On July 17, The House of Representatives Oversight and Government Reform Committee, chaired by Republican Congressman Darrell Issa (CA) held a hearing regarding the Postal Service entitled, “A Path Forward on Postal Reform.” Testifying before Congress were APWU President Cliff Guffey, Postmaster General Pat Donahoe and Quad Graphics CEO Joel Quadracci (testifying on behalf of the mailing industry).
Their written testimony, which is longer and includes items not in their verbal testimony can be viewed here. In their testimony, each of the parties provided the elements of Postal Reform that they supported. The elements cited in each of the written testimonies are as follows:
Donahoe Elements of Postal Reform in Written Testimony
1. Require USPS Health Care Plan
2. Refund FERS Overpayment and Adjust Future FERS Payment Amount
3. Adjust Delivery Frequency (Six-Day Packages/Five-Day Mail)
4. Streamline Governance Model
5. Provide Authority to Expand Products and Services
6. Require Defined Contribution Retirement System for Future Postal Employees
7. Require Arbitrators to Consider Financial Condition of Postal Service
8. Reform Workers’ Compensation
9. Right to Appeal EEOC Class Action Decisions to Federal Court
Quadracci /Large Mailer Elements of Postal Reform in Written Testimony
1. Rightsizing, consolidation, streamlining of facilities
2. Affordable amortization schedule for pre-funding health care
3. Allow USPS access to FERS/CSRS overpayments to do as they wish
4. Allow USPS outside of FEHB to seek cheaper plans
5. No price increases above CPI
6. Change to 5 Day Delivery Schedule
7. Require arbitrators to consider mailer’s interests
8. Allow USPS to retire employees of age on OWCP
Guffey Elements of Postal Reform in Written Testimony
1. Repeal pre-funding requirement
2. Allow USPS access to FERS/CSRS overpayments to do as they wish.
3. Over funding should be calculated on the basis of actual Postal Service costs.
4. Repeal CPI cap
5. We oppose proposals to create a new class of business mail
6. Maintain Delivery Service Standards and Preserve Network
7. We support proposed legislation that would require that service standards be maintained at the level established beginning in February 2012 and that would prohibit the closing of mail processing facilities where those Delivery standards could not be met.
8. Non-Postal Services Must Be Authorized
9. Wherever necessary, the Postal Service must be authorized to enter into cooperative arrangements with other federal agencies, state and local governments, and private enterprises.
10. The APWU strongly opposes legislation that would interfere with collective bargaining rights.
11. Oppose New Governance Structure or Temporary Board or Commission
12. Oppose Expedited Consideration of Service Standard Changes
Below is my transcript from C-Span’s coverage of what I believe to be an important part of the hearing. Introductions have been made and Donahoe and Quadracci have provided their opening testimony. The transcript begins where President Guffey provides his opening testimony, which is followed by Issa’s initial questions to Quadracci, Donahoe, and then Guffey.
44:11 into C-Span video
Opening Testimony of APWU President Cliff Guffey
Guffey: Thank you Chairman, I want to thank you for adopting some of senior member Cummings proposals right up front, especially using the postal demographics. I think that is a huge step forward.
(Looks down and reads from prepared remarks)
The Postal Service was not broken in 2006 when Congress passed the PAEA. As a consequence of that legislation it is nearly broke, but it still is not broken. Even today it delivers mail to every address in the United States and delivers 6 days per week at less than half the cost of mail in other industrialized nations.
(Looks up and speaks without looking at prepared remarks)
As a matter of fact, I think we looked at England. England is .6 of a pound, so it is a dollar a letter and there are no discounts.
I think the discounts in this country are appropriate. Their well. But taken as a whole with the whole Postal Service everything is operating properly and there needs to be some adjustments to save this grand institution.
(Looks down and reads from prepared remarks)
Congress needs to legislate to remove the burden of health benefits pre-funding. With that and a few other changes, the Postal Service can continue to provide excellent and universal service to the American public
Individual mail processing plants and post offices should not be judged in isolation. They are a necessary part of a universal service network.
(Looks up and speaks without looking at prepared remarks)
I’d like to point out that probably over 250 plants have already been rightsized, and we are to the point now that the more rightsizing that we get the more the mail is delayed. In other words if the mail is delayed two or three days by going to other plants and getting to the point where it loses its value to the customers and we lose the opportunity to keep the customers that we have now if we keep rightsizing.
Rightsizing is not wrong, it’s not inappropriate, as long as it doesn’t damage the product. And the product needs to be universal service, overnight or two days at maximum.
(Looks down and reads from prepared remarks)
Small offices where the mail is going is just as important as large offices where the mail begins. Without the network, none of the network pieces will work. All the pieces fit together. Cutbacks due to financial pressures have caused a severe cut in service. The situation will only get worse if postal management is forced or permitted to continue its present course.
The network consolidation plan that the Postal Service announced on May 17, 2012 is really a plan for dismantling and weakening the Postal Service. After reviewing that plan, the PRC concluded that the net savings from all these cuts in service could be as little as 46 million dollars. Although this may sound like a great deal of money it is only about 6 one hundredths of 1% of postal revenues. More optimistic cost savings projections are built on ridiculously high assumed productivity increases. I’m sure the members of this committee have seen numerous press accounts as I have that report strong complaints from postal customers about delayed mail because of the network consolidations.
We received an article today about the fact that Fastenal corporation’s finances have been damaged by delayed mail. Their accounts receivable were not received in a proper time frame. Mail is being delayed more than the Postal Service thought it would be. When a mail processing facility is closed, mail is sent to a distant facility for processing. It is very common for delays to occur and for mail not to be transported back to the original processing area for an on time delivery.
In many places, postal managers have tried to address this by requiring the mailer to mail before the end of the business day. When mailers cannot do that such changes cut off mail and delay it a full additional day. These unintended delays are compounding the effects of the Postal Service’s reduction in delivery standards. Where the Postal Service is intended to delay mail one or two days the actual effect is greater. The Postal Service now plans to deliver Tuesdays mail on Wednesday or Thursday. Often it does not get delivered until Friday. Mail intended for delivery later in the week is not being delivered until the following week. These are unnecessary cuts in service to the public. Congress should require the Postal Service to provide overnight delivery of first class mail in local delivery areas and prompt delivery of first class mail elsewhere.
Congress also must recognize that solving this problem will require an increase in postage rates. The Postal Service should be permitted to raise rates to increase postal revenues as long as the increases are consistent with the market for postal services. The CPI cap should be repealed. The situation facing the Postal Service is dire.
It is important for the Congress to refund postal service overpayments to CSRS and FERS. Postal Service payments to CSRS and FERS should be recalculated on the basis of Postal Service employees’ experience.
Congress should reject proposals to create a new class of business mail.
(Looks up and speaks without looking at prepared remarks)
Further, the Congress should not require to make some of the changes that the Postmaster General is asking, but should allow it. The unions and management can work together to create a better Postal Service for all of the employees of the Postal Service. I think the unions are willing to do so, it’s necessary, but do not require that which could be allowed to happen. Thank you.
Issa: Thank you. I’m going to try to squeeze in the first round of questions. Try to minimize the time you have to wait.
Issa Questioning Quadracci
Issa: Mr. Quadracci, you listened to the head of the second largest union say that a rate increase fixes the problem. What does a rate increase do to the customers that you serve, which represent, in flat mail, probably more than any other single group?
Quadracci: Well, I think it would be devastating. I mean selfishly, I should want it because I’d have fewer competitors at the end of the day, but I don’t think that’s what we want to do here. We saw in 2007 when our customer base had a significant increase. We saw a direct correlation to the drop in count. Remember, for people like catalogers, people who are using the mail to sell product, there’s two lists. There is the customer list, people they already have captive, but then there is the prospecting list where they trying to get more customers. And the problem is – there is a response rate. If the response rate isn’t great enough to offset the cost, they drop that and they find other ways to prospect. So we will see a devastating reduction in volume from our customer base if that were to happen.
Issa Questioning Donahoe
Issa: Mr. Donahoe, you have exigent authority to raise rates. So, in a sense you could do what Mr. Guffey is asking. You have to balance books. What do you think would happen, if without reducing most of the loss through other means if you simply sort of wrote a rate increase of 20% roughly across the board? Roughly what would be needed to balance the books, right?
Donahoe: If I wrote a rate increase of 20%, Mr. Quadracci would faint.
Issa: But you’d lose how much business?
Donahoe: It would be more than 20%.
Issa: And what would that do to the efficiencies of the system if that much volume dropped off?
Donahoe: We already have a substantial amount of over capacity. Our plans calls for no rate increases over the CPI. It’s predictable, customers can plan on that. They’re planning budgets right now for what they’re going to mail next year. That’s why we are so careful and that’s why we are pressing so hard for the legislation now. Lets get this done. These guys can plan on what they are going to put in the system. We are getting some growth back. We don’t want to hurt that growth.
Issa: Now, if we did do this increase and we lost 20% volume, in a sense we would have 20% of the letter carriers idled. In other words, there would be, even though it is not allowed under the current collective bargaining, 20% of letter carriers would have nothing to do if 20% of the volume went away. Wouldn’t that be true?
Donahoe: If we lost 20% of the volume, it would be devastating to our finances
Issa: I just want to understand from a labor standpoint. If we want to maintain the maximum number of efficient effective postal workers in the processing centers, in the retail operations, and carrying the mail to every point in the nation. The maximum number of people being used efficiently is based on the maximum volume. Isn’t that true?
Donahoe: That’s true.
Issa: So volume drives the question of employment assuming people are efficient and effective. Right?
Donahoe: That’s correct.
Issa Questioning Guffey
Issa: Mr. Guffey, one of my questions, one of Mr. Cummings’ ultimate questions too is, don’t we need to get the maximum level of efficiency – use attrition and other means to help reduce the workforce to match the current volume and keep the price low or as low as possible to maintain the maximum volume and thus the maximum employees for your union and all the other trade unions?
Guffey: Of course, and that’s what’s been going on for the last 10 years, the reduction, and the productivity increasing and the consolidating of plants, it’s happening.
Issa: Okay, so when you sort of sneered a little bit, just a little, about these money savings. If I understand correctly, what you are really saying is you would like to have an active role if something pencil outs or not but your not objecting to the Postmaster finding ways to deliver the same amount of mail with lower total labor, lower total costs and maintaining that volume?
Guffey: It might be done with lower labor and additional lower cost. And we have done a lot of that in our last contract. We saved the Post Office 3.8 million dollars. When I talk about raising the rates, I’m not talking about 20% raise. I can think I would faint just as much as my fellow panelist. It’s crazy.
Issa: I just want to look at or even if you did all the maneuvering you could do under current law, it would still be with 64 billion in revenue. You’re losing more than 12 sans these re-adjustments of retirement. To me that‘s 20%. You got it get from somewhere and if you don’t get it from the American Lung Association’s mailer you got to get it from somebody else’s mailer to get more.
Guffey: There are reductions we are talking about here in refinancing the long term health insurance for the retirees.
Issa: (interrupting) Right
Guffey: We are talking about many things.
Issa: (interrupting) Right and all of that is on the table. Absolutely, all of that is on the table.
Guffey: So that would not throw all the cost savings into a rate increase.
Issa: OK. I just want to understand that, and the point that I was making – and hopefully, all three of you are going to agree, is the least desirable part of any reform is the rate increase that inherently drives down volume. Is that agreed across the board? That’s the last thing you really want. If you can find savings without, including health care cost savings. If you can find savings without reducing those things which drive people to use your service. That’s the best solution right?
Guffey: Correct, but that would also include the fact of not slowing the mail down because that will also drive them away.
Issa: This committee is very concerned about quality of service – quality of service – and we want to define it. We want to make sure our final legislation provides the guidance that is going to assure quality of service.
Guffey: Thank you.
Issa: Now understand I flew to Alaska and I understand that their needs are for a certain type of delivery. They are less concerned about speed while others are more concerned about time perhaps than whether they can get a can of coke delivered, or a case of, actually a pallet of coca-cola delivered.
Mr. Ranking Member, I think it would be fairer if we pick you up when we come back. I want to thank you all and we stand in recess until after that last vote.
