Chairman CLAY. There is a vote on the House floor, so if there are no other opening statements we will take a 10-minute break and go vote and come back immediately.

[Recess.]

Chairman CLAY. The committee will come to order.

Mr. Runyon, welcome to the committee. Your entire statement will be included in the record at this point, without objection, and you may proceed as you decide.

STATEMENT OF HON. MARVIN T. RUNYON, POSTMASTER GENERAL AND CHIEF EXECUTIVE OFFICER, U.S. POSTAL SERVICE

Mr. RUNYON. Thank you. Thank you for the opportunity to discuss the current postal issues and the steps that we are taking to make the Postal Service more accountable, credible, and competitive.

Since the announcement of my selection as Postmaster General on May 5, I have spent much of my time talking with the Postal Service's key constituencies to our customers, the people who rely on the mail for their business and personal communications, to the employees of the Postal Service, the people who serve your mailing needs, to our unions and management associations, and to you and many of your colleagues. I would estimate that I have talked with more than 15,000 customers and nearly as many employees about the products and services we provide and the things that we can do to improve our performance. Despite the diversity of these audiences, I have found a very clear consensus about the Postal Service.

Postal employees are held in high regard by customers; they are considered to be good, dedicated people. However, customers and employees alike feel the system we serve is broken and in need of major repairs. In virtually every meeting and conversation, I have been asked to focus on three goals: one, reduce layers of postal bureaucracy; two, improve the quality of service; and, three, to eliminate red ink in order to stabilize postal rates.

In the past 87 days, we have taken steps to respond to the mandate of our constituents.

First, we have changed our management structure. We have cut out layers of decision-approving bureaucracy and reduced duplication. The number of Postal Service officers has dropped from 42 to 24. Headquarters staffing is being reduced by 37 percent. We have selected sites for area and district offices and have chosen the postal executives who will manage them. We are in consultation with our management associations to determine field staffing and other issues. We also have an ongoing dialog with our unions. Ultimately, we plan to eliminate some 30,000 postal positions that do not handle the mail.

During this difficult transition period, we are working with Lee Hecht Harrison, a national career management firm based in New York, to provide employment assistance for affected employees nationwide. We are working to establish career centers at Postal Service headquarters, in each regional headquarters city, and in other major cities nationwide. Through these centers, we will pro

vide affected employees with counseling, training, and job placement assistance both inside and outside the Postal Service.

To ease the impact of the restructuring, we have offered a cash retirement incentive of 6 months' pay and an early-out retirement option to eligible postal employees. Of the 140,000 employees eligible for retirement system-wide, 40,398 postal employees have submitted retirement applications as of September 25. Of those, 11,412 are management employees. We now project that more than 47,000 employees will exercise their retirement options and choose to retire.

We recognize that retirement is a difficult, highly personal decision. It requires careful thought and the chance to evaluate one's options. We have made a great deal of progress in building a new, more effective management structure, but we are not finished yet. We are continuing to consult with our management associations on the new field structure to make certain that all staffing and personnel issues are resolved correctly, and we are just now moving forward with implementing our headquarters structure.

As a result, some of our employees who are eligible to retire don't know what jobs will be available to them in the new management structure. They need to know more so they can make better informed decisions. Therefore, we have asked for and received authorization from the Office of Personnel Management to extend the time frame for qualifying for the early-out retirement option through November 20 for employees affected by our restructuring. We will also extend the cash retirement incentive through November 20 for eligible employees who take either early-out or optional retirement.

This extension covers about 20,000 management employees. Postmasters and associate offices are not being impacted by the structural changes, so they are not included. It also covers about 2,000 craft employees-postal nurses and employees who work at data centers, materiel distribution centers, and mail equipment shops. Some groups of postal employees have been excluded from the early-out retirement option and the retirement incentive. We have no need to reduce the number of rural letter carriers. In fact, we are currently hiring to fill vacancies. Similarly, electronic technicians and mail processing equipment maintenance mechanics are highly trained employees who will be needed in greater numbers as we deploy additional automated equipment. Postal inspectors, postal police officers, and postal police supervisors also were excluded because vacancies there do not provide ready placement opportunities for affected employees from other functions.

Second, we have taken a number of important steps to maintain and improve service quality during the transition, particularly since the holiday and election year mailing seasons are upon us. We are monitoring processing and delivery operations daily at every major facility. Generally, our performance has been good, and I certainly appreciate the efforts of our employees and what they are doing to maintain quality service during this transition. Where we have noticed problems with on-hand mail volumes and delays, we are responding to correct them.

For example, we have established service continuity teams in key field locations. These employees are serving as troubleshooters,

monitoring retirements within each ZIP Code, identifying potential problem areas, and working to facilitate staffing and training as needed. And, as a safety net, our 20,000 largest business customers will be provided with a hotline telephone number to assist them in contacting the right people in the new field organization.

Our new management structure focuses more attention on serving and satisfying our customers. Customer service support, for example, is helping business mailers of all sizes take advantage of automation and capitalize on our many products and services. The Consumer Advocate is acting as our quality control officer for service performance, and Customer Services is working to help us improve delivery and retail services in postal facilities nationwide.

As we finalize our field structure, we are committed to seeing that the necessary resources for serving customer needs are there. Postmasters and post offices will continue to serve the mailing needs of their communities. We will still have clerks, carriers, and mail handlers to move the mail and account representatives and other employees to help business mailers reach their customers, and we will continue to solicit customer advice and direction through Postal Customer Councils and advisory groups.

We are also working to expand postal business centers to more major markets, to bring external measurement of customer service to more types of mail and simplify instructions and methods to make the Postal Service more customer friendly.

Third, we have made progress financially over the past 87 days. Thanks to the efforts of postal employees to control costs and recent increases in mail volume, our operating profit projections for fiscal year 1992 have increased to nearly $400 million.

We also have been working with the underwriting firm, Morgan Stanley, to develop a debt refinancing plan involving the sale of public bonds. Next week, we plan to ask the Board of Governors to approve the issuance of up to $5 billion in bonds which will be used to replace higher-cost Federal Financing Bank loans on our books. If approved, this refinancing plan will save the Postal Service and its customers up to $90 million in interest payments per year.

With continued growth in mail volume, successful reductions in administrative staffing, reductions in programs and operational expenses, and other actions, I was prepared to tell you today that we were in a good position to break even financially next year and extend the rate cycle to at least 4 years that is unprecedented since reorganization-an important step in helping the Postal Service and America's businesses become more competitive and more successful.

However, on Friday the Appropriations Conference Committee decided that only $122 million of the $482 million necessary for the Postal Service to deliver nonprofit mail at the reduced postage rates legislated by the Congress will be reimbursed. The committee also decided that the $360 million difference could not be charged back to the organizations who use the discounted services. This action adds to the deficit we face next year. It makes it even more difficult for us to break even in fiscal year 1993 and extend current postage rates, and, in effect, it charges these millions of dollars in cost to all postal customers.

This is really nothing less than a stamp tax on the American people. As a result of the reorganization in 1970, the Postal Service has become self-sufficient. We no longer receive tax dollars to support our operations; we are no longer a burden on the American taxpayers or the Federal Government. Now when you add up the funding shortfalls in revenue forgone since fiscal year 1991, the cost of a social need identified by Congress has become a burden on postal customers of more than a half-billion dollars. I know that this committee shares my concerns and has worked hard to address this issue. However, if this practice is followed next year, it could mean a nearly $1 billion shortfall, the equivalent of a 1-cent increase in first-class postage.

On the issue of postal procurements, I share your concerns that postal contracting be fair and effective. Each year, we award thousands of contracts worth several billion dollars. Fair and effective procedures are essential to our achieving the best value for our money.

Since I became Postmaster General, I have initiated a personal review of our major facilities contracts, our major automation contracts, our major transportation contracts, and our major materiel and supply contracts. In procurement actions and in all postal issues, the independence granted in the Postal Reorganization Act must be exercised responsibly, and I'll see that that is done.

In our procurements of facilities, for example, we are already making a number of changes. We are establishing a "critical points" checklist to make certain that all relevant information is considered in the decisionmaking process. We will include prior sales information. We are developing an early warning monitoring system for potential problem projects. We are amending our guidelines on publicizing facility projects to encourage better community involvement, and we are modifying other guidelines to prohibit the purchase of any environmentally contaminated site.

In summary, both customers and employees have called for the sweeping changes that are under way within the Postal Service. Our ability to survive as a communications business and to compete with new technologies and old adversaries is at stake. Some people have been concerned that we may be making these changes too quickly. However, with change of this nature and magnitude, there is no way to do it slowly. We cannot afford to approach change bureaucratically. That is really what got us where we are today. We cannot afford to study things to death either. We have a job that needs to be done, and we must get on with it. The decisions we are making literally affect many millions of people. We have an obligation to resolve them thoughtfully, carefully, responsibly, and quickly, and we are working to do just that.

Customer satisfaction is the key to our survival and our success as a communications business. Postal employees throughout our organization must work together with teamwork and harmony if we are to succeed in meeting the communication needs of our custom

ers.

From the beginning of my tenure, I have sought the input and recommendations of our union and management association leaders and to keep them informed and involved in our process for change, and I will continue to do that. I support the joint state

ments against violence in the workplace. I am committed to seeing that employees are treated with dignity and respect at all levels of our organization, and I am working to ensure that an appreciation for diversity is part of every function and workplace within our organization. Every postal employee can contribute to the success of the Postal Service if given the opportunity to do so. We will provide our employees with that opportunity. We will see that they have the equipment, the training, the input, and the authority they need to do their job.

Given the chance and the challenge, postal people can respond in heroic fashion. Last week, I went to Miami and talked with postal employees and customers. I wanted to thank our employees on behalf of the Postal Service and the Nation for the extraordinary efforts they made to restore mail service to south Florida in the height of the emergency.

More than 1,000 postal employees lost their homes to Hurricane Andrew, including 95 percent of our people in Homestead, FL. And yet in the wake of that disaster many put the needs of their neighbors first, returning to work the day after the hurricane struck to help restore emergency mail service. Where electricity was out, they sorted mail by portable lights powered by generators. They set up temporary stations and handed out the Social Security checks and emergency supplies shipped into the area.

The actions of our employees in south Florida represent the commitment we feel toward our customers and our communities. With the efforts of more than 700,000 postal employees nationwide and the continued input and support of postal customers, we will succeed in making the Postal Service more businesslike and more competitive.

Thank you very much. That concludes my prepared statement. Chairman CLAY. Thank you.

Mr. Runyon, you have asked for an extension until November 20 because only 11,400 supervisors have opted to retire. What will happen that will make the other 18,000 that you are seeking to persuade to retire to retire between now and November 20 that didn't make them want to retire by this coming Saturday?

Mr. RUNYON. Mr. Chairman, the reason we asked for the extension was in order to give the people who need to make decisions about the organization that opportunity. We expect that in 10-15 days we will have our field organization completely done.

Now of the people that we are talking about in administrative positions, 12,000 of those people are from the craft position, so those 12,000 are taken care of. We also have about 12,000 peoplewell, I guess it is 11,400-that have volunteered already. So we are really only looking for about 7,000 more.

Now the fact is, the reason that we asked for craft people or gave them the opportunity to retire was to provide some positions for some of our supervisors. So we feel that we have been successful in preparing places for the 30,000 people.

What we don't feel good about, though, is a fairness issue to the people who are having to make a decision without knowing what the final organization is. That is the reason we asked for the 45-day extension, and, by the way, we have received that extension as of yesterday from OPM.