House postal subcommittee chairman Stephen Lynch
opened today's hearing with a very sober assessment of the challenges that
now face the Postal Service. For the first time, a member of Congress has
acknowledged that the time may have come for Congress to consider permitting
the Postal Service to depart from the current six-day mail delivery
requirement. He noted, however, that a considerable amount of additional
information will be needed to convince Congress to take this momentous step.
Lynch said that the markup scheduled for H.R. 22 today was delayed to give
the Congressional Budget Office additional time to get its estimates of
costs in order. He noted that there would be benchmarks set forth that would
govern how H.R. 22 would operate. Steps would be taken to ensure that there
would be no perpetuation of unfunded liabilities.
The chairman told those present that there are some redundancies that exist
in the current postal retail network. Postal volumes and revenue trends are
not good, so eliminating these excesses may need to be explored.
Rep: Eleanor Holmes Norton seems also to have come
around to the reality that the mail system that Americans have always known
probably will never return to the days of yesteryear. She wanted to know,
though, what the effect a change in days of delivery would actually have on
the viability and value of the USPS' services.
Rep. Gerry Connolly acknowledged that the post
office that our grandparents knew may not be the post office that is needed
by their grandchilren. The future of the Postal Service, he said, is at
stake. The business model that underlays the USPS needs to be made more
viable.
William Galligan, Senior Vice President of
Operations at the U.S. Postal Service told the panel that the Postal Service
is facing the most significant challenge of its history. Mail volume and
revenue have precipitously declined, and the USPS is looking to end the
current fiscal year with a loss. Next year looks no different. First-Class
Mail is dropping in volume and other mail is bypassing most mail processing
facilities via destination entry. He said the USPS strongly supports the
passage of H.R. 22.
Nonetheless, the USPS will still face significant challenges that require
structural solutions. He painted a story that made it clear that the Postal
Service now is saddled with operational assets that no longer are needed.
Facilities need to be restructured or closed. The change in mail volume also
makes clear the need to adjust the frequency by which mail is delivered. He
noted that most of the savings the USPS has realized thus far come from
changes to operations. He noted that even with a change of the number of
days of delivery, the USPS would need to make adjustments to the
availability of retail and other services to accommodate the needs of the
public and certain financial mail users. For instance, he said, Saturday
retail services would probably be maintained.
Galligan noted that the NALC has been helpful in the rescheduling of city
letter carrier routes to reflect changes in mail volume. He told the
subcommittee chairman that H.R. 22 is only going to be a short-term cash
flow issue. He noted that gas problems once again are a problem. Rising
prices and dropping mail volumes make the cost-cutting challenges the USPS
faces even more difficult. He noted that reducing mail delivery to five days
would allow the USPS to eliminate 14,500 temporary employee positions.
John Waller, Director of the Office of
Accountability and Compliance at the Postal Regulatory Commission, also
painted a less than optimistic outlook for postal revenues. He noted that
the Postal Service is taking steps to use more fully the flexibility granted
the Postal Service under the new postal law. He echoed Galligan's detailing
of steps the USPS has been taking to reduce costs and improve efficiencies.
He noted that the PRC recognizes the need to have the USPS provide accurate
and transparent operating and financial information. He noted that while the
Commission has not taken a formal position on H.R. 22, he said that
Commission Blair already has spoken about the need for this legislation.
Waller told the subcommittee that the Commission's estimates of cost savings
coming from changes to frequency of mail delivery include estimates of
additional mail volume changes precipitated by delivery day change. He noted
that the PRC is trying to work as closely as possible to facilitate the need
for the USPS to move ahead with new or changed services without
extraordinary regulatory delays.
Phillip Herr, Director of Physical Infrastructure
Issues at the U.S. Government Accountability Office also detailed the
financial challenges that face the Postal Service. He said
GAO may have to consider adding the USPS once again
to its High Risk list. He noted that while GAO supports the idea
of giving the USPS a two-year adjustment on its scheduled payments for
postal retiree health benefits, it does not support the eight year plan
detailed in H.R. 22. He said H.R. 22 simply would increase the amount of
this obligation that would remain unfunded.
Rep. Jason Chaffetz voiced the doubts that have
been articulated by others in Congress that passage of H.R. 22 might lessen
the Postal Service's cost cutting ardor. In addition to his questions
regarding cost cutting, Chaffetz asked about the steps the USPS has taken
and should be taking to improve the market-value of mail-based
communications. He said he really hoped the USPS would begin to engage more
creatively.
Rep. Brian Bilbray said that the time may have
come to reimburse the USPS for the taxes it pays on fuel, similar to what's
done for the military. At the same time, he noted that there is nothing in
the Constitution that requires that mail service be provided by government
employees working for a government agency. He said that the time has come to
begin to plan to accommodate for a reduction in delivery frequency rather
than spend more time to avoid the inevitability.
William Burrus, President of the American
Postal Workers Union, said it is essential to provide the USPS the relief it
seeks from enactment of H.R. 22. He said, though, that the Postal Service has
not explored fully all the alternatives. He charged that no previous effort at
operational reorganization has achieved any appreciable savings. He said the
USPS has not been forthcoming with any of the details of its plans. He attacked
mailer worksharing and the method the Postal Service has used to price its
services. The USPS, he claimed, has been giving money away to "large commercial
mailers" to the disadvantage of the "average American citizen."
He siad that the solution to the USPS' problems lies in stopping giving this
money away to business mailers. Burrus noted that his bargaining unit has
suffered most from current USPS cost-cutting efforts. He stressed again that the
USPS needs to look at reducing worksharing as a method for achieving greater
efficiencies. He said the USPS should not just look at a "disproportionate" part
of the network. Five-day delivery, he said, is an act of desperation. It's going
to be the beginning of the end. It will add to the diversion of mail to
electronic means. It also will create a window for private sector competition.
John Hegarty, President of the National
Postal Mail Handlers Union, said that facility consolidations or anticipated
changes on a case-by-case basis, particularly to minimize its impact on
employees. He also said that the Mail Handlers supports congressional passage of
H.R. 22. He said he was concerned that reducing the number of delivery days
could drive more mail out of the postal system. The competitive advantage of
Saturday delivery would be lost. He noted, though, that it may need to be
considered if it's essential to USPS survival.
Dale Goff, President of the National
Association of Postmasters of the United States, said that network right-sizing
is achievable if the USPS handles it properly. He argued against the elimination
of many retail postal operations. He said the USPS also should pursue
cross-craft training to improve productivities. He said that caution should be
observed regarding days of delivery. Eliminating a day of delivery will not be
the savior of the Postal Service.
Anthony W. Conway, Executive Director of
the Alliance of Nonprofit Mailers, noted that the causes of the
Postal Service's current crisis is well known. Even aggressive cost-cutting
efforts have not been sufficient to keep pace with declining business. It's
time, he said, to seriously consider ending Saturday mail delivery. The USPS
should avoid at all costs an exigency rate increase. The Postal Service's
massive cost structure requires pruning. The nation's postal needs have changed.
So also the Postal Service needs to change. There needs to be a whole lot more
creativity within the Postal Service. It can't come fast enough. Congress also
needs to reconsider what it really expects the Postal Service to do.
Robert McLean, Executive Director of the
Mailer's Council, noted that the USPS' retiree health funding payments are
adding to the Postal Service's challenges. For the long-term, everything needs
to be on the table. We need to find more ways to bring more mail into the
system. Worksharing can help make this happen. Postal products need to be made
more available to the general citizenry.
James O'Brien, Chairman of the Association for Postal Commerce, said the Postal Service cannot remain self-sustaining under its current model. He said the USPS must adjust its network to better match work requirements. This is acceptable provided the USPS works to maintain service performance consistency. Given the Postal Service's dire straits, PostCom is willing to work with the USPS on the redefinition of the frequency of mail delivery. Worksharing is a USPS success story. It improves cost efficiency. It should be continued and expanded. He noted, though, that the Postal Service should avoid shifting costs to the private sector merely to make its own numbers look good. He noted that PostCom also supports congressional consideration of H.R. 22. Mailers really do not want to see the Postal Service default on its payment to Treasury. The Postal Service very much needs the flexibility to redesign and run its own networks. Five-day of delivery most definitely will affect many people's businesses. These, however, are the kinds of sacrifices that need to be made to keep the Postal Service viable. We need, however, to better understand the numbers and the impact. O'Brien noted that it's impossible to make any definitive answers to the question as to whether mail volume and advertising is going to come back. He recounted some of the changes that have affected the magazine publishing industry, including companies such as his own. O'Brien recommended that the members and staff take the time to review once again the report of the President's Commission on the Postal Service. He said that there were several good suggestions that had been made and should be reconsidered.