[Senate Hearing 108-439]
[From the U.S. Government Publishing Office]
S. Hrg. 108-439
PRESERVING A STRONG UNITED STATES POSTAL SERVICE: WORKFORCE ISSUES
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HEARINGS
before the
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
FEBRUARY 4 AND 24, 2004
__________
Printed for the use of the Committee on Governmental Affairs
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WASHINGTON : 2003
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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 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, 41
Senator Akaka................................................ 3, 43
Senator Sununu............................................... 4
Senator Carper............................................... 5, 74
Senator Coleman.............................................. 8
Senator Durbin............................................... 25
Senator Stevens.............................................. 73
Prepared statement:
Senator Lautenberg........................................... 83
WITNESSES
Wednesday, February 4, 2004
Walter M. Olihovik, National President, National Association of
Postmasters of the United States............................... 9
Steve LeNoir, President, National League of Postmasters.......... 12
Ted Keating, Executive Vice President, National Association of
Postal Supervisors............................................. 15
John Calhoun Wells, Private Consultant, former Director of
Federal Mediation and Counciliation Service (FMCS)............. 28
James L. Medoff, Ph.D., Meyer Kestnbaum Professor of Labor and
Industry, Faculty of Science and Arts, Harvard University...... 32
Michael L. Wachter, Ph.D., Co-Director, Institute of Law and
Economics, and the William B. Johnson Professor of Law and
Economics, University of Pennsylvania Law School............... 35
Tuesday, February 24, 2004
Dan G. Blair, Deputy Director, Office of Personnel Management,
accompanied by Nancy Kichak, Chief Actuary, Office of Personnel
Management..................................................... 45
William Young, President, National Association of Letter Carriers 52
Dale Holton, National President, National Rural Letter Carriers.. 56
William Burrus, President, American Postal Workers Union, AFL-CIO 58
John F. Hegarty, President, National Postal Mail Handlers Union.. 63
Alphabetical List of Wistnesses
Blair, Dan G.:
Testimony.................................................... 45
Prepared statement........................................... 179
Burrus, William:
Testimony.................................................... 58
Prepared statement........................................... 199
Hegarty, John F.:
Testimony.................................................... 63
Prepared statement........................................... 216
Holton, Dale:
Testimony.................................................... 56
Prepared statement........................................... 192
Keating, Ted:
Testimony.................................................... 15
Prepared statement........................................... 128
LeNoir, Steve:
Testimony.................................................... 12
Prepared statement........................................... 111
Medoff, James L., Ph.D.:
Testimony.................................................... 32
Prepared statement........................................... 148
Olihovik, Walter M.:
Testimony.................................................... 9
Prepared statement with an attachment........................ 84
Wachter, Michael L., Ph.D.:
Testimony.................................................... 35
Prepared statement........................................... 157
Wells, John Calhoun:
Testimony.................................................... 28
Prepared statement........................................... 135
Young, William:
Testimony.................................................... 52
Prepared statement........................................... 186
APPENDIX
Letter from James L. Medoff, dated February 17, 2004, in response
to Senator Carper's question with attachments.................. 232
Letter from Victoria A. Lipnic, Assistant Secretary for
Employment Standards, U.S. Department of Labor, dated Feb. 24,
2004........................................................... 239
Questions and Responses for the Record submitted from:
Mr. Olihovik................................................. 240
Mr. LeNoir................................................... 241
Mr. Keating.................................................. 244
Mr. Wells.................................................... 247
Mr. Wachter.................................................. 252
Mr. Medoff................................................... 260
Mr. Blair with an attachment................................. 264
Mr. Young.................................................... 325
Mr. Holton................................................... 333
Mr. Burrus................................................... 338
Mr. Hegarty.................................................. 349
PRESERVING A STRONG UNITED STATES POSTAL SERVICE: WORKFORCE ISSUES
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WEDNESDAY, FEBRUARY 4, 2004
U.S. Senate,
Committee on Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 2:03 p.m., in
room 2154, in the Rayburn House Office Building, Hon. Susan M.
Collins, Chairman of the Committee, presiding.
Present: Senators Collins, Coleman, Sununu, Akaka, Durbin,
and Carper.
OPENING STATEMENT OF CHAIRMAN COLLINS
Chairman Collins. The Committee will come to order. I want
to begin today's hearing by thanking Chairman Tom Davis of the
House Government Operations Committee for allowing us to use
his hearing room. The Senate Governmental Affairs Committee,
like all of the committees in the Senate is precluded from
using its normal hearing room today which is located in the
Dirksen Building. So we were very thankful that we were able to
reschedule this morning's hearing for this afternoon with the
good graces of Chairman Davis.
I also want to thank my staff for their extraordinary
efforts in getting the word out about the hearing, and also in
trying to recreate some of the hearing materials, given the
fact that we are still denied access to our offices. They
really made heroic efforts. They were working yesterday out of
offices at GAO, at OPM, and virtually all over the city, and in
some cases out of their homes. But it just shows what can
happen when everybody works together.
Today marks the third in a series of hearings that the
Committee is holding to review the reforms recommended by the
Presidential Commission on the Postal Service. Under the
effective leadership of Co-Chairmen Harry Pierce and James
Johnson the Commission put together a comprehensive report on
an extremely complex issue identifying the operational,
structural, and financial challenges facing the U.S. Postal
Service. The Commission's recommendations are designed to help
this 225-year-old Postal Service remain viable over the long
term.
So much depends upon the Postal Service's continued
viability. The Postal Service itself employs more than 730,000
career employees. Less well known is the fact that the Postal
Service is also the linchpin of a $900 billion dollar 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 thousands of companies in these fields and the millions
that they employ.
One of the greatest challenges for the U.S. Postal Service
is the decrease in mail volume as business communication, 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 the fact 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 cost.
At our first hearing to review the Commission's
recommendations in September, the Committee heard from
Commission Co-Chairman James Johnson. His testimony provided
Committee Members with the rationale behind the Commission's
recommendations. Commissioner Johnson also made the very
important point that the Postal Service's short-term fiscal
health is illusory and that Congress must not ignore the
fundamental reality that the Postal Service as an institution
is in serious jeopardy.
This Committee is very familiar with the Postal Service's
short and long term financial outlooks, having reported out
just last year a pension bill that forestalled the financial
crisis that awaits the Postal Service if we do not act. The
Presidential Commission presented its assessment of the fiscal
crisis in frank terms concluding, ``an incremental approach to
Postal Service reform will yield too little, too late given the
enterprise's bleak fiscal outlook, the depth of its 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 it is one that
challenges both the Postal Service and Congress to embrace far-
reaching reforms.
At the Committee's second hearing in November we heard from
the Postmaster General and the Comptroller General of the
General Accounting Office. The Postmaster General described
transformation efforts already underway at the Postal Service,
many of which are consistent with the Commission's
recommendations. In his testimony the Comptroller General of
the General Accounting Office shared the Commission's concerns
about the Postal Service's $92 billion in unfunded liabilities
and obligations. He pointed to the need for fundamental reforms
to minimize the risks of a significant taxpayer bailout or
dramatic postal rate increases.
I would note that since April 2001, the Postal Service has
been included on the GAO's high-risk list.
Today we will focus on the various recommendations
affecting the Postal Service's workforce comprised of more than
700,000 dedicated letter carriers, clerks, mail handlers,
postmasters, and others. The Committee will have the
opportunity to more fully explore the workforce-related
recommendations of the Commission which include some of its
more controversial proposals. Among them are recommendations to
reform the collective bargaining process, to give management
and employee unions the authority to negotiate not only wages
but also all benefits, to establish a performance-based pay
system for all employees, and to authorize the new Postal
Service Regulatory Board to develop a mechanism for ensuring
that total compensation for postal employees is comparable to
the private sector.
The Postal Service faces the difficult task of trying to
rightsize its workforce to meet the decline in mail volume,
technological competition, and other operational challenges.
With some 47 percent of the current employees eligible for
retirement by the year 2010, rightsizing does not, however,
have to mean widespread layoffs and it should not. With careful
management, much can be done to minimize any negative impact on
employees and to create a more positive working environment.
As a Senator representing a largely rural State, whose
citizens depend on the Postal Service, I 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 whether my constituents are living in the
northern or western stretches of Maine, or on islands, or in
our many small communities that dot the State that they have
the same access to postal services as the people who live in
our large cities. If the Postal Service were no longer to
provide universal service and deliver mail to every customer,
the affordable communications link upon which many Americans
rely would be jeopardized.
I would note that 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 millions of Americans rely, not only
for communication, but also for their livelihoods. The Postal
Service has reached a critical juncture. It is time for a
thorough evaluation of its operations and requirements, and it
is also time for Congress to act to pass reform legislation.
Senator Carper and I have committed to working together
with Senator Stevens, Senator Akaka, Senator Lieberman, Senator
Sununu, and Senator Fitzgerald who have expressed great
interest in this area. I know given the history of previous
attempts at legislative reforms that we are taking on a
daunting challenge, but it is essential that we seize the
opportunity provided by the Commission's excellent work.
Successful reform will hinge on the cooperation and the support
of the Postal Service's workforce. I very much look forward to
hearing the testimony of our witnesses today.
I would now like to call on Senator Akaka for his comments.
OPENING STATEMENT OF SENATOR AKAKA
Senator Akaka. Thank you very much, Madam Chairman. I
really want to thank you for going forward with this hearing,
even on the House side. And I wish to thank our House
colleagues for offering their hearing room to us. And of
course, I want to extend my sincere appreciation to our
witnesses who rearranged their schedules to be with us this
afternoon. We are indeed privileged to hear your views on the
workforce recommendations of the Commission on the U.S. Postal
Service. So welcome to our panelists who represent the
postmasters and supervisors, and to our second panelists as
well.
For the second time in a little over 2 years, first with
anthrax and now with ricin, we find ourselves facing the
aftermath of a bioterrorist attack through the mail. The threat
of bioterrorism is something I have long been concerned with,
held hearings on, and have introduced legislation. The
President's fiscal year 2005 budget released on Monday failed
to include the Postal Service's request of $779 million to help
secure the mail. We can ill afford threats to the Postal
Service which is the cornerstone of a $9 billion dollar mailing
industry.
Our first witnesses, representing the Nation's postmasters
and postal supervisors, are uniquely qualified to discuss
postal operations and management. I also look forward to the
testimony of our expert witnesses on pay comparability and
arbitration; issues that will certainly be discussed again once
we reschedule yesterday's hearing with the postal unions.
The Postal Service is currently enjoying a period of stable
labor-management relations, but I fear this unfavorable
environment could change if portions of the workforce
recommendations suggested by the Postal Commission are adopted.
The Commission would implement a pay-for-performance system for
all postal employees, impose a rigid collective bargaining
procedure, task a new postal regulatory board with determining
total compensation, and require negotiations over benefits.
One in three Federal workers is employed by the U.S. Postal
Service. I urge caution in embracing any proposal that would
cut out postal workers from the government's pension plans and
the Federal Employee Health Benefit Plan, especially postal
retirees. We should do no harm to retired postal workers who
have already earned their benefits and planned their
retirements under the Federal pension and health plans.
I thank the Chairman and Senator Carper for seeking a
review of whether postal-only pension and health plans would
undermine the stability of the existing Federal system. Nor
should postal reform legislation result in postal workers
bearing the brunt of any reorganization. We should remember
that the future of the Postal Service is dependent not only on
how well and how effectively it manages its capital assets and
services, but on how well its labor force is managed.
I want to thank you, Madam Chairman, for conducting these
postal hearings in an open and bipartisan manner. I am pleased
to work with you, as I have always said, and with our colleague
from Delaware and others to examine how to best position the
Postal Service to serve the public in the 21st Century and be a
model employer. Thank you very much, Madam Chairman.
Chairman Collins. Thank you, Senator. Senator Sununu.
OPENING STATEMENT OF SENATOR SUNUNU
Senator Sununu. Thank you very much, Madam Chairman. It is
a pleasure to be here and I very much appreciate you having
this hearing. I must say it is a pleasure to be back in this
room. It is also nice to see that my Senate colleagues who
never served in the House had no trouble finding this side of
the Capitol.
I first began my work in Congress on this committee, the
Government Reform and Oversight Committee, and 6 years ago
began watching John McHugh's efforts at postal reform. That was
a very difficult task for John and for other committee members,
so I think it is a great effort on your behalf to try to pick
up this process, try to build on the Commission's work, knowing
full well how many obstacles will be placed in front of you,
and trying to work through a balanced, thoughtful approach to
reform.
You noted in your opening statement the trends, the changes
in technology, the competitive forces that are out there, the
importance of the mail industry to so many in the private
sector who are trying to communicate with customers or friends,
whatever that may be. But at the same time there are changes
that are very much necessary.
So I salute and appreciate your work, and I am especially
pleased to be here today with Wally Olihovik, the President of
the National Association of Postmasters and would be happy to
provide a flowery introduction at the appropriate time. Thank
you again.
Chairman Collins. Thank you very much, Senator. In the
interest of full disclosure, it took two staff people and a
trail of bread crumbs for me to find my way over to the House
side. I tried to follow you from lunch but you were too quick
for me.
Senator Carper.
OPENING STATEMENT OF SENATOR CARPER
Senator Carper. Thank you, Madam Chairman. To my friend
from New Hampshire, let me just say, I served over here for 10
years. I served on the House Banking Committee for 10 years,
just down the hall and it is nice to be back. I could have used
the bread crumbs this afternoon just to make sure I found it
quickly. But it is great to be here and we appreciate very much
our host for letting us come.
Senator Akaka served over here for a spell as well and I
know that the former Governor from Minnesota did not serve in
the House. But did you work with Bill Cohen when he was a House
member?
Chairman Collins. I did indeed. But only in the Cannon
Building.
Senator Carper. Fair enough. I am delighted that we're all
here and encouraged by being in this room where our House
colleagues have been working on these issues, especially
Congressman McHugh and Congressman Waxman, a good deal longer
than others of us.
Madam Chairman, I am delighted that our Committee is going
to be taking a day or two to study the workforce
recommendations that were made by the President's Postal
Commission last summer. These recommendations that we are going
to be discussing today have received quite a bit of attention,
as we all know, over the last few months. Whether one supports
them or not, to my colleagues I would just say that we can
agree that they are among the most controversial made by this
Commission.
The Postal Service employs over 800,000 people, I think
about 825,000, but the key workforce recommendations made by
the Commission affected roughly 725,000 employees that are
represented by the four major postal unions. Those are the
recommendations that I am going to focus on today in my opening
statement, if I may.
When the Commission first announced them I was, to be
honest with you, a bit skeptical. The collective bargaining
process used at the Postal Service today has, I think, worked
well for the most part. It forces the parties into arbitration
less than half the time. In recent years that process has
allowed the Postal Service and three of its four unions to
negotiate modest contract extensions. It has also created a
Postal Service that has provided millions of hard-working men
and women over the years with stable middle-class jobs that, I
guess now for more than three decades. After taking a couple of
months to study the Commission's recommendations more closely I
have to admit that I continue to be a bit skeptical, at least
with respect to the issues before us today.
First there are the recommended changes to the collective
bargaining process. The Commission's recommendations aim to
make the process quicker and more efficient through the use of
strict timeliness, mandatory mediation, and the last best final
offer model of interest arbitration. I must say as a baseball
fan it is an approach that I am used to, at least with respect
to negotiating contracts in baseball and one that frankly I
find some favor with.
Having said that, these suggestions appear to ignore the
fact that the current process, while admittedly not perfect,
should take no longer than 135 days if followed to the absolute
letter. These suggestions also appear to ignore the fact that
the current process gives the unions and management significant
flexibility that has allowed both sides to be creative and work
to avoid arbitration. It is not clear to me just yet how the
Commission-recommended process would work any better. As you
know, some skeptics have raised concerns that this new process
could actually force more disputes into arbitration where one
side is likely to lose big in the risky last best final offer
stage. Again as I said, while I am one who favors the last best
final offer approach, I think we have to proceed cautiously
here.
Then there are recommendations dealing with employee pay
and benefits. The Commission appears to have come to the
conclusion that postal employees are overpaid, at least when
benefits are taken into account. To remedy this they call on a
new postal regulatory body to develop an updated definition of
comparability and to use it to set a cap on total compensation
for postal employees. They also recommend allowing postal
benefits to be negotiated during collective bargaining. Like
with the Commission's recommendations on collective bargaining,
I am not yet convinced of the need for these changes either.
As I have mentioned in the past, I do not believe that
postal employees are overpaid, and to the extent that there is
a pay premium, arbitration panels in postal labor disputes have
the authority, I believe, to look at the extent of the premium
and to moderate employee pay accordingly. Before we make any
changes to the Federal Employee Health Benefits Plan that could
have a dramatic impact on other Federal employees we should
recognize that the Postal Service already has the ability to
use the collective bargaining process to press its employees to
pay a greater share of their health-care costs.
I am pleased then that the postal reform principles
announced by President Bush last month ignore the Commission's
workforce recommendations. The wages and benefits paid out to
the Postal Service's bargaining unit employees do account for
more than 50 percent of the Postal Service's total costs. The
Postal Service performs labor intensive work, however, and this
will not change even if we were to adopt the Commission's
recommendations wholesale. The President recognizes this and
has called on us to focus on those fundamental reforms that are
necessary to update the Postal Service for the 21st Century.
The challenges the Postal Service faces today were laid out
in stark detail just last week when Postmaster General Potter
and the Postal Board of Governors Chairman David Fineman
testified before the House Government Reform Committee's
special panel on postal reform. I presume that happened here in
this room. Chairman Fineman pointed out, I believe, that the
total volume of mail delivered by the Postal Service has
actually declined by more than 5 billion pieces since 2000.
Over the same period the number of homes and businesses that
the Postal Service must deliver to has increased by some 5
million. First-class mail, the largest contributor to the
Postal Service's bottom line, is leading the decline in volume.
Some of those disappearing First-Class letters are being
replaced by advertising mail, which I am sure finds its way to
all of our mailboxes, and which earns significantly less. Many
First-Class letters are being lost for good, the First-Class
Mail business, to E-mails and to electronic bill paying.
Let me just say, we should certainly be talking about
whether any changes need to be made to the Postal Service's
workforce. I actually look forward to learning more about the
Commission's recommendations and how they would work. As the
President points out, however, we do need to focus our reform
efforts on initiatives that will improve transparency, will
improve accountability at the Postal Service and give
management the increased flexibility that they need to
streamline operations and to seek out new mail volumes.
In closing, I would like to urge the Postal Service and its
unions to sit down with each other and find out if there are
any changes that should be made to the collective bargaining
process or to the laws governing pay and benefits for postal
employees. I am not convinced today that the Commission's
recommendations are the right approach but I am certain that
there are changes out there that would make a decent system
even better. The best reforms in this area will be the ones
that management and labor can agree to jointly.
Thanks again, Madam Chairman, for letting me give what I
know is a fairly long statement. I really do appreciate the
opportunity to work with you, Senator Akaka, Senator Sununu,
Senator Stevens, and our other colleagues on these issues. This
is important legislation and this is a great opportunity for us
and we look forward to making it happen.
Chairman Collins. Thank you. Senator Coleman.
OPENING STATEMENT OF SENATOR COLEMAN
Senator Coleman. Thank you, Madam Chairman. I want to thank
you for your trademark bipartisan leadership in taking on very
tough issues, and this is a tough issue. I respect the concerns
raised by my colleague from Delaware. The reality though is
that I think we take for granted universal service, we take for
granted affordability. I think in these tough economic times
there are not going to be taxpayer bailouts of institutions
that do not meet the challenge of improvements in productivity.
So we have got some challenges.
I will also look at the recommendations in a reflective
way. I do not come to this with a prejudgment but I do come to
this with a sense that we have to do what you, Madam Chairman,
articulated in your opening statement, preserve universal
service, preserve affordability. The Post Office, it is a
personal thing for so many of us, the service that we get.
It is also a key in my State. We have a tremendous printing
industry. When I was mayor of St. Paul that was one of the
strongest industries in the city. Their lifeblood depends on
the efficiency and affordability of the service. So let us go
about the task of doing what must be done to preserve universal
service, preserve affordability, and approach it with an open
mind to the type of changes that will be required for us to get
there.
Thank you, Madam Chairman.
Chairman Collins. Thank you very much.
I would now like to welcome our first panel of witnesses,
and I would like to turn to Senator Sununu for purposes of
introducing our first witness.
Senator Sununu. Thank you, Madam Chairman. I am very
pleased to be here as a Member of this Committee to participate
in this hearing, until I am asked to preside over the Senate,
which will come at 3 o'clock. I am especially proud to
introduce Wally Olihovik, the President of the National
Association of Postmasters and one of New Hampshire's finest
experts, I suppose, to the rest of the country.
Mr. Olihovik has served the National Association of
Postmasters and the Postal Service with tremendous distinction.
He is a great voice and provides a great perspective on the
value of the Postal Service, the importance of some of the
things that were spoken about in our opening statements,
universal service and being a competitive force, or a
competitive engine for so many businesses that rely on the
Postal Service. But also a great perspective on what can be
done to improve the organization and the employment structure
of the Postal Service, the security issues that we have all
been so conscious of since September 11, and of course, the
reputation for service that is just outstanding. If you ask
customers across the country about their perspective of the
service that the USPS provides, it is very high indeed, and
especially due in no small part to the work of Mr. Olihovik in
New Hampshire.
New Hampshire's Postal Service has received some of the
highest quality ratings of any postal organization in the
country because of the attributes that Wally and his
counterparts have brought to it. He has been a great resource
as a legislator. I am an engineer. What do I know about public
employment or the Postal Service or civil service rules or
collective bargaining or these issues that I did not have to
deal with necessarily in the private sector. So to have the
postmasters and other postal workers in New Hampshire to be
able to draw on as a resource have been invaluable to me.
While his professional service has been outstanding, as the
Chairman pointed out to me, Wally is a three-time recipient of
the Benjamin Award, which is given to those Postal Service
employees that make an extraordinary effort in the area of
community service. Just underscoring the degree to which Wally
understands that lifetime commitment that he has made to the
Postal Service and the postmasters extends to much more than
just that 8 o'clock to 6 o'clock timeframe where you might be
on the job.
I have been proud to work with the postmasters nationally
and in New Hampshire on a number of issues. They have been
outstanding to work with and, again, that is due in no small
part to the perspective and leadership that Wally Olihovik has
brought to the organization. It is a pleasure to welcome all of
our panelists and to introduce Wally today.
Chairman Collins. Thank you, Senator. After we hear from
Mr. Olihovik we will hear from Steve LeNoir, who is the
National President of the National League of Postmasters. He
also serves on the Postmaster General's leadership team,
workplace advisory committee and mail security task force.
Prior to becoming the national president of the league he
served two terms as the South Carolina State president for the
league.
Our final witness on this panel will be Ted Keating who is
the Executive Vice President of the National Association of
Postal Supervisors. He has been with the Postal Service for
more than 40 years and has held numerous managerial positions
during that time. Prior to becoming the executive vice
president he served as the association's New England area vice
president. So we have New England well-represented on our panel
today.
Mr. Olihovik, we will start with you.
TESTIMONY OF WALTER M. OLIHOVIK,\1\ NATIONAL PRESIDENT,
NATIONAL ASSOCIATION OF POSTMASTERS OF THE UNITED STATES
Mr. Olihovik. Thank you, Madam Chairman and Members of the
Committee. On behalf of the 42,000 NAPUS members, thank you for
inviting me to share my views with the Committee.
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\1\ The prepared statement of Mr. Olihovik appears in the Appendix
on page 84.
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For well over 100 years NAPUS has advanced the quality of
postal service to our customers, whether they reside and work
in our largest cities or our smallest towns. NAPUS looks upon
the Members of this Committee as loyal allies in the effort to
ensure the success of the Postal Service. The long-term
financial outlook for the Postal Service has not changed for
the better. Growing electronic diversion, keen competition and
lingering economic uncertainty continue to chip away at postal
revenue.
Last year NAPUS applauded the Chairman's legislation that
called for a Presidential Commission on the future of the
Postal Service. Moreover, NAPUS was encouraged by many, though
not every one of its recommendations. NAPUS was honored to
participate actively in the Commission process. Madam Chairman,
there are those in the Postal community who believe incorrectly
that postal reform is unnecessary. NAPUS disagrees with that
view.
As you know, this Committee assisted the Postal Service, if
only temporarily, by passing Public Law 108-18. The Civil
Service Retirement System recalculation legislation provided a
short reprieve. As part of your efforts to reform the Postal
Service, Congress needs to revisit the pension issue in order
to reverse the decision to shift the military retirement
liability onto the Postal Service.
In addition, remedial legislation is warranted to permit
the Postal Service to use the escrow that will accrue as the
result of the CSRS calculation. The military retirement
modification shifted a $27 billion obligation from the Federal
Government to the Postal Service. The President's Postal
Commission recommended that this obligation return to the
government. The Postal Service could use these much-needed
funds to pre-fund retiree health obligations. Eliminating the
escrow account would reduce the need for a postage rate
increase in 2006.
NAPUS also believes that such funds could be invested in
postal infrastructure that has been ignored for some time.
Over the last 2 years, the Postal Service has successfully
reduced costs to balance shrinking revenue. However, the Postal
Service cannot continue to chip away at costs without
influencing the quality of mail services that Americans expect
and demand. Rather, we need the tools and flexibility that are
essential to grow revenue. A more comprehensive approach is
necessary which addresses the operational, regulatory, and
financial needs of the Postal Service.
This Committee is familiar with the alarm sounded by many
in the Postal community as well as the General Accounting
Office about the fiscal condition of the Postal Service. Just 2
months ago President Bush urged Congress to enact postal reform
legislation. The basic and uncontested mission of the U.S.
Postal Service is that every mailer and mail recipient in this
country has access to an affordable and universal postal
network. President Bush prefaced his announced principles for
postal reform by stating that comprehensive postal reform must
ensure that the U.S. Postal Service can continue to provide
affordable and reliable universal service. For NAPUS,
universality and reliability are paramount as this Committee
pursues its much-needed reform of the Postal Service.
It is immaterial whether the postal customer resides or
works in a rural, urban or suburban setting. All communities
are entitled to high-quality mail services. Congress emphasized
its strong interest in protecting universal postal access
through the Postal Reorganization Act of 1970 stating, no small
post office shall be closed solely for operating at a deficit.
Last July the President's Commission on the Postal Service made
a number of recommendations relevant to postal infrastructure.
One of the noteworthy Commission conclusions was that any
post office necessary for the furtherance of universal service
should not be closed solely because it is unprofitable. Closing
small post offices would be a dreadful and misguided strategy.
Such actions would have a devastating effect on many
communities yet have little impact on postal finances. As
Robert Cohen of the Postal Rate Commission testified before the
Presidential Commission, closing the 10,000 smallest post
offices would only net a savings of about $567 million,
considerably less than 1 percent of the Postal Service's
operating budget. The postal network is not merely the sum of
its parts. It is an integrated system which relies even on its
smallest components.
Americans expect access to a full-service post office. The
Postal Service's own transformation plan recognized this
reality. Despite the fact that 70 percent of postal customers
were aware that postal products may have been available
elsewhere, 80 percent of stamp sales continue to take place at
the post office. NAPUS has worked with communities in
safeguarding their legal rights to protect their post office.
As part of this effort NAPUS publishes and circulates the red
book, a NAPUS action guide for preventing the closing and
consolidation of your post office. In addition, NAPUS has
worked closely with the Congressional rural caucus to safeguard
a community's due process rights.
Madam Chairman, I request permission that the Committee
include the NAPUS action guide in the official hearing record.
Chairman Collins. Without objection.
Mr. Olihovik. Post offices provide exceptional value to
mail products, including essential mail security through secure
post office boxes at convenient locations staffed by quality,
trustworthy, knowledgeable, reliable and accountable postal
personnel. Postmasters fully recognize and embrace the
principle that a postmaster must be accountable. However, daily
teleconferencing with middle postal management is not
accountability. Unfortunately, all too often this is used as a
form of micromanagement. Postmasters cannot be accountable to
everyone at every level of the postal bureaucracy. Therefore,
NAPUS was pleased that the President's Commission embraced our
recommendation that the Postal Service must focus on removing
layers of managerial bureaucracy with an eye toward simplicity
and downward delegation. We hope that postal headquarters will
apply this suggestion.
Indeed, the ability to reach postal excellence relies on
the availability of appropriate and fair incentives. The Postal
Service recently implemented a new pay-for-performance system
to replace the controversial EVA program. The key ingredients
to its success are upfront, well-planned incentives and
performance goals and good communications. Three components
comprise the performance aspect of the new pay system. The
combination of reaching corporate and unit goals make up 80
percent of the performance incentive, meeting the core
requirements of the job covers the remaining 20 percent of the
incentive. The link between performance incentives and
achieving corporate goals reflects a strategy employed by the
private sector.
Although I am cautiously optimistic about the success for
the new pay system, I strongly feel that the Postal Service
must do a better job defining the core requirements. Many
postmasters throughout the country have communicated to me
their concerns about the implementation of the pay system. Make
no doubt about it, NAPUS fully supports a fair pay-for-
performance system. However, what looks good on paper may be
challenging in practice. There is no substitute for
communication and collaboration. The agency's difficulty in
communicating the system to its own managers, however, concerns
me.
It is important to note that it is difficult to manage a
postal facility when performance incentives are inconsistent.
The managerial force is compensated using a system that rewards
performance. The current salary structure for craft employees
does not reward excellent performance. Unless we are somehow
able through collective bargaining to create a pay plan that
rewards individual or unit achievement, we will miss a crucial
opportunity to optimize efficiencies and encourage exemplary
performance. In sum, the present pay system compromises the
workplace by rewarding one set of employees yet influencing
another. This practice adversely affects morale and
performance.
We must do a better job with our unions to train employees
to perform different tasks within the post office. We should
work with the crafts to lower or eliminate barriers that
preclude postmasters from assigning personnel different duties
within a post office. Postal employees should have the
flexibility and training to cross over and perform a variety of
tasks. I would also suggest that cross-training improves job
security for those employees whose skills could become
obsolete.
Finally, NAPUS remains extremely concerned about the
Presidential Commission's suggestion to sunset FEHBP and FERS
coverage of postal employees. The proposal would subject health
and retiree benefits to collective bargaining. My two primary
concerns with the proposal is that it does not address the
impact upon current and future postal retirees, and it ignores
the effect that separating out postal employees would have on
the entire Federal benefits program.
Madam Chairman, this concludes my remarks. I look forward
to working with you and the other Members of the Committee as
we strive to ensure the Postal Service will thrive for many
years to come.
Chairman Collins. Thank you. Mr. LeNoir.
TESTIMONY OF STEVE LeNOIR,\1\ PRESIDENT, NATIONAL LEAGUE OF
POSTMASTERS
Mr. LeNoir. Madam Chairman, Members of the Committee, thank
you for inviting me to appear before you today. My name is
Steve LeNoir and I am President of the National League of
Postmasters. I welcome this opportunity to discuss with you the
important issue of postal reform. With your permission, I would
like to enter my written testimony into the record and then
proceed to give a short summary.
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\1\ The prepared statement of Mr. LeNoir appears in the Appendix on
page 111.
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Chairman Collins. Without objection, all statements will be
submitted in full for the record.
Mr. LeNoir. Starting in 1887 to represent rural postmasters
and formally organized in 1904, the National League of
Postmasters is a management association representing the
interest of all postmasters. Although we represent postmasters
from all across the country, from the very smallest to the very
largest, rural postmasters are a sizable portion of our
membership. The league speaks for thousands of retired
postmasters as well.
Madam Chairman, we would like to thank you and your
colleagues on the Governmental Affairs Committee for your
dedication to the issue of postal reform. Postal reform is
critical to the long-term ability of the Postal Service to
provide for affordable, universal mail service to every
individual, home, and business in America.
There is no doubt that the Postal Service needs fundamental
change. We know that our jobs and those of the people we manage
are ultimately at stake. While we know that the Postal
Service's transformation plan takes us in the right direction,
we also know that legislative reform is necessary to finish the
process. We commit ourselves to work with you to make this a
reality.
Madam Chairman, the most critical issue facing the Postal
Service now is the Civil Service Retirement System issue. Last
year's legislation corrected an overpayment to CSRS that saved
the Postal Service billions of dollars but put those savings--
from 2006 on--into an escrow account. The Postal Service has
suggested using the savings to pre-fund its retiree benefits,
thus funding one of the biggest unfunded liabilities the Postal
Service will face in the future. We think that is an excellent
idea.
Also last year, CSRS legislation forced the Postal Service
to assume the responsibility for $27 billion of military
retirement benefits that were earned by postal employees before
joining the Postal Service. That responsibility is not one the
Postal Service should bear and it deserves to be transferred
back to the general Treasury. We strongly urge Congress and the
Committee to make both of these issues a top priority.
This past year postal headquarters, the National League of
Postmasters, NAPUS and NAPS worked for 11 months to develop a
new pay-for-performance system. In the past, compensation
systems for postal managers were an all or nothing system. You
either met the goal or you missed it. Now we have created a new
compensation system for postmasters and other managers that we
believe will be a good driver of productivity. It recognizes
individuals not only for their contribution to the corporate
goals but also for their individual performance. It drives the
right behavior by constantly encouraging individuals to strive
for stretch and breakthrough productivity. Even small measures
of improvements will be rewarded.
The new pay-for-performance system takes three factors into
account: How we perform nationally as a Postal Service, how our
post offices performed, and how we performed as an individual.
Everyone is aligned with their performance goal. It is a
concept of recognizing both team and individual performance
that we have never had before. I believe we have developed a
fair system and the Postal Service has committed to review the
process after the first year to see if any adjustments are
needed.
The compensation system for rural carriers is also a good
driver of productivity in that it provides for an evaluation
system that is paid by the workload. It includes a combination
of mail volume, the number of deliveries, mileage, and stops.
This process provides a win-win situation for both the rural
carriers and the Postal Service.
While the league is pleased so far with the new pay-for-
performance system we do believe there are too many layers of
management between postmasters and postal headquarters and some
of that should be removed. We strongly feel that postmasters
should have the authority to manage their post offices without
being micromanaged.
Another problem that we see is that promotions in craft
positions are determined by seniority. In many cases the most
senior person is not the best qualified for the job. It is not
that he or she may be a bad employee, but just not the right
person for a particular spot.
Moreover, we need much more flexibility in how we are able
to use our craft employees. Current rules prohibit craft
employees from doing work in other crafts. We could greatly
improve efficiency if we had more flexibility.
We also need to address the issue of sick leave for FERS
employees. Currently they get no credit for unused leave at
retirement. We need to change this rule so they could sell back
sick leave or get credit at retirement.
One area in which we have made considerable progress is
that we have reduced the number of grievances filed by
employees. We need to continue to make progress in this area
and work with the unions to revise outdated work rules.
An issue that does cause us concern is the possibility of
closing rural post offices. I appreciate your comments earlier
and strongly agree with your sentiments. The National League of
Postmasters is concerned that access to a post office in a
rural community could dramatically change if postal reform is
not implemented properly. We are particularly concerned that
overzealous individuals could develop a mistaken belief that
closing small post offices would net meaningful savings for the
Postal Service. As my counterpart pointed out, the facts do not
support that. The record shows that the cost of the 10,000
smallest post offices is less than 1 percent of the Postal
Service's total budget.
We believe there is great value in our network of over
26,000 post offices and we have not yet fully maximized that
value. We are suggesting that in rural areas where the private
sector does not provide adequate services, the Postal Service
could fill that gap. For instance, in my community of Horatio,
South Carolina, I added a fax and copy machine to my post
office because the closest business that offered that service
was over 20 miles away. That served our citizens well, had no
effect on the private sector, and has paid for itself many
times over.
Also, the Postal Service could partner with State and
Federal Governments. For instance, we could offer voter
registration in our offices, making it easier for our citizens
to participate in the democratic process. We could also assist
in gathering census data in rural areas and play a role in
homeland security. The league believes that providing universal
service means not only providing universal mail delivery to all
citizens but also providing equal access to postal services
including a post office.
The Postal Service has an obligation to provide quality
postal service and access to post offices on a universal bases
regardless of whether a post office is considered profitable.
We urge this Committee to see that a definition of universal
service in any reform bill makes it clear that post offices are
necessary to fulfill the universal service mandate,
particularly in rural areas where post offices play such a
critical role.
Madam Chairman, rural post offices are key to a healthy
rural economy and are necessary to provide universal service in
America. As supported by our written testimony, the local post
office is an American institution that literally binds rural
America together politically, socially, and economically. It is
the lifeblood of rural communities and it should not be harmed.
No less important are smaller post offices in inner-city
areas. They provide a vital link to the Postal Service and the
country and they should also not be harmed. While we understand
there may be legitimate reasons to close a post office, we do
not believe that existing rules pertaining to the closing of a
post office should be changed. These rules are fair to
customers, local communities, and the Postal Service. Let us
work to make post offices not only a lifeline to customers but
also a positive link to government at all levels.
We think there is great value in our network of post
offices. The American flag is raised at post offices every day
all across this country. The tradition of postmaster, starting
with Ben Franklin in colonial times is connected to the many
freedoms enjoyed through the Constitution of the United States
and the Bill of Rights. It supports and enables many of the
rights given to us. Universal service is important to all
Americans in the equal opportunity it provides.
I would be happy to answer any questions the Committee may
have.
Chairman Collins. Thank you. Mr. Keating.
TESTIMONY OF TED KEATING,\1\ EXECUTIVE VICE PRESIDENT, NATIONAL
ASSOCIATION OF POSTAL SUPERVISORS
Mr. Keating. Thank you, Chairman Collins, for the
opportunity to appear on behalf of the 36,000 postal
supervisors, managers and postmasters who belong to the
National Association of Postal Supervisors. I, too, will
abbreviate some of my testimony since you have the complete
written record, and I will go right to our testimony.
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\1\ The prepared statement of Mr. Keating appears in the Appendix
on page 128.
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We agree with the Postal Commission that the current
network of post offices and plants requires streamlining,
leading to the closure of unneeded facilities to ensure that
universal service is delivered in the most effective and cost-
efficient manner possible. Indeed, many of the Nation's post
offices are probably no longer necessary to fulfill the
universal service obligation. Streamlining or rationalizing of
the postal network should be carried out on a comprehensive
basis under the authority and control of the Postal Service in
consultation with Congress and its stakeholders. The ultimate
aim should be to arrive at cost savings while preserving
affordable, universal service.
We see no need for the establishment of a postal network
optimization committee as recommended by the President's
Commission applying a base closing approach towards unneeded
postal facilities. A base closing approach with P-Noc
preparation of recommendations to Congress to consolidate and
rationalize the service's processing and distribution
infrastructure will only delay and diffuse the decisionmaking
that should remain in the hands of the Postal Service. The
Postal Service is the best equipped entity to arrive at the
optimal number of locations and functions for mail processing
and distribution functions just as the Postal Service is
similarly equipped to arrive at the number of locations and
functions for post offices.
Under current law, the Postal Service is not allowed to
close post offices for economic reasons alone. The Commission
recommended that such statutory restrictions be repealed and
that the service be allowed to close post offices that are no
longer necessary for the fulfillment of universal service. We
agree and urge the Congress to grant to the Postal Service the
flexibility and necessary accountability in a fair and rational
way to fulfill its universal service obligation in a cost-
efficient and effective manner.
Adversarial labor-management relations have been a
persistent cause of problems in operational efficiency as well
as the culture and work-life of the Postal Service. The General
Accounting Office and others have repeatedly documented the
degree to which poor communication, persistent confrontation
and conflict, excessive number of grievances, and difficult
labor contract negotiations have persisted within the Postal
Service. From my perspective as executive vice president of one
of the foremost management organizations within the service,
progress is being achieved in fostering better communications
at the national level between the Postal Service and the
leadership of the craft unions and management associations.
However, progress at lower levels and other areas continues
to remain uneven, especially in the resolution of grievances.
The Postal Commission noted that encouraging progress is being
made by the Postal Service and one of its unions in resolving
grievances through the use of a streamlined process involving a
dispute resolution team comprised of representatives of
management and craft. We believe the dispute resolution team
approach is best directed to the resolution of contract related
disputes in the field where they began while workplace or
environment disputes are best resolved by mediation.
We also are concerned by the growing reliance by dispute
resolution teams of non-binding arbitration decisions as
precedent. We encourage the Committee to continue its oversight
on this particular endeavor.
Over the past decade the Postal Service has led the Federal
Government in efforts to build incentive-based, performance-
driven compensation systems. It has followed the lead of
cutting edge organizations in the private sector in using
performance management systems to accelerate change and improve
individual and organizational performance. Incentive-based
systems within he Postal Service currently apply only to the
performance of executive managers, postmasters, supervisors and
other non-bargaining management employees covered under the EAS
salary schedule.
More recently the National Association of Postal
Supervisors and the postmaster organizations have collaborated
with the Postal Service in establishing a new pay-for-
performance system, reshaping the EVA system first established
in 1995 that better rewards teamwork, efficiency and service
quality in a fair manner. Measurable and realistic goals are
now being established at the unit, district, and area levels as
part of the new system. Progress in this area is being made.
We agree with the Commission that it is time to expand
merit-based pay to the entirety of the postal workforce,
including bargaining unit employees. The establishment of an
incentive-based culture of excellence in any organization
relies upon performance management systems that reach across
the entire organization and cover all employees, not only those
in the management ranks. The Commission urged the Postal
Service to undertake a study of performance-based compensation
programs for both management and union employees and work with
the unions and management organizations to design and implement
a performance-based compensation system. We are counting on the
Postmaster General and the craft unions to negotiate some form
of pay-for-performance at the bargaining table.
We also urge Congress to repeal the current statutory
salary cap as it applies to the Postal Service and authorize
the Postal Service to establish rates of pay for top Postal
Service officers and employees that are competitive with the
private sector. Pay compression of salaries at the top, leaving
little financial incentive for top mid-level employees to take
on new levels of responsibilities, are hindering the Postal
Service from recruiting the best and brightest to top
leadership positions. The cap should be lifted and the Postal
Service should have the discretion to set compensation to
attract and retain qualified individuals in the upper
management ranks. Many Federal entities that require a capable,
experienced CEO and other top officers already have pay-setting
authority. They include the Tennessee Valley Authority, the
Federal Reserve Board, the Public Company Accounting Board, and
the Federal Home Loan Bank Board.
Additionally, we encourage the Committee to take a critical
view toward the necessity of establishing a new regulatory body
such as a postal regulatory board to assume authority over
total compensation, scope of the monopoly, and definition of
universal service as well as other important policy and
regulatory powers exercised by Congress, the Postal Rate
Commission and the Postal Service itself. Similarly, we
question the wisdom of subjecting the Postal Service pension
and post-retirement benefits to collective bargaining. This
could significantly impact the vitality of the entire Federal
pension and retiree health benefit programs and we caution the
Congress to move very carefully in full consultation with the
postal stakeholder community before proceeding in these areas.
We support the Postal Service's proposal to eliminate the
escrow requirement so the service will not have to include the
$3 billion as mandated incremental operating expense in fiscal
year 2006. The service cannot use the escrow funds unless
Congress eliminates the escrow requirement or specifies by law
how these funds may be used. If no action is taken, the
unavoidable necessity to raise rates higher than necessary will
come about. This can and should be avoided.
We believe that improved and continued communication by the
Postal Service with Congress over how it will address its long
term challenges and fund its retiree obligation should provide
Congress the information it needs and assurances to eliminate
the escrow requirement.
We also support relieving the Postal Service of the burden
of funding retirement benefits attributable to military service
and returning that responsibility to the Department of the
Treasury. We support the use of these savings to pre-fund
retiree health benefits, obligations for current and former
employees estimated at approximately $50 billion dollars. Under
this proposal the funds would stay in the Civil Service
Retirement System and therefore would not impact the Federal
deficit.
Finally, we have recently been apprised of a difference in
methodology used by the Office of Personal Management and the
Postal Service in determining the Postal Service's CSRS
obligation. We were quite surprised to learn that according to
the Postal Service's calculations its obligation is $86 billion
less.
Chairman Collins, thank you for the opportunity to present
these views. We look forward to working with you to secure
postal reform and I am available to answer any questions that
you have. Thank you very much.
Chairman Collins. Thank you very much. I want to thank you
all for sharing your experience with us. We are now going to
begin a round of questions of 7 minutes for each of us.
All of you have considerable experience in the Postal
Service. Each of us is committed to universal service, to
making sure that we strengthen and preserve the Postal Service.
You have all stressed the need for us to act on the military
pension issue and the escrow account issue. I cannot help but
point out, even though I am on the House side, that the
original Collins-Carper bill did not have an escrow account in
it and it is something, on those two points, where I am very
sympathetic to the opinions that you have expressed.
But putting aside those two issues which are clearly among
your top priorities, if you were going to advise the Committee
on what two reforms you think should be included in our
legislation and are absolutely imperative for the future of the
Postal Service, what would they be? I would ask you to give us
the benefit of your many years of experience here as opposed to
just representing your members in replying to us. We will start
with Mr. Olihovik.
Mr. Olihovik. I think the thing that is absolutely critical
to NAPUS is the universal service aspect. But the two reforms I
think that the Postal Service needs is really the flexibility
and price-setting because in today's world, the archaic
structure of the way we do things now, it just does not make
sense. It does not allow this organization to react in any kind
of a timely manner. It is approximately 12 to 14 months before
the Postal Service realizes it has a problem, has to put in a
new rate structure, and has the ability to get the new rate
approved. So, we need some more flexibility.
I think the flexibility aspect is as far as where we want
to go. I am very supportive of the new pay-for-performance
program. I absolutely live by my remarks. I think we need to
extend that even further into the system. It is a well-thought
out program. I did preface some of my remarks that I still have
a little bit of concern. But I am still very cautiously
optimistic that at the end of the day this is going to turn out
to be right for the Postal Service. And I am proud that the
Postal Service brought us in early on to listen to our points
of view.
But I think as we are looking down the road, any healthy
organization needs all its parts pulling in the same direction.
This program as we have developed it is geared for excellence,
and I think that if we can somehow get the crafts to come to
the table and be part of the process I think that will go a
long way into turning this whole organization in the right
direction.
Chairman Collins. Thank you, Mr. Olihovik. Mr. LeNoir, same
question for you.
Mr. LeNoir. I would think, give us flexibility in our rate-
making process. I understand that we have monopoly products
like First-Class Mail, but there are other products that I
think we need more flexibility and not as much oversight where
we have competition. Currently it takes us--our competitors can
change rates overnight where we have to go through a very long
process and lay everything out on the table. Then our
competitors set their rates according to how that process works
out. So I do believe we need more flexibility in the rate-
making process for non-monopoly products.
Also I think we need more flexibility in the way that we
can use our employees. In the larger post offices, sometimes
you cannot cross crafts, like a clerk could not do carrier
work. We have a number of employees but we cannot necessarily
use them like we should if we had more flexibility to use those
employees.
Chairman Collins. Thank you. Mr. Keating.
Mr. Keating. I agree with my two colleagues. I think
pricing and flexibility is the key most important issue being
addressed and that the Postal Service needs to continue. The
other issue I think would be to convince Congress to allow the
Postal Service to make those decisions necessary. I believe
they are the best qualified people to move ahead with a
transformation plan and allow them to make the decisions
necessary and not have to answer to any further regulatory
boards than they already have. Thank you.
Chairman Collins. As I was preparing for this hearing I
reviewed the worker's compensation program of the Postal
Service. I was surprised to learn that in the Postal Service,
if you are on worker's compensation you can choose to stay on
worker's compensation even after the normal retirement age.
There is in fact a 102-year-old postal employee who is still
receiving worker's compensation benefits. I also found that
there were hundreds of cases where individuals have been
receiving worker's compensation for longer than 30 years, and
that there were over 1,000 cases where the individual had
qualified for worker's comp benefits between 20 and 29 years
ago.
It seems to me that this is an area that we need to take a
close look at given the enormous unfunded liability for
worker's comp in the Postal Service. Could you share any views
with the Committee based on your experience on whether you
think this is an area that reforms need to be undertaken? Mr.
Olihovik.
Mr. Olihovik. Senator Collins, I would not by any means
classify myself as a compensation expert. It is a very
confusing process. I know as a postmaster some of the greatest
frustration that I have experienced was going through the
worker's compensation merry-go-round. I think outside of the
job of postmaster, one of the most challenging jobs you can
have in the Postal Service is in injury compensation. Worker's
compensation is probably equally challenging.
It is clear to me talking to some of the experts back in
the district, whether it be in Massachusetts or New Hampshire,
that there is clearly a level of frustration out there with the
system. It needs to really be drastically looked at and in some
cases probably overhauled. We cannot make it comfortable where
people are sitting home. We have got to do the right thing for
people that are injured. There is no doubt about that. But we
cannot create a situation where our hands are tied.
That is about the only thing I can share. I know that from
a district level there is a tremendous amount of frustration
with the system as it presently exists.
Chairman Collins. Your point is a very good one. We do need
to make sure we have a system that is fair and compassionate to
injured employees. I was, however, alarmed at some of those
statistics, particularly when you look at the unfunded
liability.
Mr. LeNoir.
Mr. LeNoir. Madam Chairman, you point out a very legitimate
issue and I think we need to work to get it corrected. That
would be the short answer.
Chairman Collins. Thank you. Mr. Keating.
Mr. Keating. Chairman Collins, I read that same report that
you referred to and I was amazed at what the report entailed. I
worked in finance for most of my career before coming to
Washington and I can tell you that it has been a system out of
control for a long time and it needs an overhaul and complete
look at.
Chairman Collins. Thank you. Senator Akaka.
Senator Akaka. Thank you very much, Madam Chairman. I wish
to thank all of you for your excellent testimonies. As the
elected leaders of the Postal Service's management associations
you know firsthand that modernization of your agency is
critical for its survival. Your counsel and your guidance is
greatly appreciated.
My first question is directed to Mr. Olihovik, who like Mr.
LeNoir and Mr. Keating, collaborated with the Postal Service on
its new pay performance system for non-bargaining employees. I
believe Mr. Olihovik appropriately raised several valid
concerns over the success of the new pay system, including the
need for managers to be trained in implementing the system. I
agree that without a credible, transparent, and accountable
management plan in place putting a pay-for-performance system
in place is risky.
My question is, how would you strengthen the new pay-for-
performance system for postal managers and what would need to
be done to bring all employees, including union workers, under
a pay-for-performance system? I would like to have both Mr.
LeNoir and Mr. Keating respond to this as well.
Mr. Olihovik.
Mr. Olihovik. Senator Akaka, before I respond to that I
would be remiss if I once again did not thank you for your
support and leadership in promoting the Postmasters Equity Act.
You have been a strong friend to postmasters for many years and
I do thank you for that.
Your question is a good one. I will go back to some of the
things that I said in my prepared remarks. I think the most
important thing that you can do in any new program that you
have is good communication. I think the Postal Service is
trying to do that. I am trying to be as patient as I can with
this. I accept my responsibility as a management association
head as far as helping the Postal Service build this program,
and I am going to do everything I possibly can to make sure
that it is successful.
Like any program there are some difficulties, some stops
and starts. Convincing people of a whole new way of doing
things is hard. As I referred to the core goals, we are having
some issues there. That is 20 percent of a postmaster's
performance compensation. It is not that the Postal Service,
from the headquarters viewpoint, has not been trying. They had
a major seminar just a couple of months ago. They invited the
management associations to be a part of that seminar, and spoke
to a large group of human resources people throughout the
country. So everybody was in attendance. They were all hearing
a very clear, consistent message.
It is a whole new way of doing things, and as I said, it is
the right way to do things. But I still think we need a little
bit more clarification and communication on specific aspects of
it. Having done that, I think that this program is going to
work and I think it is going to be one of the best things that
has happened to all people and management.
Getting to the second part of your question, Senator, as
far as extending it to the crafts, quite honestly it goes to
one question and it is bedrock in everything that we do, in all
our relations. It comes down to the word trust. They have to
trust in the system. They have to believe in the system. So as
managers we have to lead the way and show that it is a good
system, it benefits and rewards excellence. I think if we allow
them the input through the collective bargaining process I
think that they will work to craft it--intelligent people
usually do intelligent things. I think that they will buy into
the process, and once they do that, having everyone as a total
group striving for excellence together is the right way for any
successful organizations to go.
Senator Akaka. Thank you. Mr. LeNoir, would you like to
comment on the Postal Service's pay-for-performance system?
Mr. LeNoir. Yes, Senator Akaka. I also thank you for your
help with the Postmasters Equity Act. All three of us at this
table helped design that system and I think that, like I said,
it is not perfect and we realized it would not be perfect the
first year we rolled it out. But I certainly think it is a
stride in the right direction.
The Postal Service has committed in April to sit back down
with us and revisit the system and look at where we may have
some shortcomings. So we look forward to that opportunity. As
my friends stated, the core goals are a concern to us and we
have to make certain we get that process right. But I really
think we have made a lot of progress in this new system, and
like I said we look forward--we realized there would be
problems rolling it out. We were late getting the goals out to
the employees because it was the first year rolling it out. But
I believe next year things will smooth out and it will continue
to improve and lead us in the right direction.
The second part of your question is about incentives for
other workers. I believe we have different systems in place. As
I said, the rural carrier system seems to work very well in
that they have an evaluated system and it goes by the amount of
mail they get, the number of stops they get. If they finish
their route early, they are able to go home. So that gives them
incentive to work as efficiently as possible and complete their
route so that they can go home.
But on the other hand, a city carrier, he is there for 8
hours and if he works very fast he is given additional work to
do when he gets back to the office. And if he works very slow
he is given overtime. So I just think the two systems, as you
can see they are like night and day, and I think we need to
work to try to get everybody on some type of incentive-type
system.
Senator Akaka. Thank you. Mr. Keating.
Mr. Keating. Yes, Senator. Wally in his testimony expressed
some reservations about this, and I think we all have
reservations. The system is so brand new. We are still in the
process of rolling out to the field. I think if you took a
census of my membership they would probably say we are crazy
for doing this, but the leadership decided that this was the
way to go. As far as, the Postmaster General is on record
numerous times, even last night at the league's dinner, saying
that this is a work in progress. We will continue to work out
the problems as it goes. It is an experimental type year. I am
convinced that we can make it work.
And to the second part of your question, quite honestly,
the only way that this is going to be ever sold to the unions
is that it does work. It has to work in order to convince the
unions to buy into the process.
Senator Akaka. Thank you very much for your responses. My
time has expired.
Chairman Collins. Thank you. Senator Carper.
Senator Carper. Thank you, Madam Chairman. As I said to you
in our earlier conversation, I may have to slip out to get on a
teleconference call. If I do, I ask your indulgence.
I want to stick with this issue of pay-for-performance for
a moment. In the past some pay-for-performance systems have
been criticized for being wasteful, even ineffective. Do you
agree with that? If so, how is the new approach better?
Mr. Olihovik. I am sorry, I did not hear the first part of
what you said.
Senator Carper. I said in the past some of the pay-for-
performance systems that were espoused by the Postal Service
have been criticized for a variety of reasons, for being
wasteful, for not being very effective. I do not know if you
agree with that or not. If you do or do not, just tell me. And
if you could, just let me know how this new system, this work
in progress, is better.
Mr. Olihovik. Under the system that we had before, the EVA
program, (economic value added) the main problem we had was
that it was not well explained and to my understanding not too
well understood by too many people. I think with the new
program there is a clearer definition.
I think especially with 80 percent of the performance pay
being objective. It is very objective. Twenty percent with the
core requirements are subjective. That is what we are trying to
convince people of. With the objective part, you hit the number
or you do not hit the number. But it is not a finish line
mentality. You can come close to the number and be rewarded.
And if you go significantly past the number you are rewarded to
a greater extent.
So I think people understand that concept. I certainly
understand that concept and I certainly support it. I would not
characterize the old system as being really wasteful but I
would probably classify them more as not being well understood.
Senator Carper. Thank you. Mr. LeNoir.
Mr. LeNoir. Senator Carper, under the old EVA system you
were connected to your district's goals. Say, for example, you
are in a area, like Columbia, South Carolina, if they had a bad
year and my little town of Horatio had a good year, I was in a
geographic region and we were all hooked together.
Now we have designed a system that measures how we perform
nationally, how your post office did, and how you did as an
individual. So we feel like it is a lot more--we are
accountable for what we do now and it is a system that drives
us to do better in our offices instead of being grouped with a
large number of people.
Senator Carper. Thanks. What town was it, Horatio?
Mr. LeNoir. Horatio, South Carolina.
Senator Carper. Where is that located?
Mr. LeNoir. It is near Sumter. I tell everybody it is
between Pixley and Hooterville. But it is a very small town.
[Laughter.]
Senator Carper. That clears it up for me. Thank you. Mr.
Keating.
Mr. Keating. Senator, what we had before was really not a
pay-for-performance system. It was a team bonus system where if
the team did well and the team was a large group, everybody
benefited. But I do not think that can compare to the pay-for-
performance system that we are putting in now. This is
individual versus a team effort.
Senator Carper. For us as Members of this Committee who are
interested in postal reform, what do we need to be mindful of
with respect to pay-for-performance system proposals and
implementation?
Mr. Olihovik. I think you should really take a close
observation of it during this first year. As Steve said, we
have a commitment from the Postal Service that if anything
needs to be tweaked, that we will go back and we will make the
necessary adjustments. We are fully supportive. This is a team
effort. This is a group effort to do our level best to make
this work, and I commend the Postal Service for leading with
that attitude, and I am convinced that with some minor
modifications that I anticipate we will make it work.
Mr. LeNoir. I think this new pay-for-performances, system,
we were able to do it because we are managers and we are not
bound by union contracts. That gave us the flexibility to
develop this system. I think the challenge is going to be how
we roll that down to the craft, to the lower levels.
Senator Carper. Thank you. Again my question is, what are
the implications for us as Members of this Committee, the
Committee of jurisdiction, as we approach postal reform? Do we
have an interest in this? Is this something that we ought to be
mindful of? That is my question.
Mr. LeNoir. I do think and the Postmaster General said that
we do support collective bargaining and I do not think that
that is necessarily a fight that we need to take on.
Senator Carper. Mr. Keating.
Mr. Keating. Basically the same thing, I think there are
some issues in communications that are not being addressed
properly. It is going to take a lot of work on headquarters
management organizations in the field. There has always been a
problem between the Postal Service headquarters and the field
in listening to and understanding communications sent out. We
struggle with this all the time. We sit down at a bargaining
table and agree to an issue and it gets misinterpreted, or
misinterpreted by the time it gets down to the field level. I
think it is ironic that we are in the communications business
but we do not communicate with our employees and managers that
well. We need to do better.
Senator Carper. Thanks. Let me change gears, if I could,
and talk about the accessing of retail postal services in
places other than post offices themselves. Any of you have an
idea of what percentage of the volume of mail services that
provided like in a retail type setting, what percentage
actually take place in a post office itself versus some other
location? I have heard 80 percent in a post office. Does that
sound about right?
Mr. Olihovik. Right, that was in my prepared remarks with
the stamp sales itself. I made the comment that even though 70
percent of Americans were well aware that retail services were
available elsewhere outside of a traditional post office
setting, that 80 percent of Americans continue to vote every
single day to purchase those stamp sales at a traditional post
office.
Mr. LeNoir. Senator, I think it is important to note that
in large communities where lines are an issue it may be a good
idea to have stamps available in Wal-Marts and other places
such as that. But in our medium to smaller communities I think
we would be making a big mistake to take the stamps and retail
things out of their lobbies. Over 7 million people visit our
lobbies each business day and we can use that as an opportunity
to up-sell and sell additional products, and I think we would
be making a mistake to try to drive them to grocery stores
instead of the post offices where lines are not an issue in the
smaller communities.
Senator Carper. What are some examples of retail operations
where people can avail themselves and buy postal services
outside of a post office where it actually is a good value for
the customer? Can you give us some examples of where it works
well?
Mr. LeNoir. I am sorry, are you referring to something like
stamp sales?
Senator Carper. Basically.
Mr. LeNoir. Obviously like I said, in the larger markets it
makes perfect business sense to make access more available, as
the Commission suggested, and we totally agree with that. But
in a small town where you might have three or four businesses
and a post office we do not think it makes good business sense
to all of a sudden have stamps available at the gas station
which is a mile down the road from the post office. We just
think that would be shortsighted.
Mr. Olihovik. Senator, in many of the larger cities we have
what they call contract postal units and depending on which
unit you look at they can work very effectively. I myself have
one in Nashua, New Hampshire.
Senator Carper. I was just in Nashua last Saturday. I was
just there in the town hall up on the third floor introducing
Joe Lieberman to a packed house. Boy, it was hot. That was the
only time all day I was hot.
Mr. Olihovik. I am sure you noticed what a friendly city it
was.
Senator Carper. It was great. People were wonderful.
Mr. Olihovik. That is good to hear. In Nashua we have a
contract postal unit. We pay a private contractor approximately
$100,000 a year to run this facility. They in turn generate $1
million. That is pretty good value that the Postal Service is
getting for its money. Many times when they work, you have got
good people operating them. I do not have any problem with
that. Sometimes you get other people operating them and they
are not so good. But I can give you examples both ways.
By and large my experience with contract postal units, as
they exist in large city settings, usually work pretty well.
The Postal Service, even in its transformation plan, determined
that basically for every dollar that they spend they are taking
in $10 in return so that is a pretty good margin.
Senator Carper. I would say it is. Madam Chairman, I have a
couple more questions I would like to submit in writing for our
panel. Thank you very much for being here today and I am going
to go jump on this call and be right back.
Chairman Collins. Thank you. The hearing record will remain
open for 14 days for the submission of additional material.
Senator Durbin.
OPENING STATEMENT OF SENATOR DURBIN
Senator Durbin. Thanks, Madam Chairman, and thank you for
your courage and determination that this hearing would go on.
Neither rain nor snow nor sleet nor ricin will stop this
Committee from its appointed tasks, and I am happy to be here
with you.
I have been to several of these hearings before and I am
looking for recurring themes and I think I have found one. When
we have postal labor witnesses they tell us the problem is
management and the politicians. When we have postal management
witnesses they tell us the problem is labor and the
politicians. So I am beginning to find that there is one
recurring theme here that perhaps we need to visit and that is
what we need to do to try to resolve differences between labor
and management and make the Postal Service more efficient and
more modern in the 21st Century. This Commission is a good
starting point but it is not the ultimate answer. It will
undoubtedly be changed during the course of considering
legislative options.
Mr. Olihovik, you testified before the Commission last
April about the red tape and micromanagement the postmasters
have to deal with, and I would like to read part of your
testimony. ``Over the past three decades the Postal Service has
mutated into a costly, multi-layered bureaucracy that has
distanced postmasters from postal headquarters. Consequently,
mid-level postal managers positioned at area and district
positions often interfere with successful post office
management and can undermine a postmaster's authority. It can
be as petty as requiring a local postmaster to file triplicate
requisition forms to purchase a role of toilet paper.'' Was
that hyperbole?
Mr. Olihovik. No, it was not. That statement, and to the
extent that it is happening today we still, I feel, have too
many layers of bureaucracy. As I said in my prepared remarks,
for the position of postmaster, we select people based on their
background, their skill level, and the trust that we have in
them to do the job. However in too many locations, not all
locations, but in too many locations we do not give them the
authority that they need to effectively do that job in the
local community that they serve. They are micromanaged to some
extent. They are answering to everybody and anybody at a
district level. It is the type of situation when everything
becomes a priority, then nothing becomes a priority. It makes
it very difficult. I like to refer to it as the conflict of
imperatives, who do I please first?
In the exact scheme of things, really a postmaster should
report to a postal operations manager who in turn reports to
the district manager. But too many times, in too many settings,
you have got people in multi-departments, delivery departments,
address management departments all interfering in the daily
operation of a postmaster. It makes it next to impossible to
manage the operation at times.
Senator Durbin. It seems that you and postal labor agree on
that point, that there is a lot of money and time wasted in
bureaucracy. But you raise a point too that is closer to home
to your personal interest, where you would suggest that the
employees ought to give when it comes to their collective
bargaining rights and benefits they currently receive. Most of
you, though there have been some qualifications to this remark,
are careful to guard the existence of post offices themselves,
to try to find new ways to utilize buildings that currently
provide postal services. Some of them are creative and
interesting and I salute you for that.
But is that not part of our challenge here? From the labor
side, they do not want to give us benefits. From your point,
you do not want to give up the building that needs a
postmaster. Are we going to have to ask both sides to be more
accommodating to reach our goal?
Mr. Olihovik. I think with the situation that we face in
the Postal Service certainly everybody should be called upon to
sacrifice. That goes across the board. As far as my
relationship with the unions, I have a lot of respect for the
unions. I have a good working relationship with the people. I
think one of the benefits that we have now with Jack Potter is
some of the people that he is dealing with on a national level,
the presidents of the unions, I think have come around to a
21st Century viewpoint on just what is best for the
organization. We all have to be smart and realize that if there
is no Postal Service, there are no postmasters, there are no
letter carriers, there are no mail handlers. So we have to do
what is right for the Postal Service.
As far as the question regarding small post offices, there
are some that make the argument that there are too many out
there, that we do not need every one that we have, that you
cannot close small post offices. Senator, I would say that is
not the case. There is nothing right now that prevents Postal
Service headquarters from closing a small post office. If you
look in the last 30 years itself----
Senator Durbin. Except for elected officials.
Mr. Olihovik. We have a process in place. It is a
recognized process. When the process has been followed to close
a small post office, we have in fact closed 14,000 small post
offices over the last 30 years.
Senator Durbin. It is devastating, as most people know, to
small towns to lose a post office. Sometimes they just
disappear at that point. That is all that is left. I saw one up
in Alaska, and frankly it was in the middle of Arctic Village,
Alaska and it was one of the few things there that appeared to
have any connection, direct connection with the outside world.
Mr. LeNoir, you talked about things we could do with post
offices, some of them very imaginative, creative things that we
might accomplish there. But are we postponing the inevitable if
we try to find new ways to use post offices that go way beyond
their original purpose?
Mr. LeNoir. Senator, absolutely not. I come from a rural
town, I have been postmaster in the town for 23 years and they
have less than 5,000 people in that town. That post office is
so much more than just a building to them. A rural carrier
going in front of somebody's house does not give you the same
service that a post office does. I have people in my community
that did not have the educational opportunities and I help them
fill out money orders, answer and read mail. Those people are
not second-class citizens. I have a gentleman that comes up on
a riding lawnmower every day. That is his mode of
transportation. To those people, this is essential for them to
have a post office there, not just a carrier going by their
house.
I feel very strongly that if we are going to have those
offices out there, we need to figure out the best way that we
can utilize that network. As I have stated in my written
testimony, that network of post offices, 26,000 all across this
country, no private industry can touch that. I do not think
that we have fully utilized those post offices. In rural areas
like mine where there is no competition with the private
sector, I think there is a lot of things we could do that would
not step on the toes of the private sector and would bring
those offices closer to profitability.
Senator Durbin. Can I ask a question that is only somewhat
related to an issue that has been before us but I am curious,
do any of you have postal employees who have been activated in
the Guard and Reserve for Iraq or Afghanistan or any other
theater at this point?
Mr. LeNoir. We are not at our offices now but we know of
plenty of postmasters that have been.
Senator Durbin. Those postal employees that are activated,
is there a policy in the post office to protect their income,
to hold them harmless while they are activated Guard and
Reserve?
Mr. LeNoir. I would have to get back with you on that. I am
not certain.
Senator Durbin. I think the answer is no. I only raise
that, not in criticism of you but in criticism of the fact that
here we are in the Federal Government not doing what States and
local units of government and private corporations do, which is
stand behind the men and women who are activated. We passed an
amendment which I offered on the floor in the last omnibus
appropriation bill to say we would hold Federal employees
harmless who are activated, and 10 percent of all Guard and
Reserve are Federal employees. Unfortunately, when it went to
conference it was stripped out, not by the House but by the
same Senate that had put it in the bill. I hope we can return
to that this year.
Thank you, Madam Chairman.
Chairman Collins. Thank you. I would like to thank our
panel of witnesses for your excellent testimony today. We want
to work very closely with you as we proceed from here and take
advantage of the many years of experience that you have. So
thank you so much for being here today.
I would now like to call forward our second panel of
witnesses. We are very fortunate today to have three very
distinguished experts in the area of labor relations. John
Wells is a labor relations consultant and a commercial
arbitrator. He also served as the director of the Federal
Mediation and Conciliation Service during President Clinton's
Administration. Both his current and previous work have
provided him with extensive public and private sector
experience with the collective bargaining process.
Dr. James Medoff is a professor of labor and industry at
Harvard University. He is considered to be one of the foremost
experts on matters pertaining to labor unions and the role that
they play in our economy. He has also served as a consultant to
the National Association of Letter Carriers.
Dr. Michael Wachter is the William B. Johnson Professor of
Law and Economics at the University of Pennsylvania. He has
conducted extensive research on the topic of postal wage
compatibility and comparability with the private sector. He has
also served as a consultant for the Postal Service.
Gentlemen, we are very pleased to have you here today. You
do represent a great deal of expertise that the Committee is
going to need the help of people like you, your help as we seek
to tackle these very difficult issues.
Mr. Wells, we will begin with you.
TESTIMONY OF JOHN CALHOUN WELLS,\1\ PRIVATE CONSULTANT, FORMER
DIRECTOR OF FEDERAL MEDIATION AND CONCILIATION SERVICE
Mr. Wells. Thank you, Madam Chairman. My name is John
Calhoun Wells and I am proud for the gracious invitation to
appear before you and this Committee today.
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\1\ The prepared statement of Mr. Wells appears in the Appendix on
page 135.
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If I may be permitted a personal note, I was looking
forward to testifying at the Dirksen Building because as a
young pup right out of graduate school I went to work for a
former colleague of yours, former U.S. Senator Wendell Ford, in
1975 to 1978 and served in the Dirksen Building. Then when we
came here I was disappointed except I looked and realized that
this is a room in which I had testified before Chairman Jack
Brooks several years ago. And I moved from Kentucky to
Beaumont, Texas where I found my bride and became a good friend
of Chairman Brooks and shot ducks with him. So I feel reassured
looking here to testify before this August body with this
picture of Jack in front of me.
I am going to summarize the opening part of my remarks for
you and then focus more principally on the latter part which
deals with the issues you have before you. I did in fact serve
from 1993 to 1998 as President Bill Clinton's Director of the
Federal Mediation and Conciliation Service. I really came to
that job with a lifetime of experience in collective bargaining
and labor relations. Every member of my family has been a
member of a labor union, including myself. I was Kentucky's
first for secretary of labor.
As FMCS director I handled an unusual number of difficult
situations and strikes, the most infamous of which was the UPS
strike with the Teamsters. I see Senator Durbin there and I am
reminded of the Caterpillar strike that I personally handled
for 4 years, 3 months, and about 7 or 8 days. I would have left
earlier. Your dear colleague and my friend, the late Senator
Paul Simon, was extraordinary helpful, always behind the
scenes. Never wanted any publicity. And without him that strike
may have still been going on.
So I have had the experience of very difficult and
unpleasant labor situations. As a native of eastern Kentucky,
we had a good number of them in the coal fields as well.
But I have also served to help build labor-management
partnerships between organizations like GTE and the CWA and
IBEW unions, and also Kaiser Permanente and AFL-CIO. I guess I
want to suggest I have been active in both the public and the
private sectors during my career. I have worked with all the
major unions, AFL-CIO and many of our Nation's major employers.
Now let me focus a bit more on my experience with the
Postal Service. Since 1993 I have both observed and
participated in postal labor relations. As director of the
Federal Mediation Service my staff made me aware of a study by
the General Accounting Office which was exceedingly critical of
the state of labor relations in the Postal Service. Shortly
thereafter Congressman John McHugh personally asked if I would
intervene and try to bring the parties together, and from that
we organized a series of labor-management summits that occurred
on approximately a quarterly basis once we got them going, and
it included the Postmaster General, his direct reports, and
also the top union officers as well. I chaired a series of
these summits for 4 or 5 years and continued when I left the
government in 1998, and I was asked by the parties to continue
to facilitate those sessions.
Now a second way in which I have been involved in postal
labor relations, I served as the mediator and the interest
arbitrator for the impasse that resulted from the unsuccessful
collective bargaining negotiations between the National Rural
Letter Carriers and the Postal Service. Those proceedings
resulted in a unanimous award being issued February 2, 2002. As
a result, I would say, of this participation in these matters I
have been involved in postal labor relations for the past
decade, both from trying to facilitate and improve what was
often a contentious relationship at that time, much improved
today I would note, but also then serving as a neutral in a
labor negotiations impasse.
I therefore appreciate the chance to address this Committee
and share some insights I have developed as a result of these
10-odd years of experience and how this in fact relates to the
recommendations, or some of the recommendations at least, of
the President's Commission on Postal Reform that I understand
this Committee is considering.
I want to focus on my experience as a mediator and interest
neutral in the collective bargaining impasse between the Postal
Service of the National Rural Letter Carriers because I think
this experience gives me particular insight to share with you
concerning these recommendations from the President's
Commission. I am referring specifically to those
recommendations called collective bargaining process
improvements.
With regard to the collective bargaining and interest
arbitration process, it is my personal opinion and professional
judgment that the current process suffers from three basic
problems. Madam Chairman, this is the heart of my testimony. It
is too formal, it is too adversarial, and it takes too long. In
my judgment changes to the process are needed to address these
counterproductive characteristics.
First, the current process is too formal because it relies
so heavily upon litigation with all of the formality of
judicial proceedings--witnesses, numerous witnesses, hundreds
of exhibits, thousands of pages of testimony before a court
reporter, rebuttal, surrebuttal, and so forth and so on. Such
formalistic procedures by their very nature tend to skew the
practical in favor of the technical and often lead to time and
resources being devoted to issues of forms instead of
substance, and to matters of what I would consider too often
marginal relevance rather than those of fundamental
significance. Litigation processes are no substitute for
practical, real-world decisionmaking.
Second, the current process is too adversarial because the
arbitrator in this judicial capacity does not get the
opportunity to meet with the parties informally and to really
mediate the issues which are at the heart of the dispute.
Instead of engaging in mediation where the neutral can really
engage and encourage the parties to focus on the core issues at
dispute, these overly adversarial proceedings are characterized
by each party responding tit for tat and full litigation
regalia in force, regardless of the merit or the significance
at issue. The us versus them mentality is difficult to contain
in a hearing room and too often spills over to impact the
entire relationship. In fact I believe if you will speak with
the leadership of the unions and the Postal Service they will
tell you that after a difficult, tough interest arbitration
that the relationship too often is damaged and harmed and it
takes a good bit of time to get it back on track again.
Third, the protracted length of these specifics is well-
documented and exacerbates the remaining underlying problems.
As noted in the commission's report, the last three impasse
proceedings took between 13 months and 17 months to finish. In
fact the interest arbitration at which I was a neutral
chairman, it took 14\1/2\ months from the contract expiration
date to the issuance of an award. This is certainly not a
definition of efficiency and it is a problem. The current
process seems to encourage the parties to negotiate for 90 days
in good faith, attempting to reach a conclusion to the
collective bargaining negotiation, and then upon the failure to
do so they start from square one in the dispute resolution
process.
In reviewing the section of the Commission's report on
proposed changes to the collective bargaining I was impressed
with their express goal to have a process where each step
builds on the progress already made and emphasizes mediation
and problem solving. In other words, even when negotiations
have not successfully reached a complete agreement, the impasse
procedures should be designed to build on the progress made to
date and to discourage the parties from trying to revert to
hard-line positions previously abandoned.
Interest arbitration, if it must have happened, need not
have gone far from scratch with the parties posturing on issues
and advancing positions that previously were the subject of
compromise. I believe that the primary recommendations of the
Commission in this respect represent a considerable improvement
over the current process.
The primary recommendations of the Commission that I would
like to address are the inclusion of a mediation stage,
essentially a lieu of fact-finding and the use of the mediator
as the interest arbitrator neutral in the med-arb format. I
speak to these issues with personal experience. I served as
both the mediator and then the interest arbitration neutral
chairman in my role with the Postal Service and the rural
carriers. As such I think that I have some experience and
insight to share with you. I might note that my understanding
is that I was only the second person in the history of
collective bargaining in the Postal Service who had served both
as a mediator and the interest arbitrator, the one immediately
preceding me back in the late 1970's.
In my judgment, there was great value to the mediation that
preceded the interest arbitration with the Postal Service and
rural carriers union because the parties engaged in very frank,
very serious discussions during the mediation with me. As a
result, while the mediation did not resolve the dispute, it did
resolve some of the issues of the dispute and it focused the
parties on the principal points of contention. In fact there
were signed agreements on several issues which enabled those
matters to avoid the arbitration entirely. Further, the
mediation had the effect of introducing realistic expectations
to both sides.
Also, the mediation better prepared me to serve as the
interest arbitrator. I was more familiar with the parties, with
the individuals, more knowledgeable of their issues and had a
better understanding of what was most important to each. I
think it would be an error to start all over again by bringing
in a new neutral for interest arbitration.
My service in both roles allowed for a continuity that
permitted each step in the process to build upon the previous
one rather than to start anew. I note that even though there
were significant changes in the contract affecting both parties
as a result of that arbitration which I chaired, the interest
arbitration award was a unanimous decision among all three
arbitrators, myself as the neutral chairman, the Postal Service
partisan arbitrator and the rural letter carriers' partisan
arbitrator. We worked very hard to achieve that unanimous
decision and are very proud of it.
I would suggest that based on my considerable labor
relations background, and more importantly the 10 years that I
have spent in postal labor relations, med-arb would be a
valuable tool for resolving collective bargaining disputes in
the Postal Service.
I would like to conclude, Madam Chairman, by this personal
observation. I think that you and your colleagues have an
unusual opportunity to strengthen and to improve an
institution, the Postal Service, that is a national treasure. I
know you come from a rural area. I was raised five miles down a
gravel road in the mountains of eastern Kentucky in the late
Carl Perkins' district, so I understand the value of the Postal
Service for rural people. I hope that you and your colleagues
can fashion a bipartisan--very important, a bipartisan reform
that makes sense, that helps the Postal Service, its employees,
its union, its management to survive and to prosper. And most
importantly, to help this institution continue to serve the
best interest of our Nation and our people.
I think you are taking on an awesome task and it is really
in line with your national reputation of fashioning bipartisan
solutions to vexing problems, that you are willing to do this,
and I commend you for it, ma'am.
Chairman Collins. Thank you very much. Thank you for your
excellent testimony. As I heard you talk about all your
experience I thought that you may be the key person for us to
bring in as we try to reach agreement on this legislation upon
which there are going to be so many disparate views.
Mr. Wells. You are most gracious.
Chairman Collins. Thank you. Professor Medoff, welcome.
TESTIMONY OF JAMES L. MEDOFF, PH.D.,\1\ MEYER KESTNBAUM
PROFESSOR OF LABOR AND INDUSTRY, FACULTY OF SCIENCE AND ARTS,
HARVARD UNIVERSITY
Mr. Medoff. Thank you very much. It was a pleasure to hear
from someone who is really a neutral, given that myself in
representing NALC for the past 5 years and Michael Wachter in
representing the Postal Service for, I think it was the past
25. So we have both had parties and he is the neutral, who I
think is very good for you to have brought here.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Medoff appears in the Appendix on
page 148.
---------------------------------------------------------------------------
Now if I remember what the questions were for me to
address, one was the Presidential Commission's recommendations,
and the second was the issue of postal pay comparability. Now I
have four main points to say about both of these.
First, I am pleased that the Commission recognized the
value of collective bargaining and recommended its retention.
Personally, I am a very strong supporter of collective
bargaining and, for whatever it is worth, I would also
recommend its retention.
Second, urge the Committee to be very cautious about making
radical changes in the existing collective bargaining process
unless both labor and management support them. So consistent
with the remarks that came before me, you really do not want to
change anything too dramatically in this area unless both labor
and management agree to those changes, because it is not going
to work if they do not.
My third point, which to my left here will be criticized I
am sure, but I do not believe that there is a postal pay
premium. I should say that it is also the case that Mr.
Fleischli does not seem to really believe there is a premium
either. So I am going to argue later on that if you measure the
wage differential between postal pay workers, in particular
letter carriers, and comparable workers in the private sector,
which I think the law says is what we should be doing, you are
going to find out that the letter carriers are paid, if
anything they are underpaid. So there is not a premium. There
is an underpayment.
I tried to tell you who I was working for in the very
beginning. I think now you know for sure, but the data do
support that position.
Then fourth, we want to keep regulators out of the
collective bargaining process. Pay comparability is best left
to the parties, because the parties will work out really what
jobs are comparable. That is not something that really anyone
can just dictate from up here, what is comparable. You have
seen, women have seen the whole problem with the issue of
comparable work. Who is going to dictate what jobs are exactly
comparable? It is very difficult. So I think people like me
would say, why don't you just enforce the hell out of Title VII
of the Civil Rights Act, then the whole issue of comparable pay
will not be an issue?
So I am saying, coming up with comparable jobs, comparable
female versus comparable male jobs, for example, it is a very
difficult thing to do. So people who write laws, in fact the
people who passed the civil rights law passed this thing called
Title VII because it would be much easier to say that no woman
should be denied a job because she is a woman. No woman should
be paid less than a man because she is a woman.
Any questions on that at this point?
Chairman Collins. We will hear all of the testimony, then I
will do some questions. Thanks.
Mr. Medoff. Collective bargaining. To have unions and
collective bargaining are good for society in my opinion.
Unions provide voice. It is also my opinion they provide voice
in two ways. One, they provide this thing called a grievance
procedure, which on a day-to-day basis lots of workers complain
about being mistreated in the workplace. So that is a form of
voice. And every 3 years or so they have this collective
bargaining process which is another way that voice will be
provided.
Now my feeling is that voice is very good. Now the main
thing that voice does is it reduces the amount of attrition,
the amount of quitting, the amount of leaving your job. If you
do not like your job, you do not have to tell your boss, what
is the expression, to shove it. You just can stay on the job
and you can file a grievance, you can go to collective
bargaining, and everything you have to say about the job will
be said without your having to leave it. So ultimately, having
a union structure in place reduces the amount of attrition, the
amount of quitting of jobs by a whole lot.
And the main reason why I argue that unions increase
productivity is that attrition is very expensive in terms of
productivity. So we estimated a direct route between quits and
attrition and productivity. We see by lowering the amount of
attrition, unions increase the amount of productivity. Some of
you will say, what, is he crazy? Has he not heard of feather-
bedding? I go, yeah, I have heard of feather-bedding.
But I imagine there are few people in this room who have
been to places where they have orchestras recently. Now let me
ask you, how often has anybody seen a standby orchestra? Or how
many of you have been recently on diesel trains where you have
a fireman? So I think the whole thing of feather-bedding is
really way overblown as an important issue.
So ultimately that is an issue that has to be studied.
There are a lot of things that unions do, some of which have
been just talked about, that ultimately increase productivity.
One is by reducing attrition. One is by providing voice to
management where they cause productivity to be higher, not
lower.
Now let me turn here to the next page. I have down here, be
careful about having a rigid timetable, because in the same way
it does not work, and people who are involved in collective
bargaining know that it does not work to come up with some
solution which forces everybody to wear a size seven shoe. I
have a certain sense in reading these recommendations, in terms
of the last best offers and things like that, that really we
are forcing all of the people, all of the parties involved into
wearing size seven shoes, and that does not work. I think
people have to state really what would be a comfortable shoe
size for them to wear.
Let me just move on. Now the last thing I said that I would
talk about was pay comparability. When we talk about pay
comparability, in labor economics there is a big issue of what
are you talking about, jobs or people? Because when you talk
about comparability you could be talking about either
comparable jobs or comparable workers.
I think I am talking about both. To me, what I think the
law says and what a comparable job is for our discussion is
really the type of job that is similar. If you went to a
company they would say, this is a similar job and in most cases
they would be looking at another company that had this job and
they would come up with a list of jobs that were
``comparable.'' Now they would not do anything like what my
friend Dr. Wachter does here like run a regression where he
defines comparable jobs in terms of jobs which have people who
have the same human capital, who have the same experience and
education and therefore are comparable. Now that just would not
be done in business. So I cannot believe that we should be
asked here to adopt a definition of comparability which is not
one that would be adopted anywhere else in our society.
Am I within my 10 minutes?
Chairman Collins. You are a little over your 10 minutes but
we very much appreciate it.
Mr. Medoff. I apologize for that.
Chairman Collins. No, that was absolutely fine and thank
you.
Dr. Wachter.
TESTIMONY OF MICHAEL L. WACHTER, PH.D.,\1\ CO-DIRECTOR,
INSTITUTE OF LAW AND ECONOMICS, AND THE WILLIAM B. JOHNSON
PROFESSOR OF LAW AND ECONOMICS, UNIVERSITY OF PENNSYLVANIA LAW
SCHOOL
Mr. Wachter. Thank you, Madam Chairman, and Members of the
Committee. My name is Michael Wachter and I am currently
employed by the University of Pennsylvania as the William B.
Johnson Professor of Law and Economics. I served as the
university's deputy provost from 1995 through 1997 and was the
university's interim provost in the year 1998. I have been
employed at the University of Pennsylvania since 1969.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Wachter appears in the Appendix
on page 157.
---------------------------------------------------------------------------
I have published extensively in the areas of labor
economics, labor law, corporate law and finance. Virtually all
the work that I have done for the Postal Service over the years
has been published in academic journals and books. My
consulting work and testimony on behalf of the Postal Service
has focused on the issues of postal wages and benefits and how
they compare to private sector wages and benefits.
I first consulted for the Postal Service in 1981. At that
time it was not tied to an interest arbitration but simply
assisting them in wage-setting and their own approach to wage-
setting and collective bargaining. Since that time I have
testified in numerous interest arbitration proceedings. My most
recent testimony was before the Goldberg interest arbitration
panel in 2001 to resolve the dispute between the Postal Service
and the APWU. On April 29, 2003 I also appeared before the
President's Commission on the U.S. Postal Service.
The starting point for my analysis of postal wages and
benefits is and always has been the Postal Reorganization Act,
which states that the U.S. Postal Service shall ``maintain
compensation and benefits for all officers and employees on a
standard of comparability to the compensation and benefits paid
for comparable levels of work in the private sector of the
economy.'' The Postal Service is unusual compared to many
regulated firms since it is so highly labor-intensive.
Currently, nearly 80 percent of its costs are for compensation,
which makes labor cost issues critical to the financial health
of the Postal Service.
The President's Commission has recommended that the Postal
Service's pension and post-retirement health care plans should
be subject to collective bargaining. Based on my research on
postal labor issues dating back 25 years, I believe the
Commission's recommendation on this count is both appropriate
and necessary. My conclusion is based on four fundamental
points.
First, my work on postal comparability shows that there is
a sizable postal compensation premium with respect to the
private sector. This violates the basic tenets of the Postal
Reorganization Act and renders the Postal Service vulnerable to
competitive product market pressures.
Second, the finding of a postal compensation premium has
been supported by postal arbitrators who have addressed the
issue since 1984. As a consequence of their findings, the
Postal Service and its unions have operated in an environment
of moderate restraint with respect to wages since 1984.
Third, while there has been some significant moderate
restraint in postal wage growth, there has been no such
moderation with respect to the growth in postal benefits.
Finally, in today's increasingly competitive environment,
the Postal Service needs both compensation restraint and
flexibility to meet its mandate of providing universal mail
service. Let me add that even if there were not a premium, the
need for flexibility would stand simply because of the
competitive environment in which the Postal Service operates.
Indeed, the Postal Service finds itself today operating in
increasingly competitive product markets across the board.
There has been a fundamental shift in postal volume growth that
reflects not only economic trends but also technological
innovations such as the Internet. Technology poses a threat of
a significant diversion of mail from the Postal Service. Total
postal volume peaked in 2000 at nearly 2,008 billion pieces.
Since that time total mail volume declined in each of the past
3 years while the economy has been growing, sometimes
moderately, more recently quite strongly.
Particularly troubling to the Postal Service is the trend
in First-Class Mail since this helps pay for the expanding
delivery network. In the first 30 years following postal
reorganization First-Class Mail grew rapidly and appeared to be
immune from competition and pricing. This is no longer the
case. First-class mail has now declined for 2 years. Moreover,
except for standard mail most Postal Service classes of mail
will experience negligible volume growth or even volume
declines in the coming years.
The competitive pressures put enormous pressure on the
Postal Service to bring its wages and benefits into conformity
with private sector comparability.
As I mentioned, I have testified in many postal interest
arbitrations, most recently before the Goldberg arbitration
panel involving the Postal Service and the APWU. I also have
published numerous academic articles on this topic with my
colleagues Dr. Jim Gillula, who is behind me here today, and
Barry Hirsch. We have concluded that a substantial wage and
benefits premium exists. I have also provided for the record a
copy of my report to the APWU interest arbitration panel.\1\ In
this report we found a wage premium of 21 percent and a total
compensation premium of 34 percent.
---------------------------------------------------------------------------
\1\ The report entitled ``Wage and Benefit Comparability of U.S.
Postal Service Clerks to the Private Sector,'' by Michael L. Wachter,
Barry T. Hirsch and James W. Gillula, October 2001, is retained in the
files of the Committee.
---------------------------------------------------------------------------
My compensation premium findings have been corroborated by
internal Postal Service data that reveal that new postal hires
are paid much more than they are paid in the private sector,
that at any one time there are literally hundreds of thousands
of individuals seeking to become postal employees and that very
few existing postal employees voluntarily leave their jobs.
Since 1984, postal arbitration panels have consistently,
and I say consistently without exception, found the existence
of a premium when they have addressed that issue, and the need
for moderate restraint as a way of decreasing the premium. I
have provided a listing of quotations on this point in my
written testimony beginning with Clark Kerr's conclusion in
1984 that discrepancies in comparability existed and that an
extended period of moderate restraint would be needed to close
the gap.
In the most recent arbitration, the 2001 postal APWU
arbitration, Arbitrator Steven Goldberg stated, ``in concluding
that there exists a Postal Service wage premium, I join a long
list of arbitrators in prior USPS interest arbitrations who
have reached the same conclusion.''
As a way of tracking the principle of moderate restraint
instituted by Arbitrator Kerr, my colleagues and I have tracked
the growth rates for postal wages and compensation compared to
private sector growth rates. The results of these tracking
analyses are particularly relevant considering the Commission's
recommendation that retirement and retiree health benefits
should be subject to collective bargaining.
During the 20 years from 1984 through the end of 2003
postal wages operating in an environment of moderate restraint,
have grown at an average annual rate of 3 percent. This
compares to the private sector annual growth rate of 3.5
percent. Thus, there has been a modest but notable annual
closing of the wage gap by one-half percent per year over a
prolonged period of time.
Unfortunately, although there has been moderation of postal
wage growth, there has been no such moderation on the benefit
side. As a consequence, over these past 20 years postal
compensation cost growth has actually slightly exceeded private
sector compensation growth. The effects of moderate restraint
on the wage side introduced by Arbitrator Kerr and agreed to by
a whole list of postal arbitrators has been entirely erased by
the growth in postal benefit costs.
Some postal benefits are subject to collective bargaining.
However, over $7 billion of retirement and retiree health
benefits expenses are outside the collective bargaining
process. The President's Commission would allow the parties to
negotiate over these benefits which have proved critical to the
problems of bringing the postal premium under control.
In summary, in operating in increasingly competitive
markets the Postal Service must ensure that its wages and
benefits meet the comparability mandate as provided for under
the Postal Reorganization Act. This requires that the Postal
Service and its unions be able to address all labor cost
components, including benefits, in future negotiations.
My experience in observing moderate postal wage growth
during the past 20 years shows me that the collective
bargaining process can make progress in allowing the Postal
Service to conform to the comparability standard. Consequently,
I support the Commission's recommendation that retirement and
health benefits for retirees should be part of the collective
bargaining process. In principle, all postal benefits should be
part of the collective bargaining process and open to
resolution through interest arbitration if necessary.
This concludes my testimony. Thank you for providing me
with the opportunity to testify before the Committee.
Chairman Collins. Thank you very much, Professor, for your
excellent testimony as well. I want to apologize to the experts
on this panel. I have just been notified that Senator Carper
and I have a vote underway on the Senate floor. It is a long
ways from where we are to the Senate floor and the vote is
underway, so I am going to just ask one very quick question of
Mr. Wells rather than getting into a lot of the pay
comparability issues. But what I would like to do is to submit
some questions to all three of you for the record and continue
this dialogue over the next few months. But I very much
appreciate all of you being here today.
Mr. Wells, the postal unions have generally opposed pay-
for-performance systems for employees that are under collective
bargaining. I wonder, given your very broad experience whether
you have any examples of large companies that have successfully
implemented pay-for-performance systems with a unionized
workforce.
Mr. Wells. It is not easy to do, Madam Chairman, but yes in
fact there are a number of models out there. There is a
gentleman by the name of Joe Scanlon who was a steelworker and
then went on to become a professor at MIT and he, working with
the steelworkers, instituted a number of pay-for-performance
processes in the steel industry in the 1940's and 1950's.
Kaiser Steel, likewise in the 1960s instituted something called
the Kaiser long-term sharing plan in which productivity
improvements were translated into pay-for-performance. That was
done with the steelworkers.
More recently, I mentioned Kaiser Permanente and the AFL-
CIO unions. There are seven or eight unions and like 60,000
employees involved that I was involved in helping shape a
partnership. This Kaiser is the huge HMO. They have a
performance sharing plan and their collective bargaining
agreement is part of their partnership. And the Saturn plant of
GM, also which has UAW represented, I know they spent at least
10 years with pay-for-performance. I do not know about the
current contract.
So there are a number of models out there. Professor Tom
Coken at MIT, a very distinguished industrial relations
professor, has done a paper recently on this and that may be
something that the staff may want to take a look at.
Chairman Collins. Thank you.
Mr. Wells. Could I say one thing though, Madam Chairman?
Chairman Collins. Yes.
Mr. Wells. I was supportive of a number of these
recommendations, and I am. I do not support all of them. I want
to make sure that I am on the record though, I have real
questions about the notion of having a three-member panel of
neutrals. Having partisan arbitrators helps sharpen the debate,
it educates the neutral chairman about what is important about
the issues. They keep you from making a serious mistake, and I
think the current system really is one that ought to be looked
at very hard before you replace it in terms of the composition
of the arbitration panel.
Chairman Collins. You just answered one of the unasked
questions that I had been planning to ask, so I am very glad
that you did. It does seem like the current system encourages
more buy-in for the ultimate decision.
Senator Carper, if you could very quickly ask a question so
we do not miss our vote.
Senator Carper. You bet. Again, thank you for your really
excellent testimony, most helpful testimony. Dr. Wachter was
suggesting that, just as the Postal Service and the union
management bargain for wages, they ought to also bargain for
benefits.
Let me just ask the other witnesses, if you will, to
address that assertion and tell me to what extent you agree or
disagree, and maybe if you do not agree, why.
Mr. Wells. In terms of bargaining for benefits?
Senator Carper. Yes.
Mr. Wells. I do an awful lot of work in the private sector.
That is really my background, and everything is on the table in
the private sector including benefits. On the other hand, I
think the answer to that question, Senator Carper, is what kind
of a Postal Service do you want? Do you want it to be a Postal
Service that can compete with FedEx and UPS and really be a
private sector model? Or do you want a Postal Service that is
going to provide universal service, that is going to be more
closely akin to a Federal agency?
If you want it to be a Postal Service that is like a UPS or
a FedEx or the private sector, then you need to put things on
the table that are not there. On the other hand, if you are
committed to universal service and a Postal Service such as we
have grown use to, then I think you need to protect it.
So the answer is, what kind of a Postal Service? Once you
decide what your vision of the future of the Postal Service is,
then you can decide about what you put on the table and what
you do not put on the table.
Senator Carper. Thanks.
Dr. Medoff, your comments in response to Dr. Wachter's
suggestion that not only wages but also benefits be
collectively bargained?
Mr. Medoff. That makes sense to me. I think it should be
total compensation that is collectively bargained over, not
just wages but wages plus fringe benefits. So I think it is the
whole compensation package that should be bargained for by
labor and management.\1\
---------------------------------------------------------------------------
\1\ Letter from Mr. Medoff, dated February 17, 2004, with a
response to the question from Senator Carper above appears in the
Appendix on page 00.
---------------------------------------------------------------------------
Senator Carper. Good. Thank you. Was that short enough?
Chairman Collins. That was very good. Thank you.
Senator Carper. Better than usual.
Chairman Collins. Again, my apologies to our expert
witnesses. We very much appreciate your testimony as we tackle
these very difficult issues.
The hearing record will remain open for 14 days for
additional materials. This hearing is now adjourned. I thank
all of our witnesses today. Thank you.
[Whereupon, at 4:18 p.m., the Committee was adjourned.]
PRESERVING A STRONG UNITED STATES POSTAL SERVICE: WORKFORCE ISSUES
----------
TUESDAY, FEBRUARY 24, 2004
U.S. Senate,
Committee on Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 10 a.m., in room
SD-342, Dirksen Senate Office Building, Hon. Susan M. Collins,
Chairman of the Committee, presiding.
Present: Senators Collins, Stevens, Akaka, and Carper.
OPENING STATEMENT OF CHAIRMAN COLLINS
Chairman Collins. The Committee will come to order.
Good morning. Today marks the fourth in a series of
hearings the Committee on Governmental Affairs is holding to
review the reforms recommended by the Presidential Commission
on the Postal Service.
Under the effective leadership of Co-Chairmen Harry Pierce
and James Johnson the Commission put together a comprehensive
report on an extremely complex issue identifying the
operational, structural, and financial challenges facing the
U.S. Postal Service. The Commission's recommendations are
designed to help this 225-year-old service remain viable over
the long-term.
So much depends upon the Postal Service's continued
viability. The Postal Service itself has more than 735,000
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 thousands of
companies and the millions 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 volume of First-Class Mail for the
past 4 years. This is highly significant given the fact 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.
At our first hearing last September the Committee heard
from the Commission Co-Chairman Jim Johnson. His testimony
provided us with the rationale behind the Commission's
recommendations. Commissioner Johnson also made the very
important point that the Postal Service's short-term fiscal
health is illusory and that Congress must not ignore the
fundamental reality that the Postal Service is an institution
in serious jeopardy.
This Committee is very familiar with the Postal Service's
short and long-term financial health having reported out the
pension bill last year that forestalled the financial crisis
that awaits the service if we do not act and enact further
reforms.
The Presidential Postal Commission presented its assessment
of this fiscal crisis in frank terms concluding, ``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 in unfunded obligations, the
downward trend of 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 an assessment
that challenges both the Postal Service and Congress to embrace
far-reaching, comprehensive reform.
At the Committee's second hearing last Fall we heard from
the Postmaster General Jack Potter and the Comptroller General
David Walker. The Postmaster General described the
transformation efforts already underway at the Postal Service,
many of which are consistent with the Commission's
recommendations. In his testimony Mr. Walker of the General
Accounting Office shared the Commission's concerns about the
Postal Service's $92 billion in unfunded liabilities and other
obligations. The Comptroller General pointed to the need for
fundamental reforms to minimize the risk of a significant
taxpayer bailout or dramatic postal rate increases. I would
note that since April 2001 the Postal Service has been included
on the GAO's high-risk list.
Most recently the Committee heard from representatives of
the postmaster and supervisor associations along with the
former director of the Federal Mediation and Conciliation
Service plus two experts on the issue of postal pay
comparability. The issues of pay-for-performance and potential
changes to the bargaining process were discussed at length.
Today we will again focus on the various recommendations
affecting the Postal Service's workforce comprised of more than
700,000 dedicated letter carriers, clerks, mail handlers,
postmasters and others. The Committee will have the opportunity
to more fully explore the workforce-related recommendations of
the Commission which include some of its more controversial
proposals. Among them are recommendations to reform the
collective bargaining process, to give management and employee
unions the authority to negotiate not only wages but also all
benefits, to establish a performance-based pay system for all
employees, and to authorize a new postal regulatory board to
develop a mechanism for ensuring that the total compensation
for postal employees is comparable to the private sector.
The Postal Service faces the difficult task of trying to
right-size the workforce to meet the decline in mail volume,
technological competition, and other operational challenges.
With some 47 percent of the current workforce eligible for
retirement by the year 2010 right-sizing does not, however,
have to mean widespread layoffs. Indeed, it should not. With
careful management much can be done to minimize any negative
impact on employees and to create a more positive working
environment.
As a Senator representing a large rural State whose
citizens depend on the Postal Service I appreciate the
Presidential 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 living on
or near our northern or western borders, or on our islands, or
in our many small rural communities have the same access to
postal services as the people of our cities. If the Postal
Service were no longer to provide universal service and deliver
mail to every customer, the affordable communication 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 charges.
The preservation of universal service is critical to
reforming the Postal Service. That and many other 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 its operations and requirements. It is also time
for legislative reforms.
Senator Carper and I have committed to working together
with Senators Stevens, Akaka, Lieberman, Fitzgerald, and many
other Members of this Committee who care deeply about the
future of the Postal Service. We want to draft a bipartisan
postal reform bill.
Now given the history of previous attempts at legislative
reforms I know that this will not be an easy task, but it is
essential this year that we seize the opportunity provided by
the Commission's excellent work. Successful reform will hinge
on the cooperation and the support of the Postal Service's
workforce. But reform is necessary if we are going to preserve
and strengthen the Postal Service.
I welcome our witnesses today and look forward to hearing
their insights and views on the recommendations of the
Presidential Commission on the Postal Service.
Now I would like to recognize Senator Akaka, who had
perfect timing this morning. He did not have to hear my speech
but he does get to present his.
OPENING STATEMENT OF SENATOR AKAKA
Senator Akaka. Thank you very much, Madam Chairman. I thank
you for your leadership here and I want you to know that your
opening remarks affirm my feelings too. It is important that we
deal with this.
I am pleased to join you this morning as we continue our
review of the recommendations made by the Commission on the
U.S. Postal Service, and to reaffirm I am here to join you in
our commitment to all who rely on the U.S. Mail.
I look forward to hearing from today's witnesses who are
uniquely qualified to discuss the Commission's workforce
recommendations. We are indeed fortunate to have as our first
panelist Dan Blair, the Deputy Director of the Office of
Personnel Management who for many years served as a senior
congressional counsel on postal and civil service matters. I
also look forward to hearing from our second panel, the elected
presidents of the four largest postal unions. Together you
represent nearly a half-million postal employees and your input
is central to any successful modernization of the Postal
Service.
The achievements of the Postal Service in recent years,
highlighted by ever-increasing record levels of productivity
and an improving financial outlook, are shared by postal
employees. In fiscal year 2003, the Postal Service's net income
reached $3.92 billion, approximately $3 billion of that figure
can be attributed to our Chairman's CSRS legislation which I
was proud to co-sponsor.
This positive financial turnaround comes at a time when the
Postal Service is rationalizing its workforce. Since 1999, the
workforce was downsized by 88,000 employees and yet customer
satisfaction and on-time First-Class Mail delivery are at all-
time highs. In concert with this good news is a stable labor-
management climate that has resulted in a series of
voluntarily-negotiated labor contracts.
I attribute this favorable labor environment to the
leadership of our second panel, to the Postmaster General, and
to the flexibility built into the existing collective
bargaining law governing those who provide this essential
public service. That is why I am concerned that certain
workforce recommendations suggested by the Postal Commission
could adversely impact today's sound labor environment and
undermine existing conditions.
The Commission would implement a pay-for-performance system
for all employees, impose collective bargaining procedures with
rigid timelines and no flexibility to waive those timelines,
empower a new postal regulatory board with determining total
compensation and defining universal service, and require
negotiations over any benefits in addition to wages.
This Committee, more than any other Senate committee,
understands the impact that bargaining over benefits could have
on the stability and financial integrity of the government's
two pension plans and its employee health insurance program. As
I noted, Madam Chairman, at our hearing 2 weeks ago, postal
workers make up one-third of the Federal workforce and I urge
caution when considering splitting postal employees from these
Federal programs without knowing the effect on active and
future employees.
Moreover, subjecting benefits to collective bargaining
could have a serious effect on retirees. We should do no harm
to retired postal workers who have already earned their
benefits and planned their retirements under the Federal
pension and health plans. Rationalizing Postal Service requires
leadership from the top down and I believe that leadership is
now in place.
I look forward to working in a bipartisan manner on a
process that is transparent and accountable to the postal
workforce and, of course, the public. I thank our distinguished
panelists for being with us and I again want to thank Madam
Chairman Collins very much for her able and good leadership.
Thank you very much.
Chairman Collins. Thank you very much, Senator. It has been
a pleasure to work with you, not only on postal issues but many
others as well.
I would now like to welcome our first witness who is no
stranger to this Committee as Senator Akaka points out. He is
Dan Blair, who is the Deputy Director of the Office of
Personnel Management. Mr. Blair has extensive experience in the
civil service sector having served for almost 17 years on the
staffs of both this Committee and the House Government Reform
and Oversight Committee. We are very pleased to have you back.
I know that the Director of OPM, Kay Coles James relies very
heavily on you and we appreciate your being here today. You may
proceed with your statement.
TESTIMONY OF DAN G. BLAIR,\1\ DEPUTY DIRECTOR, OFFICE OF
PERSONNEL MANAGEMENT, ACCOMPANIED BY NANCY KICHAK, CHIEF
ACTUARY, OFFICE OF PERSONNEL MANAGEMENT
Mr. Blair. Thank you, Madam Chairman, Senator Akaka. I
appreciate that warm welcome. Thank you for inviting me to
testify here this morning. I have a longer statement that I
would ask that you include for the record.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Blair appears in the Appendix on
page 179.
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Chairman Collins. Without objection.
Mr. Blair. But I am happy to summarize.
Nancy Kichak, to my right, is OPM's chief actuary and she
accompanies me here today. Should you have any technical
questions, with your permission, I may ask Ms. Kichak to assist
in answering your or the Committee Member's questions.
Chairman Collins. That would be fine.
Mr. Blair. Thank you.
First, I want to commend you and this Committee for the
thoughtful, studied way in which you approach the complex
issues affecting postal reform. A well-managed, fiscally
healthy Postal Service is essential for our national and
economic well-being. You said that in both your statements and
I am glad that we find that common ground because it is
extremely important.
The President's Commission on Postal Reform made many good
recommendations on which a postal reform measure could move
forward. Postmaster General Jack Potter has also done a
commendable job by working hard to move his organization
forward as well. Further, the President has endorsed the need
for modernizing postal operations and layed out five guiding
principles for postal reform last year, so there appears to be
the critical mass necessary to propel legislative reform and
anyone interested in the health of our economy and our Nation
wishes this Committee success as you move forward in enacting
needed reforms.
In your invitation to testify you asked for our comments in
three specific areas, pay-for-performance, negotiability of
retirement and health benefits, and the proper assessment of
pension liabilities.
First, thanks to this Committee's efforts we have made
progress on introducing pay-for-performance systems into the
Federal Government. As you know, our pay systems did little to
offer managers the ability to use their most strategic
management tool, pay, in ways to incentivize and recognize
outstanding performance. Hopefully we are taking steps to
change this.
Your efforts to enact needed pay reforms for the Senior
Executive Service and authorize creation of the Human Capital
Performance Fund are most appreciated. We are in the process of
implementing the new system for the SES and have issued
guidance over the past few months to the agencies. We are also
working to draft regulations to implement the new system as
well. This year's budget also asked Congress to fund the Human
Capital Performance Fund in the amount of $300 million. So
thanks to your good work and good efforts of this Committee,
Madam Chairman, we are making much-needed progress.
Second, you asked us about the potential impact on the
Federal systems in making the Postal Service's pension and
post-retirement health benefits subject to collective
bargaining. We understand this is based on the Commission's
recommendations that reflected its efforts to give the Postal
Service additional flexibility when it came to collective
bargaining. You asked us to prepare a detailed report on the
impact of this recommendation on the retirement and Federal
health benefits programs, and we are currently preparing that
report. So I am not prepared to go into detail or present
conclusions at this point. However, I would bring to the
Committee's attention a few of the issues raised in considering
such a proposal.
First, keep in mind that retirement funding is based upon
predictability and continuity. Hence, bargaining over
retirement benefits could be adopted to the extent it does not
destabilize retirement funding. While our pending report will
address in detail our thoughts on this, I would note that the
postal benefit structure is currently fully integrated with the
non-Postal Service structure.
Further, I would bring to the Committee's attention that
there has never been a major group severed from either one of
the two primary Federal retirement systems.
Regarding the recommendation to make eligibility and
retiree contributions under the post-retirement component of
the Federal Employees Health Benefits Program negotiable we
would note that currently FEHBP benefits are offered to all
enrollees regardless of work or retirement status. We do not
distinguish what benefits are offered to active employees,
retirees or by specific agency employer. Should postal retiree
benefits be subject to bargaining we would want to ensure that
the mechanism employed would not lead to unintended
consequences, such as increasing adverse selection and thereby
increasing cost and complicating the administration of the
FEHBP.
Also, many of the current carriers in the FEHBP are postal
related, such as the plans offered by the Mail Handlers, the
Letter Carriers, the Postal Workers Union, the Rural Letter
Carriers, and the Postmasters. The impact on the FEHBP could be
substantial should the Postal Service cover its retirees or
retirees under a separate health insurance program and should
these plans then drop out of the FEHBP.
I would also point out that experience has shown that when
agencies have offered their employees alternative health
insurance plans, such as the FIRREA agencies did in the mid-
1980's and 1990's, they sought legislative relief through this
Committee to bring their retirees back into the FEHBP due to
increasing costs.
Of great interest to the administration is the Commission's
recommendation to shift responsibility for military service
credit in the Civil Service Retirement System from the Postal
Service to the taxpayers. Last year this Committee did the
right thing when it promptly considered and moved legislation
addressing Postal Service overfunding of its pension
obligations. That legislation placed the Postal Service on
sound actuarial footing, including correctly assessing the
Postal Service with the full cost of covering its CSRS
employees, including those with military service. The
administration stands firm in opposing any efforts to shift
these costs to the taxpayer.
Some have said there is no direct relationship between an
employee's prior military service and the Postal Service
operations. We wholeheartedly disagree. Granting credit for
military service enables the Postal Service to better recruit
and retain veterans as part of its team. Providing these
benefits gives the Postal Service an advantage in hiring
employees of recognized professionalism, level of experience,
dedication to service, and commitment to excellence. Such
military service does indeed provide a direct benefit to the
operations of the Postal Service.
In addition, such a proposal runs counter to the long-
standing principle which has stood as the cornerstone of the
1970 Postal Reorganization Act that the Postal Service should
cover all the costs of its operations. The President set the
administration's policy when he established as one of the
guiding principles for postal reform that the legislation
ensure that the Postal Service is self-funding.
Last year's legislation rightly granted the Postal Service
needed pension funding relief; $78 billion in pension relief to
be precise. Under this methodology the taxpayers still fund the
cost of providing military service credit for postal employees
under CSRS in the amount of $21 billion. Shifting further
liabilities that essentially fund postal operations to the
taxpayer would be wrong and the administration is on record as
opposing it.
There is common ground on which this Committee can proceed
in working towards a postal reform measure. However, there are
other areas about which the administration has voiced its
objections and I hope that I have provided you with a clear
understanding of where we stand on these issues.
This concludes my oral presentation and, Madam Chairman, I
am happy to answer your or Senator Akaka's or any Member's
questions at this point. Thank you very much.
Chairman Collins. Thank you for your statement. I know that
OPM in response to a letter that Senator Carper and I sent is
still evaluating what the impact would be of potentially taking
the Postal Service out of the Federal retirement system and the
Federal Employees Health Benefit Plan. But do you or Ms. Kichak
have any preliminary judgments that you could share with the
Committee on this issue?
My concern is that we are not talking about a small number
of people. We are talking about taking a huge number of
employees and retirees out of the Federal plans. I wonder if
you could elaborate on what the impact would be on the
stability and the financial health of both the retirement and
the employee health benefits plan if you were to separate out
the Postal Service employees and retirees.
Mr. Blair. I think you hit the nail on the head, that you
are talking about potentially taking a huge portion of both
retirement and the FEHBP populations out from under these
systems. It is an extraordinarily complex matter, but there are
some aspects of the benefits which could be amenable to
negotiation. Changing one part, however, can have profound
effects on the rest and to achieve full negotiability,
especially in the pension area, and might require the Postal
Service to sever its association with both the retirement
plans. We will go into detail in our report but it is an
extraordinarily complex subject. The keys to pension funding
are predictability and stability. And if you take that away
because benefits are being negotiated you undercut the
foundation of what our plans have been built on.
With regard to the health benefits issue, again, the Postal
Service has flexibility in that area to negotiate the premium
costs. Let me correct myself, to negotiate the employer's share
of the premium cost, and it has done so. At this point in time
they pay approximately 84 percent of the premium costs as
opposed to approximately 72 percent for the rest of the Federal
Government. So it does pay more than the rest of the Federal
Government where it has exercised that flexibility. In the life
insurance area it currently plays 100 percent of the life
insurance costs. So again, where it has flexibility it has
shown that it has actually paid more and not less of the total
share.
That said, changing the composition of the enrollment group
has a direct impact on cost. Cleaving off approximately one-
third of the enrollees in the FEHBP population would not only
reduce the risk pool that we have, but would perhaps have
unintended consequences such as leading to adverse selection.
In addition, as I said earlier, five of the plans are
postal related, and we have had trouble keeping plans in the
system recently. One of the underpinnings of the FEHBP has been
competition among plans. We not only want to keep plans in, we
want to draw more plans to it. So those are concerns that we
have raised.
Now I do want to underscore, however, that there may be
aspects of this that may be amenable to the collective
bargaining process and we will point those out in further
detail in the report. But these are some of the concerns that
we have raised and I think that it is important for the
Committee to understand them.
Chairman Collins. Do the Federal employees unions also
negotiate the employee-employer split when it comes to health
insurance premiums?
Mr. Blair. No, they do not. That is set by statute.
Chairman Collins. So that is a different treatment then.
The second issue I want to explore with you is the
difficult issue of what is the appropriate entity to bear the
cost of the military service of postal employees. I am not
inclined to agree with the administration's position that the
Postal Service should continue to bear this cost. It is my
understanding that the Postal Service bears the cost of the old
Civil Service Retirement System, the pre-1984 system, but that
other agencies do not bear that cost. Is that correct? Is the
Postal Service treated differently from Federal agencies when
it comes to the old Civil Service Retirement System?
Mr. Blair. Generally speaking that is the case. What
happened last year when we caught the overfunding problem is
that we set the Postal Service's CSRS funding on sound
actuarial footing by placing it in the same category or
treating it in the same way that we fund the Federal Employee
Retirement System. That means it is fully funded. It does not
have any unfunded liabilities.
You are correct in pointing out that there are just a
handful of other Federal entities out there that may be paying
the full cost of their retirement system. The ones that come to
mind are the Metropolitan Washington Airports Authority, and
the United States Enrichment Corporation, which was a part of
the Department of Energy. But nothing on the scale or rank or
size of the Postal Service.
But I would urge you to consider what would happen if you
would shift these responsibilities back to the Treasury.
Funding of a retirement system is really not done on an a la
carte basis by taking and picking which portions should be
borne by the employer. Rather everything should be borne by the
employer. All those costs should be borne by the entity
providing those benefits. The Postal Service has the benefit of
offering a retirement system which has great recruitment and
retention value. Giving veterans that military service credit
is an incentive for veterans to come into the Postal Service.
If you are going to provide Federal retirement you should be
fully funding those costs.
We recognize that other Federal agencies and other Federal
entities out there have not been mandated by Congress to fully
fund their share of the CSRS system. We do not think that is
right. The President's Managerial Flexibility Act would have
had all agencies fully funding the CSRS system in the same as
they would for FERS. But giving a break to other agencies does
not mean we should give the break to the Postal Service. We did
the right thing last year by placing it on sound actuarial
footing and I would urge you not to backslide and go in the
opposite direction.
Ms. Kichak, did you want to add anything to that?
Ms. Kichak. Only that the fact that the Postal Service
being treated differently applies to a broad range of items.
Congress mandated in 1974 that they would start to fund their
Civil Service Retirement System through postal rates. So they
have always been treated differently and this is just one more
piece of making them cover these costs through stamp prices.
Chairman Collins. You could make a case that since the
pension costs for military service have nothing to do with
postal operations, you could almost make the case that whether
you are talking about the FERS system or the CSRS system that
postal ratepayers should not be bearing that cost. But I am not
trying to change it for FERS. I am trying to have equity in the
treatment of the Postal Service vis-a-vis other Federal
agencies in how those costs are treated for the pre-1984
employees who are veterans. It has a huge economic impact on
the Postal Service, as you know, which is obviously of concern
to the administration as well because whoever bears that cost
is going to be presented with a pretty hefty bill.
Senator Akaka.
Senator Akaka. Thank you very much, Madam Chairman.
Mr. Blair, as you know the Department of Homeland Security
and Department of Defense have been authorized to establish new
human resource systems which include performance-based pay. The
Postal Service also recommends that the Postal Service
implement a pay-for-performance system for all employees rather
than just its managers. However, many experts agree that there
is, at a minimum, a 5-year learning curve when creating a new
personnel system. There are also substantial costs associated
with this as well.
My question to you is, what would be gained if the Postal
Service extended pay-for-performance to all its employees? And
do you believe that the adoption of a pay-for-performance
system should be part of collective bargaining agreements?
Mr. Blair. In answer to your first question, the
administration is on record as generally supporting pay-for-
performance systems. We think that pay-for-performance properly
rewards people by properly recognizing outstanding performance,
and it is a strategic management tool.
In answer to your second question, we have limited
experience in the rest of the Federal Government, the non-
postal side, in dealing with collective bargaining over pay. So
this is almost an area of first impression. Not totally first
impression, but it is a newer area for us. So we would really
be starting from scratch in looking at how something like that
would be done.
Generally speaking, to make a performance-based system
successful the agency would need to establish the expectations
up front, deal with demonstrable results, and make sure that
the agency's strategic plan and annual performance plans are
linked as well. But it is a difficult process in applying it
across the board. In the rest of the Federal Government we are
implementing it for the Senior Executive Service as we stand
right now. We have the new Human Capital Performance Fund.
But we are changing the culture in government. No longer do
we want to see most of the money being siphoned off for large
across-the-board pay increases. Rather, we would prefer to see
the money available to reward outstanding performers. I think
that is a general good government principle and I think that
those general good government principles could also be applied
in the Postal Service, recognizing that they have a different
environment in which they operate.
Senator Akaka. Thank you. I am also concerned, like the
Chairman, of the cost of military service. You mentioned OPM's
position that the Postal Service should fund the cost of
military service even though other Federal agencies do not have
this obligation. Do you know if other government entities that
generate revenue like the SEC and other FIRREA agencies fund
the cost of their workers who have military service?
Mr. Blair. At this point it is my understanding that
Treasury picks up the difference, any of the normal cost
differences above the 7 percent contribution that the agency
makes. So in other words, not only with the military service
but also with cost-of-living adjustments and any costs over the
7 percent contribution that an agency makes on behalf of its
employees, Treasury picks up. But sound pension policy would
require that those agencies pick up the full difference in the
normal cost. That is why CSRS should be on the same actuarial
and funding footing as the Federal Employees' Retirement
System.
Senator Akaka. Mr. Blair, I am sure you would agree with me
that any changes in funding obligations for retirement-related
obligation could impact postal ratepayers, taxpayers, and the
Federal budget. How would you assign the responsibility, and
how would you structure a mechanism for covering the cost of
providing retirement related benefits?
Mr. Blair. I think that we have done that in a sound manner
with the legislation that was enacted last year. We need to
remember where we came from with this legislation. That over
the course of the last 30 years we have attempted to have the
Postal Service pay for its pension obligations in a random,
piecemeal fashion. First, with covering the cost of salary
increases and then with covering the cost-of-living adjustments
and then making that retroactive. But it was all done on what
we call a static basis, meaning that we projected what the cost
would be, put the payments in legislation, and never had to
revisit them.
But at the urging of this Committee, GAO came to OPM, 18
months ago I believe it was, and said, why don't you look at
this? For the first time we looked at the Postal Service's
pension obligations apart from the rest of the Federal
Government and said, what would it look like if we took their
system and applied a dynamic funding process to that from 1971?
What we came up with was the fact that by continuing those
revenue streams that they had into the Federal Government for
pieces and parts of the retirement component, they would have
overfunded their entire pension obligation by over $78 billion.
So that is why the administration recommended, and this
Committee did the right thing, in moving quickly with
legislation changing the methodology under which we determine
funding for the Postal Service. We think that that is the right
thing. We have put the Postal Service's pension funding on
sound actuarial funding. But we are concerned that efforts to
shift back to the taxpayers bits and pieces and components of
that funding do not move us in the right direction. Rather it
moves us in the wrong direction. Because we would like to see
the rest of the government moved in the same direction as we
have done for the Postal Service.
Senator Akaka. Thank you very much for your responses, Mr.
Blair. Thank you, Madam Chairman.
Chairman Collins. Thank you.
Thank you very much for your testimony today. We look
forward to working with both of you very closely as we continue
to examine these important issues. Thank you.
I would now like to call forth our second panel of
witnesses. William Young is the President of the National
Association----
Senator Akaka. Madam Chairman, may I?
Chairman Collins. Yes.
Senator Akaka. Madam Chairman, I want to take a moment to
wish our witness well, and also note that he celebrated a
birthday yesterday.
Chairman Collins. Are you going to tell us which one?
Senator Akaka. No.
Chairman Collins. He is a good friend to you, Mr. Blair. I
join in wishing you happy birthday as well.
Senator Akaka. Thank you, Madam Chairman.
Chairman Collins. Thank you.
William Young is the Pesident of the National Association
of Letter Carriers. He began his postal career almost 40 years
ago.
Dale Holton is the National President of the National Rural
Letter Carriers of America. He began his postal career in 1976
as a substitute letter carrier.
William Burrus is the President of the American Postal
Workers Union. Prior to being elected president he served for
21 years as the APWU's executive vice president and he began
his career as a distribution clerk in 1958.
John Hegarty is the President of the National Postal Mail
Handlers Union. He previously served as President of Local 301
in New England, which is the second largest local union
affiliated with the mail handlers union. This is his 20th year
with the Postal Service.
So we are very pleased to welcome you gentlemen here today,
not only as the elected presidents of your respective unions
but also because you have a wealth of experience in the Postal
Service that I think will be very helpful to this Committee as
we continue to work through these issues.
Mr. Young, we will start with you.
TESTIMONY OF WILLIAM YOUNG,\1\ PRESIDENT, NATIONAL ASSOCIATION
OF LETTER CARRIERS
Mr. Young. Good morning. On behalf of the 300,000 active
and retired city letter carriers across the Nation, thank you
for this opportunity to share our views on the crucial issue of
postal reform. NALC is the exclusive collective bargaining
agent representative of approximately 220,000 city letter
carriers who work in every State and Territory in the Nation.
City letter carriers have a tremendous stake in the future of
the Postal Service. For them postal reform is not simply a
policy matter or even a political issue. It is a matter of
great personal importance for themselves and their families. So
I wish to thank Chairman Collins, Senator Carper, and all the
Members of this Committee for taking up this vitally important
issue.
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\1\ The prepared statement of Mr. Young appears in the Appendix on
page 186.
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Over the past decade my union has been urging Congress to
pursue comprehensive postal reform. We have long recognized the
need for a new business model for the Postal Service in the age
of the Internet. Until recently the debate on postal reform has
been largely confined to the House of Representatives. Thanks
to the new leadership of this Committee and the work of the
recent Presidential Commission, both ends of Pennsylvania
Avenue, we finally have a real chance for progress on postal
reform.
NALC supports the general principles for reform recently
outlined by President Bush and we look forward to working with
the leaders of both houses of Congress to achieve bipartisan
support. Today I would like to briefly address the big picture
of postal reform before turning to the key workforce issues
that are the main topic of the panel's testimony.
NALC believes that the Postal Service's unmatched ability
to reach every household and business in America 6 days a week
is a vital part of the Nation's infrastructure. Universal
service of letters, direct mail, periodicals, and parcels by
the USPS is absolutely essential for the economic health of the
United States. As such, it is important to take steps now to
strengthen the Postal Service's ability to function in the face
of technological change.
We urge Congress to reject a pure downsizing strategy and
to embrace an empowerment strategy for the Postal Service. The
USPS should be given the commercial freedom it needs to
maximize the value of its universal service network by adding
services and working with its customers to find new uses of the
mail to replace those uses that are now migrating to electronic
alternatives. Greater commercial freedom, which involves
flexibility over pricing and the ability to strike partnerships
to optimize the value of its network would allow the Postal
Service to maximize revenues and control costs while retaining
the value of universal service.
We recognize this approach poses a difficult challenge of
balancing the commercial concerns and public service
considerations, but we believe it is possible to give the
Postal Service the flexibility it needs while protecting the
legitimate concerns of competitors, customers and the public at
large.
Let me now turn to the main topic of the hearing, postal
workforce issues. Our starting point is simple: Collective
bargaining is a fundamental right of all, and the Postal
Reorganization Act rightly established collective bargaining in
the Postal Service under the auspices of the National Labor
Relations Act. I would like to make a couple of general
observations before suggesting some guiding principles for
workforce reforms.
First, I would like to point out that collective bargaining
in the Postal Service has been a resounding success. Since the
Postal Reorganization Act was enacted there has not been a
single work stoppage or significant disruption in service as a
result of labor relations. Given that the Postal Reorganization
Act was enacted in part as a result of a national strike in
1970, this 34-year record of peaceful labor relations should
not be minimized. The fact is that postal collective bargaining
has been a win-win-win proposition. Postal workers have
achieved decent pay and benefits, taxpayers have saved billions
through the elimination of direct and indirect taxpayer
subsidies, and the mailers have enjoyed affordable postage
rates.
Second, it is important to note that neither the postal
unions nor postal management favor radical changes to the
existing collective bargaining system. Given that all sides
agree that mail delivery is an essential public service, that
we should not be disrupted by lockouts or strikes, a workable
system for resolving collective bargaining impasses is
essential. NALC believes the existing system of interest
arbitration has worked extremely well.
Third, it is important to note that postal labor relations
have improved dramatically in recent years. Three of the four
unions now have labor contracts in place that were voluntarily
negotiated, and all four have made progress in reducing the
number of workplace grievances using various mechanisms. These
improvements occurred not because Congress or the GAO or any
other outside party mandated them. They happened because the
parties themselves worked very hard to find common ground and
to seek ways to resolve mutual problems. Postmaster General
Jack Potter and his team deserve credit for working with us to
achieve this transformation.
With these general points in mind, NALC urges you to abide
by four principles when you consider the reform of the
collective bargaining system. One, I urge you to follow the
Hippocratic oath, first, do no harm. The system we have is not
perfect. Indeed, no system is perfect. But the parties have
learned how to work together within the current framework, and
as I outlined above, the process has worked well for all
concerned. At a time of great change for the Postal Service in
almost all other areas, labor stability is crucial.
Two, maintain the flexibility that is currently built into
the PRA. The PRA contains specific but flexible timetables for
negotiating contracts and resolving collective bargaining
impasses. It also provides a menu of options for impasse
resolution and it gives the parties the flexibility to shape
these options for use when appropriate as conditions change.
Indeed, the unions at this table have used at various times
mediation, fact-finding, mediation-arbitration, mediation-fact-
finding in combination, and last best offer arbitration. In the
fact of constant change, the flexibility of the current law is
a virtue.
Three, avoid politicizing the collective bargaining
process. Congressional or White House intervention in the
process would be highly destructive. This would inevitably
happen if a politically appointed regulatory body were injected
into the negotiations process.
Four, avoid exposing the process to outside litigation.
Subjecting the results of collective bargaining to litigation
before a postal regulatory board as proposed by the President's
Commission would be disastrous to the process. Depending on the
prevailing political winds of the day and the makeup of the
regulatory board at any particular moment, either side might be
tempted to try to obtain from the regulators what they could
not expect to achieve through good-faith bargaining.
Finally I wish to address a couple of specific issues that
have arisen in the wake of the report of the President's
Commission on the Postal Service, those being the direct
negotiations of pension and health benefits and the changes in
the system of interest arbitration.
I am not sure that this Committee understands, perhaps they
do, that in the current law we subject a lot of this to
collective bargaining. Not the benefits, but the pay, the cost
of the premiums that employees pay is subject to collective
bargaining. In the area of health benefits, postal management
and its unions already negotiate the share of premiums to be
paid by the workers and the Postal Service. When it comes to
negotiating wage increases, the rising costs of pensions is
explicitly discussed by the parties. The so-called roll-up
factor for employee fringe benefits, the added cost of benefits
when postal wages are increased, is never far from the
negotiator's mind. You can be sure that no interest arbitration
panel employed over the past 20 years has been spared evidence
from both sides on the cost of health and benefit pension
benefits.
My point is this. Although the parties do not directly
negotiate over all aspects of postal benefit costs, these costs
are not ignored, and invariably they affect the results of our
wage negotiations. Indeed, a close examination of postal wage
trends over the past 25 years reveals that postal wages have
increased nearly 15 percent less than wages in the private
sector as measured by the employment cost index. This wage
restraint is a direct reflection of the efforts of negotiators,
and in some instances arbitrators, to restrain wage costs in
the face of rising health and pension cost for the Postal
Service, a trend that has affected all American employers.
Given this context, we simply believe it is not necessary
to formally place health and pension programs on the collective
bargaining table. The parties already effectively take these
costs into account under the existing system.
I would like to end with a couple of points about the
reforms suggested in the Commission's report to the interest
arbitration procedure. We believe these changes are unnecessary
and counterproductive for a couple of very practical reasons.
First, the Commission's proposal would discard 30 years of
experience by the parties and require us to start all over
again under a radically different process, a prospect that
would inevitably impose significant costs on both sides.
Second, we believe the only workable changes to the system
of collective bargaining must be developed and negotiated by
the parties themselves, not externally legislated or mandated.
Both parties must see this process as their process for the
results to be legitimate. The existing system gives us the
flexibility to shape the dispute resolution process without
outside intervention.
Allow me to add one last note on interest arbitration. We
believe the existing dispute resolution system is a fair and
acceptable alternative to the right to strike. I say this not
because we always prevail when we go to interest arbitration.
Indeed, on more than one occasion we have lost. In the 1990's,
an interest arbitration panel chaired by Richard Mittenthal
adopted a USPS proposal to create a lower paid temporary
workforce to handle the transition to full automation. And
another panel chaired by Rolf Valtin increased the employee's
share of health benefits premiums.
But I say it is fair because win or lose my members know
that the existing system gives us a fair shot on the merits and
therefore they accept the results as legitimate. The
Commission's proposed changes in the area of interest
arbitration fail this basic test of the fairness.
I want to conclude my testimony by repeating something I
told the members of the President's Commission at its first
public hearing in February 2003. Good labor relations must be
built on trust and on good faith between the parties. No amount
of tinkering with the mechanics of the collective bargaining
process will change that basic fact. At this moment of great
challenges for the Postal Service we have worked hard with the
Postmaster General to build trust between us and to improve the
workplace culture in the Postal Service. Please tread lightly
in these areas so as not to risk the progress we made.
I offer this Committee the full cooperation of the men and
women who deliver the Nation's mail every day. Working together
we can ensure that every American household and business will
continue to enjoy the best postal service in the world for
decades to come. Thank you very much.
Chairman Collins. Thank you. Mr. Holton.
TESTIMONY OF DALE HOLTON,\1\ NATIONAL PRESIDENT, NATIONAL RURAL
LETTER CARRIERS
Mr. Holton. Good morning, Chairman Collins and Senator
Akaka. My name is Dale Holton and I am President of the
103,000-member National Rural Letter Carriers Association.
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\1\ The prepared statement of Mr. Holton appears in the Appendix on
page 192.
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Once again we thank President Bush for creating the
Commission on the future of the Postal Service. We think the
commissioners did a very good job in a very short window of
time, being 6 months instead of maybe a year or more. Given
their deadline we believe their intents were laudable. However,
their governance recommendations are puzzling, their collective
bargaining recommendations are problematic, and their pension
and health benefit recommendations are perilous.
Under the issue of governance, the proposed new regulator
is assigned a study of pay comparability. In our opinion, pay
comparability is a management-labor issue, not a regulatory
issue. No other regulatory agency in Washington conducts wage
comparability studies of workers in industries it regulates;
not the FAA, the SEC, FTC, or FDIC. We believe that any
discrepancies in comparability that are perceived to exist can
be addressed through collective bargaining between management
and labor. If the Postal Service goes in a downward revenue
spiral we anticipate that through collective bargaining and
ultimately interest arbitration if it becomes necessary, the
case will be made by the Postal Service to hold the line on
wages or provide for increased productivity in order to balance
those economic factors. I speak from experience because after
all, this is what happened to us in our last round of
negotiations.
With regard to the changes proposed to collective
bargaining, we find them to be problematic. The system of
collective bargaining that Congress designed 30 years ago
continues to work well today. This Commission proposes changes
in the law that would remove flexibility. We believe that the
optional system works best.
In binding arbitration there is no guarantee that either
side will prevail. The National Rural Letter Carriers
Association and the Postal Service 2000 contract negotiations
went to binding arbitration. Both parties opted to utilize a
single arbitrator all the way through from mediation to binding
arbitration. You could say we utilized the med-arb process. We
opted for it. We mutually agreed to do it.
Now I would have to say that one of your previous witnesses
talked about what a great success that process was. I would
dare say if you questioned any one of 103,000 members that we
represent they would disagree. But I would like to explain that
rural letter carriers are paid on an evaluated system. We have
to multiply the amount of our route mileage, the number of
deliveries, and an actual count of the mail in order to get a
result in total hours per week, which is the route's
evaluation. This evaluation is the basis of the rural carrier's
compensation.
Arbitrator John Calhoun Wells, listening to all the
testimony, awarded the Postal Service an increase in the work
pace of rural carriers as they case their mail. The Wells award
decreased the time value of each piece of mail in the annual
mail count. The award decreased the pay of the average rural
carrier 3.1 hours per week. Each hour is worth $1,500 a year.
Arbitrator Wells granted a pay raise of $2,600 which did not
compensate for the $4,600 loss. Senators, you do the math and
you tell me who won the arbitration.
The point is, binding arbitration does not guarantee that
the union is going to win every time. The savings to the Postal
Service by their own figures was approximately 12 million less
paid hours annually due to this arbitration award. The award
savings to the Postal Service for rural carrier compensation is
$324 million annually.
During those arbitration proceedings it took the NRLCA and
the Postal Service 7 months to schedule 21 days of hearings.
The expedited timetables proposed by the Commission are
laudable but we feel they are unattainable. The most impossible
proposal is to schedule three independent arbitrators and wrap
it up in 60 days. Again, it took us 7 months to get 21 days out
of one arbitrator. We cannot imagine scheduling three in a 60-
day window. That is unless you only count the days that we
actually hold hearings.
My points being that binding arbitration does not always
favor the union, the existing procedures allow for flexibility
to do the things that the Commission proposes, and the
proposals to change the collective bargaining procedures and
timetables are not workable. All of these points make the
proposal by the Commission to change collective bargaining
problematic.
The Commission's idea that pension and health benefits
should be subject to collective bargaining are perilous.
Currently the Postal Service has no responsibility to manage a
pension or a health benefits system. The Office of Personnel
Management performs that task quite capably. Postal workers are
one of every three civilian Federal employees. Removing one-
third of the participants out of the current retirement system
and health benefit program could have a serious adverse impact
on the existing FERS and FEHB programs.
In order to separate the pension system, the Postal Service
would need three critical items. They would need investment
experts, elaborate recordkeeping, and creation of a pension
trust fund. The National Rural Letter Carriers' Association and
probably the other unions would demand some kind of joint
trusteeship of any such pension fund.
In the health benefit area we already negotiate. The NRLCA
health plan negotiates with our insurance underwriter of 40
years, the Mutual of Omaha Insurance Company. We then negotiate
with OPM. For example, the rural carrier health benefit plan
could decide next year to pay 100 percent of annual
mammographies, since our workforce is 55 percent female. Mutual
of Omaha's actuaries would estimate how many enrollees would
utilize this benefit. Mutual would estimate the amount of
premium dollars to reserve for this increased benefit. We
negotiate how that fits in with allocation of all other premium
dollars. OPM would then ask NRLCA how it proposes to pay for
that benefit. Are we going to raise premiums, raise the copay,
or lower an existing benefit?
Finally, the percentage of the Postal Service's
contribution to each employee's health benefit premium is
currently subject to collective bargaining. Any changes to the
current status of pension and health benefits are perilous to
the programs, the Postal Service and the employee. I believe it
was the first PMG in Poor Richard's Almanac who said, haste
makes waste. In their haste, the Commission made
recommendations that to us are puzzling, problematic, and
perilous.
I want to thank you for the opportunity to appear here
today and ask that my full remarks that were submitted earlier
be entered into the record.
Chairman Collins. Without objection, all statements will be
printed in the record. Thank you for your testimony.
Mr. Burrus.
TESTIMONY OF WILLIAM BURRUS,\1\ PRESIDENT, AMERICAN POSTAL
WORKERS UNION, AFL-CIO
Mr. Burrus. Good morning, Chairman Collins, and Senator
Akaka. Thank you for the opportunity to testify on behalf of
the more than 300,000 members of the American Postal Workers
Union, AFL-CIO. We are the largest single bargaining union in
our country.
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\1\ The prepared statement of Mr. Burrus appears in the Appendix on
page 199.
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We appreciate the opportunity to share with you the views
of our members on a most important issue, postal reform. Thank
you for your continuing interest in this vital subject. In
compliance to your request to limit my testimony to 10 minutes
I will summarize my oral statement and will submit my printed
text for the record.
This Committee has a historic opportunity to protect and
preserve the U.S. Postal Service. But we must be careful to
ensure that our efforts in fact preserve the Postal Service for
the American public. Too often in this rush for reform, special
interests have been considered without balancing the broader
needs of our Nation and its individual citizens. The debate has
been driven by the mailing industry as it seeks to shape the
Postal Service in a way that best serves its interest. This is
neither suprising or bad, but it is very important that the
Committee distinguish between the public interest and universal
mail service and uniform rates and the interest of major
mailers in maximizing their profits.
The Committee has requested that testimony be limited to an
analysis of the Presidential Commission's workforce related
recommendations and I appreciate the flexibility that you
afford the witnesses to expand beyond the official request. As
president of the union, foremost among my concerns in this
review are the interest of our members. But the long-term
health of the Postal Service is also a concern, and we promise
to join with those who seek positive change.
Before I discuss the specific workforce recommendations in
the Commission's report, I urge that primary attention be
focused on the Commission recommendation that the Postal
Service be relieved of the military retiree costs and that the
escrow of the CSRS contribution be resolved.
A third consideration that is also important is resolution
of the OPM decision to shift to the Postal Service $86 billion
in cost for services attributed to previous Federal Government
employment. These would be enormous burdens to the Postal
Service, to consumers, and to the mailing industry, and the
correction of these problems may be the most important actions
that Congress could take to preserve and protect the Postal
Service.
The Commission's deliberations. In considering the
recommendations of the Commission report I want to emphasize
that the Presidential Commission did not give sufficient
consideration to the needs of individual Americans and small
businesses. As a result there were no recommendations in the
report addressing concerns of the public. The commissioners
hearings and private meetings were dominated by large mailers.
While their interests should be considered, it should not be to
the exclusion of all others. It is now up to the Members of
Congress to examine the public interest.
The widespread support for postal reform is based on the
premise that the Postal Service is a failing institution, one
that is at risk of entering a death spiral. But I believe it is
premature to make a final determination on this matter. We must
remember that postal volume continues to recover from the
effects of several events, the terrorist attacks of September
11, followed by the anthrax attack that took the lives of two
of our members. These two events were superimposed over the
recession that began in early 2001 from which we are only now
beginning to recover, a relatively weak and inconsistent
recovery. If one were to extract the impact of technological
diversion, these events standing alone would have had a serious
impact on postal volume.
But there are positive signs. The Postal Service recently
reported that mail volume during the 2003 Christmas mailing
season increased sharply over the previous year, resulting in
the highest volume period in the history of the Postal Service.
Are we to believe that technological impact took a holiday this
Christmas, or are other factors at work?
Throughout this period of technological upheaval the Postal
Service has shown a remarkable capacity to provide excellent
service. Despite declining mail volume, productivity increased
and service standards were maintained. A recent privacy trust
survey ranked the Postal Service No. 1 in trust. These are
remarkable achievements.
Because of the unprecedented productivity increases and
efficiency there is strong reason to believe that the Postal
Service revenues could be sufficient to support universal
service far into the future if rates are properly set. My
union, the APWU, has been a vocal critic of unfair rate setting
that benefits some very large mailers at the expense of
consumers and small businesses. The Postal Service's own data
shows that work-sharing discounts provided to major mailers
exceed the cost avoided by the Postal Service. These excessive
discounts cost the Postal Service hundreds of millions of
dollars in lost revenue every year.
A recent personal experience highlights the inequities of
excessive postage discounts. Several weeks ago I received two
First-Class letters, one bearing a 37-cent stamp and one which
paid 27 cents. Both letters were bar-coded to be processed
efficiently by the postal mail stream. The letter with 27 cents
postage was deposited in the mail stream in Charlotte, North
Carolina to be processed and transported to southern Maryland
where I live. The one with 37 cents was deposited in
Washington, DC, some 400 miles closer to its destination. The
27-cent letter required manual distribution by the Postal
Service itself once it was received in the delivery unit. The
postage rate for the most costly letter including
transportation and processing was in fact 10 cents less.
The suggestion that mail volume will suffer if discounts
are adjusted to represent accurate costs avoided is ludicrous
on its face. This argument taken to its logical conclusion is
that unless the Postal Service loses money on discounted mail,
mailers will find other alternatives. If this were true, it
would not make sense--to discharge the notion that logic--that
there must be a connection between postal costs and discounts.
Certainly free postage would guarantee increased volume.
The problem of discounts was acknowledged by the
Presidential Commission's recommendations that all future
discounts be limited to the cost avoided. This is simply not
good enough. That horse has left the barn and we need to get it
back to preserve universal service in the public interest.
Some interested parties have responded by calling for
bottom-up pricing or bottom-up costing. These concepts would
establish a system whereby mailers pay a pro rated share for
the services they use. I would urge the Congress or the rate
Commission to be extremely careful in pursuing this rate
strategy. The primary consideration must be adequate funding
for universal service at uniform rates. Lurking on the horizon
would be exceptions that would result in surcharges for
services.
I believe that we will all agree that postal reform will
have marginal impact on future mail volume. And if not,
adjusting to the current business model must focus on future
rates. Overlooked on this analysis is the fact that the current
business model does not determine the relative contribution to
the institutional cost by First-Class Mail as compared to
standard mail. If First-Class Mail grows or declines, the
question of dividing institutional cost among all classes of
mail will remain. At present it takes approximately three
pieces of standard mail to make up for one piece of First-Class
Mail. This distribution of cost is a rate-setting decision that
will be unresolved by postal reform. The elimination of
excessive discounts along with more appropriate pricing would
bolster postal revenues and preserve universal service.
Now I will discuss the specific workforce related
Commission recommendations. As the Committee specifically
requested I will now state our views on the workforce related
recommendations of the commission, and I begin with our
conclusion that the workforce recommendations are outrageous
and totally unacceptable to me and to the workers I represent.
As I have previously said, on the subject of workforce
issues the report is fundamentally dishonest. The report
repeatedly states that the Commission supports the rights of
workers to engage in collective bargaining. Nevertheless, it
recommends the establishment of a regulatory board appointed by
the President with the authority to set compensation of postal
employees. It is completely inconsistent and totally
unacceptable for the Commission to espouse a commitment to
collective bargaining while simultaneously recommending that
postal compensation be dictated by an appointed board.
Testifying before this Committee on September 17, 2003, Co-
Chairman James Johnson testified that any employee compensation
change would be prospective and that current employees would
not be impacted. While in fact Commission recommendations would
authorize the board to impose a cap on the compensation of new
employees and to reduce the compensation of current employees.
While the Commission recommends pay-for-performance it fails to
note that there is nothing in the current law that prohibits or
inhibits pay-for-performance. In fact we have negotiated on
several occasions at the bargaining table on the subject of
pay-for-performance.
The Commission seems to believe that postal workers are
fools. The following disingenuous platitudes appear in the
report. One, plans for modernizing the Nation's postal network
must effectively utilize the Postal Service's most valuable
asset, its employees. Two, essential to this process is the
ability of management and labor to work together. Three, first
and foremost, Postal Service management must repair its
strained relationship with its employees.
In contrast to these statements, the Commission's specific
recommendations are an invitation to open conflict with its
postal employees. The report paid lip service to the importance
of good labor relations, while making recommendations that
would guarantee labor conflict.
The Commission's recommendations to change the collective
bargaining process are unwise and would be counterproductive.
Current law permits the parties maximum flexibility in
resolving contractual impasse and over the years the parties
have negotiated every subject identified by the commission:
Health benefits, flexibility, retirement, no layoff protection,
wages, a two-tier workforce, and many others including pay-for-
performance. When the parties have disagreed they have used
last best final offer, fact-finding, mediation, and at least
once the parties' mediator became the neutral interest
arbitrator. But more importantly, most often we have agreed at
the bargaining table and concluded negotiations without outside
interference.
The Commission is wrong to say that any one of these
methods is the best way of helping the parties reach agreement.
Each negotiation brings its own challenges, and the best way to
meet these challenges is to permit the parties to adjust to the
conditions at hand rather than to impose a fixed statutory
process. We know how to reach agreement and we have done so 65
times over the 32-year period of collective bargaining.
Benefits. The Commission urged Congress to consider
removing postal employees from Federal retirement and retiree
health care plans. This would be a diametric departure from
appropriate public policy. We categorically reject the
contention that it would be appropriate for postal employees
now or in the future to be paid fringe benefits that are less
than those provided to other Federal employees.
In recent years postal workers have repeatedly stood on the
front lines of homeland security. When hired, they submit to
background checks and fingerprinting, and they are administered
a Federal oath of office. The anthrax attack that resulted in
the death of two of our members and the recent ricin attacks
expose the perils of postal employment and our role in the
Nation's defense. In the anthrax attacks we rationalized the
disparate treatment of postal employees as compared to the
occupants of Senate office buildings. But the ricin attacks
exposed the fact that there is a double standard. Senate office
buildings are vacated and tested for a period as long as it
takes while postal employees are not even informed that they
have been exposed.
The administration has been quoted as saying that those who
needed to know and needed to act upon it were aware of it. And
the administration budget now includes a complete elimination
of homeland security building decontamination research. The
message is no warning, no cleanup. This is unacceptable. Postal
workers will not be treated like the canaries in the mining
industry in years gone by.
Health benefits, whether for active workers and the
families, for people who have been injured on the job, or for
retirees and their families are very powerful and emotional
issues. It would be a callous act to reduce the benefits of
postal workers injured by anthrax or exposed to ricin. How
would this be explained to the widows of Brothers Curseen or
Morris?
The collective bargaining provisions in existing law have
worked well. They have resulted in labor costs that have
tracked the increase in the CPI and the ECI. In comparison, we
believe that the wages and fringe benefits paid by UPS and
FedEx provide an appropriate and useful yardstick for postal
compensation. These are the largest American companies whose
workers perform some of the same tasks that we perform. They
are, of course, direct competitors to the Postal Service. These
companies pay their career employees wages and benefits that
compare very favorably to the wages and benefits our members
receive.
The American Postal Workers Union finds the Commission
report unacceptable in its recommendations on collective
bargaining.
Chairman Collins. Excuse me, Mr. Burrus, you are now almost
7 minutes over your allotted time, so if I could ask you to try
to summarize. Thank you.
Mr. Burrus. I will conclude.
In conclusion, I want to return to the most urgent needs of
the Postal Service, military retirement costs at $27 billion,
the escrow cost at $10 billion, and that the position of my
union not be misunderstood on the broad issue of postal reform.
Because of our outspoken positions on the Presidential
Commission work-sharing discounts, it is convenient to report
that APW opposes reform. This is not true, and for the record,
we could support structural change to the Postal Reorganization
Act that would improve the Postal Service beyond relief from
the financial burdens. We support rate flexibility, the ability
to add new products and better utilization of the network, the
right to borrow, invest, and retain earnings, and the
limitation of work-sharing discounts. These changes would
ensure the continued effectiveness of the Postal Service far
into the future.
Thank you for your patience. Thank you again for your
continuing interest in the Postal Service and I would be
pleased to answer any questions you may have.
Chairman Collins. Thank you, Mr. Burrus. Mr. Hegarty.
TESTIMONY OF JOHN F. HEGARTY,\1\ PRESIDENT, NATIONAL POSTAL
MAIL HANDLERS UNION
Mr. Hegarty. Good morning, Madam Chairman, Senator Carper.
Thank you for the opportunity to testify, and also thank you to
the rest of the Committee. My name is John Hegarty. I am the
President of the National Postal Mail Handlers Union, which
serves as the exclusive bargaining agent for 57,000 mail
handlers.
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\1\ The prepared statement of Mr. Hegarty appears in the Appendix
on page 216.
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The Mail Handlers Union hopes to remain an active
participant in the process of postal reform. The recently
released White House principles show that the White House has
considerable confidence in the expertise and legislative
initiative of your Committee and that of your House
counterparts. I would like to congratulate each of you who have
provided leadership on this issue.
I would like to take a few moments to comment on the latest
terrorist homeland security issue affecting both Congress and
the U.S. Postal Service. I am talking, of course, about the
ricin incident in Senator Frist's mailroom earlier this month.
It is perhaps ironic that this threat occurred on the evening
before we were scheduled to testify before this Committee on
the future of the Postal Service and its employees. The advance
National Postal Mail Handlers Union written testimony raised
the danger of substances such as ricin and anthrax and noted
why career mail handlers are so crucial to the safety and
security of our country. That hearing, obviously, was postponed
but the need for safety and security goes on.
As a mail handler from a large processing plant in
Springfield, Massachusetts let me briefly explain how these
types of terrorist threats could impact mail handlers. Mail
handlers are generally the first to handle mail when it enters
a processing plant. Raw or unprocessed mail which could be
letter-sized envelopes or larger flat-sized envelopes, and in
some operations parcels and packages are dumped typically on a
conveyor belt and sorted or culled by mail handlers. Letters
and flats would then be run through a cancellation machine to
cancel the stamps and would then be forwarded to other mail
processing machinery throughout the building, which is
typically manned by either mail handlers or clerks.
After all the processing is completed mail handlers load
the processed mail into the outbound transportation for smaller
post offices to be sorted where the letter carriers will then,
and the rural carriers will deliver to the addresses.
As you can see, this is a labor-intensive, hands-on type of
mail processing. Mail handlers, and indeed all craft employees
are therefore on the front lines when it comes to possible
exposure to biological agents or other terrorist threats
through the mail.
As always, the safety of mail handlers and other postal
employees is the first concern of the National Postal Mail
Handlers Union. We are working with the Postal Service through
the Task Force on Mail Security on dangerous incidents such as
this. We appreciate the funding that Congress has already
appropriated for biodetection systems to keep our employees
safe and we look forward to working with Congress in the future
on these issues.
The Mail Handlers Union also appreciates the swiftness of
your reaction to the CSRS funding problem and the financial
strain caused by the deadly anthrax attacks. Similar financial
issues remain, however, and congressional resolution of both
the escrow issue and the military service issue are of
immediate and paramount importance to the financial future of
the Postal Service. Not releasing the postal escrow account or
forcing the Postal Service to pick up more than $27 billion in
military costs that no other Federal agency has to pay
certainly will result in a severe crisis to the Postal Service
and ultimately a hike in the cost of postage to all ratepayers.
We are prepared to do whatever it takes to get both of these
matters resolved swiftly.
My union also counts itself as a strong supporter of
legislative change that would grant the Postal Service
additional flexibility in pricing, borrowing and the design of
postal products. Such changes must allow the Postal Service to
establish postal rates that remain affordable both to the major
business mailers and the average American consumer while
providing sufficient revenue to protect and support the
infrastructure that universal service requires, and to provide
postal employees with a decent and fair standard of living.
Let me turn directly to collective bargaining in the Postal
Service. I truly believe that the term ``best practices'' can
be applied to Postal Service labor relations. In general our
collective bargaining process is seen by others as a model of
flexibility and labor peace. In recent years, moreover, all
parties have been working on these matters diligently and our
efforts have resulted in some dramatic progress. The Mail
Handlers Union strongly endorses the current process for
collective bargaining under the Postal Reorganization Act. Our
current national agreement covers the period from November 2000
through November 2006. Although it originally was scheduled to
terminate later this year, we recently reached an agreement
with the Postal Service on a two-year extension that was
overwhelmingly ratified by our membership.
Nor is productive collective bargaining a recent
phenomenon. Since the Postal Reorganization Act was enacted in
1970 we have engaged in 13 rounds of full collective bargaining
with the Postal Service, 8 of which, including the last three,
have resulted in voluntary agreements that were endorsed by
postal management and ratified by the union membership. The
other five were resolved through arbitration with the results
willingly accepted by both parties. On at least three of the
five occasions when the parties used arbitration, however, the
parties actually settled most open issues and arbitrated only
one or two issues that could not be resolved without an
arbitrator's decision.
Even when arbitration does occur, there are no guarantees.
For example, arbitration in the 1984 round of bargaining
created a lower entry rate for new mail handlers. An
arbitration in the 1990 round of bargaining produced 3 years
without any general wage increases for mail handlers. Because
both parties accepted the process, however, even these clear
management victories were implemented peacefully.
The key advantage of the current bargaining process is its
flexibility. Under the current statute, the parties to any
bargaining dispute are allowed to devise their own procedural
system for resolving their dispute. Thus, under the PRA, fact-
finding followed by arbitration is the default position, but
the parties in prior years have used fact-finding, mediation,
arbitration, and a multiple combination of these processes to
resolve their disputes. If the procedural changes recommended
by the Presidential Commission were adopted, this flexibility
would be eliminated and instead the parties would be
constrained by rigid procedural rules that in our view would
not improve the collective bargaining process one iota.
The Commission said that the core ingredient of its revised
procedure is a mediation-arbitration approach to resolve
bargaining impasses. Under a med-arb approach, the fact-finding
phase now set forth in the PRA would be replaced with a
mandatory mediation phase of 30 days, and if the mediation were
unsuccessful, the appointed mediator would become one of the
final arbitrators. We believe, however, that requiring this
med-arb approach would be counterproductive to the successful
resolution of many bargaining disputes. The flexibility now
part and parcel of the PRA permits the use of med-arb and it
has been utilized in prior rounds of bargaining when the
parties deemed it advisable.
But compelling the use of med-arb would corrupt any
attempts at mediation by destroying the usual confidentiality
of the mediation process and making it impossible for either
party to actually share its priorities with the appointed
mediator. To quote a noted expert, ``Parties to a combined
mediation-arbitration procedure are often reluctant to retreat
from extreme positions or to reveal how they prioritize their
interests.'' It also reduces the likelihood that the arbitrator
will have an accurate view of the parties' priorities.
Also part of the Presidential Commission's recommendations
is a proposal that would replace the parties' current practice
which uses a three-member arbitration panel in which each party
chooses one arbitrator and then the parties jointly select one
neutral arbitrator with three outside arbitrators. In our view,
this change would have extremely negative consequences for the
arbitration process as it would completely remove the parties'
respective representatives and their unique expertise from the
decisionmaking process. It makes it much more likely that the
eventual arbitration decision will be contrary to the desires
of either or both parties. It also severely reduces the
likelihood that the parties might be able to mediate and settle
or narrow their dispute during the arbitration process.
There are also proposals for a 10-day review period after
arbitration and a last best final offer, both of which
eliminate the current flexibility, which is one of the
administration's guiding principles that were recently released
by the White House. Frankly, I believe the Nation is better off
with bargaining and binding interest arbitration under the PRA
than with any other models. The testimony before the
Presidential Commission from postal management, from the postal
unions and even from a panel of highly respected neutral
arbitrators was consistent, that the current collective
bargaining process is working well: For 33 years the parties
have avoided the labor strife and economic warfare that often
characterizes private sector labor-management relations.
Arbitrators and all participants agree that the process has
improved dramatically over the years.
There is, in short, no reason whatsoever to amend the
statutory provision governing collective bargaining or to
otherwise adopt provisions that would allow outside entities to
interfere in the collective bargaining process.
The Presidential Commission has also proposed bargaining
over health insurance, pensions, and other benefit programs. In
fact the current employee contribution rates for health
insurance already are bargained, and the health benefits
themselves established through the Federal Employee Health
Benefit Program, are universally acknowledged to be well-
maintained and well-negotiated by OPM. The Mail Handlers Union
happens to be the sponsor of one of the largest Federal health
plans, and I can assure you that if the Postal Service were
ever to withdraw from the Federal Employees Health Benefits
System chaos would be the result.
As for annuity benefits, with the passage last year of the
``CSRS fix'' legislation, all annuity benefits for postal
employees are now fully funded. The recommendation on
bargaining benefits, therefore, is clearly aimed at guaranteed
health insurance for postal retirees. We see absolutely no
reason why promises of lifetime health insurance to postal
employees should be subject to bargaining, especially when the
Federal Government provides these benefits to Federal employees
through legislation, and many other large employers also
provide similar benefits.
In any event, recent proposals from postal management would
allow the Postal Service to ensure funding of these retiree
health costs by using the escrow account now available because
of pension overfunding. That is an appropriate use for those
funds and should be a part of any postal reform.
Thank you for allowing my to testify. I would be glad to
answer any questions you may have.
Chairman Collins. Thank you, Mr. Hegarty.
Each of you this morning has made very clear the
recommendations of the Presidential Commission that trouble you
or that you outright oppose. It is understandable that you
would focus your testimony on the recommendations that give you
the most heartburn.
I would like to ask each of you to now tell me which are
the one or two, or two or three recommendations of the
Commission that you believe are on point and should be
incorporated into the reform bill, assuming that there are any.
With Mr. Holton's comments I was reminded of the old story
about, aside from that, Mrs. Lincoln, how did you enjoy the
play? [Laughter.]
But if there are recommendations that you believe are
worthy of inclusion in legislation we would like to hear that
as well.
Mr. Young.
Mr. Young. Thank you, Senator. I believe the Commission's
recommendations in the area of pricing, flexibility and
transparency should be incorporated. I think they are very
good. I also like the Commission's recommendation on retention
of universal service, but I would tweak it a little bit because
I think that is a public policy matter and I think if I was a
member, and I am not, of Congress, I would want to retain the
jurisdiction over that myself, because it is awful clear to me
that when the people up in Maine do not get the kind of service
that they have been accustomed to, they are not going to be
calling any regulatory board. They will be calling Senator
Collins and asking why that is the case.
I also like the idea that the Postal Service can retain
earnings. I think that is an important concept that ought to be
adopted.
Chairman Collins. Thank you. Mr. Holton.
Mr. Holton. I concur with what my colleague has already
said. I also believe that the CSRS military pension portion of
it should be adopted also.
Chairman Collins. Thank you. Mr. Burrus.
Mr. Burrus. I agree with the Committee's recommendation
regarding the CSRS pension liability issue as well as the three
issues mentioned by my two colleagues. In addition, the
opportunity to add new products. I think for growth into the
future the Postal Service needs to have the opportunity to be
able to add products, so I would add that as a fourth item.
Chairman Collins. Mr. Hegarty.
Mr. Hegarty. I would also concur with the pricing
flexibility. I think the recent hike in gas prices would point
out the need or the disadvantage that the Postal Service faces
when it comes to dealing with issues such as a gas increase,
where UPS and FedEX and some of the competitors immediately
establish a surcharge for their deliveries. The Postal Service
is prohibited by law from doing so.
The other thing that I think the Postal Service should be
able to do is to negotiate discounts with their larger
customers. One thing that caught my eye in talking with Peter
Fisher of the Treasury Department last year is that the United
States Mint, which mails out probably millions and millions of
coins each year to collectors, uses UPS or FedEx. They do not
use the U.S. Postal Service. The reason they do not is they can
get a better rate because of volume discounts. I think if a
company such as Amazon.com or the United States Mint approaches
the Postal Service and says, ``I will give you three million
pieces per month, what can you give me for a discount?'' Right
now the Postal Service says, ``I cannot give you any
discount.'' I think that should be corrected.
Chairman Collins. Thank you. Each of you has considerable
experience in collective bargaining and you have made clear
your opposition to many of the changes recommended by the
commission. But I would like to walk you through a few of them
just to make sure that I understand where you are because these
issues are so complicated and you do bring a great deal of
experience in collective bargaining to the Committee today.
The Commission recommended that the current fact-finding
period be replaced by 30 days of mandatory mediation. I would
like to know whether you find the fact-finding process to be
useful, and how frequently it is waived by the parties. Mr.
Young.
Mr. Young. So far we have used it, Senator. I do not find
it particularly useful, and I will be candid and open in
telling you why. Because neither party wants to litigate the
issue twice. If we are not able to strike an agreement, the
1998 historic agreement for letter carriers that elevated my
members from level five to level six, we bargained hard with
the Postal Service and we almost go there. The differences
really were not that great. We then engaged in a mediation
process. Neither party really was candid or open with the
mediator because they did not want to put their case on twice.
We knew that the parties ultimately were not going to agree.
That it was going to have to go to an arbitrator.
I think the panel of arbitrators that testified before the
Commission could add some clarity to your inquiry here,
Senator, if you are interested because they have even more
experience than I do and they were saying similar things about
their experiences, which are greater than mine, broader than
mine. Mine are related only to the post office. Theirs, of
course, to other industries. But that is the real problem with
trying to do that.
Chairman Collins. Thank you. Mr. Holton.
Mr. Holton. I tend to agree. We have only, in 33 years,
been through fact-finding and arbitration twice. All other
times we have come to agreement on our contract. But in those
times, fact-finding, you put on your case once, for the most
part. You may not go into as much detail or depth with it, but
you still put it on. You have someone that issues a fact-
finding report and, as in our example, the first time, the
fact-finding report was in our favor which would tend to lead
you back to the bargaining table and say, OK, if we go to
arbitration these things will be in our favor so we need to
bargain more on it. And then turn right around and you go to
arbitration and then you get a second bite of the apple, so to
speak, and find an arbitrator that rules the other way.
So the point is, you are putting on your case twice.
Everybody knows what the issues are as far as the parties go.
They know what the issues are. They know what we are going to
be up against, and regardless of what the fact-finding panel
returns as a suggestion there is still nothing that tells you
you have to go through with that, so it may not be a necessary
step.
Chairman Collins. Mr. Burrus.
Mr. Burrus. Our union finds fact-finding to have no value
whatsoever. We had one very bad experience many years ago that
after completing the fact-finding process, very laborious, put
on a full-blown case, the fact-finder concluded that the
parties had a disagreement. That was his decision. He concluded
we had a disagreement, which we knew when we began the process.
The current statutory language requires fact-finding, but
the parties, the Postal Service and the unions find it in their
mutual best interest not to invoke the statute. At the
conclusion of every negotiation session, and I have had more
experience than my colleagues here in terms of negotiating
national agreements, the chief negotiator. But at the
conclusion of every national negotiation I am terribly nervous
about the Postal Service invoking the law, of requiring us to
go to fact-finding. They have found that is not in their
interest either. So we have avoided--mutual agreement to avoid
fact-finding because we just do not find it in our interest for
the very reasons stated, that we are required to put the same
case on twice. They do not want to expose their case. We
certainly do not want to expose ours.
Chairman Collins. Thank you. Mr. Hegarty.
Mr. Hegarty. I think whether you are talking about fact-
finding or mediation or any other dispute resolution mechanism,
it depends on the nature of the impasse. As I said in my
testimony, in many of our arbitration decisions we really only
had one or two items in front of the arbitrator that we had to
negotiate. The parties knew where they stood on most of the
items, but there may have been one or two items such as pay
raises, and cost-of-living adjustments that might have been in
dispute. I think the parties need the flexibility at the end of
the process to determine, based on the nature of the impasse,
what dispute resolution mechanism they wish to utilize.
Chairman Collins. Thank you. Since we have had other
Members join us I am going to yield back the remainder of my
time and we will have 8-minute rounds rather than longer ones
that I had originally intended before we were joined by our
distinguished colleagues on both sides.
Senator Akaka.
Senator Akaka. Thank you very much, Madam Chairman. I would
again thank all of you for being here. I appreciate the
thoroughness with which each of you discussed your union's view
of the collective bargaining as well as other workforce
recommendations. If I am not mistaken, and since the Chairman
has mentioned your experience, I believe the four of you
represent 130 years of service to the Postal Service. That
tells us something and is quite an accomplishment.
The Commission proposes that the Postal Service negotiate
over benefits and implement a pay-for-performance system, yet
the Postal Service already negotiates over employee health
insurance contribution levels and could negotiate for a pay-
for-performance system now. As was indicated by the Chairman,
there are differences in your statements so let me ask each of
you the same question. Why do you believe that there are such
misunderstandings and misrepresentations about Postal Service
workforce issues? I would like to start with Mr. Young.
Mr. Young. I have got to be honest with you, Senator, one
of the reasons we have to share the responsibility for. My
thrust here today is in essence asking the distinguished
Senators to consider a hands-off policy in the area of
collective bargaining. I am telling you that it has taken us 30
years to figure out what we are doing and I think we are on the
right track now. We have developed these relationships and I am
totally convinced that the parties themselves have to negotiate
these kinds of agreement among themselves and they do not need
it forced on them from outside.
But I must admit that my members, and maybe even myself on
occasions, have been too willing to come to you all with our
problems. I think it was a lack of maturity, and I am going to
apologize for the members of my union that still engage in that
today. What I mean by that is, some letter carrier perceives
that he is mistreated at the workplace. He finds it very easy
if he hails from the State of Hawaii to call on his good
Senator from Hawaii to come to his rescue, when in essence that
is not what your responsibilities are. You have got much more
important things to worry about than those issues. Those issues
should be dealt with in the internal dispute resolution
procedure that has been established.
So I think one of the reasons that there is some confusion
here is we have led to that confusion because we are too
willing to reach out to our perceived friends for help when we
maybe should be going in a different direction. I think that
has contributed a lot to some of the misunderstanding.
I think some of the other misunderstanding is just a lack
of experience. I was a little taken back by Mr. Blair's
testimony when he acknowledged that the administration does not
have much experience when it comes to labor unions, when you
were talking about pay-for-performance with him. I was thinking
about that, and I had not thought of it in that vein, to be
honest with you. But I will tell you all that my union in
convention, 8,000 people strong, voted not to accept a pay-for-
performance type of a proposal, because we have, as these other
presidents indicated, had those kind of proposals advanced in
the past.
My members are concerned about the fact that they cannot
measure that performance. That is not cut and dried like if you
get a step increase after a year's creditable service, everyone
understands what that is. They know how to apply that.
I do not mean any disparaging of my colleagues and friends
in management in the Postal Service, but they did not have such
a great experience with that. They took a pay-for-performance
system and most of them people, especially on the lower-graded
supervisors, they ended up making less money than letter
carriers, and they sacrificed more than they ever got in
return.
So that is about as much as I can add as far as to the
confusion and I hope that Senators here will pass on to their
colleagues what I have said about trying, because I am trying
to rein in now the members of my union, to get them to
understand that they should only come to you with public policy
issues and not with individual personal grievances. I think we
can handle those ourselves.
Senator Akaka. Thank you. Mr. Holton.
Mr. Holton. I think the misunderstanding--are you talking
about of the Commission itself or the Senators, or are you
talking about the public in general? Regardless of which group
you are talking about, I think a lot of times when people say
Postal Service you only hear horror stories. When you listen to
David Letterman, you read the newspaper, you hear about the
letter that was 30 years late that was lost somewhere, you hear
about an employee who did whatever that was egregious in the
workplace. But yet you never hear the fact that the employees
that we represent are out there performing a service every day
in all kinds of weather, all kinds of circumstances.
I get letters from the Postmaster General daily sometimes
about rural carriers who have gone above and beyond the call of
duty in putting out fires or saving people that have been hurt.
NALC does a great job with their Heroes Awards every year and
they cite these things. Those kind of things, we do not get
that published out there so when people form a perception of
the Postal Service and it's employees they only draw from the
David Letterman or whoever, or the Washington Post or whatever,
that shows that this was what was bad in the Postal Service so
immediately they paint everybody with one brush. So that may be
part of it.
To follow along with what he was saying about pay-for-
performance, or would you rather I just wait and get a question
on that later? Pay-for-performance, we have participated in
that. We had striving for excellence together. We still have an
MOU in our contract, memorandum of understanding, which
recognizes the benefits of pay-for-performance. The MOU tells
us that we should work together to try to find something that
mutually promotes the goals of the Postal Service and the
employees so that we can use something like that.
There are so many diverse ways to look at it systemwide,
specifically rural carrier duties, that we have not been able
to come up with a plan that everybody can agree to. So we have
just sat here with this MOU in our contract since 1995. But it
is something that effects each individual but is to be applied
systemwide.
The other thing is, a lot of times when you have pay-for-
performance if you are going to make it systemwide you can only
look at what the overall system goals are, and as a result
those are pushed forward or achieved by everybody involved and
not just what the individual rural carrier employee can do. So
we have not been able to agree on any of that.
Senator Akaka. Mr. Burrus.
Mr. Burrus. Senator, I think that there is a
misunderstanding, I think, because we are a government entity
and government entities should be transparent and should be
responsible to the people. I think that the Postal Service is
held accountable for that, and the employees who work for the
Postal Service are held accountable equally.
I think it is so very apparent what you say is correct
because 94 percent of our mail is provided by the major
mailers. They are our major users. Not the average citizen
writing to a son or daughter, or to one another within the
family. Their micromanagement of the Postal Service is
different than their reaction to their other vendors. UPS,
FedEx are likewise providers of service, performing very
similar service to the Postal Service, but no one questions the
wages and the bargaining strategies and the procedures used by
UPS or FedEx, while the procedures, the strategies, and the
results of the postal negotiations are opened up to the
microscope.
So it is because we are a government agency, and it can be
micromanaged. You cannot micromanage UPS. You can go to another
company. You can take your business to a competitor. There is
nobody quite as large as UPS. They have a monopoly just like we
do.
But because you can do it to a government agency and we
have all of the benefits of both private and public. We have
public protection. We have some private rights. We have right
of negotiations. Other Federal employees do not have those
rights. So we have the right of negotiations but we are still
Federal employees, so it opens us up to misunderstandings, deep
involvement into our internal process that one would not find
if we were a private corporation, purely private. And if we
were some other government agency they would not be making the
demands on us because we do not have the same connection with
our ratepayers.
Senator Akaka. Mr. Hegarty.
Mr. Hegarty. Thank you, Senator. I would say that the
misunderstanding about Postal Service issues, a lot of the good
things that we do, have been under the radar screen. I agree
with Dale, we get a bad rap for the letter that is delivered
late or some other negative news about the Postal Service. I am
hoping that with the Presidential Commission and with postal
reform that some of these good things that we do will come to
light. I will just give you a few examples.
I have spoken with the Office of the Inspector General, I
have spoken with the GAO over the last year and-a-half and
tried to highlight some of the good things we are doing. They
have made it into their reports. I did not invent it but we
developed a Contract Interpretation Manual. I believe the other
crafts, I know the letter carriers have it and the other crafts
are looking at it, where we took our national bargaining
agreement and took all the gray areas, went back 30 years in
postal history and found every agreement that we have ever come
to at the national level that says, this is what that means. We
put all of that into a big book so now you can use the
collective bargaining agreement side by side with the Contract
Interpretation Manual and resolve a lot of the pending disputes
in our grievance arbitration procedure.
We rolled that out nationwide last fall. We did a joint
training with postal headquarters and mail handlers union
headquarters on the same stage with a mixed audience. We had
the area managers of labor relations, we had our union
presidents, we had our union vice presidents and their
counterparts in management all in one audience and they heard
the same message from both parties: This is the Contract
Interpretation Manual. This is what it means. It will be
adhered to.
We do not have any concrete results on that yet, because as
I said, we just implemented it last fall, but we are in the
process of setting up a meeting with postal headquarters to
crunch the numbers and see how we did as far as whether the
Contract Interpretation Manual is helping us resolve disputes.
I believe that it will.
The other thing that we have in the mail handler craft is
the quality of work life, which is an interactive process where
mail handlers and managers work together in postal facilities
to better the quality of their working life. It is outside of
the collective bargaining agreement. It has to do with whatever
ideas the craft employees and the managers come up with to
better process the mail. That has been very successful. We have
an annual conference and every year it has grown tremendously
in size. That has the full support of the Postmaster General
and myself, and both he and I attend the national conference.
The other thing we have developed over the last few years
is an intervention protocol, where if we are having a problem
facility--and let us be realistic, in an organization of
730,000 people, you are going to have some problems. We have an
intervention protocol where if a building or a plant seems to
be a problem area, the parties can request intervention and the
national parties will send a team in to evaluate the climate
and make recommendations on how to resolve that. We have used
that successfully in the past.
So I would say that the reason the misperceptions or
miscommunications are out there is they just have not
publicized enough of the good things that we are doing.
Briefly on pay-for-performance, under the current
collective bargaining agreement pay-for-performance is an
option. It is bargainable and I think it should remain that
way. I do not think legislating pay-for-performance helps
anybody. The problem with pay-for-performance for craft
employees is it is very hard to individualize it. I will give
you an example.
I mentioned conveyor belts earlier. If this is a conveyor
belt and the four of us are processing mail on that conveyor
belt, how do you say that John did so many pieces of mail and
Bill did so many pieces of mail and Dale did so many pieces of
mail? How do you individualize which of the four should get the
better performance award? Say you want to just do it by a
building, then you are losing the whole essence of pay-for-
performance. If you are going to give the plant over in
Detroit, Michigan, for instance, a $200 award because their
performance was that good, you are really saying, who within
the plant did the job over and above to make that performance
that good? Some people in the plant may do an average job.
Other people may do an exceptional job.
The other problem with my craft is you get moved around
constantly in a plant. I might work on this belt for 2 hours. I
might be moved over there due to the needs of the service, so
it is very hard to individualize my performance.
Senator Akaka. Thank you very much, Madam Chairman.
Chairman Collins. Thank you, Senator.
We are very pleased to be joined by Senator Stevens, who is
not only the chairman of the powerful Appropriations Committee
but also a long-time Member of this Committee. He has had a
longstanding interest in the Postal Service and in preserving
universal service. So we are very pleased that he was able to
join us today.
Senator Stevens.
OPENING STATEMENT OF SENATOR STEVENS
Senator Stevens. Thank you, Madam Chairman. I sort of am
the last of the Mohicans, the last one around that was here at
the time of the Postal Reorganization Act. I am pleased to be
here with you. I thank you for these hearings. I have gone over
the testimony that you all have filed. I am delighted that the
Commission recommended that the universal concept be
maintained. I think that is the backbone for rural America, and
it certainly is for my State.
But I have got to say, I think we have to find some middle
ground here with the Commission because I would invite you to
come up to my State and go out to dogsled country and go with
the people who are out on the ice and see them pick up a
Blackberry and send a message to New York. The concepts of
broadband, the concepts of wireless are on us as far as basic
communications, and the Postal Service seems to now be heading
for the time when we are dealing primarily with third-class or
parcel post. You may not agree with that but we have got some
changes coming, and I do hope that all of you will work with us
to make sure that we can find some common ground here in the
Congress with regard to these recommendations from the
commission.
As with every commission, Madam Chairman, they have gone
beyond the point of achievability. They reach out too far. But
I think we have got to admit that they have got some
recommendations that we must adopt, and they have got others we
are going to have to see if we can modify, and others we are
going to reject. We have a difficult job and I am delighted you
have got that duty rather than me. I was chair of this
Committee.
I do think that within the suggestions of the Commission
are suggestions that will reduce the cost of operation that we
ought to look at, because clearly we have got to find better
ways to assure the cash flow for the Postal Service than
maintaining those things which are not efficient. On the other
hand, there are some things, like the Senator from Hawaii's
mail, parcel post and mail that comes to Alaska that there is
no way to make them cost-efficient. So there has to be some
basic system that takes into account the cost of universal
service.
I look forward to working with you, Madam Chairman. I
really do not have any questions for you. I appreciate the fact
that you have come here with statements that, as I understand
it, indicate a real willingness to go forward and reach a
conclusion where we adopt those things in the Commission's
report that can be achieved now and put some off for the
future. But we all have to look to the future. We have to look
at how we maintain the postal system despite the advent of
these new means of telecommunications and basic communications
by wireless and broadband.
Again, I thank you. I hope we can move forward because I
think action by the Senate is necessary now. The House has
acted previously, but we have to take this one and look at it
real hard and try to achieve something this year if it is at
all possible. So I look forward to working with you, Madam
Chairman. Thank you very much. Thank you all.
Chairman Collins. Thank you.
Senator Carper, it is a pleasure to welcome you to the
Committee as well. You have demonstrated a longstanding
interest in postal issues and I was pleased to partner with you
last year on the legislation dealing with the retirement
contributions.
OPENING STATEMENT OF SENATOR CARPER
Senator Carper. Thank you, Madam Chairman. It is a
privilege to work with you on these issues.
I do not know that we can come close to improving on the
great work that Senator Stevens did over three decades ago, but
I mentioned in an earlier hearing the old adage of, if it ain't
broke, do not fix it. I do not know that that applies here. Not
that the postal system is broken, but if it is not perfect,
make it better. I think we can make it better. We appreciate
really the attitude that you brought to the table today. I
regret having missed the earlier panel of witnesses. I expect I
will have a chance to talk with my staff and find out in more
detail what I did miss.
I would like to ask a couple of questions, if I could. A
bunch of the questions that I wanted to ask have been asked.
But one of them, however, I want to go back to and ask it
again. I ask you to forgive me if I am being redundant, but one
the questions I think you asked, Madam Chairman, when you said,
it is all well and good that there are things that you are
against, but there are also things that you are for with
respect to the Commission's recommendations. I do not want you
to go into any great detail but I would like for each of you to
really break it into two categories: The things recommended by
the Commission that you agree with, just flat-out agree with,
and some things that the Commission has recommended that you
could perhaps agree with if they were modified. If you could
just take it up there.
Mr. Young, we always pick on you first.
Mr. Young. That is all right. The thing that I can agree to
and accept is transparency. I think every organization that has
a public service should have transparency.
The thing that I would be willing to look at, that is a
little bit tougher, Senator. There are a lot of things that are
on the edge there. There are things that we could probably take
a look at and maybe make a little bit better. But I would
answer this question in a kind of a unique way, if you would
allow me to. When I first appeared before the commission, and
look, I realize my union believes that the Internet has had a
serious detrimental effect on First-Class Mail, and my union
believes that is going to continue and probably escalate in the
years to come. So that makes cost a very important function of
this Committee. I understand that and I would not be naive
enough to suggest to you that you should ignore that.
But I want to beg that you go beyond just the cost. I am
going to give an example, a very recent event. Just last week
Brother Holton and I went over to the Postal Service and we
witnessed the signing of an agreement between Homeland Security
and the Postal Service whereby, God forbid, there would be a
biological attack somewhere in this country, voluntarily letter
carriers and rural carriers would deliver the medicine to the
patrons they represent.
I think the unique kinds of things that we do because of
the attachments that we make with those patrons that we deliver
to every day are far too often ignored. I told the Commission
when I testified before them in their first hearing, think of
what would have happened with anthrax if, God forbid, this was
a privatized Postal Service and you had all these different
companies and you could not contain the threat. I do not mean
to demean private workers, but it is not clear to me that these
people would be willing to go the extra mile that the men and
women that I represent and the rest of these presidents at this
table represent, have already demonstrated a willingness to do.
These are very courageous public-oriented, public service-
oriented employees.
Senator Carper. Mr. Young, I agree with everything you have
just said. But my question was--and it is important that you
answer my question. My question was, among the universe of
recommendations that this Commission has made, what are several
that you agree with? You have mentioned one, transparency.
Mr. Young. You want several?
Senator Carper. Yes.
Second, cite for us some examples of those areas that you
think there might be room for negotiations to find consensus.
Mr. Young. I think there is room for negotiations on the
board of governor issue. I think there is room for negotiations
on the pay cap, the executive salary pay cap. I think there is
room for negotiations on the cost of the military. I think
there is room for negotiation on service agreements with the
mailers. I think there is room for negotiation on pricing
flexibility.
Senator Carper. That is great. That is exactly what I was
looking for. Thanks.
You mentioned the effect that E-mail has had on First-Class
Mail delivery. I took a bunch of Boy Scouts from Wilmington,
Delaware to Norfolk Naval Station this past week. I am an old
Navy guy. We take them about every 3 years. We visited ships
and submarines and saw a carrier as well. Met with seamen
recruits and chief petty officers and even admirals, and had a
chance to--really a real interesting session with a fellow who
is the commander of the U.S. submarine forces around the world.
He and his wife hosted us for a little reception at, of all
places, the Delaware House, where they live on Norfolk Naval
Station.
They shared with us what it had been like to have been in
the Navy on submarines and with a spouse at home and family and
all, and what it is like today. E-mail has come to the Navy in
the big way. We have seen a little bit through the Iraqi war
how our troops are able to communicate better. Aboard ships the
same is true, and whenever sailors have a minute to spare they
try to E-mail their families back home and to communicate. You
could not do that in the past.
The admiral that we visited with, he and his wife told us
how in the early days they were lucky to get two or three
messages during a 3-month deployment from their families. The
people on the submarines could not send anything out. They
could only receive maybe two or three messages in. The message
was limited to 20 words. Today they can E-mail their families
from the submarines deployed around the world, hundreds of feet
below the surface, and communicate with their families
throughout the course of the day and the night. So it is a
remarkable revolution that we witnessed.
Mr. Holton.
Mr. Holton. I believe that the pricing flexibility part is
something that is vital and we would be in full support of
that. As far as those things that maybe could be supported if
it was tweaked or negotiated--and that is the power of the
regulator, the way they have set the regulator up. There are a
lot of things in there that we do not like, but it could be
something that could be worked on and tweaked.
Also, the way the board of governors operates. All of this,
the Postal Service in everything that is proposed, needs to
have an ability to work as a business even though it is still a
government entity. In order to meet some of these things that
we are faced with, such as wireless communications, E-mail,
those kind of things, we have to be able to operate like a
business. Yet managers at Postal Service headquarters, I think,
are pretty much micromanaged from those people that are over
them, to the point where they are not able to concentrate on
the business as much--now this is just my opinion--but as much
as they may need to concentrate on running a $70 billion
industry.
So those two things I think could be addressed if they were
tweaked, fine-tuned, negotiated in such a way.
Senator Carper. Thank you, sir. Mr. Burrus, you can repeat
any of the ones that have already been mentioned. In fact that
would be helpful. Or you can strike out on some new ground.
Mr. Burrus. The military retirement would be at the top of
my list because it is such a large number. But I will repeat
some of what has already been said, the rate flexibility, the
opportunity to offer volume discounts so they can get away from
this charade regarding work-sharing discounts, the ability to
add new products and better utilize the network, to borrow,
invest, and retain earnings. I think that is important.
The work-sharing discount issue has to be addressed. The
Postal Service cannot be successful if it is giving away money.
Even if you adopt a good model for the future, and let us
assume everything that everybody believes is correct, that
technology is going to erode First-Class volume. I dispute that
at this point but let us just take that as factual. Even if you
adopt a good model, you cannot give money away and be
successful in the future. No company can be successful that I
am aware of, by giving money away. Those are charities. Those
are not businesses.
So I think something has to be done in terms of the cost
avoidance. There has to be a standard. The government has
adopted a very good standard in terms of contracting,
subcontracting. They say, here is the standard, the process
that will be applied if you are going to have someone else
perform the activity.
The Postal Service has been separate and apart from all
those processes, and time after time again they have given
money away, hundreds of millions of dollars, and a year later,
2 years later, 5 years later, we made a mistake. Let us
recover. Bring it back inside and let postal employees--we can
compete very well. We have very experienced, dedicated workers
in the Postal Service.
When the private sector can do it better and cheaper than
postal employees, I think it is fair game. That the ratepayer
is entitled to the best and cheapest service they can receive.
But in those circumstances where they are not doing it cheaper,
it becomes political cronyism where someone that has promised a
future job for someone gets a service, then I think that is
wrong to the ratepayer, it is wrong for the Postal Service. So
I think that is one of the most important things.
As I said in my testimony, the question of the allocation
of the rates is a looming problem for the Postal Service into
the future. I think the Senator from Alaska made significant
reference to it, the fact that a lot of the volume today--more
important than the loss of First-Class Mail is the diversion to
standard. The contribution to the institutional cost by the
different classes of mail is an issue that is going to be out
there for a long time until it is dealt with, with or without
reform, because standard mail is a growing volume of the Postal
Service, projected to grow by billions of pieces far into the
future. That is going to have to be addressed very
significantly and seriously. That is not a question of reform.
It is a question of how are you going to set your rates.
Senator Carper. Thank you, Mr. Burrus. Mr. Hegarty.
Mr. Hegarty. We agree with the Commission to maintain
universal service at uniform prices, and oppose privatization.
We agree with the Commission that the outmoded and cumbersome
ratemaking process needs to be changed. We agree that we want
to maintain 7-day mail processing and 7-day delivery to every
address in the country. Maintain equity with Federal employees
on the funding for military retirees and the CSRS. And also, as
I mentioned earlier, to allow the Postal Service to offer
discounts to its bigger mailers.
As far as negotiating or what we would agree should be
talked about, I think within the collective bargaining process
we have achieved a very delicate balance with the Postal
Service. It has taken 33 years. I think we have seen the
progress made over the years, especially in recent years, and
that anything that is negotiable now should stay negotiable. I
think we have, as I said, been able to negotiate fair contracts
that were fair not only for the Postal Service and to our
workers but for the American people.
I think locking us into any set of rigid rules, whether it
is on collective bargaining, mediation, arbitration, what we
can bargain over, what we cannot bargain over I think is a big
mistake. I think that is just change for the sake of change and
I would caution against that.
Senator Carper. Good. That was very helpful. Thank you.
One last quick question. I appreciate your willingness to
let me have a few extra minutes, Madam Chairman. I am supposed
to be co-chairing another meeting in about 2 minutes so I am
going to ask you to be real brief and direct in responding to
this next question.
As you know, the President's Commission made a number of
recommendations dealing with workers compensation costs, and
when you look at the number of injuries, the type of injuries
and repetition of the injuries, and the costs that grow out of
those injuries for the Postal Service and for those of us who
use the Postal Service, there is a lot of cost that is tied up
there. I was struck in one of our hearings when we heard that a
number of people who are hurt on the job and begin drawing
workers compensation continue to do that not only through their
normal working life but well beyond that into their seventies,
eighties, even nineties, which seemed peculiar to me. I am
going to ask you to be real short in responding to this
question, but are we doing enough to curtail injuries? If you
can give me maybe one real good idea for what further we can do
to reduce the incidence of injuries.
And maybe a second idea as to what we can do beyond
curtailing the incidents to hold down the cost that grow out of
workers comp. Mr. Hegarty, do you want to go first? Again, I
would ask you to be brief.
Mr. Hegarty. Sure. I appreciate you bringing this up.
President Bush has sent a memo to Secretary Elaine Chao to ask
her to reduce workplace injuries in the Federal sector and I
definitely agree that prevention is the first key to reducing
cost. I do not think we should be penalizing employees who
through no fault of their own are hurt on the job and then
suffer a loss of income as a result, because they are not
getting their full salary, they are not allowed to work
overtime. Under FERS they are not allowed to make contributions
to the Thrift Savings Plan, which is a serious detriment to
their future income.
But as far as are we doing enough, I think we are making
progress. The American Postal Workers Union, the National
Postal Mail Handlers Union, OSHA and the Postal Service
partnered last April on an ergonomic risk reduction project
which we have rolled out nationwide. We are training site by
site now to reduce musculoskeletal injuries and repetitive
motion injuries of our people in the field. I think ergonomics
is probably one of the best fixes that we could put in place to
eliminate workplace injuries.
The other thing that the Postal Service has done is
partnering with OSHA in getting special status on sites for
safe workplaces and we are working with them on that as well.
Senator Carper. Thanks. Mr. Burrus, again, briefly.
Mr. Burrus. We are not doing enough. We have had several
directions towards reducing workplace injuries for a 20-year
period. It was attempted to discipline their way out of
injuries. That every employee that reported an injury was faced
with disciplinary action, and that was the wrong approach. We
are now coming back to the other side of trying to find a
cooperative approach. Our union stands willing at every
opportunity to do all that we can in concert with the employer
to ensure that employees do not become injured.
The approach of looking at employees that are already
injured and say, are they costing the service money? Do
employees continue on injury compensation because it is in
their own interest up to the age of 100 and 105, and how much
it is costing the system, I think that is the wrong approach. I
think we ought to look at what is causing the injuries. Are
employees knowledgeable of how to prevent them as best they
can. And in those circumstances where they cannot avoid the
injury or something occurs that no matter our best effort
employees are injured, then we ought to have a joint approach
of making sure the employee gets the benefit of all of the
rights and privileges available to them without being
personally penalized.
Senator Carper. Thank you. Mr. Holton, a brief comment,
please.
Mr. Holton. I think we are working toward doing as much as
we can to improve safety and job-related injuries. I think
sometimes though it boils down to money and I will give you an
example.
John just told you about the OSHA ergonomic study that
these two and the Postal Service have partnered in. Then when
it came time, I believe they were talking with NALC as well as
myself about expanding the program to include our delivery
people, it got to a point where there were no resources left to
expand it. So in that sense we kind of got left out and it is
on hold.
But then again, we are also working--we have established a
national task force, safety task force with the Postal Service
and our union in which we are looking for ways to reduce auto
accidents, because rural carriers drive three million miles a
day. We are exposed out there on the highways in bad weather
and a lot of places. And one of the biggest problems we have is
pulling out and not knowing that something is in a blind spot.
So the Postal Service has contracted with MIT to look at
finding some type of sensor that we can mount on our car so
that as we get ready to pull away from a mailbox, it looks
behind for us and alerts the driver if something is there. Now
whether that can work or not and can be made into a device that
is affordable, but still it is something that we are working
toward.
Also John talked about quality of work life. We have a
quality of work life process also and we continuously address
safety issues through that process to come up with things that
would reduce potential for injury. But it is still, I mean,
when you have one employee death or the number of injuries that
we have, it is still too many. So I am sure that there always
can be a case made to do more.
Senator Carper. Good.
Mr. Young, I am going to ask you to just maybe in 30
seconds, if you could finish.
Mr. Young. I will try very hard.
Senator Carper. Then you can expand on that in writing.
Mr. Young. It may not be necessary. The job of delivering
mail in the weather, in the neighborhoods that we deliver is a
dangerous job. We do what we can to see that the injuries are
reduced. I do not know if there is any way you can help us
there, which is probably going to drive us to look at the
costs, even though we do not want to, that you are talking
about.
I think, Senator, the idea of the workers comp cost and
what happens when somebody retires should be discussed and
debated. There are issues on both sides. I am willing to
address that dialogue at the appropriate time.
Senator Carper. Thanks.
Madam Chairman, I appreciate very much your generous
allocation of time here for these questions. Gentlemen, thank
you all for coming here and for the spirit that you bring to
today's hearing. Looking out in the audience, Madam Chairman, I
see an old colleague that I served with in the House of
Representative, Congressman Bill Clay. It is always good to see
you, Bill.
Madam Chairman, I would ask unanimous consent to have my
statement entered into the record at the appropriate place.
Thank you so much.
[The prepared opening statement of Senator Carper follows:]
PREPARED OPENING STATEMENT OF SENATOR CARPER
Thank you, Madam Chairman.
I'm pleased that we will be hearing testimony today from OPM and
the four major postal unions on the workforce recommendations made by
the President's Postal Commission last summer.
As I mentioned at our last hearing, these recommendations have
received quite a bit of attention since their release. They are
probably among the most controversial made by the commission. I won't
go into detail again about my concerns with them, but I will briefly
touch on one subject I addressed last time.
I've said in the past that I don't think the evidence is there to
prove that postal employees are overpaid. I'm also reluctant to tinker
with a collective bargaining process at the Postal Service that has
worked well, especially in recent years. However, I wouldn't say that
the current system is perfect. There is certainly always room for
improvement.
I get the impression, Madam Chair, that the Postal Service has a
pretty good relationship with its employees right now. It's something I
know they've worked hard on in recent years. That good relationship is
in large part the reason why we've had three out of four major postal
unions recently agree to modest contract extensions.
That said, the current leadership at the unions and the Postal
Service will not be around forever. I think it is important, then, that
the Postal Service take full advantage of the once-in-a-generation
opportunity that postal reform offers. I believe it is important that
they sit down with their employees to see if there are any changes that
need to be made to the current system to ensure that the labor peace we
have seen in recent years lasts for as long as possible.
I'm not sure that the Commission's workforce recommendations are
the right approach, but I am certain that there are reforms out there
that could make a decent system better. The best reforms, however, will
be the ones that management and labor can agree to jointly.
Chairman Collins. Without objection. Thank you, Senator.
I want to thank all of our witnesses today, both from OPM
and the distinguished presidents of the four major postal
unions. We very much appreciate your being with us today. Each
of us shares a common goal, and that is we each want to make
sure that the Postal Service continues to provide universal
service to all Americans at affordable rates.
We also are grateful for the work that your union members
do each and every day. Mr. Young, I am pleased that you
reminded us, and Mr. Holton reminded us not only of the service
provided and the Heroes Awards, but also of the recent
agreement between the Postal Service and the Department of
Homeland Security. I think that agreement is indicative of the
service commitment, the willingness to go the extra mile of
your members.
So I very much appreciate your contributions to this
debate. I hope we can work very closely in drafting
legislation. I realize these issues are difficult. We may not
see eye to eye on all of them but I want you to know that your
contributions and input are always valued here. So thank you
for your testimony today and for being with us.
Today's hearing was the fourth in a series of hearings. I
am committed to making sure that we hear a wide variety of
views as we go forward and that we have the benefit of as much
expertise as possible as we tackle this very complex issue. I
will keep the record open for 15 days for the submission of any
additional materials that our witnesses or our Members may
have.
This hearing is now adjourned.
[Whereupon, at 12:22 p.m., the Committee was adjourned.]
A P P E N D I X
----------
PREPARED STATEMENT OF SENATOR LAUTENBERG
Postal reform is an important national issue, but most Americans
spend little time thinking about it because they take postal service
and the employees who provide it for granted.
The importance of the U.S. Postal Service (USPS) to our national
economy cannot be overstated. I'll give you one example: A 2-year delay
in postal rate increases has the potential to save publication
companies like AOL-Time Warner approximately $200 million in mailing
costs.
Last year alone, the USPS delivered more than 200 billion pieces of
mail. So the important role the Postal Service plays in our economy and
the contribution of its 843,000 dedicated employees should not be
overlooked or taken for granted.
Having said that, this is indeed a time of great change for the
Postal Service. 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's 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 must take issue with many of the Commission's labor reform
proposals.
As a former businessman, I understand the need to make a workforce
as lean and efficient as possible. But limiting employees' collective
bargaining rights and attempting to depress workers' wages while
increasing executive compensation will not solve the Postal Service's
organizational and workplace problems. Such ``solutions'' are likely to
make things worse.
Instead, I think we should take full advantage of the opportunity
that work force attrition will present to us in the years ahead. Forty-
seven percent of existing Postal Service employees--about 347,000
individuals--will be eligible for retirement by 2010.
I look forward to hearing from our witnesses about this idea and
other postal reforms.
Thank you, Madam Chairman.
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