something that would permit some flexibility to make judgments about the timing, recognizing there are transaction issues around a change in rates, but still move toward something that fits better into the business users that, in fact, are the dominant force behind this system.

Mr. HORTON. As I understand, Mr. Hall, what you are talking about with this 4 years is that there would come a time when they would be considered in the 4 years and then they would adopt a rate. Let's say it is 29 cents now. They would adopt a rate that would cover the next 2 years, we will say, and they would raise it to, say, 30 cents. Then, is it the task force's recommendation that, based on that 4-year study of those 4 years, or the estimates for those 4 years, that come the end of the second year they would then go up to 32 cents and there would be no further action taken, or the Rate Commission wouldn't have to go through the process any more? In other words, you would be saying 30 and then 32 and then, at the end of 4 years, 34 cents? Is that the way you would do it?

Mr. HALL. At the end of the second year period there would be what we call a limited mid-cycle case, and there the only requirement would be calibrating for the full break-even over the next 2 years.

Mr. HORTON. So that could go up again without any action by the Rate Commission.

Mr. HALL. Well, no. The Rate Commission would respond. In fact, let me ask David to elaborate on that again.

Mr. STOVER. The function of the mid-cycle case would solely be, as Ira says, to calibrate the rates to the revenue needs of the Postal Service, so that it is at break-even at the end of the 4 years.

A great deal of the litigation costs and time of a rate case doesn't have to do with the absolute requirement, it has to do with rate structures, it has to do with pricing, the contribution to institutional costs that the various classes are expected to make.

Mr. HORTON. Well, assuming all those, the question I'm asking though, is: Does the Rate Commission have to go through the same process that it now goes through to increase the rate, or is that rate, when it is accepted at the beginning of the 4-year period, then established so they don't have to do anything else at the end of the 2 years?

Mr. STOVER. At the end of the 2 years there is a Rate Commission proceeding, but it is a very much simpler and shorter one, because the only thing to be decided in it is what the general level of rates has to be in order to achieve break-even. The Commission, as we visualize it, would have rules which say: in the midcycle case there is no more litigation about rate design or about changing the pricing, the relative pricing of the classes, relative contributions to institutional costs of the classes, about all the technical methodological disputes that go on in an omnibus case.

Mr. HORTON. All right.

Mr. STOVER. So there would be a Commission decision but a very much more streamlined one.

Mr. HORTON. The other point I would like to make is, with the 1year test it seems to me that there is better accountability as far as the Postal Service is concerned because they have a 1-year budget,

they are looking at it then, and then when the next year comes up they are going to have to try to live with that rate like they have now, the 29 cents. If they are looking down the road and they have got another 2 cents or another 4 cents, well, then there is going to be a willingness to slacken up, so to speak, and take advantage of that amount of money which you can reasonably expect rather than to try to tighten your budget. Have you thought about that? Mr. STOVER. Yes. I think there is some control on that, sir, in that under the present system there is no control on when a rate increase can be requested. If, under the present system, costs are allowed to run beyond what they should be, the principal remedy is simply to file for a general rate increase sooner than the Service would otherwise do. You do have an element of control in the established 4-year length of the overall cycle under our recommendation.

Mr. HORTON. Thank you, Mr. Chairman.

Chairman CLAY. The time of the gentleman has expired.

Mr. Hayes.

Mr. HAYES. Mr. Chairman, thank you. I only have one question which is pressing pretty heavily on my mind, and I don't want to try to sleep with it unanswered.

On the mid-cycle rate adjustment issue, how would mailers and the public participate?

Mr. STOVER. The same way they do now. There would be the same procedural rights in a mid-cycle case as there are in an omnibus case, just that there would be fewer issues to be decided.

Mr. HAYES. I assume you know that there are some skeptics who fear decisions which are made behind closed doors. Is that what you are saying? These decisions are often made behind closed doors. When you say "same way as now,".

Mr. STOVER. NO. I was assuming, sir, that you were asking about the Rate Commission's recommended decision. That is arrived at, and would be arrived at, after public trial-type hearings which are already required by the Postal Reorganization Act in all rate cases, and that would continue to be true; they would still be held, and the decision would still be based on the evidentiary record. Mr. HAYES. Thank you, Mr. Chairman.

Chairman CLAY. We certainly want to thank you for your testimony, and especially we want to thank you for not blaming all of the problems of the Postal Service on the Great Society programs. Thank you.

[Whereupon, at 11:55 a.m., the committee was adjourned.]

OVERSIGHT HEARING ON THE U.S. POSTAL

SERVICE

TUESDAY, JUNE 2, 1992

HOUSE OF REPRESENTATIVES,

COMMITTEE ON POST OFFICE AND CIVIL SERVICE,

Washington, DC.

The committee met, pursuant to call, at 1:35 p.m., in room 311, Cannon House Office Building, Hon. William L. Clay (chairman of the committee) presiding.

Members present: Representatives Clay, McCloskey, Hayes, Norton, Myers, and Morella.

Chairman CLAY. The committee will come to order.

Good afternoon. I welcome all of you to the second hearing of the committee's annual oversight of the Postal Service. Chairman Pace, we welcome you and your fellow Governors.

Let me express a separate welcome to Governor Sam Winters on your first appearance before this committee. We congratulate you on your appointment and look forward to working with you and your colleagues to improve the postal services to the American public.

Before we begin, I would like to take a moment to remember a veteran of the Washington postal community who passed away suddenly last week. Dan Doherty was the executive director of the Alliance of Nonprofit Mailers. He also worked on postal issues for many years in the U.S. Senate. So we extend our deepest sympathy to his wife, his children, and his grandchildren. I am sure that all of you, as well as I, will miss him.

Last year when the Governors appeared, a contentious rate proceeding had just concluded. Fortunately, Chairman Pace and her counterpart, Chairman Haley of the Postal Rate Commission, established a task force to investigate and recommend improvements in the ratemaking process. Today, we will hear the Governors' comments on that task force's recommendations.

Despite this cooperation between the Postal Service and the Postal Rate Commission, all is not well with the service. Postal finances are worse than projected. Volume is down, although the drop finally appears to have ended. Automation is proceeding without reaching projected savings, and productivity is falling significantly. Our offices continue to receive complaints of poor service. We have all heard discussions of possible layoffs at the Postal Service.

The new Postmaster General will still face the paramilitary management style of which his immediate predecessor complained.

The stress and tension on the workroom floor remain which, sadly, means that the potential for more violence is ever present. We look forward to hearing your views on these matters and any other issues that you may wish to raise at this hearing.

Are there any other members wishing to make opening statements? Mr. Hayes?

[The prepared statement of Hon. William L. Clay follows:]

PREPARED STATEMENT OF HON. WILLIAM L. Clay, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MISSOURI

Good afternoon. I welcome all of you to the second hearing of the committee's annual oversight of the Postal Service. Chairman Pace, we welcome you and your fellow Governors. Let me express a separate welcome to Governor Sam Winters on your first appearance before this committee. We congratulate you on your appointment and look forward to working with you and your colleagues to improve the postal services to the American public.

Before we begin, I would like to take a moment to remember a veteran of the Washington postal community who passed away suddenly last week. Don Doherty was the executive director of the Alliance of Nonprofit Mailers. He also worked on postal issues for many years in the U.S. Senate. We extend our deepest sympathy to his wife, his children, and his grandchildren. We will all miss him.

Last year when the Governors appeared a contentious rate proceeding had just concluded. Fortunately, Chairman Pace and her counterpart, Chairman Haley of the Postal Rate Commission, established a task force to investigate and recommend improvements in the ratemaking process. Today, we will hear the Governors' comments on that task force's recommendations.

Despite this cooperation between the Postal Service and the Postal Rate Commission, all is not well with the Postal Service. Postal finances are worse than projected. Volume is down, although the drop finally appears to have ended. Automation is proceeding without reaching projected savings, and productivity is falling significantly. Our offices continue to receive complaints of poor service. We have all heard discussions of possible layoffs at the Postal Service.

The new Postmaster General will still face the paramilitary management style of which his immediate predecessor complained. The stress and tension on the workroom floor remain which, sadly, means that the potential for more violence is ever present. We look forward to hearing your views on these matters and any other issues that you wish to raise.

Does any other member wish to make an opening statement?

Mr. HAYES. Mr. Chairman, I want to thank you for convening this timely hearing. I look forward to hearing the views of the Board of Governors on some of the financial and personnel problems being experienced by the U.S. Postal Service. I would like to congratulate the board members for working with the Postal Rate Commission on the joint task force established to study the ratemaking process.

But I would remind them that, as important as the rate structure is, the survival of the Postal Service will depend upon the service it provides. Recently, events have shown that there is a need for firm leadership and hands-on guidance. I welcome our witnesses and look forward to asking them a few questions at the appropriate time.

Thank you very much.

Chairman CLAY. Thank you.

Mr. McCloskey.

Mr. MCCLOSKEY. Thank you very much, Mr. Chairman. I would like to welcome the board. I have no formal statement. I think you and Mr. Hayes have stated things well.

I would like to say there are significant, if not massive ongoing service problems. I am getting about as many reports of problems, Mr. Chairman, as I ever have.

Also, this is an opportune time, given the new Postmaster General, Mr. Runyon coming in the first week of July. I did have the pleasure of meeting him. I wish him well. And also, I think if there are strong concerns for ratemaking reform, perhaps this summer working together, all of us, this might be the time to do it.

So I thank you very much, Mr. Chairman.

Chairman CLAY. Thank you. Chairman Pace, the floor is yours. Without objection, your entire statement will be included in the record.

STATEMENT OF NORMA PACE, CHAIRMAN, BOARD OF GOVERNORS, U.S. POSTAL SERVICE; ACCOMPANIED BY JOHN W. GRIESEMER, CROCKER NEVIN, BERT MACKIE, SAM WINTERS, LEGREE S. DANIELS, AND SUSAN E. ALVARADO

Ms. PACE. Thank you. I am Chairman of the Board of Governors of the U.S. Postal Service. My fellow Governors and I appreciate this opportunity to discuss the problems and the opportunities which confront the Postal Service, and how we as Governors plan to assist postal management at this important time.

We have recently completed what is our most important task as Governors, the selection of a new Postmaster General. As we expected, this task was not a quick or easy one. But we believe that we have succeeded in obtaining the right person for the job.

Marvin Runyon, who in 1 month will officially join us as Postmaster General, is an executive who has already proved his mettle in the automobile and utility industries. His record indicates that even the most serious problems which may face an organization bring with them the opportunity for success.

His four-part prescription for that success, as he explained 2 weeks ago at the National Postal Forum, includes customer focus, quality, setting priorities, and employee participation and empowerment. Issues, I think, that were raised here in opening statements.

We look forward to assisting him to apply that prescription to the problems facing the Postal Service.

In providing that assistance, our role as Governors will be to focus upon those significant issues which affect the status of the Postal Service as a first-class world organization. These include the quality and cost of postal services, the challenge presented by growing competition from the private sector, human resource management objectives, and, of course, the goals enunciated in the Postal Reorganization Act. In setting the policies which guide management, the public interest must always be our primary consideration.

To this task, each of us will bring a unique perspective, based upon our varied experience and skills. Collectively, we provide an invaluable outside view for postal management. I, myself, as an example, have been an economic forecaster and strategic planner for many years. Consequently, these areas will be of special interest to me in our dealings with postal managers, employees, and custom