coverage without increasing the number of primary care physicians is that the already busy emergency departments are going to be swapped with people seeking care, because now that have coverage, it will come to the ed, where we all required to see many comers. guest: you raise a very valid 0.3 and met with leadership at johns hopkins university and a date raise a similar -- you raise a very valid point. i met with leadership at johns hopkins university and they raised a similar point point. we will have a large increase in health care centers so that we can deal with the needs of people today not using primary care facilities. but you are right. the bill will not be implemented overnight. it will take several years for it to be fully implemented.

we have to have primary-care physicians in place before we have these requirements go into place. host: last question, a different topic the senate will vote on expanding the cash for clunkers program. how will you vote? guest: i will vote for it. it has been more successful than many of us thought. the milage increase has gone up 10 miles per gallon on new cars. it is beating feel efficiency and new cars by 20%. we are getting off the roads these cars and trucks, mainly trucks, that are very inefficient, and getting a much more efficient automobiles, and helping our economy and creating jobs, which a stimulus should do. it is good news. host: thank you for being here. we will take you live to capitol hill. this committee hearing is the senate, and security -- senate homeland security and government affairs committee. it is chaired by tom carper.

it is on the health of the postal service. you have probably heard that the postal service has a $7 billion shortfall. there are discussions of closures of post offices, fewer days of mail delivery. all that will be discussed on live coverage of this hearing, which will begin shortly. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] .

it has had an impact on just about every family and every business. the downturn has impacted the postal service and its customers far more than most. financial data released yesterday for the third quarter of the the school year shows that the title of this hearing is accurate. our postal service is in crisis. according to the postal service, mail volume was down last quarter more than 14% compared to the third quarter of last year. we have lost $2.4 billion. the latest year-to-date loss is $4.7 billion. more than $7 billion by the end

of this fiscal year is projected. this projection takes into account cost savings we are expected to achieve by the end of next month. these numbers are sobering. some would say they are alarming. i should point out that the postmaster general has said that the mail will continue to be delivered. postal employees will continue to be paid. the path of this situation is clear. the postal service next month must get some measure of financial relief. not a bailout or lips service. a prudent measure of a fiscal relief. perhaps some tough love. i mentioned earlier that the postmaster general has assured

me that the mill will continue despite the dire projections we will discuss today. absent from some action from congress or the president in the near term, we cannot comment that that will be the case. in recent months, we have come to the conclusion that the most appropriate way to give the postal service a measure of relief is to restructure the aggressive retiring fund. the schedule has a sprained more than $5 billion a year to pre- fund its future health obligations to its retirees. this is on top of regular payments for current retiree premiums. the combination is taxing. we have introduced legislation.

the postal suffers -- service retiree health payment schedule should be restructured so they can get through it over the next several years. our proposal works much like a mortgage renegotiation for a family where someone has lost a job and needs the negotiation to keep the family able to stay in the house. if a young couple is married and both have jobs and buy a home and then in 25 years, they could start to take a 10 year mortgage. life goes on, kids, long, someone loses a job, they go back to their mortgage broker and say they want to restructure the mortgage. we cannot meet the payments. is too aggressive given the tonnage a reality we face today. we would like a 20 year mortgage

instead of a tenure mortgage. something more -- 10-year mortgage. something more reasonable that we can play. our bill is similar to that. a bill is not a silver bullet. it does not solve all the problems. work needs to be done in a number of areas to streamline postal operations further and bring back some of the business that has been lost. much of the cost-cutting discussions focus is on our proposal to move to a five-day delivery instead of a six-day delivery. it estimates that making this change would save $3 billion a year or more. a clear majority of american people would not oppose the elimination of those services.

we had a postal reform bill in 2006 that gave the postal debarment the authority to reduce frequency of deliveries. since then, congress has decided to prevent the postal service from exercising that authority. the situation the postal service is facing now calls for an evaluation of this prohibition. congress needs to reevaluate the position it takes on facility closures. the postal service clearly maintains that 35,000 retail outlets in more than 400 places around the country. it maintains that many. this network developed before e- mail and a number of communications that have revolutionized our society. we do not need all these facilities these days.

congress put up roadblocks whatever there is a mention of consolidating some of those facilities. the postal service itself needs to continue to find new ways overtime to make the products and services more relevance and with increased demand for them. some new commercial flexibility was given to the postal service in a few years ago. they have been able to take advantage of that flexibility in some instances. one is the flat with bob's promotion that i am sure a lot of you are sitting on television. -- flat rate box promotion that i am sure a lot of you are seeing on television. a variety of things are being done. we need to see more of that. the response has been good for a summer sale to bring back

additional advertising and other such mail in the system. more can be done in and using a new spirit at the postal office. labor costs -- they are set to expire in 2010 and 2011. it is my hope that these unions will continue to work constructively with the postal service for the negotiations for just pay, benefits to reflect the reality that the postal service faces in this market today. in conclusion, there are many services cover federal government provides for people in this country. few of them are -- as much as the postal service. i have seen approval ratings and

customer satisfaction ratings for the postal service. the postal service numbers are better than most of ours. we want to make sure that level of service and satisfaction continues to be held by the american people. we look the workers at the postal service will continue to be proud. let me turn to my colleague. >> thank you, mr. chairman. thank you for a comprehensive statement. and what you think you and senator cullis for your very hard work that you and the members of the committee have done on this issue over the years. i would point out that in two dozen 6, i believe the legislation was passed -- 2006, i believe the legislation was passed overwhelmingly. we address the problem for years later with a bigger problem.

the post office loses $2.4 billion in one quarter. i read your statement. i see no specific proposals you have except that maybe we should close some post offices. the would not commit to an exact number of closures but some facilities could consolidate operations what others vacate their principal location. we need some specific proposals to get the post office back onto at least a zero-loss of basis. we have had a lot of hearings

for pass legislation. so far this year the estimate is $7 billion loss. we cannot do that to the taxpayers of america. we have every right to expect some specific recommendations from mr. potter and the administration said that we can enact the law. a lot of this is due to the fact that america has changed. just as we went from horses and buggies to automobiles and now from hand delivered mail to text messages and e-mail and all the other means of communication. the post office will have to adjust to it or they will go the way of the horse and buggy. so far we have not seen from the administration or from you, mr. potter, who i understand is well

compensated for your work, a specific proposal to bring this situation under control. the 2006 bill did not solve the post office problems. maybe we have some consumer advocates, and testify before this committee as to their ideas on how we can solve this problem. we are not getting it from the it administration. >> that we turn now to our chairman. thank you for being an original cosponsor of this. >> thanks. i want to thank you and senator collins for your extraordinary work over the last several years. normally i do not come to the subcommittee meetings. we are in such a moment of crisis that i felt it was my responsibility to be here. i wanted thank you for what you have done. the post and reform act of 2006 represented a remarkable

accomplishment in terms of the variety of different stakeholders' that were brought together. i think it was a constructive and progressive piece of legislation. as you know now, the problems confronting the postal service of the united states went beyond what the postal reform act of 2006 could do. in one way we are already familiar with the extraordinary revolution that occurred in communication in our time in terms of e-mail. it is a new reality of our life. the second painful reality that we did not foresee that time with the great recession that we have gone through in the last couple of years. in my own view, the postal service has made them great

efforts to try to put the boat back on an even keel. the usgs has reduced $6.1 billion this year by a recent 87 million work hours. executive salaries were reduced. trying to reduce the cost of some existing contracts that result in some long-term savings. the oddest -- the obvious reality is the loss of $2.4 billion. the postal service is in a

downward spiral. unless we act forcefully, this great american institution created in our constitution -- that is how serious the founders of our country believed the responsibility was to provide for post offices. unless we apply some tough medicine, this dollar spiral could become a death spiral for the postal service. we do not want that to happen. the u.s. postal service health retiree funding format -- i think it is good response to the crisis. without it, there would not be enough money to pay its bills.

the postal service has made clear that it will continue to deliver the mail and pay salaries. this might change would be proposed. it is critically necessary to do this rescheduling of payments into the retiree health benefits fund. payments are now being done on a level that is way above any other government program or private-sector program as well. the reality is that that is not going to be enough. it is ia short-term stepped that will enable the postal service to keep going after october 1. we need to do something that will save the postal service.

it will not stabilise if we continue to do business the way we have been doing it. when i say that, i speak not just to the postal service, its workers and management, i speak of us in congress. none of the measures that we have talked about is going to be enough to make this work. all of us have to think about doing things we never would have thought about doing with the postal service. an amendment was introduced that requires the binding arbitrator in the labor-management dispute to consider the financial condition of the postal service. until our friends in the unions are very upset about this. i did not see how i could justify voting against that amendment. it is not mandatory.

it is a statement of reality. that same reality has to now be adopted by those who are privileged to serve and have the responsibility here in congress. i know there are discussions of consolidating work at branch offices. a five-day a week mail delivery. these responses we never would have considered at an earlier time. i do not see how we can keep this american institution can keep going without taking steps exactly like that. the constituents will not be happy. every time they expressed their unhappiness to us, we have to say if we do not say some of these tough moves, what it means is we will either have to raise your taxes make greater payments

to the postal service from the u.s. treasury, and put it on the government credit card. that is an act of irresponsibility, because we are turning the burden of repayment over to our children and grandchildren and those who follow. those of the choices we are going to have to make. i remember some years ago there was a little postal service in connecticut. people love that little post office. it was not busy, but they loved it. all of our congressional delegation went to bat for it. the post office was kept open. those were different times. we simply cannot do that anymore. this great postal service of ours is an iconic american institution. it is always delivered for the american people. now it is time for the management workers and congress to deliver for the postal service.

if we do not apply the kinds of tough measures or tough love if you want, this institution which we depend on is simply not going to be there. thank you. >> thank you. i think senator collins for her work then and now. >> thank you, mr. chairman. that may commend the chairman for having this important hearing this morning. i appreciate the opportunity to join you. i must say that it is most disappointing to once again be discussing the dire financial condition of the u.s. postal service. just 2.5 years ago, congress had a crucial reforms that i

offered that left the postal service from the high-risk list. now it is in a financial crisis. it has landed on the high-risk list. in 2008, the agency lost $2.8 billion. this year it is projected to have a net loss $7 billion. the postal service matters to our economy. it is the essential to a $900 billion milling industry that employs 9 million americans. what we are talking about a fax from more than just the employees who are working at the local post office or distribution center. it affects 9 million americans

working in fields as diverse as paper manufacturing, printing, publishing, direct mail, and financial services. indicative of that is one of our witnesses today, the chairman of a paper company that has a large plant in maine. he is representing many other businesses whose operations are linked to the postal service. if the postal service or to resort to excessive rate hikes were decrease delivery service, it has ramifications for all of these companies. they may have to respond with laos, and increase prices to consumers, or reduce services.

these would contribute to an even more perilous condition for the postal service. why? when businesses cut their costs, they reduced mailing costs. that leads to a further erosion of the postal service and shrinking mail volume, which will count more than halve rate increases in truncated delivery service. s senate tip -- as senator lieberman said, this is a vicious cycle that has no good outcome. we must prevent downward spiral. we must put our shoulders to the will and accomplished the difficult task of transforming the postal service. the postmaster general has offered three major proposals for congress to consider.

first is adjusting the payments to the retiree health benefits fund. i support a judgment in this area, the bill approved by this committee would have an increase in the unfunded liability of $4 billion. i think that is a problem. second, the postmaster general has proposed to eliminate six- day week mail delivery. and he has proposed closing or consolidating post office facilities. the post office is reviewing a 677 of as 3200 stations and embraced -- branches nationwide foreclosure or consolidation. this proposal along with other plans would give reduced

services to customers. is that really the right response to this crisis? the question is will it make a real difference in the cost structure of the postal service back if it will, we should consider those moves. when you look at where the costs are in the postal service, it raises a lot of questions in my mind. the postal service can also not expect to gain more business which is desperately needed if it is reducing services. the proposal for closing or consolidating the branches -- the non personnel costs of these facilities account for about six tenths of 1% of overall postal service operating costs.

if the postal service were to close all the branches and stations on the list -- let us say they close every one of them, it would reduce the operating costs when you include personnel by less than 1%. so we need to look at whether that is worth it. or whether there are better more effective means of reducing costs. last week before this committee , they're looking for relief. our committee adopted several amendments to address some of the cost structures and made the bill more fiscally responsible.

additional changes need to be made on the senate deplore. there is no question that we do have to act. we must rescue an institution dating to the early days -- the earliest days of our nation. we cannot allow the postal service to fail because it is too fundamental to our economy. it is going to take an honest assessment of where the costs are. it will take everyone working together, management, employees, members of the mailing community, this congress, and the administration to contribute to the solution. we must work together to find a real, lasting and fiscally responsible solution. thank you.

>> thank you for your hard work on this floor. our bill increases the and the unreliability fight -- by $4 billion. . we would have less money and less interest -- it is a drawback. i want to note that for the record. we will not recognize you for your statement. >> >> i am pleased to be here today. i know that we have a large group of witnesses here today. i will withhold my opening

statement. i have some questions during the q&a session. >> we are glad you're here. thank you for your participation. >> our first witness today will be john potter. he began his career in the postal service in 1978. he is postmaster general and has been so since 2001. our next guest is here as well. he is scheduled to serve until 2014. president clinton appointed him. thank you for your service.

our third witness is david williams the inspector general of the u.s. postal service. he has a lot of experience. he has been inspector general for five federal agencies during his career. our next witness is nancy. she is the says its director of the human resources and office of personnel management. thank you for your work. our next guest is no stranger to this committee. nameless said a variety of government programs. each of you will be recognized for roughly five minutes.

try to stay as close to that as you can. your entire statement will be made part of the record. mr. potter, please proceed, and thank you for joining us. >> good morning, mr. chairman. i appreciate the opportunity to speak with you today. i want to express my sincere thanks to the various committees for your tremendous progress in moving s15 forward for consideration with the senate. thank you for supporting a strong and national postal service system. enactment of this bill will enhance our liquidity at a time where we really needed. it would reduce our projected losses by over one-third in 2009 and 2010. we support those amendments, in

particular one that improves hour arbitration process. another then accelerates the report on our business model. this will initiate a broader debate about the manner in which postal service can help the american public. i offer you my full support and cooperation as we work with these goals. we believe that a fundamental restructuring of the legislative and regulatory framework of postal services is required. that is the future of what has been since the nation's founding. the right of every american to send and receive mail. the postal service exist as a governmental entity whose mission is universal service to all.

that mission is a direct reflection to the values on which this country was founded. those values of equality and opportunity continue to drive the postal service today as they have for more than 200 years. to adjust the challenges we face, which must push operational efficiency to the limits permitted by current postal laws. when must foster growth by increasing products and services to our entire spectrum of customers. it is possible by enhancing our performance-based culture. we need an extraordinary amount of commitment from postal stakeholders. the cost of underwriting and ever expanding universal service network and other government obligations are needed. a modern, self-sufficient postal

system can be constructed to continue to provide universal service for all at affordable prices. to do so requires new flexibility to adjust not corpses and services and to minimize trans governmental and work rules and expectations that carry with them costs and inefficiencies. it the post a community is up able to achieve this, then it appears to us that the remaining option will be more unpalatable for more stakeholders. the postal service must operate at of its antiquated business model until they are able to have a new model. these statements are taken almost verbatim from the transportation plan we developed in 2002 at the direction of congress. we achieve in exceeded many of the goals of the plan.

service and customer satisfaction continue to set new records. we have removed more than $40 billion in humans of costs, increasing efficiencies as our delivery base and its costs have grown by the addition of a loan -- 11 million new addresses. we are innovative with pricing and initiatives. we are producing results. our employees are more engaged than ever. even with the success of these efforts and new levels of flexibility, our situation is more tenuous than ever. this does not reflect a change in will but in priority for a change in command of. it reflects changes in the economy and the use of a male patterns. the costs are beyond our authority to control. the issue is not the value of the mail despite the best technological changes in the last decade.

the male is still a fight -- vital channel for financial, personal, and business communication. it is one of the most structured services in america. it is one of the most effective. the offer is unsurpassed value. we are working to increase the value each and every day. at the end of the day, for focused uncomplimentary efforts, we can protect a vital and vibrant national postal service. it must continue to bring efficiency of service to the highest level. we must identify a new business model that will offer success in any business environment. ms. close the gap between our revenues and our costs. we want to increase efficiency to narrow the gap even further.

we cannot only eliminate that gap of return to profitability without placing any financial burdens on the american taxpayer i going to a five-day delivery week. it will take patience and cooperative efforts by everyone who has a stake in emailed. we must advance the common interest. the nation's mail system was created to serve everyone equally. this must be our only goal as the work to preserve and strengthen the united states postal service, the finest in the world. that includes a statement. >> thank you. please proceed. >> they give for the opportunity

to testify only a financial crisis affecting the united states postal service. i have served on the commission for 11 years with many opportunities to support and second-guess shares. this is my first opportunity to speak in front of you myself. all of the commissioners are in general agreement for these matters. there are some differences. i think your comments and those of the postmaster general are fully described -- describing the financial situation that the postal service finds itself in. their revenues are down at

least 6 billion so far this year. at the end of the year, they may need additional congressional action in order to meet all of the payment. ups and fedex had revenue declines of 11% and 21% respectively. this is a difficult time for the industry as a whole. the postal service has responded to the revenue loss with the most aggressive cost-cutting in its history. under the postmaster general, the service has cut costs for several years. they are expecting another 100 my work hours taken out this year. an evaluation of the services,

management and labor have worked cordially to streamline this system. we are confident that they are going to be in a responsible for cost control in the future. at the request of the subcommittee on federal work force, the commission examined the underlying methodologies used by the office of personnel management to determine the postal service's unfunded liability for its retiree health-care benefits. you have received full copies of those reports. they are available online. hopefully our analysis will be helpful to you in this committee consider a long-term measures to address funding to the benefit fund. the commission developed an alternative calculation to those provided by the other agencies

utilizing current industries and best practices. this produces a long-term viability the could result in a lower payment per year than the law requires. the regulatory commission is also in the process of reviewing the postal service request for reduction in post offices. we have initiated a docket to review the matter. amid reports have been inaccurate about the process. let me be very clear. the law gives the post a regulatory commission the authority to review the process the postal service proposes, not to decide on a merit of closing individual facilities. the review does require us to

look at the potential impact that such closings would have on communities, the adequacy of financial analysis developed in planning, and participation in the process. operational changes could affect services nationwide. they must consider that. recognize that congress would have to allow such a change. whether it is a five-day delivery, collection box removal, or closure of facilities, the postal service seems intent on reducing its physical presence. no proposals have been put forward to find new sources of

revenue at post offices such as part during with other public agencies -- partnering with other public agencies. how the postal service fits into the framework of american society is now being asked. the committee is aware of the impact the postal service has on our nation's charities, the political process, and the overall flow of information. voting by mail is increasing exponentially and the country. not long ago, people service demonstrated its ability to bind presidents together when they had to make various locations -- the elections even when people were dislocated during hurricane katrina. 95% of people responded felt

the post office was important to them. while cost savings are important, the regulatory commission has a role in determining whether these cost- saving measures are beneficial in the long term or counterproductive in terms of providing ongoing support for the postal service from the community in the nation as a whole. it's also accountability has provided various things. potential new markets could be developed around hybrid products. standard mail product with a guaranteed data delivery is an

example. opportunities to better use the existing facilities have yet to be explored. the american public demands effective, and affordable nationwide service. >> i am going to ask you to wrap it up. >> ok. the commission stands with the west of the committee in congress to work towards any changes that will be required of us in the future. >> thank you. >> thank you mr. chairman and members of the committee and subcommittee. i appreciate the opportunity to discuss the retiree health-care liability for the postal service. that is currently threatened by new communications technology and the economic downturn. this situation has turned into an immediate crisis because of

the diversion of cash to pay for future retiree health-care benefits. the first six months of this year's payments was $2.7 billion. the postal service would have made $400 million instead of losing $2.3 billion in the first half of 2009. the postal service must make 10 annual payments of money for running this. the size of the $5 billion payments and the current payment method is damaging the financial viability of the postal service even during profitable times. the postal act should not affect the federal budget deficit. the postal service is not part of the federal budget and does

not receive an appropriation for operations or make its money from the sales and services. the payment amounts are fixed through 2016 and to not reflect the of earnings estimates. declining staff size and the ball must in the pharmaceutical and health-care industries -- during the current economic climate to the postal service must abortion certain places. it must borrow to pay a debt that will be incurred in the feature is a controversial practice. beyond the prominence with the payment, it is important to know -- beyond the problems of the payments, it is important to know if the postal service is obligated.

the estimates of the liabilities estimate how way the postal service will have a funded its retiree health obligations and the proper funding levels given an adjustment to the assumptions. health care inflation will average 7% which is higher. that is the inflation rate often used by fortune 500 companies. the payments are aggressive, reducing the postal service's unfunded liability more quickly than the typical pre-funding plans. by the end of 2016, the current payments will have created an accidental annuity.

a 5% interest, a $400 billion fund will burn more than $5 billion a year. this is a significant amount of money to recover retiree premiums which is predicted to reach $2 billion this year. it threatens the card crescents and the postal service solvency. it is forced to borrow during profitable years. it will be strapped during times of need. $26 billion would be unfounded by the year 2016. we want to provide more achievable financial goal. new payments will take into a can't -- account the substantial annual earnings. amos should be reset periodically -- payments in be reset periodically. it would take into account new

innovations and rates in the insurance sector. the retiree health benefit obligations should be derived mathematically. i am aware that there are voices under committee called for the proper payment level to be set at the time the payments will be started. i hope these voices will be heard to adjust this debilitating problem. the postal service can more realistically address the serious challenge and opportunities before it. thank you. >> thank you for that eliminating testimony. but >> i appreciate the invitation to provide the views regarding the funding of the

federal employees health benefits for retiring employees of the postal service. we welcome the introduction of the bill which is intended to provide short-term relief to the postal service in meeting its obligation to fund its share of retiree health benefits costs. in to a dozen 6, congress enacted the postal accountability enhancement act which requires the postal service to pay the employer's share of post retirement premium for its employees in the similar manner to allow federal agencies fund retirement employee cost under the federal employee retirement system. despite the cost of future retirement benefits while individuals are employed. pre-funding retirement benefits insures there is sufficient money set aside to pay benefits without further contributions. in the same way, the purpose of preventing premiums by the

postal service is to ensure postal employees will have employer funding available for health insurance after retirement. the law created a new fund providing for initial deposits related to the system and the amount held in escrow as a result of higher legislation. one public law provides the postal service will make the annual pay as you go until 2016 was annual payments unspecified amounts that reach 5.4 billion- 5.8 billion a year. the postal service obligation to the retirement fund which they no longer pay totaled about 5 billion. beginning with 2017, the pay-as- you-go cost will be paid for the

defense from the annual payments and will be a growing costs plus damage allies asian -- america's asian -- ameritization. the postal position is based on a study by a group which uses different assumptions from those used from another group. the private sector plans are reviewed. they start at a higher rate and decrease to a rate of a 5%. the report applies the 5% through active projections. it is not steady somethings that cover the postal service. there 7% trend assumption is appropriate. the assumption is based on careful consideration that there is a historical trend at the

other program. retirees and employees are covered under a single program and participation in medicare is not required. both of these programs features drives premiums upwards. there is a review of the assumption. one person applied and trend rate with increases higher than 7% until 2016 and lower their after. use of this trend assumption produces a result that is similar to the 7% used by the other report. the mercer report states that a 7% trend rate or higher would be a reasonable trend assumption and is consistent with the historical results achieved. both opm and hay have a discount

of a certain percentage. had they applied the same methodology to their analysis as they did to their trend assumption, they should have something substantial or around 6.2%. we believe it is very important to make and supply assumptions consistently. opm has no objections to a legislative changes. we believe the bill which provide temporary relief to the postal service and the financial -- in a financially responsible manner. it would begin paying if normal costs for employees today along with a string of payments towards unfunded liability. thank you for the average city

to discuss this issue. i will be average -- any questions. >> thank you for that. >> i am pleased to be here to discuss the issues of the u.s. postal service. i will provide an update on the financial condition and now look and explain the recent decision to place its financial situation on our high-risk list. a lot to talk about addressing current a long-term challenges. the postal service financial situation has deteriorated sharply over the past year. the volume is projected to decline 28 billion pieces this year. that loss is 7 billion which has been mentioned previously, an increase in outstanding debt to

10.2 billion. an unprecedented 1 billion cash shortfall. the outlook for fiscal year 2010 is even more challenging as the services would point to an increase in debt. around 13 billion. businesses and consumers a move to electronic communication and payments. the postmaster general says there will be a -- more declines of pieces of mail next year. we believe that restructuring is urgently needed. no single change would be sufficient to address the postal

service challenges. cutting costs quickly enough is a challenge. the long-term challenge is to restructure the operations, networks, to reflect changes in mail volume. we have called for the postal service to develop and implement a broad restructuring plan with input from key stakeholders and approval by congress and the administration that includes time frames for action. we should reflect changes in the use of the mail, better align costs with revenues, optimizing its operations, networks, and work forces, increasing mail volumes and revenues were possible, and retaining earnings and repay debt. turning to restructuring options in three key areas. .

>> there are savings opportunities and facilities. there is excess capacity in the processing facilities. processing capacities exceeds needs by 50%. about 30% of the retail revenue comes by mail, by the internet, and by grocery stores. the network of retail facilities has been underfunded and offers

opportunities. cutting costs cannot be the only solution. we must generate revenue by new products. gao has begun work on it mandated study that will examine these and other options second lead to operational reforms of the postal service. we look forward to working with your office on this effort. this concludes my statement. i am happy to answer any questions. >> thank you. we are grateful to the gao. we have wrestled with these issues. thank you for your testimony today. i will ask our colleagues to remain within the timeframe. we have time for a second round. we are not going to have any votes on the floor until 3:00.

hopefully we will conclude here well before that. i would like to start for the panel to weigh in -- that was very helpful testimony. i learned some things. it was fair and balanced. it was interesting to hear from mr. williams and mrs. kichak. almost everyone -- one thing we all agree on is we have to bring in the costs of health care. we will pass legislature this year on bringing down the health care costs and extending coverage to those who do not have it. i will ask you to weigh in on the debate we had last week, a

bill the we have introduced to reduce the postal service for this year and the next several years to give the postmaster general and his team the breathing room they think they need to get through these tough times. we think the legislation will buy them the time to attract more business. an alternative approach put forward by a colleague would provide some relief this year in order to reduce payments later in this decade. i would like to get the panel's thoughts. i will start with you. >> mr. chairman, in terms of the approaches, i support what came out of committee. it provides short-term relief. i understand the point that was

made by senator collins that at the fact -- at the end there would be somewhat underfunding by about $4 billion and her proposal saw to address that. in the immediate couple of years are urgent. i would support the proposal as it came out of committee. it provides more short-term relief and it gives us an opportunity to further discussion about the public policy issues are around the six or five-day delivery and other things we need to do to address these things. >> if you could keep your responses brief. >> the postal service needs some immediate assistance. your bill 15 07 -- your bill 1507 does provide some relief

that is financially responsible. i would say the commission's review of the issue of long-term health care, retirement benefit liability differs from the opm in the number of employees before cast in the future. it underlines my earlier comment and my confidence that they will continue to cut. therefore, in any further review, the understanding of the lower number of employees may help to resolve the long-term liability issues. >> recall for us if you will the level of postal employees, say, six years ago. >> we hit our maximum number of career employees in late 1999.

we had 803,000 career employees. we have been addressing the diversion of mail to electronics and have been managing our work force aggressively. we have 630,000 career employees. we have managed to reduce that by over 170,000 people, the number of current employees we have. if you look at where we are today compared to last year, we are down 37,000 career employees. we're down over 40,000 if you include non career. >> we are supportive of 1507. we like a lot of things about it. it pays current employees out of the fund. it is based actuarially, which is useful. it addresses the time from the

date of the employment all the way through employment. that is a good feature. we do not believe 70% is a sustainable rate -- a sustainable inflation rate. we think 5% is much better. nobody is paying seven%. the last thing is, we think it would be useful if we revisited this occasionally and if we used postal service-specific data instead of large data. we would want folks on a more recent times. the medical industry is almost unrecognizable at that. of time. >> thank you. >> he said a lot of things i like to address. let me say that with 1507, one of the things that is very

powerful the way it is addressed is that the postal service is going to pay the accruing cost every year for its employees. if they are able to bring down the employment numbers, it can control that part, which makes projecting what the loss is immaterial. those payments will be based on the actual numbers of employees. >> thank you. >> as i testified here in january, we support the short- term relief from these payments. we understand the postal service is in a very difficult financial system. we want them to come out from beneath this. it should be tied to a broader restructuring. a quid pro quo, if you will, so something is given in return.

>> this is for mr. potter. the options that face the postal service, reining in the costs. bring down the number of employees. you can try to close some facilities, post offices, some stations and satellite stations. you can try to close processes, there are over 400 of those. you could try to find and create new business opportunities. i want to go there. this talks about some of the things you're doing now to be more entrepreneurial under the language we passed a few years ago. what can you do to be more entrepreneurial going forward?

>> thank you for the question. we're taking advantage of pricing opportunities and flexibility that is in there. we now have, we are out contracting with different companies to get their business. we did not have that ability in the past. we now have different prices depending on how you access postal products. we have pricing if you go on- line. we are offering some volume discounts. a different price if you comment and use our lobby services. we have a summer self to encourage people to advertise with us. our intent is to keep going with this kind of flexibility. we have increased the numbers of sizes and shapes for our priority box that have been doing very well in the market

box -- in the marketplace. we have to think about the fact that we have a network of 37,000 retail outlets. america loves them. we cannot just sell stamps at those outlets. stamps and mail, there is a substitution factor going on. i look at -- i look around the world. in australia, if you want to renew your driver's license, you go to the post office. if you are in japan and you want to buy insurance, more likely than not, you go to the post office. i think we have done a good job of trying to sell malil. i think we have begun to scratch the surface.

>> thank you. senator mccain. >> mr. potter, the belief that we should implement many of the recommendations of the gao in their report that mr. herr just mentioned? >> yes, i do, senator. we have been working very diligently to implement much of what he talked about. if you look back in the year 2000, we had 446 mail processing plants. today we have 355. we have taken out over 20% of our mail processing plants. >> how much has your volume dropped? >> our volume has dropped a similar amount. if you look at where we were -- at where we are now obverses

last year, our volume is down to 0.6%. 80% of our cost is labor. it is down over 13%. the one area we cannot control our costs is delivery. moving from door to door six days a week is a fixed cost. if the volume declines, that portion cannot be adjusted by the fact that mail volume has declined. we have gone from 5.9 pieces of mail on average to every door since 2000, down to 4.1 pieces. we have managed aggressively to take cost out to offset that loss. i think we have reached a breaking point with the recession. that's why we're seeking to go

from toto five-day delivery -- we are seeking to go from six to five-day delivery. >> so you might not make the payments. is that correct? >> we would be approximately $700 million short. >> you would not make payroll. so what adjustments need to be made? >> in january, recognized that this was an upcoming issue. >> you did not predict the size of those losses. i think we can go back to the record. >> that is true. they have been accelerated. the $2.4 billion loss in the quarter, there is some bright news in the sense that if the look at quarter three verses

quarter towo, $800 million is a compensation, noncash adjustment. interest rates will be low. we have had to make a noncash adjustment. the net present value of what we had there has declined. it will not earn as much. >> we only have seven minutes. >> it went down from quarter to to quarter 3 -- from quarter two to quarter 3. my preference would be the we get legislation passed that would address the health benefit issue and then we would be able to meet all of our obligations. we would not pay the full $5.4

billion payment. >> mr. herr, what is your assessment of the measures the postal service has taken so far? as to what actions need to be taken in previous gao reports to congress. >> as we look at the situation this year and we consider this, we felt the considering the service provided, the challenging conditions in terms of the financial situation they face and coupled with a paradigm change in how people communicate, we felt we needed to put them on the high-risk list. >> i understand. how have the reactions of the postal service been in complying with or agreeing to the proposals you have made to

improve the situation, which is very serious? >> on the delivery side, there is a big agreement to do readjustments of routes. that has resulted in some savings. the issue is that -- >> what haven't they done? >> there are some studies under way. >> processing, meaning what? >> doing more consolidations. i mentioned that first-class mail, processing exceeds -- the capacity exceeded the need -- >> isn't the problem the benefits? >> 80% of their costs are salaries and benefits. through attrition, you would be able to cut those costs, as

well. >> it is my understanding understandingup that ups pays a higher percentage and usps pays higher life insurance premiums while other federal agencies pay about 33%. there is certainly a significant difference there. >> that is a. we have been making and in prior reports. the differential of there, it would be around $700. -- $700 million. >> that still doesn't get -- >> no, it does not. >> what does it? >> i think you'll have to look more broadly at the infrastructure.

the other thing is the salary and benefits. you have to streamline the work force. >> i thank you, mr. chairman, and i think the witnesses. college just ask one more question? are you aware of the pending -- could i just ask one more question? are you aware of the pending legislation? how do you view it? >> it is a short-term fix. i would think it should be coupled with a restructuring effort to start this moving forward and see this as getting them through the short term and to lay the groundwork come out of this in what is a real looming financial problem. >> thank you. >> senator lieberman. >> thank you to all of you. i think testimony highlights

what we're coming to understand, and that is all there are no easy choices here. none of us want to close any postal facilities. none of us want to go to a five day a week delivery as opposed to six. i fear we will probably have to do both. the alternative is increasing fiscal desperation for the u.s. postal service. the alternative to that -- it all comes back to us. you cannot keep doing what you're doing. the money does not come out of the air. either we have to raise taxes to pay the growing, surging deficits of the postal service, or we will end up doing what is easing but very wrong, which is

putting it on the government credit card and delaying payment for coming generations. that will have terrible consequences on our children and our grandchildren. i cannot say that enough. i think all of us, mr. potter, week in congress, have an obligation to bring the public where we are in this crisis. they do not want any postal facility to close. but the alternative is a higher taxes or putting off so their kids have to pay. i think you'll make it easy for them. i want you to take a moment to explain what the difference is between a post office and a branch or station.

as i understand it, you are not talking about closing post offices. >> that is correct. the difference between them is that a post office is generally a zip code that has one postal facility within its boundaries. a station is part of a larger post office located in our bigger cities. so in chicago, los angeles, new york, the geography of that city is broken up by different postal facilities. in some cases it is a station which has delivery and retail which can just be a store front will sell postal services. we have a review of our big city post offices. we spend $16.9 billion on those

operations. 2 billion of which are for non personnel costs. it is a matter of reviewing what is 1/4 of the expenses that are incurred in the third 200 facilities. >> i hope that is hopeful -- helpful to people. you say the workforce is down 170,000. >> over 170,000 since our peak in 1999. >> am i right that there is a no-layoff clause between the postal service and the workers? " there are no-layoff clauses in the contracts. there are different levels of protection depending on the contract. there are employees that could be laid off. the contracts are very complex.

if you were to lay off career employees, you would have to eliminate the use -- those employees. the biggest body of people that could be laid off are in the carrier section. we have to deliver six days a week. we have competing obligations. you like to lower the costs. but you still have to perform the delivery six days a week. >> you have produced 170,000, which is almost 20%. by attrition, i presume. >> we capture all patrician we can. we have been very aggressive about doing that in the last couple of years because of the downturn. we eliminated -- we have

reduced 37,000 career jobs. it is higher than the normal attrition. we have voluntary early retirement options for our employees. >> as you know, the groups representing and others are unhappy about the amendment headed in the committee that said they could consider the fiscal condition of the postal service. you said you support that. i wonder if you could indicate why. >> there is a direction to the arbitrator in the law. it says they should consider paying wages comparable to that. it is a very broad direction. in the past, arbitrators have

assumed that language meant the employees worked similar to the police. if you just take verbatim what that directive is, it does not in any way shape or form linked to what the financial position of the institution is. i think that by ending that phrase, you're bringing a balance to what an arbitrator would consider when it comes to the postal service and how you would view each of these agreements and how critical they are when 80% of the costs are there. >> do any of the witnesses oppose that amendment? >> no, sir. >> if i might just add to the record with regard to your question about definition of

post offices. the postal regulatory commission has a different interpretation. the service is defining post offices in terms of its administrative organization. who reports to whom. they define it in terms of the service actually provided in the community. to the extent with which branches function like post offices, we define those as post offices and expect and anticipate that all of the laws regarding closing post offices cover those stations and branches. >> i appreciate that. i would ask you to submit to the committee what the definition is. where do you draw the line? the definition is quite clear. when dusk a branch become a post office in the definition of the

commission? >> thank you. we will do that. >> senator collins. >> thank you. mr. herr, i support changing the payment schedule for the postal service to give it some relief to get through this difficult time. where we disagree is in our assessment of what the increase in the unfunded liability want to bid and also in our evaluation of the postal service's ability to pay for greater amounts into the fund in the second five years of the 10- year period. i have worked closely with the gao come up with the amortization schedule that i proposed. as i indicated under sinner

harper's proposal, it would -- under senator pop -- under senator harper's proposal, it would still increase, but it would be $500 million as opposed to $4 billion. big difference. i want to turn to the second issue, however, and that is whether it is realistic to expect the postal service to be able to pay far more between 2015 and 2019, that second five years, then is the case under current law. under senator harper's proposal, the postal service would have to pay $6.3 billion more into the retiree health benefits fund then is required under current

law in the second five years. under the bill the committee reported, it lowers substantially the payments for the next five years, but then ramps them up to the tune of $6.3 billion over the current law schedule. how optimistic are you that the postal service's financial situation is going to improve so greatly that it will be able to pay $6.3 billion in payments above what would be required by current what? >> senator collins, i think looking at the situation the postal service is in now, if there is not dramatic and rapid change enacted, it would be difficult for them to make those of larger payments.

we believe this restructuring plan is important going forward. however the committee decides to move forward, we believe it should be the need to get a plan de will help the postal service move forward and deal with some of these structural problems. >> again, i support providing some relief to the postal service because we truly are in a crisis, but i do not want to be back here in 2015 having the postal service say to us, boy, there is no way we can pay these ramp-up amounts. that is exactly what is going to happen. that is why i think the proposed schedule that my staff and i worked out with the gao is a far

more realistic assessment. it still provides relief. the difference is an increase in payments of $1.5 billion vs $6.3 billion. we half to be realistic. mr. potter, the postmasters have suggested that one source of savings from retail operations is to negotiate with the unions about cross craft training. to have more flexibility in the workrooms. are you presuming what seems to be an excellent suggestion? >> yes, we are. we have had similar discussions in the past. >> are you optimistic you're going to be able to implement some changes in the work rules that will save money?

>> i wish i could be optimistic. having discussed these issues in the past, we were not successful. hopefully the conditions we have today will have people be more open to that level of flexibility. >> let me return to the question i raised with the gao. what are your grounds for believing that the postal service will be able to pay $6.3 billion more in the second five- year period that would be required? >> i have two reasons to believe that the $6.3 billion would not have to be paid. there is an assumption in the modeling that was done in the number of employees. that number that was in the

initial analysis assumed there would be a growing number of employees. we have today 630,000 people. i also believe the country cannot survive with an inflation rate on health benefit cost of 7%. i believe the senate, the house are having significant debates about that very issue. as the second largest employer in america, i can tell you that that issue needs to be successfully addressed. i think the burden is on every business. it is those things that make big optimistic. i believe that our target will ultimately be about 550,000 employees. i am optimistic that you'll see the type of changes in our system that will lower that

cost. i'm hopeful the health benefit cost will be mitigated. >> i am going to have to leave for a while for a meeting that i cannot miss, and i will return. i realize this panel will have finished. i do want to point out another issue as i am leaving, and that is the postmaster general's testimony request that congress lift restrictions on the ability of the postal service to get in to new non-postal lines of business. the postmaster general has indicated he is interested in getting into banking, cell phones, logistics, all sorts of lines of businesses. i want to point out to everyone that the postal service cost

past forays have had very little success. gao did a study in 2001 that concluded that none of the earlier initiatives was profitable. i would also point out that there are competitive issues here if we are allowing the postal service to compete with the private sector on non- postal areas. this is an issue that has not come up today. i will be submitting some questions for the record. >> i hope you come back and rejoin us. [laughter] i really do. take just a few seconds. you said -- i did not understand what you said. >> i did say that.

let me just respond to senator collins. we're not spending a nickel on exploring any of these ideas. i was simply using that to illustrate that other countries, when faced with the same dilemma we are faced with, have provided more flexibility in that regard. >> are you asking for that authority? it was my understanding you're asking us to repeal the prohibition -- >> i would assume that will come up with the regulatory frameworks alleged any proposals which would make would have to go to the regulatory commission. i think there is a real issue on how we generate revenue out of these over 30,000 retail outlets that we have. whether that is broadening. we can do there, i think it's something that needs to be addressed.

do we have them or do we not have them? >> i am sure we will turn -- we will return to this issue again. >> thank you. the panel has been in lightning -- has been in lightning -- enlightening. as a new member of the united states senate and -- a person who receives a great deal of mail, i find a lot of this information disconcerting. in terms of, what are we going to do. i see the number of post offices and branches being closed in chicago and in the state of illinois. in terms of the 667,000 -- -- in

terms of those branches being considered for closure, how is the study being conducted? what criteria are being considered? how many possible layoffs would be involved? >> let me describe the study. we have 3200 locations in major cities around the country. it's almost a $17 billion cost base. we have asked for the local facilities to determine and do an analysis of what facilities they have, look at space that is available and in surrounding facilities, look at with traffic we have in terms of people coming into those retail outlets, up look at backroom operations. there is a review being conducted to identify

candidates. there will be a further review with in depth analysis and weather and there are cost benefits. there could be real estate opportunities. it will be done at the local level. there is a pending issue in front of the postal regulatory commission. and then decisions will be made with input from the postal regulatory commission about what actions to be taken. there will be community outreach, and to get feedback from the community. before any actions would be taken, there would be 60-day notification. that is what is going to happen. >> how did you arrive at 6077 if all that still has to be done?

-- how to derive at 6077? >> -- how did you arrive at 677? >> we began to conduct this review. at one point were asked to provide an update and are all 3200 going to be gone? there is a list that is very fluid. it got published. >> i have so many questions. how many people are we talking about in terms all playoffs? >> there is no intent to lay anyone off. >> so you're going to do all this by attrition? >> yes. >> i used a post office in chicago that is on the list and it is scheduled to be closed.

>> it is not scheduled to be closed. is still under consideration. the people who work in that unit, in these big cities, they have biding rights to move. -- they have bidding rights. >> has any study been made on what it would take, and this is just an inquiry, a speculation of a first-class stamp to cover the cost. what would it cost? we're now paying 44 cents for a first-class stamp. would it have to go up to seven 5 cents? >> well, some prognosticators said it would have to go up about 15%. all of our rates would have to go up 15%.

i caution you to say -- given a pair financial situation and the fact that substitution is a reality, each of their products could move through a different channel. raising rates is just going to drive mail away from the system. there is a misnomer here that the bulk of our revenue comes from citizens buying stamps. over 75% of our revenue comes from commercial entities. it is catalogs, its banks. think about what you get in the mail. it is those folks that make decisions -- >> would rate increase is applied to those items? >> any time we raise rates, we calculate the fact that the rate increase will drive people

further away from mail. >> i am not advocating that. you looked at that. you are nodding your head. >> we try not to do that simultaneously. we try to validated and we will work with your office so that you are aware of that. >> another question i have. in terms of the use of technology, and mr. harris said there is an excess of processing. s -- has the postal operation kept pace with the technology and the processing of the mail and packages and the various delivery -- in order to deliver the various items to the public. has the technology kept pace, or is that something that would

cost of additional moneys? >> we have the best mail processing center in the world. you put a letter in a collection box, it is not touched by a human being until -- it is read by machines. >> is it sorting to the light? >> to the light? >> technology. >> again, i invite you to come and visit a post office. >> we will talk about that. my time has run off. i tried to push the postmaster. i did not know if you have a second round with a paddle. >> we have another panel to go. i will not be taking a second round. there'll be other questions.

this has been a very good back and forth. >> thank you. i will try not to use my seven minutes. in your estimates, you showed a continuing decline in first class mail buying until 2011. do you stand behind that backs >> it is not a resurgence in the sense that -- >> deal still think you'll see an increase in first-class mail? >> the number of transactions has declined to. people have stopped using credit cards, they do not get a credit card bill at the end of the month. that would drive some. >> you do not have a dinner bet on whether that would

happen. >> everything i see in my life, people who used to melt a church bolten, ascended by -- people who used to melt a church bulletin, they send it by e- mail. i think that is too optimistic. >> we can say a drop in john q. public putting stamps in the mail. it reflects the commercial use of mail. >> that is what i am talking about. i get my bills not through the mail. >> i wish you were a better customer of ours. >> i appreciate your service through the rain, snow, and sleet. this is one side of the equation.

do you have any comments on the protection of revenue? >> we have not -- the information we have indicates it will not be as bad pass it is now. it is unlikely to return to levels that existed before we went into the crisis. >> i wanted to point out a figure on my statement. we show the percentage of payments in 2008. the mail payments are down to 56% and the electronic are up to 38%. >> that rate of change had not changed. >> the lines are merging. >> they are on a straight line. the slope of the curve is it is staying steady. you'll see an increase in that

type boat decline. >> people will begin to move to these kinds of payments. >> i wanted to add that the commission used to get volume estimates on a quarterly basis prior to 2006. it might be beneficial for them to resume that practiced in light of the recent experiences. >> the forecasts are not accurate. >> we would have a better opportunity to examine what they are. >> i do not disagree. they are highly inaccurate. we have had these hearings for three years. those of us who have been pessimistic have been much more accurate. the -- you have 637,000

employees. what is your fully absorbed labor costs? >> it is $57 billion. >> $57 billion. it comes up around $83,000 per employer. it is fully absorbed. would be any benefit of having postal employees having the same benefits? >> there would be about a $600 million cost. >> that would be if they had that. if in fact you could achieve -- safeway has 200,000 use a nice employees. they have had half of 1% increase in the past four years. they have a healthier workforce with last time off because they are intervening and

incentivizing people for weight- loss. why is it we would not want to sit down with your audience and say, here is a unionized work force that has helped their company but has had less out of pocket costs. why we did not want to model that after what safeway has done? >> i personally would. in years past, under a different administration, we went down the path of seeking to determine whether or not we could withdraw from that and it was strongly -- we were strongly advised it was not a path to seek. >> your average cost is higher. >> i do not believe so. i would have to check. >> i believe it is.

>> i am not sure, senator. >> so if -- we're going to solve your problem in the short term. the question for the american people, what is the long term? how are we going to solve this? i believe we could give you the flexibility to go to five days. i think we should keep the flexibility to do what you want in terms of your core business. but what i do not believe we should do is continue to just get out of one crisis and moved to the next. my hope is with hearings like this, we will look at the real issues and be realistic to the american public. ultimately, if in fact future health care benefits are paid

for, someone will pay for them. it could be the u.s. taxpayer. >> the quicker we do with, the better off we will all be. >> there is a difference in terms of the cost of that. you subsidize 85% side of the premium. >> i understood that. >> i agree. i thought you were talking about within fahb if you looked at the 100%. i believe our employees take lesser plans. blue-collar people tend to be healthier. it is great. that is what was in my head. >> thank you. senator cochran, please proceed. >> i think you for having this

hearing. i want to also thank the witnesses who are participating today. the postal service has shown signs -- the financial distress has been shown for some time and still faces -- the office recently placed postal service back on its high-risk list. i am very much in favor of extending needed assistance to the postal service to get them through this difficult time. this proposed fix came in the form of a bill which the committee passed last week. this bill would provide flexibility and pre fund health benefits and ordered to close budget gaps over the next several years. however, i am disappointed at

the markup of s-1507. an amendment was added to affect the bargaining process and arbitration, giving on necessary deference to management in negotiations by requiring that an arbitrator can contribute to the financial health of the postal service. the financial condition is already a key consideration. this amendment has no practical effect other than maybe to -- i believe we should not have included this additional policy change on this must-pass legislation, especially with strong objection from so many postal workers. i believe there is still time to find a compromise to address concerns by recognizing the

economy and the postal service without injecting ourselves once again into the bargaining process. mr. potter, in the first part of this year, a service in hawaii met a standard less than 7% of the time. most were well over the standard. only 1/4 of packages were delivered within three days of the service standard. i am concerned about these numbers in particular, which are the worst in the country, i am also concerned about the negative image of the postal service that such -- we offered suggestions about closing post offices and reducing delivery days. i am concerned that the point

may be reached when usps is no longer the carrier of choice due to lagging service and cuts. my question to you is, what is the postal service doing to ensure that despite these problems, it continues to provide world-class and universal service? >> flubbing address the whole why the issue -- let me address the hawaii issue. we lost the shipping -- when you pay ground rates, we put mail on boats and moved to hawaii. we have had trouble finding a supplier that operated a frequency that would have a higher level of service. we're continuing to work on that issue and is one we know we have to address.

>> commissioner goldway, the obligations that found usps generally filling the obligation. it seems to me that some of the cost-cutting options and service reductions and closings could have serious effects. my question is, do you think the options discussed for cost cutting could cause them to reevaluate the postal service's fulfillment of the obligation? >> thank you, senator. i think the commission is in fact concerned about the proposals to reduce the footprint of the foes -- of the postal service throughout the nation. we will be looking at these

proposals in terms of their impact on universal service. we hope to have public hearings in the context of this end case. we may in fact review the universal service obligation study that we did two years ago to look at what ought to be universal service in this time we are in, or how universal service could be provided. i am concerned that the cuts proposed may in fact be counterproductive, and by reducing access to the community in these options they propose that there will be simply a last opportunity for the postal service to grow in the future. .

that likely, some of this would be in light of in addition to attrition. i have two questions for you. in the past, you mentioned a week they likely could be cut, so i would like you to address why and what change would be made to saturday?

hell long would it take after the announcement of the five-day week to incur any cost savings? >> senator, the reason we moved to saturday was because further analysis around volume -- only 11% of mail is delivered on saturday. in addition, one of the reason it is low on saturday it is many businesses are closed on saturday and we do not provide delivery on saturday today. if we could pick a day in the middle of the week, there would only be four days of delivery to businesses. that may be harmful to our position from a competitive standpoint. competitors cannot deliver on saturday without a surcharge, so we are positioned well in that regard. second part of your question?

>> cost savings from this. >> we estimate $3.4 billion. in terms of how quickly we could get it, literally the day that we start, we could start to capture the savings. right now, our thinking is once it is approved, reviewed by the regulatory commission, and approved in the sense that we have the legal authority to do it, we would provide no less than six months notice to customers to make adjustments to their operations. >> thank you very much. >> that me follow up briefly. i may have missed it in the back and forth, but other country with a five-day service, i understand they do not necessarily get rid of saturday service, perhaps wednesday service.

post offices could still get some kind of service. i am thinking of canada. during different times of the year, they go to a six-day service. is there a different way in the way that country's do this? >> most places eliminate the saturday delivery. our concept has evolved, and i wish i could take a minute to describe it. we want to keep post offices open on sunday, so we're just talking about delivery. we would provide box mail delivery on saturday. part of the reason for that is there is a lot of money that moves through the mail, and those recipients have said that they need access to the remittances that come through the mail. we would continue to deliver to

post office boxes. we would allow customers to pick up their mail at the plant as it is generated. in the american public has told us that they want to have access to postal personnel on weekends. maybe they were during the weekend, on saturday to pick up a package that they may not have been able to get delivered because no one was home. we would continue to operate those officers on saturday. what we are talking about in the $3.4 billion in savings is simply the elimination of the sixth day of delivery. >> one quick question, mr. postmaster general. if it is not delivered on saturday, it would be delivered on monday. that would mean an extra load. have you taken that into consideration? >> yes, we do have holidays.

when we estimated our costs, going forward on our savings, that was a key part of the calculation. it turned out, because the machine to sort the mail and put them in sequence, the bulk of the workload is absorbed by the carrier and our systems. there is really no additional cost -- limited additional costs as a result of moving that workload from saturday to monday. >> before we excuse the panel, i want to thank you for being here, helping us wrestle with this tough issue. we thank you for your leadership. we still have a second panel, and i look forward to their testimony as well, but i would just conclude, before this panel leaves, some say that there are no silver bullets, and

i do not know that there are, but there are many ways to address these challenges. into unions have wrung a lot of cost out of the system. we will see some additional reduction through attrition as well. as members of congress, we need to get out of the way. where it makes most sense for people to have service, that is something that needs to be done. i am not interested in closing numerous facilities across the country, but to the extent that some need to to get out of the way, you have labor negotiations coming up and we commend the approach that management is taking to those negotiations. frankly, the approach that union representatives are taking as well. these are not easy negotiations,

we understand that. reducing mail delivery needs to be something on the table, and we have said that there are some different ways to see how that can be crafted. if we do not have service on saturday, no service on sunday, and monday is a holiday, three days without mail service would be a concern. having gone through some tough to ways to save money, and i know that you have done a number of them, the issue of new revenues. i understand you are not hiring a lot of people, but perhaps you would hire a lot of outside of the box thinkers. people who can really come up with ideas to and generate revenue. you are brainstorming a little bit about how to generate revenue, but perhaps we could do

some other things brown postal facilities. lastly, i had a conversation with senator mccain and i spoke about the need to rein in health-care costs. every republican and democrat in the senate has said, as we move through discussion, as important as it is to extend coverage to those who do not have it, it is incredibly important not to raise the deficit and also to reduce the cost of health care. i agree, if we are still at 7% inflation rate for health care, not just for the postal service, our country would be in dire straits. it would threaten to bankrupt not just medicare but our government.

we would further make our businesses and competitive with the rest of the world. in the meantime, while we work on legislation, we look forward to working with you. >> thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009]

the second panel will include businesses impacted by the postal service on c-span2, the senate debating the nomination of sonia sotomayor for supreme court justice. that vote will take place at 3:00 eastern. you can follow that on c-span2, an online. >> i would like to take the opportunity to ask those in the audience still visiting with one another to do that upside, if you would. thank you for your patience for the last two hours. we are delighted to welcome you. our first witness will be mr.

rolando. he began his career 20 years ago as a member of the national association of letter carriers, just last month taking the reins. we thank you for your willingness to serve in this challenging times and look forward to working with you to get us through this, not only for your employer, but for the country. next, i watched you sick and with senator burris. i wondered how you spell your name? >> he did not know how to spell. [laughter] >> i am sure he will have the opportunity to reflect that. the president of the american postal workers union.

you are elected the president of the union in 2001. our third witness this dale goff, president of the national association of postmasters. he has been a member for 29 years. 25 of those years were spent in louisiana. our next guest is james west, director for postal and legislative affairs for william sonoma. he has seen the company grow from $1 million in sales to over $3 billion. our final witness today is mark suwyn. he is the executive chairman of the newpage corporation. he has held a variety of

positions in them private- sector, including areas in my home state involving the dupont company. thank you. your statements will be submitted. i would ask that you keep your statements to about five minutes. mr. rolando, you are up first. >> thank you for inviting me to testify. postal accountability in has been act was designed to help the postal service do with the public's increased internet use. by giving more flexibility to compete with a good to services and continue to grow. i believe more and more innovative ways of using mail and the network are within our reach. however, when this committee led the charge for postal reform and successfully passed, one of the key component was to refund retiree benefits. i read them to shore up liability for our employees was commendable. nevertheless, the economy has

forced us to restudy the unfunded liability closer. it is not even more clear the aggressive schedule of payments is part of the problem. i will focus first on the short- term issues, then the long-term strategy. the requirement for them to reach a postal service is no longer feasible. no other company in america is required to fund future retirement benefits at all. much less had such an accelerated pace. the exorbitant cost accounts for most of the $67 billion the postal service has indicated will lose this year. as a reaction to the possible 15% drop in mail volume this year, and in lieu of a cashier crisis, due to the excessive prices of pre funding schedules, the postal service has put forward a blueprint for dismantling its core business

and service cuts and downsizing. it's bright and station optimization program and the five-day deliveries that are part of that response. as congress reviews these developments, it should insure the postal service does not make structural decisions that would do more harm than good over the long run. downsizing to meet depression- level demand without considering long-term impact on the ability of the postal service to meet new demands when the economy recovers would be shortsighted. short-term savings that undermine the postal service's capacity to offer new services limiting our services to our customers as a knee-jerk reaction to a temporary and taxable problem i would like to

commend the subcommittee for the dedication they have given to the postal service and your obvious commitment to see it survive in this downturn in the economy. i believe there has to be a two tiered legislative approach. the first much address the cash flow problems associated with payments. hr 22 and the omb proposal to this effectively. however, using the short term relief of emergency legislation was a last vehicle during a market session to address long- term labor practices. most shortsighted, and balance in his nature, and once in a natural vehicle for such an important issue. i wish i had this opportunity to testify before the committee before we took such an amendment under consideration. i believe it was intended to

responsibly respond to the polls services financial challenges. we are opposed to the amendment offered by senator program. inclusion of this only a test the collective bargaining procedure that was established by president nixon 40 years ago which is incorporated into the postal organization act of 1970. during those four years, numerous arbitrations have been conducted in accordance with the provision of the act. in resolving critical collective bargaining impasse is, arbitrators and parties have consistently examined and taken into account the financial condition of the postal service, along with the other relevant factors. once this amendment issue is resolved and the immediate short-term relief is passed, it will be crucial for congress to begin looking at ways to strengthen the postal service in the long run. long-term reforms will be

critical to not only the survival of postal services, but the continued growth of the broader industry that relies on its network. congress can take the first step by reforming the retiree health funding provisions in ala. the current schedule of payments is designed to fund a% of the liabilities by 2016 and that is on affordable. moreover, the actuarial methods adopted by the omb discriminate against the postal service and to give it to increase its cost. as oig confirmed in a study released, they had inflated the cost of health benefits by tens of billions of dollars by using an unreasonable assumption about the long-term growth rate. additionally, they have short- range the postal service when they set up the recovery fund by grossly underestimating the postal surplus that was in the civil service retirement system

pension plan. in other words, to use the analogy of the chairman, not only do we need to refinance, we need to revisit these formulas used in the rate, as well as the down payment. congress should resist radical reforms to the postal service like five-day delivery, massive closures and consolidations, and interference in the bargaining process in favor of practical reforms that will stabilize the postal service's finances and give it time to take advantage of the new commercial freedoms provided by the postal accountability in heads and act. i urge you to look at the overall methodology of refunding payments as well as the number of opportunities sitting in front of the postal service. we do not need to destroy the postal service to save it. what will be hit -- happy to answer any questions you have to. >> thank you for your testimony,

and congratulations. >> mr. chairman, members of the committee, i will summarize my written remarks, but i ask that the full test be submitted for the record. -- text be submitted for the record. thank you for providing my union, the american postal workers union, the opportunity to testify on behalf of the members we are privileged to represent. as you know, the postal service is in the middle of a severe financial crisis caused in large part by the nation's economic difficulties and the resulting decline in mail volumes, which as confounded by the oppressive burden of proof funding retiree health costs. in the interest of this committee, drafted legislation

that would mitigate that requirement was welcomed by the postal community. we were aware of the concerns associated with scoring such legislation and looked to the administration and chairman for their assistance in achieving a reasonable solution. the introduction gave us hope that legislation would soon be enacted that would provide substantial short-term relief to the cash strapped agencies, and progress was well underway until the full committee voted to amend the bill. one amendment which requires arbitrators in the negotiation of poster -- postal labor agreement to take the health of the industry into account drastically changed the efforts from assistant to an industry to an assault on postal workers. it is a mean-spirited amendment that is intended to shift the payment of the employer's share

for retiree health-care liabilities from the employer to employees. the committee did not consider imposing a surtax on postage rates to pay the unfunded liabilities but adopted an amendment that would, in effect, assessed a tax on postal workers. the post office obligation to pay $60 million over eight years was the product of the paea, which was endorsed by this subcommittee. the offer did not anticipate a recession that would soon grip the nation and fail to appreciate the impact it would have on mail volume in postal revenue. one goal of the paea is to reduce labor force. it is hard to achieve this objective by squeezing post of finance as to such an extent that management was left with no other options. it imposed on the postal service

the burden of refunding retiree payments, exasperated the crisis. by requiring payment of $14 billion over the last three years with more to come, the supporters of paea share the blame for the inability to ride out the economic crisis. 1507 would have alleviated the problem, but the amendment, which does not remain true to the original legislation, whatever process and by endorsing the amendment, the committee has declared war on postal workers. after years of struggle in 1971, the postal service was converted to an independent agency of the federal government and postal workers were granted the right to organize and engage in

collective bargaining. negotiations over the following 38 years have resulted in postal wastage that have tracked the consumer price index. arbitrators and economist issued a similar decision in 1994 that interpreted compare ability with standard for postal wages. to come, the parties have been -- since then, the parties have been guided by that decision. it would require the union and management to embark on a contentious year aimed at applying competing standards. in the abstract, supporters can make the case that requiring arbitrators to consider the financial health of the postal service is a reasonable standard. one only has to look at reasonable history to see that such applications have been selected. wall street executives who knew the bank of the financial industries of our country awarded themselves in these and

bonuses from the treasury to the company nearly destroyed and massive bills were funded by the taxpayer. if there was ever a time to consider help, one would think the wall street to baca would have been it. the financial health of usps and the consideration of every arbitration in phone contact -- the amendment is intended to tell that this factor above all others. one does not have to be a rocket scientist to understand the purpose. clearly, the amendment will contain wages and benefits. the amendment is not an effort to be fair and reasonable. it is an attempt to turn back the clock and penalize employees and penalize them for what? for abiding by the rules and managing to attain a middle- class wage? this is a mean-spirited

amendment that undermine the collective bargaining process. at the american postal workers union, we will oppose that because we believe this enactment will be disastrous for the american public and postal employees. that concludes my testimony and i would be pleased to respond to any questions. >> thank you for being here. we look forward to your testimony. >> i am honored to share with you the thoughts of the national association of postmasters are regarded the operational challenges confronting the u.s. postal service. today's inquiry is not new for this committee. it is consistently promoted to help the postal service constructing oversight and approving by legislation. the 2006 reform act is a prime example. however, conditions facing the postal service today are more daunting than those receiving

and acting both of reform. the economy is only now beginning its decline out of recession and sector that you smell were impacted greatly resulting in dramatic fall in mail volume. in 2006, retiree health benefits was challenging but in 2009, it is suicidal. the postal service must engage its workers to craft a coherent and responsible plan for the future and transmit the plan tentatively. i strongly urge the postal service and the board of governors to commit the biweekly meetings with their employer associations to help mark a path for the future. in the meantime, it is crucial congress enact legislation that they. without a refinancing plan, the next crucial steps may be moved. the next legislative day should be a review of the postal service's retiree health liabilities. two recent studies concluded

that the original estimate is overstated. the disparity could be up to $4 billion a year in fiscally harmful payments. we would urge the committee to really with the postal pre funding schedule in light of this analysis. beyond this re-examination, i would caution the committee against tax that would yield artificial solutions. at this point, mail delivery is misguided. the 2003 commission report warned that diminishing delivery frequency may save money, but the postal service's volume to the nation would suffer. the postal service is presently considering closing this ticket number of station and branches. the u.s. ps has yet to reveal the final number of locations and plans for closing, nor the savings. community and employee involvement is essential. postmasters will have to respond to a community of range to their facility.

therefore, real-time process must be transparent and cannot be an after the fact offense. although this facility does not appear to jeopardize post offices, [unintelligible] the postal service would save only $586 million from small and rural post offices if ever coast. this would deny vast areas of this nation accessible postal service yet make no more than a dimple in the postal service's financial health. as we move further along the legislative decision tree, changing customer preferences and mailing behavior should not be ignored. we should not mimic chicken little, but also we should not emulate an ostrich. demand for universal because of the postal service is steadfast and its employees of our trusted

public employees, and the agency is one of the most minute public institutions. however, they have deployed their national footprint and his partner with other government entities. postal employees play a fundamental promoting changes and making sacrifices. we have contributed substantial sums through increased health benefit premiums over the past few years. in addition, many postmasters' a bulwark well beyond their normal work day without additional compensation to make sure that mail is processed and delivered. postmasters were recently forced to live relinquish and 80-yearly program. for its part, the postal service must scrutinize the benefits package of its most highly compensated employees and streamline its bureaucracy to increase efficiency and effectiveness, and success.

in order to achieve more savings from operations, i encourage the postmaster general to negotiate with our unions regarding close craft training. this would boost the skills of individual employees and unable postmasters to more effectively utilize the talents of their employees. legislative and operational solution will not happen overnight, nevertheless, congress must act quickly to reconcile the differences between s1507 and hr 22. if he were to enact legislation, and result in its liability payments and calls into question congressional commitment to the full-service. thank you. >> thank you. mr. west, welcome. >> thank you for the opportunity to testify with regard to the actions necessary to preserve the united states postal service as a viable business entity.

thank you for the introduction. when i started with the company in 1972, we were just mailing one, along with annual sales of around $1 million. we have since achieved growth in sales exceeding $3 billion across 6 brand, seven direct mail catalogs, 60 websites, and 130 retail stores. we employ up to 30,000 associates. we have achieved this growth in large part by using catalogs as our primary advertising vehicle and a strategic partnership with the postal service and as part of our strategy. we will mail 250 million catalogs this year, making us one of the largest. our ability to recover from the current economic recession and

to cure our futures success depends on a significant degree on the continued ability of the u.s. postal service to provide an effective and increasingly cost-effective mail delivery. to this end, the following is essential to the recovery of the postal service. maintaining price of the dominican for the mail volume decline. sound business practice plans based on realistic volume and reasonable expectations. the prudent congressional support and oversight to transform the u.s. ps business model to meet customer needs in the future. it is imperative that mail volume be stable. without a doubt, increased postage costs on consumers with commercial mailers will only serve to drive more volume out of the system. a large increase must be avoided. financial savings are available from many sources. releasing current financial obligations, additional cost

savings, retention and expansion of cost practices, and rightsizing the infrastructure can also help demand. legislation under consideration to provide modification to postal service financial obligations which at the minimum are needed to -- my company, in conjunction with the various associations, supports the passage of this legislation. the postal service must be commended for its success in reducing operating expenses. arguably, the most significant obligation would come from a modification of servers. reduction in the number of delivery days is difficult and would compromise. the unfortunate reality is, mail volume simply no longer supports six-day delivery.

processing facilities must also be brought in line with mail volume. prudent business practice his state that a company must continually modified its infrastructure to match the volume of its business. u.s. ps can no longer be an exception. the postal service must become more realistic in developing aggressive forecast. in the near term and over the next few years, we must produce at a conservative forecast. u.s. ps is encouraged to partner with its partners. completing the transformation into a modern business enterprise will require more and sometimes difficult things. we encourage oversight and this must not in any changes nor should it turn the postal service to the point where it to develop enterprise would find untenable. and that ability and positions

must be things that the congress will call on for support. we are not aware that three- quarters of mail volume comes from commercial mailers such as my own company are are burning in an increasingly environment. economic performance is forcing us to be demanding of our partners in using new ways to reach out to our customers. we have more choice and effective way to communicate with our customers than ever before. williams sonoma as well as most of other companies is evolving to meet the new economy that is driven by new and innovative methods of communicating with our customers. the only way the postal service can retain our role in our own marketing strategy will rest on its ability to be competitive. in closing, i would like to reiterate the couple of recommendations. mitigate them volume by declining postage rates.

develop business plans with partnerships with the postal service. provide proven oversight. and transform the postal service into an efficient business organization that will remain viable for the years ahead. thank you, mr. chairman. thank you for your time and consideration. >> thank you for your testimony. >> thank you, mr. chairman. on this executive newpage, that is the shiny paper that shows up in his catalog, magazines, other point of purchase displays and materials. williams sonoma is one of our most important customers. we have nine paper manufacturing facilities in the country, including one in canada. we're also a major supplier to magazine publishers and ad industry.

in fact, more than any% of the paper we produce is used in magazines and catalogs and advertising. with that, you can imagine the viability of the postal service is critical to the future of our company. as senator collins pointed out, there are 9 million employees whose livelihood depends on effective, efficient, and low- cost postal service. certainly, our company, with the paper that we produce,: 3 system that shows up in your mailbox, it is critical that there be a viable economic system. what we want to keep in mind is studies continue to show the lowest cost and most effective way to get a response from a catalog or advertise and is from print advertising to your home. that is a need that will be

there for advertisers. the key concern, i think, has to be can the postal service can be effective to hold costs down so that they are the one delivering? meanwhile, you have newspaper that are waning, and in some cases disappearing. they have always been a source of interest, coupons, and other types of advertising materials. so there will be a vacuum created here with newspapers winning and if the cost of the postal service continues to go up, other entrepreneurs are going to find a way to deliver the materials. if that would occur, that would accelerate the downturn we are looking at as other people find ways to deliver the material. there are some experiments going on under way right now around the country. one of the real issues in the near term and what is the shape of the curve? are we going to continue to go

down at 10% per year, are we going to come back? i think the postal service cost, postal rates, if they do not go up, i believe there will be a modest rebound, certainly on the industrial side. i cannot comment on first class. there will be a rebound because a lot of what is going on now is a downturn because of the economy. there will be a rebound in the number of catalogs and direct mailings as the economy rebounds. the question is, who will be delivering this to the home? certainly, cost cuts are taken out. we have all had to downsize. we have experienced a 20% downturn in total demand. so we have had to take cost out, shut some facilities down to match the ability to produce with the demand. but we think there are also ways to look for revenue growth for

the postal service. as i indicated, there are interesting and coupons that are important to be delivered to the home that newspapers will be delivering less and less. we are doing experimentation with the content of the calls, those same interests and catalogs that are delivered by the postal service could be put in a couch and brought back and collected and put through recycling, going forward. the summer sale where you are determining with levels of all you can get depending on the price that you are charging is also an important one to understand. what is the flexibility of pricing? our company is running some specials where we have made 500 tons of paper available to catalog to try to reach new prospects. that is 500,000 new mailings this year. in summary, costs need to be

reined in, and there is a lot of discussion about how one can do that. i believe if it can be done, the postal service will be increasingly viable going forward as the route to deliver, in our part of the business, advertising to the home, which is important for the overall economy. >> thank you for your excellent testimony, mr. suwyn. we will be going at 3:00 this afternoon to the nomination of judge sotomayor to become a justice of the supreme court. i am scheduled to speak on her behalf in support of her nomination at 1:15. i'm going to have to leave your soon. i will ask my colleagues -- senator lieberman needs to leave as well. i would ask if one of my colleagues would close the

hearing if i have to leave before the ending. thank you. i want to share -- let me just go back in time. i got out of the navy in 1973 and moved from california to delaware, enrolled in the gi bill at the university of delaware. one of my labor professors was art sloan. he gave me the third and the issue of his labor economics book. i learned a whole lot from him, not only because he was my professor, but ever since then. he has given me advice on a wide range of issues, many of them pertaining to labor. one of the things he talked to

me about was the similar role that those who are elected to lead labor unions, the similar role that you have to us. we have constituents who have concerns, and you do as well. as we know from personal experience, it is impossible to please everyone. we have to do what we believe is right. i appreciate the difficult situations that you all find ourselves in, and others as well. i want to thank you for you and your predecessors, the way that you have worked with the postal service to try to find efficiencies and bring down costs to be able to do more with less. a member of our senate is not here today and asked me to explain through him the amendment that was adopted that

said an arbitrator with the negotiation cell consider the financial condition of the postal service. he said to me, let me see if i have this right. the postal service already has a line of credit with the treasury? i said yes, it is capped at $15 billion. right now they have used $2.5 billion. they would need an increase of $3 billion a year to reach $15 billion. we just came off of eight years of the largest growth in our deficit in the nation's debt in history. we have accumulated more new debt in the last eight years and we did in the first 200 years of our country. that is right. he also said we are on course to

run the biggest budget deficit that we have ever had in the history of our country, over $1 trillion. i said, that is right. we have taxpayers online for what ever already has been extended to a maximum of $15 billion. i said, that is right. he said, when the arbitrators consider and they are involved in labor negotiations, under current law, what sort of thing do they have to consider? i said there is a directive in the law that says they must consider wage comparability. whether it is u.p.s., police, fire, there is direction to consider. he said, do they consider the matter of the financial well- being of the postal service? i said my understanding was a

day do. he said to me, what is the big deal if they already do it? you are asking that we just nature? what is the big deal? especially given the fact that our taxpayers are on the hook for so much money. in national debt is growing enormously. i do not get it. i would just ask for my colleagues, who do not understand, just explain for him and for us what we do not see. >> it is important to consider the premise. first of all, in marked, senator coburn suggested the current law prevents the board from considering finances.

on the last panel, postmaster potter indicated that blog offers direction to arbitrators and neither of those are true. the law in regard to the term comparability relates only to the firm. the only language that confers limited to an arbitrator is that which is offered by the party, which as i stated in my testimony historical is included in the finances of the postal service and other equally important factors. with regard to the law preventing arbitrary issues, there is no such language. so the very premise of all that was based on that and both of us are incorrect. the way it is now, and allows the arbitrator to consider all this and offer a fair decision.

>> [inaudible] i was present when the post office was under consideration. we were discussing with congress the right to strike and collective bargaining rights binding arbitration. as was expected, the final analysis once we were federal employees and should not, did not, and would not have the right to strike. instead, congress drafted language that we put into it that we would have pre drafted bargaining with binding arbitration. free collective bargaining is either free or it is not. it is like pregnancy, there is no little bit of free collective

bargaining. we either have the right to bargain collectively without restrictions, without obligation, without either side putting their thumb on the scale, and tilting the outcome favorable to his or her side. we elected, and congress embraced, in free collective bargaining and we would forgo an inherent right in the laws of our country which is natural, the right to strike. and barnum was struck 39 years ago. 39 years later, congress seeks to impose a qualifier, a condition of pre collective bargaining. that is not fair. we have a 39-year history of our giving the financial health of the employer, the u.s. postal service. that has been a factor in every arbitration we have had since 1983.

the last 16 years we have had three arbitrations and renegotiating contracts. before us at the bargaining table was the health of the postal service. in one negotiation, we reprinted a stamp of my predecessor and introduced a 50 cent stamp if they would extend the union proposals. that has been a factor in every negotiation, and turning it into the law, and presently there is reference that they have comparability. that is not a standard for arbitration that is the postal service's obligations but not a standard for the arbitrator. this would be the first intermission in the law more the arbitrator would be required to comply with standards in rendering his decision. the expectation is to cut postal

worker's salary. the underlying purpose is to adjust the salaries to pay for the unfunded health-care liabilities. postal workers should not be put under that restriction. this would almost guarantee it. postal service coming off of the year, my union go to negotiations in 2010. next year i will be at the bargaining table in representing the 300,000 employees i represent. on the heels of the postal service offering a $7 billion deficit, $5.4 billion of that from the paea. only $1.6 billion is for other purposes. i would be entering negotiations, facing a bad debt, and newly inserted language that says they have to consider the financial health of the postal service.

no matter what the outcome in 2009, the next three, four, five negotiations would be embroiled in defining what it meant. comparability was enacted in 1970, we went to arbitration in 1983, and for the next nine years, living in that issue -- mitigated that issue. it is not just inserting language, but my attorneys come with their language, attorneys come forward with counter argument. it is the arbitrator that makes the final decision. this would put postal bargaining in the uncertainty of no finally. how does it apply to the bargaining process? >> i do not mean to be rude, but my time has expired. we have not given mr. goff a

chance to respond. thank you. could you please be brief in your response? >> i will be very brief. as managers in the postal service, we do not have arbitration rights. with that, i will refrain from making comments on that. my colleagues should be able to handle that well. >> i am going to stay for a few more minutes, but in closing, i appreciate you sharing your thoughts with us. in different subject, but i want to go back to it, dr. coburn mention safeway. they have 200,000 employees. they spent as much on health care in 2008 as they did in 2004. i visited corporate headquarters before i spoke to some people up there, and clinton until may, spoke to one of the top people

over health care reform. albert einstein said in denver city lies opportunity. my hope is that in some of this adversity that we face with respect to the postal service, we will also find opportunity. opportunities to look at other companies like safely who have a unionized work force, and see what they are doing, and if there is something we can learn in a way that they are providing health care. it seems to be well received by the employees. they have been able to do it for the same amount of money. i am going to explore that opportunity, and i would encourage us to do the same. i will pass it on to my colleagues. if you could conclude, that would be great. this has been an excellent hearing.

i am grateful to everyone who has prepared and participated in this. excellent testimony, good question. senator lieberman? >> thank you. i apologize that i did not get to hear your full testimony because i had to go back to my office for a meeting. i will read it. it was interesting and helpful to hear your response to senator carper's question. honda face of this, senator coburn introduced an amendment, and we decided the response of most members of the community was not hostile to postal employees, but how could you not do this? how could you not allow them to

consider the fiscal condition of the postal service, the binding arbitrator? now you have taken us inside the world you live in in terms of these negotiations and informed me of the least two things. one is, which is reassuring, that in every arbitration you have been through, in fact, the arbitrators to consider the financial condition of the postal service. in fact, it is relevant and is discussed and it is argued with the rest. i will tell you, one reaction, my first reaction to that -- if they do it already, what is wrong with putting in the statute? then you went to your second point, and i will be looking at it, because it could be