Author: Archive

Good afternoon, Chairman Davis and members of the Subcommittee. I appreciate the opportunity to testify today on behalf of the Governors of the Postal Service about the use of contract delivery services.

The issue being discussed here today is contracting. However, the issue for the Governors and the Postal Service is broader and more fundamental. The Postal Service must retain its ability to collectively bargain on a level playing field, and know that agreements that are reached after good faith negotiations, and the subjects of those negotiations and agreements, not be altered as a result of legislative action. The precedent set by legislatively over-riding a long-standing provision of a collective bargaining agreement is very dangerous for all parties. It is not hard to imagine how a future Congress with a different composition could tilt the playing field dramatically in a different direction.

I have had the honor of serving on the Board for almost seven years and the make-up of Congress has changed even in that time. One of the perspectives that I have gained as a Governor during that time is the importance of providing universal service to the American public at affordable rates. A touchstone for all Board decisions is to ensure that the citizens of our nation receive the quality service they deserve. However, I have seen the financial, operational, and human capital challenges confronting the Postal Service continue to mount. The Governors fully recognize and take very seriously the concerns the employee organizations have raised about the use of contractors to provide delivery service to the American public. We are also painfully aware, however, of the significant financial obstacles facing the Postal Service.

As you know, this country’s population continues to grow — and to expand geographically, with the creation of new suburban developments and urban high-rises, adding nearly 2 million new addresses to the Postal Service’s delivery network each year. At the same time, however, the growth in mail volume has slowed in the face of competition from electronic mail, online bill paying, and other forces.

The business model for the Postal Service – where steady growth in First-Class Mail finances the expansion of our delivery network to allow for affordable, universal service – is no longer working. The trend is clear. First-Class Mail, particularly single piece First-Class Mail, is no longer growing steadily. Standard Mail, which contributes significantly less than First-Class Mail to the Postal Service’s institutional costs, now comprises the majority of our volume.

As a result, we are delivering fewer pieces of First-Class Mail to each household and business, which means we can no longer rely on mail volume increases to cover the costs of an ever-expanding delivery network. The Postal Service has seen a decline in revenue per delivery point from USD 469 in 2000 to USD 433 in 2006 – a USD 36 drop per delivery point in just six years. This drop in revenue per delivery has occurred despite a 21% increase in postage rates over the same period. Despite this decline, the Postal Service has achieved positive financial results in the past few years. I want to applaud the Postal employees who have made this possible. By increasing productivity, our employees have allowed the Postal Service to remain financially sound. However, this volume trend is disturbing, as it clearly shows that the Postal Service cannot price its way out of this dilemma.

The Governors are also acutely aware of the new responsibilities placed upon the Postal Service by the Postal Act of 2006. The Act eliminated the escrow account and returned the military service obligation to the Department of Treasury. It also mandated that the Postal Service accelerate the funding of its retiree health benefits. Because of this requirement, the Postal Service reported a USD 3.8 billion loss at the end of the 2nd quarter of FY 2007, with a project