Page images
PDF
EPUB

During the past several years there has grown up a new concept in fixing fiscal responsibility for the widening spread between expenditures and revenues in postal operations, and which has proved increasingly difficult to combat. Under this philosophy a disproportionate share of the blame for Post Office Department costs is directed against the users of business mail. Singled out particularly have been the so-called big magazines, the periodicals with national distribution and volume advertising. These publications find themselves under constant attack and the center of a steady flow of allegations which hold that the lion's share of responsibility for a huge postal deficit is directly traceable to their use of the mails at rates incompatible with the amount of service and handling that must be provided by the Post Office Department. In support of these claims the Department turns to its ledgers for the figures and statistics which it says prove conclusively that second-class mail currently is "producing a revenue deficiency of $280 million annually."

This alleged heavy loss on second-class mail, the Department contends, adds up to a subsidy for the publishing industry which the taxpayers of the country are asked to bear.

In reality, however, this alleged defict is the calculated result of an arithmetical formula by which the Department arbitrarily assigns the total costs of its operations, less revenues, against the various categories of mail.

Ladies and gentlemen of the committee, I shall endeavor to clarify that under the accounting methods employed by the postal service: (a) Business mail users are held responsible for hundreds of millions of dollars in costs for operations carried out by the Post Office Department, many of them at the direction of Congress, and many of which in no sense are connected with delivering the mail, which rightfully should be charged against public service and paid out of the general funds of the Treasury Department.

The CHAIRMAN. Can you enumerate those operations?

Mr. FARRAND. That is coming, sir, on the following page.

The CHAIRMAN. All right.

Mr. FARRAND. (b) That second- and third-class mail users annually are assessed an inordinate share of the higher costs incurred by the preferential handling and delivery of first-class mail.

Can we find logic or fiscal responsibility for example in a concept which says, in effect: "Congress has directed us, the postal service, to use our personnel and our facilities for the annual registration of aliens residing in the United States. It is going to cost us money to carry out this mandate, but we have no provision for allocating the cost, so we will charge it against the postal bill of the Saturday Evening Post and the other large magazines?"

And must we accept an interpretation which assesses our industry part of the 10 percent night differential wages made necessary by the expedited handling and service required for first-class mail?

These are just two examples, picked at random from a lengthy list, that might be cited to substantiate the contention that under bookkeeping practices of the Post Office Department, use of the mails

is not necessarily the determining factor in levying charges against the user.

Mr. LESINSKI. Mr. Chairman?

The CHAIRMAN. Mr. Lesinski.

Mr. LESINSKI. Mr. Farrand, would you be kind enough to insert in the record at this point the whole list of these various expenses you contended are used against second-class mail?

Mr. FARRAND. On the following page, on page 5, I have a partial list. There are many there.

Mr. LESINSKI. I am sorry. You may proceed.

Mr. FARRAND. Many responsible studies and surveys fix the dollar value of the public service operations and functions of the Post Office Department in excess of $400 million, which should be chargeable to the Treasury, but currently are being carried on the Post Office books as a deficit.

The CHAIRMAN. Do you have a breakdown explaining those figures? Mr. FARRAND. That $400 million?

The CHAIRMAN. Yes.

Mr. FARRAND. It is in "The Post Office as a Public Service," a citizen's report, sir, that was made on February 26, 1957.

Mr. DAVIS. What report is that?

Mr. FARRAND. "The Post Office as a Public Service Report of the Citizens' Advisory Council to the Committee on Post Office and Civil Service, U.S. Senate, 85th Congress, first session, February 26, 1957." Mr. DAVIS. On what page is it in that?

Mr. FARRAND. It is on pages 12 and 13 of this report, and that indicated the figure to be $392.4 million.

Mr. DAVIS. Thank you.

Mr. LESINSKI. Mr. Chairman.

Would it be possible for that to be furnished to us in the record at this point?

The CHAIRMAN. That is one of the Senate's official documents.

Mr. LESINSKI. I appreciate that; but I meant not the whole report, but the breakdown of costs per item.

Mr. GROSS. It is available to us.

The CHAIRMAN. Yes; it is an official document.

Mr. LESINSKI. Very well, sir.

The CHAIRMAN. You many continue.

Mr. FARRAND. In a bipartisan recommendation, Senator Olin D. Johnston, democrat, of South Carolina, chairman of the Senate Post Office and Civil Service, and Senator Frank Carlson, Republican, of Kansas, ranking minority member, estimate the value of public service charges performed by the Department at 15 percent of its annual budget.

The number of public services which the Post Office Department carries on free for other governmental agencies and, at the direction of the Congress, for the general welfare of the Nation are myriad. While I have listed some of these services here, I shall not impose upon your time to read them, unless you want me to Mr. Chairman. The CHAIRMAN. That is not necessary. The list may be included in the record.

(The information referred to follows:)

Administering oaths of office.

Sale of documentary stamps.

Sale of U.S. savings bonds and stamps.

Sale of migratory bird stamps.

Collecting customs fees on dutiable mail.

Messenger service for official mail.

Locating relatives of deceased servicemen.

Notary public service.

Making U.S. flags available for veterans' funerals.

Distributing income tax forms for IRS.

Conducting examinations and other services for Civil Service Commission. Making deer and grouse census.

Collecting funds for volunteer charities.

Certifying applications for pension benefits.

Distributing census forms.

Registering boats.

Mail for the blind.

Delivery of newspapers within county of publication.

Mr. FARRAND. In addition to the so-called free services, there are numerous other operations carried out at reduced fees and rates, creating further losses to the Department, which are shifted over, under postal accounting methods, to become part of the "deficit.”

I am sure that all of you are aware, as I am, of the thoroughly worthwhile contribution that these services make to the well-being of our people and our Nation. This is not to suggest, even for a moment, that any one of these services be discontinued or curtailed.

But I think we also find ourselves in agreement—at least I hope we do that almost none of them is even remotely connected with the original purpose of the postal service, the handling, transporting, and delivery of mail. Most of these operations are performed free by the Department-but not without cost. They are "free" only in the sense that they bring in little or no revenue to the Department. But they are not free. All are carried out at considerable expense to the Post Office, with the cost of these services helping to constitute the postal "deficit" and passed on to other mail users for liquidation.

Congress has recognized the implied dangers in a system which could arbitrarily apportion mailing charges. As a deterrent against any such eventuality, the Congress wrote into the 1958 postage rate increase bill, Public Law 85-426, a postal policy section which clearly states congressional intent. It reads, in part:

SEC. 5. While the Postal Establishment, as all other Government agencies, should be operated in an efficient manner, it clearly is not a business enterprise conducted for profit or for raising general funds, and it would be an unfair burden upon any particular user or class of users of the mails to compel them to bear the expenses incurred by reason of special rate considerations granted or facilities provided to other users of the mails, or to underwrite those expenses incurred by the Postal Establishment for services of a nonpostal nature. The Congress, in passing Public Law 85-426, took a long and clear look at the importance of public service as an integral part of the Post Office Department's functions. So that there could be no possible misunderstanding or misinterpretation, the Congress specified the operations performed by the Department, and their costs, which should be identified as public service and paid for out of the general funds of the Treasury Department. The amount so identified ap proximated $270 million annually.

However, the Appropriations Committees of the Senate and House, so far at least, have failed to underwrite this concept, refusing to earmark sufficient funds to meet his recommendation. The administration of the postal service consistently has taken the position that the value of public service is considerably under the amount recommended by the Congress in Public Law 85-426. In its 1960 budget, the Department placed the value of public service at about $29 million, while the 1961 budget puts the figure at $49 million. While we are gaining, there still is a long way to go before the two estimates are in balance. Mr. JOHANSEN. May I ask a question, Mr. Chairman?

The CHAIRMAN. Mr. Johansen.

Mr. JOHANSEN. Have you either had the opportunity or sought the opportunity, and not been able to secure it, to make any presentation or showing before either of the appropriations committees, by way of urging the appropriation of this more adequate and proper amount?which I agree is proper and should be enacted.

Mr. FARRAND. The answer is No, sir; we have not.

Mr. JOHANSEN. I asked you a double-barreled question, inadvertently. Would you feel that it might be desirable to seek such an opportunity?

Mr. FARRAND. Yes, sir.

Mr. JOHANSEN. I would like to encourage you in that good effort. Mr. FARRAND. Thank you.

The CHAIRMAN. All right, you may proceed.

Mr. FARRAND. The handling, transportation, and delivery of firstclass mail is the first and fundamental purpose of the postal service. The nearly 36,000 post offices scattered far and wide across our Nation were established and are being maintained primarily for handling this preferential mail. Were it not for the timely treatment and transportation that must be accorded letter mail, the operational costs of the Post Office could be slashed by millions of dollars annually.

We need not look beyond the management of the Department itself for the clearly worded admission that many of the charges incurred by the Post Office would be nonexistent "if the mail services were not geared to the expedited movement of first-class communications." Director of the Budget Maurice Stans, in 1958, as Deputy Postmaster General, testified on postal rate increases, and in a statement to the committee said:

There are many operations of the postal service geared to first class exclusively. The Post Office incurs many extra expenditures because of this treatment.

Of the 10 percent higher wage scale paid to night workers, Mr. Stans said:

There is only one primary reason for working employees in the evening, and that is to move first-class mail. If it were not necessary to expedite first-class mail, post offices could be operated on an 8-hour day, following the practice of industry. Were it not for the fact that night shifts are needed to handle this category of mail

there would be no necessity of expending an additional $35 million annually, the amount of night-differential pay involved.

That incidentally, was the figure then. We do not know what it is

now.

Commenting on the more than $52 million the Department spends annually to provide city collection service and second and third delivery trips, Mr. Stans told the Senate committee,

This expense could be avoided entirely if it were not for first-class mail matter. These are just a few of the examples cited by the then Deputy Postmaster General in listing the many expensive costs incurred by the Department in providing expedited treatment for first-class mail.

It is only fair

Mr. Stans said-

to relieve the other classes of mail of such costs

The CHAIRMAN. You agree with Mr. Stans on that, do you not?
Mr. FARRAND. Yes, sir.

The CHAIRMAN. Then, you are in favor of an increase in the first class?

Mr. FARRAND. Not at the moment; not under the present system of bookkeeping used by the Post Office.

The CHAIRMAN. All right.

Mr. FARRAND. Mr. Stans said

to relieve the other classes of mail of such costs, and to charge them wholly to first-class mail for ratemaking purposes.

Under the cost allocation system of the Department, however, there is no such concentration of charges. The costs, regardless of where or how they are incurred, are apportioned to all classifications of mail.

I am sure that none of us could honestly contest any reasonable amount of money the Government may be required to spend in providing our people with the best possible service on first-class mail. If the rates on this category are found by Congress to be too low, then let Congress, in its judgment, act accordingly. I contend, however, that no sound justification can be found for an accounting practice which spreads the cost of first-class mail, whatever they may be, to be borne by the users of the other categories of mail.

The management of the Post Office Department has stated on several occasions in the past-and from what I can gather, still contends that postage revenues paid by the Curtis Publishing Co. are considerably below what the Department must spend in handling our publications, creating an out-of-pocket cost to the service of several millions of dollars annually. The Department reported to Representative Holifield of the House Post Office Committee during the 1957 rate hearings that the incremental loss claimed by the Post Office in distributing the Saturday Evening Post amounted to $6,069,000 a year.

We deny any such contention. It is based upon a dangerously faulty premise. It provides us with a specific example of the unrealistic and unbusinesslike accounting system used by the Postal Establishment in assigning the costs of its operations. Under these accounting practices of the Department, we find that total operational costs reported to Congress are averaged out and applied, not only on a mail classification but even on an individual user basis, a principle we have no choice but to contest.

The Curtis Publishing Co. is completely convinced that, taking into full account the second-class postage rate increases enacted into law in 1958 by the 85th Congress, postage revenues from our company com

« PreviousContinue »