Hearing with the Commissioners of the Postal Regulatory Commission

Okay. Good morning. The subcommittee on government operations will come to order and I'd like to welcome everyone uh with some uh explanation I had cataract surgery last week and find myself in bright lights so i'm gonna make my ophthalmologist happy and she tells me me too uh by avoiding a further damage to my eyes so uh i probably will end up getting a call from bono a bono uh asking me to uh quit trying to impersonate him but i would ask uh some bit of of of uh leverage uh on myself to at least uh be able to read what i'm doing so uh without objection uh i made declare a recess at any time as chair, I recognize for my per myself for the purpose of making an open statement, and good morning to each of you who have taken time to be at this important hearing. Uh, first of all, I would like to welcome everybody to today's hearing with the Postal Regulatory Commission. Uh, it's the latest installation of the subcommittee's ongoing effort to oversee the troubled landscape of the United States Postal Service. The uh PRC, Postal Regulatory Commission, is a key stakeholder in the postal universe and has been at the center of core issues, service performance, revised service standards, and of course postal rights. And each of these members that are here today will be given not only a chance to articulate their thoughts and ideas, but we wanna welcome them because they are the effort between as part of the regulatory oversight to make sure that we get their side of the story. Yet, the commissioners of the PRC have not testified before this committee since twenty eighteen, we felt like it was time. So, I thought it was high time not only for this visit, but also the update at these times which continue to be changing. And what has been a recurring event, the Postal Service finds itself self-identified and by others at a time of crisis. In March, the Postmaster General testified before this subcommittee that the Postal Service would run out of cash in about twelve months, meaning that it would be impossible to maintain anything close to the level of service that not only Congress but that the American people and customers would expect. Since that time, he has suspended employer contributions to the federal employee retirement system and placed restrictions on nonessential spending. I am not aware of an official estimate of how much these additional time measures have bought the Postal Service, but I'm given the understanding that it might be several years. Regardless, the Postal Service needs our attention. It needs the attention of not only Congress, but of course the Postal Regulatory Commission and others who are in this space, who provide added service, to the postal service, to customers, and certainly as payers into the system. So, it just doesn't make sense that we would simply ignore these issues that need to come forth, but rather talk about them, because I, too, am concerned about postal workers. I, too, am concerned about us treating not only workers fairly, but making sure that their future is secure. And I, too, care very much about our Postmaster General, who I think has uh the right attitude about his service to the United States of America, and in service to the Postal Service. I will once again take the opening opportunity to commend uh former Postmaster Lewis uh uh uh Lewis DeJoy for doing his best to come up with an enduring solution to the Postal Service's problems. He had lots of ideas. He had lots of things that he put into place. But I also see how the delivering for America plan is going to provide r- did not provide the results that he had hoped that it would. So, we're not just back at the table. We're back to where we have to work with each other. Similarly, I commend the current Postmaster General, my friend, Mister Steiner, for taking on this important task. I'm not sure how many people would have accepted the call from President Trump to do this. He willingly did and is taking this issue on with his team forthrightly. During our March meeting, Postmaster General Steiner told this subcommittee he needs congressional action to increase the Postal Service's borrowing authority and just two days ago, he presented the committee with a number of additional legislative requests. There is no reason to assume additional borrowed funds infused into this unintended business model would be anything more than throwing good money after bad results. So, that is part of why we're here today to get closer on our collaboration, not only with the United States Postal Service and its great employees, but also with the Postmaster General. We also have the United States Senate that has a a number of ideas about this, and we will include their ideas in. So to be clear, this is not a shot at my friend the Postmaster General. He himself has said Congress and the American people need to decide what they want. And I think this want, while it is the big issue of the day, we need to be clear that we need to get closer on a lot of the activities that add up to that quote want. And that is the day-to-day running, the decisions that are made, and also the obligations under law and necessary to support the American uh workers that are called postal workers and the systems that they're to are part of. So it's not just a matter of what a customer wants, it's not just a matter of what we want as members of Congress, it is called working together. If we want the status quo or at least what would be to be described as the good parts from some people's perspective, we're gonna have to pay for it one way or another. We're gonna have to understand these are different times. But, I would say that since its conception, the Postal Service has provided numerous societal benefit, laborers that work increasingly to the benefit of customers, and we need to make sure we more clearly understand those retirem- requirements and expectations. So it must deliver everywhere, not all the time, but darn near close to it. So regardless of how remote or the resources that it takes, we need to focus on the goal at hand, and that is closer l- understanding what we're trying to aid and be a part of. So, uh, what we're gonna do here today is to hear, take feedback. We're gonna take feedback, uh, not only from the Postal Regulatory Commission, but we're gonna hear from members of Congress. Uh, I would say to you, and I think it's no surprise to Mr. Mfume, almost every single member of Congress has an opinion about the Postal Service also. And I'm sure the Postal Service has lots of opinions that they cannot always express, but that's what today is about, to hear from the Postal Regulatory Commission. I'm delighted that they're here. At this time, I would yield to the distinguished member from Maryland, my friend, the subcommittee, uh s- uh ranking member, Mister Mfume, gentlemen's recognized.

Thank you very much uh Mister Chairman, good morning everyone. I wanna thank Chairman Sessions for calling this hearing on what we all agree is a very important topic. This is the fourth, in case you didn't know, in a series of subcommittee hearings on the postal service. This time with the Postal Reconnaidory Commission as we can see, and we are at a very critical juncture for the postal service. which as most of us know is facing an estimated nine billion dollar net loss, a nearly fifty percent decline in mail volume since two thousand six, and is at risk, serious risk of running out of cash in the near future. The Postal Service powers communities by providing universal, reliable and efficient mail services across all fifty states and territories. That's not anything new. That's what the service has been doing since it was created. Mail delivery, as we can all agree, is a public service, and it's a public service to all Americans, and it relies, uh, on the Postal Service's regulatory oversight bodies and Congress to find a way to work together to ensure its survival. Uh, the Independent Postal Regulatory Commission, also known as PRC, regulates, as all of you know, who are here to testify today, the male monopoly of the Postal Service. The PRC regulates uh and establishes regulations and procedures on setting postal rates and analyzes the Postal Service's finances, service performance and compliance with the universal service obligation. In addition to that, the PRC has the authority to hear public appeals of post office closures and receives and investigates public complaints alleging uh that the Postal Service may or may not be violating its statutory regulatory requirements. The PRC currently has, as we know, and excuse the redundancy here, four commissioners with critical expertise in the functions of the Postal Service and is a critical component of the postal system, which ensures that rates are fair and maintains a transparent, accountable universal mail system. As the Postal Service faces and comes to grips with its own future, that service must continue to cut costs and to find ways to creatively increase revenue. When Congress passed last, its last major reform bill, uh to support the postal service. And then Postmaster General DeJoy spent forty billion dollars on capital investments, reduced performance targets, weakened the service in underserved areas, and any solution that Congress is willing to undertake must include more safeguards to hold this and any future Postmaster General and the Board of Governors to the uh uh public by making sure that they're accountable in various ways. So I'm particularly interested in discussing potential guardrails that strengthen the role of the PRC and while I'm encouraged by the Postmaster General's efforts to prioritize service performance as he leads the postal service during this difficult time, uh I think even more has to be done. So I look forward to the discussion on how we can all work together to put the postal service back on as they say the right track. I yield back, Mister Chairman.

Mister Mfume, thank you very much, uh so that this uh subcommittee understands the gentlemen from Maryland are very, not only uh very good personal friends, we try and operate this subcommittee uh based upon the ability to work together, to talk with each other about even difficult subjects. And while he is given the authority and responsibility, as am I, to hold our own opinion, we try and work together. And I wanna publicly thank the gentleman, not only for this attribute that he has, ability to do it, um but to also let him know that I will continue that, uh as we move forward in this process that seemingly has a a lot of work to go. So, thank you very much, Mister Mfume. Without objection, representatives Walkinshaw of Virginia, Basinski of Illinois, Lynch of Massachusetts and Bellamissara are waived on to this subcommittee for the purpose of questioning the witnesses at today's subcommittee hearing. I am very pleased today to welcome our witnesses who are before us today. Robert Taub is the Vice Chairman of the Postal Regulatory Commission, formerly sitting in the chairman's seat for over six years and totaling over forty years of public service. I first met Robert a couple hundred years ago when I sat on the Postal Subcommittee of Government Reform at the time uh that i- we had a postal subcommittee and Robert I am delighted that you are here today. Ann Fisher. Ann Fisher has been the Commissioner at the Postal Regulatory Commission since twenty nineteen. She has served in the federal government thirty-two years to include holding a number of positions in the United States Senate and the United States Postal Service. During her s- Senate tenure, she was the lead Republican aide overseeing passage of the two thousand six Postal Accountability and En- En- Enhancement Act. Thomas Day, the gentleman has been a commissioner at the Postal Regulatory Commission since twenty twenty-three. He also has served forty-five years in the federal government. To include thirty-five years at the Postal Service where he held a number of senior executive positions. Ashley Poling, Ashley Poling has been a commissioner at the Postal Regulatory Commission since twenty nineteen. Prior to her service on the commission, she held a number of senior roles to serve the United States Senate. and the American people. So I wanna say thank you to each of you for joining us today. It was uh important for me, as I told Mister Mfume, as I had discussions with you uh yesterday to prepare us for today, I felt like that your insight, your opportunity to express your views and beliefs uh were very important. And it is my hope today that each of you will be able to not only complete the sentence that you start at the end of five minutes, But we'll make sure those points are well made and I have a slow gavel as Mister Infou may know. So, I would now ask each of our witness to please stand up. Pursuant to committee rule nine G, the witnesses will rise and raise their right hand and uh answer or affirm as I asked them, do you solemnly swear or affirm that the testimony that you're about to give is the truth, the whole truth and nothing but the truth, so help you God. Let the record show that the witness has answered an affirmative. Thank you very much. You may now take a seat. We're delighted that you're here, uh, and we appreciate you being here today. I'd like to remind the witnesses that in order for us to maintain proper opportunity for each of our members to come and participate uh, that we're gonna ask that you try and make sure that your time here is succinct and well done. But with that said, the we have the clock that you're aware of, the uh green light yellow light red light uh as we get to the red light please think about uh those closing your statements that you would have so we're delighted that you are here and i now uh would go go to our witnesses and mister chairman will allow you to come first the gentlemen's recognized

chairman sessions ranking member mafume and members of the subcommittee thank you for convening this hearing on the state of the postal service and the critical role the Postal Regulatory Commission plays in providing transparency and accountability for the American people. The President designated me Chairman of the Commission for more than six years, from December twenty-fourteen until January twenty-twenty-one. For the past two years, I was elected Vice Chairman of the agency by my fellow Commissioners who join me here today. We have a vacancy in the Chairman position, so pursuant to law, the Vice Chairman acts as Chairman. As current agency head, my remarks this morning reflect the full commission testimony. In some ways, not much has changed since my last testimony before this committee more than nine years ago in February twenty seventeen. If anything, the situation has gotten worse. Almost three months ago, the Postmaster General testified here and presented a dismal fiscal forecast. He stated that they would run out of cash and stop delivering mail just under nine months from now. He also presented three doors from which Congress could choose a solution. Two doors leading to continued dismal results and the quickened demise of the postal service such as stopping mail delivery severely reducing service, closing post offices, and raising prices. And one he referred to as the Goldilocks choice, which he championed would be just right, solving all the problems. The proposal includes increasing its borrowing cap from fifteen billion dollars to thirty billion dollars, among other options, such as reallocating retiree liabilities, diversifying retirement funds, and modifying current actuarial assumptions to reduce pension payments. Our written testimony dives deeper into the many reasons why the Postal Service is in the situation it is in today, and highlights how the Commission has repeatedly raised concerns over the past few years. While the Commission broadly agrees with the Postmaster General on some of the causes, Some of the Postal Service's explanations give us pause. Its proposed solutions should also be viewed cautiously. However, we agree with the Postmaster General on the most important solution, only by first specifically defining what America needs of its postal service and what that costs will Congress then truly know how best to fix the fundamental s- funding structure while preserving appropriate service and delivery standards. specifically defining the public service mission, that is, the universal service obligation, or USO for short, of this vital government institution, should be job one. Before further discussing this important issue of the USO, some words of caution about the Postmaster General's suggested approach in his testimony of just granting the service more freedom to operate like a truly independent entity and ridding it of any regulatory or statutory requirements, then hoping that will make everything better. That approach, combined with the Goldilocks choice, can generally be described as "give us more money with less oversight." The Postal Service is not an independent private business. It is a government establishment with extensive special legal privileges, including two statutory monopolies valued at nearly six billion dollars, over letter delivery and mailbox access that no other private sector company is allowed to maintain. This is why Congress established specific and limited statutory and regulatory guardrails and has relied on the Commission for the past fifty-six years to protect American consumers and businesses from potential monopolistic abuse such as predatory pricing, poor service, and unfair competition by this government establishment operating in commercial markets. The commission also cautions against endorsing the Postal Service's plan to move full steam ahead with what in essence is the Delivering for America plan, DFA, a plan that promised break-even operations by twenty twenty-three, and a cumulative ten year net income of two hundred million dollars. In fact, now in year six of the ten year DFA plan, the Postal Service has incurred thirty-one billion dollars in losses and is on the path to losing even more in the remaining four years of its implementation. It is a plan that promised to streamline and save the postal service twenty-eight to forty billion dollars by twenty-thirty as initially estimated, yet implementation of the plan has slowed mail delivery across the United States, particularly in rural areas, which to a greater extent rely on affordable and reliable mail delivery. Further, The mounting financial losses continue, a situation the Commission warned about on several prior occasions. Congress has enacted significant financial relief in recent years, including ten billion dollars in COVID relief, three billion dollars for electric vehicles, and approximately fifty-seven billion dollars in balance sheet relief under the twenty-twenty-two law. Without these extraordinary measures, postal finances would be even worse. The twenty-twenty-two also required Medicare enrollment for postal retirees, which was estimated to generate longer-term cost savings of two and a half billion dollars over the twenty twenty-one, twenty-thirty-one period. In addition, in twenty twenty-one the commission provided the postal service with additional rate authority above inflation for its monopoly products, such as letters. There are no limits on rates for their competitive parcel and package products. This additional pricing authority helped offset costs related to inflation as well as two sources of cost that the Postal Service argues are outside of its control. The Commission agreed, and we created additional rate authorities targeted at offsetting those specific costs of male density and retirement obligations. Since the effective date of the Commission's new rules in twenty twenty-one, the Postal Service has used all this authority to raise rates by forty-five percent for most classes. Rate authority due to inflation granted during that time totals twenty-three percent, which means the commission provided additional revenue raising authority to the Postal Service of twenty-two percent. Looking at the first class stamp price, the Postal Service accelerated the rate in just five years, from fifty-five cents to eighty-two cents effective next month, a forty-nine percent increase. Now more money is being requested, with no fundamental solution in sight. The commission is doubtful that just fifteen billion dollars more is going to solve the problem. Extend the date of the ultimate crisis? Yes. But prevent it? No. Understanding the situation and working to address it, the commission, building on its record of trying to identify creative pathways forward, undertook a major action in April that fundamentally alters the Postal Service's pronouncements that it could be out of cash in less than a year. The commission provided the Postal Service with a total of potentially fifteen billion dollars or more in relief through twenty thirty, to help avert a cash crisis in the near term, by issuing a waiver of our regulations requiring minimum retirement payments. I will say that again so it is very clear how circumstances have changed since the Postmaster General's testimony in March. The Commission provided the Postal Service a total of potentially fifteen billion dollars or more in relief through twenty thirty, and averted a cash crisis in the near term, by issuing a waiver of its regulations requiring minimum retirement payments. The commission's action offers some breathing room and extends the time before the Postal Service's reported insolvency and the stated crisis of stopping mail delivery to at least another several years provided the Postal Service makes judicious decisions about its expenditures starting now. To be clear, this is not a panacea nor a permanent or long-term fix. to the Postal Service's problems. But it does allow Congress an opportunity to enact thoughtful and fundamental change as opposed to choices of desperation. There are several areas where we disagree with the Postal Service on how it got into the position it's in now or how it will get out of it. However, I'd like to focus on the areas where we agree with the Postal Service and the singular action the Commission believes is critical that Congress enact. Define the universal service obligation. Clearly defining the USO means describing what the country needs from our postal service and setting up a system to fully pay for it. We fully agree with the Postmaster General on this point as he testified, quote, "Just tell us what you want us to do and how to pay for it and we'll do it." End quote. It really is just that simple. As the Government Accountability Office testified to you that same day, the existing postal service The Commission strongly agrees, and we have urged action in this regard since two thousand eight. This position has been echoed in recent years by the GAO, the Postal Inspector General, President Trump's task force on the postal system led by the Secretary of the Treasury, among others, which is that the United States needs to clearly define the public service mission for this wholly government, not private, establishment. In other words, What is the universal service obligation? Defining the USO involves answering tough questions. But in doing so, it also, perhaps more importantly, forms the basis for the infrastructure and financial arrangements needed to ensure our fellow Americans receive the postal services they need. Those tough questions may include how many days of delivery each week are needed in twenty twenty-six and beyond. What are acceptable delivery service times across Does the Postal Service need to offer fewer or more products and services? Should delivery service and access be the same across the nation? The Commission has extensive experience evaluating the USO.

Yeah.

In the two thousand six postal law, Congress directed the Commission to produce a comprehensive report on universal service, and it identified seven specific attributes that comprise the USO. I think it's important to name them. One, geographic scope. Two, range of products. Three, access to services and facilities. Four, delivery frequency. Five, affordable and uniform pricing. Six, service quality. And seven, enfor- an enforcement mechanism. The first four of these attributes, geography, products, access, and delivery frequency, directly impact the costs incurred by the postal service. The fifth attribute, pricing, directly impacts the revenue of the postal service and the sixth attribute addresses service performance. To date, however, other than mandating six day a week delivery, Congress has not specifically defined the other features of the USO. Once the Postal Service's duties under the US are defined, the costs for providing them can be assigned, and a viable financial structure can be established to support the level of universal service required. Only by defining the USO clearly can we begin to design a system that will fund the services required. It is our nation's mission statement for the postal service, and it needs to be clear. The law requires the commission to annually estimate the USO costs, and we currently estimate that the total cost of the USO is more than six point six billion dollars. Unlike many other countries, the USO within the United States is largely undefined, and instead is comprised of a broad set of policy statements with only a few legislative prescriptions. In the absence of a clear definition of the USO, particularly given the current financial challenges, each of us, including the Postal Service, will have different views of what services and operations it must provide to fulfill the USO, and all our views will have different price tags. As part of the financial pressure of generating sufficient funds to remain solvent make capital investments and pay retiree costs the Postal Service must fund the six point six billion dollar annual and growing cost for its universal service obligations. Given the Commission's substantial work on the USO, we would welcome the opportunity to collaborate with this committee on designing a viable solution with a possible legislative approach detailed in the written testimony. We appear before this committee today fully aware of the difficulties that lie ahead. I believe the Commission has a clear understanding of the serious and numerous financial challenges that face America's postal system. As you all know well, the mail stream of today has been diminished by electronic means of communication that replace mail. They replace stamps, and thus they replace the revenues necessary to operate our key mail delivery system. Some may even suggest that the time of the postal service has passed. But the fact is, for all the challenges the postal service of the twenty-first century faces it still retains an integral place as a key cog in how American businesses conduct their affairs and how Americans all across this land communicate. The U. S. postal and delivery sector represents a nearly two trillion dollar a year industry with almost eight million jobs making it vital to our economy. However, the postal service is in a serious financial crisis, operating under an unsustainable model, and the commission, along with the GAO, the IG, President Trump's treasury task force on the postal system, and the Postal Service itself have all pointed the way forward to find the USO, again, as the Postmaster General testified here in March, quote, "Just tell us what you want us to do and how to pay for it and we'll do it." End quote.

Mister Chairman, thank you very much.

Thank you, Mister Chairman.

Um, a- as I suggested to you yesterday and reiterated this morning, I think your presentation was necessary, balanced and contained, uh certainly a challenge for this subcommittee, members of Congress. and and certainly the American people. Thank you very much.

Thank you, Mr. Chairman.

Ms. Fisher?

Good morning and thank you, Chairman Sessions and Ranking Member Mfumi, for holding this hearing. The Postal Service faces an incredibly tough mandate. It must operate like a business by funding itself through its own revenues, yet it must serve the public as a universal service provider, delivering to every single address regardless of profitability, all while under persistent financial distress. I fully support the comments of my longtime colleague, Vice Chairman Taub. At its core, the question this committee is before this committee is whether the current rate system and broader statutory framework give the postal service a realistic path to long-term solvency while preserving a universal service. With the two thousand six enactment of the Postal Accountability and Enhancement Act, Congress directed the commission to establish a rate-making system designed to achieve a set of interlocking objectives laid out in the law. Particularly relevant to the discussion on postal finances is objective five, to assure adequate revenues, including retained earnings to maintain financial stability. True financial stability requires a system that can lawfully generate the reserves and retained earnings needed to invest in vehicles, facilities, and modern infrastructure. Without long-term viability, the universal service mandate cannot be sustained. If objective five were the only objective the commission had to consider, rates would need to rise about fifty percent to add ten billion in net income and a one billion dollar buffer likely triggering a roughly thirty percent volume decline and accelerating customer loss. Fortunately, that's not the way the rate system is designed, objective five must be balanced with seven other objectives that call for, among other things, maximizing incentives for operational cost reduction in maintaining predictable, stable rates and high quality service standards. The commission cannot simply allow the postal service to price its way out of structural deficit without seriously eroding the very mail volumes that still fund the universal service members of Congress routinely hear from their constituents about service problems high quality reliable service is the expectation but that carries an un- undeniable multi-billion dollar cost. In postal economics, cost efficiency trades off with service quality. Leaner networks cut costs, but high reliable service demands significant operating premiums. High quality service is not just management, it requires costly operational buffers. Extra staff, overtime, and added transport. For a cash constrained postal service, every gain in service scores has a direct price tag. About seventy percent of postal costs are labor. This past fiscal year, overtime jumped by five million hours, even as total hours fell by twelve million and headcount by fifteen thousand. Yet higher benefits, more career conversions, and volatile overtime still drove compensation costs up. In twenty twenty, the commission modified the rate-making system and granted the Postal Service additional flexibility to raise market-dominant rates above inflation, to help address structural deficits. We had to strike a very careful balancing act. allowing prices high enough to cover the actual costs of processing and delivery, but not so high that they accelerate volume declines and drive customers out of the mail altogether. Those tools have helped stabilize revenue, but they cannot overcome the combination of declining mail volume, rising structural costs, and balance sheet obligations. The Postal Service was designed to be self-funded, but has not reported an annual profit in roughly the last decade. Over just the last three years, cumulative net losses total about twenty-five billion dollars, underscoring that the current trajectory is not self-correcting. Given this backdrop, the commission has had to make difficult decisions. Vice Chairman Taub noted the waiver we recently granted the Postal Service allowing for emergency liquidity relief. The Postal Service is also seeking congressional assistance in the form of an increased debt limit and annual appropriation to fund universal service, and other items. all of which deserve fair consideration. I hope that issuance of the waiver, though, will provide Congress with time to decide what the nation needs from the Postal Service and how best to finance that mandate. From a regulatory perspective, short-term liquidity fixes are not a substitute for a sustainable long-term funding model for universal service. On a personal note, I want to thank Chairman Sessions for his recent visit to South Dakota. Having spent much of my life there, I have observed firsthand how the slowdown in rural and remote mail delivery can affect daily routines. The concern is not only slower delivery times but also reduced access. Last year the Postal Service closed fourteen postal counters in Sioux Falls, Hy-Vee and Lewis drug stores, leaving two full-service post offices to serve the state's largest city. A local newspaper quoted a Postal Service representative as saying the fourteen closures, better enabled the Postal Service to fulfill its commitment to serve our communities with efficient and reliable access to retail services. It seems to me the opposite is happening, because for many residents access has become more limited. At the same time the broader delivery landscape is evolving. In my own experience, I am extremely well served in the packaged delivery area. I often receive prompt same-day door delivery on countless items from private carriers. By contrast, postal service packages are delivered to a cluster box a quarter mile from my home, which can be difficult to access during winter conditions in South Dakota. In some instances, alternative shipping options through local retailers is sometimes less expensive in a shorter drive than my post office. And my mother, who lives even further away, receives necessary medication via a private carrier. My point is that while delivery options and consumer expectations continue to evolve, rural and remote communities still rely on the postal service for affordable delivery of mail and packages. This presents both a challenge and an opportunity to evaluate the current needs of postal service stakeholders. I encourage Congress to consider this evolving landscape when determining how best to ensure a responsive and viable postal service into the future. Thank you.

Miss Fisher, thank you very much. Uh, the gentleman Thomas Day, Miss, uh, Mister Day, you're recognized.

Good morning, Chairman Sessions, Ranking Member Mfume, and members of the subcommittee. Thank you for calling this hearing to discuss the current situation confronting the Postal Service. I look forward to the opportunity to discuss the critical role of the Postal Regulatory Commission, as well as what I believe it could do to assist in securing a sustainable future. I've been professionally associated with the Postal Service for forty-two years. Following nine years in the U. S. Army, I began my postal career in nineteen eighty four, and in thirty five years in the postal service, I served at all levels of management from front-line supervisor to senior executive vice presidents. Uh, I also worked all aspects of operations and virtually most if not all of the supporting functions as well. I'm in full agreement with the factual background the Vice Chairman Taub's testimony provided. The summary of performance and the path forward to achieving resolution and improvement. I would like to emphasize a few points, however. I fully agree we must define the scope of the universal service obligation. It's important to understand and this complex task will likely take some time to c- be completed. In the meantime, there are other critical steps that can be taken to improve the postal service, to reduce cost, improve service, and ensure a safe and secure work environment for its employees. Under current postal leadership, there is a clear effort to improve service and reduce cost. More than just an effort, real results are being achieved. That said, continued use of the network created for delivering for America plan DFA cannot achieve an optimal solution. As indicated in the advisory opinion of the PRC back in January of twenty-five, the DFA plan is fundamentally flawed. The flaws in the DFA limit what realistically can be achieved. To be clear, under current effort, improvement will take place. It simply will not be the best that could be achieved. I could go into a lengthy academic discussion explaining the deterministic models that the postal service utilized uh as opposed to the stochastic models that they should have utilized. What it ultimately comes down to is variation, variation throughout the network. No two places are the same. At each of the regional processing distribution centers, the RPDCs, there's a unique community to be served. The density of population varies, the types of roadways and traffic vary, and even the types and amount of mail vary. Despite this variation, the Postal Service decided to implement a single uniform format for RPDCs, a seemingly arbitrary fifty mile radius. Beyond fifty miles, most mail goes to the Regional Transportation Optimization, the RTO network. Most RTO offices have a single truck each day, to both pick up mail from the previous day and to drop off the mail for delivery that day. An example used during our advisory hearing was Miami, Florida. When you look at the Miami, Florida, RPDC location, if you go fifteen miles to the east, you're in the Atlantic Ocean. Go fifteen miles west, you're in the Everglades. Just one example of how a uniform fifty mile radius is objectively and fundamentally flawed. Only four of the RPC_s of the fifty or so that are out there are in new locations. The overwhelming majority of the RPD_s and the hundreds of the local processing centers, the LPC_s, were all placed in the existing network. The DFA network simply modified transportation routes between existing facilities and processing operations within those existing facilities. Properly modeling and designing an optical network does not require an overwhelming investment. Modeling, design and implementation of an optimal network should improve service, reduce cost, and provide employees with a more stable work environment. The PRC was clear in its advisory opinion. More than a year later, the facts and data uh are clear. We were correct in what we stated last year. It is almost certainly a better solution for the postal service to step back from DFA and properly design and implement an optimized network within the physical network that already exists. It will take some time to study and approve the implement of a revision to USO. As that effort is underway, properly designing and implementing a revised postal network is critical. This is a value for the immediate future, but it also will recreate a framework for future updates, as change will continue to take place throughout the postal industry. Proper network design and updates will be needed for the foreseeable future. Thank you again for the opportunity to testify before this subcommittee. I hope my testimony is informative and I look forward to any questions you may have.

For your service to the United States. uh government and the people of the United States. Thank you very much. Uh Miss Poling, you're now recognized.

Thank you. Chairman Sessions, Ranking Member Mahume, and distinguished subcommittee members. Thank you for taking the time to hear from the Commission on this critically important issue, the future of the United States Postal Service and the role of the Postal Regulatory Commission. First, I would like to echo the statement of the Vice Chairman. and state for the record that I appreciate his strong and steady leadership during these rapidly changing times in the postal community. The situation facing the Postal Service is a five alarm fire. Volume of traditional mail continues to decline, a result of both ongoing electronic diversion and an acceleration due in part to the Postal Service's aggressive pricing strategy. And at the same time, service quality continues to suffer. as the leadership of the Postal Service has decided to slow service standards for several mail products over the last five years, including twice for the flagship first class mail product, while also lowering its service performance targets. What this means is simple. The American people are paying more while fewer mail pieces are being delivered in the expected time frame. As declining mail volumes and an increasing number of delivery points, continue to put financial pressure on the Postal Service, the incentive to underperform service expectations can be expected to increase. It is likely time for Congress to consider authorizing additional oversight to ensure the Postal Service meets its statutory obligations to the American people, especially if those obligations are spelled out in an explicit universal service obligation. With that in mind, I would like to focus the remainder of my remarks not on what aspects of the Postal Service's broken business model Congress should address but on why addressing the sustainability of the Postal Service is so critically important, even in a world dominated by electronic communication. Especially for the nearly sixty-six million rural Americans, the Postal Service continues to fill an important role, not just as a communication channel but as a lifeline for rural residents. ordering pharmaceuticals and other necessary medical i- medical items, and an economic engine for local small businesses reaching their customers. And every year, there are numerous stories of letter carriers saving the lives of elderly residents throughout the country, simply by showing up at their doors every day and noticing that they haven't collected their mail. I started my career in postal issues working for several senators from states with large rural populations. including Montana, North Dakota, and Michigan. I saw firsthand the impact of missed daily mail deliveries and how a post office can serve as the beating heart of a rural community. And in many areas of this country, the Postal Service is the most visible daily interaction that people have with their federal government. In this way alone, it continues to bind the nation together. And it's important to remember that the Postal Service is first and foremost a basic and fundamental service, provided to the people by the government of the United States. As Congress works to clearly define the scope of the USO, it is important to acknowledge that the Postal Service has a number of resources that can be utilized for the benefit of the American people. A nationwide delivery network serving every community from New York City to Nome, Alaska. A physical presence in almost every community in the country with over thirty thousand post offices and almost one hundred and sixty-three thousand delivery vehicles. making daily rounds to every address and a large workforce of highly trusted, dedicated public servants. Each of these assets could be leveraged to provide value-added services to the American people. Although the Postal Service Reform Act of twenty twenty-two granted the Postal Service additional authority to provide new products and services to federal, state, local and tribal governments, a recent Office of Inspector General report notes that the Postal Service has barely begun to scratch the surface on these new revenue opportunities. So a critical question for Congress, as it approaches the issue of universal service, is not only where and when it wants the postal service to deliver to the American public, but also what it wants them to deliver. There is hope for the future, but con- congressional intervention to address the root causes of the postal service's problems is a prerequisite to meaningful reform. So what do you do when a fire threatens to rage out of control? It is my belief that now is the time for everyone to grab a bucket and work together to secure the future of the postal service that provides high quality, universal service to all parts of our country. And the Commission stands ready to assist in any way we can to help preserve this two hundred and fifty year old national treasure. Thank you again for convening this very important hearing.

I wanna thank you uh also for your service.

Thank you, Chairman Bono. It's always a pleasure being with you. Um, I was on a radio station one time in my youth and I couldn't pick the music, cuz I'd have just picked all country and western, but they kept playing this Dad Got Me U Two stuff, and I said, uh, I remembered I was sitting on a corner in Belfast and um this guy was saying, yeah mate, I'm about ready to get out of the music business, I said, no Bono, you need to stick with it. And literally, weeks later people came up to me and said, did you really know Bono? And I go, no, no. But anyway, gullible folks. Anyway, thank you all so much. I'm a big fan of the post office. I'm a I went back before my congressional career, I was a prolific e-payer. I had over a thousand sales and And I agree with what one of y'all said about the postman coming to people's houses. Um, they are they're really a lifeline for seniors, and sometimes it's the only contact they have with the folks out there. And I've had I've had my share of uh tussles with y'all's higher-ups because of some management decisions, but that's not with y'all. But anyway, um, this is for all y'all. What what's the market dominant products? offered by the United States Postal Service.

Uh, Congressman, those are the, uh, overwhelming majority of letter, uh, flats, periodicals, newspaper magazines. So when you think of your first class letters and cards, that's a mark-a-down product. The result is based in statute, which is the idea that if the Postal Service either has a statutory monopoly over that, for example, letters no one else can, uh, deliver, or there's a economic test of the law but the post service has market dominance that uh at a level that they can uh raise prices substantially uh either degrade service uh without the significant risk of losing business that's a statutory test it's

right

regulated as market dominant if it's not it's competitive where they have immense flexibility in price like parcels

i'm so what you said there uh does every category of marketing uh male make money including the flats

Uh, flats is uh one of the areas, marketing mail flats, where they are losing money, but uh the rest of marketing mail is uh actually contributing quite a bit to the overhead.

OK. Now, given that those are unprofitable, would you all recommend the postal service phase out or restrict some of those products?

Uh, what we have done in the uh rate system that we've designed is require the postal service to uh increase those rates to better

And what percentage of their postal employees fall into the collective

Hmm.

bargaining agreements compared to possibly the non-postal federal employees?

are collectively bargained employees. Those are the clerks, the carriers, rural and city, uh and the mail handlers. Uh that is the bulk of the uh Postal Service workforce.

Now now does the high percentage of union folks give the Postal Service more or less flexibility to adjust postal functions?

Uh the uh collective bargaining requirements have been embedded in the statute since Postal Service was created. Uh so that does create uh a a a mandated uh process would be different than other federal employees where they're not uh uh under collective bargaining restrictions and mandates.

And this may be, may have to go under what you said you were gonna get for me, that what's the Postal Service oper uh how much what percentage of the Postal Service operating costs go to labor

Right.

and how can the federal government or decrease that amount?

Uh, generally speaking, uh, historically, uh, the Postal Service roughly seventy percent of the costs are for uh labor. Uh, it's a very uh you know handicraft uh uh uh focused business but generally it's been about seventy percent of the total cost of postal service uh for labor uh while revenue has been increasing over say the last decade the expenditures have been going up more than that just in the last five years their costs have been going up ten percent variety of factors but if you got seventy percent of that bogey as uh employee cost that is gonna be obviously uh a driving uh expenditures

now i know that Chairman Sessions served with him or grew up with him, but wasn't Benjamin Franklin the first Postmaster General?

Uh, i- indeed, yes, seventeen seventy-five.

And and he's in the Constitution. The Post Office is in the Constitution.

Article one.

We made sure it got in there.

Yeah.

You're not recognized, Mr. Chairman.

Article one, section eight, clause seven, yes.

Okay, one last question. I've got seven seconds. Uh, what action can Postal Service take right now to extend the timeline before running out of money and does Congress have to intervene?

Uh, we uh provided a waiver of a regulation we required that required uh payments into the retirement. Uh, if the governors of the Postal Service choose to activate that waiver, which means notifying the Secretary of Treasury, that's gonna be a free, that frees up two point four billion this year. We did it with a time limit of till twenty thirty. That's potentially fifteen billion dollars of breathing room in the near term. But it doesn't solve the problem by any means,

All right.

but it gives you the freedom.

Thank you, Mr. Chairman. Just for the record, I'm a fan of the Post Office, obviously, and the people that work there, I'm maybe not a fan of some of their management. in the past, but I would hope that we could work together on both sides of the aisle to help alleviate some of these problems, because the post office is a godsend for a lot of people and a lot of people, my rural folks in my area get their medicine and things like that, and when it's delayed, their medicine's delayed and that that hurts me. So, thank you, Mister Chairman.

I wa- I wanna thank the gentlemen.

Thank you all.

I think that the uh witnesses who are here as well as others know that Mister Burchette attends Uh, each of our hearings i- has a uh a view that I think is very important, and I wanna personally thank you for being involved. Uh, I think I've told this to uh the con- young congressman and he's agreed we're all part of the problem, not just w- each of us uh individually or as a as a as a group. Each of us are gonna be a part of that solution. I told him that I appreciate him staying at the table to to make sure we get closer to that so sir i wanna thank you very much uh the gentleman gentleman is recognized

thank you i wanna begin by thanking postal service employees for their dedicated dedication and hard work in twenty twenty the postal regulatory commission granted the postal service the power to raise mail rates above the rate of inflation. Over the past six years, the Postal Service has repeatedly exercised that power to impose higher costs on American consumers. Since July twenty twenty one, first class mail r rates were incre increased by forty-two percent. with an additional five percent increase scheduled next month.

Good mix.

I'm glad you're glad you're back.

At the same time, delivery standards have gotten worse. First class mail now takes three to five days to deliver, whereas previously it took two to three days. Uh, President Trump's reckless actions and guided policies have resulted in sharply higher gas, grocery and other prices, and Americans are paying more in postage for worse service. This is simply not acceptable. Millions of people across the country rely on the postal service to be an effective, affordable way to pay their bills. fill file their taxes and run their businesses. Our prices mean shutting out many Americans from full participation in our society. Vice President Twork, uh a as the Postal S- as the Postal Service Commission reviews and approves postal rate changes for the postal service, to what extent are you weighing the the deterioration of service.

I, Congresswoman, we take that very seriously and we are deeply concerned about that. As you referenced, uh, about uh five years ago, the commission modified as is a requirement under the law, the market dominant or price cap system for these market dominant products where the postal service has captive customers, those that you were talking to, you know, who have no other alternatives than the mail. That had been locked at CPI. There's nine somewhat conflicting objectives in law that the uh commission must balance, uh and those include things like rate predictability, stability, includes the financial stability of the postal service, and a variety of others. Uh we looked at that system and found it wasn't meeting those objectives, so we provided the postal service, as you indicated, some additional rate authorities above inflation to capture costs that are outside of their control. uh they made clear they were gonna be judicious in their use they have been maximalist in that uh use and as you indicated we are seeing degraded service uh during that time so in essence folks are paying more for worse service uh and hearing those concerns we started a review earlier on this system and we identified one of the changes uh that we actually uh promulgated in january was limiting the Postal Service, again on this market dominant side, competitive products they could change daily, to once a year. They were in uh many cases doing twice a year increases, which really are uh attacks on the American businesses and consumers throughout this United States by a government agency twice a year. And uh we limited that to a once a year, but we did not change the maximum uh ability to go above inflation, nor the other many uh flexibilities that the Postal Service has. for pricing.

Commissioner Day, uh the universal service obligation guarantees that all Americans regardless of location can access public services at uniform rate rates. What states, what steps will be required to preserve the universal service obligation for future generations?

This is part of what uh the the uh Vice-Chair had already said, excuse me. As we look at the USO, we're gonna have to clearly define that, it is an open issue. At this point the Postal Service has been able to redefine, as you've already just said, excuse me, to go from overnight to three day to a two day to five day service, and even change the service measurement system. Pardon me. The uh the reality is Mm. Oh, pardon me. The the reality is we're gonna have to work our way through that. I don't have a definitive answer at this point in time. It has to be done in conjunction with all aspects of the universal service obligation.

Thank you. Uh, Commissioner Pauling, aside from raising mail rates, what other options are available to the Postal Service for generating additional revenue?

Thank you so much. You said I just wanna make sure I had the question correct. Um, you said aside from raising mail rates, what other forms of revenue raising are available to the Postal Service? Is that correct? Okay, I'll just go ahead there. Um, I was just gonna say, yes, so I think the Postal Service, one of the things I about in my testimony is I think they have a tremendous ability to go forward and and pursue these additional revenues uh the Office of Inspector General I think did a fantastic report kind of seizing on in the twenty twenty two law um you know it has been expanded in terms of working with state local and tribal governments um in terms of doing these added revenues so I think that's something the Postal Service should really be pursuing. Um I would also say I think there's untapped potential looking in younger generations as well. I think we need to look at Gen Z, we n- need to look at millennials, we need to look at what is it sort of that people want from their postal service, and ultimately we that's why we need to define this universal service obligation.

Thank you. As I told Postal S- Postmaster General Steiner when he testified before the subcommittee in March, postal services must be accessible, reliable and affordable, raising prices uh and lowering delivery standards will not save the postal service from its current financial predicament. And I look forward to working with each of you on a more sustainable long-term solution, and I yield back.

I thank the gentleman. I thank the gentlewoman and also wanna thank her for being at each and every one of these hearings about the postal service and I appreciate her service to the country also. Uh, we now move to the distinguished gentlewoman, the chairman of the rules committee, the gentlewoman from North Carolina, Mrs. Fox.

Thank you, thank you, sir.

Yeah.

Thank you, sir. Um, as many people know, I use the Post Office a lot for all kinds of things, especially personal issues, and so do my constituents. We want the Postal Service to ensure business functions are done, re- people receive medicine, pay bills, stay connected with their loved ones. However, during the last several years the Postal Service's financial problems have not abated. Even though Congress provided a one-time relief in twenty twenty-two, the Postal Service continued down its unsustainable path of huge annual losses. With no end to the losses in sight, it's increasingly clear the Postal Service has lost Rather than a disciplined, efficient operation, the Postal Service resembles a bloated federal jobs program that delivers higher postage rates, delays, and deteriorating service. The Postal Service must return to its core mission of providing reliable, affordable, universal mail service. I uh, Vice Chairman Taub, I'm concerned that the Postal Service is spending money duplicating functions that the private sector can provide better and at lower costs, such as package labeling technology and IT solutions. Does the commission evaluate whether postal service is duplicating capabilities that private companies have already invested in and developed?

Uh, we don't have that direct authority in the law, but I will say, uh, the law requires and we, I mentioned, uh, modify the rate system. There's a requirement of law called work sharing. And it really is based on this idea of a vibrant public-private partnership, where if the private sector can do it at for less cost than the postal service, it makes total sense to have the private sector doing that. Uh, and

Well, does does the law allow you to seek more transparency from the postal service on how existing commercial technologies can improve service and reduce cost? I would assume it does.

Uh, you know, those, uh, you, uh, there's the separation between the regulator And so, some of what you're describing are operational decisions by the Postal Service to invest, whether it's new technology or invest in a whole middle mile network, which the current plan is doing, uh, with promises that that's gonna be more efficient. Uh, and so, for example, we opened a docket early on when the signs were clear that this plan that I think we all hoped would uh provide the results was not. And so, indeed, uh, uh, uh, uh, Doctor Fox, you were right on that, uh, that is

So what problems arise when the Postal Service invests in technologies that can disrupt private sector solutions especially when those company's products are regulated by the Postal Service itself?

Yeah, uh, deeply, uh, you know, you just go down the list. Not only that is then uh adding and saddling the postal service and the rate payers with more costs that otherwise could be inflected uh by leveraging the public-private partnerships but it's affecting the private sector of the United States, the government establishment, and commercial marketplace. We do have authority based on the two thousand six law uh to police through complaint where the postal service is using its regulatory authority to unfairly compete with uh the private sector. And so tho- those are areas that uh we've had a chance to police, but we have not actually adjudicated uh many of those complaints. But that is a deep concern and we do have authority over that.

So the Postal Service keeps raising rates on mailers well above inflation, which is unsustainable. Businesses in my district must make tough decisions, such as laying off staff and newspapers and magazines must cut print days. which results in less local news and information reaching constituents. Everyone involved pays more for a worse product. What remedies do you believe should be implemented?

We have an open docket right now that's ongoing, looking at that market dominant rate system and whether there should be changes, uh, including those additional rate authorities above inflation that I mentioned we provided the postal service. I would note Postmaster General testified, uh, and has continued to allude to, uh pending in that pending docket the postal service has filed their perspective as to how we should modify that and their recommendation is that we should get rid of any price cap limitations on the postal service just trust the postal service to uh raise rates as they deem appropriate and then the alternative if we don't do that their petition suggests that we uh per grant them uh upwards of twenty three percent one time authority to do that that's pending before us It's an ongoing docket. Like everything we do at the commission is in the light of day, where we get notice and comment, Administrative Procedures Act. Any party, including the Postal Service, if they don't like our final decision, can take us to uh the DC circuit. Uh, and I would suggest, in- little different than the Postal Service itself, which is exempt from the Administrative Procedure Act, we're there to really represent the public interest, and so we are looking at that issue right now.

Well, I thank all our witnesses. I thank the chairman. And I will be submitting some questions. um after the hearing. Thank you.

Chairman Fox, thank you very much. We'll look forward to getting those questions and of course uh each of the witnesses will be expected to respond back to those as I know that they will. Thank you very much for your constant feedback uh to me since the day I took over this job, Virginia Fox has made sure that she's a regular visitor with me on these issues. Thank you very much. Uh gentlemen, yield back time, uh the gentleman from Florida, Mister F- uh Mister Frost, you're recognized.

Thank you so much, Mr. Chairman. Um, I wanna start by talking about the uh Regional Transportation Optimization Plan, the RTO, um that might impact seventy-two percent of all post offices. At a previous subcommittee hearing I was able to ask the Postmaster General about the RTO plan directly, and now I just wanna hear from um you all. Uh, Commissioner Pauling, um does the PRC believe that the RTO plan will achieve its projected cost savings and improve the financial health of the postal service?

Thank you, Congressman Frost. Um, uh, the Postal Regulatory Commission uh issued an advisory opinion in January of twenty twenty five and in that advisory opinion we actually did find that the changes the Postal Service was making would disproportionately harm rural America. RTO was among among the things that we were looking at, right, when we made that determination. Um, unfortunately and the thing is, I think we're all here wanting to make sure the Postal Service is better, wanting to improve it. I don't think it brings any of us any joy that some of our findings were right in that advisory opinion, but as things have been borne out to date, yes, I think the RTO is something that has proven to be very challenged. Um, and, you know, again, in the advisory opinion process, uh, the Postal Service has the ability to look at our recommendations, but they don't have to follow them because it is advisory in nature.

Um, how might the, uh, RTO or similar restructuring activities negatively affect mail delivery times?

I think that's a really good question. I think we've seen uh obviously service standards change and be degraded drastically particularly over the last five years two times service standards have already gone down so I worry a lot about what does a local citizen know about their delivery times uh we actually did make a recommendation in our advisory opinion that said maybe you should put something to the postal service put something maybe on these blue box is saying how much longer it's going to take right when we're adding in this these extra days of delivery um to date that has not been taken into account um again i think the biggest thing we have to think about is what what is it that citizens expect from their mail what do they need from their mail and frankly they need to be they need to be given a lot more transparency from the postal service they need to understand how long it's going to take something to be delivered and right now i worry about that disconnect between maybe what the postal service is saying with service standards and these changes that have been made and then the actual experience that customers are having on the ground.

Hundred percent. And you know, part of the reason I ask is I'm concerned about time-sensitive mail, um, and specifically, you know, of course, bills and paying for things, but also we have elections coming up and so mail-in ballots and different things like that and so I'm just concerned about the RTO's uh the RTO plan and its impact on on elections and and working people and how they use the postal service. Um, I also wanna spend a few minutes talking about the importance of having an independent, uh, United States Postal Service and a knowledgeable, uh, PRC. Um, Vice Chairman, can you speak a little bit about your qualifications and experience that you feel prepared you for this role?

Uh, sure thing. Uh, the, uh, Chairman had mentioned, uh, he's had the honor and privilege, uh, and joy of working on postal issues for nearly three decades when he, uh, came to Congress and was, uh, signed to the Postal Service subcommittee on this committee at the time. I happen to be its staff director, uh and so I've been on uh this journey of uh trying to help insure that this important vital service to America uh i- is delivered. The statue in two thousand six when it was modified to create the postal regulatory commission, did add qualifications in statute for postal regulatory commissioners, includes experience in things like public administration, accounting, economics, law, uh and so like a lot of the uh uh three and uh four letter uh independent regulatory agencies in town.

Yeah.

The idea is we have a multi-headed agency that bring differing perspectives. And so uh I think, you know, that is in many ways the strength. Uh and it's an honor working with uh my colleagues here today. I know we were all appreciative. The Chairman uh for Public Service Recognition, Rick, a few weeks ago came to visit the good hard working uh folks at the commission who who do that work.

Yeah. Thank you. I mean it's clear that you all care about the financial health of the USPS and The qualities you all possess are also important qualities for nominees, uh, to the Postal Service Board of Governors as well. I'm very concerned about the president's, uh, the president, uh, seeming to, uh, nominate people to the board that have his best interests in mind and not the best interests of the USPS like his most recent nominee Anthony, uh, Lomagino, who is also one of his top donors. He's a co-founder who put millions of dollars into a super PAC to help get the president re-elected. Look, I think it's important that we fill vacancies on the Postal Service Board of Governors with Senate-confirmed appointees that meet the qualifications and experiences um to help serve the needs of the people, not the President. Um the postal service is not a business opportunity. Um and independent govern- government boards must remain independent. Thank you and I yield back.

Thank you very much, Jim. He yields back uh his time. And I also want to thank the gentleman from Florida. He attends each of our hearings, stays up on these issues, and I believe uh brings a a balanced comment to people on this issue. And I wanna thank the gentlemen. We now move to the distinguished gentleman, former uh Chairman of the Policy Committee for the Republican Conference, the gentleman, Mister Palmer.

Thank you, Mister Chairman. Um Postal service carries roughly a hundred and one billion dollars in unfunded retirement benefits. Um. It, you had to uh s- you're spending about ten billion a year trying to meet those obligations. It's a a huge hit on on your your annual fiscal year budget. And back in April you had to suspend contributions uh out of concern that that you would run out of cash. Um, I I just wonder from each of you h how much thought you've given to the uh recommendations

Uh uh Congressman, uh i- i- one of those things, all of the above, all of those ideas are worthy to be considered by Congress. Uh we would simply suggest before Congress uh jumps into uh those decisions, we first focus on what is the public service mission that America needs from its postal service,

Well, if you're going bankrupt, which you're headed in that direction, if you were a private company with a hundred and over a hundred billion dollar unfunded liability, uh, you you gotta start thinking about this differently.

I- exactly. That goes to the heart of defining the mission. But, uh, Congressman, you're right on. There is on that balance sheet a enormous debt to the American taxpayer for the retirement obligations that they have not paid. for over a decade. The commission added additional rate authority for those Markitama products, and if they chose to do it, they could finally start making some payments, which they did do. We stepped in earlier this year at their request to look at that and waived that requirement. But you're right, it's on the books, but they've been in essence uh not paying that, uh in some ways I'd say in essence unilaterally increased the scale.

We're not gonna let - we're not gonna let people who've spent their career uh delivering the mail uh lose any of their retirement benefits,

Right.

but at the same time you can't let the obligations for the retirement benefits bankrupt the entire operation.

Right.

So, do you think we're at a point where Congress needs to consider amending federal law to allow the Postal Service to divers- diversify its retirement investments because everyone that has looked at this believes that this would significantly reduce the burden.

Yes. Yeah, eh, yeah, that would be, uh, a- again, trying to help the Postal Service, like it's been looked at. I think it's a, uh, uh, reasonable suggestion uh obviously the secretary of the treasury would have some equities here that would need to be at the table um but from our perspective uh while it's outside the direct lane of the commission definitely all of the above things that can uh help but on the retiree uh i the action i was mentioning gives all of us as policymakers in congress a little bit more breathing room as opposed to reaching for choices of desperation right now

yeah well The fact that you had to suspend uh the employer contributions is indicative of how dire the situation is,

Yeah.

and Mister Chairman I think maybe we ought to try to do look at this in a by-partsome manner to give the uh Postal Service the ability to diversify its investments. Yes, everyone who's looked at this agrees, uh unless the some of the other commissioners disagree, and I haven't heard from them, that this would largely uh mitigate the problem. Um, uh, my other question, and - and - and not, um, anyone can respond to this is what other cost-saving measures is the Postal Service considering?

Uh, the Postal Service, as you mentioned, not only unilaterally separate from our actions, uh, suspended the two hundred million every two weeks for their current first employees, uh, the Postmaster General just recently issued a directive where they were not going to hire new positions, they would still back fi- uh, fill, and limited expenditures on certain things like travel uh and all of that so uh Postmaster General has announced certainly the FERS uh withdrawal gives them uh quite a bit of money uh in the payment but uh they are undertaking right now efforts to conserve cash which again uh changes that uh beam broke at the end of the year to a little more breathing room, but it's not a permanent fix.

Well I thought I saw some smiles and nods from from the other witnesses I I do appreciate your your uh response to my my question, my concerns about this, and I think there's some opportunities here for us to work together to on on this issue that could really help the Postal Service when they're, Mister Chairman, they're spending ten billion dollars a year just on the unfunded part of the retirement obligations. I appreciate uh the witnesses being here and I yield back.

I want to thank the uh gentleman, Mister Palmer, not only for his comments and insight, this is part of that huge issue that each of our postal regulatory commissioners have spoken of today, something that has been uh important for the Postmaster General, uh the the dialogues between our staffs, the dialogues between each of us, uh and that is why it was uh referred to as a five alarm fire this morning, that we do need to pay attention to. It is not one subject, it is a big subject in Uh, it it is the purpose of these hearings, Mister uh, Chairman Palmer, is to do exactly as you suggest, and that is to get into the intimate details of of the piece parts about how we're gonna pay for this, cuz it's a big system and there's a lot at risk. And I appreciate the distinguished gentlemen for taking time to be here today. Uh, I next would like to go to the uh gentlewoman, Miss Randall, to be recognized at this time. Gentlewoman is recognized.

Thank you, Mr. Chairman. Like so many rural communities across the country, the Postal Service is crucial to folks in my district. Tribal members, veterans, military families, aging neighbors across Washington's sixth rely on the Postal Service to deliver life-saving medications, to pay bills, to stay connected to their communities, especially in a place where reliable internet is hard to come by. One of my constituents recently wrote to my office, experiencing multiple seriously serious delays in just the span of one month. A certified check sent from Carlsberg to her credit union was expected to arrive in a few days. It took weeks. A priority mail check sent from SQUIM also took roughly two weeks to arrive. And a bill mailed to her waste and recycling provider still has not arrived more than two weeks later. It's not just frustrating. For a household trying to deposit a tax refund, pay bills and manage daily life through a mail system they need it to be reliable. And in a universal vote-by-mail state like Washington, those same delays raise concerns, especially when our democracy and free and fair elections are under attack. If people can't trust a check or a bill will arrive on time, they're gonna ask the same questions about their ballots. And no one should have res- less reliable mail service because they live in a rural community on tribal land or at the end of a long delivery route universal service it's got to mean universal service and right now the numbers that congress gets are too broad to show what people in individual neighborhoods and on routes are actually experiencing national average doesn't tell us whether ballots are moving on time in kids up county where thousands of military families rely on dependable mail service. It doesn't show us whether mail is reaching communities in Forks and Quileute, um, at the edges of the Olympic Peninsula. We need to know how the mail is performing community by community, particularly when we depend on it for our ballot delivery. That means looking at the three-digit zip code data and service performance across every congressional district. Commissioner Poling, in a universal vote-by-mail state like Washington, how should Congress be thinking about postal service performance as part of election access and voter confidence?

Thank you, Congresswoman Randall. I appreciate the question and it's it's certainly very timely. Um, service performance and I also just wanted to say I really appreciate what you said about the rural nature um of your district and what you deal with. Working for the states of North Dakota and Montana, I really got to see it many times when I was out there. and could really appreciate the lifeline that the postal service is. So I I really do understand and I appreciate everything you said there. Um I would say this, so the Postal Regulatory Commission, through our annual compliance determination process, we do measure the service performance of election mail. Um so that will come out of course a little bit later, I wish it were a little bit more in time, um but the nature of our process measures the prior the prior fiscal year. Um but I will say this, I think something that's very encouraging about election mail, historically, um, is that, uh, service performance for, for these ballots is historically so much higher, right, than even any other kind of mail. And I think that's because the Postal Service, they do something called extraordinary measures during elections, I think, where they really are paying attention to that. Um, if I could, I think the greater service performance issue that we're dealing with is a little bit of what you I mean this is absolutely a part of it, kind of in the, in under the umbrella, if you will. Um, but what you talked about with this disconnect between I think maybe what the postal service is, these changes they've made with service performance over the years, the degradation of service standards, lowering them, and then the actual customer experience. That's where I think we really need to figure out um what it is, right, that the American people need from their postal service, and we also need more reliable information and transparency about what's going on. Um unfortunately I can't get into a lot of details, but the commission is currently looking at service performance. through a serv service performance measurement docket, which really is getting at that idea, right, between what is that disconnect between what's happening on the ground, and maybe what the Postal Service is saying. So I think all of these things need to be really carefully looked at by Congress, and I do echo what the Vice Chairman said very strongly, that this universal service obligation is something I think that needs to be tackled.

Absolutely. Thank you. And I think understanding, you know, having more access to the data that will allow us to see how um, those performance standards breakdown community by community will be really

Yes.

helpful for us and our um the work that we are doing on behalf of our constituents.

Absolutely agree.

But we'll continue to track this the results and and stay in close contact because mail is a lifeline for folks in communities like mine and all across the country.

Thank you.

Joe Allman yields back her time. Thank you very much. Uh, The uh gentleman from Texas, Mr. Guil, you're recognized.

Sir, thank you, Mister Chairman. Thanks for uh holding this hearing and uh doing a great job leading this this subcommittee and uh allowing us to get some some meaningful work done. And thank you to the witnesses for taking the time to be here. Uh, Miss- Mister Taub, I've I've got a a couple questions for you.

Yes, sir.

Uh, do you know how much the uh US Postal Service lost in fiscal year twenty twenty five?

Uh, about nine billion dollars.

Nine billion. And what - what - roughly how much did it lose in the last three years?

Uh, y- the last three years, uh, you're looking at roughly, uh, uh, twenty some a billion. Uh, you know, the, uh, uh, again to go off the top of my mouth, uh, we know they've lost thirty-one billion dollars, uh, in the five years, uh, since they've undertaken this, uh, DFA plan.

Thirty-one billion in - in five years. And despite, um, massive financial relief uh in the wake of covid uh and the postal service uh relief uh reform act of twenty twenty two we're still seeing massive budgetary holes, is that correct

that is correct

got it and and how much do you expect the postal service to lose over the next several years, do you have an estimate that you could sort of walk us through

uh don't have a uh good estimate but i uh i would uh feel very comfortable assuring you it's going to be considerable

yup And - and your testimony alludes to the fact that the USPS believed the Delivering for America plan would lead to the Postal Service breaking even by twenty-twenty-three. Is that correct?

Uh, that was the, uh, initial estimated plan in addition to a promise of twenty-eight to forty billion dollars of self-help, uh, by twenty-thirty.

Can you help us understand why that didn't happen?

Uh, well, certainly it would seem to suggest a, uh, flaw in the plan, um, eh the postal service certainly points to a variety of factors which are true, inflation, uh circumstances change, uh but at some point after year after year after year when it seems that the initially estimated predicate of building out a middle mile network to save twenty eight to thirty uh forty billion dollars is not occurring uh i- it just raises the question is it time to reassess if this is the right path we're on. Uh and yep.

Mm-hmm. And and what about some of the underlying assumptions on mail volume and, uh, package growth, pricing, can you walk us through some of those and and what you expected and and what turned out to be the case?

Well, yeah, again, it it postal regulatory commission is not the operator, uh, we're a regulator trying to provide transparency, and so the DFA plan as the operator's plan, uh, you know, it moved forward and continues to this day, but it it was, as you alluded to, predicated on the idea of, uh, building out a middle mile network to capture what was expected to be a a uh significant growth in the competitive parcel package market.

Mm.

Uh and with each passing year we see that market actually becoming much more competitive. In fact, the volume that the Postal Service is getting from this is dropping off, and although revenue is significant in that area for the Postal Service, in no way can it make up for the large amount of uh contribution to the overhead cost that the Mark Adomit products, letter mail, periodicals, magazines, uh uh those are the type of uh marketing mail uh i- those are the ones contributing to the overhead. So the whole predicate of the plan, while I think all of us had hoped that it would play out, uh doesn't seem to be where things uh have gotten us uh or going.

Yep. And - and can you help me understand how employee count and - and mail volume have trended over the past few years? Do you know how many employees to the US P S have in twenty ten?

Uh, in twenty ten I don't have that number offhand, uh, Congressman.

Okay. It's about six hundred seventy one thousand employees. Do you know what it what it was in twenty twenty five?

Uh, it w- I believe in roughly the same neighborhood.

So about six hundred twenty four thousand employees, so a reduction of forty five thousand roughly.

Yeah.

Um, do you know how mail volume trended during that period?

Uh, overall mail volume continued its unrelenting decline.

it declined by about thirty-six percent

Yeah.

during that period. Do you think that the difference between the decline in mail volume and the decline in employee count had something to do perhaps with the decline in profitability?

Oh, certainly, you know, one of the measures that the Postal Service has used since nineteen sixty-three is what they call total factor productivity to measure the efficiency of the Postal Service. Uh, the last several years have seen uh the worst in a five-year period and in fact uh, Postal. you know, two of the worst in since it was being measured uh the uh second of the three was in nineteen seventy nine uh and so if you've got volume going out and yet your um uh you know what you've got your inputs shall we say to handle that not going down as quickly uh the the math just doesn't work

right and what do you think is sort of the the obvious policy response to that from the post office's standpoint

uh well certainly uh when you see uh while revenue has gone up expenses and uh going up faster uh gotta be a focus on where can uh things be saved and yeah as i said

mmm

this dfa immense amount of capital investments and for the foreseeable future they're looking to continue those at uh uh you know questionable levels of sustainability four to five billion

yep

dollars going forward in the future

yes sir my time is up so i i'll yield back to the chairman thank you

mister gill i wanna thank you for taking time of not only attending each of our hearings

Thank you, Mr. Chairman. I want to take a moment to talk about something my constituents have been raising with me since I came into Congress. Their mail isn't showing up. When they need it, whether it's prescriptions, tax returns, bills, or letters from their loved ones, People in St. Louis don't know where their mail is, where their mail is, or when it's coming. Last year, the USPS Inspector General's office conducted an audit of seven delivery facilities across our region. They found delayed mail at every single one. My constituents didn't need an audit to tell them that. They've known it for years. But now it's documented, it's on the record, And there's no excuse for it not to be fixed. That's why I introduced the St. Louis Up to Par Act to address to address accountability for documented systemat- systemic failures like these. My constituents in St. Louis aren't following following postal policy debates in Washington. They're just trying to get their mail. So today I wanna hear from the commission about what it can actually do when the Inspector General identifies problems like these. Uh, Ms. Poling, is it fair to say that the commission's oversight authority is primarily focused on national performance met metrics rather than operational conditions at individual facilities?

I would say that's fair.

And when the inspector general documents failures at specific facilities, the way they did in St. Louis, what role does the postal regulatory commission play in making sure these findings lead to real changes on the ground?

That's a great question. I would say currently we don't have a specific role when it comes to that, those those exact changes on the ground. Where we do have a role is, and we're actually the only ones that do, is in the advisory opinion process. So when the Postal Service decides to make a nationwide or substantially nationwide change in service, they have to come before the commission. It is advisory as it sounds, um but that is where we have our team of technical uh legal, economic really dig into how these changes are going to affect the entire country. And that that does flow down, right, to St. Louis and how it would affect affect you all. Um, but I think that's somewhere, uh, that could stand to be strengthened, frankly, that that part of the process. I think it would be, uh, very helpful, again, my own personal opinion, uh, for the commission to have more oversight when it comes to that process.

And the gap is exactly why we introduced uh this up to par act to require usps

yeah

to report directly to congress on whether the fixes they promised are actually happening on the ground because you can't um you can't fix what you don't measure

right

um um that's all i have mr. chairman i yield back

thank you

thank you very much sheldon yields back his time um so that the the gentleman mr. bell is aware uh there have been many discussions not only that members have had with me on a bipartisan basis, but also internal. I've had them uh in somewhat with Mister Nfume about the need and the desire to look at specifically St. Louis, not only from a perspective of a regional uh s center part of the country, but how it feeds many other people. It is a huge hub uh for the postal service and comes into interaction with days uh that it takes to receive mail back and forth. So I want you to know that Mister Mfume and I will update you on the plans uh for uh what would be a visit by myself and our staff, including Mister Mfume, if he were to be able to break free.

Mister Chair, if I may also say um I this has been a bipartisan effort even amongst our congressional district. Um and so I appreciate um um that the your remarks and

Well, Mister Bell, thank you, in in fact uh Mister Mfume and I insist on making sure that it is something, not just bipartisan but also players in the arena be able to talk to each other, uh whether it be uh a postal service or other people who are engaged in that area also. So Mister Mfume has told me that you would be here, your needs, And we will get back to you and I wanna thank the gentlemen for being here.

Thank you, Mister Chair, Mister Chairman.

Yes, sir. Gentlemen, yields back that time, the gentleman now, Mister Jack, is recognized.

Thank you very much, Mister Chairman, and I'd like to start with um actually a very positive story related to your leadership. You held a hearing uh with Postmaster General a few months ago, and at that hearing you provided me an opportunity to share with him a challenge that I was experiencing in my district. There was a post office in my home county that burned down three years ago, and it had suffered delay after delay, setback after setback, and uh because of that hearing and because of the Postmaster General's leadership and also that of uh Kayla Dufresne who works for him, um they swiftly reacted and this past Monday I was able to reopen that post office to the delight of many in my community. And to Mister Mfume, if I could share with you, turns out that the City Councilman in Tyrone, Georgia, actually grew up in Baltimore as a big fan of you, so you also made me look good, for which I'm grateful. Um, but if I could start with uh Vice Chairman Taub, um, just to follow a little bit on the line of questioning from Mister Gill, in a vacuum, do postal services products turn a profit?

Uh, they certainly are marked up in a way to uh cover their costs and contribute to the overhead of the postal service. There are a few products that are underwater uh marketing mail flats are uh uh one of them uh and uh uh a couple others that are uh the entire class of periodicals magazines have been a perennial problem for twenty years in terms of covering their cost and then there's an Alaska bipal uh that the last few years those costs have risen except for those three on the market dominant side while the uh volume continues to go down they are contributing to the overhead and of course on competitive products while not the same level of volume or kicking to the overhead they are uh uh uh covering not only covering the cost but contributing to uh uh it's just while that's the good news on the revenue side the expenditure side of the equation is going up faster and could you break us I know you've spoke about it at

and could you break us I know you've spoke about it at length today but

length today but talk talk through a few of the expenditures uh that in

talk talk through a few of the expenditures uh that in recent years

recent years have really exploded in in cost to the postal service and

have really exploded in in cost to the postal service and and helped

and helped uh help us identify what those are certainly when you look

uh help us identify what those are

at the postal service and their cost structure and this has been generally the uh case for uh decades uh is about roughly uh seventy percent are for uh labor uh and it's just the nature of uh the uh uh operation and how it works uh and certainly a lot of this plan the post service has been on is about trying to achieve savings in the transportation area uh while they have achieved some, they certainly aren't what they predicted or hoped uh but when you're looking at uh you know rack and and stack and hey where are the areas we need to look at from expenditure certainly labor logically is going to be the largest cost structure uh that drives the cost of the postal service

i'm curious have you looked into other countries and i'm curious other other countries experiencing similar difficulties with their own postal service systems

uh definitely it's the you know nature of uh the world we live in now which is uh just the unrelenting decline throughout the world of folks mailing letters less and packages growing more. I would say, however, uh, Congressman, that most other countries have gone through the hard exercise of defining through regulation licensing contract and in statute, what they expect of their national postal administration that must be done for the American public. Uh, in our case we need to do that, but for their citizens, and a lot of that is much more narrow and defined. Uh, and so right now we have a situation where, except for six day, it's more, hey, buying the nation together, uh, you know, uh, and left to the Postal Service to self-define that. Uh, and that I think is, uh, created some of the challenges for us as a nation and - and the concerns we here at the Commission have been expressed today about service.

If no action is taken, describe the state of the Postal Service two years from now, five years from now.

Uh, yeah, I think i- i- at the, uh, very end of, uh, the Commission's testimony that I provide It is an article from almost exactly fifteen years ago by Bloomberg Businessweek with a uh old mail truck uh crunched on the front that says " end of the mail as we know it, end of twenty eleven, they're broke". Um the numbers have gotten worse uh and so you know there is at some point something's gotta give these bills that have talked about that have not been paid for retiree benefits for uh in uh twenty twenty two law uh recalculated the retiree health benefit payments but it kicks in again in twenty thirty one that'll be thirty one billion dollars so the question is can they do what they've been doing for the last fifteen years and just not pay it and figure that OPM and treasury will pay those bills when they come due or at some point is uh uh you know the bill gonna be come in due but you add on those obligations on top of the requirement of six point six billion a year and growing of meeting the universal service obligation mission. So, uh, our concern is unless we do the hard work of defining the mission and figuring out what that costs the public service mission for this government entity and then figuring out a funding structure we're gonna be here in two five ten years. Uh, you know, somebody who's doing this job, uh, in my case as the Post Minister General, fifteen years will be attaching an article like Bloomberg News and, uh, you know, it's like a baggage carousel coming around.

Well, thank you for your testimony. To all the commissioners, thank you for your testimony. I yield back.

Gentlemen, yields back his time. Uh, Mister Jack, I wanna thank you also for taking time uh to m- have this be important to you and, your constituent and certainly this uh subcommittee. Thank you very much. Uh, we now, it looks like that we would go to the distinguishing ranking member for his time. Gentlemen, it's right in the back.

Thank you very much, Mister Chairman, it's uh it's been a good hearing, I wanna again be redundant and thank all of the witnesses who have come here and set shared their time and their thoughts and their energy. Um, and I wanna thank members on both sides of the aisle who have been coming and going because of congressional schedules today but found it important enough to be here to to participate to some degree. Um, there's a lot to pick through. I mean, there really, really is. And I'm gonna try to do this without any kind of uh metrics or order just based on what i've been hearing and what i know the challenges are both for this committee for the united states congress and for the post office that we love and must find a way uh to keep and mister tov you began this by saying uh clearly that post office is not a private business and that one of the things or several of the things we've gotta protect against are monopolistic abuse, predatory uh pricing, and that you are very doubtful, as I am with you, that this fifteen billion dollars will solve the crisis once and for all. That's - I think that's poppycock. That's just not going to happen. So I wanna come back to that, but I'd - I would uh also wanna point out and to thank uh the others who are going on record with some profound thoughts and assessments about what we can do and what we ought to do. And one of the things that continues to come up is the need for a definit- definitive service obligation, a universal service obligation. One set of rules, one set of practices, one set of standards, that no matter where we are we can all adhere to. And the construction of that is really where

Yes, please.

I'm finding most of my appeal about all of this is, if we don't do that, then we've just not done anything. I mean, we've just kicked the ball down the road. So I I wanna come back to that, but um, I do wanna thank, um, several of you for providing, Miss Fisher, that's who I wanna thank. Thank you for, uh, laying out some of the, uh, the challenges that sometimes we don't always think about, this Whole notion of vehicles and facilities and facility upkeep, and compensation cost and volume declines, um, and cumulative net losses, not the least of which Mister Taub referenced when he talked about, uh, the retiree benefits which are gonna kick in. Those things really ought to frighten all of us to know that if we are very, very serious, we can't do anything unless we address all of the things that are in front of us. And it may in some instances be so large and voluminous that many members of the Congress will defer to this committee and say, well, that's your job. Uh, yeah, it is the committee's job, but it is also the job of the full Congress once we are able to construct and put forward with input on both sides of the aisle a universal service obligation that is functional it's gotta be uh adopted and passed. I wanna thank you for that, Miss Fisher. Miss Poling, thank you for switching things around also and - and to point out while we have these challenges that there are some built-in advantages that we oughta recognize to the extent that they - they might be able to help us, we - and that is the network of physical vehicles, the um significant fleet, the highly trained workforce, the fact that we are in every community in the United States with a presence, and off the top of my head, I don't know how you sew all of those things together, except that if we are looking at them as interconnecting possibilities and interconnecting assets, that in the construction of this universal service obligation, we ought to take those into consideration. Now, Let me just say one thing about challenge. I appreciate the chair giving me some extra time here. Um, Commissioner Poling, businesses across the Baltimore area that I represent, including newspapers and small mailers and and and others are paying more for worse services. That's been talked about over and over again today. In fiscal year twenty nineteen, a single piece of first class mail was delivered within three days, um, eighty percent of the time. Last year, under the five-day standard, not the three-day, but the five-day standard, on time, deliberately, had fallen to seventy-three percent. So that's a significant decline in service for a significantly higher price. And all of us in the greater Baltimore area are feeling that disparity, as they are in other areas, as has been talked about today and feeling it in in different ways, not the least of which is the fact that in three weeks throughout the state of Maryland we've got voting that will be occurring uh a great deal of that by way of the United States Postal Service in mailing ballots now this is not for you but just maybe the Postmaster is listening today we'd like to at least call your attention sir to the fact that Maryland like other states really are concerned about um, ballots and balance arriving on time and other things. So, um, here's what I wanna do. Mister Taub, I wanna end up with you where I started. Um, I've got a question because I I was really perplexed when I, uh, heard the President talking about the idea of floating the postal service into the Department of Commerce as if that was going to heal many of the things that you've already pointed out are challenges and uh that the Postmaster General uh called for significant changes in how PRC regulates the postal service. In fact, former Commissioner DeJoy went further by saying that uh the commission, all of you, are an unnecessary agency. That's his own opinion. Many of us disagree with that. Um, but again, if we're to get to where we wanna get to, which is a definitive, well-defined, structural, legal, uh, universal service obligation that we all play by, one set of rules, some of those things have to be taken, uh, in consideration. And I would ask you just quickly, Mister Talbot, is that an idea that continues to resonate? And are commissioners being forced to sort of consider that?

I, in terms of the idea of the Department of Commerce, uh, or just the,

The Department of Commerce taking the Post Office and putting it there.

uh, the, the, the I, I, I'm unaware of, uh, efforts, uh, there in that regard, but I would say to your other point, uh, I think it's always important to level set and remind folks why we exist.

Mm-hmm.

Congress created the commission in nineteen seventy when it got out of business to setting postal rates, and recognized they weren't gonna turn over rate setting authority to the Postal Service as a government agency with the authorities we had. Two thousand six, Last major change to the statutes, Congress gave the Postal Service more flexibility to price products, introduce products, uh compete in the marketplace. They didn't then say, you know what, trust the Postal Service, they'll do it. That's where we turn into the regulatory commission. So I think that's parse and parcel of that seventh feature of those, uh seven features of universal service, an enforcement mechanism. We do everything in the light of day, transparent, accountable to the public. We hear from uh everyone and weigh what's in the statute required of us, and uh as long as Congress still feels that's important I think we have to do it, but I would suggest I think it's also vitally important unless and until some day when the Postal Service is not wielding government powers with special legal privileges and I'm not suggesting that should be there, but until then they're a government agency operating commercial marketplace and I think that's why fifty-six years ago Congress chose to create the commission.

And that's why now if we do nothing else, we've got to construct some real universal service obligations, so that we know what the path is in front of us. And I I raise that because my hope is, as Chairman Sessions has pointed out several times here, we find a way in this committee to work together. We don't always have to do it at the highest speed, but we always end up where we wanna go. And this situation really cries out for smart ideas, which I hope all of you will consider forwarding to us, uh, and an understanding that this is where it really starts. So that formulation of ideas assists all members of this committee. I know Chairman Sessions and I both realize the work that you do. We also realize the challenges, having gone through so many of these - these hearings, as some of you know. But if we don't do anything here, then the question becomes why are we here. So I'm hoping that this really starts to level set, gives us the opportunity, working together to come up with a idea of the things that should go into that construction of the uh universal service obligation. Um and then, Mister Chairman, I just wanna commit, rededicate myself to working with you on this. You know, we've just had so many hearings. Uh, but we're determined to find a way to make it work, and I would yield back. Thank you, sir.

Gentleman yields back his gentleman yields back his Back his time. We also committed we'd do a lot of things as we're trying to do about the overpayments, Mm-hmm. uh misdirected payments, so we've got a full plate. Mm-hmm. Yes, I know. And thank you for your friendship to get this done. Uh, we now wanna move to the uh what at this time is two remaining uh members that you had Miss Budansky uh from Illinois you're now recognized

thank you thank you very much um uh chairman sessions and ranking member Mahfumi for allowing me to wave onto this hearing I very much appreciate this opportunity uh secondly I wanna thank Vice Chair Taub and all the commissioners for being here today it's good to see you again um the United States Postal Service is approaching a pivotal point in its long and storied history In fiscal year twenty twenty five, the Postal Service lost over nine billion dollars and lost o- around two billion dollars in f- in quarter two of fiscal year twenty twenty six. At the most recent Board of Governors' meeting, Postmaster General Steiner reiterated his calls for Congress to work with the USPS, to find solutions to the financial issues they are facing. As the co-chair of the Congressional Postal Service Caucus, I am committed to that mission as well. Congress must be working with the Postal Service and stakeholders to protect USPS employees and ensure the Postal Service has a strong financial footing, as we enter the twenty-thirties and beyond. Additionally, any postal reform bill sanctioned by Congress must include provisions that protect and strengthen the role of the Postal Regulatory Commission. Contrary to what some at the Postal Service have said about the PRC, I believe they are a critical oversight body. Um, in the coming months and years as Congress moves forward with potential reform ideas, I want to emphasize the importance of an independent postal regulatory commission and look to expand its oversight ability. With all of that in mind, my first question is to Vice Chair Staub Taub, I'm sorry, Taub, regarding the Regional Trans Transportation Optimization Plan. I was wondering if you could talk about why you the Postal Service's analysis on the RTO was flawed and what lessons can be drawn from future network restructuring initiatives that impact rural communities, like the ones that I represent in downstate Illinois.

Sure. I i- the uh commission under the law, it dates from the nineteen seventies act and is one of the few holdovers in the two thousand six law that left it as an advisory opinion, but recognizing Postal Service as the operator uh when they make changes that uh are generally affecting service station wide they have to come to us for advisory opinions a full blown administrative procedure act proceeding we sit and bonk uh it's on the record uh and we uh postal service came to us as required under the law uh in december of twenty twenty four and sought our opinion we uh provided that in january and cautioned that this plan was a predicated on savings that we found were

mmm

uh at best illusory and frankly we couldn't really verify uh and secondly deep concern that we were seeing uh what was gonna be created was creating a tale of two uh americas shall we say rural america was going to see uh uh delayed service slower service um under this plan uh it gives me no joy to say that unfortunately uh more than a year in under plan which uh they ignored our advice in fact criticized us that we didn't know what we were talking about that were just uh a burden uh has come to fruition

right

uh

thank you and if i have a couple more questions if you don't mind if we pause there um my my

thanks man

second question is to you again vice chair um as congress looks at potential postal reform ideas i am curious if there are any historical precedents um in other that you think could provide a blueprint to insure the postal service is able to continue serving Americans for decades to come.

Yes, uh, it comes from the commission's uh full testimony uh suggests a possible legislative approach that could be informative if Congress is trying to grapple with the issue of how do we find the universal service obligation. Uh, the Federal Communications Commission under the nineteen ninety-six Telecommunications Act was directed by Congress OK.

checking that out. Just one question last, um, can you discuss what went into the PRC's decision to grant USPS the temporary conditional waiver on amortization payments and how do you think this changes, changes the short and medium term financial outlook for the Postal Service?

Uh, it was not an easy decision for us because we uh provided the Postal Service additional rate authority to go above inflation on their market dominant products, and if they chose to, it was an opportunity for the first time in over a decade to start paying the uh obligations for CSRS and FIRs that otherwise they've been defaulting on. Um but we recognize the reality of what we're dealing with in which we're - we're facing suddenly a uh a cash crisis as the Post Service announced and we stepped forward and provided a waiver for a few years that's two point four billion dollars as of September thirtieth this year and probably payments of uh about three billion or more that's moving it's in the rate base it's been collected from restricted cash to unrestricted to allow the paid bills. Uh, it's not a f- a - a - a panacea or fix, but I think it provides Congress and all of us an opportunity, a little bit of more breathing room to not reach for choices of desperation,

Mm-hmm.

but think this through in a little more constructive way.

Thank you very much, and I yield back.

Thank you very much, gentlemen. It yields back your time. The w- we've also waved on Mr. Walkinshaw, uh, and we're delighted that he's here, that the gentleman's recognized.

Thank you, Mr. Chairman. I appreciate it again. um, your willingness to allow me to to wave on and thank you all for being here. I apologize that I missed your opening statements, but I did, um, read all of your statements and, um, it's clear that, you know, you've you've all put forward a range of ideas as other stakeholders have to address the financial challenges the service failures. But in my view, if we're gonna get to meaningful reform, especially if we're gonna build the kind of support here that's necessary for meaningful reform we gotta have clear goals that prioritize both the long-term financial stability and the reliable service because we can't have one without the other and if we're gonna set those goals and evaluate the trade-offs and there certainly will be trade-offs we have to have data showing how these proposals the savings they generate would affect the long-term finances and service performance of the Postal Service. It's also necessary to have that data so that we can all hold the Postal Service accountable. And that's why, uh, I think it was in March of this year, uh, when the Postmaster General was here, I asked him if he would be willing to provide this committee with financial projections showing how proposed reforms, including the continued implementation perhaps of Delivering for America and the RTO initiative, affect the Postal Service's finances and service performance. Uh, he committed, sitting right there, to providing quote, this is a direct quote, multiple budgets, demonstrating the trade-offs among different proposals and their impact on uh five-year financial projections. Um, unfortunately after a few months of of asking, we got a two-page response, and I'll just read one paragraph, Mister Chairman. "The Committee on Oversight and Government Reform recently asked five-year financial projections in the form of multi-scenario analyses. While we do not do such financial projections in the ordinary course of business, we can provide general information that answers many of these questions. They go on to provide some general information that largely rehashes documents that have been released publicly. Uh, they do not answer the question of five-year or even multi-year um financial projections, which is uh frustrating to me. Um, since they didn't find the time or the interest in providing that data, that in my view I think it necessary to inform our reform efforts, um, let me let me just ask you all, maybe you can help me a little bit. Um, Vice Chairman Taub, uh, past PRC reports warned that uh DFA plan changes would slow service and disproportionately harm rural communities. Uh, your testimony today that I read, I think, says essentially that those warnings were prescient. Um, unfortunately uh in your view and the PRC's view uh DFA has slowed service and disproportionately harmed rural communities, has not achieved the savings that it was predicted or projected to uh achieve at the time. And one of the reasons I'm asking for some forward-looking financial projections from the Postal Service is because they have repeatedly failed to deliver on their promises to produce real savings through DFA and other efforts. So, um, I I just wanna ask you, you know, do you share that concern? Am I wrong to think that an organization with the scope and scale and import of the United States Postal Service shouldn't be able to in the course of ordin- in the ordinary course of business produce some kind of multi-year financial projections for this committee or for anyone else

uh it congressman again they are a government agency uh working for on behalf of the uh american public and they uh it seems to me should be doing that and in fact your uh suggestion and request was a hundred percent what the Comptroller General, the Government Accountability Office, recommended to the Postal Service in a recent report they issued in uh, December and the Postal Service's response to the GAO was " ain't doing it".

Yeah. I, I, you know, we have, as, as you all have pointed out, some important work that we need to do here as members of Congress on this issue, and I'm asking the Postal Service to help us help you. Because I can't and the Chairman, I don't think can go to our colleagues and say we gotta make some some tough decisions here without being able to give them some idea that there's a path that's gonna lead to a better a better situation if we're willing to make these tough decisions I don't know why the Postal Service doesn't wanna help us do that. Thank you, Mister Chairman, I yield back.

Gentleman yields back his time. I wanna thank the gentleman for his insistence to be a

Thank you, Mr. Chairman. I ask unanimous consent to enter into the record a statement from Elena Patel, Co-director the Urban Bookings Tax Policy Center regarding today's hearing.

Without objection.

I ask unanimous consent to enter into the record a statement from the President of the National Postal Mail Handlers' Union regarding today's hearing.

Without objection.

I ask unanimous consent to enter into the record a statement from the National Newspaper Association regarding today's hearing.

Without objection.

And I ask unanimous consent to enter into the record a statement from former Representative Kevin Yoder Executive Director of Keep Us posted regarding today's hearing.

Without objection. Uh, I also would enter to the record, uh, uh, data and information, a letter from the, uh, um, what what is called the EMA, which is, uh, the president, uh, Marie Clark, uh, the Im- Im- Envelope Manufacturers Association. Without objection, these will all be entered into the record, and, uh, thank you very much. I now will move uh to my time and I wanna thank everybody. I think that while this has been a highly successful uh collaboration, uh I I I think that you have seen, each of you have seen, certainly anybody watching, of a high interest, not just in this subcommittee but by members of Congress. So I'd really like to engage all four of you, but I would like to start by saying that uh my attempts at this effort have been to recognize the larger body of people who were engaged in this, not just the postal service. Uh we have uh people who were engaged outside of that, a tremendous uh commercial interest, tremend- tremendous interest of large companies uh in this country. Uh and I have tended to believe uh that we need to work together, all of us, and that literally everybody uh if we worked together could not only find achievement and success, but that would lead to a financial integrity that is more in line with the opportunity to extend each of these businesses uh technology, trucking, timing, all of these things could come together But then potentially the customer, the American uh uh citizen who wants, needs and counts on as we've heard today from Mrs. Poling and others, uh that I understand, Mister Mfume understands, people who live back home. I serve uh a mostly rural congressional district. I started when I w- came into uh Congress with a rural district. I intentionally went out with uh a rural uh letter carrier uh and and intentionally went saw how he did his work uh tried to do well enough to get back but I had a very sore arm from trying to assist uh in that delivery and so it took me a while uh but I learned firsthand of the importance to the American people uh especially in rural areas where someone might be home more often than not. So uh today I would like to say I'm still at the point that I believe is correct, and that is United States Postal Service with its uh young Postmaster General Steiner and certainly Peter and Michael who represent the Postmaster General are here today, and so is the industry. And I wanna reiterate to each one of them that I do believe that we need to work uh with each other and in concert with each other. Um, I happen to believe uh some of the conversation here about working together means that the Postal Service might not take these operations on directly by themself. The Postmaster General knows that. I've had direct conversations with him. Uh, I think that some of the the ideas that the Postmaster General is attempting to accomplish can be made. But I will tell you that if we do not work together, if we do not see each other's, not just line of business, but import to the value-add uh solutions, we will be in trouble. With that said, I'd like to go to m- Miss Fisher if I can, Miss Fisher, you. spoke very clearly in some bit of depth uh that I appreciate about the loss of male, about the loss of what we might call first class stamps. Uh I happen to believe that whether it it might be magazines, I went to Southwestern University, I got used to seeing a Southwestern University catalog probably two or three times a year it was important to my university it was important to me, to stay up. These things have gone away. First class ma- mail is dwindling. Do you see a world by which we could get back to increasing pieces of mail, envelopes that might come, uh the availability of technology that would aid and help all of this transformation to be effective and efficient? How do you see increasing parcels of mail?

I think we can see a return to that, but first we have to see a lot better service and performance when it comes to the letter mail. My personal observation seems to be that the postal service in chasing revenues because of their dramatic financial losses has really focused on packages. And I don't know that they'll ever be able to fully compete there. They can compete, but that space is just being inundated with more and more competitors, as I relate, even in South Dakota, as I talked about. Um, but i- in the meantime, it seems they pay less and less attention to everything that falls under the scope of the market dominant product. and the magazines the letter mail etcetera newspapers that still has a huge amount of people very reliant upon it looking forward to it and the reliability of the service is dramatically lacking so yes i do think that can be built back up there's a tremendous amount of our economy that relies upon that but we have to get the postal service in some sort of a shape to where they can try to improve the service and the reliability overall and focus more of their effort on what's happening on the market-dominant side, and a little less, perhaps, on the competitive side.

Does that mean that there would be some observations about what I would call rural delivery of these packages versus city or suburban? uh large areas middle middle areas parts of the country how might we look at what you're saying or how should we look at to evaluate what the postal service is looking at, for deliver these package uh boxes.

The postal service still has um in general the least costly service available for the delivery of the packages. Um, but there is an in immense effort. I read an article the other day about how uh both Amazon and Walmart, who have made a concerted effort to build up their space into rural remote areas. And they've also noticed that it's not just the people who've lived there, but it's more and more people, uh, telework, they are moving into these rural or remote areas. So, Amazon and Walmart are in a a race to try and best serve that community. You pay a price for it with your membership, at each one, but you can get same day delivery. But from the postal service, if they could just improve again their reliability and their, perhaps their tracking capabilities, it would go far.

Good. Mister Day, uh, I had an opportunity, as you've heard, to go to South Dakota. part of the conversation in South Dakota was about problems of getting mail in South Dakota. Uh, a deeper uh, a view of that developed to me very rapidly, and that was it was getting the mail to South Dakota was the delay. In this case, it happens to be a city where I used to live, St. Louis, Missouri, and uh it it is uh in the center part of the country. And yet we hear conversation, not just from members of Congress that are worried about that effort. And then they don't live in South Dakota, they live in St. Louis. And they're having problems in St. Louis. Uh, I just want you to know that I'd like to have you, uh, and the commission to provide to me in writing anything about your observations about the the system that the post office is using, if you have any insight into that, you might be uh aware from your s- great service about that service, about getting to St. Louis, about getting out of St. Louis, about producing things. If you ha- Do you think you have any observations related to St. Louis or any other hub where there might be difficulties?

i chairman i i i could certainly comment on saint louis i've been to saint louis processing center several times uh uh it's been a while since i've been there it's actually an interesting facility with an older section and a newer section where the floors are actually at different levels so i've i've been through it but it it's been a while since i've been there um it it does come to that though it it is the specifics of this network that's been created under dfa uh unique to each one of those facilities again i said it during my testimony

you did

there there's only four of all the rp d c's were actually built from the ground up brand new and actually the very first one they did uh was quite a problem for the first couple of years uh the one in palmetto georgia um but that said a place like uh saint louis uh has been around for quite a while uh It's not a new concept. I'll d- I'll say this. Back in the day, I remember when we were first looking at service, whether it was, and this is the old overnight two three day, there were some places I happened to be working in Maine at the time, we had to get to Fort Kent every day, down from Fort Kent to Portland, back up to Fort Kent. And that's quite a quite a trip, and you're getting the mail late at night, you gotta turn it around quick and get it back up, and our service wasn't that good. Just wasn't consistent and what we eventually were able to do was change that and it was we could tell the people of fort kent yes now the standard is not overnight it's today but we can give you some consistency and so distances traveled does play into it but when you start moving mail from south dakota to saint louis it it's just a lot of time on the road um just as a quick thought one of the things you might do particularly on first class individual piece mail the the bill payment, the birthday card, the wedding invitation, is to put it through an initial process, just the initial process in South Dakota to keep your local mail-in state there, and then send the rest of the country's mail, wherever that's going, to St. Louis for processing. That gives you good consistent service, hopefully, within South Dakota. So there there's different ways to do it, i- i- and you've gotta find the right mix between cost effectiveness and your obligation to service. And I think there is no one of those that is the single right answer. What's the right blend? And I think it's in the name of the organization. It is the postal service. Service has always been the key. And I I'll just close it with this. I've always found in my leadership time at the postal service, running districts, running plants, that when the postal service provides quality service with consistency, it also has the lowest cost. It's an efficient operation.

I believe that's right. Miss Pauline, you have spoken very eloquently about rural customers' expectations and the things uh which are a piece part to their satisfaction as well as as Mister Day just said the effective operation of money uh what conversation would you have with me con a conversation of competition to that what might be called last mile, uh or the the competition angle with the post office and other competing factors. Maybe uh Amazon, maybe uh someone else, UPS could be,

Yeah.

but that's competing in that market. Can you put us in that world of of how that works and what those issues might be?

I will do my best. Uh, thank you, Chairman. Um, I guess I would start with, you know, I think the Postal Service and, you know, obviously it is such a national treasure and that's why we're here today having this conversation. We all care about it, we wanna make sure it stays viable, um, hopefully for many, many more years. And I think, you know, again, getting back to this universal service obligation, that's sort of why I think we need to start having these conversations. What I worry a lot about is that in these rural areas right it's not always as profitable to deliver to them right and so and unlike the postal service private carriers have the option of deciding not to right not to deliver to those areas or to rate or to charge rural surcharges the postal service has to be accessible and affordable to everyone and i think you know this has been brought up several times today so i will not belabor it but in our advisory opinion you know uh the the vice chairman said this i thought so well you know, it is a tale of two Americas that could start happening, right, between sort of the rural folks and - and those and who live far away, right, and then those who don't. And we don't - Again, this is a service that is meant for everyone, that is supposed to be for everyone, that is absolutely supposed to be accessible and affordable. And I think we need to be doing everything we can right now to ensure that. And I do worry a lot about what happens if we don't have those conversations. um about the postal service and about the broken business model that it has um because again i worry about the impact that this will have on rural america where it is costly to deliver to those areas and these folks you know it is their lifeline and it is something that they really rely on so i um i think all of those conversations need to be had and i think i will say this too i think there's tremendous opportunity to be had with the private sector as well i think there have been a lot of great

Thank you very much. Uh, Mister Chairman, Mi- Vice Chairman, uh, Mister Chairman, today to me, uh, there have been lots of conversations that I, you and I have had about the Post Office having to comp- to compete, but in that competition also doing things that they had utilized other people in the marketplace. Technology, trucking, all sorts of things of this larger unit that now seemingly the post office is finding a way to bring that internally, whether it's technology or whether it's other things that they do. Do you have insight into that?

Oh, do you, public-private partnerships, for lack of a better term, are, have been really the success story of the U. S. Postal Service since it was created in nineteen seventy. earlier this idea of work sharing, where if the private sector can present the mail or prepare it or transport it in a way that saves the Postal Service that cost or put it further in the system, it's a win-win for the private sector and the Postal Service. In fact, i- in the early years after uh the nineteen seventy act, the Postal Service was pushing back on it and then embraced it. And of course it was of a era of increasing volume but was a success story. In two thousand six Congress recognized that and there's an uncodified part of the Postal Accountability Enhancement Act, that in fact directed the postal service through a sense of Congress that public-private partnerships are critical, whether it's in the transportation space and i- leveraging that. I was concerned, seen over the evolution of the last few years with the DFA before, uh, the new Postmaster General took over, of this concerted effort to bring more of that in-house. uh and do it there uh and it seemed to be upending the success story it's heartening to see uh recently the postal service just signed a uh negotiated service agreement with dhl uh which is owned by deutscher post uh which is a privatized post by the way but an opportunity to open up that last mile that really has been such a strength um and so i think uh hundred and ten percent with you mister chairman with the thought of your question which is we really need to be looking at leveraging the success of that public-private partnership and recognizing at the end of the day the Post Service has a mission to do from the Public Service mission. That, uh, why else does it exist, and if we make sure that's being done, if there's ways that then we can leverage what's good, efficient ideas in the private sector, uh, it seems to me that w- that is a path forward as opposed to just bringing it all in-house, Particularly if we are doing it in a way that isn't going to sustain what we as a nation need from the postal service.

And perhaps more importantly, technology keeps on moving,

Yes.

and there are lots of people that have technology at their fingertips, and that is their specialty. Uh, today we have had an opportunity to hear from you, and the four of you I want to thank for your service, not just to the Postal Regulatory Commission, but really to the process. And and I I think both both Mr. and Mr. Mfume and I recognize that we want to keep working with the people like you, like the Postal Service, and other groups on getting this right. I I really uh uh would say to you that I said to you, and you know this, What are the tough decisions that the Postal Service has had to make? What are the really hard questions that they have had to face down? And I you you gave me a good answer. Uh, I want you to know that these are the things that are aimed right at Congress right now. What really hard decisions are we willing to not just ask the questions, but the decisions we're gonna make and perhaps the one that each of you have have put back right at at Mister Mfume and I or at least myself what is that standard gonna be what's the plan what is the service going to look like what what are the what these questions need to be answered before you answer the other so we hear you we appreciate you and I want you to know that I think that that not just Mister Mfume but our subcommittee and other members heard today that if we fail to answer these questions we will fail to do our job, which the American people have put us to. I wanna thank each of you. Uh, Mister Mfume, do you wish to have any time for closing remark?

No, but thank you. Just wanna thank our uh guests, the witnesses and uh don't make this your last time here. we're open to any communications that you may have uh to help guide us on this path. Thank you, sir.

Yeah, thank you. Mister Infome and I are gonna come down here as soon as we finish this hearing and come down and check your hand and thank you for being here, and get your picture. With that said, without objection, all members have five legislative days within which to submit material and additional written questions for the witnesses that w- then will be forwarded directly to the commission If there is no further business without objection, the subcommittee stands adjourned.