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agers. The purpose of the meeting was to try to identify major operating problems. The Managers met in separate six-hour sessions, itemized what they saw as obstacles to improved service, and subsequently offered to the Postmaster General their recommendations for ways to overcome them. The Managers cited inflexible post office budgets, slow equipment procurement, a lack of employee standards which impaired morale, faulty communications between districts and headquarters, the slow-down effect of the new Managed Mail Program, and the lack of sufficient space-available air transport for first-class mail, among other things, as their major problems. In responding to these recommendations, the Postal Service made a first step toward correcting some of the difficulties leading up to the January break-down. Hearings and Inspection Trips

Pursuant to Senate Resolution 61, the Post Office and Civil Service Committee held hearings on March 7 and 8, 1973, at which the Postmaster General and his staff appeared and testified. The hearings were continued July 25, 26, and 31. The Committee heard testimony from postal labor organizations, the Comptroller General of the United States, former high officials of the Post Office Department, and representatives of the transportation industry. Field hearings were held at Juneau, Fairbanks, and Anchorage, Alaska; and at Salt Lake City, Utah.

Staff investigators visited post offices in Hawaii, Georgia, Florida, Texas. Colorado, Wyoming, State of Washington, Illinois, Maryland, Pennsylvania, New York, Ohio, West Virginia and California. In general the trips in mid-summer revealed a deterioration in the quality of postal service. This deterioration appeared attributable to the Service's efforts to become self-supporting, specifically including:

Two programs involving bonuses to encourage early retirement, resulting in the loss to the Service of some 13,000 employees in key supervisory and managerial positions.

A prohibition against any hiring, including the filling of vacancies, instituted in March, 1972 and continuing until August, 1972.

Reductions in collection services and delivery services; and cutbacks in Saturday window services.

The institution of new distribution systems, the Managed Mail Program and Area Mail Processing, which in some places delayed the mail by massing it at processing centers.

In the following pages, the Committee's findings are described in greater detail.

BACKGROUND On April 3, 1967, Postmaster General Lawrence F. O'Brien, in a speech before the Magazine Publishers’ Association and the American Society of Magazine Editors, proposed that the Post Office Department be removed from the President's Cabinet and converted to a Government corporation. Mr. O'Brien cited his now-famous colloquy with Representative Tom Steed of Oklahoma, the Chairman of the House Appropriations Subcommittee. Chairman Steed asked:

General ... would this be a fair summary: that at the present time as the manager of the Post Office Department,

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you have no control over your work load, you have no control over the rates of revenue that you are able to bring in, you have no control over the pay rates of the employees that you employ, you have very little control over the conditions of the service of these employees, you have virtually no control, by the nature of it, of the physical facilities that you are forced to use, and you have only a limited control at best over the transportation facilities that you are compelled to

? And then he added:

this is ... a staggering amount of ‘no control' in terms of

the duties you have to perform. The O'Brien Proposal

Mr. O'Brien said he responded to Chairman Steed that the area of "no control" of the Postmaster General was almost unlimited. In order to restore that control, Mr. O'Brien proposed a new postal service that:

should cease to be part of the President's Cabinet;

should become a nonprofit Government corporation, rendering essential public service;

should provide postal services authorized by the Congress;

should be operated by a board of directors, appointed by the President, and confirmed by the Congress;

should be managed by a professional executive appointed by the board ;

should be given a clear mandate on the percentage of cost coverage for postal services, so that further revisions in rates-should they be necessary-would be made on a fixed-formula basis.

The O'Brien recommendations had been formulated as the result of a special task force of five top staff postal aides appointed by the Postmaster General to recommend to him the means by which the Post Office Department could be established on entirely new grounds.

Five days after Mr. O'Brien's plan was made public, President Lyndon B. Johnson appointed the President's Commission on Postal Organization to investigate the feasibility of the O'Brien proposal. Frederick R. Kappel, former Chairman of the Board of American Telephone and Telegraph was named Commission Chairman. The Postmaster General characterized his proposal as the most extensive ever made in the history of the Postal Service; he said that it constituted, in his views, the only way to achieve the superlative postal service worthy of the American standard. The Commission's Findings

In June of 1968, the Commission published its report recommending that a postal corporation owned entirely by the Federal Government be created by Congress to operate the postal service of the United States on a self-supporting basis. The Commission predicted that at least 29% of postal costs—well over $1 billion a year at 1968 volumes and more than $3.2 billion a year at present-day volumeswould be saved if post office management were free to plan and finance postal operations and capital investment strictly in accordance with postal needs. The Commission said:

There is no telling what greater savings could be made over the long pull by business-like management in the Post

Office. President Johnson endorsed the Commission's report and his successor, President Richard M. Nixon, announced his support of the postal corporation idea after he assumed office. With bi-partisan political support from two Presidents of the United States, the corporation idea was trumpeted as the only means of escape from postal chaos by a well-financed Citizens' Committee for Postal Reform headed by former Postmaster General Lawrence F. O'Brien. Legislative Consideration

Winton Blount, President Nixon's Postmaster General and a former President of the United States Chamber of Commerce which had gone on record as supporting the corporation idea—moved forward forcefully to sell the plan to Congress. Initial Congressional response was lukewarm. The highly influential postal employee groups showed no interest. Reasonably enough, they wanted a pay increase and the enactment of a labor-management relations measure providing for compulsory arbitration of disputes over pay and fringe benefits.

On December 18, 1969, a resolution of the conflicting views seemed to have been reached when President Nixon and James H. Rademacher, President of the National Association of Letter Carriers, met in the White House, at the President's initiative, for a private conference. The President agreed to grant employees the absolute right to compulsory arbitration, and he agreed to a substantial pay raise for postal employees, this accord having been reached in the tense atmosphere caused by the threat of an illegal postal strike in New York City. Although the agreement was not unanimously endorsed either on the part of leaders of the other postal organizations on the one hand or the Members of Congress concerned on the other—both of whom felt they should have been consulted—it was nevertheless a strong factor in swinging the employee groups away from their previous position of indifference and opposition to support for the corporation idea, provided the enabling legislation contained a strong labor-management section. The agreement indicated to Congress that new horsepower was being generated in support of the corporation plan. The Postal Strike

In March of 1970, the letter carriers of New York and parts of Connecticut and New Jersey went out on a wildcat strike, with other postal employees honoring their picket lines. After a week's time, having been promised the right to negotiate with postal management, 98 percent of the wild-cat strikers returned to work. The Government agreed to an immediate 6 percent pay raise for all postal employees retroactive to the previous December and an additional 8 percent upon the passage of postal reorganization legislation. Thus, the last domino fell. Added to the strong forces of those in favor of postal reorganization were the very influential postal unions.

S. Rept. 93-727

Committee Concerns and Misgivings

Throughout the Summer of 1970, as the Senate Committee proceeded with its hearings on and studies of the postal reorganization question, it became apparent that a bill would indeed be enacted. What remained to be determined was how the Congress would shape Lawrence F. O'Brien's original concept of a postal corporation into a form responsive to its own concerns and misgivings over certain aspects of the plan. Postmaster General Winton M. Blount was at that time vigorously advocating his own version, which had attracted substantial public and institutional support. Chief among the Senate Committee's concerns was the question of service. Despite the Post Office Department's protestations that it could save millions a year (if not the $1 billion per annum predicted by the Kappel Commission report), it was clear that if reorganization were enacted, there would be a strong temptation on the part of postal managers to reduce expenditures by cutting service. Surely the Department's payroll, 80 percent of its total costs, would be the logical place to stop up expense loopholes. And when payroll is cut, whether by attrition or other means, service, in a service industry, must commensurately diminish.

The Committee's concern was also directed to how well good service in rural and other remote areas would be maintained where obviously service costs much more than the revenue derived from it. The Committee wanted speed and reliability of service continued and if possible improved. This view is reflected in the policy section of the Act which states that “[the Postal Service] shall provide prompt, reliable and efficient services to patrons in all areas and shall render postal services to all communities'.

Committee Members during the hearings expressed some doubt that the application of modern business methods and the installation of mechanization could result in the early cost reductions envisioned by the Kappel Commission and by advocates of the Post Office Department's postal reorganization bill. Postmaster General Blount, as cited above in his testimony, appeared reluctant to accept a public-service subsidy of any sort, apparently believing that the new Postal Service would be better off without any reliance whatever on Congress. His confidence in the new system's ability to break even without Congressional support appeared boundless. On this issue, however, the Congress prevailed, and the Act provides that, for public service costs, there shall be appropriated from 1972 through 1979, 10 percent of the total cost of operating the Postal Service in the year 1971, and that for each of the five years following 1979, that amount reduced by 1 percent was authorized to be appropriated, so that after 13 years, the public service appropriation would end entirely.

Events have shown that the Committee's view in favor of a subsidy, at least within the short term, was accurate. The United States Postal Service payroll has been reduced somewhat since 1969 in the aggregate number of personnel employed (the total is around 700,000) but payroll costs have risen 40 percent. Congress this year appropriated some $920 million as the public service subsidy; and still the Postal Service faces a $1.3 billion deficit. Inexorable postal economics would seem to show that the public-service subsidy provided by law should have been set even higher.

The Committee concurred that rate preferences previously established by law for certain classes of mail ought to be abolished, but the

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mailers were given a five- and a ten-year period to adjust to the impact of rate increases.

Concern was expressed over the independence of the Postal Rate Commission established under the new law to set postal rates. The Committee believed that the Commission should be free to act independently as a ratemaking body and should be subject to an override by the Board of Governors of the Postal Service only under extraordinary circumstances. The Administration bill would have allowed the Governors to set rates upon the basis of the corporation's revenue needs.

The Committee agreed with Administration proponents of the measure that continuity of management personnel was assuredly an objective to be sought. Thus the new law established conditions and circumstances which would make it far easier for top postal management to retain tenure than had existed previously. "Politics" were removed. Pure merit would prevail. Salaries were authorized to be set higher than those in the rest of the Government, and the Postal Service was authorized to establish its own career personnel system with full authority to transfer without regard to Civil Service rules.

COST CUTTING

Measures undertaken to control postal costs, when coupled with numerous retirements of experienced personnel during 1971 and 1972, contributed significantly to the problems the Service encountered late in 1972 and early in 1973. The cost-control program proved to be intolerable as acknowledged by the Postmaster General in testimony before the Committee in March of 1973. He said, “We were so hell-bent on costs that we did not pay enough attention perhaps to service .. We made some damn bad mistakes”.

Unfortunately, this over-zealous cost cutting, which involved a freeze on hiring, ran headlong into heavy mail volume, producing delays. There was a severe service drop in the last quarter of 1972 which did not begin to turn around until the end of March, 1973. Collection and Delivery Services

Cutbacks in both the number of street letter-boxes and the frequency of collection have been made over the past several years. Weekend and holiday collections have been particularly affected by collecting policies derised to meet what the Service has determined are services consistent with the patterns of modern business and family life.

The Postal Service defends its policy, contending, for example, that traffic congestion and urban sprawl make it very difficult to collect mail from a great number of far-flung collection boxes during evening rush hours and move the mail to post offices to be processed in time to make available dispatches. Moreover, the institution of Area Mail Processing, which is covered elsewhere in this report, has led to a policy of once-a-day dispatches from many post offices associated with area mail processing centers.

Collections now are made from most residential neighborhood boxes only once daily by the carrier serving the area. More frequent collections have been sharply curtailed and, across the nation in post office after post office, residential area street letter boxes have been removed

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