OVERSIGHT HEARING ON THE U.S. POSTAL

SERVICE

THURSDAY, JUNE 11, 1992

HOUSE OF REPRESENTATIVES,

COMMITTEE ON POST OFFICE AND CIVIL SERVICE,

Washington, DC.

The committee met, pursuant to call, at 10:04 a.m., in room 311, Cannon House Office Building, Hon. Charles A. Hayes, presiding. Members present: Representatives Clay, Oakar, McCloskey, Hayes, Norton, Collins, Horton, Young, and Morella.

Mr. HAYES. If we can come to order for just a few minutes.

I would like to inform you that there is a vote, and it seems to make sense to run over and vote and then come back and start our hearings, if you don't mind. So I beg your indulgence.

[Recess.]

Mr. HAYES. We will come to order. We can begin our hearing. Today, we begin the last of the committee's annual oversight hearings on the Postal Service. I would like to make a few observations about the previous hearings.

First, we no longer are dealing with a postal monopoly. Numerous areas of the Postal Service are competing with the private sector. Just look at parcel post, where the Postal Service domination has been replaced by UPS and others. Express and 2-day delivery of urgent mail has become a minor share of the Postal Service business.

We also see increased erosion of third-class mail to alternate delivery systems. Even jobs-such as sorting, processing and services such as purchasing stamps through vending machines-have increasingly privatized the business. The Postal Service today is no more a monopoly than AT&T.

Second, all parties here today agree that the current ratemaking process is sorely in need of reform. They say that members of the Rate Commission are out of touch with reality, or operating on monopoly assumptions which no longer are valid.

Third, some of the Joint Task Force recommendations would be implemented before the next rate case. These changes would make the Postal Service more competitive and less tied to the ideas of bygone days. While these changes are important, they are a starting point rather than the finish line.

Finally, and most importantly, the Postal Service faces a serious financial crisis. The causes of the current situation are many. I believe management at the Postal Service, which admits that automation, has not captured either the estimated savings or produced

the advertised results, bears much of the responsibility. However, Postal Service management indicated that there are no plans to reevaluate the automation plan.

Certainly the fiscal crisis has been aggravated by the administration and the Congress, which uses the Postal Service as an unending fountain of funds. But Congress is becoming a convenient target for many things these days. The Congress is not the root cause of many of the problems which have been raised during these hearings.

My colleagues and I have expressed our opinion that we are not sure that the Postal Service will survive the next 10 years, or that it will merely be a shell of itself. I will work to prevent that day from coming. Sometimes, when I talk to people who complain about the Postal Service, I ponder the wisdom of the phrase: "People don't know what they have got until it is gone." For large users and individuals, Postal employees and congressional supporters of the Postal Service, we had better all row in the same direction or we will realize our worst fears.

I wish to welcome the employee organizations today. Their cooperation in these hearings is essential to our success. I am sure they were stunned, as was I, to hear that the Postal Service has identified 150,000 employees who could be affected by layoffs, and that it would take cuts of 30,000-40,000 to bring next fiscal year's deficit down to zero.

As soon as the news hit the wires, the phones in our offices started ringing off the hook. We need to address this issue, as it goes to the heart and soul of personnel, operations, and services.

As I indicated at a previous meeting, I am concerned that automation is not working properly, but that union workers are taking the blame. At times I wonder-particularly when I look at these remote bar code encoders-which came first: The system to move mail or the scheme to replace union workers with nonunion work

ers.

I would like to ask my colleague, Congressman McCloskey, if he has some opening remarks or statement.

[The prepared statement of Hon. Charles A. Hayes follows:]

PREPARED STATEMENT OF HON. CHARLES A. HAYES, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Today, we begin the last of the committee's annual oversight hearings on the Postal Service. I would like to make a few observations about the previous hearings. First, we no longer are dealing with a "postal monopoly." Numerous areas of the Postal Service are competing with the private sector. Just look at parcel post, where the Postal Service domination has been replaced by UPS and others. Express and 2day delivery of urgent mail has become a minor share of the Postal Service business. We also see increased erosion of third-class mail to alternate delivery systems. Even jobs-such as sorting and processing; and services such as purchasing stamps through vending machines-have increasingly privatized the business. The Postal Service today is no more a monopoly that AT&T.

Second, all parties here today agree that the current ratemaking process is sorely in need of reform. They say that members of the Rate Commission are out of touch with reality, or operating "monopoly" assumptions which no longer are valid.

Third, some of the Joint Task Force recommendations could be implemented before the next rate case. These changes would make the Postal Service more competitive, and less tied to the ideas of by-gone days. While these changes are important, the are a starting point rather than the finish line.

Finally, and most importantly, the Postal Service faces a serious financial crisis. The causes of the current situation are many. I believe management at the Postal Service, which says that automation, which has not captured either the estimated savings or produced the advertised results, bears much of the responsibility. However, Postal Service management indicated that there are no plans to reevaluate the automation plan.

Certainly the fiscal crisis has been aggravated by the administration and the Congress, which use the Postal Service as a unending fountain of funds. But Congress is becoming a convenient target for many things these days. The Congress is not the root cause of many of the problems which have been raised during these hearings. My colleagues and I have expressed our opinion that we are not sure that the Postal Service will survive the next 10 years, or that it will merely be a shell of itself. I will work to prevent that day from coming. Sometimes, when I talk to people who complain about the Postal Service, I ponder the wisdom of the phrase: 'people don't know what they've got til it's gone." For large users and individuals, postal employees and congressional supporters of the Postal Service, we had better all row in the same direction or we will realize our worst fears.

I wish to welcome the employee organizations today. Their participation in these hearings is essential to our success. I am sure they were stunned, as was I to hear that the Postal Service has identified 150,000 employees who could be affected by layoffs, and that it would take cuts of 30,000-40,000 to bring next fiscal year's deficit down to zero. As I indicated at a previous hearing, I am concerned that automation is not working properly but that union workers are taking the blame. At times I wonder-particularly when I look at these remote bar code encoders-which came first: the system to move mail or the scheme to replace union workers with nonunion workers.

As soon as the news hit the wires, the phones in our offices started ringing off the hook. We need to address this issue, as it goes to the heart-and-soul of personnel, operations and services.

Mr. MCCLOSKEY. I thank you for your leadership and an excellent statement, Mr. Chairman, and I am looking forward to hearing from our expert and dynamic witnesses, and thank you very much.

[The prepared statement of Hon. Frank McCloskey follows:]

PREPARED STATEMENT OF HON. FRANK McCloskey, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF INDIANA

Today marks the final appearance of the distinguished president of the National Association of Postal Supervisors, Rubin Handelman, before this committee. During my tenure as chairman of both the Postal Personnel Subcommittee and the Postal Operations Subcommittee, Mr. Handelman has proved to be an outstanding president and a pleasure to work with. His determination and devotion to the members of the National Association of Postal Supervisors and to the Postal Service is unparalleled in this community. I will sorely miss working with Rubin and hope that he stays in close contact myself and this committee.

I look forward to this afternoon's hearing.

Mr. HAYES. Mr. Young.

Mr. YOUNG. Mr. Chairman, I commend you for holding these oversight hearings, and, Mr. Chairman, I have a written statement that I will not read in the view of time and the witnesses' time, also.

I can only echo what you have said. I represent a State that is primarily rural. Of course, we have the large cities and the contracting services have already infringed upon those areas because they are skimming and the loss of any Postal services would be a terrible blow to the villages in my area. We depend primarily on the Postal Service.

I am deeply disturbed again by the Congress, very frankly, and this administration. I noticed the chairman mentioned the administration and then politely said the Congress. I will do it the other

way around, the Congress and the administration. They have used the Postal Service to gain dollars.

You should, the Postal Service, should be off budget, $9.5 billion worth of hits that have occurred by this Congress to appease other interest groups and really not groups that I believe that serve as well as the Postal Service has.

I am deeply concerned about the loss of workers. We have already lost a lot and have not replaced them. And as you mentioned, Mr. Chairman, I am afraid if we do not do something, if we do not allow the Postal Service to continue their efforts without tapping their till, we will not have the services in the areas that go across the borders from sea to sea, and in the North Pole, to the very, very tip of our United States.

So I welcome the witnesses, and we will try. Unfortunately, try as we may, for some reason there are other Members of this body that think that you ought to pay for all other things instead of the services that you are providing for the people, and that is very, very unfortunate.

Thank you, Mr. Chairman.

Mr. HAYES. Congressman Young, without objection your entire opening statement will be made a part of the record of this hearing.

[The prepared statement of Hon. Don Young follows:]

PREPARED Statement of HON. DON YOUng, a Representative in CONGRESS FROM THE STATE OF ALASKA

Mr. Chairman, I commend you for holding this oversight hearing to address the operational and economic challenges facing the U.S. Postal Service.

Perhaps at no time since I've been in Congress has the Postal Service faced as many serious financial, service and management challenges as we face today. I am deeply concerned about the future of the Postal Service and its dedicated employees. Under the direction of former Postmaster General Frank, the Postal Service has tried to implement aggressive policies designed to keep operating costs below the rate of inflation in order to meet both financial and service demands. Moreover, Postmaster Frank was instrumental in implementing a new automation program to improve service and productivity, and help control operating costs.

Despite these initiatives, the Postal Service is in poor financial condition, and the benefits of automation cannot solve all of the problem facing this vital institution. Clearly, the Postal Service's current financial state is not solely its own fault. Despite my vote to take the Postal Service off budget, the Postal Service is required to absorb $9.1 billion in budget "hits" under successive Omnibus Budget Reconciliation Acts.

However, in the 20 years since postal reorganization, the Postal Service's position within the marketplace has gradually declined. This is due, in part, to two factors: Increased competition from the private sector and rising costs.

Since the last rate increase, the Postal Service has witnesses a decline in mail volume and income. This is due in large part because a growing number of mailers are using alternative delivery services. This development is very disturbing for two reasons. First, a reduction in mail volume results in less income. This in turn forces postal management to file for another rate increase much sooner than expectedthus, threatening to decrease mail volume further through higher prices. Second, the rising prices and operational costs threaten to undermine the principles of universal service.

Over the past few weeks, this committee has held hearings to address potential changes in the postal ratemaking process. During these hearings, alarming statements have been made regarding the future of the Postal Service and its employees. It has been reported that:

• The Postal Service may file for another postal rate increase by early next year; • The Postal Service will likely face a deficit of over $1 billion in fiscal year 1993; • The new Postmaster General, Marvin Runyon, will have to drastically reduce the deficit in fiscal year 1993; and

• Between 20,000 and 30,000 postal employees may be laid off during the next year.

Today, this committee will hear testimony from the postal labor unions. Given the current state of the Postal Service and the alarming testimony presented to this committee, a number of serious questions must be addressed during this hearing: 1. How will the potential 20,000-30,000 postal employees affect mail service?

2. Will massive layoffs lead to the privatization of the Postal Service?

3. The Postal Board of Governors'/Postal Rate Commission Task Force recommends reforms in the ratemaking process.

Do you support the task force's recommendations?

4. When do you foresee the next rate case being filed?

Thank you, Mr. Chairman.

Mr. HAYES. Congresswoman Norton?

MS. NORTON. Thank you, Mr. Chairman.

Mr. Chairman, I appreciate the opportunity today's hearing presents to see Postal Service challenges and problems through the eyes of witnesses who represent our Postal employee organizations. The front-line experience of workers in many sectors has led to dramatic changes that include employees in decisionmaking and have dramatically increased productivity and profits. The Postal Service can learn from this trend. Postal employees are the backbone of the Postal Service. No significant improvements are possible without a partnership with the employees who are the engine of the service.

I look forward to hearing their comments on the ratemaking process and other pressing issues of concern to the Nation's postal workers. Many thanks to all the witnesses and welcome to them. Mr. HAYES. Thank you very much.

[The prepared statement of Hon. Eleanor Holmes Norton follows:]

PREPARED Statement of HON. ELEANOR HOLMES NORTON, A REPRESENTATIVE IN CONGRESS FROM THE DISTRICT OF COLUMBIA

Mr. Chairman, I appreciate the opportunity today's hearing presents to see Postal Service challenges and problems through the eyes of witnesses who represent our postal employee organizations.

The front line experience of workers in many sectors has led to dramatic changes that include employees in decisionmaking and have dramatically increase productivity and profits. The Postal Service can learn from this trend. Postal employees are the backbone of the Postal Service. No significant improvements are possible without a partnership with the employees who are the engine of the Service.

I look forward to bearing their comments on the ratemaking process and other pressing issues of concern to the Nation's postal workers.

My thanks to all the witnesses and welcome.

Mr. HAYES. Congresswoman Morella, do you have an opening remark or statement to put in the record?

Mrs. MORELLA. No, Mr. Chairman, I have no opening remarks, however, again, I would like to welcome our witnesses here today at our hearing on oversight of the Postal Service. It is important to all of us, and I particularly want to give welcome greetings to our friends on this committee, the American Postal Workers Union and the National Association of Letter Carriers and the National Rural Letter Carriers Association. Thank you all very much. Look forward to the testimony.

Mr. HAYES. Congresswoman Collins.

Ms. COLLINS of Michigan. I thank you, Mr. Chairman, for calling this oversight hearing, and I thank the witnesses, President Biller