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POSTAL RATE REVISION

WEDNESDAY, MAY 11, 1960

HOUSE OF REPRESENTATIVES,

COMMITTEE ON POST OFFICE AND CIVIL SERVICE,

Washington, D.C. The committee met at 10:15 a.m., pursuant to recess, in room 215, House Office Building, Hon. Tom Murray (chairman of the committee) presiding.

The CHAIRMAN. The committee will be in order.

The hearings will be resumed on the various postal rate bills now pending before the committee. This morning the first witness will be the Assistant Postmaster General, Mr. Hyde Gillette. We will be glad to hear you, Mr. Gillette.

STATEMENT OF HON. ARTHUR E. SUMMERFIELD, THE POSTMASTER GENERAL; HON. HYDE GILLETTE, ASSISTANT POSTMASTER GENERAL, BUREAU OF FINANCE; LINDSLEY H. NOBLE, DEPUTY ASSISTANT POSTMASTER GENERAL AND CONTROLLER, BUREAU OF FINANCE; ARTHUR EDEN, DIRECTOR, POSTAL RATES DIVISION, BUREAU OF FINANCE; HON. JOHN M. McKIBBIN, DEPUTY POSTMASTER GENERAL; HON. BERT B. BARNES, ASSISTANT POSTMASTER GENERAL, BUREAU OF OPERATIONS; HON. GEORGE M. MOORE, ASSISTANT POSTMASTER GENERAL, BUREAU OF TRANSPORTATION; HON. HERBERT E. WARBURTON, GENERAL COUNSEL; NYLE M. JACKSON, EXECUTIVE ASSISTANT TO THE POSTMASTER GENERAL; LOUIS J. DOYLE, ASSOCIATE GENERAL COUNSEL; BEN WOSTEIN, CHIEF, LEGISLATIVE RATE SECTION, POSTAL RATES DIVISION, BUREAU OF FINANCE; EDWIN A. RILEY, DIRECTOR, POSTAL SERVICES DIVISION, BUREAU OF OPERATIONS, POST OFFICE DEPARTMENT-Resumed

Mr. GILLETTE. Thank you, Mr. Chairman. Before I read my prepared statement, I would like to clarify a statement I made yesterday in answer to a question about the inclusion of intangibles in the cost-ascertainment report of 1956.

I stated that I was not here at the time that policy was adopted. That statement was correct in that the policy was adopted and described in the 1955 cost-ascertainment report. I was sworn into my present position on March 4, 1957. However, the 1956 costascertainment report which I referred to was transmitted by me to the Postmaster General on March 25, 3 weeks after I was sworn in. So

I would like to clarify any misunderstanding of my statement by pointing out that while I was not a party to the policy decision made in 1955, I did transmit the statement containing that policy to the Postmaster General, 3 weeks after I took office.

The CHAIRMAN. Very well.

Mr. GILLETTE. In 1957, I changed the policy of including these intangibles in the cost-ascertainment report as the letter of transmittal to the Postmaster General dated June 1, 1958, clearly shows. The reason for the change in policy was basically the enactment of Public Law 85-426, the Postal Policy Act of 1958, under which provision was made for periodic reports by the Postmaster General of all factors that might be useful for the Congress in developing postal rate decisions.

In the letter of transmittal of the 1957 cost-ascertainment report, I stated:

With the enactment of the Postal Policy Act of 1958 (title I of Public Law 85-426), on May 27, 1958, provision was made for the purpose of postal rate determination, for the inclusion in specific periodic reports to the Congress of various other factors affecting rates, such as value of priority or deferment given to any class of mail or service, relative values of the service to the patron, and relative intrinsic value of items handled, together with the value of certain "public services," the latter amount to be determined by the Congress. Therefore, in this study no evaluation has been made of such factors.

I think that should clarify any misunderstanding, and I hope it does, Mr. Chairman.

The CHAIRMAN. I am sure it does.

Mr. GILLETTE. Thank you.

Now I would like to read from my statement to this committee. The CHAIRMAN. You may proceed.

Mr. GILLETTE. Thank you very much, Mr. Chairman.

I should like to outline in moderate detail the substance of the Post Office Department's current rate proposals. I should like, also, to give you our evaluation of the probable effect of these proposals, from the standpoint of the Post Office Department and the patrons it serves. In this evaluation, I trust we shall answer some of the questions and criticisms which have arisen since our rate proposals were first sent to the Congress on March 11.

POSTAL POLICY

First, let me review the financial guidelines which are the basis for the Department's rate proposals. Of overriding importance is the break-even objective of the Postal Policy Act of 1958. Section 103 (c) (4) states that:

Postal rates and fees shall be adjusted from time to time as may be required to produce the amount of revenue approximately equal to the total cost of operating the Postal Establishment less the amount deemed to be attributable to the performance of public services under section 104(b) of this title.

In addition to this break-even objective and the guidelines for estimating public service losses, the Congress also reaffirmed its longstanding approach to the pricing of first-class mail. Section 103 (c) (2) directed that the allocated cost of first-class mail should be considered simply as the starting point in arriving at a basis for rates. Postage should be sufficient to cover these costs plus

an additional amount representing the fair value of all extraordinary and preferential services, facilities, and factors relating thereto.

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