Treasury, Post Office, and Executive Office Appropriations for Fiscal Year 1969, Hearings Before the Subcommittee of ... , 90-2 on H.R. 16489

result in operating savings in subsequent years and are the essence of the Department's Modernization Program. The total of $313.3 million in investment funds requested for FY 69 amounts to 4.3 percent of anticipated Department expenditures. This is a very modest request when you consider that the Department failed to invest on any substantial level in past years. Yet the level of the investment now in efficient space and mechanical equipment determines the extent to which the Department can improve its productivity and handle the volume of mail expected in future years.

If you will permit me, I would like to draw upon my business experience to demonstrate a point. I would like to cite the level of construction expenditures in the Bell System, an organization also involved in the business of moving information. During each of the last ten years, investment by the Bell System in buildings and equipment has regularly averaged in the area of 30 to 35% of revenues. This contrasts sharply with the Post Office Department's 4.3% for fiscal year 1969, and yet, this same 4.3% is a higher percentage of investment to expenditures for the Department than any time in the recent past.

I would like now to examine each of the four appropriation requests in some detail. This chart (see attached Chart 5) outlines the planned expenditures of $216 million originally requested from Congress in the Building Occupancy appropriation. This request is an increase of $30.1 million over fiscal year 1968. Twenty-four million dollars of the increase is in the rent program and the remainder is spread over fuel, utilities, communications and moving expenses. The House cut $6 million from the Building Occupancy request reducing it to $210 million and stated that slippages in the lease program should generate sufficient latitude to accommodate the reduction they recommended.

We have accepted this cut on the following premise. In fiscal year 1968 we plan to obligate $6.8 million for leasehold improvements. This low level of obligation was achieved as a result of action taken by the Department in October of 1967 to fund only critical leasehold improvement projects such as the installation of equipment or the improvements absolutely necessary for the movement of mail or safety and health of the employees. We provided $14 million in fiscal year 1969 for leasehold improvements. We will attempt in fiscal year 1969 to hold these expenditures at a level of $8 million which is an increase of $1.2 million over fiscal year 1968.

Obviously the Department cannot continue to defer improvements projects indefinitely. If we do not incur a slippage in the lease program and if we are unable to keep leasehold improvements at a level of $8 million, we would have to come back to the Congress for a supplemental request. Summarizing the Building Occupancy request, I might add that should our estimate for fuel, utilities and communications be understated, the need for a supplemental becomes that much more urgent.

Chart 6 (see attached Chart 6) outlines the fiscal year 1969 request to the Congress for Supplies and Services. This request totals $110.781 million to cover such expenses as (1) building and postal supplies and services, (2) data processing services, (3) activities involving mail bags, such as manufacturing, repair and storage, (4) stamps and accountable paper, (5) printing and reproduction, and (6) facilities field personnel salaries. The fiscal year 1969 request in Supplies and Services reflects the Department's needs in this account much more accurately than in the past two fiscal years.

The House action on this appropration was to cut the $110.781 million to $110 million dollars. We believe we can find ways to absorb this cut of $781 thousand and the Department is therefore not appealing it.

Turning now to our investment appropriations, Chart 7 (see attached Chart 7) shows a request of $225 million for FY 1969 in the Plant and Equipment account. These investments are necessary to help us better cope with the problems of the future. Specifically, we are asking for $42 million in the Federal Building Improvements Program, $66 million for vehicles, $74.7 million for mail processing equipment, $16.4 million in customer service equipment and $25.9 million in Postal support equipment. My experience with the Western Electric Company amply supports the value of these investments. Western Electric carried out a prudent investment program and even though labor rates more than doubled and material costs increased significantly, Western Electric's prices on the products it manufactures are today well below what they were in 1950.

The Post Office Department needs to invest in Plant and Equipment in order to handle rising mail volumes efficiently and provide a return on the investment in the form of future operational savings. It is very important to note here that savings cannot occur until the equipment is installed and operational. In most cases, the savings on FY 1969 investments will not begin to materialize until

FY 1971 since the lead time on many items is 18 to 24 months. In the case of fixed mechanized system, the lead time might be several years due to the time required to construct a new facility.

The House Committee cut this request by $25 million and directed that a major part of the reduction be taken in the Federal Building Improvement Program and in equipment which is not essential at this time. The majority of the funds for equipment are to purchase either mechanized systems associated with new buildings, non-fixed mechanization such as letter sorters and facer-cancellers or other operational equipment such as nutting trucks, scales, lock boxes, lobby equipment, maintenance equipment and other such necessary items. Therefore, the proposed cut by the House would have to be taken in the Federal Building Improvement Program. This will be very difficult to do in FY 1969. Three developments changes in transportation modes, the need to improve fire protection, and the conversion from mailsters to four wheel sedan delivery vehicles-were not fully anticipated when the budget was prepared. Extensive modifications to docks, parking and maneuvering areas, facilities to house and maintain vehicles and building improvements will be necessary. We are, therefore, appealing the House cut of $25 million.

In support of the Postmaster General's modernization plans, this next chart (see attached Chart 8) outlines our FY 1969 request for $88,252,000 for Postal Public Buildings. This request covers 32 projects and the exercise of purchase options on two major facilities now leased. Of this amount, $50,627,000 was requested for the purchase of site and design services for 31 projects in fiscal year 1969. On six of these 31 projects delegated to the Department in fiscal year 1968, site and design funding requirements were partially met with fiscal year 1968 funds. Funding would be completed with the fiscal year 1969 funds. Another $32,133,000 was requested for the award in fiscal year 1969 of three construction projects. The remainder included $4,992,000 for the purchase of two leased buildings and $500,000 for project planning and development.

These new major facilities are the very core of the Post Office Department's modernization program. The older buildings which we plan to replace have serious deficiencies. They cannot accommodate modern mail handling equipment. They are too small to handle today's mail volume, thus requiring supplemental space and costly "split" operations. They are not located properly for today's transportation methods. And they are seriously short of adequate maneuvering and platform space for trucks and parking area for patrons and employees.

The House cut $38.252 million from our fiscal year 1969 request. In view of the urgent need for additional space, in view of the deficiencies in present facilities, and in view of the operational savings involved of nearly $700 million, we are requesting that the House cut in Postal Public Buildings be restored.

(The charts referred to on p. 379 follow :)

THE POSTAL MODERNIZATION PROGRAM CONSISTS OF...

• Modernization of Space