[Senate Hearing 108-213]
[From the U.S. Government Publishing Office]
S. Hrg. 108-213
U.S. POSTAL SERVICE: WHAT CAN BE DONE TO ENSURE ITS FUTURE VIABILITY?
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HEARING
before the
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 17, 2003
__________
Printed for the use of the Committee on Governmental Affairs
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COMMITTEE ON GOVERNMENTAL AFFAIRS
SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan
NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii
ARLEN SPECTER, Pennsylvania RICHARD J. DURBIN, Illinois
ROBERT F. BENNETT, Utah THOMAS R. CARPER, Delaware
PETER G. FITZGERALD, Illinois MARK DAYTON, Minnesota
JOHN E. SUNUNU, New Hampshire FRANK LAUTENBERG, New Jersey
RICHARD C. SHELBY, Alabama MARK PRYOR, Arkansas
Michael D. Bopp, Staff Director and Chief Counsel
Ann C. Fisher, Deputy Staff Director
Joyce A. Rechtschaffen, Minority Staff Director and Chief Counsel
Susan E. Propper, Minority Counsel
Amy B. Newhouse, Chief Clerk
C O N T E N T S
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Opening statements:
Page
Senator Collins.............................................. 1
Senator Lautenberg........................................... 4
Senator Durbin............................................... 5
Senator Dayton............................................... 6
Senator Carper............................................... 14
Senator Akaka................................................ 17
Senator Fitzgerald........................................... 18
Senator Pryor................................................ 27
Prepared statements:
Senator Coleman.............................................. 39
Senator Lieberman............................................ 39
Senator Stevens.............................................. 41
WITNESS
Wednesday, September 17, 2003
James A. Johnson, Co-Chair, Presidential Commission on the U.S.
Postal Service, and Vice Chairman, Perseus, LLC
Testimony.................................................... 6
Prepared Statement........................................... 42
Appendix
Questions and Responses for the Record for Mr. Johnson from:
Senator Collins.............................................. 58
Senator Carper............................................... 65
Senator Stevens.............................................. 69
U.S. POSTAL SERVICE: WHAT CAN BE DONE TO ENSURE ITS FUTURE VIABILITY?
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WEDNESDAY, SEPTEMBER 17, 2003
U.S. Senate,
Committee on Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 10 o'clock a.m.,
in room SD-342, Dirksen Senate Office Building, Hon. Susan M.
Collins, Chairman of the Committee, presiding.
Present: Senators Collins, Fitzgerald, Akaka, Durbin,
Carper, Dayton, Lautenberg, and Pryor.
OPENING STATEMENT OF CHAIRMAN COLLINS
Chairman Collins. The Committee will come to order.
This past December, President Bush announced the creation
of a bipartisan Commission charged with identifying the
operational, structural, and financial challenges facing the
U.S. Postal Service. The President charged this Commission with
examining all significant aspects of the Postal Service with
the goal of recommending legislative and administrative reforms
to ensure its long-term viability.
Harry Pearce, the chairman of Hughes Electronics
Corporation, and James Johnson, the vice chairman of Perseus,
LLC, were appointed by the President to serve as the
Commission's co-chairmen. I very much welcome Mr. Johnson here
today, and I regret to announce that due to illness, Mr. Pearce
is unable to join us here today as planned. He was an
invaluable participant in the development of the Commission's
final report, and I sincerely regret that illness prevents him
from joining us today. I wish him, and I know that Mr. Johnson
joins me in wishing him a speedy recovery.
Mr. Johnson, I want to begin this morning by thanking you
for your tremendous effort in putting together a highly
comprehensive report on an extremely complex issue. In a
limited amount of time, you and Mr. Pearce conducted seven
public hearings across the country and heard from countless
witnesses.
On July 31, the Commission released its final report,
making 35 legislative and administrative recommendations for
the reform of the Postal Service. You and the eight other
members of the Commission committed yourselves fully to a
daunting task, and I want to congratulate you on your fine
work.
As I read through the Commission's report, I was struck by
what I considered to be the Commission's wakeup call to
Congress, your statement that ``An incremental approach to
Postal Service reform will yield too little too late given the
enterprise's bleak fiscal outlook, the depth of the current
debt and unfunded obligations, the downward trend in First-
Class mail volumes, and the limited potential of its Legacy
Postal Network that was built for a bygone era.''
That is a very strong statement and one that challenges
both the Postal Service and Congress to embrace far-reaching
reforms.
To the relief of many, myself included, the Commission did
not recommend privatization of the Postal Service. Instead, the
Commission worked toward finding a way for the Postal Service
to do, as Mr. Johnson described it to me, ``an overwhelmingly
better job under the same general structure.''
The Commission's recommendations are designed to help the
225-year-old Postal Service remain viable through at least the
next two decades.
The financial and operational problems confronting the
Postal Service are serious indeed. At present, the Postal
Service is paying down $6.5 billion in debt to the U.S.
Treasury, and its long-term liabilities are enormous, to the
tune of nearly $6 billion for workers' compensation claims, $5
billion for retirement costs, and perhaps as much as $45
billion to cover retiree health care costs.
In an unexpected turn of events last year, the Office of
Personnel Management discovered that if postal payments into
the Civil Service Retirement System fund were to continue on
the basis required under existing law, the Postal Service would
overfund its estimated liability by approximately $71 billion
over a period of 60 years. To correct this overfunding problem,
Senator Carper and I introduced bipartisan legislation in
February. It was enacted and signed into law this past April,
and thus, the result is that the Postal Service has been able
to delay its next rate increase until 2006 and has been able to
pay down more aggressively the billions of dollars in debt owed
to the U.S. Treasury.
Despite this reprieve, however, many challenges remain. It
is important to understand the impact of the Postal Service on
our economy. The Postal Service itself employs more than
750,000 career employees. Less well-known is the fact that it
is also the linchpin of a $900 billion mailing industry that
employs 9 million Americans in fields as diverse as direct
mailing, printing, catalog production, and paper manufacturing.
The health of the Postal Service is essential to the
vitality and the economic viability of thousands of companies
and the millions of Americans that they employ. One of the
greatest challenges for the Postal Service is the decrease in
mail volume as business communications, bills and payments move
more and more to the internet. The Postal Service has faced
declining volumes of First-Class mail for the past 4 years.
This is highly significant given that First-Class mail accounts
for 48 percent of total mail volume, and the revenue it
generates pays for more than two-thirds of the Postal Service's
institutional costs.
The Postal Service also faces the difficult task of trying
to cut costs from its nationwide infrastructure and
transportation network. These costs are difficult to reduce.
Even though mail volumes may be decreasing, carriers must still
deliver 6 days a week to more than 139 million addresses even
if they are delivering fewer letters.
Despite much discussion about reforming the Postal Service
and previous attempts by some of our colleagues in the House of
Representatives to do so, the diverse views of what shape
postal reform should take, if any, have only led to stalemates
in the past. To take a fresh look at these issues, last July, I
introduced a bill to establish a Presidential Postal Commission
charged with examining the problems the Postal Service faces
and developing specific recommendations and legislative
proposals that Congress and the Postal Service could implement.
You can imagine my pleasure that the President moved ahead
with just such a Commission, and today we are hearing the
results of those efforts. In many ways, the work of the
Commission builds upon work already started by the Postal
Service. At the request of the Senate, Postmaster General Jack
Potter delivered to Congress in April of last year a
comprehensive Transformation Plan designed to ensure the
continuation of affordable universal service and to prepare the
organization for the challenges of change in a dynamic
marketplace.
The Postal Service has determined what changes could be
made within existing constraints that would result in improved
operations, performance and finances. The Transformation Plan
has been widely recognized as a good first step, but that is
exactly what it is--a first step. Without legislation, many of
the necessary reforms highlighted in the Commission's report
simply will not happen.
In closing, I would like to say that as a Senator
representing a large rural State, I greatly appreciate the
Commission's strong endorsement of the basic features of
universal service--affordable rates, frequent delivery, and
convenient community access to retail postal services.
It is important to me that my constituents, whether they
are living in the far reaches of Northern Maine or out on an
island or in our many rural small towns, have the same access
to the Postal Service as the people of our large cities. If the
Postal Service were to no longer provide universal service and
deliver mail to every customer, the affordable communications
link upon which many Americans rely would be jeopardized. Most
commercial enterprises would find it uneconomical if not
impossible to deliver mail and packages to rural Americans at
the rates that the Postal Service has been offering.
The preservation of universal service and many more issues
must be examined in depth if we are to save and strengthen this
vital service upon which so many Americans rely for
communication and for their jobs. The Postal Service has
reached a critical juncture. It is time for a thorough
evaluation of the Service's operations and requirements. It is
time for action.
This will be the first in a series of hearings that the
Committee will hold to examine these important issues.
Again, I want to commend the Commission for preparing this
important report. We look forward to hearing your testimony,
Mr. Johnson, and discussing with you the rationale behind some
of the recommendations and what you recommend as the next steps
in the effort to reform and preserve the Postal Service.
Senator Lautenberg.
OPENING STATEMENT OF SENATOR LAUTENBERG
Senator Lautenberg. Thank you, Madam Chairman, and welcome,
Jim Johnson.
I have known Mr. Johnson for a long time, and when I see
him, I am not sure whether he is representing the cultural
concerns of the community, the banking concerns of the
community, or, in old days, the political concerns, but I think
he has put those aside for better pursuits. We always know that
where Jim Johnson lends a hand, things usually come out very
well. I will have to reserve a little judgment until I have a
chance to study the proposal a little bit longer, but I am
certainly glad to see you here, Jim.
Postal reform is an incredibly important national issue,
and most Americans do not spend a lot of time thinking about it
until the mail is not there in the time frame that they expect,
or there is a request or suggestion that maybe Saturday mail be
eliminated or curtailment of service in any way, because
although it is costly and at times cumbersome, the fact is we
love it, and we like what the Postal Service represents.
There are a couple of things that have to be of concern as
we look at reform. One is to be able to guarantee that the
basic service is available and at the same time, that the
staff, the loyal employees of the Postal Service, have their
rights protected. If change is to be made, they have to be
consulted, and we have to respect their views and ideas. It
does not mean that we are going to agree with every one of
them, but certainly we want to hear what they have to say.
The importance of the U.S. Postal Service to our national
economy cannot be overstated. An example is that a 2-year delay
in postal rate increases has the potential to save publication
companies like AOL-Time Warner--I guess it is now just Time
Warner--approximately $200 million in mailing costs. Last year
alone, the U.S. Postal Service delivered more than 200 billion
pieces of mail. So the important role that the Postal Service
plays in our economy and the contribution of its 843,000
dedicated employees, as I said earlier, cannot be overlooked or
taken for granted.
Having said that, this is indeed a time of great change for
the Postal Service. Things that are not directly related to the
performance of the Postal Service's duties, but are rather
technology changes, have had a vast impact. As the President's
Commission has observed, traditional mail streams will likely
continue to migrate to cheaper, internet-based alternatives.
And given the existing regulatory structure, the Postal Service
debt is likely to increase every year, making it tougher for
the Postal Service to achieve its fundamental mission of
universal service.
I support the Commission's recommendation to make the rate-
setting process less cumbersome and more efficient, but I want
to take a second look at the Commission's labor reform
proposals--at one of them. As a former businessman, I
understand the need to make the work force as lean and
efficient as possible, but restricting employees' collective
bargaining rights, privatizing jobs, and increasing executive
compensation, will not solve all of the Postal Service's
organizational and workplace problems nor improve employee
morale or efficiency. And I would hope that I could be found to
improve the process, the collective bargaining process but, as
I said in my opening comment, encouraging the views and the
ideas of the people who are on the front line performing; they
have the best knowledge bank of all.
So I look forward, Madam Chairman, to hearing from Mr.
Johnson and to try to resolve in whatever way we can some of
the tension that exists there but at the same time to make
certain that the people in this country know that the Postal
Service is going to be there to provide them with the service
they need.
Chairman Collins. Thank you, Senator Lautenberg.
Senator Durbin.
OPENING STATEMENT OF SENATOR DURBIN
Senator Durbin. Thank you very much, Madam Chairman, and
thank you for this hearing.
Jim Johnson, thank you for your public service. You
continue to add to our country with everything that you have
volunteered to step forward to do, and this is no exception.
I, for one, believe that we should start this hearing
keeping two things in mind which I think your Commission began
with. First, our commitment to universal mail service. It
distinguishes the United States as a Nation, and I think it is
something that we need to preserve and work hard to make
certain that in the 21st Century, it meets modern standards.
I was encouraged by your recognition of what the Internet
and email have done to mail volume and what they are likely to
do in the future. I think that addressing that head-on is
honest and is an indispensable part of a realistic evaluation
of the future of the Postal Service, and I thank you for that.
Second, I want to commend my colleagues and the good work
of our fellow Senator, George Voinovich of Ohio, who has since
he has come to this Committee really focused on an element that
is essential to quality service in the Federal Government. He
has focused on the people of the Federal Government. Beyond the
obvious box charts and good thoughts that we might have about
organization and structure, in the final analysis, the success
of every agency of the Federal Government, from our great
military to the men and women who serve in so many different
agencies, depends on their skills and their morale and their
commitment to excellence. And I think that as we talk about the
future of the Postal Service, we should never discount that. So
long as we have excellent men and women serving our country in
the Postal Service, I think we have the greatest potential to
develop it into the 21st Century in a fashion that is
essential.
I want to echo what Senator Lautenberg has said. Many of
the workers of the Postal Service look at this report with a
lot of concern as to whether or not it is going to recognize
them as individuals, is going to give them the kind of dignity
that they deserve in the workplace. And I hope that we can find
the right balance. We have to say to them that as a team
approach, we need to find better ways to reach excellence in
performance, and we need to do it recognizing your worth as an
individual and your importance to a team effort.
I think we also have to say to those who are critics of the
Postal Service--and there are many out there, from late night
talk shows to people on Capitol Hill--that if they can find
another place in the world where, for 37 cents, you can get a
letter delivered 2,000 miles away within a few days, please
tell me where that is. I just do not think that is something we
should ever take for granted, and I hope that becomes the
bottom line of our conversation here.
Thank you very much.
Chairman Collins. Senator Dayton.
OPENING STATEMENT OF SENATOR DAYTON
Senator Dayton. I think that is true everywhere in America
except for the mail that comes to the Capitol.
Senator Durbin. That is true.
Senator Dayton. Madam Chairman, I want to commend you for
taking on this subject. After grappling with the Department of
Defense, I am glad you picked something simple like the Postal
Service. Most people would not take on both of those in a
lifetime much less in the same year. So thank you very much for
your leadership on these and other issues.
One reason I am in the U.S. Senate from Minnesota is
because Mr. Johnson decided to stay in Washington rather than
go back and run for political office in his home State of
Minnesota. Anybody with a name that ends in ``-son'' in
Minnesota has a natural advantage of about a quarter million
votes. But he found opportunities to make even more
distinguished service and contributions to our country in
Washington. He is a proud native son of Minnesota, and we are
proud to have him as a native son, and I look forward to his
remarks.
Chairman Collins. Thank you.
I am now pleased to introduce our witness who clearly is
well-known to those on the Democratic side of the aisle on this
Committee--James Johnson, who is vice chairman of Perseus, a
merchant banking and private equity firm here in Washington.
He is well-known not only for his political work but for
his 10 years at Fannie Mae, having served as vice chairman,
chairman, and CEO and as chairman of the Executive Committee.
Prior to joining Fannie Mae, Mr. Johnson served as president of
Public Strategies, a Washington-based consulting firm which
advised corporations on strategic issues. He has also served as
an executive assistant to former Vice President Walter Mondale,
another Minnesota connection, and is the recipient of numerous
awards and degrees.
Again, we are very pleased to have you here today, and I
want to thank you on behalf of all my colleagues for your very
diligent and impressive work in producing this comprehensive
report.
We look forward to hearing from you. Take as much time as
you need for your statement.
TESTIMONY OF JAMES A. JOHNSON,\1\ CO-CHAIR, PRESIDENTIAL
COMMISSION ON THE U.S. POSTAL SERVICE, AND VICE CHAIRMAN,
PERSEUS, LLC
Mr. Johnson. Thank you very much, Madam Chairman.
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\1\ The prepared statement of Mr. Johnson appears in the Appendix
on page 42.
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I want to compliment you for the extraordinary intelligence
and discipline with which you have approached this issue. You
have become a real leader in this area, and I have no doubt
that by virtue of you chairing this Committee, the end result
of these recommendations and the reform effort will be
substantially better.
To my friends, colleagues, long-time associates, thank you
so much for your opening remarks. I am delighted that each of
you are here, and I understand and embrace the spirit of your
opening remarks. I would like to address many of those concerns
as directly as possible.
What I am going to do is not read back through the
testimony which we presented but rather just highlight a few of
the recommendations, Madam Chairman, that we think are most
significant and also try to give a little background to our
thinking as a Commission.
I should say that the Commission staff did an excellent
job. Dennis Shea is here this morning and other members of the
staff are also here. They did a wonderful job. I also think
that the eight other members of the Commission deserve a real
public thank you. These are people who gave hundreds and
hundreds of hours. All of us came to this very complex
challenge with no real background in postal issues. A lot of us
had substantial background in large organizations, in corporate
issues of various kinds and thinking through logistics
businesses or service businesses, but we were new to this
issue. I think all of the people sitting behind me in this room
certainly knew more when I began and probably know more today.
But we did make a very substantial, honest effort to take a
look at these complex issues and offer you our best thoughts.
We do not consider ourselves to have the last word or the
final word on any of these issues. We have a perspective which
is informed by our role in the business world largely, some
small business, some large business, some in the public policy
world, so we welcome the dialogue. We were not writing
legislation; we were writing perspective, and the perspectives
that we gave are an honest effort by all of us to keep the
focus on reform, keep the focus on a better Postal Service, and
to keep appropriate focus on everyone who contributes to that.
I am very grateful to you for leading this effort in the
Senate.
Let me just give a little bit of context at the beginning.
As you and your colleagues have pointed out, this is tricky
business. What we have here is a very large enterprise which is
designed to break even, to deliver hundreds of billions of
pieces of mail, to not have excessive costs to the ratepayers,
to have universal service, and above all to not be a threat
ultimately to the taxpayer.
We are trying to balance a lot of things at once and do it
in a very complex organization.
The very first conclusion that the Commission came to is
that the work of the Congress more than 30 years ago was very
good work. In fact, this basic construct was a very sound basic
construct and we should not be looking at radical privatization
alternatives, we should not be looking at ways of subsidizing
this in tax dollars. But we should find a way if we possibly
can to make the most efficient, most effective postal system
that could stand on its own two feet, that could break even
over time, that could manage its responsibilities and its
obligations along with the rate-setting process so that it
would have adequate revenues, adequate growth, more than
adequate service, and in the end be an institution that all
Americans can respect and value.
As part of our effort, we did an opinion survey. Peter Hart
from The Wall Street Journal and Linda Duval led the effort,
one traditionally on the Republican side, one traditionally on
the Democratic side. What we found is that the Postal Service
is among the very most respected institutions in America. This
is not a broken institution. This is a strong and respected
institution. And it is very important that everybody keep in
mind that Americans all over this country very highly value the
services they receive and have great respect for the people who
deliver those services.
That was the broad context in which we began. We felt that
as part of the future prospects, one of the things that we
should focus on is making those services of the postal system
even more easily available. We have a number of recommendations
about how to extend the service, how to extend through retail
outlets, more accessibility, how to get more service within
easy reach of more people on a regular basis. And you will see
in the report that that is a big part of our thinking.
We were also concerned about organizational effectiveness
in terms of the focus of the organization. So many
organizations that have failed in America in the last 20
years--Senator Lautenberg certainly knows about this from his
corporate background--have failed because they have not kept
the focus on their core mission; they have gotten involved in
things that were not things they knew how to do.
Therefore one of the core recommendations here is stick to
your knitting. Do what you are supposed to be doing. Do not be
looking for other ways of expanding into businesses where you
do not have expertise, where you do not have a clear
preparation and a clear background.
The second recommendation in the mission and governance
area--and this is also something that Members of the Committee
I think will relate to very strongly--is that we all felt that
there should be the best of corporate governance put in place.
As part of that best of corporate governance, our strong belief
was that we should now take advantage of the benchmarking that
is going on among large organizations and put in place the
characteristics of the most effective boards of directors in
America today. We reached out to the Conference Board and to a
lot of academic institutions, a lot of other institutions that
are focusing on governance in a corporate setting, and made a
set of recommendations for a new board of directors for the
Postal Service, which we think are a sound set of
recommendations.
We were also very much aware of the fact that there are
many public mission responsibilities for the Postal Service. It
is supposed to operate in a businesslike manner, but it is not
supposed to be a business that operates without the public
sector and public mission very much in mind.
We tried to craft a new regulatory approach with the postal
regulator, with some broad authority for review but also very
broad instructions not to be involved in trying to micromanage
this large enterprise. Whether we got this exactly right or
not, once again, is part of the dialogue of the next several
months and longer.
We said if there are major changes in universal service,
really major, that should be a subject reviewed by the postal
regulator. We said if there were extensions of monopoly
activities, that should be reviewed by the postal regulator.
We recommended setting up a new rate mechanism, trying to
figure out a way to have a much speedier, much more efficient,
but also fair rate-setting mechanism so that you wouldn't have
this extended 18-month process which is currently part of the
Postal Rate Commission structure. That is something that is
going to require a lot of work to get it right. We think we
have made some very useful suggestions, and as you think about
legislation, obviously, you will have to decide whether or not
we have gotten most of the dimensions right or not.
We were also focused very strongly on the overall
effectiveness of the postal system--the delivery system, the
processing system--so that the enormous strides that have been
made in corporate America in the last 20 years could be put in
place within the context of the business efficiency and
logistics requirements of the postal system. Many businesses in
America today are operating dramatically more efficiently than
before, with better technology, more modern organization,
better assessment of the performance characteristics of all of
the elements.
Today, gentlemen, Madam Chairman, there are 446 postal
facilities for processing, distribution, and bulk mail. We had
a very substantial dialogue with the Postmaster General, Mr.
Potter, and others about what would be the right sizing of the
system--how many facilities there should be; how they should be
integrated into a comprehensive network as opposed to
facilities that were built at different times with different
methodologies, with different characteristics, with different
efficiencies. We came up with an idea which is not original--
and I know that Senator Carper and others have expressed a lot
of interest in this. After a lot of study of what happened with
the Base Closing Commission we have created something that we
chose to call the Postal Network Optimization Commission. This
Commission would take recommendations from the Postmaster
General, have an obligation to talk about them very broadly
with all concerned parties, including the communities that
would be affected, and come back with a proposal for a network
modernization which we believe, the Postmaster General
believes, virtually everybody who testified before our
Commission believes, would yield a smaller number of
facilities. I do not want in any way to try to say that is not
the implication of this Commission. This is a Commission which
says in its formation that we believe there are more facilities
than are required for efficient performance, and we believe
that some of them should be redesigned, many of them should be
reconnected with each other in a smarter, more effective way,
and that some of them should be closed.
I think we have provided a mechanism for an enormous amount
of public input; we have provided a mechanism for congressional
review; we have provided a mechanism for the Postal Service to
take the lead, and I think that is a promising recommendation.
We also spent a lot of time talking about the enormous real
estate assets of the Postal Service. There are, as you know,
38,000 postal facilities--not all of them look like what you
expect when you see a photo. Some of them are contract
facilities; not all of them are large, not all of them have
conceivable alternative uses. But we felt that with that
enormous real estate holding, $15 billion in book value, very
substantially more than that in all likelihood in market value,
that we should be looking for ways to limit the overall cost of
the leasing, the overall cost of the real estate owned, look
for an active management of those real estate assets, so that
as we are pressed to keep rates as low as we can and as we are
pressed to keep this as a viable enterprise, we do not have
substantial assets which are being underutilized.
We also placed an emphasis on a lot of cost-saving
mechanisms through work-sharing discounts, through outsourcing
of postal function. Let me stop for just a moment on the
outsourcing concept. This is something which I know has become
extraordinarily controversial, something that people have
talked about at great length.
The Commission discussed this at great length, and today
there are already between $10 and $20 billion of cooperative
efforts between the private sector and the Postal Service. This
is probably the leader--it is the leader, I am sure--of all
public entities in terms of joint public-private partnership
and cooperation and the intertwining of what is being provided
by the government and by the private sector.
We reviewed this. Some on the Commission were extremely
aggressive about the potential of this. In the end, I and a
couple of other Commission members said let us be absolutely
clear here, and what guides us through all of this activity is
best execution. We do not have an ideological preference of
some kind here that we are putting on the table. What we are
saying is that at every step of the way, best execution is the
measure. If the best execution is a public execution through
the postal employees who are in place today, then that is
absolutely what should be done. If the best execution happens
to be through a contracting mechanism where we can lower the
cost and get greater efficiency and reliability, then we go in
that direction. But this is not intended to be a wholesale
reorientation. This is intended, as so many of our other
recommendations, to be focused primarily on best execution.
What would the best practices in corporate America tell us
today about the lowest-cost, most efficient, most reliable
execution for all of these functions that we are talking about?
We also talked frankly about ways of enhancing the value of
the Postal Service as it is designed today. As Senator
Lautenberg pointed out, this is a huge enterprise and, as you
pointed out in your opening remarks, $900 billion of activity
in the United States economy. This Postal Service is a very
valuable national asset and we should be thinking about how not
only can we make it run efficiently as it might be threatened
by electronic activities, but within the core of its mission.
We should be thinking about ways in which it can be even more
economically important, where it can be even more socially
important, where it can interconnect our people even more
effectively.
We also had a growth orientation to this service function
as well as making sure that we were always focused on best
execution.
In the financial areas the Commission more than anything
else, embraced transparency. We believe that everything about
this public enterprise should be transparent. We also had a
dialogue with the SEC to talk about the best standards of
transparency, reporting and visibility of financial reality
that flows through their processes.
We think the Postal Service should report quarterly the way
major companies in America report quarterly to the SEC, meeting
the highest standard of transparency.
We also believe as we change this rate-setting mechanism,
if we do, that we should be very much focused on an ongoing
transparency about the allocation of costs within the Postal
Service, that the form, content, and timing requirements of
mail products and services should be clear for all to see how
the Postal Service views this, how they allocate the costs. We
all felt that the cost allocation in the present formulas was
inadequate. We had some testimony on that point saying that it
should go up to a dramatically higher level than it is today.
Not all of us were of the view that that was possible, but
higher than today in terms of the allocation of costs of the
various products and services.
Let me now talk about the more controversial piece of what
the nine commissioners came to consensus on having to do with
the work force--and I want to be very frank here and obviously
will take whatever questions anybody has.
We believe, the Postmaster General believes, and a number
of other people believe that there are probably more employees
today in the Postal Service as a whole than are required in the
most efficient organization that could be put together. Many of
the employees are eligible for retirement within a short time
frame. Our belief is that one of the core responsibilities of
the newly-constituted board of directors is to have a
comprehensive human resources plan, not unlike any other major
corporation in America. As you look at the work to be done, as
you look at the challenges that you face, we believe that the
board of directors should have a point of view about the
optimum size of the work force, and with the retirements that
are already expected, we believe that this can be done in the
context of attrition. But we do not believe, with 76 percent of
the overall expenses of the Postal Service, that this is
something that should be ignored. It will be difficult. I
believe the consultation that Senator Lautenberg talked about
and I know others feel strongly about is essential to this. It
cannot be done without full cooperation between management and
the unionized labor force of the postal system. In the end,
others may have a different point of view. But we nine
citizens, in looking at this, came to believe that with the
best technology, the best execution, the best rationalization,
the best consideration of what was state of the art in terms of
processing, distribution and all the other bulk challenges of
the Postal Service, that with proper investment in technology,
with proper orientation to capital investment over time, the
postal work force would shrink. So we put that on the table. We
do not know how much, we do not know over what period of time,
but we believe that with that being 76 percent of the cost that
you cannot do a credible report without saying that this is a
core responsibility to right-size the work force. So we said
it.
Let me make another point--and this too is very
controversial--on pay-for-performance. We had endless
conversations within the Commission about what was the nature
of financial incentive that should be part of a structure that
is seeking to get to the highest level of performance. And we
came up with a number of ideas. We had a lot of help from
outside consultants. Let me just start with the bottom line,
and that is that the Commission members unanimously believe
that an appropriate, disclosed, broad-based reward for superior
performance should be part of the incentive structure for the
Postal Service.
Many of the unionized representatives, or representatives
of the unionized workers, did not think that was the right way
to proceed. We listened to them in a variety of different
contexts, publicly and privately. There is no doubt that there
are issues in this area. We had an outside consultant talk to
us about major companies with unionized work forces that did
have pay-for-performance systems that they believed worked
well. But this is not cookie-cutter business. This is something
that would have to be shaped very carefully. We would have to
make sure that none of those dimensions of favoritism and
disruption of the work force that the labor representatives
talked about came into play. But as a matter of conviction, all
of the nine members of the Commission said we believe over time
that we will have higher performance if we tie performance to
superior work contribution. It is controversial, but it is
something that we attacked and thought about.
The next thing in the work force area is something that
really flows directly from Capitol Hill, and this is something
we also spent an enormous amount of time on, and that is pay
comparability. When the Act was passed more than 30 years ago,
it became the law of the land that there should be
comparability between the people in the postal work force and
people in comparable jobs in the private sector. That was
principally motivated at the time because there was a feeling
that there was inadequate compensation in the Postal Service,
that they were not in fact meeting the standard of
comparability to the private sector.
We heard a great deal of testimony from people now saying
that in their opinion, there was a premium on compensation in
the Postal Service to comparable jobs in the private sector. We
never came to a conclusion on that. The Commission does not
have a point of view on that. There are individual members of
the Commission who have a point of view, but one of the things
that we worked through was not to have an opinion on pay
comparability but to say this is the law of the land, this is
what the Congress has so clearly stated, and we should
recommend a mechanism to review whether or not in fact the law
is being complied with.
Now, obviously, at any time you want to change the law with
the cooperation of your people in the House, you can change
that law any way you want. We didn't know how to have a
comprehensive report without addressing the issue of
comparability. What we said was that there should be a thorough
examination of this, that there should be a review of the most
appropriate comparisons, and then there should be mechanisms
put in place to assure that if it were not comparable, that
with new employees hired, there should be a requirement that it
be comparable. Once again, very controversial and something
that no doubt you will discuss at great length.
One of the things to keep in mind about all of the things
that we said in the work force area is that none of the things
that we recommended should be retrospective; nothing should
affect current retirees, nothing should affect current
bargaining agreements. These are things that should be
considered for the future as opposed to affecting current
employees.
The final recommendation that I know you have talked about
at great length already has to do with whether or not the
Postal Service should have responsibility for military pension
costs. We came down saying no, that this is an unusual burden
and should not be a burden of the Postal Service. Lifting those
pension costs obviously will have major economic implications
and positive implications toward the Postal Service.
So the core of our message, plain and simple--and I am
sorry if I have gone on too long--plain and simple is that this
is a fabulous national asset. The current structure and
approach is the right structure and approach. We believe that
there is no immediate crisis, but we believe that Congress
needs to address many of these challenges that have been on the
table this morning and have been on the table many times
before. If we do not address the challenges now of having the
most efficient, effective possible Postal Service, there will
be a time when we will either have dramatic, and I think
destructive, rate increases to keep the requirement of breaking
even, the potential for a bailout, or dramatic reductions in
service. We do not want any one of those three things. What we
are trying to do with our recommendations is to push ahead by
saying let us embrace universal service in the fullest sense of
that definition, let us get it right as a large organization in
terms of best execution, and then let us get the most we can
possibly get out of this model so that we have the potential
for the next 10 to 20 years of taking what is already a very
effective institution, make it even better, and stabilize it
within the context of its core definition.
That is what we were trying to do. I have tried to give you
a little background behind how we thought about a variety of
these things. I am fully aware that not everyone will agree on
all these topics, but I and all the other members of the
Commission very much welcome the dialogue and are completely
open to discussing our thinking on any one of these topics.
Chairman Collins. Thank you very much, Mr. Johnson, for an
excellent statement. Your written statement will be entered in
the record along with any other materials that you wish to
provide, but that overview was terrific, and I thank you.
Senator Carper. Madam Chairman.
Chairman Collins. Yes, Senator Carper.
Senator Carper. Could I ask a point of personal privilege?
We have been dealing with a natural disaster, a flooding
problem, up in northern Delaware, and I have been engaged on
that this morning and arrived too late to give an opening
statement. Rather than give one, I would just ask for 2 minutes
just to make a brief statement if I could.
Chairman Collins. Certainly.
Senator Carper has been very active on postal issues. We
teamed up earlier this year on the postal bill that I mentioned
in my opening statement.
I am pleased to yield to you for some comments.
OPENING STATEMENT OF SENATOR CARPER
Senator Carper. And I am pleased to be on your team.
Chairman Collins. Just stay there. [Laughter.]
Senator Carper. You can always look for me on your right
flank.
I love to tell this story, and I will be very quick. In my
first year or so in the Senate, I was preparing to offer an
amendment on the energy bill, something that was important at
the time and is still an important issue. And Senator Collins
was good enough to join me as a sponsor of the amendment, and
we offered it. A lot of people thought we would lose, but we
ended up winning by a lot, despite the opposition of the
Chairman of the Committee and the Ranking Member.
When it was all over, I went over to Senator Collins on the
Senate floor, and I said, ``You know, I have not been here for
that long, but this is the first time I have ever won a fight
on a major amendment.'' And she looked at me and smiled and
said, ``I have never lost.'' And I said, ``I am going to stick
with you, sister.'' And I have.
My hope is that we will be able to work closely together
with our colleagues across the aisle here.
Thirty-two years ago, another junior Senator, a fellow
named Ted Stevens from Alaska, decided to get involved in
postal issues, and he did, in a remarkably effective way, and
laid the foundation for an organization which endured not only
for the rest of the 20th Century but into the 21st Century. In
1971, I do not know what the rest of you were doing, but I was
in my second tour in Southeast Asia, and I remember reading
something about it in Time or Newsweek magazines at the time.
Thinking back to 1971, unlike our troops today who are deployed
in Afghanistan, Kuwait, and other places, we did not have the
ability to email our families, and frankly, we did not have the
opportunity to talk to them much on the phone. We had a MARS
system where you could actually talk a little bit on the
phone--it was sort of like a Hamm radio operator--you could
talk to them a little bit and say ``Over,'' and then they would
talk back to you. But we did not have the ability to go into a
tent or a facility and talk to our families then.
We wrote a lot of letters. We got a lot of them back. They
were all handwritten.
We did not have direct deposit then.
If you think about the way that our lives were in 1971 and
the way we work today with direct deposit, email, and can call
anybody with a cellphone almost around the world at any time,
the world has changed dramatically, and our postal system needs
to change and evolve as well.
I am really pleased that the Commission--and I want to
thank you and Harry Pearce for your leadership--and for all in
the room and a lot of people who are not here who have
contributed to your deliberations, to come with a very
thoughtful set of recommendations. Now, obviously, we are not
going to agree on all of them, and in particular I just want to
make sure that in the end, we follow the golden rule with
respect to the way we treat not just our customers but the
folks who work at the Postal Service, that we treat them as we
want to be treated.
But I am pleased that you have said that universal service
is important and we want to continue it. I am delighted that we
are not going to try to privatize this operation. I am pleased
with the importance and the premium that you have placed on
employees as well.
I will just conclude with this. Every now and then,
Presidents send budgets to the Hill, and they are deemed ``dead
on arrival.'' We see other proposals from Presidents, Democrat
and Republican, and from other entities, they come to us and
they are described as ``dead on arrival.''
I think that the recommendations that you have sent to us
are ``alive on arrival,'' and we very much look forward to
working with you and improving some of them, accepting others,
and going forward. I think this country will be better for it,
and I think those who work for the Postal Service and their
customers will be better for it.
I thank you for the opportunity to make that comment.
[The prepared opening statement of Senator Carper follows:]
PREPARED OPENING STATEMENT OF SENATOR CARPER
Thank you, Madam Chairman. I'd like to begin by thanking Mr.
Johnson and his colleagues for their willingness to serve on the
President's postal commission. Postal reform is a difficult issue. It
is also a vitally important issue for every American who depends on the
Postal Service everyday. Their willingness to listen to all sides of
the debate and to attemt to craft a set of balanced reform
recommendations is admired and appreciated.
By all accounts, the Postal Service has been a success. It receives
virtually no taxpayer support and the service its hundreds of thousands
of employees provide to every American nearly every day is second to
none. More than 30 eyars after its birth, the Postal Service now
delivers to more than 140 million addresses each day and is the anchor
of a $900 billion mailing industry.
As the commission's final report recognizes, however, the Postal
Service is clearly in need of modernization. When it started out in
1971, nobody had access to fax machines, cell phones or pagers and
nobody imagined that we would ever see innovations like e-mail and
electronic bill pay. After decades of success, electronic diversion of
mail volume, coupled with economic recession and terrorism, have made
for some rough going at the Postal Service in recent years.
The Postal Service's financial situation has improved in recent
months. They will have $4 billion surplus in the current fiscal eyar.
They could be debt-free by the middle of next year. However, I don't
think volume is yet where we'd like it to be. In addition, the Postal
Service continues to add nearly two million new delivery points each
year, creating the need for new routes, more letter carriers and new or
expanded postal facilities.
As more and more customers turn to electronic forms of
communciation, letter carriers will likely begin to bring fewer and
fewer pieces of mail to each address they serve. The rate increases
that will be needed to maintain the Postal Service's current
infrastructure, to finance retirement obligations to its current
employees, and to pay for new letter carriers and new facilities will
only further erode mail volume. The Postal Service has been trying to
improve on its own. They are making progress, but there is only so much
they can do.
That is where Congress must step in. Even if the economy recovers
soon and the Postal Service begins to see volume and revenues improve,
I believe we will still need to make some fundamental changes in order
to make the Postal Service as successful in the 21st Century as it has
been for the past 30 years.
That is where Congress must step in. Even if the economy recovers
soon and the Postal Service begins to see volume and revenues improve,
I believe we will still need to make some fundamental changes in order
to make the Postal Service as successful in the 21st Century as it has
been for the past thirty years.
S. 1285, which I introduced early this past summer, aims to
modernize the Postal Service without rolling back service. It instead
explicitly preserves the requirement that the Postal Service ``bind the
Nation together through the mail'' and serve all parts of the country--
urban, suburban and rural. It also preserves the Postal Service's
monopoly over the mailbox and maintains the prohibition on closing post
offices in some rural and inner city communities that often operate at
a deficit.
S. 1285 also forces the Postal Service to concentrate solely on
what it does best--processing and delivering the mail--and provides
them with much-needed pricing flexibility that they can use to
encourage increased mail volume. It does this while making the
ratemaking process less time-consuming, less administratively
burdensome and more predictable.
S. 1285 also attempts to strengthen service standards for most
Postal Service products as a way to make the mail more valuable for
customers. The bill requires the Postal Rate Commission, re-named the
Postal Regulatory Commission, to develop standards for the Postal
Service's Market Dominant products, a category made up mostly of those
products included in the postal monopoly.
Finally, S. 1285 makes the new Postal Regulatory Commission the
strong regulatory body needed to ensure that the Postal Service is
serving the public interest and competing fairly with private sector
mailers. Commissioners would be better qualified and would be armed
with new authority, such as subpoena power, that can be used to demand
information from postal management. Commissioners would also be
empowered to punish the Postal Service for failing to abide by rate and
service regulations or for using revenue from their monopoly products
to subsidize those products that are also offered by private sector
mailers.
S. 1285 is based in large part on legislation introduced last year
in the House by Congressmen John McHugh. While his bill enjoyed the
support of much of the mailing community and most Postal Service
employees and was endorsed by the Postal Service's Board of Governors,
it failed in the Government Reform Committee. For any piece of postal
reform legislation to be signed into law during the 108th Congress, it
will probably need to enjoy near-unanimous support among mailers and
postal employees and have strong support in Congress and at the White
House. The president's postal commission was created, in part, to help
build the consensus that we will need to get something done. For the
most part, I believe they've done an excellent job.
Like my bill, the commission's report calls for the preservation of
universal service and the Postal Service's monopoly over the mailbox.
The commission also recommends, like I do, turning the Postal Service's
Board of Governors into a stronger, more independent body that would be
better able to manage a business the size of the Postal Service. Both
my bill and the commission's report would also give the Postal Service
significant pricing flexibility and turn the Postal Rate Commission
into a stronger regulatory body. They would also streamline the Postal
Service's physical infrastructure and encourage them to adopt new
technology that would improve productivity and add value to their
products.
I am a little concerned, however, with three items addressed in the
commission's report. First, there is the call for after-the-fact review
of rates. I fear this could allow potentially damaging rate changes to
go into effect without being studied properly and without giving the
public an opportunity to comment. The commission's recommendations
would allow rates set by the Postal Service to later be adjusted by the
regulatory body if a third party challenges them. By the time the
regulators get an opportunity to act, however, mailers could have
already suffered significant financial damage. To avoid this, I believe
we should ensure that the regulators are given enough time before rates
changes go into effect to study them and, if necessary, stop them from
happening.
Second, I am also concerned about the way in which the commission's
recommendations address facility closings. The commission rightly, I
believe, acknowledges the need for the Postal Service to rationalize
its network of post offices and processing centers. While I make
similar recommendations in S. 1285, my bill ensures that the facility
closing process is part of a larger overall plan to strengthen service
standards and give Americans better access to postal services than they
have today.
While the Postal Service should certainly study the need to close
some existing facilities, it is important that they do so in an
orderly, accountable way that promotes public confidence and does not
in any way hinder their ability to carry out their mandate to serve all
Americans. If done haphazardly, facility closings could hurt service in
some communities, especially rural and inner-city areas.
Finally, there are the recommended changes to collective bargaining
and employee pay. I won't dwell on the details of those recommendations
but I will say that we should think carefully before tinkering with a
system that I believe has worked well for both the Postal Service and
its union employees. Since the Postal Service's financial difficulties
worsened, postal unions have agreed to contract renewals with modest,
reasonable pay increases without going into arbitration. While labor
does make up a significant percentage of the Postal Service's costs,
the Postal Service performs labor-intensive work. Reducing employee pay
and benefits will not change this.
In closing, I believe it is important to emphasize that postal
reform should be about preserving and improving the important service
that the Postal Service provides. As I've said in the past, we should
give the Postal Service the ability to operate more like a business. We
should also recognize, however, that the Postal Service is not a
business. Whatever new flexibility we give the Postal Service to price
its products or manage its property and workforce, we should ensure
that their top goal is to continue serving the public.
Chairman Collins. Thank you. I want to give the other
Members who arrived after opening statements were done the
opportunity to make very brief comments if they would like to.
Senator Pryor, I think you were next.
Senator Pryor. No, thank you.
Chairman Collins. Senator Akaka, if you would like to make
any brief opening statement, feel free to.
OPENING STATEMENT OF SENATOR AKAKA
Senator Akaka. Madam Chairman, I thank you for asking. I
would like to ask that my opening statement be included in the
record.
Chairman Collins. Without objection.
[The opening prepared statement of Senator Akaka follows:]
PREPARED OPENING STATEMENT OF SENATOR AKAKA
Madam Chairman, thank you for holding this hearing today. Your
attention underscores this Committee's longstanding dedication to the
men and women of the U.S. Postal Service and our commitment to all who
rely on the U.S. Mail.
It is timely that we focus on the Postal Service during these
difficult economic times. The Postal Service is a core element of the
American economic engine. The Postal Service and mail-related
businesses account for nearly $900 billion in job-producing economic
activity. Mail generates well over $700 billion in direct sales. The
value of goods transported by the parcel delivery industry, which
includes the Postal Service, equals 12 and one third percent of all
goods transported in the United States.
Two years ago, the leadership of this Committee asked the Postal
Service for a comprehensive transformation plan to address short- and
long-term operational and financial goals. The Postal Service presented
its Transformation Plan to the Senate at a hearing that I chaired in
May 2003.
My concern then, as it was in December when the President appointed
a commission to review the Postal Service, was how do we ensure the
continuation of the Postal Service's core mission--universal service--
at an affordable price.
I believe the Commission, within a compressed time frame, tackled
that question. They grappled with the challenges facing the Postal
Service and made significant recommendations.
I was especially pleased that the Commission rejected privatizing
the Postal Service. To those who say a privately-run mail service is
the only road to financial stability, I am concerned that it would be a
one-way street to unequal mail service throughout the nation.
Despite the technological advances that have transformed our lives,
I believe a government-owned and government-run mail service remains
key to the nation's economic and social well being. My state of Hawaii
is dependent on affordable and timely delivery of goods and services,
many of which come through the U.S. Mail. Mail is particularly
important for Hawaii's small businesses as means of sustaining old
customers and nurturing new ones.
Although no organization, including the Postal Service, should be
frozen in time, effective reform is dependent on the support of and
acceptance by its employees. Whether we are transforming the Department
of Defense or the Postal Service, labor unions and management must work
together for the transformation to succeed.
I do not support proposals that would eliminate protections and
rights currently enjoyed by postal workers. As Federal employees and
annuitants, postal workers are entitled to certain statutory benefits,
including access to the Federal Employee Health Benefit program and the
government's 401(k)-type retirement plan. As a strong advocate of
employee rights, I will review carefully any proposal to shift postal
workers and retirees from existing government-wide benefits and
protections.
Postal employees have much to lose if the financial, managerial,
and operational challenges facing the Postal Service are not addressed.
Yet, not all the problems facing the Postal Service are labor-related.
The Postal Service's future may be more dependent on how well and how
effectively it manages its employees, capital assets, purchased
transportation services, and consumables such as fuel.
Like other segments of the transportation industry, the Postal
Service operates within a quickly changing marketplace. Competition is
fierce, and rapidly changing economic conditions and rising fuel and
energy costs can affect the Postal Service's ability to remain
financially viable. The Commission's recommendations that the Postal
Service have pricing and management flexibility will allow the Postal
Service to adapt to this rapidly without the need to penalize its
workers. I thank Mr. Johnson and his fellow commissioners for their
effort.
And Madam Chairman, I thank you again for convening this hearing.
The collection and delivery of mail is a basic and fundamental public
service. I look forward to hearing from our distinguished witness.
Chairman Collins. Senator Fitzgerald, if you have any
opening comments.
OPENING STATEMENT OF SENATOR FITZGERALD
Senator Fitzgerald. I would just ask to include my opening
statement in the record, too, Madam Chairman. Thank you for
having this hearing, and Mr. Johnson, thank you very much for
your service. We appreciate it and appreciate the fine
recommendations of the Commission.
We will see what we can do. We operate in a political
world, so we cannot quite be as efficient, I am afraid, as the
business world, but we can try around here. Thank you very
much.
[The prepared statement of Senator Fitzgerald follows:]
PREPARED OPENING STATEMENT OF SENATOR FITZGERALD
Good morning. I'm pleased to join my colleagues in welcoming our
witness today, Mr. James Johnson, co-chair of the President's Postal
Commission. Mr. Johnson has played an important leadership role in a
much-needed effort to preserve and modernize one of the nation's vital
institutions. I also would like to thank Chairman Collins for holding
this hearing and applaud her leadership over many years on postal
issues.
The U.S. Postal Service (USPS) is a unique institution that has
provided an invaluable service since its inception. The Postal Service
has over 830,000 employees nationwide, over 43,000 of whom are in my
home state of Illinois. The Postal Service also operates 2,079 postal
facilities in my state.
The Postal Service now faces the challenges of increased
competition, however, and a regulatory structure that does not meet
today's needs. As a $67 billion enterprise, the Postal Service is the
nation's second largest employer and the 11th largest by revenue. The
services provided by this multi-billion dollar enterprise are being
displaced through market competition and greater use of electronic
forms of communication. Relatively new means of communication such as
email, threaten the financial health and long-term viability of the
Postal Service. As fewer and fewer people mail letters, postal volume
is stagnant or shrinking.
Due to the Postal Service's debt and the decline in its traditional
revenue sources, the General Accounting Office placed the
transformational efforts and long-term outlook of the Postal Service on
its ``high risk'' list in 2001. As the Commission notes in its report,
even if the Postal Service were not in financial jeopardy, the
inefficiency of its operations causes billions of dollars in
unnecessary costs that should be eliminated.
Strong financial management and good governance have long been
interests of mine. I believe that good business practices, strong
financial accounting, and independent oversight are important to the
overall success of any institution, and these are key areas to address
in the transformational process at the U.S. Postal Service.
To transform the Postal Service the Commission has undertaken a
comprehensive review of the Postal Service's operations. I was
especially pleased to read the recommendations to use the ``best
practices'' of the nation's leading businesses to transform the Postal
Service organization and improve its efficiency. The Commission report
emphasizes several aspects of current Postal Service operations that
would not be required of a business. This is important to take note of,
as these responsibilities are inconsistent with the Postal Service's
charter as an independently financed federal entity. It is partly due
to these requirements that the Postal Service is struggling to maintain
its operations.
I look forward to hearing from our witness today regarding how
Congress can help the Postal Service function more like a business and
less like a bureaucracy. Additionally, I hope to hear about the
proposed oversight and regulatory structure of the Postal Service, the
opportunities to enhance financial transparency, and the management of
its monopoly powers.
Thank you, Chairman Collins.
Chairman Collins. Mr. Johnson, we are now going to turn to
questions, and we will do rounds of 6 minutes each, back and
forth.
Your report makes extensive recommendations, both
administrative and legislative, on a large variety of issues,
and it really is a comprehensive look at the problems of the
Postal Service. If Congress were to do nothing--if we failed to
enact the legislative reforms that you have recommended, or at
least some of the legislative reforms--how long would the
Postal Service, as we know it, be able to continue to operate?
Would it be sustainable in the long term if we just throw up
our hands and say these issues are too difficult?
Mr. Johnson. Let me try to answer that as honestly as I
can. The Postal Service is in dramatically better shape today
than it was a year ago for two important reasons. The first
reason is the bill that you and Senator Carper shepherded
through on the recognition of the overpayment of retirement
benefits and now the reversing of that overpayment, which is
giving the Postal Service an opportunity to pay down debt and
to have other opportunities to do much needed investment.
Frankly, that has changed the dynamic of urgency to some
degree.
The second thing that has changed the dynamic of urgency is
the skill of the Postmaster General and the leadership of the
Postal Service. Their Transformation Plan, their efforts to put
best practices in place, are bearing substantial dividends.
They are moving forward on a wide variety of fronts, and I
tried in every one of our nine public meetings to compliment
them. I do not want to fail to do that today because I think
excellence in Federal service should be recognized
systematically, and I think many of the things that they are
doing are very impressive.
The short-term, medium-term, next 3-years answer is that
things are better than they were. In terms of the longer term,
we focus a great deal of energy on the diversion question, the
electronic challenge, elements of inefficiency, and the cost
structure. I have no doubt that in the somewhat longer time
horizon, every one of the challenges that was apparent a year
or two ago will be back front and center. As I said earlier, I
do not think anyone wants this to be taxpayer-subsidized. No
one wants to boost rates to the point where mailers do not want
to mail and where they cut their volumes or boost them again
and again to the point where you have a downward spiral of
activity and revenue. My belief is that we do not have a long
time to get it straight and to take our best effort for the
long term, but it is not a fire. The full consideration by your
Committee, the full consideration by your companion committee
on the House side, the full engagement of the President and the
administration, the further engagement of the Postmaster
General--this is an ideal time, it seems to me, where we can
see the sort of contours of a bad future if we do not act, but
we have time to get it right. As long as we can maintain
forward momentum for reform, true engagement, and honest
dialogue, I would be very hopeful. And thanks to the work that
you all have done, I am more hopeful now than I was a few
months ago.
Chairman Collins. You mentioned in your statement the
recommendation that the Postal Service should stick to its core
business. Over the past few years, the Postal Service has
offered a variety of non-postal products and services which
actually lost money. In addition, I heard from a lot of gift
shop owners and printers in Maine who are very unhappy about
having what they saw as unfair subsidized competition from the
Postal Service.
There are a couple of examples of failed ventures in the
non-core area such as Net Post Mailing Online, the on-line
payment services, which resulted in fiscal year 2002 losses of
$10.6 million and $1.15 million respectively.
You have recommended that the Postal Service focus on its
core business. Could you define that further for us and what
exactly you mean by that?
Mr. Johnson. Once again, we spent a lot of time on this
subject. We were informed by so many corporate disasters of
people who had done essentially the same thing, that is, gotten
involved in businesses that they were not prepared to run well
because they did not have adequate background and expertise. So
all of us--and this was all nine--had the strong view that
there should be a restraint on non-postal services and new
businesses which were not related to the core.
The way we defined the core business was ``acceptance,
collection, sorting, transportation and delivery of letters,
newspapers, magazines, advertising mail and parcels.'' That is
pretty restrictive, and people came along and asked, isn't it
true that people get passport photos done in post offices? Are
you against that? And we said no; that is an incidental public
service which we think is completely appropriate and not a
risky business venture.
What we were really trying to do here was to get at the
risky business venture concept as opposed to small auxiliary
services that in some way might be provided.
I have the feeling once again that the current management
of the Postal Service understands this point. I do not think
they like being overly constrained, and they probably find our
definition a little bit restrictive. But my own view is that
the Postal Service as it is defined here is huge, and that is
in fact the public function that is needed. There are many
private sector providers who can provide a lot of other
services, and I see no reason to be taking things where there
are adequate public sector providers and replacing them with
public sector activities.
This is a long and complicated discussion in regard to all
kinds of different government suppliers, whether they be
defense contractors or communications companies. It is an
endless discussion about where these boundaries should be.
Once again, I think our work should be viewed primarily as
directional, and that is ``No'' on risk business ventures,
``Yes'' on core business ventures, where exactly you define
that. We have given the regulators some power to say that if
there are things that are challenged to the regulator on the
basis that this is something that would not be possible without
cross-subsidy. For example, we have given a lot of latitude for
the regulator to come in. I know this is a concern of many in
the mailing community, and that is that things in the end get
distorted through various kinds of cross-subsidy, and that
before the Postal Rate Commission, that is an ongoing, huge
topic.
We have tried to give a framework without defining it down
to the last detail, but certainly we come from where you come
from.
Chairman Collins. Thank you.
I am going to call on my colleagues in the order that they
arrived, and I believe, Senator Dayton, you were next.
Senator Dayton. Thank you, Madam Chairman.
Mr. Johnson, if we define the mission of the Postal Service
as universal service 6 days a week, and if the volume of mail,
particularly First-Class, is now diminishing, and if that is
going to be the structural change that is going to persist for
a while, then, realistically, how does this business model ever
work other than just to try to compress the revenues, and even
if you try to get efficiencies, aren't we just trying to extend
this further and further when it is essentially not a revenue-
balancing possibility?
Mr. Johnson. A very interesting question, and once again
something we spent a lot of time on. We had the feeling that if
we were guided by best execution throughout, very substantial
savings could be achieved and therefore, with lower revenues,
there still could be a break-even result. That was very much on
our minds.
We also talked extensively with the Postmaster General
about standards of service, and one of the concepts that he
talked about--and he will obviously be before you at some
point, and he can correct the record if I am wrong--but part of
the point he made to us was that there were reasonably small
changes in standard of service which would yield quite large
economic benefit. All 6-day delivery is not created equal; all
extensions of service are not created equal--and with more
flexibility in management, he could find some ways, in his
opinion, of very modestly, very reasonably, cutting back on
some of those service standards and getting big dollar results.
We do not know the future of the internet; we do not know
the future particularly of the bill payment mechanism. The bill
presentment and bill payment are really the biggest pieces of
this whole internet point, and if we could see the future on
that--and we employed some consultants who took us out 20 years
and longer in terms of looking at the dynamics of how that
might work. In my own view--I had a good friend and colleague
who was at Citigroup for 27 years, I hired him, and when he
came to work at Fannie Mae, I said, ``Tell me about the
checkless society,'' and he said, ``I am now in the 30th year
of a prediction of a checkless society, and every one of those
30 years, there have been more checks than the year before.''
I do not know quite how this internet usage, bill payment,
bill presentment works out over time, and obviously, that is a
very big piece of this dynamic because in terms of, if you
will, the profitable business of the post office, a lot of that
comes in the bill-paying, First-Class dynamic. I think if
things are simply stable, if you are not getting new
efficiencies, if you are not getting better execution, if you
are not riding a little slower curve on some of these matters,
you can certainly run to the point where you will run out of
efficiencies and cost control, and you will have service
requirements which will simply give you an imbalance. We think
that, if everything is done right, that can be many years from
now. But if we are sitting here 15 or 20 years from now, you
could get to a point where the electronic diversion and
alternative executions were such that you not only had a
smaller post office, but you had one at that point where you
did not feel you had additional capacity to raise rates,
because you were simply diverting into other mechanisms by
further rate increases, where you had expenses which were
really down to a minimum, and that you had a mismatch.
I think we are probably a couple of decades away from
there, and for government work, that is not bad.
Senator Dayton. It is as good as it gets.
You recommend what you call a transformation of the nine-
member board of governors to what you call a corporate-style,
12-member board of directors which does not require Senate
confirmation--and I am sure that was just an omission in the
report--but how does this corporate-style board of directors
distinguish itself from this current nine-member board of
governors. And then--I will make it a two-part question--you
also set up this three-member Postal Regulatory Board with
greater authority for accountability and public oversight of
the Postal Service. What is the interface, then, between this
Regulatory Board and the board of directors?
Mr. Johnson. Let me start at the back end of your question.
The reason that we put the Postal Regulatory Board in place is
that we believe that there are major public policy implications
of how the Postal Service goes about its business. We provided
for Senate confirmation of that Postal Regulatory Board because
we believe that is the core for setting the boundaries and
expectations of this activity.
In terms of the corporate-style board of directors, the
qualifications which we would like to see in this new board
would involve people who had run similarly-sized enterprises,
who had deep experience in logistics businesses, people who had
been involved with companies with very large work forces. Our
feeling was that this was primarily a business-like function as
opposed to a public policy-like function. While it is hard to
find the exact contours of what is confirmable and what is not
confirmable, it seemed to us that a reasonable separation
between the sort of entre here on public policy issues should
be Senate-confirmed, and that which was more a strictly
business background kind of best execution did not seem like a
confirmation item.
Just a few examples--if you look at Sallie Mae, Fannie Mae,
Freddie Mac, Federal Home Loan Bank Board, those being business
functions, none of those is confirmed. There are Presidential
appointments there which are simply Presidential appointments,
and they go to work on what is essentially a business financial
entity with essentially a business financial function for the
board. Now, in all of those entities, there are some public
policy dynamics, obviously--whether or not you do the work you
should be doing for housing and for student loans--so it is not
pure. But it seemed to us that confirmation should be focused
on the people who are setting the public policy ground rules,
and that the people performing business-type functions should
probably not be infirmed--but once again, you all will decide
in the end whether that makes any sense or not.
Senator Dayton. My time has expired.
Thank you, Madam Chairman. Thank you for your report.
Chairman Collins. Thank you. Senator Fitzgerald.
Senator Fitzgerald. Thank you, Madam Chairman.
Mr. Johnson, I was wondering what your thoughts were with
respect to rural post office service. One of the big issues I
have heard about repeatedly in the State of Illinois is that we
have a lot of smaller Down State communities, and occasionally,
the Postal Service recommends closing a facility. Of course,
everybody in the community is up-in-arms, and it often makes it
difficult for me as a Senator to figure out what to do.
Obviously, the community does not want to lose its post office,
but we know at the same time that there are some post offices
that are not efficient to keep.
I was wondering if you could explain to the Committee your
Commission's findings with respect to underutilized facilities
and what the Postal Service should do with those.
Mr. Johnson. This was also a much-discussed topic, and let
me give you our perspective. Our feeling is that any postal
facility that is required to fulfill the universal service
obligation should stay open. So, pure and simple, if this is
part of getting the job done either on the retail side or on
the distribution side, and if there are not reasonable
alternatives, it should stay open--that universal service comes
first.
Now, if you have a facility where you have three more post
offices in a very small area there will be circumstances where
there will be post offices or postal contract services which it
will be very hard to argue are essential to providing universal
service either in terms of retail or other postal functions.
What we have said in that regard is that we do not like the
sort of yes-or-no dynamic of open or closed. There should be a
very broad opportunity for the Postal Service to work with the
community to either add Federal or other functions to that
facility which would make it more economically viable, to
cooperate with State and local government in keeping it open.
For example, they might put a part of city hall or some other
dimension of public service in that building. We even went so
far as to say if there was not a market for that postal
facility, the Postal Service should have the option of giving
it to the community even if the Postal Service owned it, giving
it to a nonprofit organization----
Senator Fitzgerald. Do they have that option now?
Mr. Johnson. No, I do not believe so. Since I am relatively
new to all of this, I can be corrected at any time, but I do
not believe that is an option under current law.
Our hope was that if there are facilities that really are
not economic that you do not just have a yes-or-no for the
community to be a winner or a loser, and that in fact there
would be multiple ways for the community, even including giving
them the facility, that they could put it to good use for
public functions or for public services. We tried to be as
broadly responsive as we could to the social function that
small post offices play.
We have 38,000 post offices today. I think it is safe to
say that every single ``expert'' we spoke to thought that was
far more than what was required to get the job done. It is a
hot potato. But we tried to think through systematically how we
might make this a little more viable. I do not know whether we
have succeeded or not.
Senator Fitzgerald. I am not sure if the Postal Service is
in any way organized as a corporation.
Mr. Johnson. It is.
Senator Fitzgerald. It is a separate corporation, and it
has a----
Mr. Johnson. It is a separate, independent governmental
entity. It is not a Delaware corporation. It is not subject
to----
Senator Fitzgerald. But it has a Federal Government charter
like a Fannie Mae or a Freddie Mac, although it would be quite
different?
Mr. Johnson. It has a Federal Government--it is an
independent agency within the Federal Government.
Senator Fitzgerald. I see in the book that you put out, you
have a brief statement of the liabilities of the postal agency,
but I cannot find in here a statement of the assets of the
agency. When an agency is not organized as a corporation, it
gets very hard to figure it out and compare it, say, to the
other corporations that you attempt to compare it to in terms
of revenue and in terms of employees.
I am wondering if it would not make sense to actually
incorporate it and have it go through some of the disciplines
that corporations do, even though it would obviously be owned
or have some special status as a government-chartered
corporation.
Mr. Johnson. It is interesting that you should ask that
question. We talked about that, and we to some extent had the
advice of outside experts on that point. The conclusion that we
came to is that by something that looked more like a
traditional chartering, we would pick up problems of various
kinds, including the capacity to be sued for various things and
other things that are not currently a problem for the Postal
Service.
We tried to get at the financial transparency issues in
other ways, through the SEC filings that we recommend and so
on. Dick Strasser, the chief financial officer of the Postal
Service, happens to be sitting right behind me this morning,
and I am sure he can shed substantially greater light at the
appropriate time on how to think about the assets.
Senator Fitzgerald. I just noticed that in your report, in
order to come up with some of these viabilities, you are
deriving some of them from, like, a letter that the CBO wrote
to Jim Nussle. It does not look like they are written down or
accounted for in certain places.
Let me ask you one final question. I know my time is up.
Chairman Collins. I am going to try to hold to the time, so
if you could wrap up; thank you.
Senator Fitzgerald. Just a final question. Were there other
liabilities besides this military pension liability that
somehow was foisted onto the Postal Service that
administrations over the years have tried to hide or bury in
the Postal Service?
Mr. Johnson. There are major liability areas, but I am not
aware of those being suddenly or externally introduced.
Senator Fitzgerald. Thank you.
Chairman Collins. Senator Durbin.
Senator Durbin. Thank you, Madam Chairman, and thank you,
Mr. Johnson and all those who took part in this postal reform
effort.
I think there are two elements that are essential if this
is going to be successful. The first is selling postal reform
proposals to Congress and the White House, and second is
selling it to the men and women of the Postal Service so that
it finally is implemented in a successful fashion.
I read portions of your report with great interest, and let
me point out one that you noted in your statement. ``The Postal
Service employs approximately 843,000 people, making it the
second-largest work force in the United States. Its jobs are
highly-coveted. As of July 2001, the Postal Service had a
backlog of some 400,000 job applicants and virtually no
turnover.''
Then I turn to another section, and I read that ``In 2002,
184,329 grievances were filed by members of the Postal Service
before the major union reached a second-step appeal; and
106,834 were pending arbitration.''
``Clearly, something is wrong when a unionized work force
of 746,000 employees generates more than 184,000 second-step
grievances in 1 year. By comparison with a work force of
102,000 employees, American Airlines launched a major
alternative dispute resolution initiative when its backlog of
employee complaints reached a mere 800.''
I want to try to explore this for a moment with you. Those
seem to be two very contradictory statements. The most coveted
job to the point where 400,000 people are waiting to get an
opportunity to work there, and of the people who are there,
grievances are being filed on behalf of about one out of four
employees every year. It suggests to me that there is a lure to
the job but a dissatisfaction once they have arrived with
management and the relationship between labor and management.
Do you feel that we need to look at this more seriously at
the outset before we can hope to implement successfully any
postal reform where a commission or the management is going to
suggest to a work force which apparently has its differences
with the management has any chance of success?
Mr. Johnson. Yes is the answer to your question. I believe
that the grievances are far too high. Now, there are some
alternative dispute mechanisms which I think should be more
broadly applied. The letter carriers have made some very
substantial progress on some experimental programs that they
have to reduce grievances and deal with them more
expeditiously.
It was absolutely clear to the Commission that this gave
every evidence of an inadequate level of trust between labor
and management, that the grievances were unbelievably high, and
that it was something that had to be very seriously addressed.
I must say, just to give you a little editorial comment, there
was no feeling that this was primarily a labor problem. There
was a feeling that this is an indication of a very substantial
shortfall on management's part as well as an indication of a
strong willingness to confront the terms of the contract and
that, for everybody's better interest, there should be a better
way.
Senator Durbin. So how will this management team, which is
having substantial difficulty with the current law, regulation,
and procedure of the U.S. Postal Service, lead this team into
the era of reform, suggesting some substantial and sometimes
painful changes in the workplace? How can this same management
team which apparently has such a contentious relationship be
expected to be successful?
Mr. Johnson. A good question once again, and this is also a
subjective reply. Having spent dozens and dozens of hours now
with the management team--I must say, dozens of hours as well
with the labor leaders who represent the major employee units--
my feeling is that Jack Potter and the other people on his team
have a lot better orientation and attitude than they do record.
That gives me some hope. It does not make me foolishly
optimistic, but I think we have a great deal of work here to do
on everybody's part. I think you are absolutely right to be
focused on this. The grievances are dramatically too high.
There needs to be an earlier resolution, a quicker resolution.
And in terms of whether or not this management can provide that
leadership, I see every evidence that they can, but the record
at this point is nothing to be proud of.
Senator Durbin. I do not have enough time to get into this
next area, but I would like you to consider and perhaps get
back to me informally or formally--if we are looking for a
different work force for the Postal Service in the 21st
Century, in the next 15 or 20 years, to respond to technology
and challenges to the Postal Service, how can you reconcile the
need for this type of new Federal employee in the work force
with your suggestions of compromising or reducing health and
retirement benefits for new hires?
It strikes me that United Airlines and others have learned
in the midst of bankruptcy that you just have to be careful
that you do not compromise your ability to retain and attract
the very best personnel because somebody out there is going to
offer them a better arrangements.
Mr. Johnson. I think it is an area of great concern. In
every company that I am involved in, we are constantly
preoccupied with whether or not our best people are going to be
stolen.
In the Washington area, when I was CEO of Fannie Mae in the
1990's, there was a war underway between IBM, Marriott, Fannie
Mae, and a few other companies for the best talent in the
technology area. What you raise is a very real point. That is
part of the reason why we made another controversial
recommendation, and that is that we should not have the same
ceiling we have today on total compensation. The Postmaster
General and other key leaders should have more flexibility, or
the board should have more flexibility, in terms of paying them
competitive market rates.
I think the Congress has kind of a fundamental choice here.
What we were dealing with was what we viewed as a black-letter
law on comparability. We tried to add things to the collective
bargaining dynamic within the context of our reading of that
law.
Now, if this is going to be even more nimble in the future
to the Postal Service overall, maybe the Congress needs to look
at some provisions for flexibility. We were dealing with the
fact that we had witness after witness after witness who said
it is not comparable; people in the Postal Service are being
paid more. We never bought into that. We said we hear what you
are saying, but we do not have the capacity to determine
whether or not it is comparable.
What we recommended was a mechanism to work on this
comparability issue through the Postal Regulatory Board.
From my point of view, if I were running a comparable
company, as I was at Fannie Mae, a comparably large company,
without flexibility in terms of attracting and retaining my
most valuable employees, I would have been unreasonably
hamstrung, and we could never have been the company we were if
we were hamstrung in that way.
But we viewed it essentially as a precondition of our work,
the very clear statement in the early 1970's statute saying
that comparability was the law of the land. If that should not
be the way it is looked at, then Congress should address that.
Senator Durbin. Thank you. Thank you, Madam Chairman.
Chairman Collins. Senator Pryor.
OPENING STATEMENT OF SENATOR PRYOR
Senator Pryor. Thank you, Madam Chairman.
I would like to ask you about some trends at the post
office and the Postal Service generally in this country--and I
may be mistaken, but as I understand it, there has been a drop
in First-Class mail, and some people think that possibly email,
the internet, etc., maybe the economy have something to do with
that, and as I understand it, your parcel business remains
strong.
So I would just like to hear the trends that you see at the
post office and what we are dealing with here and where you
think we are going.
Mr. Johnson. Thank you, Senator.
The short answer is we do not know where we are going, and
that is what makes many of us feel so uncertain. We have had
this economic downturn, and we now have a consensus of
economists saying it is over and that third-quarter growth will
be 5 percent or thereabouts, that we are on our way to a
substantial recovery.
We have had this interaction between the rise of the
internet, the rise of the internet bill-paying dynamic which I
was talking about just a minute ago, and the downturn in the
economy. Typically in the past, if the economy is growing, mail
volumes have grown. So if you look now at the next 12 months--
and I do not know how fast you will be dealing with this
legislation or possible legislation--but we are going to learn
a lot in the next 12 months in terms of disentangling the
electronics from the economy. If we do in fact have the
recovery which most economists now predict, and we do not see
volume growth, and we have more and more incentives being
provided--and this is a very big reality--where credit card
companies, public utilities and others are incenting----
Senator Pryor. Your mass mailers.
Mr. Johnson. Well, no, this is even a little different than
the mass mailing thing--in many cases, they have very large
numbers that they are mailing--but if you are paying a bill to
a telephone company today or to a public utility or to American
Express, with the cost savings that flow from your being an
internet bill-payer, they are prepared to give you a gift
certificate of $100 or $200 or a variety of other incentives to
move you from somebody who uses the U.S. mails to somebody who
does not. This is a very big commercial reality.
We also do not know at this point--to use an economist's
term--where the indifference points are in the American
consumer's mind. There are lots of people who still say . . .
One of the most significant credit card companies came to see
me not long after I had been named co-chair of this Commission.
They said that now, up to 32 percent of their bills were being
paid on line, and they were getting nowhere on people being
willing to receive their bills on line. Then they went through
the economics of how much money they would save if they could
get them to receive their bills on line, and it became clear
that they could give hundreds of dollars to each person with a
reasonable perspective about how long that account was going to
last, and still be better-off if they could convert them to an
on line customer.
We have a lot of unknowns, a lot of variables, a lot of
question marks. My expectation is at least to answer the
primary question mark and that is, what is the effect of slow
economic growth versus robust economic growth? I hope we have a
chance to observe in the next year.
Senator Pryor. I do, too. You may not know where we are
going in the future, but what about right now? What are the
trends right now? Are all of your lines of service lines that
they have been in the past?
Mr. Johnson. No. The real point here is First-Class mail.
Senator Pryor. First-Class mail.
Mr. Johnson. Yes. There are many other dimensions here that
are growing or staying relatively flat, and the First-Class
mail, of course, is where the highest postal rates are, where
the support for the overhead of the institution flows from, and
that is really where the focal point should be in terms of the
threat to the basic balance of revenues and costs.
Senator Pryor. If you do not know where you are going--and
it is hard to know with all the variables out there, and like
you said, we will know a lot in the next 12 months--should we,
the Congress, go into sort of a holding pattern for the next 12
months and let you sort this out before we restructure and
transform and change things at the Postal Service?
Mr. Johnson. Well, over the next 12 months, I am not going
to be sorting out much of anything having to do with the mail.
I think that there are many areas in our recommendations which
have an orientation to best practice, best execution, better
organization, better functioning, growth, marketing,
cooperation with the private sector, where nothing needs to
wait, where a reform agenda could be pursued starting today.
I think there are other dimensions where the size of the
challenge may evolve, but we tried to look at a very broad
range of possible futures, and even within that broad range of
possible futures, we came to the view that this was the right
structure. Starting with universal service, structured as it is
today, with the balance of revenues and costs, that we could
achieve in a couple of decades in all likelihood, unless there
were some radical change, of stability in this model.
Therefore, you may get more or less political support. For
example, on the question of whether or not the Postal Service
should have to pick up this $25 to $30 billion of armed
services pension obligation, because if you get a mismatch
sooner rather than later, it may be even more apparent that it
is a burden that should not be put on the Postal Service
because it will rock the ship. But in my view over the long
term, much of the reform agenda, not just from our work but
from the work of people on this Committee, the Chairman most
notably, work in the House, much of this agenda of change,
flexibility, transparency, is an agenda that is ready to go. So
I would certainly not be in the camp of saying wait if you do
not have to.
Senator Pryor. Thank you. Thank you, Madam Chairman.
Chairman Collins. Senator Carper.
Senator Carper. Thanks, Madam Chairman.
I think I said this before, but I want to say it again to
you and to Harry Pearce and the others who served on this
Commission--and I know you have day jobs as well--but thank you
very much for finding the time in your lives to invest as
heavily as you have. And you have a very small staff. I do not
know if any of them are with you here today--one or two of them
look like I have seen them before.
Mr. Johnson. Yes.
Senator Carper. I just want to express to them and others
who work with them our thanks; for a relatively few people,
they did a lot, and I think they have done a good job.
I mentioned earlier that I spent some time in the Navy back
in the sixties and seventies on active duty, and for a long
time after that, actually, in the reserves. I remember being in
the military a long time ago, and people used to talk about
government work. They would do a job, not very well, and they
would say: ``That is good enough for Government work.'' You
have probably heard that before. I never liked that, and people
learned never to say that around me.
When you are doing government's work, you are doing the
people's work, and I think that demands our very best effort.
Later, I was elected to State Treasurer, and at about the
same time, Jimmy Carter was elected President, and he had a guy
named Bert Lance, who used to work for me, as his budget
director for a while. Bert Lance used to like to say, ``If it
ain't broke, don't fix it.'' I do not know if it originated
with him, but he was the first person I ever heard say that. I
used to say that myself. I stopped saying that, though.
And eventually, when I was Governor of Delaware, we would
never say, ``If it ain't broke, don't fix it''--we would say,
``If it isn't perfect, make it better.'' And I think we will
all agree that our Postal Service is not perfect, and it can be
made better.
I wish we had a futurist here. I am glad that you are here,
and I am delighted that you served on this panel. But I wish we
had a futurist here who could talk--and this is sort of
following up on Senator Pryor's question--and tell us what is
the future, what is the Postal Service going to look like 10
years from now, 20 years from now, 30 years from now. Back when
Ted Stevens was a young Senator, I do not know if they had a
vision of what the Postal Service was going to look like in 30
or 32 years.
We were talking here about email and trying to get people
to use electronic checking and that kind of thing. We do a
biweekly mail report in my office--I always say that the things
you measure are the things you do best--to actually measure how
we are doing on the mail, how many letters we receive on what
subjects, how long our turnaround time is. I hold everybody on
my staff accountable, including myself.
It is interesting that when we did our mail report for this
week and the last few weeks--do you know what we learned--we
learned I think for the first time that if you look at the
folks who are emailing us versus the folks who are writing us
versus the folks who are calling us by phone, we now get more
communications by email than either of the other two put
together. That was not the case even 2\1/2\ years ago when I
came here, so obviously, things are changing.
But take just a moment, and realizing that none of us has
the ability to see the future clearly, but what do you think 10
or 20 years from now our Postal Service should look like, just
in general terms?
Mr. Johnson. The first thing that I would say is that many
American corporations have found dimensions of productivity
increase far beyond what they ever imagined. If you read the
Six Sigma literature coming from General Electric, a lot of
operational efficiency literature, if you look at the
integration of networks, if you look at the imaging now that is
routine in major American companies, and if you now look at
Alan Greenspan's discussion on an ongoing basis of productivity
increases, I think we are going to see--and I have great
respect for public functions as well--I think we are going to
see a postal system which is dramatically streamlined from what
it is today. I find that very encouraging because all
dimensions of being able to do more and better for less need to
be pursued in the public sector, or you develop the kind of
cynicism that you are talking about, about how it is not the
best way to do things.
I keep getting reminded of the Social Security
Administration and some other dimensions of government who
constantly are winning awards for the lowest cost, the best
execution, doing things better than the private sector in many
of their functions. I do not necessarily see it as more
private. A number of my colleagues on the Commission do, and I
think that should be an ongoing dialogue about what is private
and what is public.
But I would be thrilled if we were able to take all of
those dimensions of logistical, technology, and imaging
investment and organize those in the context of being a
government entity and staffed by people who are staffing it
today.
I think this will make it better integrated, much more
efficient from a process and logistics point of view, and I
would guess even within the context of the narrow function that
we describe, finding lots of new businesses as they go along. I
think people want to be connected, and I think they want to be
connected in tangible physical ways. And yes, you can print an
email, and yes, you can take things off your screen, and maybe
I am just so old that I have not gotten it yet, but when
somebody sends me a thank you note, if it comes on email, I say
fine, and it goes into my wastebasket reasonably quickly. But
if somebody takes the time to write me, with some thought, and
I have it tangibly in front of me, it makes a big difference to
me. Now, as I said, maybe that is generational.
Likewise, I happen to be somebody who still works from pink
slips on my telephone messages, because until I throw away the
pink slip, it is still in front of me, and I cannot ignore it
on a list, and I cannot ignore it on a memo. I have the slip,
and I know that if I have not thrown it away myself, I have not
dealt with the issue.
I think there is a tactile, touching, feeling dimension to
a lot of us that some of the discussion about how we are all
going to become email people and computer screen people and
video-cellphone people ignores--yes, we probably will. But as I
move around and try to get my work done, I have all those
tangible assets. In the end, if it is important, if it is
personal, if it is complicated, I really like to see it and
feel it and touch it, so I tend to be a little bit on the kind
of slow revolution side. I am a little bit on the side of the
person who is not surprised that there are more checks every
year. But I would not bet on it. I would not bet a lot of money
that that is the way it is going to roll out. But I think
Americans have shown a lot of flexibility--and this goes back
to Senator Fitzgerald's question. I come from rural America--I
grew up in a town of 3,000 people; my father was the acting
postmaster in our town of 3,000 people--and I know a little bit
about that rural dynamic. But they are changing, too, and I
think as long as you have a service orientation from top to
bottom in the Postal Service, we will probably be doing a lot
of things in different ways.
Now, if you do not have a service orientation, and you do
not have a public mission orientation, you are going to leave
people behind, and you are going to make bad decisions; but if
you have the best of technology and that sort of public
service, service orientation, this could look very different,
but I think it could be even more of an asset for our country
than it is today.
Senator Carper. Madam Chairman, my time has expired. If I
could just conclude, not with a question but with a comment--
there is a whole range of issues that I wish we had time to
explore. I do not know if any of my colleagues have had a
chance to visit a new post office in their States in recent
months or weeks. I was down in Seaford, Delaware during the
August recess. If you go to the beaches in Delaware--Rehobeth
or Dewey or Bethany or any of those places--from Washington,
you pass very close to Seaford, Delaware, which is where the
first nylon plant in the world was built by the DuPont Company
about 50 years ago.
They recently sold off their post office which was right in
downtown Seaford, and it is now a museum. It is really exciting
what they have done with it. But they built a new post office
not far from there, and it is a post office that is really more
attuned to the 21st Century in their ability to process mail,
but also in their ability to act as a retail operation and be
customer-friendly and so forth.
So I would just invite my colleagues, if you have a chance
when you are out, touring around your State, to take a look at
what the Postal Service is doing to give us a little bit of a
window into the future, which I think would suggest that maybe
the best days of the Postal Service are not entirely behind us.
Thank you, Madam Chairman.
Chairman Collins. Thank you, Senator. Senator Akaka.
Senator Akaka. Thank you very much, Madam Chairman.
Mr. Johnson, about 2 years ago, this Committee asked the
Postal Service for a comprehensive transformation plan, which
would address the short- and long-term operational and
financial goals of the Postal Service, including providing
universal service at an affordable price.
I should tell you that I believe the Commission, within a
compressed time frame, tackled that question. You grappled with
the challenges facing the Postal Service and made significant
recommendations.
You touched on the Commission's recommendation that would
task the Postal Regulatory Board with the responsibility of
determining pay and benefit comparability. The Commission also
recommends clarifying the term ``comparability'' by redefining
current laws and applying any clarification prospectively. Were
there other alternatives discussed on the comparability issue,
and were there concerns that two different pay and benefit
systems could have a chilling effect on employee morale?
Mr. Johnson. Yes, there were. There were very substantial
discussions of both of those concerns, and we could not think
of a better way to proceed than what we recommended.
As I said earlier, comparability is the law of the land.
Partial comparability we did not believe was congressional
intent. We believed that it was all compensation. This can
always be reinterpreted by the Congress, but we felt that it
meant all compensation.
We were highly sensitive about doing anything that would
seem to abrogate existing arrangements, existing contracts,
existing retirees, so we thought the only possible entry point
was for new employees. We also felt that if you did not
honestly address it--and I am not prejudging the comparability
issue; friends of mine in the labor movement have said to me,
convincingly or very strongly, that if you look at the correct,
honest comparability measures, you will not find a premium, and
obviously, that is the kind of data that the regulator would be
legally required to very carefully evaluate.
We did not think that this was a fabulous, easy, non-
disruptive way of thinking about it, because just as we
considered everything else, entering with new employees
comprehensively seemed to us to be the best alternative. So
that is where we ended up.
Senator Akaka. Thank you for your response, Mr. Johnson.
You mentioned transparency. The lack of financial
transparency within the Postal Service has long troubled me, so
I was interested in the Commission's recommendation that the
Postal Service voluntarily comply with the Securities and
Exchange Commission's reporting standards. My question to you
is why should this be voluntary, and what incentive would there
be for the Postal Service to comply?
Mr. Johnson. I think the incentive to comply would be to
end a long simmering discussion. As you said, you have had a
long concern about whether or not they were reporting
adequately, comprehensively, to a standard that should be
expected of such a large, complex financial enterprise.
The SEC standard is America's standard today; it is the
gold standard in terms of transparency for large financial
enterprises, so therefore, it kind of ends the issue.
Ultimately, there might be a way of making it a little less
voluntary. On the other hand, these are very complex issues--
and I happen to know that my former company, Fannie Mae, has
committed to meeting all of the SEC standards in all of their
reporting. It took them 9 months of very detailed negotiations
for a company that reports a lot more like a standard company
than the Postal Service does to get all the agreements and
standards and arrangements all in place, and it was a very
complicated effort.
It did not seem to us to be an easy thing to mandate given
that level of complexity. Now, maybe we should have been more
aggressive in terms of saying that over a transition period of
a couple of years or some reasonable period of time, the SEC
should be asked to declare that they are in compliance. That
could be a somewhat more aggressive approach, and if the
Committee likes this idea at all, maybe the Committee should
move in that direction. We were just a little lighter, even
though we all thought it was a good standard.
Senator Akaka. Madam Chairman, my time has expired. May I
ask a follow-up to that?
Chairman Collins. Certainly.
Senator Akaka. You recommend, Mr. Johnson, that the Postal
Regulatory Board develop reporting requirements and impose
sanctions to enforce its reporting requirements. What sanctions
are envisioned by the Commission?
Mr. Johnson. Well, there is a sanction that would involve
simply requiring the Postal Service to stop a function. For
example, if they thought that there was cross-subsidy involved,
they would have the authority to say there is cross-subsidy and
you may not do this any further. If they found a rate-setting
noncompliance, they could force compliance with the rate-
setting standards which the Regulatory Board had put in place.
We contemplated the Postal Regulatory Board having subpoena
power so that if there was a shortfall of information or a
shortfall of candor, the Regulatory Board would have the legal
capacity to subpoena records, to subpoena testimony.
I think we have given this regulator some teeth, some would
argue too many teeth, and it ultimately, obviously, has to be
shaped by this Committee. But our idea was that on the areas
where they were supposed to assume responsibility, they had a
lot of authority.
Senator Akaka. Thank you very much for your responses, Mr.
Johnson. Thank you, Madam Chairman.
Chairman Collins. Thank you, Senator.
Mr. Johnson, I have so many more questions I want to ask
you, but in view of the hour, I am only going to ask you a few
of them.
First, all of us are sensitive to making sure that the
postal work force is fairly compensated, well-treated, and that
morale is high, and that is why there is sensitivity, I think,
to some of the recommendations that were made. But to help give
us a better understanding, I want to ask you just a few
questions in that area.
I believe you said that 76 percent of the overall expenses
of the Postal Service are personnel. I realize the Postal
Service is truly unique and that it is not comparable to
Federal Express or United Parcel Service in its mission, but do
you have any idea what the comparable percentage of personal
cost is for FedEx or UPS?
Mr. Johnson. The answer is I do not have enough of an idea
to give you an answer. It is quite dramatically less. But
Dennis Shea, who is still working with the Commission for a
couple more weeks, and I will get back to you.
Chairman Collins. Thank you. That would be helpful.
Second, it is my understanding from your report that a
substantial number of postal employees will be eligible for
retirement within the next 7 years, and I think if there is
going to be a need for downsizing, all of us would hope that we
could do this through retirements or other natural attrition
rather than making the very painful choice of laying people
off. Could you give us some idea of how many postal employees
will be eligible for retirement by the year 2010?
Mr. Johnson. The number that we used in the report which we
got from the Postal Service was 47 percent between now and
2010. I assume that is a generally accurate number.
We also had an interesting session one night with the
Postmaster General--and I would urge you to explore these
topics with him as well. We discussed that there are quite a
large number of temporary employees in the Postal Service,
there are quite a large number of special arrangements of
different kinds within the Postal Service, and if you are
thinking about the counted employees in that 835,000, if that
is the correct number for today, and the 47 percent, there is
also a lot of latitude in terms of building greater
efficiencies and lowering costs that can be pursued outside of
that core of professional employees.
We were convinced that with the scale of attrition, there
would be very substantial latitude in terms of having a smaller
work force without doing the kinds of things that you and the
other Members of the Committee I am sure would not want to be
doing.
Chairman Collins. I have great respect for the fine men and
women who serve for the Postal Service--I know you do as well--
--
Mr. Johnson. So do we.
Chairman Collins. [continuing] And we will certainly work
closely with them and with the Postal Service and with the
Commission as we pursue these recommendations.
The pay-for-performance issue is one that interests me
because I have been involved in a lot of the civil service
reform issues, and I know it was unanimously agreed on by the
Commission. It is a principle that I support.
Would you agree that if you go to a pay-for-performance
system, however, it is absolutely key that you have a lot of
training in how it should be used to ensure that there is a
fair system in place with standards for employee appraisal and
involvement of the employees in coming up with the system?
Mr. Johnson. I would certainly strongly agree. We tried to
make that very clear in the report. We also had some data that
was provided for us by Watson Wyatt, the human resources
consulting firm. They do an employer bargaining objectives
survey each year of establishments with collective bargaining
agreements. Let me just give you a couple of numbers. They
found a prevalence of incentive and variable pay plans--these
are in unionized work forces. They found that 16 percent of
employers utilize group incentive plans, 10 percent utilize
gain-sharing plans, 9 percent utilize individual incentive
plans, and 7 percent utilize profit-sharing plans. The survey
also found that these percentages are approximately 50 percent
higher for manufacturing and processing concerns.
We also went back to Watson Wyatt just in the last few days
and said there has been a lot of skepticism about whether or
not these incentive arrangements work in unionized work forces,
whether they can be done on a fair basis, and asked them for
some examples of companies that had these kinds of pay-for-
performance incentive plans in place. Dennis can provide you
with a list of companies where they are in place if there is a
desire on your part or your staff's to see whether there are
some of these that, in fact, are following the guidelines that
we talked about, that you just talked about, and are working
out well.
Chairman Collins. That would be very helpful.
Mr. Johnson. We do not expect anybody to accept anything on
faith. Obviously, the Committee would want to examine very
carefully places where this is being tried and see whether or
not it meets the Committee standards in terms of its
effectiveness.
[The information follows.]
Incentive Plans For Collectively Bargained Employees
As a follow-up to the September 17th hearing, I wanted to let
you know that Commission consultant Watson Wyatt has informed
me that they believe the following companies have incentive
plans for their represented employees:
Boeing
United Parcel Service
Ford Motor Co.
Delphi Corp.
DaimierChrysler
Nucor Corporation
Chairman Collins. The Commission noted in its report that
the Postal Service has excess capacity in its mail processing
function. I remember being struck by the fact that the
Brentwood facility could be closed for I think it was 18 months
in the wake of the anthrax contamination and yet did not seem
to have a notable impact on this area's ability to process and
receive mail.
Did the Commission look at that example and others in
reaching its determination, and did you come up with any
percentage, or did you attempt to quantify the excess capacity?
Mr. Johnson. The answer unfortunately is no and no. We did
not look at Brentwood in any real detail. We did not attempt to
quantify with any precision. We asked a lot of people what
their view was of how much excess capacity and inefficiency
there was in the current system of processing and distribution.
And we had a lot of general characterizations saying ``a lot'',
``a tremendous amount'', ``a lot of work can be done'', ``many,
many facilities can be closed.'' We pressed the Postmaster
General one night on how many he thought could be done over a
3-year period--it was an off-the-record discussion so I will
not give you his answer, but it was not a trivial number.
So once again, our work here was really directional. We ask
the post office to come in with its very best judgment about
how it can have the most efficient, optimum network, and then
deal with it--take it to the President, bring it to this
Committee and the comparable committee in the House, and vote
it up or down.
The feeling on the Commission after having visited a lot of
different facilities, but by no means being experts, was that
there was a large number of facilities that were duplicative.
Chairman Collins. Finally, I realize that the Commission's
report has to be considered as a whole, but are there any
particular recommendations that you think are absolutely
imperative and want to highlight for the Committee today--you
presented an overview, but if you were prioritizing the
recommendations.
Mr. Johnson. Perhaps the next time we talk.
Chairman Collins. OK.
Mr. Johnson. I would be happy to try to think that through
in the right way.
Chairman Collins. That would be fine.
Mr. Johnson. Thank you.
Chairman Collins. Again, I want to thank you very much for
your hard work and for appearing before us today at our initial
hearing to look at the Commission's report.
I promise to send you a handwritten thank you note through
the United States mail. You will not get a curt email thank you
from me. It will have a 37-cent stamp on it--I will not even
frank it. [Laughter.]
Today's hearing is the first in a series. Our next hearing,
which will probably be in early November, but we will announce
the time shortly, will feature the Postal Service and the
General Accounting Office.
We also look forward to continuing these hearings next year
and hearing from those more directly affected--the postal union
representatives, the mailing community representatives. We want
to get a wide variety of views, and we will indeed be
soliciting those opinions even after we have adjourned for this
session.
I want to thank you, Mr. Johnson, for being our lead-off
witness. You did a superb job in presenting the Commission's
report, and I want to join all of my colleagues in thanking not
only you, but Mr. Pearce and all the members of the Commission
and its staff for your diligent work. I really think you did a
superb job.
Probably no one will agree with every single recommendation
that you have made, but all of us are grateful for the very
thorough look and examination that you did. I think it is a
well-balanced, well-done report, and I salute you for it.
We are going to keep the record open for 15 days following
this hearing for the submission of additional statements and
questions.
I want to thank everybody for being here today. I think the
attendance shows that there are many people who recognize how
critical this report is to ensuring the future viability of the
Postal Service, an organization, an institution, that has
served our country so well for more than 200 years.
This hearing is now adjourned.
[Whereupon, at 12:01 p.m., the Committee was adjourned.]
A P P E N D I X
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PREPARED OPENING STATEMENT OF SENATOR COLEMAN
Thank you Chairman Collins for holding this hearing. I know of your
long involvement in this issue and look forward to helping you craft
legislation to help the Postal Service prepare for the future.
I think there is broad agreement on the challenges faced by the
Postal Service. Every year the addition of 1.7 new addresses increases
its operating costs. At the same time, competitive and technological
changes have reduced both its volume and operating margins. E-mail and
e-banking will continue to pose a growing challenge to First Class
mail. While it is true that e-commerce is likely to increase the number
of packages going to consumers, the Postal Service already faces strong
competition in these markets.
The Commission's report details all of this. It also details over
$90 billion in unfunded future liabilities facing the Postal Service.
By far the largest part of these liabilities is the health care costs
promised to current future retirees. Unfortunately, the report does not
detail how the Postal Service will generate sufficient revenues to pay
these liabilities. There is a real danger that significantly raising
postal rates will only increase the competitive threat.
In the last decade the nation's leading private companies have
implemented revolutionary changes in their logistics operations. Common
changes include a significant reduction in the number of warehouses,
automation, outsourcing of major activities, installation of inventory
management systems often at enormous cost and difficulty, and better
metrics. The Postal Service has begun to implement some of these
changes but institutional resistance and statutory restrictions have
slowed its progress. If the Postal Service were to undergo a revolution
equivalent to that in the private sector, I believe it would look like
a much different organization.
The question is how do we get from here to there. I believe that if
we act soon, we can ensure that changes are well thought out and we can
find the resources to be fair to all the stakeholders. Given the
challenges facing the Post Office, all parties are going to have to
accept some portion of the costs of transformation. But I hope that we
can still meet the priorities of each group. In contrast, significant
delay only increases that chance that reforms will be imposed upon us
in an atmosphere of panic at a time when we lack the ability to ensure
fairness. Like the steel industry a couple of decades ago, the need for
change is clear. Now we need the will to address these challenges in an
honest and fair manner.
PREPARED OPENING STATEMENT OF SENATOR LIEBERMAN
Thank you, Madam Chairman, for convening this hearing on the
recommendations of the President's Commission on the U.S. Postal
Service. The Commission was established in December 2002 and was
charged with identifying the severe financial and managerial challenges
facing the Postal Service, examining potential solutions, and
recommending legislative and administrative steps to ensure the long-
term viability of the Postal Service.
On July 31, the Commission issued its report, which contains 35
recommendations to reform the Postal Service on a wide range of topics.
I commend the Commissioners for their efforts to understand and analyze
the many challenges the Postal Service faces, and I believe they have
made a number of valuable recommendations. For example, I have long
been an advocate for greater financial disclosure by the Postal
Service, to provide the American people a full accounting of its fiscal
health, and I am pleased that the Commission has also seen the need for
such increased financial transparency.
But before I say more about this and other recommendations that I
support, I must first express my profound disappointment about parts of
the Commission's report that seem based on the mistaken belief that the
problems of Postal Service can be solved by capping and cutting the pay
and benefits of its workers. It is hard to think of any institution
with a greater impact on virtually every American than the Postal
Service, and its effective functioning depends on the continued loyal
service and hard work of its employees. I believe that Commission
recommendations which would undermine collective bargaining, threaten
employees' economic security, and add to morale problems in the
workplace, are misconceived and counterproductive. Such suggestions
send the wrong message at the wrong time to postal workers: just when
their good will and hard work are most needed to improve the Postal
Service's status, these proposals convey the message that postal
workers are part of the problem instead of the solution.
For example, although wages at the Postal Service are now
established by negotiation between management and employee
representatives under a system of collective-bargaining, the Commission
proposes to empower a new presidentially-appointed Postal Regulatory
Board to determine what it believes are comparable compensation levels
in the private sector and then to forbid collective bargaining
agreements to exceed those caps. Collective bargaining, where
management and labor are supposed to meet and bargain on a level field,
would become a sham if a presidentially-appointed political board
suppresses wages by capping or even lowering the compensation levels
that can be agreed to.
Another troubling recommendation is the Commission's proposal to
empower managers at the Postal Service to bargain away the pension and
post-retirement health-care benefits of workers. These benefits, which
are now established in statute, are based on longstanding congressional
initiatives and commitments, keeping Postal Service employees under the
same health and retirement benefits as federal civil service employees.
Breaking these commitments and subjecting pension and retiree health-
care rights to negotiation is an unwarranted step that could well
result in reduced benefits and hardship to postal workers.
I urge my colleagues on this Committee and in the full Senate to
recognize the importance of maintaining our commitment to a
professional and fairly compensated postal workforce, and to oppose
these and other proposals that try to fix the Postal Service's problems
on the backs of a workforce that delivers for each and every one of us
every day.
Despite my deep opposition to some of the Commission's workforce
recommendations, I believe other aspects of its report are worthy of
commendation. For example, as I mentioned earlier, I have long
supported efforts to improve the transparency of the Postal Service's
financial reporting. In the last Congress, I joined with other members
of this Committee to successfully urge the Postal Service to provide
more and better financial information on its website, but these
improvements were only a beginning. Greater openness is an important
first step toward fiscal health and accountability, and I support the
Commission's recommendation that the Postal Service's financial
reporting be enhanced. Whether this reporting should take the form of
SEC-like requirements, as the Commission recommends, is a question that
needs further study, but it is clear to me that the public and the
mailing community, as well as the Postal Service itself, will benefit
from this additional disclosure.
I also agree with the Commission that we need to set qualifications
ensuring a breadth of experience and skills on the Postal Board of
Governors, and that this Board should operate in many ways like
successful corporate boards now do. However, I am not convinced that
allowing the Board members to select their own successors, as proposed
by the Commission, is the right choice for a governmental entity like
the Postal Service that must still be answerable to Congress and the
public.
Another worthwhile recommendation of the Commission urges the
Postal Service to review its entire management structure to reduce
unnecessary layers of management and to realign and modernize its
organization. This review would help the Postal Service to optimize
communications and efficiency throughout the organization and to
effectively plan for the future.
Finally, the Commission wisely reaffirmed certain basic principles
fundamental to the future of the Postal Service, such as the concept of
universal service and preserving the postal monopoly on First Class
letter mail. However, I believe the suggested role of a new Postal
Regulatory Board in ``refining'' these concepts requires additional
review.
Madam Chairman, I know there are many difficult decisions and
discussions ahead as we consider these recommendations. This hearing is
a good first step. I hope future hearings will allow us to hear from
those most affected by the Commission's recommendations.
PREPARED OPENING STATEMENT OF SENATOR STEVENS
I commend James Johnson and Harry Pearce for your efforts which
created the final report of the President's Commission on the U.S.
Postal Service. Each of you took on a great responsibility when you
agreed to study the Postal Service and provide recommendations to
improve it. I was particularly pleased to read that the Commission
pledged its commitment to preserve universal mail service throughout
the United States.
My State of Alaska does not have access to the infrastructure found
in the lower 48. For many Alaskans the mail service is a lifeline. Each
day the Postal Service delivers two million pieces of mail to Alaskan
homes and businesses, including vital products that would not otherwise
be available in bush Alaska. My thanks to the Commission for
specifically recognizing Alaska's unique needs and dependence on
universal service. As the Commission's report notes, the near daily
appearance of the Postal Service at virtually every home and business
is essential to American commerce and society.
I am also pleased the Commission has recognized the Postal Service
should remain a public entity.
Although I believe reform of the Postal Service is necessary, it is
my belief that some aspects of the existing Postal Service should be
preserved.
Again, I commend the two co-chairs of the President's Commission on
the Postal Service for their efforts and I look forward to the
opportunity to further discuss the recommendations made in their
report.
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