows. You are always invited there, Mr. Connolly.
    Chairman Chaffetz. I now recognize the gentlewoman from 
Illinois, Ms. Kelly, for 5 minutes.
    Ms. Kelly. Thank you, Mr. Chair. I just wanted to say every 
time we have a postal hearing I text my brother because he 
works for the post office, so I ask him did he have any 
questions that he wanted me to ask you. But one thing I wanted 
to say as far as the consolidations, I am glad that you thought 
enough, even though they might be necessary to slow it down 
because service does come first, and that is some of the things 
that he has spoken about because of all the closed stations, 
the long lines, and not enough clerks in the window. So I am 
glad that you are still putting service first and taking that 
into consideration because people will go other places if they 
don't feel like they are getting good service. And we 
definitely want the post office to thrive.
    Ms. Brennan, one of the elements of the joint postal reform 
proposal put forward by the Postal Service, the postal unions, 
and certain elements of the mailing industry is the use of 
postal-specific demographic assumptions when calculating 
pension liabilities. The proposal would also require any 
surplus resulting from those calculations to be used to pay 
down the Postal Service's debt to the U.S. Treasury.
    Intuitively, it makes sense to use the demographic and 
salary growth statistics of the postal workforce when 
calculating the Postal Service's pension liabilities. What is 
it about the demographics of the postal workforce compared to 
those of the government's entire workforce that you believe 
will result in lower cost?
    Ms. Brennan. Specifically, Congresswoman, the salary wage 
growth. And we estimate over a 5-year period that to be valued 
at roughly $3.2 billion.
    Ms. Kelly. Okay. Has the Postal Service calculated how much 
in savings would result from the use of postal-specific 
demographic assumptions?
    Ms. Brennan. Roughly $3.2 billion over a 5-year period.
    Ms. Kelly. Okay. Ms. Rectanus, GAO has done a significant 
amount of work on postal pension funding issues in recent 
years. In 2014, the GAO supported the use of the most accurate 
actuarial assumptions for postal pension liability 
calculations. Do you agree with Ms. Brennan that the Postal 
Service should use postal-specific demographics when 
calculating pension liabilities?
    Ms. Rectanus. Yes, we support it because if it is the most 
accurate data, then that should be used to get a better number 
of what the liability is.
    Ms. Kelly. And do you have any views on the amount of the 
potential savings that may be available if that is used? Do you 
agree or do you have different ----
    Ms. Rectanus. We have not done the calculation so I can't--
and we haven't looked at the Postal Service's data so I can't 
comment on that.
    Ms. Kelly. Okay. Thank you. And I yield back my time.
    Chairman Chaffetz. Thank you.
    Mr. Connelly. Would the gentlelady ----
    Ms. Kelly. Yes, I will yield. Yes.
    Mr. Connelly.--yield? I thank my friend. And I want to 
thank you all for being here. And I have got to say, Postmaster 
General Brennan, you represent a breath of enormous fresh air. 
I mean, I want to say publicly how much I appreciate working 
with you. We have been able to forge a bipartisan coalition. 
Mr. Chairman, thank you for your leadership and bringing us 
together to do that.
    And I share the sentiments of my friend Mr. Lynch from 
Massachusetts and am very hopeful we are going to get postal 
reform, not everything but a big chunk of what we need to be 
addressing so thank you.
    Ms. Brennan, what does it mean for the Postal Service to 
lose the exigent rate, which expired, I think, in April, right?
    Ms. Brennan. Yes, Congressman Connelly. This year, we 
estimate that impact to be up to a billion dollars this fiscal 
year and roughly $2.1 billion going forward, worsening our 
financial situation.
    Mr. Connelly. And, Ms. Rectanus, in your testimony you 
state, ``The Postal Service's financial condition continues to 
deteriorate'' and you attribute that to ``declining mail volume 
and growing expenses at the same time,'' is that correct?
    Ms. Rectanus. Yes, that is.
    Mr. Connelly. And yet do you believe that some of the 
elements of the reform we have been talking about, freeing up 
the Postal Service to, you know, engage in some other lines of 
business that may be profitable like other postal services 
around the world do, so lifting some of those restrictions, 
lifting the burden of a unique prepayment requirement, as Mr. 
Rolando pointed out, unique to the Postal Service. No other 
Federal agency, no other private corporation in America is held 
to that standard in terms of that prepayment. And it is, you 
know, whatever it is, $5 billion plus, plus the Medicare reform 
I think we have been talking about, which I wish Mr. Farenthold 
were still here. That is not a taxpayer giveaway. Postal 
workers have paid $29 billion for a service they don't 
participate in, benefit from yet. Those things, could they turn 
around that financial description you have offered in your 
report?
    Ms. Rectanus. GAO has not taken a position on specific 
elements in that proposal. However, we have supported 
appropriate restructuring of the ----
    Mr. Connelly. Well ----
    Ms. Rectanus.--retiree health benefits ----
    Mr. Connelly.--if I may because I am running out of time, I 
am not asking you for your position; I am asking you for your 
analysis. If those things were adopted, would your numbers and 
your prognosis change?
    Ms. Rectanus. Certainly they would benefit the Postal 
Service. What we would not want to see, however is not an equal 
focus on cost reduction and right-sizing and trying to get the 
house in order so that whatever revenue is generated is 
appropriate and people understand that solutions are trying to 
be gotten in both areas.
    Mr. Connelly. If the chairman will allow the postmaster 
general to comment on that as well, and then I will be done. I 
thank the chair.
    Ms. Brennan. Thank you, Congressman Connelly. And it 
relates to the questions from Congressman Meadows. We need the 
legislative reform, a favorable resolve of the rate-setting 
process, and management actions need to continue to drive 
operational efficiencies and grow profitable revenue. All the 
above would put us on firmer financial footing, have manageable 
debt, and have the ability to invest.
    Mr. Connelly. Thank you. And thank you, Mr. Chairman.
    Chairman Chaffetz. Thank you.
    Mr. Connelly. Thank you, Ms. Kelly.
    Chairman Chaffetz. I will now recognize the gentleman from 
Georgia, Mr. Hice, for 5 minutes.
    Mr. Hice. Thank you, Mr. Chairman.
    Ms. Brennan, I think I heard this; I just want to clarify. 
How many employees at the Postal Service total?
    Ms. Brennan. We have about 498,000 career and 136,000 
flexible or non-career employees.
    Mr. Hice. Okay. What was the 7.5 million referred to twice, 
Ms. Lowrance, you and Mr. Rolando both.
    Ms. Lowrance. That is the entire mailing industry, so it 
includes private sector, as well as the Postal Service.
    Mr. Hice. Okay. So more or less, what, 550,000, 600,000? I 
didn't tally that.
    Ms. Brennan. Yes, roughly 634,000.
    Mr. Hice. Six thirty-four, okay. And yet we all understand 
we have got a declining industry as a whole because of a 
variety of factors, digital and so forth. Does the Postal 
Service have too many employees?
    Ms. Brennan. We have a requirement, our universal service 
obligation, to deliver to all 155 million delivery points, 135 
million of which are physical delivery points. The other 20 are 
post office boxes. So that requires an extensive network, and 
that network includes employees, facilities, vehicles and 
equipment ----
    Mr. Hice. I understand that, but is it top-heavy? Do we 
have too many employees?
    Ms. Brennan. No. I would say that we consistently look at 
how to rebalance and where there are opportunities. And if you 
look at the reduction in overall complement, we've reduced more 
than 168,000 employees over the last decade.
    Mr. Hice. Okay. So we have 634,000 employees, we have a 
declining business, but you don't think we have too many 
employees still?
    Ms. Brennan. The challenge, sir, is the workload content 
associated with package delivery, as an example ----
    Mr. Hice. No ----
    Ms. Brennan.--is ----
    Mr. Hice.--I understand that.
    Ms. Brennan. There's ----
    Mr. Hice. But that problem is why we have a declining 
business. The result of a declining business--what would a 
private company do? If a private company is losing money month 
after month, year after year, quarter after quarter, what would 
they do?
    Ms. Brennan. What we did, sir, in terms of rationalizing 
the network, consolidating facilities, adjusting retail hours 
at post offices to match customer demand, some of the same 
management actions that I've been recently criticized for.
    Mr. Hice. But we are still losing money. And I will go on. 
You said a few moments ago that your goal is to fill mailboxes 
and trucks. Is that your strategy to turn this thing around?
    Ms. Brennan. Our strategy is far more complex than that, 
Congressman.
    Mr. Hice. I would hope so.
    Ms. Brennan. I was trying to simplify.
    Mr. Hice. Well, but that is what you said was your goal.
    Ms. Brennan. It's--you don't want to--you can't cost-cut 
your way to prosperity. There are opportunities for us, 
certainly, to drive efficiencies. There are opportunities for 
us to look at overall operating expense, and we do that every 
day, but we also need to look at opportunity to grow. There are 
opportunities to grow. Mail still works. We delivered 154 
billion pieces of mail last year and 150 billion was mail, 4 
billion packages ----
    Mr. Hice. But you continue to lose money. That is the 
issue, and it seems rather unrealistic when you have a 
declining industry to think that somehow the goal of simply 
filling mailboxes and trucks is going to be successful in the 
long run.
    Ms. Rectanus, you mentioned earlier that the Postal Service 
has been on high risk since 2009. And you summarized the 
reason--two basic reasons: less mail and higher salaries. Do 
you see an opportunity without cutting, be it the workforce or 
whatever, for the Postal Service to turn this around?
    Ms. Rectanus. We have proposed that it's really got to be a 
balancing act between generating revenue and aligning costs. We 
do believe that there's more right-sizing that the Postal 
Service can do, and that's addressing where they have excess 
capacity but then putting that where they do need capacity, 
certainly exploring some of the workforce issues that they 
have, and they--Ms. Brennan is right. They've done a great job 
over the past several years to manage their workforce, but 
we're starting to see it creep up again in fiscal year 2015, 
and looking at the delivery mechanisms.
    Again--and you need to do that by also looking at the 
revenue, but you have to look at both of them. And, yes, part 
of it is what does the mail picture look like today and in the 
future and what type of services are going to be required, and 
how do we want to provide those services, which is what we 
would like to see through comprehensive postal reform.
    Mr. Hice. Okay. Well, let me springboard off of that and 
come back to you for my final question, Ms. Brennan. What is 
the Postal Service's long-term plan for addressing the 
declining industry?
    Ms. Brennan. Let me first, if I may, Congressman, address 
your comment earlier about the losses. The majority of the 
losses are tied to the prefunding mandate.
    In terms of our long-term plan, it is addressing 
infrastructure, how to leverage that, repurpose that to support 
the growth, address the latent capacity ----
    Mr. Hice. Support what growth?
    Ms. Brennan. Package growth, sir. We've grown our packages 
49 percent over the past 5 years. We will right-size the 
infrastructure, as we've been doing with where we need to 
consolidate with the decline in letter volume. We'll continue 
to look at every opportunity to improve operating efficiencies. 
We have a number, as I mentioned, of over $5 billion of cost 
reductions identified in our 5-year plan.
    Mr. Hice. Thank you. I think it is time for the Postal 
Service to act as private business has to act in similar 
situations of constantly losing money without relying upon the 
taxpayer. At some point we have got to change.
    Mr. Chairman, I thank you for your indulgence.
    Chairman Chaffetz. I thank the gentleman.
    I will now recognize the gentleman from California, Mr. 
Lieu, for 5 minutes.
    Mr. Lieu. Thank you, Mr. Chairman.
    Postmaster General Brennan, last October the U.S. Postal 
Inspection Service issued a release about mail theft. And it 
says that these crimes are increasing and that mail theft from 
collection boxes and customers' mailboxes is a big problem. It 
also said in most cases of mail theft from centralized mailbox 
units involved counterfeit master keys.
    So two questions for you. One is when you talk about right-
sizing, are you reducing U.S. Postal Inspection Service members 
at all, and does that have an effect on mail theft? And second, 
as you move to more and more cluster boxes, doesn't that also 
increase mail theft because you just need one master key and 
then you have access to a whole lot of mailboxes?
    Ms. Brennan. To your first question, no, we are not 
reducing. In fact, we have two classes currently and in 
training to increase the postal inspection staffing.
    And in terms of the theft, particularly as you're aware in 
your district, Congressman, we've got a postal inspection task 
force that's working with local authorities and the community 
and taking some proactive measures to address that. I'd be more 
than happy to brief you in detail given the sensitivity of 
those corrective measures.
    Mr. Lieu. Thank you. I would appreciate that.
    Ms. Brennan. Certainly.
    Mr. Lieu. Second, in terms of trying to raise revenue, what 
is your view of postal banking as a way to generate revenue and 
also serve communities that may not be served as well by banks 
or may not have a trust of private banks but may trust the post 
office?
    Ms. Brennan. Fundamentally, we're open to any new product 
and service that would generate profitable revenue. That said, 
we do provide some banking services now. We provide money 
orders, electronic money transfers, and cash treasury checks. 
We would need to look at that through a business prism. Can we 
execute effectively? Can we grow profitable revenue? And is 
this a service that is not offered in the public sector?
    Mr. Lieu. Okay. We have had a number of difficulties with 
service in my district, so the first point I want to make is 
when we contact your office, they have been enormously 
responsive and they are able to help cases. About 97 percent of 
cases get resolved. The problem is we continue to get more and 
more cases, and now it looks like it is a systemic issue in 
western L.A. County. A councilmember in west L.A., his office 
had not gotten any mail for an entire week. We just checked 
again, and even when they get mail, it is sort of spotty, so 
this past Monday and Tuesday they are not getting any mail. We 
get complaints from Santa Monica and Redondo Beach.
    In the city of Beverly Hills it got so bad that the local 
newspaper did an entire series on it. So last August, for 
example, they printed a story saying, ``residents agree, 
Beverly Hills post office fails to deliver.'' Last September, 
``post office acknowledges crisis and meeting at Congressman 
Lieu's office.'' Last December, ``Beverly Hills post office 
issues continue.'' And then this January from Beverly Hills 
Courier, ``Beverly Hills post office ends year with more 
customer woes.''
    And with the indulgence of the chair, if I could submit 
these for the record.
    Chairman Chaffetz. Without objection, so ordered.
    Mr. Lieu. Thank you.
    I would just like your commitment that you will work with 
our office to look into these issues. I am elevating it because 
you happen to be here, but also, we have tried with the local 
folks on numerous occasions. And what will solve individual 
cases, systemically, they just keep on coming in. I think there 
needs to be a systemic fix.
    Ms. Brennan. Congressman, absolutely. And if I may just 
address Beverly Hills, which I am familiar with specifically, 
we did make some adjustments in transportation and staffing to 
improve the performance out of that particular facility, and 
I'll be glad to talk to you and follow upon the other issues.
    Mr. Lieu. All right. Thank you. And then my last point, one 
of my colleagues said that the Postal Service should be run 
more like a business. You don't actually set the rates for your 
products, correct?
    Ms. Brennan. Products that generate roughly 76 percent of 
our revenue are capped at household inflation.
    Mr. Lieu. Right. And in fact, if you actually set your 
products at market rates, you would be getting a lot more 
revenue. Isn't that correct? Potentially?
    Ms. Brennan. We have an opportunity in 2017 with the review 
by the PRC of the rate-making process to look at the present 
price cap, is it meeting its objective as outlined in PAEA, 
which was to ensure that revenues cover our expenses and to 
ensure the financial stability of the Postal Service. We think 
there's opportunity there. We think a rigid price cap is 
fundamentally unsuited in an environment where you have 
declining workload and fixed or growing infrastructure costs.
    Mr. Lieu. My view is if people want the Postal Service to 
run like a business, they need to give it tools to make it run 
like a business. Otherwise, they should stop saying that. I 
yield back.
    Chairman Chaffetz. I thank the gentleman.
    I will now recognize the gentleman from North Carolina, Mr. 
Walker, for 5 minutes.
    Mr. Walker. Thank you, Mr. Chairman. Thank you, panel, for 
being here today.
    A lot of this to me is about the perception's trust in the 
post office as a whole. And just going back and looking at the 
numbers over the last few years, 2015, $5.1 billion lost; 2014, 
$5.5 billion; '13, $5 billion; 2012, $15.9 billion; 2011, $5.1 
billion; 2010, $8.5 billion. At some point the people are 
saying what is going on here? So this is just a perception. 
This is the reality of a major trust issue. I have 5 minutes to 
speak. In those 5 minutes, the approximate amount that the post 
office will lose is $47,564. That is a huge issue.
    And I have heard today from some of the witnesses that we 
are working hard or some of the members, the colleagues, that 
they are working hard to try to do things better, but I have a 
couple specific questions in regards to this rate increase that 
we are beseeching Congress on. If you did receive this rate 
increase, can you tell me about where this extra money would be 
reinvested, General Brennan?
    Ms. Brennan. In terms of if we were granted ----
    Mr. Walker. If you were granted a rate increase, where 
would that money go? Where would ----
    Ms. Brennan. Well, one ----
    Mr. Walker.--you invest it?
    Ms. Brennan. First of all, we would look to pay down debt 
if we were to--able to address these long-term liabilities. And 
the net losses that you cited, Congressman, are in large part 
due to the prefunding requirement. The past 3 years we have had 
controllable income, which is revenue less expense, that which 
was--is within our control.
    Mr. Walker. Would you agree with this statement that the 
Postal Service could run out of money between 6 months and a 
year at the most?
    Ms. Brennan. What we will do, our fiduciary responsibility 
would be to make decisions and prioritize which payments to 
make to ensure that we would be able to continue to deliver the 
mail and pay our employees and our suppliers.
    Mr. Walker. My concern with that statement is that wasn't a 
recent statement. That statement was from over 3 years ago, and 
we have seen continuing beseech of Congress as far as more and 
more funding, this isn't working out.
    I want to hone in today on something, though, specifically 
about packages versus the mail. And I want to make sure that I 
am clear on this, as we have done some research on this lately. 
The increases that you are requesting, would they be used to 
subsidize the package area of the post office business or would 
it be to increase the mail delivery? Can you expound on that a 
little bit today?
    Ms. Brennan. Yes. In terms of the cross subsidization 
issue, the PRC annually reviews to ensure that there is no 
cross subsidization, that our competitive products cover their 
cost, and also that they contribute a minimum of 5.5 percent to 
institutional costs. The PRC has found annually since the 
inception of PAEA that that is in fact happening.
    Mr. Walker. Well, you have stated that Postal Service has 
made consolidations to respond to the decline in the mail, but 
you have also stated that you are investing in package 
delivery. I believe you just said that just a few minutes 
earlier. And that as a result of those investments, package 
delivery was not slowed by the consolidations. But Title 39, 
section 101, subsection (e) states that ``in determining all 
policies for postal services, the Postal Service shall give the 
highest consideration to the requirement for the most 
expeditious collection, transportation, and delivery of 
important letter mail.'' Do you think that the Postal Service 
is following both the spirit and the letter of this law given 
your current actions?
    Ms. Brennan. I do believe we're following the spirit of 
that law.
    Mr. Walker. Well, if that is the case, then, the annual 
compliance report suggests that the post office, the Postal 
Service is routinely prioritizing competitive products over 
market-dominant products. Do you disagree with that?
    Ms. Brennan. I'd have to see that, sir, in terms of what 
you're actually referring to.
    Mr. Walker. Well, I believe it is your annual compliance 
report that once again ----
    Ms. Brennan. That says ----
    Mr. Walker.--suggests that the Postal Service is routinely 
prioritizing competitive products over market-dominant 
products. Can you expound on that?
    Ms. Brennan. No, I believe that may be the PRC's comment 
that it suggests--I'm not sure what you're referencing there. 
If I can talk about the annual compliance ----
    Mr. Walker. Sure.
    Ms. Brennan.--report and annual compliance determination, 
we're very transparent about performance in terms of transit 
time performance, in terms of volume growth, and in terms of 
investments within the organization.
    Mr. Walker. Thank you, Mr. Chairman. I appreciate the time. 
Thank you, General Brennan, and I will yield back.
    Chairman Chaffetz. Thank you. I now recognize the gentleman 
from Pennsylvania, Mr. Boyle, for 5 minutes.
    Mr. Boyle. Yes, thank you, Mr. Chairman.
    I was struck by the fact that--I don't know when this was; 
I know it was recent--that Pew Research did a poll of 
favorability ratings of different, various government agencies, 
and the post office came out the highest at 84 percent, which I 
can't remember where Congress was, but I think Postal Service 
was slightly higher than where Congress ended up, significantly 
lower than that. That is made all the more remarkable by the 
fact that you have had a decade where there are 200,000 fewer 
employees than there were just a decade ago.
    My question, though, is regarding the rather unique 
requirement the Postal Service lives under where essentially 
you have to prepay 75 years of obligations within a 10-year 
window. Can you talk about the effect that that has had on the 
balance sheet? And do you know of any other government agency 
or for that matter private sector company that has to live 
under such a unique requirement? I will leave that to anyone 
who wants to grab in. If you would like to go ahead.
    Ms. Brennan. I'll be happy to, Congressman. In terms of the 
prefunding requirement, my understanding is it's--would be 
unique to the Postal Service. There is some responsibility with 
the Department of Defense in terms of prefunding. My 
understanding is that their amortization payments are over a 
longer period of time, plus they are appropriated and 
integrated with Medicare.
    Mr. Boyle. If anyone else would like to add something?
    Mr. Taub. Yes, Congressman, this was enacted as part of the 
2006 law in a bipartisan way with the best of intentions. Of 
course, the next year, our economy went into the deepest 
recession since the Great Depression, and with that the mail 
volume accelerated and caused these challenges. The postmaster 
general is correct.
    I would point out when the 2006 law was enacted, there was 
zero dollars prefunded for future retiree health benefits. 
Today, as we speak, there's more than $50 billion that has been 
prefunded. There's still an outstanding obligation of roughly 
half that amount, but we have gone from nothing prefunded to 
$50 billion today.
    Mr. Boyle. If you would like to add something.
    Mr. Rolando. Yes, I would. Thanks. Yes, this is unique to 
the Postal Service, but I'd like to point out that the 
proposals that the consensus group has put together, we would 
not only fully fund the retiree health fund, we would be 
overfunded if you took all the components that something else--
something that nobody else is able to do.
    Mr. Boyle. Thank you. I would just add that my great 
concern is, particularly as we have this conversation of going 
from 6-day to 5-day mail, that we continue to be in this 
negative cycle of cutbacks and closures that is really a self-
fulfilling prophecy. That can be very destructive to 
communities and neighborhoods. I represent a largely suburban 
and urban residential district. When we went through even just 
a rumored closing of our post office in the 19116 zip code, 
that set off a firestorm. And maybe not for people my age but 
for those who are of an older age, having that local post 
office there is an important part of the community.
    So as we look at these decisions, and certainly dollars and 
cents plays a major role, I think we also have to put a value 
on what the local post office means to the community. And if 
that is the case in a neighborhood and in a suburban area, I 
think it is only more so the case in a rural area, which tends 
to be more remote.
    Thank you. I yield back.
    Mr. Meadows. If the gentleman would yield for just a 
second?
    Mr. Boyle. Sure.
    Mr. Meadows. I want to make sure it is clear. We are not 
talking about 5-day delivery. I mean, I don't want that to be 
the headline that comes out of this hearing because your point 
is well-taken. So whether it is in a suburban area or a very 
rural area, I don't want the phone calls to start coming in.
    Mr. Boyle. Thank you, Mr. Meadows.
    Mr. Meadows. I agree with Mr. Lynch ----
    Mr. Boyle. Yes. Okay. Thank you ----
    Mr. Meadows.--and so I thank ----
    Mr. Boyle. And if I could ----
    Mr. Lynch. Would the gentleman ----
    Mr. Boyle. Actually, if I could reclaim my time ----
    Mr. Lynch. Sure.
    Mr. Boyle.--and then will yield briefly to Mr. Lynch, I 
would say that while that might not be the point of today, 
there have been numerous proposals about going to 5 days, and 
it has me very concerned and a number of our constituents for 
the reasons you described.
    I will yield now to Mr. Lynch.
    Mr. Lynch. Thank you. Yes. Very briefly, Mr. Chairman, and 
I thank the gentleman for yielding.
    I know there was some implications here that the postal 
workers were not doing their part or that, you know, costs are 
creeping up and things like that. I just want to read you 
something. In 2011, the American Postal Workers Union, which is 
the largest union, and the Postal Service reached a voluntary 
agreement that resulted in a sea change of significant and far-
reaching concessions. The 2002-2015 agreement contained wage 
freezes for year 1, wage freeze for year 2, and that is within 
a 5-year contract, followed by a 1 percent raise, a 1.5 percent 
raise, and a 1 percent raise cost of living, and it was 
deferred to the third and fourth year.
    So extremely, extremely, extremely modest increase on the 
part of the employees, including 2 years of a wage freeze in a 
5-year contract. So, you know, just people should bear that in 
mind. I yield back. Thank you.
    Chairman Chaffetz. Thank you. I thank the gentleman.
    I will now recognize the gentleman from Alabama, Mr. 
Palmer.
    Mr. Palmer. Thank you, Mr. Chairman. And for the record I 
want to say that my wife and I love our postman. He does a 
great job.
    Ms. Lowrance, it was mentioned earlier about some of the 
things that are being done in the private sector. I would like 
to ask you what cost-cutting initiatives has industry had to 
implement in the wake of the evolving postal world as we know 
it?
    Ms. Lowrance. So we've seen a great consolidation in our 
industry. We have seen some of the larger print houses kind of 
eat up all the little ones to get rid of access capacity. We've 
seen plant closures and layoffs and those sorts of things in 
order to kind of compensate for the decline in mail volume 
that's seen across the industry.
    Mr. Palmer. If you had to guess, what cost-cutting efforts 
would the Postal Service have to take or be taking if it were a 
private company?
    Ms. Lowrance. Well, I think that the Postal Service has 
shown an ability to cut costs in the extreme conditions that 
they've been functioning under. I mean, I'm not really at 
liberty to say that layoffs should happen or anything should 
happen to the common employee of the Postal Service. I think 
that there are great lengths of additional price signals and 
cost efficiencies that they could gain through working with the 
industry. I think the industry has done more and more in the 
form of work share to take work hours out of, you know, the 
postal facilities and continue to rely on the industry to do 
things that they do very well.
    Mr. Palmer. I want to bring up a couple of things that have 
come to my attention that I think might be helpful. For 
instance, there is an economic analysis from a group called 
Keybridge you might be familiar with Ms. Brennan that says the 
Postal Service could save over $2 billion on the delivery 
vehicle procurement that you are planning, which is expected to 
cost over $6 billion. How do you respond to that?
    Ms. Brennan. Congressman, I'd have to read that report. In 
terms of the actual cost, we have some estimates about the 
cost, but a number of factors will determine the cost of the 
vehicle fleet replacement.
    Mr. Palmer. You are correct in that. There are a number of 
factors, and that is one of the reasons why your costs are so 
high because you are buying vehicles that you plan to keep in 
place for a number of years and your fuel costs, your 
maintenance costs are exorbitant compared to what other private 
companies would be doing. And I highly recommend that you take 
a look at that Keybridge analysis. And if you have trouble 
finding it, I think if you will let the committee know, we can 
find that for you, get that for you.
    There is also an issue, Ms. Brennan, that in November the 
inspector general put out their semiannual report and found 
that there was $1.8 billion in funds that could be put to 
better use and $455 million in questionable costs from April to 
September of 2015 alone. I would like to know how you responded 
to the IG's report.
    Ms. Brennan. Well, Congressman, that's a compilation of 
literally probably hundreds of audits and/or studies, so I 
would need to look at them in separation or in isolation to 
address that. Currently, the OIG does valuable work for us and 
identifies opportunity. Oftentimes, it is work that we are 
currently undertaking and working through, so I would certainly 
acknowledge that there is opportunity for process improvement 
and additional efficiencies that will help drive down costs.
    Mr. Palmer. Well, considering the environment that you are 
in right now and, you know, these two combined would be 
somewhere in the range of $2.3 billion and that you could save 
another $2 billion in your vehicle procurement, you know, it 
gets you a little over $4 billion, I think that ought to be a 
couple of things at the top of your list for consideration.
    And then I am not for layoffs either, but I also am 
concerned about the public perception of the post office and, 
again, for the record, we think the world of our postmen. But 
there was a survey done by Accenture, evaluated 24 government-
operated postal organizations and two private companies that 
together deliver 75 percent of the world's mail and found that 
the post office ranked last as the lowest-performing postal 
agency or commercial operator in the world. And my concern is 
it is not just with the cost-cutting but the public perception 
of what the post office does and yet you add the poor 
performance, and I think because of the labor contract you are 
under, the inability to remove poor-performing workers and then 
these losses, the post office has got to really address these 
issues to improve its image and to make it a viable industry.
    Thank you, Mr. Chairman. I yield back.
    Chairman Chaffetz. I thank the gentleman.
    I will now recognize the gentlewoman from Michigan, Mrs. 
Lawrence, for 5 minutes.
    Mrs. Lawrence. Thank you.
    It is an honor to be here today, and thank you, Chairman 
and the ranking member, for calling this hearing.
    I wanted to be clear for the record that I had a 30-year 
career with the Postal Service starting as a letter carrier, so 
I have a lot of respect for Mr. Rolando.
    I also want to say no other organization in America is 
compelled to prefund future retirement benefits at the level 
that is done by the Postal Service. It is clear that pushing a 
public agenda which operates with no taxpayer funds--so there 
was some allusion earlier that we are using taxpayer dollars. 
The revenue that we generate from the sale of our products is 
what we fund and operate our business with. And so often it 
seems to get confusing in debate when we start talking about 
the Postal Service as if we are using taxpayer dollars. So it 
operates with no taxpayer funds to the brink of financial 
crisis by forcing it to assume the financial burden assumed by 
no other agency or company is the height of the financial 
irresponsibility of Congress, and Congress should fix this 
problem that we created.
    Today, as we are having this debate about the future of the 
Postal Service--and yes, there are some issues that we need to 
work with. And, Ms. Brennan, I have been very clear with you in 
private conversations, and, you know, trusting you to continue 
to keep delivery standards as one of the primary objectives, 
and as I look here with our postal customers and mailers who 
depend on us.
    But one of the things I wanted to talk about is the 
downsizing commitment that has been made by the Postal Service, 
reducing your workforce by 200,000 careers since 2006, reducing 
your work hours by 331 million, changing operation hours. Can 
you, Ms. Brennan--and I would like Mr. Rolando to weigh in on 
this as well, and my mailers if you have time--how has this 
consolidation and reduction of workforce aligned with the phase 
1 and phase 2 of the Network Rationalization plan or 
initiative?
    Ms. Brennan. Yes, if I may start, Congresswoman, we 
completed phase 1. Phase 2 we completed 17 of the projected 82 
consolidations. So we have additional consolidations that we'll 
revisit. We'll redo the economic analysis, given that that is 
now 5 years old, and would make the appropriate notifications 
before we resume those consolidations.
    Mrs. Lawrence. Mr. Rolando, how is it affecting the day-to-
day ----
    Mr. Rolando. Well, first, I'd just like to say keep in mind 
a lot of this is in reaction to the prefunding itself. I keep 
hearing over and over, what would you do if you were a private 
company, and if we were a private company, we wouldn't have $50 
billion of resources tied up in a fund for 75 years into the 
future. It would certainly affect the standards, it would 
affect service, it would affect rates, it would affect 
vehicles, it would affect infrastructure, it would affect all 
kinds of things.
    So I think the takeaway from all of this is we're not 
allowed in that way to act like a private company. We do have 
to prefund. There's no appetite in Congress for us not to 
prefund, so that's why we've put together this coalition to 
find a way to satisfy that mandate. We've come up with a way to 
do it. And moving on from then, then we can act as a private 
company or as a Postal Service in a rational and efficient 
manner moving forward.
    Mrs. Lawrence. And I just want to add, it is about being 
competitive. We are in a very competitive market, the Postal 
Service, and if you truly want this company to be efficient and 
competitive, then we as Congress must recognize how we are 
tying the hands of the Postal Service.
    And so I say to my colleagues very passionately that we 
absolutely want to the Postal Service, which is covered--you 
know, when I was employed, I had to take an oath that I would 
protect the mail and make sure that it is protected from 
foreign agencies and how important and special it was to be an 
agent of the Postal Service. But then we tie their hands and 
then we criticize them.
    And one of the things that I want to talk about is the 
future of these packages. We know that drones in other 
industries are coming, but we consistently tie our hands and we 
see the other industries moving forward to embrace the ability 
to be competitive, to reduce costs, but we in the Postal 
Service--we, I am saying we because I am a retiree--those in 
the Postal Service continuously fight against these 
restrictions, so we as Congress must step up and take ownership 
of what we have created. And we have amazing opportunity now to 
remove some of those barriers as we hold the Postal Service 
accountable for filling their role of delivery.
    And I am over, so thank you.
    Mr. Meadows. [Presiding] I thank the gentlewoman.
    The chair recognizes the gentleman from Missouri, Mr. Clay, 
for 5 minutes.
    Mr. Clay. Thank you, Mr. Chairman.
    And let me start with Ms. Rectanus. Do you know of any 
other government agency or private sector company that has to 
fully prefund the health care costs of its retirees?
    Ms. Rectanus. The issue you're asking about is whether 
anybody's quite like the Postal Service, and the issue is they 
are a unique organization that were designed to be a Federal 
entity, an independent agency within the Federal Government. 
And so they are designed to be self-sustaining. So that's why 
they are in a different situation than other organizations.
    Mr. Clay. But the 2006 Postal Accountability Act imposed 
that requirement on the Postal Service, correct?
    Ms. Rectanus. That's correct.
    Mr. Clay. How much money has the Postal Service been 
required to pay in, and has it been able to make all of these 
payments?
    Ms. Rectanus. To date, the Postal Service has paid about 
$18 billion on top of the original money that was put in 
originally. They have missed $28 billion in payments as far as 
the retiree health benefits program ----
    Mr. Clay. And so $28 billion is the value of the unfunded 
liability?
    Ms. Rectanus. No, sir. That's the amount of money the 
Postal Service has not put in. The amount of money that is 
unfunded is about $54 billion.
    Mr. Clay. I see. Ms. Brennan, I understand that 86 percent 
of the losses that the Postal Service accumulated between the 
years '07 and '11 are attributable to this prefunding 
requirement. Is that right?
    Ms. Brennan. That's correct, Congressman Clay.
    Mr. Clay. Do you believe that the prefunding mandate is 
unfair to the Postal Service, and do you agree with Mr. 
Rolando?
    Ms. Brennan. I agree with Mr.--President Rolando's 
comments. I would say that it's responsible to prefund. The 
challenge for us in the recent past was the accelerated payment 
schedule. Going forward, though, the challenge for us is to 
ensure Medicare integration.
    Mr. Clay. Is modifying this prefunding requirement an 
essential part of the joint reform proposal to which the Postal 
Service, postal unions, and certain mailers have agreed?
    Ms. Brennan. Yes, Congressman. Given that the prefunding 
requirement ends this fall, the challenge now is to address the 
larger issue of an unaffordable system for the Postal Service 
and our retirees.
    Mr. Clay. And how much money do you think this would save 
the Postal Service?
    Ms. Brennan. Fully integrating with Medicare for all of our 
retirees 65 and older would save us over $17.5 billion over the 
next 5 years.
    Mr. Clay. I see. Is it true that the Postal Service's 
retiree health care fund is already 50 percent funded?
    Ms. Brennan. That's correct, Congressman. We're better 
situated than most.
    Mr. Clay. And do you know what the current balance in that 
fund is?
    Ms. Brennan. The current assets are over $50 billion in the 
RHB fund.
    Mr. Clay. Wow. The prefunding requirement may have made 
sense back in '06, but it no longer makes sense to have the 
Postal Service comply with a requirement that would force it 
into insolvency.
    And just one question for Mr. Rolando. Give me your overall 
sense of how the morale is among Postal Service workers today.
    Mr. Rolando. The overall morale, we deal really in four 
different avenues if you will with the Postal Service depending 
on the level of engagement of each of the probably employees, 
organizations. We deal in a collective bargaining arena whereby 
obviously we're addressing things that are going to affect 
morale in terms of pay and benefits and working conditions.
    We work together in an arena of growing the business and 
making sure that service is what it needs to be so that we can 
face our customers every day. Obviously, that can be rewarding 
and frustrating at the same time.
    We deal together in a legislative arena, as we're doing 
today, to make sure that the Postal Service is here to serve 
the American people for many years to come.
    And then we deal in another arena that I will call the 
culture of the Postal Service. And I think that's an important 
thing that's been embedded for a long time in the way it exists 
that we certainly have the commitment from leadership in the 
Postal Service and the unions to address that. And all those 
things contribute to the morale of postal workers all over the 
country in different ways.
    Mr. Clay. Thank you for that response.
    May I yield of the rest of my time to the gentleman from 
Massachusetts?
    Mr. Lynch. Just quickly, Mr. Chairman. Thank you.
    I just want to push back a little bit on a suggestion that 
was made earlier by one of my brothers across the aisle about 
the comparative value or the comparative performance of the 
United states postal system versus some of the international 
competition. There is a great report out by Oxford University. 
It is Oxford Strategic Consulting, and they measured the 
efficiency of the postal services in the top 20 countries, in 
the G-20, and the United States Postal Service came out the 
best, and remarkably, it is the only system in that top group 
that does not receive taxpayer funding. So ours is doing better 
than all the rest, contrary to the statement made earlier.
    And remarkably, the United States Postal Service scores the 
highest for efficiency even as it delivers far more letters per 
employee, 268,894 in the last study period, than any other 
service in the G-20. Japan came in second, and it is less than 
one-third of that.
    And also we have universal service, which a lot of these 
other countries don't have, so we deliver to every single 
location. And the only criticisms that the British study had 
was that, unlike in Siberia where their post offices actually 
sell groceries, ours do not. But we have grocery stores that do 
that.
    But I just want to push on--we came out the best in the 
study. It was a very credible study, and ----
    Chairman Chaffetz. I thank the ----
    Mr. Lynch.--it was reported by CNN. I would like to enter 
this as part of the record.
    Chairman Chaffetz. Without objection, so ordered.
    Mr. Lynch. Thank you.
    Chairman Chaffetz. I thank the gentleman. His time is 
expired.
    I will now recognize the gentleman from Wisconsin, Mr. 
Grothman, for 5 minutes.
    Mr. Grothman. Thank you much.
    Chairman Taub, one of the objectives of the current system 
and any new system that comes out of the rate review is to make 
sure we have high-quality service standards. And right now, 
there is some indication that we are struggling in that regard. 
If the Postal Service continues to have problems in that area, 
what action do you think the Commission will take?
    Mr. Taub. Congressman, the Commission by law has what's 
called the annual compliance determination where annually we 
look to ensure that rates and fees that were in effect in the 
last year were in compliance, as well as service standards were 
met. We just issued our most recent one just about a month-and-
a-half ago, and we did find that service standards indeed 
weren't met. All the first-class mail did not meet their 
targets, both parts of periodicals mail, most of standard mail.
    We directed the Postal Service to come back in 120 days 
with a comprehensive plan particularly on the--what's called 
flats, the periodicals and the standard and the first-class 
flats, a 90-day report on first-class letters and cards. So 
once we get that back, we'll assess next steps. But it was a 
very directed study, did bring attention, which has been a 
trend that unfortunately hasn't been trending in the right 
direction.
    So that's why this year we took, shall we say, a little bit 
more of an aggressive stance to ask the Postal Service to come 
in with a more comprehensive focus as to what are the pain 
points, what are the pinch points, how do we get past this 
because service, as the postmaster general said, is the basic 
standard that has to be met.
    Mr. Grothman. Okay. I have a question for Ms. Brennan here. 
You know, we talked a lot about how the volume of mail has 
dropped over the last 10 years from 213 billion to 154 billion. 
And we use 2006 as the base year. But do you know what it was 
like 10 years before or 20 years before that?
    Ms. Brennan. Off the top of my head, I don't, Congressman. 
I'll get that information for you.
    Mr. Grothman. Was it going up? I mean, the point I am 
trying to make is it ----
    Ms. Brennan. It was growing, sir, yes.
    Mr. Grothman. So it might have been 154 billion in 1986 or 
1990? Two thousand and six was the high point in terms of total 
volume in the system.
    Mr. Grothman. So what I am getting at here is I wonder if 
you are creating kind of an artificial cause for a problem by 
grabbing the higher at 213 and say we are at 154 so of course 
we are going to have a crisis? Maybe we were at 154 in 1980 and 
you weren't having a problem. You know what I am saying?
    Ms. Brennan. I understand your point. I ----
    Mr. Grothman. But you don't know the answer?
    Ms. Brennan. I would tell you that it's not artificial, the 
challenges that we face.
    Mr. Grothman. Okay. One of the biggest capital investments 
you have--and we had a hearing on this before--is replacing the 
aging vehicles. What is the current status of that situation?
    Ms. Brennan. Congressman, we're currently in the technical 
review phase for the prototype vehicles. The plan is that we 
will determine one or more suppliers with multiple vehicle 
types that will test over roughly an 18-month period different 
topographies, different climates, and that will help inform our 
decisions as we move to the production timeline.
    Mr. Grothman. Okay. Last time you guys were in here on this 
topic you said you were going to buy 120,000 vehicles. Is that 
still the plan?
    Ms. Brennan. That would be the upper bound in terms of 
replacement, and clearly, given our financial situation and 
certainly the suppliers' capability, we would be looking to 
purchase and deploy roughly 20 to 25,000 year.
    Mr. Grothman. Okay. So you are going to try to spread it 
out maybe ----
    Ms. Brennan. Correct, multiple years ----
    Mr. Grothman.--over 6 years ----
    Ms. Brennan.--Congressman, yes.
    Mr. Grothman.--5 or 6 years. Okay. Next question. What is 
the pay if I go to work for the post office, start out either 
deliveryman, one of the guys and/or gals in the office? What is 
the starting pay for that?
    Ms. Brennan. I would tell you the average work hour rate 
that I have off the top of my head is $41.
    Mr. Grothman. Pardon?
    Ms. Brennan. Average work hour rate, fully loaded, $41. If 
it was a non-career employee, roughly $15 an hour.
    Mr. Grothman. Okay. So if I get a job--and I know you have 
got to work part-time in the first place. If I get a job as--I 
don't know that you start out as a mailman or not, but what do 
I expect starting as far as my pay?
    Ms. Brennan. It would depend on the craft. If you were a 
letter carrier, roughly $15 an hour for a supplemental non-
career employee.
    Mr. Grothman. How about a career employee?
    Ms. Brennan. It would depend again on if you were new, 
roughly probably 20, $25 an hour. I'll get you the exact, 
Congressman.
    Mr. Grothman. Twenty-five dollars an hour, plus--do those 
people get overtime? Do you have overtime?
    Ms. Brennan. Yes, absolutely. More than 8 hours in a day or 
40 hours in a week, consistent with the FLSA rules.
    Mr. Grothman. Okay. And is that common?
    Ms. Brennan. Overtime can be in certain locales. It's 
seasonal. It depends on employee availability, mail volume, and 
the like.
    Mr. Grothman. What's your average mailman make right now?
    Ms. Brennan. Average salary?
    Mr. Grothman. Yes.
    Ms. Brennan. Again, let me--I'll provide that for the 
record.
    Mr. Grothman. Okay. My time is up. I will yield the 
remainder of my time.
    Chairman Chaffetz. Wow, thank you, impressive. Let that be 
a lesson to all of us that are still sitting here.
    We will give 6 minutes to the gentlewoman from New Mexico, 
Ms. Lujan Grisham.
    Ms. Lujan Grisham. Thank you, Mr. Chairman. I really 
appreciate that.
    I am going to change up what I was going to do a little bit 
because I really appreciate the comments that my colleague Mr. 
Lynch made, although I don't need that report. If you want to 
see the efficiencies of the post office, go visit and do a 
ride-along with a letter carrier, and you will have no doubt 
that it is one of the most efficient systems in the world. And 
so thank you very much for that honor. And I plan to do more of 
that, particularly in the area that another one of my 
colleagues as already mentioned, Mrs. Lawrence.
    But in this effort, because of budgetary issues, that we 
were consolidating, and, Ms. Brennan, I heard that that is on 
hold. But given the fact that that has really hurt rural and 
frontier areas, disabled and senior population who are 
traveling distances to get prescription drugs, I am very happy 
to hear that that is on hold.
    But in addition to that and the numbers that have already 
been talked about, 200,000 employees, more than 360 facilities 
consolidated, there is now a 2011--so it is a little bit 
dated--but that GAO report says that, look, when you reduce the 
level of your services, you are actually hurting your revenue 
stream. So it is counterproductive.
    And as you look at these issues, I would love it if you 
would give us further information in writing to this committee 
about your efforts in modernizing services and addressing these 
issues given your, I think, unfair mandates, that there is a 
healthy balance and we want to make sure in fact that we are 
building a revenue stream and at the same time continue to take 
appropriate actions to protect the populations who need the 
Postal Service in a way that I think is different than the 
average person receiving mail. So if you would do that, I would 
appreciate it.
    Ms. Brennan. Yes.
    Ms. Lujan Grisham. And thanks for that update.
    The second thing that I want to talk about that is, I 
think, a bit may be different than what my colleagues have 
addressed, but in my community, unfortunately, in my district, 
in my State we are seeing a high number of vandalism and mail 
theft. I want to thank you for your work, particularly in 
Albuquerque, but I am concerned that with lack of personnel we 
have a backlog in those investigations. You don't get those 
investigations, we don't deal with the perpetrators. If we 
don't deal with the perpetrators, soon we have this--we are on 
a merry-go-round in this situation as well so that it continues 
to occur at much higher rates than around the country.
    And I will tell you that given, you know, our poverty 
issues and our other public health issues, which I will address 
later today in terms of substance abuse, it is a significant 
problem. And so it also creates safety issues for folks who are 
not dealing with this appropriately. Because of those backlogs 
and investigatory issues, we are not replacing those damaged 
mailboxes.
    And I would love for you to give me a sense about what you 
can do differently or if you have had any thoughts or what do 
you need from Congress to make sure that you can address these 
what I am going to call hotspots if you will so that we can do 
something about it.
    Ms. Brennan. Yes, thank you, Congresswoman. In terms of in 
Albuquerque and the effort we have again with the Postal 
Inspection Service partnering with local law enforcement and 
community members, we've got an antitheft prevention type 
campaign. I'll be happy to come up and brief you in more detail 
because it is important to us.
    And as we deploy centralized boxes, we need to ensure that 
they are secure and that we can minimize any potential theft 
there. But I'll be happy to come up and give you more 
specifics. Given the sensitivity ----
    Ms. Lujan Grisham. And I would like you to really--and I am 
happy to do that, but I really want you to think about and talk 
about if I have got more time--although I am happy to give it 
back to the chairman because he is so good to me, and I meant 
that genuinely--that I think it is important to think about it 
in a policy mechanism because the truth is--and again, in my 
community, I love my community and I love my State and I love 
my district, but we have real challenges.
    You know, I have got a police force that is under consent 
decree that also has one of the lowest staffing in the country 
and is in real trouble in terms of recruitment and staffing. So 
leveraging there is not leveraging.
    And the reality is is that we are not keeping up and we 
have a real public safety issue, and we have got a confidence 
issue. And it needs to be addressed, so what else can we be 
doing? And you ought to take into account all those kinds of 
circumstances. So the reality is, because those boxes are still 
damaged and we still have a problem, people don't have access 
to their mail.
    Ms. Brennan. We need to correct that, whether it's holding 
mail at the post office or looking at other ways to affect 
delivery. We don't want disruption in service.
    Ms. Lujan Grisham. And it is recognizable when you see all 
these damaged boxes in my community. It is a huge problem.
    Mr. Chairman, I yield back the rest of my time.
    Chairman Chaffetz. Thank you. I thank the gentlewoman and I 
appreciate it.
    I have some comments and questions, and then Mr. Lynch, and 
then we will wrap up.
    Mr. Taub, give me your perspective on the PRC. We are 
looking at a reform package. How would you reform or adjust 
what the PRC does or doesn't do? What reforms are you looking 
for?
    Mr. Taub. Mr. Chairman, I think the most important thing, 
of course, is the financial balance sheet. That's the house 
that's on fire that has to be dealt with.
    In terms of the Postal Regulatory Commission, attached to 
my testimony is a study that mandated by law at least every 5 
years the Commission looks at the entire Postal Accountability 
Act of 2006, as well as the whole law, and offers 
recommendations for changes to the President and Congress. We 
did that in 2011. We're in the midst of doing that report right 
now. The 2011 report did suggest a variety of possible 
opportunities where the Commission ----
    Chairman Chaffetz. Pardon me, but when do you anticipate 
that will be complete?
    Mr. Taub. We should have that complete by the end of the 
year. My hope is that this would be delivered to Congress ----
    Chairman Chaffetz. Can you have it by the end of May?
    Mr. Taub. I wish we could. We just issued a few weeks ago a 
call for public input and comment on that, a baker's dozen of 
issues. We asked the public to input by June 14. So when the 
public gives us the input, then we have to put that together. 
So we will strive to ----
    Chairman Chaffetz. Any preliminary suggestions?
    Ms. Brennan. Yes ----
    Chairman Chaffetz. As the chairman of this committee, let 
me give you an outline of where we are headed with this. We do 
anticipate introducing a discussion draft of a bill soon. I 
anticipate that that will be available for perhaps 2 weeks 
unless there is some major hiccup, and then the intention is to 
introduce a bill, mark it up.
    We are actively trying to address the prefunding issue. We 
are obviously, as we have heard from across the whole spectrum 
of the board, trying to deal with the Medicare portion of that. 
It is amazing that, you know, $29 billion has been paid in 
since 1983, and that has to be adjusted.
    If there are structural adjustments or suggestions or ideas 
that any of you have, we need to have those now. We have been 
meeting and hearing and listening and now we are having a 
formal hearing, but we need those as soon as possible.
    From the GAO's perspective, I want to go to the Board of 
Governors. And it is a little unfair to put any of you on the 
spot but the GAO, you know, we can put you on the spot. How 
many Board of Governors are there?
    Ms. Rectanus. At this point there is--well, there's one 
Board of ----
    Chairman Chaffetz. Out of?
    Ms. Rectanus. Nine.
    Chairman Chaffetz. That is the right answer. There is one 
out of nine. Quite frankly, I can't figure out what in the 
world the Board of Governors does. It is almost never fully 
staffed. One of the things that we are looking at doing is 
fusing the Board of Governors and the PRC into one entity. If 
somebody has a problem or a challenge with that or has a 
different suggestion than that, let us know, but to have two 
separate groups, one of which is never fully staffed and 
literally has one person, they don't have a quorum, they can't 
operate. And yet nobody seems to mind. I don't get any 
complaints.
    So that is one thing that I am looking at that I am just 
saying to the world if you have a suggestion on that, let us --
--
    Mr. Taub. Mr. Chairman?
    Chairman Chaffetz. Yes?
    Mr. Taub. Just to make a personal observation from having 
been involved in this for so long, the current structure of the 
statute sets the Commission up as a regulator, not the 
operator, the Postal Service. Nineteen seventy when the old 
Post Office Department was abolished, the current governors and 
board was created to exercise the power of the Postal Service 
and represent the public interest generally.
    I would simply observe that, to the extent they are 
together, making sure thinking through these issues of 
regulator versus operator, but beyond that observation ----
    Chairman Chaffetz. I still see a role of Congress, I still 
see the role of the postmaster, and I still see the role of the 
PRC, but this extra layer does not make a lot of sense to me. 
Postmaster General, do you have a comment?
    Ms. Brennan. If I may ----
    Chairman Chaffetz. Yes.
    Ms. Brennan.--Mr. Chairman, I appreciate your offer for 
insight on this, and we'll be happy to share it. I think 
Chairman Taub outlined it well in terms of the differentiation 
of responsibility.
    My only caution is that it would be problematic for the 
regulator to become the operator, so that would just be the 
caution. But we're happy to provide some additional insight.
    Chairman Chaffetz. And you want to triangulate the issue, 
but at the same time, it is problematic when there is not a 
functional group, and there hasn't been for a while, and there 
doesn't seem to be any desire to get one. And so I am just 
looking at structurally changing that. But duly noted. You 
don't want your regulator to also be your operator, and there 
does need to be an arm's length distance. But there is also a 
role of Congress, and we have to serve in some of those 
functions as well.
    Mr. Rolando, kind of walk us through--I don't know what 
time frame--but the unions have--I mean, the enrollment is way 
down because in large part the reductions in staff. If somebody 
is watching this for the first time, give them a perspective of 
how the unions have stepped up and have helped to address this 
problem. And there have been quite a number of staff reductions 
along the way.
    Mr. Rolando. Well, Mr. Chairman, as far as reductions, yes, 
there's been a loss of 200,000 jobs in the last 10 years. I 
think for the majority of the collective bargaining agreements 
now, no new employees come in as career employees. They come in 
as non-career employees ----
    Chairman Chaffetz. Right.
    Mr. Rolando.--without any benefits, much lower pay, and 
have to wait for a career position to become available for them 
to be eligible for that.
    As far as--and then the collective bargaining itself, it's 
a process that's worked well for a long time in terms of 
negotiating agreements, whether by settlement or through 
interest arbitration.
    And as I mentioned before, there's other arenas that we 
deal with with the Postal Service, for example, in the 
legislative arena. That's an extremely, I think, important 
thing that we do, along with the mailing industry, to be able 
to get a consensus together to move something through Congress 
that's going to preserve the Postal Service in the future.
    So we have--and again, I talked briefly before about being 
involved in the growth of the business and service and the 
networks and the value working together to do that, you know, 
to the point of bringing in business to the Postal Service. And 
again, the fourth arena is just the whole culture of the Postal 
Service.
    Chairman Chaffetz. Thank you. Ms. Lowrance, let's talk 
about what you would like to see first and foremost out of 
Congress. And we have your testimony and you have answered some 
questions, but give me the best synopsis you have on what you 
need people in Congress to do.
    Ms. Lowrance. We need predictable and reliable mail 
service, so if you're going to say it's going to take 3 days, 
take 3 days to get there, right? We have planning purposes from 
business mailer perspectives that we do to interact with the 
Postal Service and have the most efficient manner possible.
    We need predictable, stable Postal Service prices, right? 
If we see rate shock or extreme conditions to raise revenues in 
order to cover the existing cost, mail will leave faster and 
faster and faster and they'll find other means to communicate.
    And then lastly, transparent costs. And I know both pricing 
and costing can be done currently at the regulator, and we're 
looking at the 10-year review to see if that--if the current 
pricing mechanism is the right fit under the conditions.
    So, I mean, if Congress were to do anything, I would say 
releasing some of the liabilities on the balance sheet is 
really what would help mailers going into the rate review, as 
well as help the Postal Service alleviate some of the pressures 
on the cap and be able to really concentrate on service since 
that seems to be a large message that came across today.
    Chairman Chaffetz. Thank you, and I appreciate it.
    The Postal Service, as I said at the beginning, serves a 
vital element of our commerce here in the United States. They 
have a monopoly, and they have high fixed costs. When you have 
high fixed costs, you don't reduce services and raise rates and 
expect to solve your problems. What you need to do is move 
volume. You have got to make the post office more relevant in 
people's lives so that there is more volume that can move 
through the system. So again, raising rates and cutting 
services is not the way we are going to necessarily get there.
    Now, I can tell you personally I have migrated a long way 
the more I have studied this where initially my inclination was 
the outlet is, you know, 5-day service, that sounds good, let's 
increase the number of postal holidays, that sounds good, but 
the more you dive into it, the more you realize that is not the 
way the economy is moving. What is happening is there is more 
e-commerce out there and people want to have their packages and 
goods delivered right to them right now. And so you see the 
Amazons of the world and others that consumers are starting to 
expect Saturday and even Sunday delivery, and the post office 
is in a unique position but they are not monopoly to produce 
that.
    Personally, I feel very strongly that the post office 
should not be participating in business that is also found on 
Main Street. Selling coffee and T-shirts, with all due respect, 
other services that you can find it down the street, I don't 
think that is necessarily the role of somebody who has a tax 
advantage, has a monopoly, and I have very deep concerns about 
that.
    The one thing that I haven't heard in the last couple hours 
of this hearing that I continue to harp on and it is incumbent 
upon us but also I think the post office itself is the 
government-to-government business. When I think of where do I 
go to get my passport, I think of the post office. That type of 
business arrangement needs to expand. It does at the State 
level and it should at the Federal level. It drives me crazy to 
no end that we go out and spend all this money FEMA to try to 
remap the United States and have all these drug distribution 
facilities.
    We already have got post offices and letter carriers and 
others that already know their community. They could walk the 
streets without the street signs. They don't need their own 
special map. We have already done that with the Postal Service, 
and yet we spend hundreds of millions of dollars, if not 
billions of dollars, doing that. We have disaster with FEMA and 
others that happen, but we have to be prepared for that, but it 
is your post office and your postmaster that probably 
understands the area and the community better than anybody.
    I visited Montezuma Creek, Utah, a small place down on a 
Navajo Indian Reservation, a dilapidated building, but that 
local postmaster had been there for more than 20 years. She 
knows her community. She knows all the people. She knows people 
who speak English, who don't speak English. She knows who rides 
in on a horse to come get their mail. She knows the community. 
That is the type of effort that the rest of the Federal 
Government should be engaged in.
    Also, I want to continue to look--and this committee has 
jurisdiction on the census. We are going to go out and spend 
billions of dollars on the census to try to recreate what the 
post office already has in place. And I can tell the postmaster 
is itching to speak here, so please.
    Ms. Brennan. I'm sorry, Mr. Chairman, I did just want to--a 
proof point to your comments, too, if I may. One was working 
recently with a Midwestern city to provide information on 
vacant buildings through our address management system.
    Another you mentioned, the census, we did a pilot I 
mentioned earlier in the hearing out in Arizona on-boarding 
census workers, but we think there's an opportunity for us with 
the actual conducting of the census given in-person proofing at 
the facility or on the doorstep with the technology we now 
have.
    Chairman Chaffetz. Your local letter carrier is going to 
far more understand that there aren't 15 people living in this 
house. I have been walking the street going to their door for 
the last 7 years and there aren't 15 people in this building. 
That type of thing and insight, they are going to spend the 
billions of dollars. Let's spend it smartly. And I hope this 
committee will further look at this.
    I have gone way over my time here, but I am excited to move 
this forward and again appreciate the work that Mr. Meadows, 
Mr. Lynch, Mr. Connelly, and certainly Mr. Cummings.
    And as we wrap up, I think, Mr. Lynch, did you have--let me 
yield to Mr. Lynch and ----
    Mr. Lynch. Very briefly. And I think there is a wonderful 
opportunity there with the Postal Service and the census. We 
are walking those streets already, so there is a way to, I 
think, maximize the skills and the expertise that the Postal 
Service has.
    I do want to push back a little bit again. You know, I 
cited the Oxford report that said the United States Postal 
Service was the best in the world, and one of my colleagues 
indicated his belief that--I haven't seen the study--but that 
we were the worst in the world. I think that the best judge of 
this is actually the customer, is the American citizens.
    And, you know, the Pew Research Center polled Americans 
about their government. And I think Mr. Boyle brought this up, 
but the people of the United States in that poll said that the 
most trusted government employees in the United States today is 
the United States postal worker. And that is a tribute to you, 
Postmaster General, and also to the unions and the people who 
do that work every single day.
    So, you know, I just want to say that they rank you, I 
think, 84, 84 percent. You are the highest of any government 
employees. Congress was also in that study, and we were around 
6 percent between swine flu and the Taliban. That is where 
Congress came in. So ----
    Chairman Chaffetz. Well, this committee competes with the 
Zika, so we are way down there.
    Mr. Lynch. Amen to that. But, you know, it is indeed ironic 
that we have a member of a body that has 6 percent approval 
criticizing the employees who have 84 percent approval rating 
in the eyes of our constituents.
    So I will yield back. I will leave it at that. Thank you.
    Chairman Chaffetz. Thank you. I recognize Mr. Cummings.
    Mr. Cummings. I want to thank you all for your testimony.
    I just think that we have got to get this done. I mean, we 
can go around this circle forever and ever and be in the same 
place 10 years from now. Again, I want to thank all of you all 
for coming to the table.
    But I am interested in what the chairman said about 
government-to-government. Do you see that, I mean, growing or 
going, Postmaster General?
    Ms. Brennan. Sir, I do see opportunity there. I think 
another example that ----
    Mr. Cummings. And how will we get there? I mean, how would 
you ----
    Ms. Brennan. We may need some support from you and the 
chairman on that, but I think some of the outreach effort we 
have had with some of the other agencies is a starting point, 
leveraging our infrastructure.
    I think another example is the TSA pre-verification for 
frequent fliers. There is an opportunity, I think, for us to 
handle some of that work as well.
    Mr. Taub. Mr. Chairman, if I may, Mr. Ranking Member 
Cummings, I just--I think one of the key pieces if the Postal 
Service is going to go down this road is also the funding 
associated with that, and that goes to that larger issue of 
what is it that we want this government institution to do. And 
I know with a house on fire financially we need to put that out 
and the legislative process doesn't always lend itself to the 
ability to get to first principles. But if there is some way, 
whether in this round or the next, to think about what it is 
that this government institution must do and what are the costs 
associated with that and where does the revenue come in.
    My only concern would be the extent they take on more 
responsibility in this area, there's costs there, and if the 
associated funding doesn't go to it, then we're adding more of 
a burden to the Postal Service.
    Ms. Brennan. Yes, hence my comment, Robert, about needing 
need some assistance from the chair and the ranking member.
    Mr. Taub. I was just trying to get a little more ----
    Ms. Brennan. Thank you.
    Mr. Cummings. Certainly, we would not want you to go into 
something that is going to not yield a sufficient profit. That 
doesn't make any sense. And we certainly don't want to burden 
you with more obligations when the yield is simply to cost 
more. That is ridiculous. But I am hoping that we will be able 
to resolve some of these things and, as I said, resolve them 
soon.
    Again, thank you very much.
    Chairman Chaffetz. The final point I would make on the 
government-to-government is that, yes, these other agencies are 
funded with resources to execute on these things, and if they 
are going to spend money on them, they should be spending them 
and looking at the option of doing it to the Postal Service.
    I think the unions would appreciate that. They have got the 
physical infrastructure unlike any other entity. They would be 
able to do that whether, again, passports, census. You are 
going to get a request from us to look at the financials of how 
the whole passport business has worked, but I look within my 
own district, the Department of Motor Vehicles, you know, there 
are other State opportunities, not just the Federal Government 
opportunities, where they need a physical location that is safe 
and secure and that people know where it is.
    So we have had a good, healthy hearing. We appreciate your 
participation. I hope the men and women of the Postal Service 
know that we care about them and that we are trying to do the 
best thing, but I agree with Mr. Cummings. It is time to do it 
sooner rather than later.
    With that, the committee stands adjourned. Thank you.
    Ms. Brennan. Thank you.
    [Whereupon, at 12:28 p.m., the committee was adjourned.]





                               APPENDIX

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