[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
THE FINANCIAL CONDITION
OF THE POSTAL SERVICE
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON
OVERSIGHT AND REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
APRIL 30, 2019
__________
Serial No. 116-16
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Printed for the use of the Committee on Oversight and Reform
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COMMITTEE ON OVERSIGHT AND REFORM
ELIJAH E. CUMMINGS, Maryland, Chairman
Carolyn B. Maloney, New York Jim Jordan, Ohio, Ranking Minority
Eleanor Holmes Norton, District of Member
Columbia Justin Amash, Michigan
Wm. Lacy Clay, Missouri Paul A. Gosar, Arizona
Stephen F. Lynch, Massachusetts Virginia Foxx, North Carolina
Jim Cooper, Tennessee Thomas Massie, Kentucky
Gerald E. Connolly, Virginia Mark Meadows, North Carolina
Raja Krishnamoorthi, Illinois Jody B. Hice, Georgia
Jamie Raskin, Maryland Glenn Grothman, Wisconsin
Harley Rouda, California James Comer, Kentucky
Katie Hill, California Michael Cloud, Texas
Debbie Wasserman Schultz, Florida Bob Gibbs, Ohio
John P. Sarbanes, Maryland Ralph Norman, South Carolina
Peter Welch, Vermont Clay Higgins, Louisiana
Jackie Speier, California Chip Roy, Texas
Robin L. Kelly, Illinois Carol D. Miller, West Virginia
Mark DeSaulnier, California Mark E. Green, Tennessee
Brenda L. Lawrence, Michigan Kelly Armstrong, North Dakota
Stacey E. Plaskett, Virgin Islands W. Gregory Steube, Florida
Ro Khanna, California
Jimmy Gomez, California
Alexandria Ocasio-Cortez, New York
Ayanna Pressley, Massachusetts
Rashida Tlaib, Michigan
David Rapallo, Staff Director
Lucinda Lessley, Policy Director and Senior Investigator
Mark Stephenson, Director of Legislation
Laura Rush, Deputy Chief Clerk
Christopher Hixon, Minority Staff Director
Contact Number: 202-225-5051
C O N T E N T S
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Page
Hearing held on April 30, 2019................................... 1
Witnesses
The Honorable Megan J. Brennan, Postmaster General, United States
Postal Service
Oral Statement............................................... 4
Ms. Margaret M. Cigno, Director, Office of Accountability and
Compliance, Postal Regulatory Commission
Oral Statement............................................... 6
Mr. Joel Quadracci, Chairman, President, and CEO, Quad/Graphics
Oral Statement............................................... 7
Mr. Fredric V. Rolando, President, National Association of Letter
Carriers
Oral Statement............................................... 9
Mr. Chris Edwards, Director of Tax Policy Studies, Cato Institute
Oral Statement............................................... 11
* Opening statements, and the prepared statements for the above
witnesses are available at the U.S. House of Representatives
Repository: https://docs.house.gov.
INDEX OF DOCUMENTS
----------
The documents entered into the record during this hearing are
listed below, and available at: https://docs.house.gov.
* Prepared statement of the Greeting Card Association;
submitted by Rep. Connolly.
* Questions for the Record, from Rep. Wasserman Schultz,
addressed to Postmaster General Brennan.
* The American Catalog Mailers Association, written testimony;
submitted by Chairman Cummings.
* National Active and Retired Federal Employees Association
letter; submitted by Chairman Cummings.
* Public Citizen, written testimony by Bartlett Collins Naylor,
Financial Policy Advocate; submitted by Chairman Cummings.
* Package Coalition, written testimony; submitted by Chairman
Cummings.
* Statement from the American Postal Workers Union; submitted
by Chairman Cummings.
* Statement by Rep. Gerry E. Connolly
THE FINANCIAL CONDITION
OF THE POSTAL SERVICE
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Tuesday, April 30, 2019
House of Representatives
Committee on Oversight and Reform
Washington, D.C.
The committee met, pursuant to notice, at 10:05 a.m., in
room 2154, Rayburn House Office Building, Hon. Elijah Cummings
(chairman of the committee) presiding.
Present: Representatives Cummings, Norton, Clay, Lynch,
Connolly, Krishnamoorthi, Rouda, Hill, Wasserman Schultz,
Sarbanes, Welch, Kelly, DeSaulnier, Lawrence, Plaskett, Gomez,
Ocasio-Cortez, Pressley, Tlaib, Jordan, Amash, Foxx, Massie,
Meadows, Hice, Grothman, Comer, Cloud, Gibbs, Roy, Miller,
Green, and Steube.
Chairman Cummings. Good morning, everyone. Today, we are
holding a very important hearing on the future of the United
States Postal Service.
The Postal Service is one of our most essential and
recognizable institutions. It provides universal service to
every single address in the United States. It delivers mail and
packages to nearly 159 million locations, no matter how remote.
I have often said that we take our postal system for
granted, because it is so dependable, and it binds together
every corner of our Nation. Unfortunately, the Postal Service's
financial condition has been deteriorating over the past
decade.
The three primary reasons for this: First, there has been a
decline in first-class mail, which has been the Postal
Service's most profitable product. Second, the Postal Service's
expenses have been increasing more quickly than its revenues.
And third, Congress put in place requirements in 2006 for the
Postal Service to make billions of dollars of payments each
year to pre-fund retiree health benefits.
This is a requirement that no other Federal agency or
private-sector company faces. The Postal Service has made
several changes to meet these challenges. It has reduced its
work force by hundreds of thousands of people. It has hired
more part-time employees than ever.
Let me go back for a moment to all the employees who have
been--that they're no longer there. They gave their blood,
their sweat, and their tears so many years, and I want to
compliment the unions, because every time I--every time we try
to work with the Post Office to make sure that we--did whatever
was necessary to make sure they stayed afloat, the unions have
been extremely cooperative and worked with us very closely, and
to make reasonable changes. And from the depth of my heart I
truly appreciate that.
And then it has consolidated facilities and delivery
routes. So, at the same time the Postal Service has an
obligation to provide universal service. So, it has continued
expanding its network to deliver mail to approximately 1
million new addresses a year. I mean think about that. And it's
one million new addresses per year.
As a result, even with deep cuts to its work force, the
Postal Service has been forced to begin defaulting on its re-
funding payments for retiree health benefits. It now owes more
than $42 billion for retiree health benefits.
The Postal Service has also been forced to start defaulting
on pension benefit payments as well. Today, one of the most
pressing concerns for the Postal Service is dwindling
liquidity. As its expenses continue to grow more quickly than
its revenues, the Postal Service faces challenges with having
enough cash to conduct its operations.
For example, in Fiscal Year 2018, the Postal Service had
less than two months' worth of cash on hand on an average day.
That's not good. If major changes are not made soon, there will
come a time when the Postal Service will run out of cash, and
its ability to provide the services Americans rely on will be
in jeopardy.
Congress, ladies and gentlemen, has a responsibility to
ensure that that day never comes. Never. For several years now
I've worked closely with my colleagues on this committee to
develop bipartisan legislation to reform the Postal Service and
place it on a more sustainable path.
I worked with Representatives Connolly, and Lynch, and
Lawrence, and I work closely with Representative Meadows, all
of whom have spent a phenomenal amount of time on this issue,
as well as former Chairman Chaffetz and former Chairman Gowdy.
And I hope to work productively with Ranking Member Jordan as
well.
Last Congress, this committee passed bipartisan reform
legislation. We've all had to give a little during those
negotiations. Was that legislation perfect? No. Were there some
people that were unhappy with parts of it? Yes. But, again, not
only did the unions come together, but our stakeholders came
together. I mean that's unusual to have everybody joining hands
and saying, ``Yes. Well, we may not like everything in this,
but we're going to make this work, because this is for the
American people.''
But that bill would have saved nearly $6 billion over 10
years, according to the Congressional Budget Office. That was a
significant accomplishment. Unfortunately, the bill was never
brought to the House floor.
So, today it is our responsibility to move further than we
did in the past. We now have a whole new Congress. We now have
members that are new to this committee and new to this issue. I
hope today's hearing will be an opportunity for all of our
members, new and old, to get an overview of the challenges
faced by our Postal Service, and to get an update on its
current financial condition, and to hear about the many
different proposals that have been made for reform.
The Administration has also proposed some ideas through its
taskforce. One is to allow the Postal Service to explore new
business opportunities to leverage its current assets and
business liens. Of course, this was an initiative that we
included in our legislation last Congress, and one that I
strongly supported.
Finally, I want to highlight one principle that I hope will
guide us through our efforts. We must not place the burden of
reforming the Postal Service on the backs of the Postal
workers. Their wages and benefits are modest. Our nation can
and must honor the commitments we have made to the men and
women who dedicate their lives to delivering our mail day in
and day out in every conceivable condition.
So, I want to thank our witnesses for being here today, and
I look forward to our discussion. And I now yield to the
gentleman, ranking member, Mr. Jordan.
Mr. Jordan. Thank you, Mr. Chairman, and thank you for this
hearing.
This morning this committee has jurisdiction with the
Postal Service, and it is our responsibility, our
responsibility to make the necessary legislative reforms and
protect the interests of the American taxpayer.
It saddens me to report that due to years of Congress
kicking the can down the road the U.S. Postal Service remains
in dire financial straits. The United Postal Service has been
on the GAO high risk list for over a decade. For the past 11
years it has been losing money at a rapid clip. The losses now
total $69 billion.
What's worse is that the United States Postal Service's
unfunded liabilities equate to 139 billion, almost double its
annual revenue. This is a slow-motion train wreck that keeps
getting worse while Congress looks on. The situation is
untenable under current law, and congressional action is
required to stop the bleeding, and prevent a catastrophic
financial reckoning that would actually soak taxpayers.
We need real institutional reform. Can't afford to keep
moving money from one financially failing program into another.
Some reforms are quite obvious. They must require the Postal
Board of Governors to have fiduciary duties to a newly defined
stakeholder, the American taxpayer.
This is not already the mandate of a government-run
service. It's just flat-out wrong. If we fail to act, we risk a
taxpayer bailout of the U.S. Postal Service, something that I
could not support. The reforms have been right in front of us
for over a decade, but we've lacked the courage to act. This
situation is especially sad because we are lagging behind the
rest of the world in reforming our postal system.
For instance, Sweden has repealed its postal monopoly in
1993. Sweden Post has reorganized into a corporate structure.
Germany's Deutsche Post was largely commercialized in a stock
offering in 2000, and Germany opened its postal markets to
competition in 2008.
Britain opened its postal market to competition in 2006,
and after 500 years of government ownership, commercialized the
Royal Mail and share offerings in 2013 and 2015.
In New Zealand, the government forced the postal service to
cut costs, and put it into a corporate form. The country
appealed its monopoly in the 1990's.
The Trump Administration is doing its part. In 2018, the
President organized a taskforce to evaluate postal operations.
In December, the taskforce proposed 26 recommendations,
including that the United States Postal Service must reduce
labor costs and restructure health and retirement benefits. I
hope we can discuss the taskforce proposals today. We must now
endeavor to make the tough choices, tough decisions, those
before us have failed to make. I hope today can be the
beginning of living up to the expectations of those who sent us
to Washington to deal with the tough problems.
And with that, Mr. Chairman, I would yield back.
Chairman Cummings. Thank you very much. Without objection,
the chair is authorized to declare a recess of the committee at
any time.
The full committee hearing is convenient to review the
current financial condition of the Postal Service as well as
the urgent need for reform legislation.
Now I want to welcome our witnesses. We are very pleased to
be joined by the Postmaster General of the United States Postal
Service, Ms. Megan J. Brennan; Margaret Cigno, the Director of
the Office of Accountability and Compliance for the Postal
Service Regulatory Commission; Joel Quadracci, Chairman,
President, and CEO of Quad Graphics; Fredric Rolando, President
of the National Association of Letter Carriers; and Chris
Edwards, the Director of Tax Policy Studies, at the Cato
Institute.
If the witnesses would kindly rise and raise your hands,
and I will swear you in.
Do you swear or affirm that the testimony you are about to
give is the truth, the whole truth, and nothing but the truth,
so help you God? You may affirm. Thank you very much.
Let the record show that the witnesses answered in the
affirmative. I want to thank you. And I want to let you know
that the microphones are very sensitive, so please speak
directly into them.
Without objection, your written statement will be made part
of the record.
With that, Postmaster Brennan, you are now recognized to
give an oral presentation.
STATEMENT OF MEGAN J. BRENNAN, POSTMASTER GENERAL, UNITED
STATES POSTAL SERVICE
Ms. Brennan. Thank you, Mr. Chairman. Good morning.
Chairman Cummings. Good morning.
Ms. Brennan. Good morning, Ranking Member Jordan, and
members of the committee.
Thank you, Chairman Cummings, for calling this hearing. I
am proud to be here today on behalf of the 630,000 hardworking,
dedicated men and women of the United States Postal Service.
The Postal Service is grateful for this committee's focus
on the need for postal reform. We also appreciate the
engagement of the Administration and that the President's
taskforce recognized the importance of the Postal Service to
the U.S. economy as both a service provider and an employer.
Today, the Postal Service will deliver more than 450
million pieces of mail and 20 million packages to 159 million
addresses. We serve every American home and business, and play
a vital role in every American community. We are an
indispensable part of America's economic infrastructure.
Two years ago, I testified before this committee to
advocate for Postal reform. Given our deteriorating financial
condition, the need for legislative reform is even more urgent
today. The President's taskforce agrees that our business
model, with its rigid price cap, is unsustainable.
Since 2007, total mail volume has declined by 31 percent,
and first-class mail, our most profitable product, has declined
by 41 percent. In response we have streamlined our operations,
restructured our network, reduced the size of our work force,
and improved productivity. From these efforts we reduced our
annual cost base by approximately $13 billion. In just the past
five years we have grown our package revenue by $9 billion, and
we continue to strengthen the value of mail.
Nevertheless, given the constraints imposed by law, no set
of management actions is sufficient to offset the continuing
decline in the use of mail. The Postal Service is required to
maintain an extensive network necessary to fulfill our
universal service obligation to deliver the mail six days a
week regardless of volume.
As our country grows by more than 1 million new delivery
points each year, the cost of our network continues to
increase. We are delivering less mail to more addresses, which
means there is less revenue to pay for mandated costs. And
although we have grown our package business, the rate of growth
has slowed, due to increased competition.
Since 2012, the Postal Service has been forced to default
on $48 billion in mandated payments for retirement-related
benefits. Without these defaults, the deferral of critical
capital investments, and aggressive management actions, we
would not have been able to pay our employees and suppliers, or
deliver the mail.
We cannot overcome systemic financial imbalances caused by
business model constraints. Forcing the Postal Service to
default on mandated payments and order to deliver the mail is
an untenable public policy. Even if the Postal Service decides
to continue with our current pattern of defaults, absent
legislative and regulatory reforms, we are likely to run out of
cash in 2024.
Mr. Chairman, the Postal Service, led by its board of
Governors, is working through the details of a 10-year business
plan to restore the organization to financial stability. And
this plan will include recommended legislative reforms.
We believe it is important for the committee to continue to
consider core legislative provisions that would need to be part
of any long-term financial solution. These include requiring
full Medicare integration for parts A, B, and D for postal
retiree health plans, or exploring other Medicare integration
scenarios, restoring half the exigent price increase for
market-dominant products, and providing some additional product
flexibility.
These provisions have already gained broad support among
postal stakeholders.
Mr. Chairman, Ranking Member Jordan, the Postal Service
matters to the American public and the American economy. I look
forward to working with you in 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.
Chairman Cummings. Ms. Cigno?
STATEMENT OF MARGARET CIGNO, DIRECTOR, OFFICE OF ACCOUNTABILITY
AND COMPLIANCE, POSTAL REGULATORY COMMISSION
Ms. Cigno. Chairman Cummings, Ranking Member Jordan, and
members of the Committee of Oversight and Reform, good morning.
Chairman Cummings. Good morning.
Ms. Cigno. I am pleased to testify before you today.
The Commission is an independent Federal agency that
provides transparency and accountability of the U.S. Postal
Service's operations and finances. It is composed of five
commissioners, each appointed by the President, and confirmed
by the Senate.
The Commission determines the legality of the Postal
Service's prices and products, adjudicates complaints, and fair
competition issues, and oversees the Postal Service's delivery
performance. The Commission carries out this work with a very
small budget and staff. Its current year appropriation is $15.2
million to regulate the much larger Postal Service.
Commission funding comes entirely from the off-budget
permanently appropriated Postal Service fund, which is wholly
comprised of rate payer, not taxpayer funds.
The U.S. Postal Service is a $71 billion operation, with
over 600,000 employees. The Postal Service receives no taxpayer
moneys. The sale of postage products and services funds its
operation.
Starting in Fiscal Year 2014, the Commission developed a
separate annual financial analysis to provide greater clarity,
transparency, and accountability of the Postal Service's
financial deed and trends. This financial analysis not only
reviews the overall financial position of the Postal Service,
but also analyzes volumes, revenues, and costs of both market
dominant and competitive products.
The Fiscal Year 2018 report was issued on April 19, 2019. I
would like to highlight some of the Commission's conclusions
from this year's report.
In Fiscal Year 2018, the Postal Service recorded a net loss
of $3.9 billion. This was the 11th consecutive net loss posted
since Fiscal Year 2007, and has increased the cumulative net
deficit to $62.6 billion.
As part of the detailed financial analysis of the Postal
Service income statements, the Commission also analyzes the net
loss from operations. Net loss from operations excludes from
expenses the payments for unfunded retirement benefits, and the
non-cash adjustments to the Workers' Compensation liability. In
Fiscal Year 2018, the Postal Service recorded a net loss from
operations of $2.1 billion.
These continuing losses have created a substantial gap
between the Postal Services assets and liabilities. Total
assets and liabilities are comprised of current and non-current
portions. In Fiscal Year 2018, the Postal Service had current
assets of $11.6 billion and current liabilities of $69.5
billion.
If current assets are insufficient to meet its short-term
liabilities, the Postal Service could have problems paying its
creditors. The gap between current assets and current
liabilities has increased substantially since Fiscal Year 2008.
Total mail volume in Fiscal Year 2018 continued to decline.
Over the last 12 years market-dominant products volume has
declined by approximately 70 billion pieces. And although
volumes for competitive products continued to grow in Fiscal
Year 2018, the rate of increase was lower than in recent years.
In addition, competitor products volume only makes up 3.9
percent of the total mail volume of the Postal Service.
Nevertheless, competitive products account for 35.2 percent of
total attributable costs and 28.5 percent of total contribution
to institutional costs.
Every five years the commission is required to issue a
report on how well the PAEA is operating, and to recommend
legislation or other measures necessary to improve the
effectiveness and efficiency of our Nation's postal laws. In
its 2016 report, the Commission found that the most important
legislative recommendations it could make related directly to
improving the financial condition of the U.S. Postal Service.
In 2017, the Commission issued its findings related to the
system for regulating raising classes established the PAEA. Of
relevance to this testimony, with respect to finances, the
Commission found that the system has not maintained the
financial health of the Postal Service as intended by the PAEA.
As a result of this and other findings, the Commission
concurrently issued a notice of proposed rulemaking to address
the shortcomings identified by the Commission in its review.
The Commission is currently considering rules to modify
existing regulations, or adopt an alternative system that the
Commission believes will achieve the objectives.
In summary, the Postal Service faces significant financial
obstacles for the future. Continued losses, including two years
of operating losses, have put the Postal Service in a perilous
financial position. With the growing liability of retiree
health benefits, the inability to sufficiently fund needed
capital investments, and the continued loss of high-margin
first-class revenues, the important task of improving the
financial condition of the Postal Service is daunting. The
Commission stands ready to assist in your search for answers on
behalf of our Nation's postal system.
Thank you for the opportunity to testify today. And I am
happy to answer any questions.
Chairman Cummings. Thank you very much.
Mr. Quadracci?
STATEMENT OF JOEL QUADRACCI, CHAIRMAN, PRESIDENT, AND CEO,
QUAD/GRAPHICS
Mr. Quadracci. Good morning, Mr. Chairman, Ranking Member
Jordan, and members of the committee.
On behalf of our coalition and our company, I want to thank
the members, and in particular, Chairman Cummings and Mr.
Meadows, along with Mr. Connolly and Mr. Lynch for your
continued leadership and bipartisan efforts on the urgent
matter of restoring the Postal Service to financial stability.
It has become critical to enact the substance of the
bipartisan bill from the 115th Congress with some modest
updating. We respectfully urge the committee to move forward as
swiftly as possible.
I am here today on behalf of the Coalition of the 21st
Century Postal Service, or C21, which broadly represents an
industry that employs over 7-and-a-half million people, and
generates revenue of over $1.4 trillion, and in one way, shape,
or form, they rely on the Postal Service to be healthy.
As a marketing solution partner with the foundation and
print, Quad is a member of C21. The partnership with our
clients lets our customers thrive in a multi-channel marketing
world. Quad's print foundation has allowed us to grow from 11
employees in Wisconsin to now providing 20,000 employees with
family supporting wages, 55 plants in 26 states, serving 7,000
clients, and mailing 10 billion pieces of mail each year.
The Postal Service is vital to the urban core of our
country, and is even more crucial to rural America, where
access to broadband is hardly universal, and the USPS delivers
critical supplies, mail packages, et cetera. Overall, in 2018,
the Postal Service delivered more than 146 billion pieces of
mail and packages, with 70 billion in revenue.
Let's put these numbers in perspective, however. While
revenues have held up relatively steady by repeated CPI
increases and one-time exigent surcharge, the volume number
represents a decline of 31 percent since its peak in 2006. And
while mail volume declines, the number of delivery points
increases yearly by a million addresses. That combination has
challenged the Postal Service as unsustainable.
Irrespective of these volume declines, operations have run
generally near or close to black at times, but do have a
fighting chance to get there. The elephant in the room has been
the obligation to pre-fund retirement healthcare to an extent
so devastating the USPS has defaulted on $48 billion in
payments.
Rarely have circumstances turned what was intended to
buttress a public good into mortal threat to the organization
overall. The digital world continues to disrupt our industries,
forcing us to adapt our businesses to new realities. The Postal
Service is no different.
Three months after PAEA was enacted at the end of 2006, the
best year in USPS's history, Steve Jobs introduced the iPhone.
There was a double-digit increase in postage rates, which was
followed quickly by the Great Recession, and the route was on.
The advent of online business and e-mail social media,
streaming, and other online channels shifted a great deal of
advertising out of the postal system. After the recession
ended, the mail volumes did not return, demonstrating that the
shift to electronic alternatives was real and permanent.
While print has hit a significant reset in volume, it fits
into a comprehensive advertising strategy through the power of
print by itself, and integrated into a comprehensive
multichannel strategy. Print is not going away. Our own market
surveys show that 71 percent of Millennials read direct mail,
and in the last 30 days, one in three redeemed direct mail
coupons.
Printed products have a clear place in this multichannel
world, but only if they remain cost-effective, with a positive
ROI.
Postage is now the single largest expense for mailers,
ranging up to 60 percent of the cost of the printed piece.
Prior to the recession postage was approximately 50 percent,
and at one time was only a third. While print is less than 20
percent.
Above inflation, postage rates cannot be part of the
solution. The CPI cap has worked as intended, providing mailers
with price predictability and certainty. On the bright side,
for the Postal Service is e-commerce explosion. Packages now
generate more than 7 billion toward the USPS overhead.
USPS serves those who receive and ship packages, and even
competitors, which depend on USPS to deliver to areas not
economically efficient. Prices for competitive products must be
based on market conditions, and not imposed as favor of costing
methodologies that arbitrarily raise prices for consumers.
The prime need to stabilize USPS for the short run is
address pre-funding. We urge you to draw upon private sector
best practices to reduce pre-funding costs. In a rare moment of
convergence, we join the postal unions on these common-sense
recommendations. Set the pre-funding target at 60 percent of
vested liability for retiree health benefits, fully integrate
with Medicare. These changes should reduce the USPS liabilities
by about $85 billion.
Additions to legislation are crucial. Our service
performance measurements worked out during the last Congress by
Mr. Meadows with Senator Heitkamp, and directing the Commission
to take into account in its 10-year rate setting review the
financial impact of this legislation, including our commitment
in the legislation to a one-time increase worth 8.5 billion.
The stakeholders also request the committee not include
rescinding the authority of the PRC, to prescribe rules for
distributing costs, clearing the way for arbitrary price
increases on packages, particularly, and mandating a mode of
delivery to consumers and business.
Thank you, Mr. Chairman.
Chairman Cummings. Thank you.
Mr. Rolando?
STATEMENT OF FREDRIC ROLANDO, PRESIDENT, NATIONAL ASSOCIATION
OF LETTER CARRIERS
Mr. Rolando. Thank you, Chairman Cummings, Ranking Member
Jordan, and members of the committee for the opportunity to
testify and for the tireless bipartisan work of the committee
in recent years to strengthen the Postal Service.
Over the past decade or so, Postal employees have worked
diligently to adapt to technological change, and increase
productivity. Thanks to the e-commerce boom, we have recovered
strongly from the recession. However, only Congress can address
our biggest financial challenge, the unsustainable burden to
pre-fund future retiree health benefits.
This burden, which was imposed by the Postal Accountability
and Enhance Act of 2006 is one that no other enterprise in the
country faces, and has accounted for 92 percent of our reported
financial losses since 2007. Without it, the Postal Service
would have recorded profits in each of the past six years.
While Congress could not have foreseen the devastating
impact of the coming recession, it nevertheless saddled the
Postal Service with an unaffordable mandate. A clear mistake
that reclassified a long-term liability into a short-term
liability.
Compounding the Postal Service's financial woes was the PRC
decision to make the 2013 exigent rate increase temporary, even
though the recession-related volume loss was permanent. This
continues to cost the service $2.1 billion per year.
A simple repeal of the pre-funding mandate remains the most
obvious solution to the postal financial crisis. A repeal, in
combination with a more sensible rate setting system from the
PRC's 10-year review, would go a long way toward stabilizing
the service's finances.
In fact, Representative Peter DeFazio and Tom Reed
yesterday introduced a pre-funding repeal bill, HR-2382. If
enacted, we would still have 12 to 13 years of funds sets aside
for retiree health premiums, a total of $47-and-a-half billion.
After the retiree health fund is used up for its intended
purpose, the Postal Service would return to the pay-as-you-go
approach to retiree health that other Federal agencies and
private businesses use. The resulting near-term financial
stability would create the conditions for the Postal Service
and its stakeholders to evolve and adapt as we have for much of
our history.
We recognize that some Members of Congress would prefer to
maintain the pre-funding policy, but focus on ways to reduce
its burden by fully integrating with Medicare. Unfortunately,
that approach has failed to advance in Congress for a number of
reasons. Most notably, the refusal of other committees of
jurisdiction to take up measures containing Medicare proposals
and the lack of certain safeguards.
Even more problematic was language to ban new door delivery
service, and to require the conversion of existing door
delivery to curb line, and centralize delivery. In fact, a
bipartisan majority of 247 members of the last Congress co-
sponsored House Resolution 28, a resolution that opposed such
door delivery changes.
Going forward, NELC is committed to building consensus to
overcome these obstacles with the House, with the Senate, and
the postal stakeholder community. We believe there are viable
options that could be pursued to reduce future postal
liabilities by tens of billions of dollars, without burdening
the taxpayers. The consensus among the stakeholders is simple,
adjusting the pre-funding target to levels observed in the
private sector, and to phase in Medicare integration in a way
that limits its impact on the trust funds over the next 10
years.
In addition, we support the idea of basing the level of
pre-funding on the Postal Service's vested liability for
retiree health benefits. What it would cost to cover current
retirees and employees near retirement age, who are actually
eligible for such benefits. This would match the best practice
of Fortune 1000 companies that choose to pre-fund, while
reducing the pre-funding burden on the Postal Service
significantly.
By initially providing postal health plans, the Medicare
Part D benefits available to private health plans, and then
phasing in integration with Medicare Parts A and B, Congress
would provide meaningful financial relief to the Postal
Service, while minimizing the impact on the trust funds. This
phase-in could be done by applying the standard private sector
requirement to enroll in Medicare's Part A and B at age 65 to
active Postal employees who are now under the age of 55.
Let me close with two final points, Mr. Chairman. First,
I'd like to urge the committee to aggressive pursue postal
reform this year, but to do it with caution and humility. As we
learned in 2006, it's hard to predict the future. Long-term
economic forecasts are notoriously inaccurate. And the costs of
misconstruing the future can be high.
Indeed, the internet did not destroy the Postal Service as
predicted. Just imagine if we had given into those who were
advocating the end of Saturday delivery in 2011 or 2012. We
would have missed out on the e-commerce boom. Worse, we would
have unnecessarily eliminated tens of thousands of good jobs
and weaken the Postal Service.
Second, we urge you to get both the content and the
sequence of postal reform right. Let's address the most
important issue first, the misguided pre-funding burden. Let's
implement the PRC's new rate setting system. Let's fill the
seven vacancies and the board of Governors with talented people
who are capable of developing a workable business plan, and
then let the Postal Service and its employees adapt and
innovate to meet the evolving needs of our Nation.
Thank you again for this invitation to testify.
Chairman Cummings. Thank you very much.
Mr. Edwards?
STATEMENT OF CHRIS EDWARDS, DIRECTOR OF TAX POLICY STUDIES,
CATO INSTITUTE
Mr. Edwards. Thank you very much, Mr. Chairman, and members
of the committee. Thanks for inviting me to testify.
While USPS mail volume is plunging, and the company is
losing billions of dollars a year, European countries are
facing the exact same problems of plunging mail volumes, but
their response has been to open up postal markets to
competition, and to privatize postal companies. A very
different response than ours.
America should follow suit. Privatization and competition
would give the USPS the flexibility it needs to cut costs and
to innovate, while creating equal treatment of businesses
across postal and package markets.
Aside from legal monopolies, the USPS enjoys numerous other
benefits, including the fact that it pays no Federal, state, or
local taxes. But at the same time, Congress ties the hand of
the USPS, preventing it from solving its own financial
problems.
So, what are some of the solutions? Well, first, I would
say close post office locations. There are thousands of
locations with very few customers.
I live in Northern Virginia, near Seven Corners, and
there's actually two post office locations right near me within
a half-a-mile on Leesburg Pike. It makes absolutely no sense.
So, I would suggest closing one of my post offices in my
neighborhood.
Cut labor costs. The USPS has $110 billion in unfunded
liability for retiree pension and health. Most private
businesses do not even provide retiree health benefits, let
alone defined benefit plans, which have gone the way of the
dinosaurs.
Third, narrow the universal service obligation. The United
States is one of the most expansive universal service
obligations in the world.
And fourth, end cross-subsidies. There's been a lot of
discussion of whether the USPS is using its monopoly mail to
subsidize its package delivery. It's a complex issue, and I
know the PRC recently had a ruling on that, but this issue is
not going to go away, because the USPS is a special government-
owned entity.
Federal Express pays $2 billion a year in Federal, state,
and local taxes. The USPS pays none. So, that creates a lot of
unfairness and distortion, and an uneven playing field.
In the long-term, Congress should privatize the USPS,
repeal its legal monopolies, and give the company flexibility
to adjust to changing postal markets. Privatization may sound
radical, but governments around the world have transferred
thousands of state-owned businesses worth more than $3 trillion
to the private sector, everything from railroads, to airports,
to postal systems have been privatized in Europe.
Europe has opened its postal markets to competition, and
some nations, like the UK and Germany, have privatized their
post offices.
A major report last year by the European Commission
summarized a bunch of reforms that European postal companies
are making. European postal companies, they are cutting costs
with more flexible employment. They're using performance pay
for workers. They're cutting delivery speed. They're cutting
the frequency of delivery. They're delivering to common street
mailboxes instead of doors. And some of them are closing down
post offices.
Sweden and Germany essentially don't have post offices any
more. They do retail postal activities through grocery stores
and convenience stores, and that sort of stuff.
European postal companies are diversifying to try to make
money in this new challenging environment. But the USPS is
government owned. It's harder to diversify. Nor would we want
USPS diversifying into industries like banking or grocery
delivery, because it would create unfair competition to tax-
paying businesses.
So, again, I think the solution is privatization.
Privatization would improve corporate governance. The USPS
board is dysfunctional currently. Privatization would allow the
USPS to access debt and equity markets for investment that it
desperately needs. A privatized USPS would pay Federal, state,
and local taxes. It would put the USPS on a level playing field
with other businesses.
Congress could impose the universal service obligation on a
privatized USPS, but it should narrow the mandate, a narrower
universal service obligation.
Postal markets are changing rapidly. Household-to-household
personal letters have plunged to just three percent of total
mail volume. Advertising mail represents 62 percent of the
entire household mail volume today. Sixty percent of bill
paying has moved online. There is more than 200 billion e-mails
sent around the world every single day. The world is rapidly
changing. America should follow the reforms in Europe.
Thanks a lot for having the hearing.
Chairman Cummings. Thank you very much.
Mr. Connolly. Mr. Chairman?
Chairman Cummings. Yes.
Mr. Connolly. I just have a unanimous consent request. I
would ask that the prepared statement of the Greeting Card
Association be entered into the record.
Chairman Cummings. Without objection.
Mr. Connolly. I thank the chair.
Chairman Cummings. We'll go now into questioning, and I'll
yield myself five minutes.
Let me say this. Ms. Brennan, I have few questions of you,
Postmaster. But first of all, I want to thank you and your
staff, and certainly your deputy, Mr. Stroman, you all have
been constantly meeting with us. I was just sitting up here
thinking about the many times that I met with all the
stakeholders.
I've been on this committee along time, 23 years, and
there's no entity that I've been in meetings with more than the
Postal Service. So, we worked hard. Mr. Meadows----
Mr. Meadows. Amen to that.
Chairman Cummings. Mr. Meadows, Mr. Connolly, and Mr.
Lynch. I mean lots of meetings. And Ms. Lawrence.
And so, I want to thank all of you all for trying to work
with us, and you all have been there for us whenever we needed
information.
Postmaster Brennan, I'd like to go through some of the
financial figures for the Postal Service, so that we can clear
up some matters. The Postal Service receives no taxpayer
funding, and relies solely on the sale of postage, and postage
products to generate revenue. Is that right?
Ms. Brennan. That's correct.
Chairman Cummings. According to the Postal Service's 10K
filing for Fiscal Year 2018, the Postal Service's reported
operating revenue was $70.6 billion, an increase of $1 billion,
or a 1.5 percent increase from the prior year. Nonetheless, it
ended the year with a net loss of $3. 9 billion. What are the
primary reasons for these losses?
Ms. Brennan. Mr. Chairman, the fundamental root cause of
our financial instability is a flawed business model that
imposes significant costs on us, legally mandated costs, yet
constrains our ability to raise revenue to offset those costs.
Chairman Cummings. Mm-hmm.
Ms. Brennan. Specifically, an unaffordable retiree health
benefit plan, which I think you heard from a number of the
panelists. And the solution there is Medicare integration.
A strict price cap on products that generate roughly 70
percent of our revenue is a burden to our ability to improve
our financial standing.
Chairman Cummings. The Postal Service has incurred
cumulative net losses of $69 billion from 2007 to 2018. How can
the Postal Service still be functioning if you lost that much
money over the past decade?
Ms. Brennan. Mr. Chairman, I think as a number of the
panelists had indicated, and as you did as well, the onerous
burden to pre-fund retiree health benefits is roughly 80
percent of those net losses in the past decade.
Now what the Postal Service has done over these years is we
prioritized our fundamental mission, which is delivering the
mail. So, we deferred needed capital investments to help us in
terms of a competitive marketplace. And we defaulted on
mandated payments of more than $48 billion.
Chairman Cummings. So, in fact, the Postal Service reported
it had been defaulting on payments for retiree health benefits
and pension benefits to conserve cash. But absent legislative
action, will the Postal Service ever be able to make those
payments at any point in the future?
Ms. Brennan. Mr. Chairman, absent legislative and
regulatory reform, in all probability we'll be out of cash in
2024. And that will threaten our ability to meet our obligation
to the American public, and to our business partners like Mr.
Quadracci, who relies on our platform for his business.
Chairman Cummings. Now at the end of Fiscal Year 2018, the
Postal Service reported that it had cash revenues of $10.1
billion, and that its average daily liquidity balance during
that year was $11.3 billion, which represents about 54 days'
worth of cash.
How much cash does the Postal Service need to make its
regular biweekly payroll?
Ms. Brennan. Well, I would tell you, Mr. Chairman, we have
a daily cash outlay of over $200 million. And our financial
advisor, who looked at our liquidity, which, as we describe it,
is cash on hand and ability to borrow. That 11.3 billion is
insufficient. For an organization with a $70 billion revenue
stream, at a minimum, we should have roughly 20 billion in cash
on hand or ability to borrow.
Chairman Cummings. That would equal how many days?
Ms. Brennan. Roughly, 100 days.
Chairman Cummings. And we have a few months right now.
Ms. Brennan. Correct.
Chairman Cummings. What is the impact of having less than
two months' worth of liquidity on a company the size of the
Postal Service?
Ms. Brennan. Well, again, Mr. Chairman, it requires you to
be very judicious in terms of how you prioritize your spend,
and also, frankly, hinders your potential ability to improve
your competitive standing, because you're deferring capital
investments, and you're making priorities day in and day out to
ensure that you can continue to pay your employers and pay your
suppliers, and deliver the mail.
Chairman Cummings. Absent legislative action, when might
the Postal Service run out of cash it needs to perform its
mission for delivering the mail?
Ms. Brennan. Mr. Chairman, if we make our legally mandated
payments in 2019, we will be out of cash in 2020.
Chairman Cummings. You know, the situation you described is
simply no way to run a business, I think you said is a flawed
business model, and it's simply not sustainable. However,
things do not have to be this way. Congress can enact
legislation, making some basic reforms, which is what we've
been trying to do, including eliminating unreasonable payments
imposed by Congress that will end these defaults, and ensure
the Postal Service is not always operating on the brink of
liquidity event.
This should not be a partisan issue, would you agree?
Ms. Brennan. I would agree.
Chairman Cummings. This committee hash previously passed by
bipartisan legislation that would have helped address the
Postal Service's financial challenges. And I believe that we
can pass similar legislation again, and take it to the floor of
the House to get it passed this year. So, I hope the members on
both sides of the aisle will join me in supporting this effort.
With that, I yield now to----
Mr. Connolly. Mr. Chairman, could I just ask you a
question?
Chairman Cummings. What's your question?
Mr. Connolly. You made a really good point about this
committee passing the bill. My recollection is we actually
passed it on the unanimous vote of this committee, is that
correct?
Chairman Cummings. That's right.
Mr. Connolly. I thank the chair.
Chairman Cummings. I now recognize Mr. Hice for five
minutes.
Mr. Hice. Thank you, Mr. Chairman.
Mr. Rolando, it is true that the Postal Service is not
supposed to be involved in political campaigns, correct, other
than delivering mail? The Office of Special Counsel found
systematic violations of the Hatch Act in 2016 with the Letter
Carriers 2016 initiative. Are you familiar with that report,
and the violations?
Mr. Rolando. Somewhat familiar with the issue they had with
the Postal Service. Yes.
Mr. Hice. You ought to be very familiar with it. And just
out of curiosity, were there any letter carriers requesting to
campaign for Donald Trump during that time?
Mr. Rolando. I don't know.
Mr. Hice. Had they come forward to campaign, have a leave
of absence, would you have forced management to grant Trump
supporters a leave of absence to campaign for him?
Mr. Rolando. That would have been my decision, Congressman.
Mr. Hice. Whose decision would that be?
Mr. Rolando. It would have been the Postal Service, if
they're requesting leave to do anything.
Mr. Hice. I mean who at the Postal Service?
Mr. Rolando. Their supervisor.
Mr. Hice. All right. Well, there was a concerted effort
across the board for political activity on behalf of Hillary
Clinton, and I'm just curious how that happened, and the
violations. Were there any consequences for violations of the
Hatch Act?
Mr. Rolando. Not that I'm aware of, because there weren't
any violations by letter carriers.
Mr. Hice. There most certainly were.
Mr. Rolando. Well, that's not what the report said, sir.
Mr. Hice. Well, the report makes it clear that there were
systematic violations.
Mr. Rolando. Not by letter carriers.
Mr. Hice. Who were the violations committed by?
Mr. Rolando. I believe they were directed at the Postal
Service.
Mr. Hice. Well, I mean aren't letter carriers the ones that
took a leave of absence?
Mr. Rolando. They are the employees of the Postal Service.
Mr. Hice. And they were the ones who took a leave of
absence for two months to campaign.
Mr. Rolando. They were the ones that had their requests for
leave approved by the Postal Service.
Mr. Hice. And their requests were approved, and they
campaigned for two months, had a leave of absence for two
months, kept their job, came back. So, I'm curious if there
were any consequences to that.
Mr. Rolando. To who, sir? To the letter carriers?
Mr. Hice. To those who were responsible. For crying out
loud, this is not a complicated question.
Mr. Rolando. Oh, it is. It actually is a complicated
question.
Mr. Hice. The Hatch Act was violated. I'm curious if those
who were guilty of violating it, were there any consequences?
Mr. Rolando. You'd have to ask the Postal Service, because
I believe----
Mr. Hice. Well obviously, because I'm not going to get any
answers from you. Let me go to you, Ms. Brennan. You told this
committee back in 2016 at the front end of the five-year plan
that you had identified some $5 billion in cost reductions,
which was a good thing, but I'm curious if that strategy that
you mentioned in 2016 has been implemented.
Ms. Brennan. In part, Congressman. And what we're focused
on, looking out, is a 10-year plan that would address the USO
and address pricing and product flexibility, giving the Postal
Service the opportunity to better compete in an increasingly
competitive environment.
Mr. Hice. So, that the plan that you mentioned four years
ago has not been fully implemented.
Ms. Brennan. All the savings have not been achieved.
Mr. Hice. Okay. You also mentioned in February 2017, two
years ago, you assured me personally, that the issue of
replacing aging vehicles was going to occur in any month. You
said that the award would be granted in a matter of months.
That never took place, did it?
Ms. Brennan. Congressman, if we were talking about the next
generation delivery program, that is a multi-year research,
development, and testing program, that we just completed the
testing actually in March.
Mr. Hice. All right. So, there was not an award, a contract
award for----
Ms. Brennan. You may have been talking about the contract
award, or we may have been discussing the contract award for
the prototypes.
Mr. Hice. But that was never done.
Ms. Brennan. Yes, it was.
Mr. Hice. It was done?
Ms. Brennan. Yes.
Mr. Hice. All right. So, where do we stand now on aging
vehicles?
Ms. Brennan. We just completed the prototype testing in
March. So, we are currently analyzing the results of the
testing that was done over a multi-month period in different
topographies, different climates. And those results will help
inform the production requirements going forward.
Mr. Hice. Okay. I'd love to explore this further. My time
is running out.
Mr. Edwards, let me end with you. You brought up some
interesting points a while ago. The Post Office is running out
of money. Ms. Brennan mentioned 2024. I don't know if it will
go that long, or not. But if the Postal Service were a private
company, what changes would immediately be taking place to make
it solvent?
Chairman Cummings. The gentleman's time has expired, but
you may answer the question.
Mr. Hice. Thank you, Mr. Chairman.
Mr. Edwards. I mentioned some cost-cutting, like closing
post offices, cutting labor costs, that sort of thing. One
thing I did want to mention about the retiree healthcare, the
vast majority of private companies do not even offer private
healthcare. And even if we move that entire burden over to,
say, Medicare, the taxpayers, today, there is more than $3
billion every year of new healthcare costs accruing from
current employees.
So, you could move the costs over to taxpayers now. It
doesn't solve the problem. These costs keep accruing and
accruing. There's kind of a death spiral going on here.
Chairman Cummings. Ms. Norton?
Ms. Norton. Thank you, Mr. Chairman. And I certainly
appreciate this hearing, because this Postal Service is an
issue we work on every Congress, and don't seem to move very
far. I recall that under a republican Congress we did pass a
bill, and this bill never made it to the floor of that
Congress.
And, of course, we've seen nothing in the Senate, this pre-
funding notion put on the Postal Service - and nobody else. It
can hardly be considered a best practice any longer. If it was
such a best practice, then obviously we'd make everybody do it.
And that bill that we passed some years ago, this
committee, the Postal Service, Postmaster General Brennan was
required to enroll its employees in Medicare. How many have
elected to enroll in Medicare Parts A and B?
Ms. Brennan. Delegate Norton, roughly 76 percent of our
retirees are enrolled in Medicare Part A and B. The balance
that are not is roughly 88,000 retirees. When this committee
last----
Ms. Norton. The balance are who? I'm sorry. The balance who
have not enrolled are who?
Ms. Brennan. Roughly 88,000, the number. Retirees.
Ms. Norton. Already retired. And, therefore, in the old
system.
Ms. Brennan. They're not enrolled in Medicare Part A and B.
And you mentioned in the last Congress, and the provisions of a
bill, there was bipartisan support for Medicare integration for
retirees. Restore half the exigent price increase, and provide
us some product flexibility, and in total, those provisions
would have generated roughly 50 to 55 billion over a 10-year
period.
Ms. Norton. Mr. Rolando, we have understood that some in
the unions, I don't know if it was your union, in particular,
have opposed required enrollment in Medicare. Has that been the
view of the letter carriers?
Mr. Rolando. Speaking for the letter carriers, the only
objection we had to Medicare integration was to have some
protections for requiring and mandating anybody to pay
something that they wouldn't be able to use. For example,
veterans that had VA benefits that don't integrate with
Medicare. Retirees that might live out of the country, you
know, to be able to have exceptions. Don't make somebody buy
something they can't use.
Ms. Norton. Well, of course, Postmaster General Brennan,
have the Postal Service employees already, I mean in light of
Mr. Rolando's notion involving veterans, perfectly
understandable, but have Postal Service employees already
contributed to Medicare?
Ms. Brennan. Yes, ma'am. In fact, the Postal Service and
Postal employees, through Medicare taxes, have contributed more
than $32 billion to the Medicare trust fund since 1983.
Ms. Norton. So, they've already contributed. That even
retirees who have elected not to enroll in Medicare have
actually contributed to Medicare while they were still working.
Ms. Brennan. While they were employed?
Ms. Norton. Yes.
Ms. Brennan. Correct.
Ms. Norton. Do you know how much integrating Postal Service
employees into Medicare would increase costs to the Medicare
system? I think it may have been Mr. Edwards who said, you
know, you're shifting the costs from one system to the other.
The difference is while the Medicare system is in some
considerable trouble, it's certainly not where the Postal
system is.
And typically, the Congress responds when Medicare is in
that kind of trouble, at least when we get close to the date
when it's going to run out for people.
So, I'm asking do you have any sense of how much
integrating Postal Service employees into Medicare would
increase the costs of the Medicare system itself, or would
somehow burden the Medicare system itself?
Ms. Brennan. Yes. And depending on the scenario, as
President Rolando outlined a so-called carveout for those who
may not benefit, our actuaries have estimated roughly 700
million to a billion dollars per year, which is roughly one-day
spend.
Chairman Cummings. Your time has expired.
Ms. Norton. Thank you, Mr. Chairman.
Chairman Cummings. Congressman Massie?
Mr. Massie. Thank you, Mr. Chairman.
Ms. Brennan, the President convened a taskforce to evaluate
operational and management challenges at the U.S. Postal
Service. I assume you looked at it. Are there any things in
there that resonated with you? Are there any recommendations
that you think we should take up?
Ms. Brennan. Yes, Congressman Massie. First, we appreciate
the Administration's interest, and that they recognize the
value of the Postal Service as a service provider and an
employer.
The taskforce recognized that the business model is
unsustainable, that a price cap, again, on products that
generate roughly 70 percent of our revenue is unsustainable.
They made recommendations about re-amortizing our retiree
health benefits. They also made a host of administrative and
legislative recommendations that should inform the public
policy discussion going forward.
Mr. Massie. Are there any of those that you prefer the
most? Any of those recommendations to Congress legislatively?
Ms. Brennan. Well, eliminating the price cap would be a
priority. Giving us additional flexibility. The taskforce made
recommendations about enabling the Postal Service to expand
products and services with other Federal agencies, local, state
tribal nations. I think that's an opportunity for us to
leverage our physical and IT infrastructure.
Mr. Massie. So, along those lines, one of the
recommendations from the report argues for redefining mail
classes to reduce costs, or to exit the product class
altogether. So, there may be products that you can get into
that you're not into now. But are there products right now that
aren't profitable, or that maybe should be combined, maybe
classes that should be combined, or classes that we shouldn't
be offering?
Or are there products that, frankly, the private sector may
be doing that the Post Office doesn't need to do anymore? Can
you talk about those, and that recommendation in the report?
Ms. Brennan. Yes, Congressman. There was a recommendation
as I would describe as regrouping the products into essential
and commercial. And in talking with some of our business
customers, they would tell you that everything they mail is
essential. That said, I believe it's a discussion that we
should have with the stakeholders.
The proposed regrouping doesn't necessarily serve as a
proxy to our current market-dominant and competitive products,
but I think it's worth a discussion.
Mr. Massie. Mr. Edwards, I'd like to ask you about the
President's recommendations. Is there anything in that report
that stood out to you, or things that we should be doing, or
things that aren't in the report that they need to be doing at
the Post Office to be more competitive?
Mr. Edwards. I thought it was a very good report. They
didn't go far enough. I mean the crisis here is much more dire,
I think, than a lot of people are recognizing. Those healthcare
costs keep accruing every year. First class mail volume keeps
plunging.
I would agree with the USPS that we should raise the price
cap on their monopoly products, but then we should open them to
competition. You can't have one without the other. You need to
protect consumers by opening up the USPS to competition, at the
same time, giving them the flexibility.
I mean the marketplace is changing dramatically. Amazon's
getting into delivery, it looks like, down the road. We need to
let USPS defend itself. And the way to do that is to privatize
them, open them up, give them pricing flexibility, and let them
diversify into other businesses. That's the way that they can
defend themselves, and, frankly, their workers in the long run.
Mr. Massie. What is the most troubling part of the U.S.
Postal Service's finances to you? You started out by saying,
``We have more dire consequences facing us sooner than we
realized.''
Mr. Edwards. Some people on the panel have mentioned it.
It's because first class mail keeps plunging in volume. Forty-
five percent fall since 2001. That is their most profitable
product.
You know, the USPS has very vigorous competitors, UPS and
FedEx, and probably Amazon in the future. So, I think there's a
death spiral here. I think that ultimately Congress is going to
have to do a major reform. This is unsustainable, the direction
we're going.
Mr. Massie. Thank you, Mr. Chairman. I yield back the
balance of my time.
Chairman Cummings. Thank you very much, Mr. Massie. Mr.
Lynch?
Mr. Lynch. Thank you, Mr. Chairman. I also want to thank
Mr. Connolly and Mr. Meadows for their great work on this
issue, and as well as Ms. Holmes-Norton. She's been terrific on
it. We've been at this for a long time.
I do want to point out a couple things. As Ms. Cigno has
pointed out, right now the Postal Service, and forever, the
Postal Service has been funded by stamps. Stamps. That's how we
fund it. So, it doesn't get a big tax, you know, benefit. You
know, we don't have an appropriation that we give to the post
office. They basically work their system off of stamps.
And because stamps come in one at a time, it is 55 cents
now for a first-class stamp, we give them a credit line. The
Federal Government gives them a credit line, because it takes a
while to collect all those stamps, and reimburse. So, this idea
that the taxpayer has been footing the bill here is not
accurate.
Second, I want to point out to my esteemed colleague from
Ohio, the ranking member, that Sweden, you know, he holds up
Sweden as the example, Sweden has about 10 million people.
Okay? The United States has about 330 million people. So, 330
million people versus 10 million people. So, that's a real
discrepancy there.
Sweden and all the EU countries, they have the national
health service. So, all their workers, all their workers have
their healthcare paid for by the government. The retirees have
all their benefits paid for by the government. So, we don't
have that. The postal workers are paying their own way here.
We're helping out, obviously. There are some economies of scale
that work in their favor, but to try to say that we're all of a
sudden going to just switch this over.
We could use the example of Great Britain, which is a much
better--there's about 60 million people there. So, a better
example. But when they went to a privatization model, their
postal rates went up between 30 and 40 percent.
So, Mr. Quadracci, what would that to your industry if we
went up 30 to 40 percent on our postal costs?
Mr. Quadracci. Well, it actually close to happened. And I
took on my job in 2006, which was a glorious year, but it was
the last year that the post office could increase rates before
the cap came into play. And so, when that happened in 2007,
before the impact of the recession----
Mr. Lynch. Yes.
Mr. Quadracci [continuing]. I had to quickly shutter about
a million square feet of capacity because the increase drove
huge significant volume out of the system.
Mr. Lynch. All right. So, it would not be good.
Mr. Quadracci. It would not be good.
Mr. Lynch. Okay. The other thing I want to point out about
the British conversion, they tried to--well, they did privatize
their system. And, again, they already have everybody on
national healthcare, so there's no healthcare costs to the
postal system there. But they still had to go up 30 to 40
percent.
They also had $38 billion in unfunded--I'm sorry. The
comparison for us would be the taxpayer would have to pick up
$38 billion in unfunded liability for retirees' retirement
costs. And then we would have to pick up, the taxpayer would
have to pick, at least, Mr. Edwards, that's what you were
alluding to, we would have to shift the--it doesn't go away. It
just gets shifted.
So, privatization, which I firmly oppose, would require the
taxpayer in the United States to take the $38 billion in
underfunded liability from the postal workers' pensions, which
they're carrying now themselves, and then they'd also have to
pick up, the taxpayer would have to pick up $62 billion in
retiree healthcare unfunded liability.
So, we're shifting about $100 billion in debt over to the
taxpayer, based on the privatization model that we have here
today. So, you know, I just think there's much more that we can
do here to help the Postal Service get squared away. I do
believe in the idea of ending that odd system of paying
retirees from the day that they join the Postal Service. You
have to basically pay for their retirement immediately for 30
years hence, which is not the way the rest of the world works.
We usually use a pay-as-you go system.
But, you know, as a proud son of a postal work, you know,
two of my sisters are postal workers, I think if we added them
up, I've told people before, I believe there's 17 members of my
family, at one point, that were either working for the post
office right now, or are retirees, or who have passed on.
So, it's been a real blessing in my family to make sure
that those people have decent retirements after working their
whole lives, decent healthcare. Look, we should hold ourselves
to a higher standard here in the United States. We should treat
our postal workers with respect and decency, based on the job
that they do.
I yield back.
Chairman Cummings. Mr. Lynch, I just want you to know, that
my wife thinks I'm crazy, but I still use postage stamps.
[Laughter.]
Chairman Cummings. I just want you to know I'm supporting
all the members of your family.
Mr. Lynch. Well, thank you.
Chairman Cummings. I pay all my bills, all of them.
Mr. Connolly. Mr. Chairman.
Chairman Cummings. Yes?
Mr. Connolly. I just want you to know I come from the part
of Boston where my family envied Mr. Lynch's family. We wanted
to work for the post office.
[Laughter.]
Chairman Cummings. Mr. Meadows.
Mr. Meadows?
Mr. Meadows. Thank you, Mr. Chairman. And I want to thank
you, Mr. Chairman, Mr. Connolly, Mr. Lynch for your work on the
previous bill. And I guess I'm here today a little bit
conflicted, in that I convinced all my colleagues to go along
with a bipartisan bill. Mainly because a lot of the people that
are in the audience, some of you that are there at the table
today helped me understand the crisis that we're facing.
Ms. Brennan, I'm coming to you because I'm very upset with
a lack of followup from you. And you've taken an advocate,
someone who is willing to put in political cause, and you've
turned me into someone who questions whether I can trust what
you tell this committee, and specifically what you tell me.
And you met with me, with Mr. Stroman, back in January. You
told me that you have a business plan. I said even if it has
the S word for subsidy, I wanted a plan on how we can make the
postal system viable long-term. You said you would get that to
me in 10 days.
You know what? Ten days came and went, and I didn't get
anything. So, we followed back up with you. We said, ``Where is
the plan?'' And I was told that I would get it in a week. A
week came and went, and it didn't come. I'm looking at your
testimony, you don't even have a business plan today, Ms.
Brennan. And I guess at what point are we going to get serious
about fixing the postal system? And are you going to followup
on the commitments you made to me personally?
Ms. Brennan. Yes. And Congressman Meadows, to be clear,
when we met, it was early January, and we----
Mr. Meadows. January 4.
Ms. Brennan. And we indicated we would be meeting with our
board to discuss----
Mr. Meadows. No. You didn't--you've changed the narrative.
Did you commit to get me a plan?
Ms. Brennan. Yes, I did.
Mr. Meadows. Do I have that plan?
Ms. Brennan. You do not. It is still a work in progress.
Congressman Meadows----
Mr. Meadows. Only in D.C. is 10 days three months?
Ms. Brennan. Congressman Meadows, throughout this timeline,
as we were continuing to work on a 10-year plan with our board,
we kept your office informed.
Mr. Meadows. No, you didn't.
Ms. Brennan. And I personally spoke to your chief of staff
a few weeks back.
Mr. Meadows. We followed up with you, because we didn't
hear from you, Ms. Brennan. And I've got e-mails to support it.
Ms. Brennan. Then I apologize Congressman Meadows, because
it was my understanding that we were keeping your office
informed as we continued to meet with the board each month to
work on a 10-year plan.
Mr. Meadows. So, how long are we going to have to wait for
a plan to come from the board, Ms. Brennan? I mean we've been
dealing with this--it's been in crisis mode for two or three
years. When are we going to have a plan?
Ms. Brennan. And yes. And if this committee had acted, and
if we were able to pass reform, we'd be in a much better
position today.
Mr. Meadows. You're changing the goalpost here. You're
changing the goalpost, Ms. Brennan. I asked you for a plan to
make it solvent long-term.
Ms. Brennan. Fair enough. And we are finalizing a plan that
addresses a $125 billion gap, Congressman. That's not something
you do overnight. So, I apologize if I did not get the plan and
submit it to you.
Mr. Meadows. Did you just recently find out that you had
this gap?
Ms. Brennan. No, sir.
Mr. Meadows. Neither did I. When we spoke, we knew the
crisis we were at, and yet, you sat in my office, and didn't
give me the details, and lacked the courtesy of following up to
let me know that it was being held up. We had to followup with
you
Ms. Brennan. And I apologize for that----
Mr. Meadows. So, how do you take an advocate----
Ms. Brennan [continuing]. then, Congressman Meadows. I'd
like you to remain an advocate. You've been a tireless advocate
for the Postal Service, and we need you to continue to support
the Postal Service.
Mr. Meadows. Well, I need a plan.
Ms. Brennan. Fair enough.
Mr. Meadows. I need a plan. Even my democrat colleagues
today understand we need a plan. And at what point are we going
to get it?
Ms. Brennan. We're in agreement. In fact, I had asked to
meet with you, and my understanding is you requested to meet
with our Governors, as opposed to meeting with me.
Mr. Meadows. Actually, the Governors reached out to me to
meet with me. And so, let me just tell you, when we have it, I
have met with all these people. You're more connected. You know
what's going on.
Ms. Brennan. Mm-hmm.
Mr. Meadows. You are more connected than the NSA. And here,
I am suggesting that you're taking an advocate and turning him
into someone who has become hostile, because you are not
willing to give us some facts.
Ms. Brennan. Well, I'm going to work on regaining your
trust.
Mr. Meadows. When can I get a plan? You've talked to the
board of Governors, the two of them.
Ms. Brennan. Mm-hmm.
Mr. Meadows. When are we going to have a plan?
Ms. Brennan. As I communicated to the chairman and the
ranking member, within 60 days was our commitment to ensure
that we brief out to this committee leadership, as well as our
stakeholders.
Mr. Meadows. And so, in 60 days you're going to come up
with a plan, which puts us about the August recess, where we
can't get anything done. Ms. Brennan, I told you if we're going
to act, we have to act now. And your delay is causing a real
implication on behalf of the American people.
I yield back.
Ms. Brennan. If I may, Mr. Chairman.
Chairman Cummings. You may.
Ms. Brennan. May I respond to that, please?
Chairman Cummings. Yes, you may respond.
Ms. Brennan. This committee can act now on the core
provisions that have been communicated, that have gained broad
support among key stakeholders that will go a long way in
putting us on firmer financial footing, and giving us some
runway, Congressman, to try to build consensus for a plan that
will address broader structural issues.
As you well know, we need stakeholder consensus in order to
move----
Mr. Meadows. We are not going to a part-time bailout. I
think the chairman would agree with me here. We want a plan so
you're not back here in two years asking for more money.
Chairman Cummings. Thank you very much. Postmaster Brennan,
how long will it take you to get this plan? You said 60 days.
Sixty days from when?
Ms. Brennan. From when I spoke with you two weeks ago, Mr.
Chairman.
Chairman Cummings. So----
Ms. Brennan. We're finalizing the plan.
Chairman Cummings. Now my math does not put us in August.
What is it? July. I believe in effectiveness and efficiency.
And I don't want to waste my time and I don't want to waste
yours. I also believe in fairness to the gentleman.
We're going to set a date consistent with----
Ms. Brennan. Fair enough.
Chairman Cummings [continuing]. that. And we're going to
bring you all back. And at that time, we hope to have your
plan. And I'd like to have--I'm going to set it so that we will
have the plan a little bit in advance, so we will have a chance
to read it, and then we can talk about it. All right?
Ms. Brennan. Yes.
Chairman Cummings. We will let you know that date----
Ms. Brennan. Fair enough.
Chairman Cummings [continuing]. today. All right?
Ms. Brennan. Thank you.
Chairman Cummings. I just asked you to do that.
Mr. Connolly. Mr. Chairman?
Chairman Cummings. Thank you very much. Yes?
Mr. Connolly. Could I just--I just want to say we have
never had a better partner on the other side of the aisle on
postal reform than Mr. Meadows.
Chairman Cummings. I agree.
Mr. Connolly. And it is quite consequential if his
perception that a promise was made and not kept. And so, I
would strongly exhort the Postal Service to provide that plan,
Mr. Chairman, along maybe the timeline you provided, and to
repair the damage done in the communication between yourself
and Mr. Meadows.
He is an essential partner. He has never broken his word to
us on this side of the aisle. He has, in fact, relented on some
things I know he cared about for the sake of having harmony on
a bill. And I don't want to lose that. And I want to assure our
friend from North Carolina he'll have our support in enforcing
his request.
I thank the chair for his indulgence.
Chairman Cummings. I agree with everything syllable you
just said.
Mr. Rouda?
Mr. Rouda. Thank you, Mr. Chairman. And thank you to the
committee members here long before me who have worked so
diligently on this issue. And thank you to our witnesses for
being here today.
I would like to followup on a couple more questions on the
business plan that Representative Meadows just mentioned. You
said 60 days to get that finished. Can you give me an
indication, Postmaster General Brennan, as to how far along you
are in that planning process now? Like, are you 50 percent
done, 60 percent done? I come from the business world, so I am
just kind of curious with a business plan as robust and as
extensive, and requiring as much due diligence as this does,
for a budget this large, I'm hoping you're pretty far down that
path.
Ms. Brennan. We are, Congressman. It's final validation.
Mr. Rouda. Okay. Thank you. And then this question is for
you as well, and Mr. Rolando.
It seems that there's a fair amount of agreement on how we
can better position the business going forward so that it is at
least breakeven, if not profitable. Can the two of you just
tell us up here the major three, four, five things where there
is concrete agreement?
Ms. Brennan. I'll speak for myself. Medicare integration.
Mr. Rouda. Okay.
Ms. Brennan. Or some scenario that includes Medicare
integration. Because, to us, if health costs--health benefit
costs are roughly 14 cents for every dollar of revenue. It is
essential to improving our financial condition.
And I believe pricing and product flexibility. They're the
cornerstones of our ask.
Mr. Rouda. And when we talk about Medicare and we talk
about how other countries have privatized, many of those other
countries, if not all of them, provide universal healthcare for
their citizens. So, we don't really have an apples-to-apples
comparison when we talk about that, correct?
Ms. Brennan. No, we don't. I think in a number of different
criteria, when you look at the European Post, probably more so
size and scale. We deliver 47 percent of the world's mail.
Mr. Rouda. Mr. Rolando?
Mr. Rolando. Yes. I think there's--I know if you're
referring to just pre-funding, I think there's three parts that
I think we somewhat agree on going forward. There's obviously
the 10-year review that needs to be completed by the PRC in
terms of the pricing.
There's the filling the board of Governors with qualified
people, so that they can get to work on the vision necessary to
proceed, and to fill our networks. And as far as the pre-
funding goes, I believe we have some generic agreement on using
common sense corporate practices in terms of addressing the
pre-funding, if, again, we don't do the obvious solution of
repealing this in terms of the vested liability, the percent of
the liability, the investment of any new funds that aren't just
Treasury securities, the benefits of part D for Medicare and
the integration, with exceptions of Medicare A and B.
Mr. Rouda. And we talk about these innovations to the
business model, I know both of you, and everyone on the panel
are discussing those possibilities, one question I've got on
the universal delivery mandate, is there thought of adjusting
the pricing depending on the delivery address being affected?
And if so, wouldn't that have a dramatic impact on rural areas,
the cost of receiving their mail?
In other words, is one cost first class for everyone versus
modified cost structure based on delivery?
Ms. Brennan. No. We're not looking at--particularly, when
you look at our market-dominant products, in terms of our
pricing. You know, the universal service obligation certainly
recognizes the value of delivering to every address in America
regardless of location.
Mr. Rouda. Wouldn't that be one of the concerns, though? If
it was completely privatized and based on a competitive
structure, wouldn't you have different pricing by address,
literally, potentially?
Ms. Brennan. Potentially, yes, Congressman. I think you
would look at a surcharge, as some competitors currently do to
deliver in deep rural America. When you look at the network
economics, it would likely bear that out from a business
perspective.
Mr. Rouda. Mr. Rolando, there are 68 million Americans who
are underserved by banks and financial institutions. Do you
believe the Postal Service should be given authority to offer
limited financial services such as check cashing and
rechargeable gift cards as broadening the base of products and
services the Postal Service can provide?
Mr. Rolando. I believe that there is a lot of things
involving financial services that the Postal Service could do
under existing law. I think that's one of the things that
getting a full board of Governors. I would defer to their
wisdom, and vision, and judgment in terms of anything beyond
current law with financial services.
Mr. Rouda. Okay. Thank you, Mr. Chairman. I yield back the
remainder of my time.
Chairman Cummings. Mr. Grothman?
Mr. Grothman. Yes. Mr. Edwards, how much did the Post
Office lose last year, do you know?
Mr. Edwards. They've been losing, you know, 4 or 5 billion
a year for over a decade now.
Mr. Grothman. Okay. Can you rattle off just a few of your
suggestions that will not result in getting rid of the
universal mandate? Your suggestions for reducing that deficit.
Mr. Edwards. Well, closing post office locations, like I
said, in my testimony. Sweden and German essentially don't
have----
Mr. Grothman. Could you rattle off like how much each one
of those things you--how much savings you would find in those
things?
Mr. Edwards. I don't know off the top of my head. I mean
the USPS has over 30,000 locations. So, you can imagine the
huge infrastructure costs that entails. If we move those post
office locations to convenience stores and grocery stores, like
European countries have done, I think that will save a lot of
money.
The $110 billion of unfunded liabilities for pension and
health is a massive problem. I don't disagree in the long term,
if you restructured USPS that some, or maybe even all that cost
could be moved on to taxpayers. That is what Britain did when
they privatized their Royal Mail.
The issue is, those costs are already past. You have to
think moving forward. We have to allow USPS the flexibility for
pricing, for marketing mail, for periodicals, and the
flexibility to cut costs.
Mr. Grothman. Okay. I am going to ask a couple questions of
Ms. Cigno. But first of all, I would like to ask Mr. Quadracci,
do you have an opinion on that, as far as what you would do to
reign in the costs?
Mr. Quadracci. Yes, I do. I've been involved in this a long
time. This is also a family business. So, I grew up around
postal for better or for worse. And these are not new ideas.
We've talked about a silver bullet for many years.
I run a very tough business. The post office is a very
tough business. And I think we all naturally try and go for a
silver bullet, when, in fact, the way I have to run my
business, a lot of incremental tough decisions day by day.
I met with the taskforce from the President. I was invited
in. And I told them that I thought that the solution was in
this bill. And if you think about privatizing the post office,
yes, maybe that's an idea at some future point. And when you
say privatize, you're basically saying let it run like a
business.
Well, the first thing I would do if I was running it like a
business is, I'd have to get rid of the pre-funding of the
retirement healthcare. I'd have to do most of the stuff that's
done in this bill, and the fact that we haven't passed this is
just accumulated the losses that could have maybe--energy could
have been spent in investing in better incremental improvement.
Mr. Grothman. I will ask you. I assume a fair amount of the
Postal Service cost is employee related. Okay? And you have
many employees. So, you have some feeling about what adequate
compensation is, adequate retirement, adequate fringe benefits,
adequate----
Mr. Quadracci. Yes.
Mr. Grothman. Do you think there is any potential cost
savings there?
Mr. Quadracci. There always is. I mean automation has taken
on a lot of new levels. We automate all over the place. But I
have to manage all the same challenges of healthcare, benefits,
while most of my contracts being under a CPI cap. So, you know,
it's tough business, but you've got to make a lot of different
decisions. But there are costs that can come out on the labor
side in any business.
Mr. Grothman. Okay. You think that is particularly true of
the post office, or not?
Mr. Quadracci. I think it's particularly true of any
business that has a lot of employees.
Mr. Grothman. Okay. I don't mean to put you on the spot
there.
Mr. Quadracci. That's Okay.
Mr. Grothman. Okay. I will ask some questions with regard
to the delivery vehicles. Ms. Brennan, you have an older fleet
right now of vehicles. It is about 24 years old, on the
average, is that right? Your delivery vehicles?
Ms. Brennan. Congressman, we have over 200,000 vehicles in
our fleet. When you look at our delivery fleet, the majority of
those vehicle are called long-life vehicles. Yes. And the
average age is 27 years.
Mr. Grothman. Would there be a savings if you were to begin
to replace some of them, given your billion dollars a year in
maintenance.
Ms. Brennan. Yes, sir. And that billion dollars includes
some field costs as well, but yes.
Mr. Grothman. Okay. What is the status? We've had testimony
before in this hearing. What is your status, when you begin to
think new acquisitions will be made?
Ms. Brennan. Congressman Hice asked a similar question, and
we just completed the testing of the prototype vehicles this
past month. We're now in the stage where we're assessing those
test results, and that will help inform the production
requirements. And ultimately, our request for production, which
would likely be later this summer, early fall.
Mr. Grothman. So, you will begin to order new vehicles, or
they'll be in production later this year.
Ms. Brennan. Well, I would say this, Congressman, we deploy
roughly 10,000 to 12,000 new vehicles a year. But this next
generation, that will be also a multi-year procurement
timeline.
Mr. Grothman. When do you think you will buy the first
ones?
Ms. Brennan. Likely 2021, given the production capacity.
Mr. Grothman. We're still two years off.
Ms. Brennan. Correct. For the next generation. In the
meantime, though, Congressman, we are also testing commercial
off-the-shelf vehicles, and that will be an opportunity for us
to replace potentially up to 50,000 vehicles in the next year
or two.
Mr. Grothman. Thank you much.
Chairman Cummings. Ms. Hill?
Ms. Hill. Thank you. I want to thank the chairman for
convening today's hearing, and I look forward to working with
him and all the members of the committee to enact reform
legislation in this Congress. And I want to thank you all for
being here.
As the chairman stated, it appears that the financial
condition of the Postal Service has deteriorated for three
reasons. Decline in first-class mail, increase in expenses, and
the pre-funding requirement.
Mr. Rolando and Mr. Quadracci, you've both stated, and
actually, Ms. Postmaster, you have all stated that repealing
the pre-funding mandate will have the biggest impact on long-
term solvency, is that correct?
Ms. Brennan. That's correct. It's roughly $3 billion.
Ms. Hill. Great. So, how would you address, and I guess the
question is to the three of you. Actually, this can be to
everyone. How would you address the other two reasons about,
you know, the reduction in first-class mail, and the increase
in expenses? Just briefly.
Mr. Rolando. I would say, again, this is a three-part
process. The pre-funding is just a part of it. As far as the
revenue, I think it's really important to fill the vacant seven
positions on the board Governors, and, again, allow them to
exhibit their vision and their expertise, and to fill the
networks, and, you know, deal with the revenue stream.
On the expense side, again, there's a 10-year review that's
being done by the PRC that should conclude sometime this year.
And I think that will balance that.
But those three pieces are all really important. As I said
in my opening statement, in terms of, you know, doing any kind
of 10-year review, I think it's almost premature to try to do
that without having some idea of what's going to come out of
that review, and what's going to happen legislatively with
regard to the pre-funding, unless the review would really just
project those things, you know, happening in a particular way.
Ms. Hill. And Ms. Brennan?
Ms. Brennan. I would add afford the Postal Service more
flexibility with products that we can provide our customers.
Leverage our unrivaled physical infrastructure and our IT
infrastructure.
Ms. Hill. What products would you increase, or include that
are not currently----
Ms. Brennan. One I would say, if you think about the
current process with passports, there is an opportunity for us
to provide other services that maybe local, state, tribal
nations currently provide. I also think if you considered the
digital space, and I.D. services, an opportunity where the
Postal Service may be able to play there as well.
Ms. Hill. Great. Ms. Cigno, anything you would like to add?
Or Mr. Quadracci?
Ms. Cigno. No. I think they covered it pretty well.
Ms. Hill. Thank you. Mr. Quadracci?
Mr. Quadracci. Yes. I think they covered it as well, but
I'd say that there's been a fair amount of innovation to be
worked with the post office years ago about doing some
discounting for people who would start to use multi-channeling
to mail. And it's been very successful. So, I think we have a
very good public-private relationship, where we also, by the
way, as a printer, do a lot of the work for the post office.
And that has been very helpful over the years. So, I think
innovation is going to be important.
Ms. Hill. Thank you. And Mr. Edwards, you, in your
testimony, spoke about a problem with the union work force
being paid too much. You tout slashing the work force and large
cuts as efficiency gains. And to me, you know--you discussed
reducing the delivery to every other day. And closing office
locations.
So, I am just wondering if, to put it simply, your proposal
is literally to cut jobs, pay people less, and serve fewer
people?
Mr. Edwards. Yes. And I think, looking down the road, that
is going to happen, where the USPS is in a dire situation. The
Postmaster mentioned that they had--the USPS owns over 200,000
vehicles, an enormous cost. They've got to replace that fleet.
If you went to every second day delivery, you could cut the
fleet in half. That would be enormous savings, and frankly,
would be a green reform, good for the environment.
Ms. Hill. Okay. I only have a little bit of time left. But
you are a director of tax policy studies at a think tank that
was founded by the Koch family. It is a nonprofit organization.
And on a page on your website that talks about tax deductible
contributions that corporations can be making, tax deductible
contributions.
The first quote under the section called, Praise for Cato,
is from Frederick Smith, the chairman and CEO of the FedEx
Corporation. So, just to clarify, FedEx is a major supporter of
your organization, and you're here advocating for the
privatization of postal services.
So, essentially FedEx is receiving a tax deduction to have
someone come testify in front of Congress to take measures that
would directly benefit them, is that correct?
Mr. Edwards. Well, what you just highlighted was the fact
that we're very transparent about who our funders are.
Ms. Hill. Okay. Well, I am glad you're transparent about
it, but that's the end result, right? That you're advocating
for something that would directly benefit FedEx.
Mr. Edwards. No one told me what to say here. I can say
whatever I want from my perspective of analyzing the finances
of the USPS.
Ms. Hill. Okay. Just wondering why we should trust you.
Thank you. I yield back.
Chairman Cummings. The gentle lady's time has expired. Were
you finished, Mr. Edwards?
Mr. Edwards. Yes.
Chairman Cummings. I just wanted to make sure you had an
opportunity.
Mr. Edwards. Yes.
Chairman Cummings. Very well. Ms. Miller?
Ms. Miller. Thank you, Mr. Chairman. And thank you all for
being here today.
The United States Postal Service is critical in districts
like mine where we do not always have access to reliable
broadband or cell phone service. The Postal Service helps
connect my constituents with their loved ones, and deliver
goods to their home. That is why I am troubled to hear about
the financial insolvency facing this important service. It is
necessary that we look at options to help increase revenue and
ensure that our constituents can still receive their mail in a
timely fashion.
Postmaster General Brennan, can you talk about rural
delivery? Is it correct that the USPS does not charge any
surcharges to my constituents, or to any ZIP codes in America?
Ms. Brennan. Congresswoman, for market-dominant products,
that's correct. On the competitive side we do adjust pricing.
We have published rates, and we have non-published rates. And
the non-published rates can include a different price for
competitive product delivery in rural America.
Ms. Miller. Okay. Thank you.
Director Cigno, how much have package prices been raised
over the past few years? And is this in line with private
carriers?
Ms. Cigno. I think on average the increases have been
roughly about five percent over the past couple of years. I
think this is in line with private carriers, although, I would
note that private carriers have a lot of unpublished rates. So,
it's hard to do a one-to-one comparison between the rates,
because I don't know what they charge a lot of their customers.
Ms. Miller. Okay. Thank you.
Mr. Edwards, as you know, President Trump signed an
executive order to establish a task force on the United States
Postal Service. One of the recommendations made by the task
force was to allow the USPS to explore new business
opportunities, to expand revenue, such as allowing the USPS to
process hunting and fishing licenses.
How would ideas like this be helpful in helping the USPS
collect new revenue?
Mr. Edwards. I think it's reasonable to allow USPS some
modest diversification, but once they--if you think about the
USPS making a major leap, say, into banking, or a grocery
delivery, and other sorts of things like that, it makes no
sense, because we already have private sector entrepreneurs
doing those sorts of things. And they pay Federal, state, and
local taxes. The USPS pays no Federal, state, or local taxes.
So, it's an issue of unfair competition.
So, some diversification is fine, but I mean making big
leaps into other industries where we already have private
businesses makes no sense.
Ms. Miller. How can Congress empower the USPS to make some
of those changes?
Mr. Edwards. Well, I think, as I testified in my written
testimony, I think that the USPS is in a giant dilemma now. It
needs to diversify to survive. It really does. Mail volume is
plunging. Marketing mail volume is falling as well.
So, its core is disappearing. It's in a dire situation. It
has to diversify. But we can't let it diversify if it's going
to be competing against taxpaying companies. The only way out,
in my view, is privatization. And I think, you know, Congress
can put this off and put it off. In the end, it's going to
happen because it has to to survive, it has to diversify. If we
want it to diversify, it's got to be on a level playing field
with other companies.
Ms. Miller. Are there ways in the USPS can better utilize
technology in order to allow for better cost allocation and
targeted pricing?
Mr. Edwards. I'm sure it can. As I mentioned in my
testimony the European commission came out with a giant 300-
page report last year on European postal systems. And reading
that report, it really did strike me that the more
entrepreneurial European systems were getting heavy into
technology all over the place.
And I know the USPS is doing a lot on that, but I'm sure
more could be done. Again, I think the issue is privatization.
Private companies are just much more innovative than government
bureaucracies.
Ms. Miller. Okay. Thank you so much. Mr. Chairman, I yield
back my time.
Chairman Cummings. Thank you very much. Let me say this, as
I call on Ms. Wasserman Schultz. Ms. Wasserman Schultz, I just
want to compliment you on your efforts with regard to safety of
our postal workers. The fact, the pipe bomb, I know it affected
your office directly. And it would have affected me. I was on
the list, too. It just didn't get to me.
But I am looking at possibly doing a hearing that combines
that issue with another safety issue, which is the one that was
mentioned on 60 Minutes this past Sunday, where Fentanyl is
being shipped from China. And they say if you just touch it,
you can die. So, again, that goes to safety of our employees.
But I am sure you may have some questions now. But I just
wanted you to know that's on our radar screen.
Ms. Wasserman Schultz. Thank you. Thank you, Mr. Chairman.
Chairman Cummings. Ms. Wasserman Schultz?
Ms. Wasserman Schultz. Thank you, Mr. Chairman. I
appreciate your kind words and your underscoring the importance
of security for our postal workers throughout the entire
system, and certainly from mail recipients as well.
And just to recap, I do have a brief question about that,
and then I have a question related to pre-funding.
Just as a reminder, and Ms. Brennan, my question will be of
you. In October 2018, packages containing explosive materials
were sent to democratic leaders, including President Obama and
Secretary Clinton. My name and district office address were
listed as the return address for every single one of those
packages.
Unfortunately, one package was returned by the USPS to my
office. Some packages were captured in transit, and others
reached their intended recipient.
The explosive device returned to my office had to be
detonated in a nearby stairwell right outside my office.
Luckily, the perpetrator was apprehended and no one was
injured. And I'm internally grateful to the FBI, local law
enforcement, and the USPS for their efforts to keep us safe.
But this incident did expose potentially serious holes in
our postal system security. Safety of mail services is critical
for not only its recipients, but mail carriers and workers who
work at post offices and mail processing centers. Every worker
who not only handled, but was in proximity to these packages
were in danger.
They were determined to be explosive devices. Let me be
clear. When the package containing a pipe bomb was delivered to
my district office, my staff and everyone working in the
building was threatened, and the pipe bomb package was in my
office for 48 hours.
Ms. Brennan, with the incident I just described in mind,
since these attempted mail bombings in November, has USPS made
changes to or improved its safety procedures? Do you believe
that major postal centers are adequately equipped with
appropriate technology to track and identify suspicious
packages or abnormalities, keeping in mind that none of these
packages were intercepted while they were in the mail system?
Ms. Brennan. Congresswoman, first, the safety and security
of our employees and the customers we serve is paramount. I
would like to talk to you privately about some of those
enhancements we made, given the sensitivity, but suffice it to
say, in that particular situation, it was trained and alert
employees, as well as the enhancements we made, invisibility,
as packages moved through our network, that ultimately enabled
us to identify those additional packages.
Ms. Wasserman Schultz. Are you not able to share additional
steps that you have taken? Because most of the packages left
the Postal Service, and actually reached some stage of its
intended recipient's address. Most of them were not intercepted
in the Postal Service.
So, are you currently investigating any additional
equipment or technology to assist in identification of
suspicious packages? I'm certainly happy to discuss that with
you----
Ms. Brennan. Yes.
Ms. Wasserman Schultz.--privately to the degree that that
is necessary. What is the timeframe and likelihood of
implementation for your measures that you are in the process of
looking at?
Ms. Brennan. Ongoing. These are ongoing efforts to improve
the security of our infrastructure. That's our network.
Obviously, continuing to train employees to identify suspicious
packages. You know, clearly, once we saw that package, how it
was prepared, the number of stamps on that package, et cetera.
And also, the investments we made in identifying those types of
packages as it moves through our network.
Ms. Wasserman Schultz. Well, given that that was 2018, this
is 2019, you can understand how troubling it is that we
wouldn't already have those kinds of security measures in----
Ms. Brennan. Mm-hmm.
Ms. Wasserman Schultz.--place. And that we obviously
aggressively need to add security measures beyond which you
already had in place.
And Mr. Chairman, I would very much appreciate--I think
it's absolutely essential that we do hold a hearing. I there's
nothing partisan about this issue. We are all potentially
endangered. And so, if you would, both because of the Fentanyl
issue and the overall security issues that this brought to
light, it would be incredibly important.
Chairman Cummings. I promise you, we will followup.
Ms. Wasserman Schultz. Thank you so much.
And then just moving on in my last 45 seconds, Mr. Rolando,
I know we've talked about the pre-funding issue. The pre-
funding payments are statutorily prescribed, ranging from $5.4
billion to $5.8 billion annually. Is there any other agency in
the U.S. Government that is required to accelerate their
funding like this, or are they allowed to pay as people are
projected to retire under normal circumstances?
Mr. Rolando. To my knowledge, the Postal Service is the
only agency.
Ms. Wasserman Schultz. And Mr. Rolando, how much of USPS's
losses since the mandate came into effect can be directly
attributed to the pre-funding mandate?
Mr. Rolando. Since 2007, I believe it's about 92 percent.
Ms. Wasserman Schultz. Ninety-two percent.
Mr. Rolando. Yes.
Ms. Wasserman Schultz. Well, that certainly cries out for
doing something differently, and addressing this situation in a
very significant way. In business, if we actually had 92
percent of a deficit that could be attributed to a policy
change, then perhaps you would rethink and revisit the policy
change. And so, I just wanted to make sure that that was
underscored because it had not been up to this point.
With that, I yield back. Thank you.
Chairman Cummings. Thank you very much. With unanimous
consent, I'm going to grant the gentleman a minute-and-a-half.
Mr. Meadows. Thank you, Mr. Chairman.
And I want to than the gentlewoman for raising this issue
of security, and I want to not only join her, but make it a
priority where you come in, privately brief us immediately.
And let me tell you the reason for this is, we have to take
this extremely seriously. And I know you're making efforts, but
failure is not an option, Ms. Brennan. And just like her staff
was at risk, let me tell you why it comes home to me as well.
We got a notice on our door up here, which appeared to be a
suspicious package addressed to someone from an unknown place.
I got on the phone to call, because as I said, maybe the postal
letter carrier is at risk. And I was put on hold for an hour-
and-43 minutes, where I actually made it to the post office
quicker than they actually answered my--we got a real person.
They put me on hold. Actually, it was even worse than that.
They put my wife on hold for an hour-and-43 minutes. So, I
actually went to the post office to say, ``We've got this
suspicious package,'' of which we gave to the postal inspector.
When we got there, it was great, but to her point, it is a
critical, critical thing that we have to address, and I think
within the next couple of weeks we need to make sure we have
this understanding on what you're doing.
I thank the gentleman. I yield back.
Chairman Cummings. I want to thank the gentleman for his
statement.
What I will do is working with the ranking member and
certainly all those that are interested, we will set up that
private meeting. But, again, I'm going to also followup in the
bigger picture, too. All right? Thank you very much.
Mr. Comer?
Mr. Comer. Thank you, Mr. Chairman, and Ms. Brennan. Thank
you all for being here. Like most Americans I support the post
office, the Postal Service. Like everyone on this committee, I
think we agree we need major reform to the postal system.
My grandmother was a rural mail carrier. She retired from
the post office, so I am very familiar with the challenges that
the Postal Service has. But I am very concerned about the
proposals to the definition of universal service.
What would this mean for rural mail delivery? It sounds to
me like the proposal is to make rural Americans pay more to
receive non-essential packages. Is that your understanding?
Ms. Brennan. No, Congressman, it's not. And we certainly
recognize the importance of rural America. The taskforce
recognizes the importance of rural America.
Mr. Comer. Okay. Well, with respect to the two tiers of
service, essential and non-essential, let's touch on that.
Who's to say what's essential? Are groceries not essential for
rural Americans when rural grocery stores are struggling to
stay open? Are clothes for kids not essential for moms who
don't have affordable retail options? Are any items sold by
small businesses not essential for that small business? Who
determines essential and non-essential?
Ms. Brennan. Congressman, I think that will be the
discussion. That was a recommendation from the taskforce.
Clearly, you could argue that that's subjective. It's
arbitrary, and I think that's a discussion the stakeholders
need to have.
My comment earlier regarding essential was that any
business that mails with us considers that product essential to
their business.
Mr. Comer. Well, let me close by saying this. I would
strongly encourage you to get a plan as quickly as possible to
this committee. There aren't a lot of things that I think have
potential for bipartisan support, but this possibly is one, if
there is a plan.
You talk to the business community, there's a lot of
concerns with the post office. I know there are things the
Postal Service does that puts them at a competitive
disadvantage to some of the private companies. I'm aware of
that.
So, I think it is imperative that we try to come up with a
solution, but we can't do that without a viable plan. And just
touching on what my friend and colleague, Representative
Meadows, said, we don't need a plan to put a Band-Aid on it,
and then have you all come back next year asking for another
assistance subsidy bailout, or whatever. We want to see you
succeed, but we have to have a viable plan.
So, Mr. Chairman----
Mr. Meadows. Will the gentleman yield?
Mr. Comer. I yield to Representative Meadows.
Mr. Meadows. So, let me go back. I mean there's been a lot
of comments. And Ms. Brennan, I want to make sure that I'm
clear with a couple of things.
One is, with all due respect to my good friend, Mr.
Edwards, we're not going to close post offices. There is not
the political will on Capitol Hill to do it. And candidly, when
we did it before, it did not save money. And you are working
it, as much as this might sound like a good idea, it doesn't
save money. And it disproportionately impacts rural
communities, and so, as you're working on the plan.
The other is quit focusing on pre-funding. We gave that up
last time. We said, ``Okay, we understand the pre-funding is
there.'' The problem is with pre-funding out of the way, you're
still not profitable. And by profitable, you still do not break
even in a non-profit environment, I guess. You are still
operating in red ink, even with the pre-funding out of the way.
So, I need your plan to assume that pre-funding goes away,
which I think we've passed that Rubicon a long time ago. But
for us to focus on pre-funding as the end-all, be-all, it does
not solve our problem. Would you agree with that, Ms.----
Ms. Brennan. I would agree with you Congressman Meadows.
It's why I mentioned that $120 billion cumulative loss, and
that we have to address broader issues.
Mr. Meadows. And so, let me in the few short--with the
gentleman's permission, with a few short--what are we going to
do about--I know we've been looking at parcels, and that's
going to be the saving grace. And yet parcel increases, in
terms of the overall market, went up by 15 percent. Your market
share only went up by six.
I mean that is a business model that is not sustainable
either. What are we going to do to address that?
And I yield back.
Ms. Brennan. And it's not solely package growth. I think as
Mr. Quadracci mentioned, when you look at the efforts we have
to enhance the value of mail, promotions, giving print a
digital reflection, to keep customers in the mail, when you
think about our--what, in essence, are two lines of business,
package volume is roughly four percent of our volume. Mail is
96 percent of our volume.
So, that mix, while there's been some adjustment, we'll
still be heavily relying on mail. So, we have to continue to
keep mail relevant, keep it targeted, make it creative to keep
customers in the mail.
Chairman Cummings. Thank you very much. Mr. Welch?
Mr. Welch. Thank you very much. And I thank the chairman
for this hearing. I thank the witnesses. This committee has
been laboring on this for a long time, and it's tough.
You know, one of the reasons I will go to you, Mr. Edwards.
You made the case that if there are going to be some other--
you're making the case for privatization. I understand that.
But the public policy question is whether there are some
services, such as the Postal Service, that has been around
longer than the country has been around, where you make a
public policy decision that that will be provided, because it
serves some significant goals. Do you dispute that?
Mr. Edwards. No. I think with a privatized post office,
Congress could, like most European countries, I think every
European country has, you keep a universal service mandate on
that private formerly monopoly provider, and you could fund it.
You could do an annual calculation to find out how much that
costs the USPS. Maybe a few billion dollars a year. And you
could give them a line item subsidy to cover all the addresses
for whatever universal mandate you want. But then you open the
playing field to other companies.
Mr. Welch. So, you are saying you'd have competition with
other private entities trying to compete with the post office
itself.
Mr. Edwards. Right. But then the post office is the
universal service provider, and it would have a mandate for
that.
Mr. Welch. I disagree with that, but I understand what
you're saying. Because I think what tends to happen is that it
will be kind of a race to the bottom. A lot of services would
be offloaded and the profitable services will be the ones where
there's competition. And I think at the end of that, the public
will lose. But that is obviously a philosophical debate.
Postmaster General Brennan, what's your view on that, what
he just said?
Ms. Brennan. The Postal Service view is we're a creature of
statute.
Mr. Welch. Right.
Ms. Brennan. We were established as a fundamental
government service. And we believe that there is a path forward
to sustainability while remaining a quasi-governmental
institution.
Mr. Welch. Right. And the big advantage that you have is
you can provide a level of service that our citizens still
value, right.
Ms. Brennan. Correct.
Mr. Welch. And I hope that would include continuing six-day
delivery.
Ms. Brennan. The challenge for us is when you look out,
we're delivery less mail to more addresses. And that's not
sustainable in the long run.
Mr. Welch. Right.
Ms. Brennan. But I do believe part of the discussion, as we
discuss the USO, would be delivery frequency.
Mr. Welch. Right. But here's the dilemma that we have. The
better the service, the more people will use it, in general. I
mean would you agree with that?
Ms. Brennan. Yes.
Mr. Welch. And then you have the challenge of trying to
figure out how to pay for it, correct?
Ms. Brennan. Yes.
Mr. Welch. Yes. Mr. Rolando, you have any thoughts about
what it is we need to do to maintain service consistent with
the enormous pressures that folks you represent have to contend
with?
Mr. Rolando. Yes. I guess it really depends on the agenda,
you know. If the agenda is to raise costs, reduce service, take
business away from the Postal Service, and hand it over to
private delivery companies, that's one agenda. If the agenda is
to work with Congress to correct, again, an unintended error
some 13 years ago, it's a whole different group of ideas. And
it's what we are here to try to move forward.
Mr. Welch. All right. The work force in the Postal Service
has shrunk quite a bit, right?
Mr. Rolando. By about 200,000. Yes, sir.
Mr. Welch. Yes. That's a lot of folks. And there's a lot of
temporary workers on whose pay and benefits are significantly
different than the full-time force, correct?
Mr. Rolando. Productivity is an all-time high. We are
working with about 200,000 less people, and postal employees
are not hired to career positions any longer. They have to come
in as non-career.
Mr. Welch. By the way, you guys work hard.
Mr. Rolando. We do.
Mr. Welch. I'm showing up at my apartment, it's nine at
night and I see a postal person. What's going on? Are you
complying with OSHA? Are you working them too hard? What's
going on?
[Laughter.]
Mr. Welch. Seriously. I mean what----
[Laughter.]
Mr. Rolando. Oh, that's a question?
Mr. Welch. Well, I'm amazed. I'm coming home, and they're
there delivering the mail. They've been at it for 10 or 12
hours. They work harder than Jordan does.
[Laughter.]
Mr. Welch. Anyway, thank you. I yield back.
Mr. Meadows. Will the gentleman yield? The gentleman
yields?
Mr. Welch. I do yield. Yes.
Mr. Meadows. Let me ask you this, Mr. Rolando.
Mr. Rolando. Yes.
Mr. Meadows. You just said employees are coming in non-
career. Is that what you said?
Mr. Rolando. Yes, sir.
Mr. Meadows. Can you explain that, because I don't think a
lot of people understand what that means, and how that is
different than maybe before.
Mr. Rolando. Yes. It used to be, prior to, I don't know,
maybe 2012, 2013, letter carriers were, I'll speak for my
union, letter carriers were hired as part-time flexibles, but
they were career employees, and then over a period of time they
would become full-time regulars.
The way the hiring works now, you come in as what's known
as a CCA, which is non-career position. And then career
positions are filled from the non-career work force later on.
Chairman Cummings. Do benefits come with that?
Mr. Rolando. The non-career position?
Chairman Cummings. Non-career.
Mr. Rolando. No, sir.
Chairman Cummings. All right. Thank you very much. Mr.
Jordan?
Mr. Jordan. I'm going to yield the gentleman from North
Carolina.
Mr. Meadows. I thank the gentleman. So, let me followup on
a few real quick things that I think are critical.
Ms. Brennan, did you say we're going to look at five-day
service? Because that is very concerning. That is exactly the
opposite way that we went the last time. Mr. Hice tried that.
And all due respect to Mr. Hice, it didn't work then. I don't
know that it's going to work now. So, why are we considering
that?
Ms. Brennan. Congressman Meadows, I would say, as you know,
in the last Congress, and for actually the last five years,
we've been working to build consensus around a bill. And it's
why we did not address delivery frequency in the past.
The board is looking at a range of potential options,
recognizing that many of them will require legislative reform.
Mr. Meadows. But Ms. Brennan, as you know, did you tell the
board that dog won't hunt?
Ms. Brennan. Well, not----
Mr. Meadows. It just won't. And I guess how are you going
to deliver, have Sunday delivery for Amazon, if you're going to
five days?
Ms. Brennan. Again, I would say, Congressman Meadows, there
are a number of potential revenue-generating and cost-reduction
initiatives in this plan. I don't anticipate----
Mr. Meadows. You mean the plan we're going to get.
Ms. Brennan. That's correct, sir.
Mr. Meadows. Now did I hear you correctly earlier that you
are just in the final verification of that plan?
Ms. Brennan. No. My comment was the validation, the rigor
around the range of magnitude of savings over a 10-year period,
given it's a 10-year plan. I recognize----
Mr. Meadows. So, you are validating your assumptions. Is
that what you're saying?
Ms. Brennan. Yes. Correct. The financial validation, and
frankly, and----
Mr. Meadows. But if you've got those, why are you not
sharing that with Chairman Cummings at this point?
Ms. Brennan. I had a conversation with the chairman and the
ranking member at a high level where we are with the plan, and
in broad categories, what the plan will address. And as I
noted----
Mr. Meadows. So, is it making the assumption that you have
a five-day delivery?
Ms. Brennan. There is in there, delivery frequency.
Mr. Meadows. So, yes and no. Five-day delivery or not?
Ms. Brennan. Yes. And seven-day package delivery.
Mr. Meadows. Okay. So, quit wasting----
Ms. Brennan. We recognize the political implications.
Mr. Meadows [continuing]. our time, Ms. Brennan. We have
very little time to get this done. And what you're doing is you
are saying you are going to deliver packages seven days a week,
and deliver mail five days a week. I do not understand that. I
understand it from a financial standpoint, but I don't
understand how you can say that your primary objective is to
deliver mail, and that packages are a follow-on. And yet, you
are going to put the priority on seven-day delivery for
packages, and cut back mail to five days. Why would you do
that?
Ms. Brennan. Congressman Meadows, it's one of a number of
initiatives that we would put forward. The board has a
fiduciary responsibility to outline a path forward. Now
ultimately this Congress, this committee determines what the
universal service obligation entails.
Mr. Meadows. So, did you tell the board of Governors that
that idea has been rejected by Congress on both sides of the
aisle previously?
Ms. Brennan. Yes. We had conversations about the political
reality of that particular----
Mr. Meadows. And that it has been rejected? They know that
it's been rejected previously.
Ms. Brennan. Yes.
Mr. Meadows. And they continue to go on down that----
Ms. Brennan. Again, we have a responsibility to put forward
a plan, and as I indicated, there are a range of initiatives.
The challenge for us, as noted, is we're adding a million new
deliveries a year as mail continues to decline.
Mr. Meadows. So, it sounds like you're a package company
and not a mail company.
Ms. Brennan. Ninety-six percent of our----
Mr. Meadows. If you're adding a million new parcels----
Ms. Brennan [continuing]. volume is mail, not packages.
Ninety-six percent of our volume is mail, not packages.
Mr. Meadows. You keep coming back--listen, this is not my
first rodeo. I understand how the numbers work. Is your mail
volume declining in terms of overall?
Ms. Brennan. Yes.
Mr. Meadows. Is your package volume increasing overall?
Ms. Brennan. Yes.
Mr. Meadows. Okay. So, don't go with the other statistics
that would try to blur the lines. The truth of the matter is
you're moving more to packages. And if that's where we're going
to be, let's be honest about it.
Ms. Brennan. I'm being very candid and direct here,
Congressman. The reality is----
Mr. Meadows. With the fact that you're looking at five-day
delivery.
Ms. Brennan. The reality is the board has the
responsibility----
Mr. Meadows. The Chairman is not with you on five-day
delivery, and neither am I, Ms. Brennan. You know that.
Ms. Brennan. Congressman Meadows, as I indicated,
ultimately, Congress will determine what the USO entails. But
we have a responsibility to put forward a plan that closes this
gap. It would be irresponsible not to.
Mr. Meadows. I yield back.
Chairman Cummings. Thank you very much. Ms. Lawrence?
Ms. Lawrence. Okay. I want to thank Mr. Cummings for this
hearing. I also want to thank Postmaster General Brennan for
everything that you do.
There's no other Member of Congress who has served in the
Postal Service for 30 years and had a career. I was a letter
carrier. I carried mail door to door. I worked midnight, sorted
mail. I was a supervisor on the floor, supervising employees. I
have been an EO investigator. I have been a manager. I've
worked in the budget department and in the labor department.
So, I have seen the post office, Mr. Edwards, adjust to
volume, adjust to work force, and privatizing it is not an
option for me. However, the Postal Service must adjust to the
times and must become a--not a profit-making--it concerns me
when we say that we need to be competitive with private
industry. That is just like saying I need to run a race with
everyone else, but I am going to tie your legs together.
Everyone else can run, but I am going to keep the strings on
you. So, a lot of the things that you are proposing, just, the
math doesn't work.
With that being said, the Postal Service, under 39 USC
Section 202, and I quote, ``The exercise of the power of the
Postal Service shall be directed by the board of Governors. By
statute, the board of Governors is comprised of 11 members,
including nine individuals appointed by the president, and with
the advice and consent of the Senate. And the postmaster and
the post deputy are both appointed by the board of Governors.''
My question to you, Postmaster, how many members does the
board have today?
Ms. Brennan. Currently, Congresswoman, there are two
independent Governors, and the deputy and I. So, there are four
of us that comprise the temporary emergency committee of the
board.
Ms. Lawrence. That is not a quorum, correct?
Ms. Brennan. That's correct.
Ms. Lawrence. How long has the board lacked a quorum? A
long time.
Ms. Brennan. It's been years. Yes.
Ms. Lawrence. It's been years.
Ms. Brennan. Since 2015, I believe, ma'am.
Ms. Lawrence. So, because of this non-functioning part of
our responsibility as a government to provide you, under
statute, a board of Governors to make a lot of these decisions
that we are talking about, the board has created this so-called
temporary emergency committee to ensure governance of this.
Can you explain what is the role of the temporary emergency
committee, and what power do you have?
Ms. Brennan. Its fundamental responsibility is to ensure
continuity of operations.
Ms. Lawrence. So, at one time there were only two people,
correct?
Ms. Brennan. Correct.
Ms. Lawrence. You and the deputy.
Ms. Brennan. That's correct.
Ms. Lawrence. And so, now we just recently received four.
We still don't have a quorum, but you're making decisions on
operations that we're holding you accountable for, correct?
Ms. Brennan. That's correct.
Ms. Lawrence. What is the challenge of operating in this
arena, with all the challenges and changes not having, by
statute, the structure to be able to be responsive and to do
your job?
Ms. Brennan. As we've said, for years, Congresswoman, that
we're best served having a fully functioning board, whether
it's nine independent Governors, or five. The issue becomes
individuals that have the experience, the credentials, and that
generally represent the public interest.
So, it's critically important that the Senate move to
confirm the three Governors that are currently, or, excuse me,
the three nominees that are in process.
Ms. Lawrence. Mm-hmm. So, I am going to close with I want a
plan. I do want a 10-year plan. I will never support reducing
delivery days. We know fundamentally that it's a lot of money
to be made in high-density populated areas. Rural America will
suffer tremendously.
I represent a high-volume area. I'll get postal delivery
and it will be competitive, and a lot of people want to pick it
up. But it's very few companies, even today, FedEx, and all of
the competitors that we talk about, use the Postal Service for
first and last mile. We know that they do not make money, so
they will drop it at a local post office, and pay the post
office to make that mile road down the road to have one or two
homes.
So, when we are looking at this plan, and we start talking
about that, I expect a plan that not only just looks at
numbers, but look at the overall commitment that the Postal
Service was established to provide the service to our country.
The other thing I want to talk about is the work force. We
have a work force in the Postal Service that has all the
challenges, thank goodness, of being representative of the
diversity of this country. We are one of the largest employers
of veterans. We are one of the largest employers of handicapped
employees.
So, while we talk about a lot of these things, a lot of our
story hasn't been told. We have the second largest fleet in the
United States of America next to the military. We need to be
efficient. Look how long it has taken us to get through
Congress to actually buy a fleet that is functional, and that
can provide that service.
So, with that, I close. And we have a lot of work to do. I
want us to get a board of Governors, so that we can actually
hold you accountable.
Thank you.
Chairman Cummings. Thank you very much. Mr. Gibbs?
Mr. Gibbs. Thank you, Chairman. To the Postmaster General,
I'm a little confused. Back in I guess the last Congress, I was
on this committee, but the bill, it didn't move. It said that
retirees who were over the age of 65 would be required to
enroll in Medicare, who weren't already enrolled.
My first question is, are the current retirees enrolled in
Medicare?
Ms. Brennan. Yes. Actually, the majority, roughly 75 to 76
percent are integrated with Medicare.
Mr. Gibbs. That was my second question. Okay. When they
were working, and current workers now, may we separate the two,
did they pay into Medicare, and did the post office pay into
Medicare?
Ms. Brennan. Yes, Congressman. Between the Postal Service
and employees, we paid more than $32 billion into the Medicare
trust fund since 1983.
Mr. Gibbs. So, this pre-funding level, if most employees,
retirees are in Medicare, and both the employer and employee
paid into the system like in the private sector, so this pre-
funding, that's actually for, like, the supplemental coverage
of Medicare?
Ms. Brennan. That's--excuse me?
Mr. Gibbs. Is that for like providing supplemental Medicare
coverage?
Ms. Brennan. It's pre-funding to cover the entire employee
and retiree pool.
Mr. Gibbs. Yes. But they're already----
Ms. Brennan. It's current active and retired. Excuse me,
Congressman.
Mr. Gibbs. Yes. Where I'm confused, if they're in the
Medicare system, Okay, and they pay like everybody else, just
like everybody else, and then you have to buy a supplemental
policy for the 20 percent, is that what the pre-funding for? Or
are you paying twice?
Ms. Brennan. No. The pre-funding is to ensure that our fund
is 100 percent funded. Right now, it's roughly 42 percent
funded. So, we have to make amortization payments each----
Mr. Gibbs. No. I've got that. Where I don't understand is
if they're in the Medicare system why do you have this level of
pre-funding if it is paying for 100 percent of the Medicare
costs?
Ms. Brennan. Not all of those retirees are currently
integrated with Medicare.
Mr. Gibbs. Well, 25 percent. So, that's 25 percent then.
Ms. Brennan. Correct. It's roughly like----
Mr. Gibbs. Okay.
Ms. Brennan [continuing]. 87,000 or 88,000 people.
Mr. Gibbs. Okay. Okay. Okay. That kind of answers that.
Because I've been confused.
Now current workers, are they scheduled to go into that
system, or Medicare 100 percent, like in the private sector?
Ms. Brennan. That's the discussion. We believe that this is
a fundamental question of fairness, and that we should be
treated like any self-funded entity that requires--that provide
healthcare benefits typically require Medicare become the
primary, and if you have a secondary, like FEHB.
Mr. Gibbs. Yes. That's where I was getting at, because I
was getting confusion when I talk to different letter carriers
and stuff.
Ms. Brennan. We'd be happy to come and brief you or your
staff, Congressman.
Mr. Gibbs. Okay. In my area, in Ohio, and I assume around
the country, you've closed a lot of processing centers. Like, I
think in the northern Ohio you've probably closed--there's
probably one left, and there's--at least three are closed. Have
you reviewed how that has affected your cost savings, supposed
cost savings versus service?
Ms. Brennan. Those consolidations certainly were as a
result of a continuing decline in volume. So, we looked at the
latent capacity in our network. We identified savings. And not
in all cases did we achieve the savings during the targeted
timeline, but that's an opportunity that continues.
And we'll have to continue to look at the infrastructure as
the mail mix changes, and as the overall volume declines.
Mr. Gibbs. I just have a concern. I think we need six-day
delivery. And then I've been concerned about some of the
processing centers closing. It might have gone too far and
affected service. Then it also affects your bottom line at the
end, because people are dissatisfied that, especially large
mailers, they might be going different options, but just a
comment.
Mr. Gibbs. The Office of Special Council found that there
were systematic Hatch Act violations by the Post Office, and
specifically, the letter carriers left pay for the Hillary
campaign. My question is the Office of Special Council required
that the Postal Service submit a corrective action plan by
August 31st, 2017. Did the Postal Service submit that
corrective action plan?
Ms. Brennan. We did, Congressman.
Mr. Gibbs. Okay. Thank you. I yield back.
Chairman Cummings. Thank you. Ms. Plaskett?
Ms. Plaskett. Thank you very much. And good afternoon to
everyone.
Postmaster General Brennan, I am pleased that you're here
before the Oversight and Reform Committee to discuss the
current financial conditions of the Postal Service.
One of the themes that I've heard throughout this hearing
that I want to reiterate is the need for communication. Over
the past two years I've had several correspondences and was
grateful for an in-person meeting with Deputy Postmaster
Stroman. But there have been times when your leadership team
and others have not been as responsive to my office and I
assume other offices as well with regard to systemic issues
within the Postal Service.
I'm grateful for the opportunity I have now to have this
conversation with you in a public hearing, but I can understand
that, and I'm concerned, because I have been sitting on
Oversight since I came to Congress. And if it's difficult for
me to be in touch with you, I can only imagine what my other
colleagues, who do not have direct oversight over the Postal
Service, the kind of communication that they have with your
office.
So, as I hear other colleagues speaking, I think that's
something that really needs to be addressed, this notion of
being able to communicate, and getting information back and
forth.
I wanted to talk with you about some issues that I have
noted and want to get your opinion on. In the Virgin Islands,
of course, after what we've gone through in 2017, with two
hurricanes, one of the things I'm concerned with, with the
growing number of natural disasters in this country, and the
issues that we had with regard to getting mail, and
communication directly to the islands, is that we are now just
two weeks away from the 2019 hurricane season.
And over the past two years, and looking back on what has
been done, and what worked, and what didn't work, can you tell
me what steps the U.S. Postal Service has taken to improve its
preparedness for natural disasters, especially hurricanes,
tornadoes, and such throughout the country?
Ms. Brennan. Yes. If I may address your first comment, I
am----
Ms. Plaskett. Sure.
Ms. Brennan [continuing]. personally accessible. We have a
government relations team that is accessible to all the
members. I'd be happy, certainly, to followup, and apologize if
there was any lack of communication or a gap in being
responsive to you.
Ms. Plaskett. Mm-hmm.
Ms. Brennan. In terms of preparation, as you would imagine,
we have incidents that occur every day throughout this country.
So, we have continuity of operation planning that we do,
emphasis on protecting people, product, and property. And the
same in the Virgin Islands. And I know the devastation that
occurred, we responded by adjusting our transportation. We
chartered planes to bring volume and product into the Virgin
Islands, and bypass the gateway typically that we use in Puerto
Rico.
Our new area vice president for the northeast area just
recently visited the islands. So, we'd like to take the
opportunity to introduce you to him as well, and ensure that
we're well prepared----
Ms. Plaskett. Sure
Ms. Brennan [continuing]. for this upcoming hurricane
season.
Ms. Plaskett. Sure. I mean what happens oftentimes is that
our mail is going through Puerto Rico, and that becomes an
issue of us fighting with our neighbor for accessibility. If I
have problems in the Virgin Islands, and having to report to
Puerto Rico about those problems, that becomes problematic,
because they're going to cover for themselves in some way with
regard to the issues that are being systemically filtered down
to the people of the territory.
And so, those routes become very problematic to us, having
mail go through Puerto Rico. Because they're fighting for as
much mail as they can get to keep the FTEs and the people that
are there. With regard to that, you know, we just recently had
a review that was done, an excellent review that was done by
your agency on manpower hours.
Ms. Brennan. Yes.
Ms. Plaskett. And they said that 22 individuals needed to
be hired. Well, in terms of communication, I didn't know when
you were doing those hirings. And I understand that a lot of
those were contractual hires that needed to be made. And my
concern now is that we didn't open that pool up to the local
people. And a lot of the individuals who were hired are
actually from Puerto Rico, who are then going to be coming to
the Islands. They'll stay there. They'll stay in the Virgin
Islands for two years, and then they'll take that FTE back to
Puerto Rico again. And we'll end up exactly where we were, with
our letter carriers and others doing the bulk of the work, mail
sorters, supervisors, the stress and strain of having less FTEs
on the ground.
Mr. Rolando, would you say that that has happened in the
past. Have you heard any of those complaints from individuals
in the Virgin Islands?
Mr. Rolando. It's been a while since I've been down there.
I went down there to check on the employees right after the
hurricane. And there were some staffing issues at the time
related----
Ms. Plaskett. Mm-hmm.
Mr. Rolando [continuing]. to what you're talking about. I
don't know if it's been corrected, or if it was directly
related to the storms, but yes.
Ms. Plaskett. But I would just say as I hear throughout all
of this, is that we want to be a part of those plans. We want
to be a part of those discussions. I know that you have
bureaucracy, and you have regs that you're dealing with. But
there are individuals that are sitting here on this committee
who want to make this work, not just for our constituents, but
for you as well. Because the people who work in the Post Office
are people that we deal with every day, whether they're family
members or individuals. So, if that communication can work a
little better, that would be helpful.
Ms. Brennan. Absolutely commitment to that. And we
recognize that the churn, if you don't have a labor pool that
you identify from the Island, so point taken.
Ms. Plaskett. Thank you. I yield back.
Ms. Brennan. Thank you.
Ms. Plaskett. Thank you for your indulgence, Mr. Chairman.
Chairman Cummings. Ms. Ocasio-Cortez?
Ms. Ocasio-Cortez. Thank you, Mr. Chair. Postmaster General
Brennan, before 2006, to your knowledge, was the Postal Service
fiscally sound? Would you say it was solvent?
Ms. Brennan. Yes. We were in a much better position than we
were post-2006.
Ms. Ocasio-Cortez. And that's when you all maintained a
pay-as-you-go system for retiree health benefits, is that
correct?
Ms. Brennan. Prior. That's correct. Yes.
Ms. Ocasio-Cortez. Prior to 2006. Now I know that there's
been a lot of conversation here about the retiree health
benefits, and my colleague across the aisle urged us all, you
know, and urged you, saying, ``We need a plan. We need a
plan.'' And I believe that we do need a plan, but we need a
plan. Congress needs a plan. Because before 2006 things were
fine on your end. And it was in 2006 where we passed
legislation that--the Postal Accountability and Enhancement Act
that required you to fully pre-fund the Postal Service's
portion of the cost providing healthcare for future retirees,
is that correct?
Ms. Brennan. That's correct.
Ms. Ocasio-Cortez. So, when you opened today you talked
about how a lot of the failures in our system have to do with a
failed business model. And that business model was changed in
large part by us, is that correct?
Ms. Brennan. That's correct. It was imposed on the Postal
Service by the Congress.
Ms. Ocasio-Cortez. So, this was an imposition on us. We
created this problem. I would say that we created this problem.
And I think that it's on us to fix it, at least in this
specific respect, with retiree health benefits.
So, Postmaster General Brennan, how much money is currently
saved in the retiree health benefits fund?
Ms. Brennan. In the current fund, the RHB fund, the assets
are really $48 billion.
Ms. Ocasio-Cortez. $48 billion that's already currently
saved. Is any other Federal agency required to pre-fund the
cost of retiree healthcare coverage?
Ms. Brennan. The only other Federal agency is Department of
Defense, through their TRICARE system. We are better funded
than they are, and as you well know, they are appropriated, and
they are required to integrate with Medicare.
Ms. Ocasio-Cortez. That's right. And I find that to be such
an irony, because we don't even pre-fund our own retiree
benefits here in Congress. And so, we're asking you to reach a
higher standard that we even create for ourselves. I don't
think it's surprising that we've tied your hands. We've made
your job impossible, and then we're upset that we've given you
an impossible standard that you haven't been able to meet.
Mr. Quadracci, are private sector firms like the ones that
you work with required by law to pre-fund the cost of retiree
healthcare coverage?
Mr. Quadracci. No, we'd be out of business.
Ms. Ocasio-Cortez. So, you'd be out of business. Congress
doesn't even impose this on ourselves. Yet, this is a standard
that we have imposed on you. And even when DOD has a similar
requirement, we actually fund it. And they have that Medicare
provision that you're asking for.
Mr. Quadracci. If I might, also, I think we're
characterizing this as a bailout. It is not a bailout.
Ms. Ocasio-Cortez. Absolutely.
Mr. Quadracci. We just want to not have them do what no one
else has to do.
Ms. Ocasio-Cortez. And I think you bring up an excellent
point, Mr. Quadracci, because you're not asking for a dime.
You're just asking us to end this unreasonable requirement,
fiscal requirement----
Mr. Quadracci. Yes.
Ms. Ocasio-Cortez [continuing]. that no other business and
virtually almost no other Federal agency has.
Postmaster General, how critical is eliminating the burden
of pre-funding retiree health benefits to placing the Postal
Service on sound financial footing?
Ms. Brennan. It will go a long way, Congresswoman. It will
generate roughly $3 billion in savings per annum, and over $33
billion over a 10-year period.
Ms. Ocasio-Cortez. You know, I think it is so important
that that gets across, because there is no way that we can
develop a plan, there's no way that I think you can develop a
plan that is realistic unless we lift this burdensome
requirement on you.
Ms. Brennan. That's correct. Any reform bill must have a
fix for this burden that would require Medicare integration for
retirees.
Ms. Ocasio-Cortez. Mm-hmm. And I know my colleague from
Massachusetts, he talked about his family wanted to be postal
workers. And I know that that's certainly a reality for my
family as well, because it is one of the--in our current
economic climate, it's one of the few positions, at least in
the career workers' position, that you can get access to
dignified healthcare and strong benefits.
And we talk about privatizing. A lot of private delivery
corporations do not cover healthcare for a lot of their
employees. It's extremely stressful work conditions. And I
think that when we--this is also a question of dignity of work.
I want to commend you and your commitment for maintaining that
dignity of work for our Postal Service workers, and ensuring
that we find a business model that works in a way that does not
compromise the right to healthcare.
So, that being said, I would like to make the
recommendation that we eliminate this burden of the pre-funding
retiree health costs, so that you can do your job.
Thank you very much.
Ms. Brennan. Thank you. And our employees take great pride
in the mission. Thank you.
Chairman Cummings. Thank you very much. Ms. Pressley?
Ms. Pressley. Thank you, Chairman Cummings. The Postal
Service is certainly a fundamental pillar of the
interconnectivity of our global economy, a critical resource
for communities across America. I'm glad we can discuss
potential solutions to solve the financial challenges of what
is such a critical American service.
My mother, may she rest in power, I recall her, and her
generation, you know, there were three things the black folks
wanted to do that were a pathway to upward mobility. You were
either a teacher, you were a nurse, or you were a letter
carrier. And there was great pride in that.
I want to talk for a moment about the Postal Services work
force and the needs of working families. According to recent
SCC filings, the Postal Service is ``the second largest
civilian employer in our Nation, with approximately 634,000
employees as of the end of 2018.''
In fact, in the district I represent, the Massachusetts
7th, there are approximately 2,897 U.S. Postal Service workers.
The highest concentration of workers across our state. The
issue of pay and benefits is a top concern for many of these
workers, particularly the vast number of non-career workers the
USPS now employs.
Ms. Brennan, can you explain the differences in basic pay
and benefits between career and non-career positions?
Ms. Brennan. Yes, Congresswoman. The non-career employee
wage rate is roughly $11 less than a career employee. That's an
average wage rate that I'm citing. And they have limited
benefits.
Now what I would say is the non-career, or the flexible
work force, will become tomorrow's career employee. There is a
path to a career position.
Ms. Pressley. Okay. So, can you speak a little bit more
about that? What is the Postal Service doing to retain and
support both career and non-career employees so that they can
gain that foothold into the middle class that I spoke about a
moment ago?
Ms. Brennan. We have a very low turnover rate with the
career employees, but with the non-career employees we do have
a challenge in retention. One, it's setting clear expectations
at the outset that it's a physically demanding job, and also,
as you would likely appreciate, when we do exit interviews with
employees, it's less about the pay and more about the treatment
and their relationship with the supervisor. So, making inroads
there to ensure we have better workplace environment for all
employees.
Ms. Pressley. So, in preparation for this hearing I was
going over some data and it showed that nearly half of all USPS
workers are women, is that correct?
Ms. Brennan. That's correct.
Ms. Pressley. Okay. And the average salary for a career
employee was less than $57,000 in 2018. Does that sound about
right?
Ms. Brennan. That sounds directionally close for wages. It
does not include benefits. Yes.
Ms. Pressley. Okay. Well, that was my next question,
because although this is not an issue that should be
genderized, we do know it is one that is disproportionately of
unique import to women. Could you just talk about, particularly
in single female-headed households, childcare, what you
provide, if there is anything flexible or onsite that you might
provide. What types of benefits do you provide?
Ms. Brennan. In terms of benefits, none for childcare, per
se, but we do, of course, follow the--I'm sorry. I'm drawing a
blank. Dependent care. And we provide FMLA leave.
Ms. Pressley. Okay. So, flexible----
Ms. Brennan. We do provide those provisions.
Ms. Pressley [continuing]. time off.
Ms. Brennan. Yes. Where feasible, where operations dictate.
Ms. Pressley. Okay. And no childcare onsite, or anything
like that?
Ms. Brennan. No.
Ms. Pressley. Okay. Well, as we consider proposals to
reform the Postal Service, it is critical we remember the men
and women who work for the Postal Service. They are providing a
service that really is vital to our Nation, and so, I just
wanted to take this opportunity to say thank you to all those
hardworking folks out there. And we're doing everything we can
to support you, and everything you do for our families, we want
to make sure that you have that same stabilization and those
opportunities.
So, thank you, and I yield back.
Chairman Cummings. Thank you.
Ms. Brennan. Thank you.
Chairman Cummings. Ms. Brennan, just one question.
Veterans, how many veterans, what is the percentage of veterans
that----
Ms. Brennan. We have over 100,000 veterans. Roughly 13 to
15 percent of the work force, Mr. Chairman.
Chairman Cummings. Okay. Mr. Jordan?
Mr. Jordan. Mr. Chairman, thank you again. I want to thank
all our witnesses. If I could, just a couple quick questions.
Postmaster General Brennan, just back where some of the
previous questions were. If you got rid of the pre-funding
mandate, I think your answer to that was it will go a long way
toward helping you become financially solvent. But it wouldn't
get you there. Is that right?
Ms. Brennan. It would not close the full gap.
Mr. Jordan. The pre-funding mandate was 2006, I believe.
Ms. Brennan. That's correct.
Mr. Jordan. Okay. And since that time have you--separate
and aside from that, have you run surpluses or deficits each of
those respective fiscal years?
Ms. Brennan. Both. I'd lay out the timeline for you by
year. But most recent, net income losses and controllable
losses.
Mr. Jordan. More often than not, though, you were losing
money each of those years.
Ms. Brennan. That's correct. Yes. The last 12 years we have
had net losses. And as indicated, the majority of those losses
were tied to the pre-funding requirement.
Mr. Jordan. Understand. But I think someone said earlier, I
forget who, but even with that issue, and I'm not dismissing
it's an issue----
Ms. Brennan. Mm-hmm.
Mr. Jordan [continuing]. you're still not there.
Ms. Brennan. No. That's correct. We've got $125 billion gap
that we're facing over the next 10 years.
Mr. Jordan. Okay. I know you had a long conversation with
Mr. Meadows a couple different times on this plan. And I do
appreciate the fact that you called the chairman and I a couple
of weeks ago. We had a nice conversation. I distinctly remember
in that conversation encouraging you to call Mr. Meadows. I
take it you didn't.
Ms. Brennan. We, in fact, did.
Mr. Jordan. Did you?
Ms. Brennan. Yes.
Mr. Jordan. Okay. Good. Okay. Good. Well, I appreciate
that, because I didn't know that you had. So, we do look
forward to receiving that, and getting a chance to analyze it,
and move forward from there.
With that, Mr. Chairman, again, thank you, and would yield
back.
Chairman Cummings. Thank you very much. And really to all
of you, I want to thank you for being here today. This is so
very, very important.
As I listened to all the comments, I just want us to be
very careful. When we talk about things like privatization, Mr.
Edwards, one of my concerns is that--I don't want us to be
placed in the situation where people are paying $1.50 for a
stamp. I mean I love the postal system, and I buy my stamps.
But that's kind of high.
I think it's important that we balance all of these things.
And the thing that really, I guess, concerns me is we were so
much there. We had a solution. And it was a solution that I
felt pretty good about, and Mr. Meadows felt good about. And
I'm hoping that--and I looked at the commission's reports, and
all that kind of stuff. I still think it's the best solution.
How we'll be able to get back to that level of comfort,
and, again, I'm not saying everybody is going to be
comfortable, but the level of comfort we had with the bill that
came out of this committee unanimously, I don't know how we're
going to do that, but we're going to try to do that as best we
can.
Again, Madam Postmaster General, please make sure that we
get the report. I can tell you we will have a date for you
today. I think it's going to be around July 7, somewhere around
there. But you will know today.
Chairman Cummings. And I am going to ask unanimous consent
to enter into the record the following for this hearing: A
statement from the National Active and Retired Federal
Employees, written testimony from the American Catalog Mailers
Association, a statement from the American Postal Workers
Union, written testimony from the Package Coalition, and
statement from the Public Citizen. Without objection, so
ordered.
Chairman Cummings. And I want to thank you, Mr. Jordan, for
your cooperation in sitting down and trying to work this thing
out.
The last thing I would say to all of our stakeholders,
let's hold hands and get through this. I don't want you all to
get splintered. Try to keep working together. Keep talking.
Keep letting us know what you would like to see in a bill.
And I guarantee you, you're going to be conflicted with
some other stakeholder. I just want you to know that before you
even bring anything to us. But I think it's worth a try.
Mr. Gomez, you're coming right in under the bell.
[Laughter.]
Chairman Cummings. Boy, you're close, man. I was just about
on the one-inch line, about to go over the goal. And as you
prepare yourself with your questions, I'm stalling for you.
[Laughter.]
Chairman Cummings. But we are so glad to see you. Amen.
[Laughter.]
Chairman Cummings. Ladies and gentleman, the distinguished
gentleman, my friend, Mr. Gomez.
[Laughter.]
Mr. Gomez. Thank you all for waiting for me, and making
sure I had that big introduction. Mr. Chairman, thank you so
much. I really do appreciate it.
We all know that the Postal Service reaches every ZIP Code
in this country. It provides more than 159 delivery points,
reaching most of the most of the remote areas of the Nation.
But as people become more reliant on e-mail, the post office
has been struggling to keep up with the rising expenses.
Most pressing, the Postal Service has had a difficult time
complying with the requirements put in place by Congress to
pre-fund retiree health benefits. According to the GAO, the
Postal Service owes their retirement benefit program more than
38 billion in payments.
Yes, we need to protect our national Postal Service, but we
must also ensure that any reforms from Congress don't take
benefits away from postal workers.
Postmaster General Brennan, taken all these factors into
consideration, what is being done by the work force to adjust
to the realities of the retiree health benefit mandate and
declining revenues. I almost ran out of breath.
[Laughter.]
Mr. Gomez. Go ahead.
Ms. Brennan. Thank you.
The Postal Service has been clear that Medicare integration
is vital, and it's essential to improving our financial
situation. I think there is general consensus among a broad
stakeholder group that that is an onerous burden unique to the
Postal Service, and we need to move forward.
In terms of reacting to the change in the mail mix, and the
overall decline in volume, like any business, we'll address
where we have latent capacity in our network, and we'll
consolidate operations where it makes sense to do so.
Mr. Gomez. Well, thank you, because that does turn to an
issue in my district. My constituents have reached out to me
regarding the closure of one of my neighborhood postal
facility, the Little Tokyo facility, in my district, which is
heavily used by seniors, was closed suddenly without proper
notice. Now my constituents have been directed to use another
facility a mile away that might not sound too far for some, but
those with very limited mobility issues, it might as well be in
another part of the city.
Postmaster, I'd like to discuss the process in which postal
facilities are selected for closure. According to your written
testimony the Postal Service consolidated 363 mail processing
facilities between September 30th, 2006, and September 30th,
2018. Can you explain how processing facilities are chosen for
closure and consolidation?
Ms. Brennan. Yes. If I may first answer your comment about
the post office--I believe that was an emergency suspension,
temporary closure. So, I'll followup on that, and we'll get
back to you.
Mr. Gomez. Okay.
Ms. Brennan. In terms of when we look at opportunities to
consolidate operations, we look at the overall volume, we look
at the efficiency of the facility. We do an economic analysis
to determine where there are opportunities. And clearly, the
governance is service that we're able to maintain service
levels.
Mr. Gomez. You said it was a--the one facility might have
been an emergency. How is that determined?
Ms. Brennan. For instance, say the roof leaks, or if some
natural disaster or incident occurs that impedes our ability to
safely conduct business there. I don't know the specifics of
that facility, but I'll find out for you.
Mr. Gomez. Okay. Thank you so much.
And did the closure, do you know if the closure or the
consolidation of these facilities contribute to the slowed
delivery of mail and the service declines that many communities
are experiencing?
Ms. Brennan. We actually adjusted service standards, and
what we called an operating window change. And the
consolidations were part of that overall effort.
Mr. Gomez. Okay. You also wrote in your testimony, ``Our
actions have been necessary and we are prepared to do more,
including making difficult operation decisions that may impact
services, but we urgently need legislative regulatory reform.''
What additional actions that may impact service is the
Postal Service considering, and what savings would be expected
from these actions?
Ms. Brennan. Congressman, as we talk through with the
committee throughout this morning, our board takes their
fiduciary responsibility seriously. We are looking at a 10-year
business plan that includes both cost reductions as well as
revenue-generating initiatives to close that gap. It's a
deliverable I owe to the chair and members of the committee.
Mr. Gomez. Okay. Could additional processing facilities and
other types of facilities, such as post offices, be closed? If
so, what is the timeframe within which such closures may occur?
Ms. Brennan. Congressman, I don't want to preempt any
plans. Certainly, we have a process, should we go forward with
a consolidation of a facility that includes a public meeting.
Mr. Gomez. No. I appreciate that. And I'm not going to
push. It's just, you know, mail delivery is something that
Americans have been able to count on for decades and
generations, right? And it is the one thing that I think in
government we should hold almost sacred. And I want to make
sure that we keep pushing to make sure that every community has
access to the Postal Service, and the workers are treated
fairly.
So, with that, I appreciate your staying around, making
sure I had a time to ask some questions, but I really do
appreciate your response. And Postmaster General, your office
was able to help with some issues that I had in my district as
well. So, thank you so much.
Ms. Brennan. Thank you. And be assured, we believe there's
a path forward with congressional assistance and regulatory
reform.
Mr. Gomez. Mr. Chairman, I yield back.
Chairman Cummings. Thank you very much. I want to thank all
of you again for just a very informative hearing. And so,
without objection, all members will have five legislative days
within which to submit additional written questions for the
witnesses to the chair, which will be forwarded to the
witnesses for their response. I ask our witnesses to please
respond as promptly as you are able to.
With that, this meeting is adjourned.
[Whereupon, at 12:45 p.m., the committee was adjourned.]
[all]