[Senate Hearing 111-1045] [From the U.S. Government Publishing Office] S. Hrg. 111-1045 NOMINATION OF DENNIS J. TONER ======================================================================= HEARING before the COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS UNITED STATES SENATE ONE HUNDRED ELEVENTH CONGRESS SECOND SESSION __________ JUNE 10, 2010 __________ NOMINATION OF DENNIS J. TONER TO BE A GOVERNOR, U.S. POSTAL SERVICE __________ Available via the World Wide Web: http://www.fdsys.gov Printed for the use of the Committee on Homeland Security and Governmental Affairs ---------- U.S. GOVERNMENT PRINTING OFFICE 58-032 PDF WASHINGTON : 2011 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC 20402-0001 COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS JOSEPH I. LIEBERMAN, Connecticut, Chairman CARL LEVIN, Michigan SUSAN M. COLLINS, Maine DANIEL K. AKAKA, Hawaii TOM COBURN, Oklahoma THOMAS R. CARPER, Delaware SCOTT P. BROWN, Massachusetts MARK L. PRYOR, Arkansas JOHN McCAIN, Arizona MARY L. LANDRIEU, Louisiana GEORGE V. VOINOVICH, Ohio CLAIRE McCASKILL, Missouri JOHN ENSIGN, Nevada JON TESTER, Montana LINDSEY GRAHAM, South Carolina ROLAND W. BURRIS, Illinois EDWARD E. KAUFMAN, Delaware Michael L. Alexander, Staff Director Kristine V. Lam, Professional Staff Member Kenya N. Wiley, Counsel John P. Kilvington, Staff Director, Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security Brandon L. Milhorn, Minority Staff Director and Chief Counsel Jennifer L. Tarr, Minority Counsel Trina Driessnack Tyrer, Chief Clerk Patricia R. Hogan, Publications Clerk and GPO Detailee Laura W. Kilbride, Hearing Clerk C O N T E N T S ------ Opening statements: Page Senator Carper............................................... 1 Senator Kaufman.............................................. 1 Prepared statements: Senator Carper............................................... 13 Senator Kaufman.............................................. 15 WITNESS Thursday, June 10, 2010 Dennis J. Toner to be a Governor, U.S. Postal Service: Testimony.................................................... 5 Prepared statement........................................... 16 Biographical and financial information....................... 17 Responses to pre-hearing questions........................... 25 Letter from the Office of Government Ethics.................. 38 NOMINATION OF DENNIS J. TONER ---------- THURSDAY, JUNE 10, 2010 U.S. Senate, Committee on Homeland Security and Governmental Affairs, Washington, DC. The Committee met, pursuant to notice, at 2:33 p.m., in room SD-342, Dirksen Senate Office Building, Hon. Thomas R. Carper, presiding. Present: Senators Carper and Kaufman. OPENING STATEMENT OF SENATOR CARPER Senator Carper. The Committee will come to order. It is not exactly standing room only, but that does not mean this is not an important hearing. Senator Kaufman. Quality over quantity. [Laughter.] Senator Carper. We are delighted to be here, Senator Kaufman, myself, and Dennis Toner. I do not know what the odds would be that three guys from Delaware would be sitting here in these three rows for today's hearing, but however long those odds might be, we are here, and it is a good thing, I would like to say, for Delaware and for our country, I hope. Today, we are going to be considering the nomination of Dennis Toner to be a member of the U.S. Postal Service's Board of Governors. Senator Kaufman has in his past, not too recent past, been a governor. I have been a governor. And if things go well with your nomination and the confirmation process, the three of us may share the common bond of being governors, recovering governors in the case of Senator Kaufman and myself, and you, a real governor as a member of the Board of Governors. We will see how this process moves forward after today. Before I give my opening statement, I want to give my friend, our colleague from Delaware, Senator Kaufman, the opportunity to introduce this nominee, whom I think he knows pretty well. Sometimes, we have the opportunity to introduce people that we really do not know that well, but in this case, you know him well, so we are anxious to hear what you have to say about him. Senator Kaufman. OPENING STATEMENT OF SENATOR KAUFMAN Senator Kaufman. Thank you, Mr. Chairman. It is a great honor to be here with you chairing the Committee, and---- Senator Carper. Well, we were just talking earlier. We reversed roles about a month or so ago, when you chaired the Judiciary Committee for the hearing for Leonard Stark when he was nominated to be a Federal District Court Judge. Senator Kaufman. Yes, small world. Senator Carper. It is interesting how we do this. Obviously, Delaware has taken over here. Senator Kaufman. Exactly. [Laughter.] You said it. It is a great day for Delaware, and it is a great day for the country. Senator Carper. Could I ask you a question before you go any further? Senator Kaufman. Yes. Senator Carper. How long have you been married? Senator Kaufman. Fifty years. Senator Carper. When is your anniversary? Senator Kaufman. Today. Senator Carper. Congratulations. Senator Kaufman. Thank you. Senator Carper. Is that not great? [Applause.] Let the record show polite, scattered applause. [Laughter.] No, it was robust. It was vigorous. Senator Kaufman. And it is a special day, too---- Senator Carper. Congratulations. Senator Kaufman. I just want to thank you for the opportunity to introduce Dennis Toner to be the President's nominee for the Board of Governors for the U.S. Postal Service. As you say, I have known Mr. Toner for over 30 years, and he is truly a man of singular intelligence, character, integrity, and conviction. He had a career spanning more than three decades of service in the Federal Government as an invaluable, important, essential member of then-Senator Joe Biden's staff. As someone who had the true privilege of working closely with him for much of this time, I can attest to his loyalty and his strong leadership. As long as I have known him, I have always been able to rely upon his wise judgment and sound advice. More importantly, he brings a business acumen to the Board of Governors that will help the Postal Service successfully navigate the major financial and operational challenges that it currently faces. He served as Finance Director for Biden for President and Citizens for Biden, and as a business consultant over the last 2 years, he provided comprehensive business solutions to a broad range of private and public entities. I am truly confident that he can draw upon his wealth of business knowledge and experience to identify the critical issues affecting the Postal Service and implement the vital reforms that it needs to continue serving its essential role to our country. He will be an excellent leader and member of the Postal Service Board of Governors if the Senate chooses to confirm him, and I certainly hope they will. Mr. Toner is truly one of the most qualified people that I have ever worked with. Thank you, Mr. Chairman. Senator Carper. Thank you, Senator. Thank you very much. I know it means a lot to him that you are sitting here with him, and it means a lot to me, as well. Thank you. I have a statement I am going to go on with. Senator Kaufman, I know you are on about four or five committees, and if you have to leave, we understand, but you are great to be here. Dennis Toner is, of course, no stranger to me. For many years, he and I have been runners in Delaware. He has run in more Caesar Rodney Half-Marathons than I have and certainly a lot more marathons. I have never run in one, but he has run in a bunch of those. I have never finished ahead of him, and I have always looked forward to the opportunity to get even with him---- [Laughter.] And then today comes along. I only recognize him in a race from behind, way behind. So he is no stranger to me, certainly no stranger to Senator Kaufman and to those who worked with him during all those years that he worked for Senator Joe Biden. I am delighted that he is willing to now put in the time and the effort that is needed to help steer the Postal Service out of the difficulties that it finds itself in. As anyone watching this hearing certainly knows, this is a challenging time for the Postal Service. It is a challenging time for our country. Mr. Toner. Yes. Senator Carper. I think the country is up to that challenge, and I believe the Postal Service is, too. We need good people in leadership positions, and we have the opportunity to find out that we have a pretty good one right here, I think. Mr. Toner. Thank you. Senator Carper. The Postal Service ended fiscal year 2009 with a 13 percent decline in mail volume compared to fiscal year 2008. This resulted in a year-end loss of some $3.8 billion, up from $2.8 billion a year before, and a couple of years ago, this outfit was making that much money, and here we are dropping like a rock. This loss comes despite heroic efforts on not just the part of the Postmaster General and his team, but a lot of folks who work in the Postal Service across the country in towns large and small as they have sought to achieve more than $6 billion in cost savings over a very short period of time. And the loss would have been significantly higher, I think a total of about $7.8 billion, to be exact, if Congress and the President had not acted at the last minute to reduce the size of the Postal Service's overly large retiree health prefunding payment. Unfortunately, the projections for the current fiscal year look no better than the results for fiscal year 2009. And despite an expected recovery in at least some areas of the economy, the Postal Service is anticipating a further decline in mail volume. This, coupled with the fact that savings will likely be harder to come by, not easier, this year, will result in the kind of massive $7 or $8 billion loss that we were expecting right up until the end of fiscal year 2009. On top of all this news, the Postal Service recently hired a group of three outside consultants to look at its business model and to look ahead. Those three outfits came back with findings showing that the Postal Service will continue to lose mail volume, even when the economy recovers. They even pointed out that the Postal Service can be expected to lose more than $230 billion over the next decade if major changes are not made. Congress must address this situation, first by finishing the work we began last September and permanently restructuring the Postal Service's retiree health obligation in a way that makes sense. Payments that the Postal Service is required to make under current law are unaffordable, especially during such a difficult economic time when the Postal Service is already losing customers to electronic forms of communication. I will also note that these payments are not related at all to what the Postal Service owes to its future retirees. I have introduced with some of my colleagues legislation to address this problem. It has been reported out of this Committee. My hope is it can be considered by the full Senate in the near future. We also need to look at the Postal Service's pension obligations. According to an analysis conducted not many months ago by the Postal Service's Office of Inspector General, the formula that is used to determine how much the Postal Service must pay into the old Civil Service Retirement System may have actually resulted in an overpayment by the Postal Service into that system of as much as $75 billion. The Postal Regulatory Commission is currently examining these findings and should be finished with that work sometime this summer. It is my hope that any overpayment that did occur can be used to provide the Postal Service with immediate relief and to prevent or delay potentially damaging service or other cuts that might be on the table during this difficult time. Another thing that Congress can do to help in this environment is to leave the day-to-day management of the Postal Service to the Postal Service. Too often, those of us here in the Senate and the House stand in the way of the Postal Service's efforts to streamline operations and to remove excess capacity, especially when it comes to closing or consolidating retail and processing facilities. We also, unfortunately, are preventing the Postal Service from changing delivery frequency to adjust to the changing mailing economy. Studies have shown that the elimination of Saturday delivery alone could save the Postal Service upwards of $3 billion per year. In addition, about 75 percent of the public would support such a move, according to a number of polls. I might say, that 70 or 75 percent number came as a surprise to me and, I know, to a number of my colleagues. In many ways, then, we need to let the Postal Service management do what it needs to do to manage its way through the crisis it currently faces, and that is not to say we do not have some obligations here, as well, and we need to meet those obligations. But I think a good deal of it lies on the management and their ability to work with the rank and file and the union leadership, as well, to manage through this crisis. Mr. Toner, you have decades of experience in public policy, in management, and perhaps most importantly, in listening to a variety of views and finding consensus--not just finding consensus, but building consensus--and those are skills that will be much needed in the days ahead on the Board of Governors in the Postal Service. I look forward to learning more today about how you would apply that experience and those skills to the crisis currently facing the Postal Service. At this time, I would usually turn to my colleagues on the dais for any statements that they might like to add. The fact that there is no one here sitting with me at this moment is actually a good sign because if they were sitting here, they probably would not be here to throw bouquets in your direction. [Laughter.] It might be to throw some tough questions your way and to raise questions about your worthiness as a nominee. Mr. Toner, I would note for the record, has filed responses to a biographical and financial questionnaire. He has also answered pre-hearing questions that were submitted by Committee Members and Committee staff. In addition, his financial statements have been reviewed by the Office of Government Ethics. Without objection, this information will be made part of the hearing record. Financial data, however, will remain on file and available for public inspection in the Committee offices. Committee rules require that all witnesses at nomination hearings give their testimony, as you may know, under oath. Mr. Toner. I understand. Senator Carper. I am going to ask you, if you would, to please stand and raise your right hand, and I will administer this oath. Do you swear that the testimony you will give before this Committee will be the truth, the whole truth, and nothing but the truth, so help you, God? Mr. Toner. I do. Senator Carper. Please be seated. So far, so good. And with that, you are recognized to offer your statement. I would ask that you keep your statement within 30 minutes. [Laughter.] Mr. Toner. Very good. Thank you. Senator Carper. If you go much beyond that, I will have to leave. [Laughter.] TESTIMONY OF DENNIS J. TONER \1\ TO BE A GOVERNOR, U.S. POSTAL SERVICE Mr. Toner. Thank you, Mr. Chairman, both for your kind remarks and, as well, for holding this hearing this afternoon. I am very grateful to President Obama for nominating me to serve as a Governor in the U.S. Postal Service. I would like to thank you, Senator Carper, for your abiding interest in the Postal Service and the role the Postal Service plays in American life. If confirmed, I hope to be able to work with you to address the many challenges confronting the Postal Service. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Toner appears in the Appendix on page 16. --------------------------------------------------------------------------- I would also like to take a minute to thank my personal friend, Senator Kaufman, for taking time out of his schedule to introduce me today. I had the pleasure and honor of working closely with Senator Kaufman for more years than we need to count when we both worked for then-Senator Joe Biden. I would just like to simply say thanks to Senator Kaufman for the support and friendship he has provided me throughout this process. I have been asked by many why I would want to serve on the Postal Board of Governors given the extreme financial difficulty it faces today. My answer is this: The Postal Service is woven into the fabric of every American community. It is a way of life. However, it is clear that changes are needed on a number of fronts to allow the Postal Service to regain its financial footing. In my more than 30 years working for the U.S. Senate, I developed an ongoing interest in the challenges that arise from organizations such as the Postal Service and Amtrak--Federal organizations that Congress wants to act like a business but provide public service in all of its many combinations. Should I be confirmed, I believe that I can bring that experience to bear working with the Governors, Postal Service management, and the many different Postal Service stakeholders to address the mutual interest facing the Postal Service. I thank you for holding this hearing, and I will be happy to answer any questions. Thank you. Senator Carper. You are quite welcome. Thank you for that statement. Under the Committee rules, there are a couple of standard questions that I need to ask you and ask that you would then respond to those, and then I will ask you a number of questions that are policy-related. Mr. Toner. Thank you. Senator Carper. First, is there anything that you are aware of in your background that might present a conflict of interest with the duties of the office to which you have been nominated? Mr. Toner. No. Senator Carper. 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? Mr. Toner. No. Senator Carper. Third, 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? Mr. Toner. Yes. Senator Carper. Thank you. Now, a couple of policy questions, if I could. As you and I discussed recently, we made changes to the law in 2006, I believe, so that members of the Board of Governors had the experience necessary to play a role in managing what is really one of the largest organizations in the world. What do you think that you would bring to the Board, particularly at such a challenging time for the Postal Service? There are times in our lives to be modest, and there are times to be immodest. This is the latter. Mr. Toner. Thank you, Mr. Chairman. I believe my experience or what I bring to the Board rests heavily on my 30-plus-year Senate career. It has given me an opportunity to provide insight in this constant match that we come across between government and business models, that is, the idea to balance service and costs. I believe my Senate career has dealt with this throughout its entire time, and I consider that a real asset, hopefully, if I should be confirmed or added to the Board. In addition to that, I just believe the institutional knowledge that I have gained on postal legislative issues that continue to be shaped by continuing technology will be an asset. When I first came to the Senate in the very early 1970s, when there were discussions regarding electronic mail, the ideas were just foreign to any of us. Senator Carper. Did they still have quill pens then? [Laughter.] Mr. Toner. No, we did not, but we did have the old facsimile machines. We did have those. In addition to that, I believe that my career has provided the process in which it has become clear that we need to involve all stakeholders in possible solutions. But at the same time, we need to strive to find solutions that are both realistic and achievable. I think what I bring is a conservative outlook in terms of what is possible as we deal with the legislative process as it relates to any government agency, but particularly the Postal Service. Senator Carper. All right. Thank you. As I noted in my opening statement, the Postal Service suffered a significant loss in fiscal year 2009, coming on the heels of an early loss in 2008. The Postal Service is projected to lose a significant amount this year, as well. If confirmed, how would you work with your new colleagues on the Board of Governors and with senior Postal Service management to attempt to minimize the financial impact of the loss in revenue that the Postal Service is currently experiencing? Mr. Toner. Mr. Chairman, I agree with your statement that the Postal Service is experiencing financial losses of historical proportions. I believe every facet, every piece needs to be on the table in terms of negotiation. I have had the opportunity to review the business model presented by the Postal Service. I am encouraged by the new initiatives that have been offered. But at the same time, I think we need to do more in terms of reviewing the cost control measures in particular. These are hard choices as relates to excess capacity and how we best address declining volume. My position, as a candidate for the Postal Board of Governors, is that it is imperative that the Governors continue or increase their outreach to all stakeholders to help best determine how we go forward in terms of addressing the financial situation in which we find ourselves. Senator Carper. Thank you. As you know, the Postal Service is required to make a payment at the end of each fiscal year to pre-fund its future health obligations for its pensioners. These payments are large, ranging anywhere from about $5.4 billion to $5.8 billion. They are not closely related to what the Postal Service owes its future retirees. They are also something that the Postal Service simply cannot afford at a time like this when the economy is still recovering and the competition from electronic forms of communication is growing. How important is it, in your view, for Congress to find some way to permanently restructure the Postal Service's retiree health obligation--not to walk away from that obligation, but to restructure it in a way that is more realistic and sensible? Mr. Toner. Thank you for the question. Mr. Chairman, I fully support the need for Congress to restructure these obligations. I believe the retiree health benefits represents the most threatening issue the Postal Service needs to address. These current obligations have produced far-ranging consequences on other operations, as well. Absent a solution provided by Congress as relates to retiree health benefits, we will not be able to address other issues that need to be considered. Senator Carper. In my old job as State Treasurer, the State Treasurer's responsibilities included administering fringe benefit programs for State employees, including all the folks in our school system. At the time, in 1976, 1977, we had no pension fund. We had not created a pension fund. We paid pension payments every month to State retirees on a cash basis. When the State of Delaware's credit rating was lowered to the lowest in the Nation, the rating agencies pointed to the fact that we had no amortization schedule. It was one of the problems with our finances. We had given no thought to meeting the health care obligations of future pensioners. We did not even have a pension fund for the pension obligation. Mr. Toner. I did not know that. Senator Carper. And you know what? We were not by ourselves. There were a lot of other States and local governments in the same situation. Fast forward about 20 years, and the State of Delaware, which used to have the worst credit rating in the country, ended up with the best credit rating, AAA credit ratings across the board. We had literally about 10 years to create a pension fund that fully amortized our pension obligations, but we got the AAA credit ratings. The folks from the rating agency said, you still have not done much at all with respect to your future health obligations that you owe to those people. You are going to be making pension payments, too. So we began making a downpayment on that obligation, but a very modest downpayment. And over the last 8 years, with the governor who succeeded me, the State attempted to make some progress in meeting that health care obligation to those potential future pensioners, but not much progress was made. And as it turns out, relatively few State and local governments have done much to meet the similar obligation to their future pensioners. If you actually look at corporations, the private sector, and what they have done in terms of setting aside money to meet their health care obligations for their future pensioners, their story is not a great deal better than the State and local governments. The legislation that was signed by President Bush in 2006 said, we are going to require the Postal Service to commit to a prepayment schedule that is unlike any that we would ever require with a State or local government or a private corporation. And while we think it is important to meet that obligation within a reasonable schedule, to have it front-end loaded and as conservative as it is, in my view, just makes little sense. And as it turns out, I think that is a view that is shared by my colleagues. Mr. Toner. Good. Senator Carper. In my view, it is important for the Postal Service to combine any efforts to cut costs and streamline operations during this financial crisis with an aggressive effort to attract new business and retain as much as possible of what is left after the downturn. What is your assessment of the steps that the Postal Service management has done so far on the revenue side in recent months and years? What further steps might you suggest be taken, if confirmed, to further bolster future revenues? Mr. Toner. Mr. Chairman, I have had an opportunity to review the business plan. I have also considered the Government Accountability Office study and other reactions to the plan offered by the Postal Service in this process. But in terms of the Postal Service business plan itself, I believe that the steps represented so far are just that, first steps. I believe that the revenue initiatives that have been attempted--flat- rate boxes, for instance, summer sales, pursuing partnerships-- these are awfully strong productive measures that the Postal Service has put forward, and hopefully it is measures such as these that will best allow the Postal Service to regain a firm financial footing. I believe going forward that the Board of Governors, in particular, needs to do even more in terms of outreach with all of its stakeholders to find common grounds so that we can all work together to bring the financial footing the Postal Service needs back to a reasonable course. Senator Carper. A colleague of ours from Oregon, Ron Wyden, and I and others have introduced legislation modeled after what they do in Oregon when it comes to voting. They end up being able to realize a far greater turnout of voters conducting elections every couple of years in a way that not only draws a greater turnout, but I think actually costs less money. They have been able to, they think, in a satisfactory way, address the potential for fraud among folks trying to vote, and they do it by relying on the mail. In my old role as Governor, I used to say that every problem, every challenge we face in Delaware, some other State has not only faced that challenge, but solved it, figured out how to do it, and sometimes I think of the States as laboratories of democracy. In this case, I think Oregon could be a State for us to model as a Nation. There are some benefits that flow to the Postal Service, obviously, in terms of additional revenues and business, but there is also on the civic side the potential for 10, 20, 30 percent greater turnout and the ability to hold elections not only with more people voting, but also in a way that does not cost more money and might actually cost less. So that is the kind of thing we are looking at. There is a fellow that a lot of us from Delaware know. He is a professor at the University of Delaware College of Earth, Ocean, and Environment. His name is Willett Kempton, and he works on technology called Vehicle to Grid. And as you know, Mr. Toner, the State of Delaware is looking forward to, about 2 years from now, being able to deploy a windmill farm---- Mr. Toner. Yes. Senator Carper [continuing]. Twelve miles off the cost of Rehoboth. Down in Dover, I think this week, they are beginning the work on a 60- or 80-acre solar energy farm just outside of the city to provide the city and the city's residents with much of their electricity needs. We also know that the wind does not always blow and the sun does not always shine---- Mr. Toner. Yes. Senator Carper [continuing]. And however wonderful these renewable energies might be, and they are, we need the ability to be able to store electricity when the wind is blowing and the sun is shining. Willett Kempton has been working on a technology to do that, to store the energy through something called Vehicle to Grid, where the electricity generated is actually stored by batteries of fleets of vehicles, and then as the energy is needed to go back onto the grid to meet our needs, the electricity is drawn down from the fleet of vehicles. There are not many companies in this country that have more vehicles in their fleet than the Postal Service, and there are not many companies in this country that have an older fleet than the Postal Service. And there might be some opportunities here for the Postal Service to help in a day that we are trying to do more with non-fossil fuel generation of electricity, and at the same time do some good things for our environment, strike a blow for technology and innovation, and make some money at it at the same time. Those are a couple of ideas. Mr. Toner. Good. Senator Carper. You probably are aware that the Postal Service receives criticism whenever it attempts to close or consolidate facilities. Let me just ask, what do you think the Postal Service needs to do to address this criticism and, where necessary, to eliminate excess retail and processing capacity? Mr. Toner. Mr. Chairman, I believe that excess retail and processing capacity clearly has become a drain on the resources and has contributed, in part, to the current state that the Postal Service finds itself. At the same time, I believe the Postal Service has been very diligent in terms of maintaining its service standards that it has always kept in place. As relates to processing facilities, again, I do believe that we all must recognize excess capacity, but I do think it is important that we do as good a job or even a better job in communications with all of the stakeholders as we attempt to redefine or streamline this excess retail capacity so that people can plan accordingly and private citizens can be assured that we will continue to maintain the same standard of service. And I think if we can just do a better job of communicating our attempts to deal with excess processing capacity, we can help alleviate the fears that people have with it. Senator Carper. All right. Thanks very much. In the past, I have spoken about the need for the Postal Service to focus not just on closing facilities, but also expanding access to the services that it offers. This does not necessarily mean building new post offices. It could, where appropriate, mean expanding access to alternate retail, such as Automated Postal Centers located in places where people go every day, like our grocery stores or our pharmacies. It used to be that if I wanted to go to the bank, I would go to the bank. Today, I can go to the bank at my grocery store. It used to be I would go to the pharmacy, or today I can go to the pharmacy in my grocery store. Times have changed, as you know. But what do you think the Postal Service might be able to do in this area? Mr. Toner. Thank you, Mr. Chairman. I believe that obviously, the Postal Service needs to discover new revenue initiatives if it is going to survive. To the extent that I have had a chance to review it, I believe the Postal Service has done a commendable job during the past 6 years in terms of dealing with cost controls and so forth. However, these measures are not sufficient to deal with the financial realities that the Postal Service faces. Thus, the new revenue initiatives need to be put into place. And I believe that the customers are comfortable, provided alternative access is available, that is, as you point out, Mr. Chairman, as it relates to doing so-called multi-tasking, be it grocery shopping and pharmacies and so forth, such actions are likely essential to future growth, and the Postal Service needs to do as other outfits have been able to do, and that is, follow your market, so to speak. These new revenue initiatives, I think, can only enhance the financial stability that we need to get to. Senator Carper. Thank you. One of the biggest issues that the Congress and the Postal Service will face in the coming months is the question of whether delivery frequency should be changed, perhaps by eliminating Saturday delivery. How important do you think it is that the Congress allow the Postal Service to make the business decision to eliminate a day of delivery if doing so is deemed necessary? Mr. Toner. Thank you, Mr. Chairman. In my view, I believe the Postal Service has done a commendable job in involving all so-called stakeholders regarding the possible change in frequency, be it 6 days to 5 days or 6 days to whatever. I believe the Postal Service has done its homework in terms of conducting studies, holding interviews, completing its various opinion polls, and seeking outside guidance in terms of developing the business plan that could perhaps address moving delivery from 6 days down to 5 days. All of that being said, I believe the Postal Service is well positioned to make the decision itself, and I believe the decision should be made by the Postal Service rather than the Congress. Senator Carper. Thanks. Do you think there might be some way to retain 6-day-a-week delivery and to take a page out of what they have done over in the U.S. domestic auto industry, where new folks who are being hired to build cars, trucks, and vans in America actually come in at a somewhat different wage- benefit structure than the folks who have been there for an extended period of time? Maybe the folks who deliver the mail on Saturdays could come out of a somewhat different compensation structure. Mr. Toner. Interesting thought. Obviously, when I was completing a round of interviews during the past few days with a few of your colleagues, such a proposal was put forward. I believe it is worth further study. I would like to have the opportunity to speak with various stakeholders about the prospects, but again, I think the Postal Service needs to become just more responsive to this should the decision be made to maintain 6-day service as opposed to the cost savings that could be represented by a reduction to 5-day service. Senator Carper. I may have some extra questions for the record, and my colleagues may have some questions for the record. This is the last one I will ask you today. The Postal Service receives a lot of praise. When you ask people in this country, when they consider different, if you will, government services that are available to them, where do they have the most confidence or where they give the highest ratings, I think the Postal Service usually ranks right up around the top. That should be noted and commended. But the Postal Service receives a fair amount of criticism due to the fact that labor costs are such a large percentage of their total costs. As I recall, it is maybe as much as 80 percent. All four Postal Service unions will be entering contract negotiations with the Postal Service in the coming year or so, and if confirmed, how would you recommend that Postal Service management approach these negotiations? Mr. Toner. Thank you, Mr. Chairman. It is a very difficult, involved question, obviously, when you are dealing with labor costs that have become such a high percentage for not only the Postal Service, but any such institution, be it public or private business. I believe that all parties are now aware of the historic financial times the Postal Service finds itself and that sacrifice is needed by all the stakeholders. I think the Postal Service will need to do more to address this idea of an 80 percent figure as relates to labor costs. As I understand it, I believe the Postal Service has made some gains in lowering this percentage cost and hopefully will continue to work to that end. I think, in addition to that, the role of the Governors needs to be to further encourage these discussions and continue these communications as we approach all of the assets as it relates to the upcoming negotiations. Senator Carper. Thank you. Again, my thanks to you for responding to our questions. Mr. Toner. Thank you, Mr. Chairman. Senator Carper. I thank you for appearing before us today and for your testimony. I also want to thank you for your service for more than three decades and for making our former junior and then senior Senator, Joe Biden, look good enough to actually become---- Mr. Toner. Easy task. Thank you. Senator Carper [continuing]. Vice President of this country, no small undertaking. But we thank you for your willingness to maybe continue that service to our country in a different way through serving on the Board of Governors, should my colleagues see fit to confirm your nomination, and if they do, I certainly look forward to working with you. I know I speak for our staff and for my colleagues. The hearing record will be open until noon tomorrow for the submission of additional questions. That is a pretty short period of time. I think we might be having a Committee markup the following week. And there is a chance that if there is no objection raised by our colleagues, your nomination could literally be on the agenda for that business meeting the week after next, but we will see. Mr. Toner. I would welcome that. Thank you. Senator Carper. Again, thanks to our staff for helping to arrange for this hearing and to you for your preparation and your responses. I wish you well and look forward to seeing you again soon. Thanks so much. Mr. Toner. Thank you. Senator Carper. And with that, this hearing is adjourned. [Whereupon, at 3:12 p.m., the Committee was adjourned.] A P P E N D I X ---------- [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]