with the keeping of records when they ought to be giving more attention to other matters? Mr. BARNES. I am prepared to go into that any time you wish. Mr. GARY. Fine. General SUMMERFIELD. Off the record. (Discussion off the record.) PROSPECTS FOR IMPROVED EFFICIENCY AND LOWER COSTS Mr. GARY. General, what prospects do you see for improved efficiency and consequent lower costs in the postal system through such techniques as raising the production of substandard individuals, offices, and regions? General SUMMERFIELD. I am very hopeful, Mr. Chairman, that ultimately, as we acquire more modern facilities by properly locating, designing, and constructing new buildings, and as we install the proper mechanized equipment in them, the new efficiencies being built into the old postal operation, including transportation between post offices, will enable us to absorb, to a large extent, the normal increases in cost that come about by reason of increased volume. I do not think we can expect efficiencies in the Department or mechanization to offset any increases in the costs that the Department might have to bear that are not properly related to the increase in volume. That includes such items as increases in rates that might be paid to the various transportation media. That also refers to increases in salaries, and fringe benefits that go beyond the comparable rate that would be paid in competitive industry for similar jobs and work. In summing it up, I think that the Department can certainly increase its efficiency with these other things being done, and can, when it has large scale mechanization and adequate capacity, pretty much absorb the natural increases in costs coming from increased volume, etc. Mr. Barnes has some figures that might be more nearly definite. than those I gave to you in my general observation, Mr. Chairman. Have you some figures, Mr. Barnes, that you would like to put in? Mr. BARNES. Yes, Mr. Chairman. In 1958, for example, the average number of pieces handled per clerk man-year was 239,223. That increased in 1959 to 241,530. Our estimated 1960 productivity is 243,231, and our estimate for 1961 is based upon a further increase in productivity to 245,568 pieces per clerk man-year. From 239,223 to 245,568 is quite an increase in production. It should be noted, however, that the increase at this stage, is more attributable to improvement in operating procedures than to mechanization. Mr. GARY. General, does your budget request for 1961 take into account any such increases in efficiency? General SUMMERFIELD. It does completely. I do not know of any Department that is not recognizing that feature. Mr. BARNES. It is based on the last figure I gave you, which meant an approximate 1-percent increase each year over the last few years. Mr. PILLION. One percent of efficiency. Mr. BARNES. Yes. 50436-60- -2 ECONOMIC ASSUMPTIONS FOR MAIL VOLUME ESTIMATES Mr. GARY. What are the economic assumptions on which the estimates for mail volume for 1961 are based? General SUMMERFIELD. Mr. Gillette will answer that, if he may. Mr. GILLETTE. The economic assumptions which we have used in our formula of correlation between mail volume and business indices have been developed by our economist, and are generally in line with the data used by other agencies in preparing the President's budget. We find that the two indices with which there is the closest correlation, as I explained in detail to the committee last year, are personal income and population growth. The personal income figure we are using for 1961, on a constant dollar basis, for the fiscal year is $328.8 billion. The population figure for 1961 which we are using on a fiscal year basis is an estimate of 181.7 million. The personal income figure that I mentioned to you is related to a figure that is more generally quoted in business circles: the gross national product. The estimate of the gross national product for 1961 that we have used on a current dollar calendar year basis is $536.8 billion. We have a Post Office Department worksheet of national economic indicators seasonally adjusted at annual rates which support the estimates of mail volume. Is there any objection to putting that into the record? General SUMMERFIELD. Mr. Chairman, may I speak off the record for just a minute? Mr. GARY. Yes, sir. (Discussion off the record.) Mr. GARY. If there is no objection, we shall insert this sheet in the record at this point. General SUMMERFIELD. Very good, sir. (The document follows:) 1 Congressional estimate as basis for appropriation for 1960. Post Office Department 1960 budget estimate * Predicted before early settlement of steel strike was known and reflected. EFFECT OF CHANGES IN MAIL MIX Mr. GARY. Is there any evidence that changes in mail mix result General SUMMERFIELD. That is quite a question. Will you answer Mr. GILLETTE. Mr. Chairman, may I have your permission to an- Mr. GARY. Yes, sir. Mr. GILLETTE. We do have some evidence, particularly in 1959, that there has been some small impact on the mail mix and a temporary minor effect on the total volume of mail, from the rate increases that went into effect on August 1, 1958. The principal effect that we noted seemed to be a diversion from first-class post cards to third-class bulk mail, primarily because of the widening differential between the third-class bulk piece rate and the first-class post card rate, which widened from a half a cent to 12 cents for 5 months from August 1, 1958, and then declined to a 1 cent differential from January 1, 1959. This might have been simply the result of business usage of third class for printed post card material where they formerly used firstclass letters, such as printed notices, and things of that sort. It is, however, impossible to separate the influence of continuing recession in some businesses from the possible factor of rate increases. Now, I would like to defer to Mr. Barnes on the policing aspect. Mr. BARNES. Would you repeat the last part of your question, Mr. Chairman? Mr. GARY. If so, what measures are taken to police the usage of mail to insure that such users actually changed their material being mailed to the new classes claimed? Mr. BARNES. In other words, what you are asking is whether or not there may not now be material in third-class mail that should properly be paid for at first-class postage rates. We have, in the various offices of the postal service, people who are continually inspecting this by actually examining mail and turning it back for additional postage if it is required under the classification. Mr. GARY. That is mail originating in those offices? Mr. BARNES. That is right. Observation at the originating office would pretty well catch it; yes. PUBLIC SERVICES AND POSTAL DEFICITS Mr. GARY. Under the definition of public services and the computations of the losses for public services resulting from that definition, do you feel that the postal deficit is now a true measure of the extent to which postal rates now fail to cover the cost of the postal service? General SUMMERFIELD. Yes. Mr. GARY. Will you tell us on what basis the item, "Payment for public services" in the 1961 budget is figured? Mr. GILLETTE. Mr. Chairman, the item was figured on exactly the same basis which was assumed by the Congress in granting the fiscal 1960 reimbursement to the Post Office Department for public services. Mr. GARY. And that is Mr. GILLETTE. That is, sir, the revenue loss as calculated by the difference between the lower preferential rate and the regular rate. In other words, the revenue foregone as a result of granting special rates for free and preferential classes of mail plus the reimbursement for the additional cost of using foreign air carriers as explained to this committee last year. Those two items only, constitute the public service estimate of this year, in conformity with the determinations by the Congress last year. Mr. GARY. And you feel that is now a fair criterion in the determination of public services? Mr. GILLETTE. We feel that very definitely; yes, sir. Mr. GARY. Up to the present time has there been any application of the public services credit to various classes of mail in specific postal rate proceedings? Mr. GILLETTE. We have had no rate proceedings since the law was enacted, except for the parcel post rate case, in which case it was the Department's categoric position that there was nothing in the Postal Policy Act of 1958 that applied to parcel post cost allocation. Mr. GARY. And that was sustained by the Interstate Commerce Commission, as I recall it; wasn't it? Mr. GILLETTE. Yes. May I ask our General Counsel, Mr. Warburton, to supplement my statement? Mr. WARBURTON. Mr. Chairman, we are prepared fully to discuss this whole aspect with you tomorrow or at the appropriate time, including the parcel post rate increase case and its present effect on this status. Mr. GARY. Thank you, Mr. Warburton. EFFECT OF CAPITAL AND RESEARCH PROGRAMS ON COST OF HANDLING MAIL Mr. GARY. How will the capital and research programs of the Post Office Department affect the cost of handling the mail over a period of years? General SUMMERFIELD. I think what we have already been able to do is shown by the record. The increased volume we have absorbed with a minimum increase in expenses indicates that we have been able to develop mechanization which increased our efficiency and reduced costs, and I think that will continue. Mr. GARY. How will it affect production per man-year? General SUMMERFIELD. I think as already shown it will favorably affect the production per man-year. Mr. GARY. Do you feel special delivery service should be selfsupporting? General SUMMERFIELD. Of course, I believe that all of these services should be self-supporting. Mr. GARY. I think you and I agree on that. General SUMMERFIELD. For 7 years we have, sir. Mr. GARY. Throughout the 7 years. General SUMMERFIELD. That is right. Mr. GARY. Instead of saying "you and I" I should have said "you and our committee." I think our entire committee has stood with you on that principle. Mr. GILLETTE. Off the record. (Discussion off the record.) PROJECTS TURNKEY AND GATEWAY Mr. GARY. Why is the cost per square foot for interior platform and open space omitted from the justifications for Project Turnkey. General SUMMERFIELD. Mr. Barnard. |