<DOC>
[109 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:27641.wais]
S. Hrg. 109-63
NOMINATIONS OF CAROLYN LEWIS GALLAGHER, LOUIS J. GIULIANO, AND TONY
HAMMOND
=======================================================================
HEARING
before the
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
ON THE
NOMINATIONS OF CAROLYN LEWIS GALLAGHER, TO BE GOVERNOR, U.S. POSTAL
SERVICE; LOUIS J. GIULIANO, TO BE GOVERNOR, U.S. POSTAL SERVICE; AND
TONY HAMMOND TO BE COMMISSIONER, POSTAL RATE COMMISSION
__________
MAY 19, 2005
__________
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan
NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia
Michael D. Bopp, Staff Director and Chief Counsel
Jennifer A. Hemingway, Professional Staff Member
Joyce A. Rechtschaffen, Minority Staff Director and Counsel
Adam R. Sedgewick, Minority Professional Staff Member
Trina D. Tyrer, Chief Clerk
C O N T E N T S
------
Opening statements:
Page
Senator Collins.............................................. 1
Senator Warner............................................... 3
WITNESSES
Thursday, May 19, 2005
Hon. John Cornyn, a U.S. Senator from the State of Texas......... 4
Carolyn Lewis Gallagher, to be Governor, U.S. Postal Service..... 7
Louis J. Giuliano, to be Governor, U.S. Postal Service........... 6
Tony Hammond, to be Commissioner, Postal Rate Commission......... 7
Hon. Christopher S. Bond, a U.S. Senator from the State of
Missouri....................................................... 12
Alphabetical List of Witnesses
Bond, Hon. Christopher S.:
Testimony.................................................... 12
Prepared statement........................................... 13
Cornyn, Hon. John:
Testimony.................................................... 4
Prepared statement........................................... 5
Gallagher, Carolyn Lewis:
Testimony.................................................... 6
Biographical and financial information....................... 17
Pre-hearing Questions and Responses for the Record........... 31
Responses to post-hearing questions for Ms. Gallagher from:
Senator Lautenberg......................................... 42
Senator Akaka.............................................. 43
Senator Lieberman.......................................... 46
Giuliano, Louis J.:
Testimony.................................................... 7
Biographical and financial information....................... 48
Pre-hearing Questions and Responses for the Record........... 57
Responses to post-hearing questions for Mr. Giuliano from:
Senator Akaka.............................................. 67
Senator Lieberman.......................................... 69
Hammond, Tony:
Testimony.................................................... 7
Prepared statement........................................... 8
Biographical and financial information....................... 71
Pre-hearing Questions and Responses for the Record........... 78
Responses to post-hearing questions for Mr. Hammond from:
Senator Akaka.............................................. 89
NOMINATIONS OF CAROLYN LEWIS GALLAGHER, LOUIS J. GIULIANO, AND TONY
HAMMOND
----------
THURSDAY, MAY 19, 2005
U.S. Senate,
Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 10:18 a.m. in
room SD-562, Dirksen Senate Office Building, Hon. Susan M.
Collins, Chairman of the Committee, presiding.
Present: Senators Collins and Warner.
OPENING STATEMENT OF CHAIRMAN COLLINS
Chairman Collins. The Committee will come to order.
The Committee will now consider the nominations of Carolyn
Lewis Gallagher and Louis Giuliano to be Governors of the U.S.
Postal Service and Tony Hammond to be a Commissioner of the
Postal Rate Commission.
This Committee is very familiar with the many serious
issues facing the Postal Service and has spent a great deal of
time developing postal reform legislation.
The Board of Governors of the U.S. Postal Service is
comparable to the Board of Governors of a corporation. The
Board selects the CEO, in this case the Postmaster General, who
then becomes the Board's tenth member.
The Board directs the exercise of powers of the Postal
Service. It controls its expenditures, conducts long-range
planning, and sets policy. The most important duty of the Board
is to represent the public interest.
Carolyn Lewis Gallagher is an Austin, Texas business
executive with an impressive record. She was named governor by
the President through a recess appointment on November 3, 2004.
Without confirmation, the appointment will expire at the end of
this year.
She serves as a member of the Strategic Planning Committee
and the Board's Governance Committee. Ms. Gallagher has strong
private sector experience. She is currently an investor and
adviser to several businesses and has some 20 years of
experience in acquiring and growing companies.
In addition to her business background, she has a
commitment to public service. President Bush also appointed her
in 2003 to serve on the President's Commission on the U.S.
Postal Service.
The Commission's report has been the foundation for the
legislation that this Committee has drafted. It is very helpful
to have someone who actually served on the Commission now be a
member of the Board of Governors.
Louis Giuliano is Chairman of the Board of Directors of ITT
Industries. He also was named a governor by President Bush
through a recess appointment last November. He serves as
Chairman of the Capital Projects Committee and is a member of
the Audit and Finance Committee.
Mr. Giuliano has a strong private sector background also.
As ITT Board Chairman, he is responsible for managing all
aspects of Board activities and helping to set the strategic
and operational direction of this Fortune 500 global industrial
company.
Before becoming chairman, he served as President and Chief
Executive Officer at IT&T and played a key role in improving
the company's operating performance. He also has a number of
charitable causes with which he is involved.
The Postal Rate Commission is an independent regulatory
agency. The five commissioners review Postal Service requests
for new domestic mail rates, fees, and classification. The
Commission reviews these requests and then makes
recommendations to the governors of the Postal Service.
In addition, the Commission may propose changes in mail
classifications. It also investigates complaints of postal
customers that are of national significance and it issues
advisory opinions in response to Postal Service requests to
substantially change postal services.
The Postal Rate Commission also hears from postal customers
regarding decisions to close or consolidate post offices. For
any of us who represent rural States, that is always a big
issue.
Tony Hammond first became the Commissioner of the Postal
Rate Commission by a recess appointment in 2002. Later that
year, the Senate confirmed his appointment to a term expiring
on October 14, 2004. So I do want to point out that Mr. Hammond
has been previously confirmed.
Before being named to the Commission, Commissioner Hammond
was owner and managing member of T. Hammond Company, a private
consulting firm based in Arlington, Virginia. He has also
served as senior vice president of a direct marketing firm and
as senior consultant to Forbes 2000, Incorporated.
As Members of this Committee well know, the U.S. Postal
Service is an essential part of our society and our economy. It
is the linchpin of a $900 billion mailing industry that employs
more than nine million people.
We also know the fiscal challenges facing the Postal
Service could threaten the future of affordable service. Each
of these nominees appears to possess, without prejudging their
responses, the knowledge, the experience, and the talents and
commitment needed to strengthen the Postal Service.
I welcome them to the Committee today and I look forward to
hearing their views.
We are very pleased today to be joined by distinguished
members of the U.S. Senate who are going to introduce the
nominees and we will start with Senator Warner.
OPENING STATEMENT OF SENATOR WARNER
Senator Warner. Thank you very much, Madam Chairman. To
expedite things here, you have given a very comprehensive
biographical sketch of the nominees. I am privileged to be here
on behalf of Mr. Giuliano of Virginia today who has been
nominated to serve on the Board of Governors of the U.S. Postal
Service.
As you said, Madam Chairman, the Board is responsible for
directing the overall operation and developing a long-range
plan to ensure the viability of the U.S. Postal Service, an
institution that dates back to 1775.
And I cannot resist saying that during World War II, 1943,
before I went in the Navy, I worked as a postal worker. There
was a tremendous shortage. Postal workers by and large were in
uniform and gone, so they had to hire a bunch of 16-year-olds
to drive the trucks and deliver the mail which I was happy to
do, particularly during Christmastime.
So it is a very special privilege for me to introduce this
distinguished gentleman and I hope that you find the Postal
Service in good hands that we left it in 60 years ago.
[Laughter.]
We might go back and check it out.
You have outlined his background, but clearly his
extraordinary accomplishments eminently qualify him to take on
the managerial positions and the Board's functions for the
Postal Service as the Postal Service has been under a lot of
tough challenges here recently, particularly in what I think is
a good, healthy, competitive world.
So I will not review all of his accomplishments because the
record is now containing the Chairman's observations.
His lovely wife is here. I wonder if you might take a
moment to introduce your wife.
Mr. Giuliano. Certainly. I would like to introduce my wife,
Barbara, who I am very pleased could join us this morning.
Senator Warner. Thank you. Madam Chairman, I will put the
balance of my remarks in the record.
Chairman Collins. Without objection. And thank you for
being here. Senator Warner, I know you have a number of other
commitments, so we will excuse you to be on your way. Thank
you.
Senator Warner. Good luck to you.
Mr. Giuliano. Thank you.
[The prepared statement of Senator Warner follows:]
PREPARED STATEMENT OF SENATOR WARNER
Madam Chairman Collins, Senator Lieberman, and my other
distinguished colleagues on the Senate Homeland Security and
Governmental Affairs Committee. I thank you for holding this
confirmation hearing.
Today, I am pleased to introduce to you Louis Giuliano of Virginia,
who has been nominated to serve on the Board of Governors of the U.S.
Postal Service. This Board is responsible for directing the overall
operation and developing a long-range plan to ensure the viability of
the U.S. Postal Service, an institution that dates back to 1775.
Mr. Giuliano's background makes him highly qualified for this
position. He received his Bachelor of Science in chemistry and Masters
of Business Administration (MBA) from Syracuse University.
Subsequent to earning his MBA, Mr. Giuliano joined Allied Signal,
where he ultimately served as president of the company's Avionics
Systems Group and was responsible for overseeing seven principal
operating units across the nation.
Following his 19-year career at Allied-Signal, Mr. Giuliano joined
ITT Industries, a Fortune 500 global engineering and manufacturing
company. While at ITT Industries, Mr. Giuliano served in a number of
key leadership positions including chairman, president, chief operating
officer, senior vice president, and vice president.
Mr. Giuliano played an instrumental role in growing the company's
revenues and performance, leading to significantly stronger margins and
higher cash flow. He led ITT through strategies designed to streamline
processes and increase competitiveness throughout the company.
Madam Chairman, Louis Giuliano is obviously a very accomplished
businessman. His extensive experience and accomplishments of increasing
performance in such a competitive industry make him well qualified to
serve as a Governor of the U.S. Postal Service. I support his
nomination, and look forward to the Committee reporting out his
nomination favorably.
Chairman Collins. We are also very pleased to be joined
today by another of our colleagues, Senator John Cornyn of
Texas. Welcome.
STATEMENT OF THE HON. JOHN CORNYN, A U.S. SENATOR FROM THE
STATE OF TEXAS
Senator Cornyn. Thank you very much, Chairman Collins. It
is nice to be here before the Committee, especially to
introduce another Texan, Carolyn Gallagher, the President's
nominee to serve on the U.S. Postal Service Board of Governors.
I believe you always find this Austin, Texan well-qualified
or you will find this Austin, Texan well-qualified for the
position and deserving of the Committee's unanimous support.
I assured her that the fact that the seats were not filled
on the Committee was actually a good thing and that hopefully
her nomination as the other nominations represented here today
will go through smoothly and without any unexpected speed
bumps.
As this Committee well knows, the U.S. Postal Service must
modernize its operations and adapt its business model and
practices to conform to a new environment.
We live in a world of instantaneous communications, cell
phones, the Internet, e-mail, blogs, faxes, and the rest. And
that does not make the U.S. Postal Service irrelevant. It just
means that the status quo cannot continue and it must
modernize.
Clearly Ms. Gallagher understands this and has the skills
and qualifications critical to helping the U.S. Postal Service
do just exactly that.
You were generous in your introduction, but let me just
sort of expand a little bit on what you said, Madam Chairman.
Her education and private sector background speaks for
itself, an undergraduate degree from Duke University and a
Master's in Business Administration from the Harvard Business
School.
She knows what it takes to succeed in a competitive
environment. She served as the President and CEO of Texwood
Furniture which posted annual profits for 12 years under her
leadership.
And she has been deeply involved in the community of
Austin, Texas for many years serving on numerous nonprofit
boards.
She has direct experience in the issues confronting the
U.S. Postal Service today making her even more qualified. These
include, as you noted, a 2003 appointment by President Bush to
serve on the Commission on the U.S. Postal Service and then, of
course, her November 2004 recess appointment which further
demonstrates President Bush's commitment to ensuring that good
people serve on the U.S. Postal Service Board of Governors.
In closing, let me just stay that Carolyn Gallagher is a
nominee uniquely qualified to meet the 21st Century challenges
of the U.S. Postal Service. I support her nomination and I
encourage the Committee to do so as well and to unanimously
report her nomination to the floor so she can be quickly
confirmed.
Thank you very much.
[The prepared statement of Senator Cornyn follows:]
PREPARED STATEMENT OF SENATOR CORNYN
Chairman Collins and Ranking Member Lieberman, I appreciate the
Committee allowing me to come before it and introduce Carolyn
Gallagher, the President's nominee to serve on the United States Postal
Service Board of Governors.
I believe you will find this Austin, Texan well qualified for the
position and deserving of the Committee's unanimous support.
As this Committee knows the U.S. Postal Service must modernize its
operations and adapt its business model and practices to conform to the
21st Century.
We live in a world of instantaneous communication: Cell phones, the
Internet, e-mail, blogs, faxes and the rest. This doesn't make the U.S.
Postal Service irrelevant, just that the status quo can't continue.
Clearly Ms. Gallagher understands this and has the skills and
qualifications critical to helping the U.S. Postal Service modernize.
Briefly, let me touch on those:
Her education and private sector background speaks for itself:
<bullet> an undergraduate degree from Duke University and a
Masters in Business Administration from the Harvard Business School
<bullet> She knows what it takes to succeed in a competitive
environment--she served as the President and CEO of Texwood Furniture
which posted annual profits for 12 years under her leadership
<bullet> and she has been deeply involved in the Austin, Texas
community over the years, serving on numerous non-profit boards.
Moreover, she has direct experience in the issues confronting the
U.S. Postal Service today, making her uniquely qualified. These
include:
In 2003 President Bush appointed her to serve on the President's
Commission on the United States Postal Service.
This Commission was charged with exploring ways to modernize the
U.S. Postal Service, which it did when it submitted its report in July
of 2003. This report has proven a critical road map to reforming the
U.S. Postal Service.
In addition, Ms. Gallagher has been serving as a Postal Service
Governor as a result of a November 2004 recess appointment,
demonstrating President Bush's commitment to ensuring good people
continue to serve on the U.S. Postal Service Board of Governors.
In closing, just let me say that Carolyn Gallagher is a nominee
uniquely qualified to meet the 21st Century challenges the U.S. Postal
Service faces.
I support her nomination and I encourage the Committee to do so as
well and to unanimously report her nomination.
Chairman Collins. Thank you very much, Senator. Your
endorsement carries great weight with this Committee and you
are right to assure the witness that the absence of senators is
actually a good sign, not a bad one.
So thank you. I know your schedule also is very crowded
today, so you are welcome to depart if you would like.
Senator Cornyn. Thank you, Madam Chairman. I neglected to
extend the same courtesy to Ms. Gallagher that Senator Warner
did to Mr. Giuliano and that is I would like for her to
introduce her husband who I know is with her here today
supporting her nomination.
Ms. Gallagher. Yes. I am pleased to introduce my husband,
Tom, who is with me today. Thank you.
Chairman Collins. Thank you. We welcome all the family
members who are here today.
Mr. Hammond, it is my understanding that Senator Bond is on
the way and I do not want you to feel left out. We will have
your introduction as soon as he arrives.
If you have any family members that you would like to
introduce, I would invite you to do so at this time.
Mr. Hammond. No one.
Chairman Collins. OK. Thank you.
All three of the nominees have filed responses to a
biographical and financial questionnaire, answered pre-hearing
questions submitted by the Committee, and had their financial
statements reviewed by the Office of Government Ethics.
Without objection, this information will be made part of
the hearing record with the exception of the financial data
which are on file and available for public inspection in the
Committee offices.
Our Committee rules do require that all witnesses at
nomination hearings give their testimony under oath. So I would
ask that you all stand and raise your right hand.
Do you swear that the testimony you are about to give to
the Committee will be the truth, the whole truth, and nothing
but the truth, so help you, God?
Ms. Gallagher. I do.
Mr. Giuliano. I do.
Mr. Hammond. I do.
Chairman Collins. Ms. Gallagher, I am going to ask you to
lead off and proceed with any opening comments that you might
have at this time.
TESTIMONY OF CAROLYN LEWIS GALLAGHER,\1\ NOMINEE TO BE
GOVERNOR, U.S. POSTAL SERVICE
Ms. Gallagher. Thank you, Madam Chairman.
---------------------------------------------------------------------------
\1\ The biographical and financial information of Ms. Gallagher
appears in the Appendix on page 17.
Pre-hearing questions and responses for the Record for Ms.
Gallagher appears in the Appendix on page 31.
Post-hearing questions and responses for Ms. Gallagher appears in
the Appendix on page 42.
---------------------------------------------------------------------------
First, I would like to thank Senator Cornyn for his
gracious introduction. It is both a great honor and a humbling
experience to appear before you today.
I would like to thank President Bush for having the
confidence in me to appoint me to the Board of Governors and I
would like to thank you and the distinguished Members of your
Committee for considering my nomination.
Thank you.
Chairman Collins. Thank you. Mr. Giuliano.
TESTIMONY OF LOUIS J. GIULIANO,\1\ NOMINEE TO BE GOVERNOR, U.S.
POSTAL SERVICE
Mr. Giuliano. Good morning, Chairman.
---------------------------------------------------------------------------
\1\ The biographical and financial information of Mr. Giuliano
appears in the Appendix on page 48.
Pre-hearing questions and responses for the Record for Mr.
Giuliano appears in the Appendix on page 57.
Post-hearing questions and responses for Mr. Giuliano appears in
the Appendix on page 67.
---------------------------------------------------------------------------
Chairman Collins. Good morning.
Mr. Giuliano. It is my pleasure to be here this morning. I
am honored to have been nominated and to be considered by your
Committee. It certainly is a new departure for me in my
activities.
I would like to say that one of the major surprises to me
as I evaluated whether or not to even be considered for this
position was getting to know the management of the Postal
Service.
Through that process, I became convinced that there was a
team of people there that had energy and a commitment to change
and a capability that would be very important for the future.
I decided that I would like to do anything I could to help
that team take on the challenges for the future and to continue
that progress, a significant record of accomplishment that they
have achieved over the last several years and continue to
improve that going forward.
So I am very glad to be here today and thank you for your
consideration.
Chairman Collins. Thank you. Mr. Hammond.
TESTIMONY OF TONY HAMMOND,\2\ NOMINEE TO BE COMMISSIONER,
POSTAL RATE COMMISSION
Mr. Hammond. Thank you, Chairman Collins, for inviting me
to be here today and I especially appreciate the serious
consideration that you have given to postal issues during the
time that I have served on the Postal Rate Commission.
---------------------------------------------------------------------------
\2\ The biographical and financial information of Mr. Hammond
appears in the Appendix on page 71.
Pre-hearing questions and responses for the Record for Mr. Hammond
appears in the Appendix on page 78.
Post-hearing questions and responses for Mr. Hammond appears in
the Appendix on page 89.
---------------------------------------------------------------------------
And I would in advance like to thank Senator Bond when he
arrives for being willing to introduce me again to this
Committee.
And I would also like to congratulate Governors Gallagher
and Giuliano on their appointments. I know that they are
joining a committed team at the U.S. Postal Service.
And if I could take one moment, my fellow commissioner,
Ruth Goldway, has been able to join us and I am pleased to have
her here today also.
Since the time I was originally before this Committee
almost 3 years ago up until the past month, the Postal Rate
Commission did not have an omnibus postal rate case before us.
And that stability in postal rates for over 3 years has been
very beneficial to the American public.
I know it was largely the result of congressional action
and it has made a big difference in the mailing industry in
this country.
However, during the time I have been on the Commission and
serving as vice chairman, we have had a number of issues
dealing with postal rates and efficiencies and been active in
them. And if I could mention just briefly a few of them.
We have adopted initiatives designed to improve flexibility
in the ratemaking process through negotiated service agreements
between the Postal Service and mailers.
We have adopted rules of practice that now require the
Postal Service to provide road-map testimony in omnibus rate
case filings. This is so that rate payers can more quickly
identify changes that would affect them.
We have attempted to increase the Postal Service's
financial transparency by adopting rules that direct the Postal
Service to provide relevant financial and operating reports.
Our goal has been to reduce the need for legal discovery and to
shorten the rate hearing process.
We have also recommended approval of a number of
experimental products which allow the Postal Service to
increase services in its core mission which is, of course,
delivery of the mail.
These are just some of the activities that the Commission
has been active in since the Senate confirmed me to the
unexpired term in 2002 and I am grateful for that opportunity
to serve.
If confirmed for a full term at the Postal Rate Commission,
I will continue to handle all the cases and issues that come
before us in a fair and responsible manner.
And, again, thank you for giving me this opportunity today.
I will be happy to answer any questions that you might have.
[The prepared statement of Mr. Hammond follows:]
PREPARED STATEMENT OF TONY HAMMOND
Thank you, Madam Chairman and Members of the Committee, for
inviting me to appear this morning. I especially appreciate the serious
consideration that you have given to postal issues during the time I
have served on the Postal Rate Commission.
I would like to thank Senator Bond for taking time to be here today
to introduce me again to this Committee. As a native Missourian, I know
we feel honored that he has devoted almost 30 years to public service
on our behalf.
I also want to congratulate Governor's Gallagher and Giuliano on
their appointments. I know they are joining a committed team at the
U.S. Postal Service.
Since the time I was originally before this Committee almost three
years ago, until this past month, the Postal Rate Commission did not
have an Omnibus Postal Rate case come before us.
The stability in postage rates for over three years has been very
beneficial to the American public. I know it was largely the result of
congressional action and has made a major difference in the mailing
industry in this country.
However, during the time I have served as Commissioner and Vice
Chairman, we have been active on a number of issues dealing with postal
rates and efficiencies.
The Postal Rate Commission has adopted initiatives designed to
improve flexibility in the rate-making process through Negotiated
Service Agreements (NSA's) between the Postal Service and mailers.
We have adopted rules of practice requiring the Postal Service
provide ``roadmap'' testimony in Omnibus Rate Case filings so
ratepayers can more quickly identify changes that affect them.
We have attempted to increase the Postal Services' financial
transparency by adopting rules directing the Postal Service to provide
relevant financial and operating reports, in order to reduce the need
for discovery and to shorten rate hearings.
The Postal Rate Commission has also recommended approval of a
number of experimental products which allow the Postal Service to
increase services in its core mission, which is the delivery of the
mail.
These are just some of the activities that the Commission has been
active in since the Senate confirmed me to the unexpired term in 2002.
I am grateful for that opportunity to serve.
If confirmed for a full term at the Postal Rate Commission, I will
continue to handle all cases and issues before us in a fair and
responsible manner and, again, thank you for giving me this opportunity
today. I would be pleased to answer any questions you might have.
Chairman Collins. Thank you very much for your service and
your testimony.
Ms. Gallagher, you are in the unique position of having
served on the President's Commission of the Postal Service as
well as serving as the Governor of the Postal Service Board
since last November.
Now that you have seen the Postal Service up close as a
governor, have you changed your mind on any of the
recommendations made by the Commission?
Ms. Gallagher. Not that I can think of, Senator. I have
been impressed with the management, even more so than we were
on the Commission. They are doing a terrific job. And I think
for the most part our recommendations, I will still support.
Chairman Collins. That is very helpful to know. I was very
impressed with the work done by the Presidential Commission,
but obviously seeing the Postal Service more from the inside
perspective might cause you to alter your judgment. It is good
to know that you think those recommendations are still valid
and should be pursued.
Ms. Gallagher, in response to the prehearing questionnaire
on the use of the Postal Service's $32 billion pension
liability and its annual pension related payments, you stated
that the use of the savings should be balanced between
mitigating rate increases and pre-funding retiree health
benefits.
The Postal Bill that Senator Carper and I have introduced
would return roughly 25 percent of these savings to the Postal
Service to mitigate future rate increases and the remaining 75
percent would be used to pre-fund retiree health benefits.
Ms. Gallagher. I do agree with it, Senator. I think both
are critical to the long-term health of the Postal Service. It
is hard to be sure of what the right thing is. But I think it
is a good balance and addresses both.
Chairman Collins. Mr. Giuliano, do you support that general
approach?
Mr. Giuliano. Well, I think it is consistent with my
statement and it is hard for me to in my perspective argue with
specific percentages or ratios. But I think generally it is
consistent with what I think would be the right thing to do.
I think you also have to put it in context of the total
bill and whatever other restraints and limitations are in the
bill, what happens with military liabilities and be mindful of
the total issue.
Chairman Collins. Ms. Gallagher, the Treasury Department
has suggested that none of the money should be used to mitigate
rate increases and instead should be used entirely for pre-
funding retiree health benefits and other obligations.
Could you give the Committee a sense of what kind of impact
that would have on future rate increases if none of the money
could be used to mitigate rate increases?
Ms. Gallagher. Clearly we are in a situation where our
costs are going up. I do not think that will change in the
future. I think if it was all used toward the retirement
unfunded liability that we would clearly have to raise rates
under the cap more often than we would otherwise and certainly
more, although obviously limited by the cap in your bill. So I
do think there would be more and bigger rate requests.
Chairman Collins. Mr. Giuliano, would you like to comment
on that also?
Mr. Giuliano. Yes. Clearly it would have a negative impact,
if you will, on the rate structure and require larger rate
increases than we anticipate now. I think it is important to
recognize that the Postal Service has an opportunity to grow
this business, to actually provide greater service and greater
performance to the American taxpayer with the introduction of
additional capabilities, but better service.
Even though their track record is much better than it has
been in the past, there are still ways to improve. And what you
want to be able to do is make this a more attractive service,
one that actually helps American enterprise in a more positive
way going forward.
I also think that you have to remember how this money was
generated to begin with. This was already money supplied by the
rate payers and it would be kind of a double bill not to be
able to get any of that benefit.
Chairman Collins. I think that is an excellent point.
Mr. Giuliano, you raise the question of growing the Postal
Service's business and one reason that I am very excited about
both yours and Ms. Gallagher's involvement is you have so much
private sector experience in doing just that. I think it is
going to be very helpful and already has been very helpful to
the Postal Service to have the benefit of your experience.
One real challenge for the Postal Service is declining
First Class Mail volumes. As you know, this raises questions
about the long-term future for the Postal Service since First
Class Mail revenues cover more than two-thirds of the Postal
Service's institutional costs, many of which are related to
maintaining the delivery and retail networks that are
fundamental to universal service, there is a lot of concern
about what can be done to reverse the decline in First Class
Mail.
Mr. Giuliano and Ms. Gallagher, could you give us any
insights on how you think the Postal Service could begin to
reverse this troubling trend and what steps have been taken so
far in this regard.
Mr. Giuliano. Well, I think the Postal Service and the
management team has already demonstrated the beginnings of
that. And, actually, I think we had about a 3- or 4-month
period here where First Class Mail actually went up. Now, that
may have been a confluence of positive factors that may not be
repeating all the time.
Chairman Collins. An election year, I think, was a major
factor.
Mr. Giuliano. The election helped, but it was compounded by
the financial services businesses and some of these negotiated
agreements. These have changed people's perspective as to how
big a role First Class Mail played in their advertising and
their promotional activities.
I think that is a key indicator. I think improving
services, adding things like the automated postal machines,
Click 'n Ship, extending hours. I know we are talking about
extending the hours that the post offices are open. Relatively
simple things that make it more convenient and easier to do
business.
We are thinking about this from the customer's perspective.
What do they need to do their job. What do they need to grow
their businesses and how can the mail process help that. I
think if we continue to look at things like that, improved
could be significant mitigation of volume decline.
Most businesses face issues like this in one form or
another. It may not be the same drivers, but most businesses
are faced with issues where either different technology or
different competitors come in and create this type of problem.
There has to be creative thinking as how to overcome it.
That is why I think that it is so important that in the
Postal Reform Bill, we review the impact the total legislative
package has on the ability of the Postal Service to have some
flexibility in how it addresses customer needs.
Chairman Collins. Ms. Gallagher.
Ms. Gallagher. I agree with Governor Giuliano. I think
clearly there is opportunity to find more ways to make the
products and services at the Postal Services useful to its
customer. I do think that has been a strong initiative of the
Postal Service. He mentions Click 'n Ship and the automated
postal centers which I think both have made a big difference in
the use of the postal services.
We are also working on intelligent mail which I think will
be a tremendous new service that can bring in volume and
enhance the way people use the Postal Service.
I do think the Postal Service should be limited to its core
business of delivering the mail, but it has the obligation to
continually look for better ways to do that.
Chairman Collins. Thank you.
The Collins-Carper Postal Reform Bill is designed to foster
more efficient postal operations by giving the Postal Service
much more flexibility than it has now to set its own rates and
implement revised operating procedures.
The bill includes, however, a strict rate cap that is
intended to ensure that rates will not rise faster than
inflation.
A key assumption is that the level of services provided by
the Postal Service will remain sufficient to meet the personal
and business needs of this Nation.
A major concern that mailers have brought to my attention
is that if the Postal Service projects that its costs are
likely to rise faster than inflation during some period, it
might decide to cut services instead of implementing more
efficient operating practices.
We tried to avoid that in our bill by requiring the Postal
Service, in consultation with the Postal Rate Commission, to
develop and define standards of service. I assume that you all
support the overall goal of developing service standards and
providing performance data against which those standards can be
measured.
But do you agree with the suggestion that these standards,
performance goals, and other measures should be included on the
Postal Service's Web site so that the public would have easy
access?
One of my concerns is to make the Postal Service more
transparent to its customers. Having more information available
is one way to do that.
Ms. Gallagher. Senator, I certainly agree that more
transparency is better and I think the Postal Service is moving
in that direction voluntarily as well.
And I do agree with setting performance standards and
making the performance on those standards public. In terms of
what specific standards those should be. I do not know at this
time, but I do agree with the overall goal.
Chairman Collins. Mr. Giuliano.
Mr. Giuliano. First of all, I think the Postal Service is
very transparent compared to most businesses. I mean, they even
publish their financial statements monthly. There is no
business that I know that does that. So I think that there is a
fair amount of transparency already.
I would like to come at this from the customer's
perspective. Certainly a customer ought to know what it is
contracting for in terms of service performance. The idea of
setting strict service standards and having them published is
fine.
But in my view, if you are really going to satisfy
customers, it may actually restrict the opportunities that a
customer might have to modify service in a way that is more
important to them. There may be large mailers or certain
classes of customers that want a different type of performance.
And that would be very meaningful to their business.
And so I am concerned about just restricting service to a
specific set that is difficult to change and certainly may be
legislated or monitored by a regulatory agency.
I think that the best opportunity for the postal customers
is to be able to work out service standards within the cost and
the bounds, the other bounds of that total package that might
be best for them.
Chairman Collins. I would now like to recognize the
distinguished Senator from Missouri who has joined us. We thank
you very much for being here today, Senator Bond. I understand
you are going to introduce Mr. Hammond.
STATEMENT OF THE HON. CHRISTOPHER S. BOND, A U.S. SENATOR FROM
THE STATE OF MISSOURI
Senator Bond. Thank you very much, Madam Chairman. I may be
known as the late Senator from Missouri, but we were trying to
work out the schedule, a number of commitments I had today. And
I apologize for being late.
But I did want to take an opportunity to tell you a little
bit about a fellow Missourian and a good friend, Commissioner
Hammond, a graduate of Southwest Missouri State University,
soon to be known as Missouri State University.
He is an owner of the family farm in Hickory County,
Missouri. He served on Capitol Hill from 1979 to 1989 on the
official staff of Congressman Gene Taylor. And anybody who does
not remember Gene Taylor, I have many stories to tell about the
way he assisted me when I arrived here as a rookie in 1987.
Working on Congressman Taylor's staff, Tony dealt with many
things in serving the congressman on the Post Office and Civil
Service Committee. He had many legislative experiences with
Postal Service rates and operations.
He has been Executive Director as well as Finance Director
of the Missouri Republican party. He was Director in 1998 of
the campaign operations at the Republican National Committee
and previously served as a field representative.
Before being named to the Postal Rate Commission,
Commissioner Hammond was owner and managing member of Hammond
Company, a private consulting firm, and he served as senior
vice president of a direct marketing firm and a senior
consultant to Forbes 2000, Inc.
For the past several years, Commissioner Hammond has worked
hard to assure that postal rates are set openly and that they
are fair. He has been responsible for making sure that an
adequate level of affordable mail service is available
throughout the country as the cost of mail service has
generally tracked the rate of inflation.
It is my prediction that he will continue to provide the
highest level of care and service that this country needs as he
continues another term with the Postal Rate Commission. It is
with great pride that I support his nomination. I trust the
Committee will as well. And if you need any help on the floor,
I will be more than happy to provide it.
But, Madam Chairman, thank you for the hearing and I thank
you for giving me the opportunity to say just a few words about
a good friend for whom I have the highest respect.
[The prepared statement of Senator Bond follows:]
PREPARED STATEMENT OF SENATOR BOND
Thank you, Madam Chairman, for allowing me to join you today to
introduce a fellow Missourian, Mr. Tony Hammond, who has been serving
as Commissioner of the United States Postal Rate Commission since the
Fall of 2002.
Commissioner Hammond is a graduate of Southwest Missouri State
University in Springfield and remains an owner of the Hammond family
farm in his native Hickory County Missouri.
He served on Capitol Hill from 1979 to 1989 on the official staff
of Missouri Congressman Gene Taylor as Legislative Director. During
Taylor's tenure as Ranking Member of the Post Office and Civil Service
Committee, Hammond dealt with the diverse issues and interests
concerning U.S. Postal Service rates and operations.
From 1989 to 1994, Mr. Hammond was Executive Director, as well as
Finance Director, of the Missouri Republican Party.
During the 1998 election cycle, Hammond was Director of Campaign
Operations at the Republican National Committee where he was
responsible for political programs nationwide. He was previously RNC
Regional Field Representative in the Great Lakes Region and the
Southern Region where he assisted campaigns and state party
organizations in implementing RNC programs.
Before being named to the PRC, Commissioner Hammond was owner and
managing member of T. Hammond Company, a private consulting firm based
in Arlington, Virginia. He also served as Senior Vice President of the
direct marketing firm, Feather , Larson& Synhorst, and Senior
Consultant to Forbes 2000, Inc.
For the past several years, Commissioner Hammond has worked hard to
assure that postal rates are set openly, and that they are fair. He has
been responsible for making sure that an adequate level of affordable
mail service is available throughout this country as the cost of mail
service has generally tracked the rate of inflation. It is my
prediction that he will continue to provide the highest level of care
and service that this country needs as he continues another term with
the Postal Rate Commission.
It is with great pride that I introduce Mr. Hammond before this
Committee today.
Chairman Collins. Thank you very much, Senator Bond. Your
endorsement means a great deal to this Committee and we
appreciate your taking the time out of your busy schedule to be
here.
I know that you have other demands on your schedule, so we
are happy to excuse you at this time if you would like.
Senator Bond. I appreciate that. Thank you.
Chairman Collins. Thank you.
I am now going to turn to some substantive questions for
Mr. Hammond. Before I do that, there are three standard
questions that I need to ask all of you for the record.
First, is there anything you are aware of in your
background which might present a conflict of interest with the
duties of the office to which you have been nominated?
Ms. Gallagher. No, there is not.
Mr. Giuliano. No.
Mr. Hammond. No.
Chairman Collins. Second, do you know of anything personal
or otherwise that would in any way prevent you from fully and
honorably discharging the responsibilities of the office to
which you have been nominated?
Ms. Gallagher. No.
Mr. Giuliano. No.
Mr. Hammond. No.
Chairman Collins. And, finally, do you agree without
reservation to respond to any reasonable summons to appear and
testify before any duly constituted Committee of Congress if
you are confirmed?
Ms. Gallagher. Yes, I do.
Mr. Giuliano. Yes.
Mr. Hammond. Yes.
Chairman Collins. Thank you. It shows you were listening to
the questions. Two nos and a yes. That is exactly what we were
seeking.
Mr. Hammond, in your answers to written questions, you
expressed the importance of the Postal Service providing high-
quality, timely data to the Postal Rate Commission.
In the legislation that Senator Carper and I have
introduced, we increase the data reporting requirements that
the Postal Service would have to provide, including requiring
annual cost, revenue, rates, and service reports requiring SEC
type reporting and giving the Postal Rate Commission subpoena
power.
Do you support these changes?
Mr. Hammond. Yes, I totally support those changes. I think
that increased financial transparency at the Postal Service is
necessary for everyone.
New periodic reporting requirements would also specifically
assist us during consideration of rate cases, and in between
consideration of rate cases because, as you know, currently,
between omnibus rate cases, we get very little updated
information.
And since we were fortunate to go for over 3 years without
a rate case before us, the data that we had used before was
really close to being outdated. So that would be very
beneficial to us if indeed we were to have that. And I hope
that you will include that in the legislation, yes.
Chairman Collins. Are there other changes beyond what are
included in our legislation that you feel would help the Postal
Rate Commission do its job?
Mr. Hammond. I think that from what I have seen in your
draft bill that would cover it very well.
Chairman Collins. In answers to written questions, you also
stated that you believe that a rate cap mechanism could help
shorten the rate making process.
The complaints that I hear all the time is that the rate-
making process is too lengthy, too expensive, and too
litigious. On the other hand, the rate cap must be established
to provide the Postal Service with incentives to continue its
work to become more efficient.
The legislation that I have introduced establishes the
Consumer Price Index, the CPI, as the rate cap on each class
and only allows for rate changes for exigency, rate changes in
extraordinary circumstances.
First, do you support the rate cap?
Mr. Hammond. Yes.
Chairman Collins. Do you think the CPI is the correct
index?
Mr. Hammond. I think that it is a good index to use, yes.
Chairman Collins. Is there anything that you would
recommend with regard to the rate cap mechanism in the bill?
Mr. Hammond. Well, I believe you have taken care of this in
the legislation as it gets to markup; we'll see--but making it
very difficult for the Postal Service to go beyond this except
in exigent circumstances, to go outside the rate cap would--it
needs to have strict limits on it.
I think those circumstances should be emergency
circumstances such as something as drastic as when the deadly
anthrax mailings, for instance, came through rather than just
the Postal Service finding that it is not raising enough
revenue.
You have to force efficiencies on any government monopoly
and I appreciate the management of the Postal Service recently
doing a very good job. But still it remains a government
monopoly and I think you have to have the safeguards that you
have put in place in that legislation to make sure it stays
that way.
Chairman Collins. Our legislation allows the Postal Service
to change rates for market dominant products, but requires a
prior review by the Postal Regulatory Commission. The Postal
Service has expressed a desire for an after-the-fact review.
In your opinion which approach best meets the needs of both
the Postal Service, its customers, the competitors, the general
public? We obviously have a lot of different interests to
balance.
Mr. Hammond. Right. Well, certainly the U.S. Postal Service
if it is to survive well into the 21st Century is going to have
to have more rate flexibility.
But on the other hand, especially if you are going to go
into market dominant products, it remains a government monopoly
and you have to have somewhere such as a postal regulatory
commission so that rate payers, the stakeholders, have a place
to go rather than the Postal Service having ultimate
flexibility of just charging whatever they want to.
So you do need to have review by, in this instance because
it is a monopoly, a regulatory agency to protect the interest
of the public. That is what it is there for.
Chairman Collins. Thank you.
I would like to thank all of the nominees for appearing
today and for your willingness to serve the public.
I believe the Postal Service is so important to this
country and making sure that we have the very best people
involved on the Board of Governors, and the Postal Rate
Commission is truly vital.
We need to make sure we are strengthening the Postal
Service for the 21st Century and make sure that this
institution, which has endured for over 200 years, continues to
serve us for another 200 years.
I want to thank you all for your commitment, for your
willingness to serve what I think is a very important cause.
Without objection, the hearing record will be kept open
until 5 p.m. today for the submission of any additional
questions or statements for the record.
Again, my thanks to all of you, and this hearing is now
adjourned.
[Whereupon, at 11 a.m., the Committee was adjourned.]
A P P E N D I X
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