U.S. GOVERNMENT PRINTING OFFICE

66–250 cc WASHINGTON : 2000

S. Hrg. 106–676

THE ANNUAL REPORT OF THE POSTMASTER

GENERAL

HEARING

BEFORE THE

INTERNATIONAL SECURITY, PROLIFERATION, AND

FEDERAL SERVICES SUBCOMMITTEE

OF THE

COMMITTEE ON

GOVERNMENTAL AFFAIRS

UNITED STATES SENATE

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

JULY 13, 2000

Printed for the use of the Committee on Governmental Affairs

(

For sale by the Superintendent of Documents, Congressional Sales Office

U.S. Government Printing Office, Washington, DC 20402

(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS

FRED THOMPSON, Tennessee, Chairman

WILLIAM V. ROTH, Jr., Delaware

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

GEORGE V. VOINOVICH, Ohio

PETE V. DOMENICI, New Mexico

THAD COCHRAN, Mississippi

ARLEN SPECTER, Pennsylvania

JUDD GREGG, New Hampshire

JOSEPH I. LIEBERMAN, Connecticut

CARL LEVIN, Michigan

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

JOHN EDWARDS, North Carolina

HANNAH S. SISTARE, Staff Director and Counsel

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Counsel

DARLA D. CASSELL, Chief Clerk

INTERNATIONAL SECURITY, PROLIFERATION, AND FEDERAL SERVICES

SUBCOMMITTEE

THAD COCHRAN, Mississippi, Chairman

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

PETE V. DOMENICI, New Mexico

ARLEN SPECTER, Pennsylvania

JUDD GREGG, New Hampshire

DANIEL K. AKAKA, Hawaii

CARL LEVIN, Michigan

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

JOHN EDWARDS, North Carolina

MITCHEL B. KUGLER, Staff Director

RICHARD J. KESSLER, Minority Staff Director

JULIE A. SANDER, Chief Clerk

(III)

C O N T E N T S

Opening statements: Page

Senator Cochran ............................................................................................... 1

Senator Akaka .................................................................................................. 7

Senator Levin .................................................................................................... 8

Prepared statement:

Senator Cleland ................................................................................................ 21

WITNESS

WEDNESDAY, JULY 13, 2000

William J. Henderson, Postmaster General, U.S. Postal Service:

Testimony .......................................................................................................... 2

Prepared statement .......................................................................................... 23

APPENDIX

List of the Postal Service’s electronic commerce initiatives responses to Senator Cochran’s request ......................................................................................... 29

E–Bay website pages submitted by Senator Akaka .............................................. 31

Responses from Mr. Henderson:

For questions submitted by Senator Cochran ................................................ 38

For questions submitted by Senator Domenici .............................................. 44

For questions submitted by Senator Lieberman ............................................ 45

For questions submitted by Senator Akaka ................................................... 48

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ANNUAL REPORT OF THE POSTMASTER

GENERAL

THURSDAY, JULY 13, 2000

U.S. SENATE, SUBCOMMITTEE ON INTERNATIONAL SECURITY, PROLIFERATION, AND FEDERAL SERVICES

OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS, Washington, DC.

The Subcommittee met, pursuant to notice, at 2:10 p.m. in room

342, Dirksen Senate Office Building, Hon. Thad Cochran, Chairman of the Subcommittee, presiding.

Present: Senators Cochran, Akaka, and Levin.

OPENING STATEMENT OF SENATOR COCHRAN

Senator COCHRAN. The Subcommittee will please come to order.

Today we have the pleasure of hearing from the Postmaster General of the United States, William Henderson, who is here to

present the annual report of the U.S. Postal Service to the Congress, specifically to the Senate Subcommittee that has jurisdiction

over the Postal Service.

In 1970, Congress converted, in the Postal Reorganization Act,

the Post Office Department of the Federal Government to an independently managed U.S. Postal Service. Since that time, there has

been a tremendous amount of growth in the Postal Service and in

its activities. It now employs over 800,000 employees, and takes in

more than $64 billion dollars in annual revenues.

One of the changes that has been most significant is that instead

of a deficit operation, year in and year out, that was subsidized by

the taxpayers of the United States, the U.S. Postal Service has

made major improvements in its financial policies and management. It has reported a positive net income for 5 straight years, operating without the benefit of taxpayers’ subsidies.

The Postal Service has also consistently improved its performance. It has become and is recognized as a dependable deliverer of

mail to American citizens through the country and its territories.

Despite these impressive achievements, there are still some interesting challenges and problems facing the Postal Service. There

is increased competition, technological changes, electronic communications, to name just a few of the developments in recent years

that affect the operation of the Postal Service and its capacity to

continue to operate without subsidies from the taxpayers.

We are pleased to have this opportunity to review with the Postmaster General the activities and problems of the Postal Service

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1The prepared statement of Mr. Henderson appears in the Appendix on page 23.

and any issues that, in his judgment, should be brought to the attention of this Subcommittee.

We do hope the Postal Service will continue to pursue its fundamental responsibilities, providing universal mail service at affordable rates.

Mr. Henderson, we congratulate you on your performance during

the time you have been in office. We look forward to hearing your

report.

TESTIMONY OF HON. WILLIAM J. HENDERSON,1 POSTMASTER

GENERAL, U.S. POSTAL SERVICE

Mr. HENDERSON. Thank you, Mr. Chairman.

We were almost late for this hearing, because of the President’s

motorcade running around here. It has got all the traffic locked up.

Senator COCHRAN. Thanks for the warning. [Laughter.]

Mr. HENDERSON. I will submit my testimony for the record. I will

not read back to you what you have already read.

I will try to summarize it. There are three fundamental issues

facing the Postal Service in the future. It is true that the Postal

Reorganization Act in 1970 was a huge success. It put modern

business practices into an agency that desperately needed modern

business practices.

Today, we face three big issues, as I said. The first one is affordability. We have to keep the price of postage down. That means

that we have to undertake heroic cost cutting. That troubles me,

as a CEO of an organization; not the cost cutting, but having the

ability to do that, and to keep costs low.

Because the second issue facing us is growth. We are simply not

growing at a rate that funds our infrastructure. Last year, we

missed our revenue targets by $600 million. That was primarily

due to migration of advertising mail to the Internet.

Companies have fixed budgets for advertising. When people saw

the Internet as another channel, they took money out of direct

mail, and prospecting with direct mail and First Class, and went

to the Internet. The good news is, they did not get much out of it.

Nonetheless, you can see the Internet as a channel that is going

to be a potential substitute for advertising mail in the future.

This year, we are seeing about a $700 million to $800 million

softening in our revenue, primarily due to consolidation of FirstClass mail.

Let me explain that. The banks have consolidated their billings.

They use duplex printing, which means they print on both sides of

the paper, which means mail is lighter. That is having an effect.

In the future, we see the erosion in bills and bill payments. It is not a matter of if, but when; and $17 billion of the $64 billion

in revenues that you mentioned are directly attributable to bills

and bill payments. That puts the Postal Service, at some time in

the future, in a crisis mode.

So growth is a very important factor for us, for the Postal Service

to watch. Because as the revenues slow, then the only avenue you

have, if you have done extensive cost cutting, is to raise prices.

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Raising prices in today’s world is not a smart thing to do, from a

business perspective.

Second, we believe in the Postal Service that the Postal Reorganization Act of 1970 needs reform. It needs reform in the area of

more pricing freedoms for the Postal Service, faster ability to move

products to the marketplace. The speed of business today is accelerating, geometrically. We are locked into a much slower process

than what we think is necessary to have a viable business.

Third, we would like some opportunity to use our investment

monies in the marketplace to make investments, to have the freedom so that we can make money off those investments, as opposed

to government securities.

Finally, we think the issue of resolution of disputes between

labor and management needs to be examined, both by labor and by

management. Something other than arbitration should be put in

place.

These issues need to be looked at, and we look to the Congress

for help in making those kinds of adjustments, because we think

a healthy Postal Service is extremely important, for a long time to

come, to America.

That concludes my summary, Mr. Chairman.

Senator COCHRAN. Thank you very much.

You mentioned the idea of reform of the Postal Reorganization

Act of 1970. When I first assumed the responsibility as Chairman

of this Subcommittee, I reviewed the proposal that was, at that

time, pending in the House of Representatives for reform. It is H.R.

22, a comprehensive reform bill.

After a little analysis, we discovered that that was also very controversial. A lot of people were disagreeing with the proposal for

various reasons. That bill is still pending in the House, and has not

been enacted.

We decided to try to do a more modest proposed reform, targeting some individual subject areas for change that we thought

might be noncontroversial. I introduced a noncontroversial, modest

bill, which became immediately controversial. It was introduced.

[Laughter.]

I came to the conclusion that there is no such thing as a modest,

noncontroversial reform available for the Postal Service.

What is your suggestion about specific changes that we need to

consider making in the Postal Reorganization Act?

Mr. HENDERSON. Well, the first one, as I said earlier, is pricing

freedoms. The Postal Service needs the ability to adjust prices during the fiscal year to respond to changing business conditions.

It needs the ability to negotiate prices with large customers. We

believe in universal service at affordable rates, but we need pricing

flexibility.

Second, we also need the ability to go to the marketplace quickly

to test products. When you have a full-blown hearing for 10 months

on a product, it is not exactly innovative, by the time it gets to the

marketplace.

Third, as I said, we need some investment income freedoms, so

that we can make money off of our cash flow, the monies that we

have.

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Finally, we think we need a new model for resolving labor

disputes, that does not put so much authority in the hands of one

person, the arbitrator, since we are very labor intensive. Our customers need to be involved in this equation.

For our employees, we are not saying that labor is broken, by

any stretch of the imagination, but we need a new resolution

model. I think those areas will allow the Postal Service to stay

healthy.

I might add that looking at other postal administrations and

their reforms, most have come about because of a crisis, or some

major economic change. Since we have not had a crisis, so to speak,

and as you said in your opening remarks, we have been financially

successful over the last 4 or 5 years, we are having a hard time

generating the kind of interest in postal reform that we think

should be there, if you actually looked at the tea leaves, 5 to 8

years out.

But postal administrations around the world are modernizing.

They are becoming more commercial. The German Post, in the fall,

is likely going to have an initial public offering, which will make

it private, to some degree.

The German Post owns 51 percent of DHL International. They

are the largest or one of the largest logistics organizations in the

world. They still have a core mail business, and they have an express business. So the Germans are operating under a model.

The Deutsche Post bought TNT and became TPG. It is now a

publicly traded organization. It is very aggressive in the world. So

they are not only aggressive in their countries in Europe, they are

also aggressive in the United States.

We look at ourselves as fairly outdated, compared to industrialized posts around the world. We do not think all of those models

are wrong. We think that needs to be examined for the Postal Service.

Senator COCHRAN. I think it is part of the Reorganization Act

that each class of mail has to stand on its own two feet, so to

speak. In other words, you cannot use the revenues from one class

to subsidize the operations of another class or character of service.

Does that present you a particular problem, and is there any proposal for change in that, that you would make?

Mr. HENDERSON. The answer is no. I think that you would create

more controversy if you allowed, say, First-Class mail to subsidize

standard A, or vice versa. I think that getting a consensus in the

customer community would be nearly impossible, without those

kinds of safeguards.

Senator COCHRAN. One of the criticisms that I have had brought

to my attention from some who compete in the delivery of parcels

and bulk items is in the international area, where they allege that

there is just no way for you to actually carry the packages and the

parcels the distances that you do, and not have some overhead expense paid for by other classes of mail or other operations of the

Postal Service. Is that a fair criticism?

Mr. HENDERSON. No, sir.

Senator COCHRAN. If not, why not?

Mr. HENDERSON. Well, as you will recall, I think a couple of

years ago, we had a hearing on that subject, maybe in this very

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room. We committed to having an independent review of the cost

coverage of international.

The conclusion was that domestic mail does not subsidize international mail. The Postal Rate Commission looks at that issue at

every rate filing. So we are confident that our international mail

is not subsidized by our domestic.

Senator COCHRAN. There is always concern that the price of postage is going to continue to go up, just for the reasons that we have

both pointed out. The pressures from competition and technology,

e-commerce, and the like, make it more and more difficult to do

business at the same postage rates in the future.

What do you anticipate in terms of future rate increases for the

various types of mail that you deliver? Is it inevitable that we are

going to see prices continue to go up?

Mr. HENDERSON. Under the current regimen of 1970, I think it

is inevitable that prices will continue to go up. They will continue

to go up, fueled by things like internal inflation, the cost of fuel.

As you can see, for example, this year alone, the increase in the price of fuel for the Postal Service is costing us $240 million in unexpected costs. The rise in inflation in the United States, beyond

what was predicted, is costing another $50 million.

Those kind of pressures, along with the pressures of labor, inevitably translate themselves into price increases. That is in spite of

the fact that we have the highest labor productivity this fiscal year

that we have had in a decade.

Senator COCHRAN. What do you anticipate will be your next increase in postage rates, and when will that occur?

Mr. HENDERSON. It will occur likely in January. It will be for

First-Class postage, a one-cent increase. For the other classes of

mail, it will vary, based on their individual cost cells.

Senator COCHRAN. There is some indication from a meeting that

I had with postmasters and their representatives recently that

there was concern that because of the arbitration clauses and the

powers that the employee unions have, that salaries for some of the

employees have gone up, because of those pressures, above the salaries that are paid to some postmasters.

There is some concern that that is unfair. Their responsibilities

for managing and supervising and doing the things that are in the

job definition of a postmaster justify higher salaries and wages

than they are getting, compared with some of those who are working in the post office with them, and whose wages have gone up

because of arbitration and other pressures.

Is that a legitimate concern; and if so, what is there that we can

tell them that will be done by the management of the Postal Service that will respond to that concern?

Mr. HENDERSON. We periodically have consultation with our

postmaster organizations to talk about wages, pay for performance,

and those kinds of things. If you look at our smaller postmasters,

I understand you are getting that complaint. I get that complaint,

myself.

If you look at level 11, 13, and 15, those are the smaller rural

offices, and the average salary and benefits are about $60,000 a

year. We think that is fair compensation. But we are mindful of the

differential for postmasters who have craft employees working for

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them. We do not have situations, to my knowledge, where a postmaster has a craft employee working for him that makes more

money than they do. I am not aware of any situations to that extent.

In smaller offices, where there are no craft employees, the postmasters are paid less; in other words, where the postmaster works

on the window, or works, in essence, like a window clerk does, in

a larger office. We look at those, as compared to the next higher

level postmaster. We try to keep comparability in there.

Senator COCHRAN. There was a lot of pressure, at one time,

about new rules for closing post offices, and getting public opinion

of the local community, to be sure that everybody knows what the

plan of the Postal Service is for a particular location.

Do you think the changes that have been put in place and the

openness of the process now have served to alleviate the concerns?

There was pressure to actually change the law, to put in specific

requirements, by law, that you would have to follow, if you wanted

to close or relocate a post office. Has that concern been satisfactorily addressed, in your opinion?

Mr. HENDERSON. Yes, we have a moratorium right now on closing post offices. If you go in and close a post office, by the time you

close one that the community does not want closed, you have lost

so much good will, in the eyes of the community, it is simply not

worth it.

Most of the post offices that are closed now are really abandoned.

There are post offices where the person retires, and has a post office in their grocery store or whatever, and they simply do not want

to do it anymore, and we cannot find someone to serve it.

But we have been working with our postmaster organizations to

identify any opportunities in these, what we call suspended post offices, and that is the postal term, to reopen them. But by and large,

we have not closed any post offices now in a couple of years.

Senator COCHRAN. Speaking of suspension, we are going to have

to suspend this hearing, because I am just advised that we have

a vote occurring in the Senate, and there are only 5 minutes remaining to cast the vote. I have to go and do that. I will return

and we will reconvene, as soon as I can get back. I apologize to everybody for that.

[Whereupon, at 2:27 p.m., the Subcommittee recessed to vote.]

Senator COCHRAN. The Subcommittee will come back to order.

We are pleased to be joined by the distinguished Ranking Member of the Subcommittee, Senator Akaka, and Senator Levin.

Senator Akaka and I have introduced a bill, S. 2686, which is intended to improve the process for establishing postal rates for nonprofit and reduced rate mailers. The bill would establish a structured relationship between nonprofit and commercial postage rates.

Some of these nonprofit groups are worried they will see another

substantial rate increase, unless the current rate setting procedure

is changed.

Do you believe that changes in the law are appropriate to avoid

unpredictable rate changes for nonprofit mailers, and would you

support the adoption of S. 2686?

Mr. HENDERSON. Absolutely; we think it is essential for the

health of nonprofits to have that piece of legislation.

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Senator COCHRAN. I have one other question about the employment situation, and the number of employees. We understand that

in the Postal Service, there is a plan to eliminate some 700 administrative positions. Are there plans to do this, and what specifically

do you have in mind?

Mr. HENDERSON. The answer to your question is yes, and that is

the beginning and not the end. We are going to eliminate 700 administrative jobs.

Essentially, we are reviewing the organization and its structure,

to get rid of duplicate work. We are also looking at redesigning our

processes to reduce the number of employees.

It is just the pressures of being in a competitive environment

that make you constantly look at yourself and say, is there not a

more efficient way to operate? This is simply the outcome of that.

Senator COCHRAN. I have had a chance to ask a number of questions. I am going to yield, at this time, to the distinguished Ranking Minority Member of the Subcommittee, Senator Akaka, for any

comments or other questions that he would like to ask.

OPENING STATEMENT OF SENATOR AKAKA

Senator AKAKA. Thank you very much, Mr. Chairman, my good

friend and great leader, Senator Cochran.

As the Ranking Member of the Subcommittee, I look forward to

receiving the Postmaster General’s testimony today from Mr. Henderson. The Postal Service enjoys a uniquely personal relationship

with the American people. A new Gallup poll found that nine out

of ten American households have a positive view of the Postal Service.

I applaud the dedicated career postal employees, who have

earned their fellow citizens’ appreciation, and Mr. Postmaster General, your leadership in this effort.

Right now, the Postal Service is analyzing its operation, products, and management in order to become a key player in the ecommerce area, and deal with revenue shortfalls. As these reviews

are made and decisions reached, it is critical that the Postal Service’s mandate of universal service and commitments to its employees are not compromised.

I am confident that under the leadership of the Postmaster General, the Deputy Postmaster General and the Board of Governors,

the Postal Service will find answers to the diverse challenges that

lie ahead, without sacrificing customer satisfaction or harming

labor/management relations.

I wish to compliment the Postal Service on its recent decision to

donate out-of-date, stand-alone computer systems to disadvantaged

families without computers. As a former educator, I am pleased

that the Postal Service is working toward closing that digital divide. I am well aware of the great community services performed

by postal employees, and this is yet another example of the Postal

Service enriching the lives of those it serves.

As the Postmaster General knows, I recently introduced. S. 2703,

the Postmaster’s Fairness and Rights Act, which is co-sponsored by

12 senators. I hope that you and I can work toward addressing the

issues raised in this bill.

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My remarks would not be complete without mentioning my interest in a U.S. postage stamp for Duke Kahanamoku, Hawaii’s five

time Olympic medal winner, and the father of modern surfing.

I have supported this effort for many years, and appreciate

knowing that the proposed stamp remains under serious consideration by the Citizens Stamp Advisory Committee. The time has

come to honor the Duke, who holds a unique place in surfing history, and whose Olympic skills are legend.

I thank you, again, Mr. Chairman, for this hearing. I look forward to reviewing the Postmaster General’s report.

Thank you.

Senator COCHRAN. Thank you, Senator Akaka.

Senator Levin.

OPENING STATEMENT OF SENATOR LEVIN

Senator LEVIN. Thank you, Mr. Chairman.

Senator Akaka’s statistics about the favorable rating of the Postal Service and its employees really is quite stunning. Nine out of

ten have a favorable view is a close second to the view of the U.S.

Congress. I just want to commend you for not overtaking us. We

really appreciate that. [Laughter.]

Mr. HENDERSON. Does that mean we cannot wear the yellow jersey?

Senator LEVIN. You have to work harder. If you are No. 2, you

just try harder, that is all. [Laughter.]

As you know, Mr. Henderson, our sweepstakes legislation went

into effect in April of this year. This was an effort to end the

abuses that exist in the area of sweepstakes, the mail that comes

too often to our houses, telling us we won something when we did

not, and with screaming headlines saying you have won a whole

bunch of money, when in fact we have not, and other kinds of

come-ons that mislead so many people, and have caused so much

injury and economic hardship and misery in this country.

We have some good news and some bad news, since April, when

this new law went into effect, and, as you know which this Subcommittee had a great deal of involvement in making the law.

I guess the bad news first would be this sweepstakes notice from

McCalls Magazine. You have a copy of it in front of you now. This

is an urgent message, in big headlines here. It says, ‘‘Urgent Message for ‘L,’ you have been declared one of our million dollar winners. We are waiting for you to claim your prize money.’’ That is

in big print.

Now there is a little print right above it, which is the hook. That

says, ‘‘No, you have not.’’ The big headline says, ‘‘You won a million.’’ Then in these big headlines down here, it says ‘‘K, W, and

L have been declared million dollar winners. We will pay the next

million dollars to the people names, and them alone, but only if you

respond to this notice.’’

This is the same kind of a come-on and misleading brochure and

sweepstakes notice that existed before the law changed. The new

law makes it very clear that it is illegal for any material to go out

which ‘‘represents that an individual is a winner of a prize, unless

that individual has won such prize.’’

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I would like you to look at this. I am not going to ask you to do

that today, unless you would like to. But I would like you to take

this back to the office, give it to your folks in charge of this, and

let us know immediately whether, in your judgment, that come-on

complies with the new law. Because that is exactly what we intended to put out of existence with the new law.

Senator Collins is not here. She was very, very active in this law.

It was the Collins/Levin initiative, with Members of this Subcommittee, by the way, our Chairman, Senator Akaka and others,

being very actively supportive of it. So we are all familiar with this

issue.

I cannot speak for any other Senator, but I think it is fair to say,

we had looked forward to a significant change in the behavior of

the sweepstakes folks. So we need to know from you whether or not

our law made a difference.

If this is the kind of junk that is going to continue to bombard

our mails, with these kinds of misleading statements that are going

to deceive too many of our people, especially seniors, then we are

going to get back to the drawing board. So please let us know on

that.

Now there have been some changes, however, which I think we

want to acknowledge. That is in a Reader’s Digest notice that went

out, and there is a copy of that in front of you.

This one does show a real change in the approach of the Reader’s

Digest. Instead of saying, ‘‘You have won,’’ it says it is a ‘‘winners

selection process.’’ That is a lot different from saying that you have

won. This is done a lot more carefully, in a number of respects.

However, if you will look at the fine print down on the back, you

will see it says, ‘‘No purchase or payment necessary to enter or

win.’’ That was required by our new law to be prominently displayed.

We need your folks to tell us whether or not that tiny little print

is prominently displayed, in your judgment. I must say, it is not

in mine; but let us know.

Then it is interesting, because one of the things that we fought

very hard to get into the new law was a very prominently displayed

statement that says, ‘‘A purchase will not improve an entry’s

chance of winning.’’ That statement is even in smaller print, not as

bold, and further down.

Mr. HENDERSON. Yes, I found it.

Senator LEVIN. You found it?

Mr. HENDERSON. Yes.

Senator LEVIN. You have your magnifiers on, then. [Laughter.]

So if you could have your experts take a look at both of those

statements, and tell us whether or not, in your judgment, they

comply with the new law, that would be very helpful to us.

If you would comment, I would be happy to just stop there, and

let you have a chance to respond.

Mr. HENDERSON. Well, as you know, we supported the legislation. We think things had gotten out of hand. Hopefully, the new

law will curb these industry practices, and the industry has been

cooperating. To date, we have only received three requests for subpoenas to look at the information.

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Senator LEVIN. When you say you have received subpoenas, what

do you mean?

Mr. HENDERSON. Our General Counsel has issued three administrative subpoenas.

We will look at this and get back to you tomorrow.

Senator LEVIN. That would be great.

The number of complaints, then, has gone down since the new

law had gone into effect?

Mr. HENDERSON. Yes, and I would add that the industry, from

my perspective, has really cooperated in trying to stamp out those

deceptive practices.

Senator LEVIN. Have you had any information sessions with

sweepstakes promoters, to educate them about the new law?

Mr. HENDERSON. Yes, we have.

Senator LEVIN. Do you know anything about the status of the requirement to allow persons to be asked to be taken off the mailing

lists of sweepstakes promotions?

Mr. HENDERSON. Not off the top of my head, but I will be happy

to supply that for the record.

RESPONSES TO SENATOR LEVIN’S QUESTION ON THE SWEEPSTAKES 1–800 NUMBER

AND THE McCall’s AND Readers’ Digest MAILINGS

1–800 Number

Regarding the status of the 1–800 number for sweepstakes, Title 39,

U.S.C. 3017, Nonmailable Skill Contests and Sweepstakes Matter, requires

that the sweepstakes promoters establish and maintain a notification system to include an 1–800 number. The requirement is to provide individuals

the opportunity to request that their name be removed from sweepstakes

and contest mailing lists. The requirement is not mandatory until December 12, 2000.

The Postal Inspection Service will monitor mailings in an effort to ensure

companies are providing a notification system as required by Sec. 3017.

Readers’ Digest and McCall’s Mailings

Postal Inspection Service officials have contacted McCall’s magazine and

the Reader’s Digest to obtain copies of the complete mailings. Postal Service

lawyers are reviewing the mailings to ensure compliance with the Deceptive

Mail Prevention and Enforcement Act. The mailings are still under review.

Also, Inspection Service officials are arranging meetings with officials from

both publications to discuss their compliance with the law. I understand Inspection Service officials have been in regular contact with Senator Levin’s

staff on the status of this review.

Senator LEVIN. Has the volume of sweepstakes solicitations that

go through the mail been affected by the new law, if you know?

Mr. HENDERSON. Yes, it has. I cannot give you a hard number,

but sweepstakes have dropped off dramatically. I might add, that

is not just necessarily because of the law. It is because of the publicity that surrounded deceptive practices. Sweepstakes took a hit

to their brand. I use that word as people begin to look at them in

a different light, and they have not recovered today.

Senator LEVIN. Well, in my judgment, I would have said that it

was a well-deserved hit. If they comply with the law, its letter and

its spirit, that will be fine.

If we see that key information, that a purchase does not improve

your chances of winning, if that is prominently displayed, as the

law requires, it seems to me then, and only then, can the sweepstakes solicitations be justified.

11

Otherwise, it seems to me, they are deceptive. But more important, you are the experts. We need you to tell us whether or not

the examples I gave you fit or violate the prohibitions, in your

judgment.

If so, if they do violate them, then take proper enforcement. If

they do not, let us know, because I think then we are going to have

to tighten up the law, again.

Should I keep going, Mr. Chairman? I have just a couple more

questions.

Senator COCHRAN. Sure, please proceed.

Senator LEVIN. I do not want to go beyond my allotted time. I

just have a couple of questions about semipostals.

We have had a lot of discussion about this issue. We have seen

some data on the breast cancer research semipostal stamp and we

still need some of the cost information, which you are working on.

But the fundamental question which the Congress really has to

face is whether or not we should be authorizing semipostals—additional stamps that raise funds for various charities. We have had

about 15 semipostal bills now introduced to raise funds for various

charities and groups.

By the way, although I voted against it in the first place, I think

it is clear that we should reauthorize the breast cancer stamp, because we have a huge number apparently printed.

It has already been authorized once. Although I don’t think we

should be issuing these stamps as a matter of principle. It would

make sense to utilize all the balance of the stamps that are printed.

Putting aside that issue, the reauthorization of the breast cancer

research stamp, should either we or you, through your Citizens

Stamp Advisory Committee, be issuing or recommending to the

Postal Service, additional semipostals? If the answer is yes, in your

judgment then, should we be doing this?

This gets us into all kinds of political issues as to which of the

very important charitable causes we should favor, politically.

Should your Citizens Stamp Advisory Committee be doing it? Who

should be doing it, if we should do more of this at all?

Mr. HENDERSON. First, let me say that the breast cancer stamp

has been something that has created just an incredibly positive

view towards the Postal Service, but I think that is unique.

Senator LEVIN. When you say the view, you mean that particular

cause?

Mr. HENDERSON. Yes. We are not in favor of semipostals. They

are very difficult to select. I do not know what criteria you would

use.

The Citizens Stamp Advisory Committee does not want any part

in that, and you know they are volunteers. They want no part of

trying to select which charity over another ought to receive the

support of the Postal Service. We are not interested in administering that, or being a part of that at all.

I do not know what the reaction would be of the Citizens Stamp

Advisory Committee if they were forced to do it, but I suspect it

would be very negative. I know today, they are just not equipped,

and we are not equipped. I am in the business of running the PostVerDate 11-MAY-2000 11:01 Oct 05, 2000 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6601 66250.TXT SAFFAIRS PsN: SAFFAIRS
12

al Service. I am not in the business of trying to figure out which

charity over which charity, or which cause over another cause.

Our job, in my view, is if the Congress feels that a semipostal

ought to be issued, that it directs the Postal Service, as it did with

the breast cancer stamp. Then we will do the best job we possibly

can at making the intent of Congress a raving success.

Absent that, we do not want to be in a position to issue one

semipostal a year or two or whatever. We just think that would be

a disaster for our organization. I will not attempt to tell the Congress what I think they ought to do. But I do not believe

semipostals ought to be issued.

I think it is very difficult. I think you raised a very valid point.

How do you select them? I mean, they are all good causes. Prostate

cancer is a very legitimate cause. It affects millions of males. There

are just a thousand subjects that really are worthy. What screening

you do to put them on a stamp and raise money for them, I just

do not have a clue.

Senator LEVIN. When you say that you should not be issuing,

what you are saying is, you do not want to do the selection, your

Citizen Stamp Advisory Committee. But is it not also a fair statement that you hope that Congress does not authorize additional

ones. Is that right?

Mr. HENDERSON. That is right. That is exactly right.

Senator LEVIN. Thank you.

Senator COCHRAN. Thank you very much, Senator.

Postmaster General Henderson, you have mentioned the possibility of expanding the products and services of the Postal Service,

and getting into the e-commerce area, as well. How does offering

e-commerce products promote the core mission of the Postal Service?

Mr. HENDERSON. Well, e-commerce becomes another channel for

customers of business and consumers to get at postal products. It

can be as simple as looking up a ZIP code or ordering a priority

label; or in the case of the private companies, where PC postage

is offered, getting postage off a computer.

It is true that the activities we have taken to date relate to our

information platform, which we are building for internal reasons to

enable us to cut real time costs, to build an activity based accounting system, and to offer our customers a window into the mail

stream, so they can see where their mail is; that is the major driver, and simply for convenience.

We have an electronic bill payment offering: We carry bills today,

and they are in the mail. You have got your bill, you mail it back.

We are offering a service to do that electronically. We have had

about 75,000 people go to that link. About 10 percent of them have

actually signed up. But that is just a service we are offering our

consumers.

So we see this as really an extension of our core products. Just

another analogy is, we used to move mail exclusively on trains.

Now we use airplanes and trucks and other things. But we are not

getting out there into areas that are completely foreign to us. It is

all tangential to the mail.

Senator COCHRAN. You mentioned the e-bill payment program.

Are there any other new initiatives that are considered important

13

1List of the Postal Service’s electronic commerce initiatives requested by Senator Cochran appears in the Appendix on page 29.

for the Postal Service, and what do you expect to achieve in these

areas?1

Mr. HENDERSON. Well, they are very similar to what we do

today, as a matter of our core mission. For example, we have

PosteCS, which is a secure document transmission system, that is

a partnership between the Canada post, the French post, and the

United States post. It is a service that we offer around the world.

It is just the ability to send a secure document.

The reason for my market research that folks will chose the Postal Service, is because they have trusted the Postal Service with

their documents forever. This is just a natural extension.

But we have several things that we are looking at. I will be

happy to supply for you a listing of the products and an explanation of them, and how they relate to our business.

Senator COCHRAN. Do you expect these products and services will

cover their costs and make a contribution to the overhead of the

Postal Service?

Mr. HENDERSON. Absolutely, but we do not think that they will

substitute for the $65 billion business that we manage on a dayto-day basis. In many instances, they are conveniences for our customers. It is just another way to access the Postal Service.

Senator COCHRAN. Last year, you announced the service you referred to, PC postage, as an innovative way for customers to purchase and print postage, through their personal computers. Is this

a program that is gaining in popularity? What is the status of it?

How many customers are using it?

Mr. HENDERSON. They have purchased about $26 million worth

of postage. There are currently, I believe, 16 organizations. When

I testified before, there were four. Now it has grown. It gets mixed

reviews in the marketplace, but customers are going to PC postage.

Senator COCHRAN. In the current rate case, the providers of PC

postage are seeking a discount for consumers who use PC postage

to prepare their mail, because it provides cost savings to the Postal

Service. What is the Postal Service’s position on this request?

Mr. HENDERSON. We do not agree with that. To think that we

could incrementally take the costs out of one stamp being purchased at a retail unit or vending machine versus a computer is

not understanding the Postal Service’s business model.

It is just an added convenience, but it has not, as of yet, made

any difference. We have 7 million people a day that walk into postal lobbies. So it has not really had an impact. They just handed me

the numbers. There are 302,293 customers using PC postage today

in the United States.

Senator COCHRAN. The Postal Service is also developing a program to provide a secure electronic mailbox for every American

household. What is the status of this program, and can you tell us

how the service would work?

Mr. HENDERSON. It is on the drafting board. Essentially, it would

allow you to access the Postal Service and some of its special products through a secure mailbox. You could go in and you could click

on, for example, a post office.

14

1 E–Bay website pages submitted by Senator Akaka for the record appears in the Appendix

on page 31.

Then electronically, you could confirm where a letter happened

to be, if it had been read through one of our sorting machines. You

can buy special services. It is an opportunity for you to visit an environment that is secure in a Postal Service.

Senator COCHRAN. Do you have to go to the Board of Governors

to get permission for each individual new e-commerce type activity,

or do you get a blanket kind of approval? What is the process that

you use in interfacing with the Board of Governors on this?

Mr. HENDERSON. It is actually both. We have a by-law that requires us to go to the governors on anything that, in their view,

would be controversial. So we have chosen to take these initiatives,

either in writing or in person, to the governors, and they decide

whether or not they want to vote, or whether they just want to let

us continue.

We keep them apprised, on a regular basis. We have a strategic

planning committee, which is a sub-group of the governors, in

which we discuss on a monthly basis all of our initiatives and what

progress we have made.

Some we get on the drawing boards, and if we decide they will

not fly, we scratch them. But we have a group of people looking,

as is every business, I think, in America, and every institution,

looking at how this new channel of the Internet, what it means to

your business, and how it can affect your business. So we have a

group that is just doing that.

Senator COCHRAN. The Postal Rate Commission is called on to

approve any requests and changes or increases in postal rates. Are

any of these initiatives in the e-commerce area subject to the approval of the Postal Rate Commission?

Mr. HENDERSON. Some have been mailing online for example,

and it was subject to the Postal Rate Commission’s review. Others

are not. Traditionally, some services have gone to the Postal Rate

Commission for setting rates. Some, we have set fees, independently of the Postal Rate Commission. It varies. If it’s a core product, all of them go to the Postal Rate Commission.

Senator COCHRAN. Senator Akaka, do you have any other questions?

Senator AKAKA. Yes, Mr. Chairman, I do.

I would like to ask the Postmaster General about the selling of

postal collectibles on E–Bay, one of the most popular Internet auction site.1

There are currently 34 items that have been put online by the

Postal Service, as of this afternoon.

For instance, one of the items says that the auction starts on

July 7 and ends July 17. The price is $500. The item is a Barbie

stamp. I have a list here of the 34 items.

Mr. Henderson, who in the Postal Service approves putting postal products up on E–Bay? Was the Board of Governors involved in

this decision or consulted?

Mr. HENDERSON. I do not know. I think we told the governors

about it, but they would not approve something like that. We would

do that in management.

15

We are using E–Bay as a part of World Stamp Expo, which is

going on in Anaheim, California, where we have 150 foreign postal

administrations displaying stamps. We have collectors from all over

the world, and we put collectibles on E–Bay.

But from time to time, we have gone on these home shopping

networks, and have sold postal collectibles. It has been everything

from stamps signed by astronauts, and so on.

It really is a way of keeping that kind of item that we have, that

people are interested in buying, out of the post office, so that it

does not interfere with the people who want to come in and mail

packages. I think most of these are stamp-related items or in connection with that. This particular E–Bay site is in connection with

the World Stamp Expo.

Senator AKAKA. As the Postal Service looks at an eventual downturn of revenues, you have said that the Postal Service will work

with the Office of Personnel Management on early retirement procedures. I have several questions relating to that issue.

Is the Postal Service talking to OPM now about procedures, and

do you have any timeframe as to when the cuts will actually take

place? Also, will the Postal Service target specific categories of employees or specific geographic locations?

Mr. HENDERSON. The answer to the first part of the question is

yes, we have talked to OPM, and we are talking to them now. We

will be targeting functions, not categories of employees, but functions. As I said, 700 positions is the beginning. We are looking at

redesigning the work that we do to make it more efficient. To the

degree that we have to run a reduction in force, we are prepared

to do that.

At the present time, I see the impact as not being significant.

However, we have 771,000 career employees, and 700 is not much

of a dent. Later on, down the road, we are looking at a longer term

process, as I said, of trying to change all the work. I can just give

you an example.

Every employee on travel has to submit a voucher. That travel

voucher is in writing, or in some instances, it is done by a secretary. There is no reason to have that piece of paper floating

around.

The subject of requisitions, a form that we have to ask for supplies, in today’s world, you should not have to write that on a piece

of paper. You ought to be able to use the Internet to communicate.

I was talking to Lou Gersner at IBM. He said that in their purchasing department alone, which is about the size of ours, that

over a 4-year period of time, by taking paper out, he saved a billion

dollars.

So that is the kind of thing that we are looking at, just practices

that we have kind of taken for granted for 30 years. I am very familiar with a form that is called 7381, that you requisition supplies

on. I might be lost if I did not have one. But nonetheless, there is

no reason to do that anymore.

So we are trying to be more modern. That reduces administrative

jobs. We feel we have too much administrative overhead, given the

communication channels that we have available to us on the Internet.

16

We are not trying to slash and burn. This is not about saying

that a person who is sitting at a desk doing a job, that suddenly

we are going to get rid of them because we do not like them. We

are trying to really affect the work that is being done.

Senator AKAKA. Senator Lieberman, the Ranking Member of the

Full Committee, is unable to join us today. However, he has asked

me to pose the following question relating to the Postal Service ecommerce initiatives.

The question is, how can the Postal Service ensure that it does

not use its governmental authority to provide a competitive advantage; not just to its own products, but also to the products of its

marketing partners? The second question is, how can Congress ensure the Postal Service does not regulate and compete with the private sector?

Mr. HENDERSON. I think that we would say to the last part that

we absolutely do not believe that you can regulate and compete in

the same business, and we would not do that.

To the part about being competitive, if you look at our competitors, and a playing field that is not level, we are on the bottom side

of that playing field, not on the upper side of it. If you are in the

business of selling products, and you do not have pricing freedoms,

which we do not on packages, and we do not on Express Mail, you

are at a disadvantage.

It is like selling cars. Every other dealer can negotiate a price

and you cannot. You know which dealer, for the most part, that

people are going to flock to. So we are all for this concept of a level

playing field. We think that begins by giving us some pricing freedoms.

Senator AKAKA. Mr. Henderson, I would like to focus on diversity

within the Postal Service. I know there is a commitment by management to ensure that the diversity within our communities are

reflected within the Postal Service.

I am sure you are familiar with the just-released GAO supplement to its 1999 report about the representation of women and minorities in the Executive and Administrative Schedule of management positions in the Postal Service.

The supplement focuses on employees in EAS levels, 16 through

26 positions, including postmasters and managers of customer service and managers of postal operations.

Hawaii and Puerto Rico were not included in the GAO reports,

since these districts have a more specific classification system.

Because the GAO report only compared women and minorities

with white males, in preparation for this hearing, I asked for a

breakdown, based on aggregate percentages for White, Black, Hispanic, Asian, Indian/Alaskan males; and White, Black, Hispanic,

Asian, Indian/Alaskan females. Hawaii and Puerto Rico Postal Districts are not included in these aggregate percentages.

The figures worked out by GAO indicate that White males make

up 50 percent of the EAS levels 16 through 26, and White females

comprise 18.5 percent.

When African males and females were added, these four groups

comprised a cumulative 90.9 percent of all EAS levels 16 through

26 employees. The remaining 9.1 percent are Hispanic, Asian and

Indian/Alaskan EAS employees.

17

Overall, the Postal Service is doing a good job to ensure that the

Postal Service better reflects the communities it serves. However,

as the Postal Service continues to reduce its labor force, I want to

make sure that the commitment to diversity is not diminished, and

that the Postal Service does not lose sight of the progress made

over the past decade.

I want to ensure that appropriate training programs are in place

to further career development and bolster recruitment efforts for

all minority groups, including Asian/Pacific Americans, American

Indians, and Alaskan Natives.

My question is: Do you have any comments on either the GAO

report or what steps the Postal Service is taking to train the diverse populations within the communities it serves?

Mr. HENDERSON. Well, the Postal Service, for some time, has

considered its diversity a very distinct, competitive advantage in

the market place. It has worked very hard to continue its diversity.

As you may know, it was recently recognized. Fortune Magazine

published the 50 best companies in America, or organizations in

America. They said companies, but they included us. We ranked

ninth for all minorities in terms of the best place to work. We

ranked fourth on that same list for African Americans.

We also received a Hammer award for our efforts in affirmative

action, and were recognized as one of the best in class in government.

So we take diversity seriously. As we go through reductions, we

are very mindful of the fact that when our employees and our community look at the Postal Service, they want to see a reflection of

themselves. To the degree that that is humanly possible, we are

committed to that.

Senator AKAKA. Thank you.

Mr. Chairman, may I ask one more question?

Senator COCHRAN. Yes, go ahead.

Senator AKAKA. Mr. Henderson, in addition to the challenges

that the Postal Service is facing on the domestic front, I know that

the international mail scene is providing challenges, as well.

In testimony before the House Postal Subcommittee, you expressed support for H.R. 22, Representative McHugh’s Postal Reform bill, based in part on your belief that it could have an impact

on the Postal Service’s international mail business. How would

postal reform address the Postal Service’s concerns relating to competition and international business?

Mr. HENDERSON. Well, let me preface my comment. H.R. 22, we

are supportive of it, but it is a compromise. You cannot take just

pieces of it. In the case of international, it is re-regulated in H.R.

22, more like the domestic. But in the domestic mail, we had pricing freedoms in H.R. 22, which we do not have today.

We are opposed, individually, to putting us again on a lower

playing field by regulating our international activity. I think I have

testified in this hearing on that. We have committed to not having

a cross-subsidy. While H.R. 22 does re-regulate international mail,

it has to be taken in the context of that total bill.

We realize that in order to get pricing freedoms, in order to have

product freedoms, in order to have investment freedoms, you have

got to give up something. That is the nature of the beast that we

18

understand. But we do not get anything if you just regulate international mail.

Senator AKAKA. Well, thank you very much, Mr. Chairman.

Senator COCHRAN. Mr. Postmaster General, I have heard from

some who mail periodicals that they are very concerned about the

proposed double digit rate increase. Is this something that is

planned? Can you tell us more about it?

Mr. HENDERSON. Well, the process that exists today is that once

you select the price for First-Class mail, and in this case, the rate

increase is a penny, which is a modest 3.6 percent, then a costing

study that has been going on throughout the year is finalized and

validated. That is looking backward. That is one of the problems.

Obviously, each class and category of mail, each class of mail,

must cover its cost. In the case of periodicals, the coverage was 92

percent, so there was a big increase. It has a one point mark-up,

which means that it ranges from 13 to 15 percent, which is a lot

different from 3.6 percent for First-Class mailers.

When we saw those cost studies, we began working with the

magazine publishers, to try to identify strategies to reduce costs.

We think we have been successful with about $150 million in costs

identified.

But there is a problem for the future, if we do not figure out a

way to eliminate those costs. These costs are going to recur. So it

is not over with just lowering the rates in this rate case. It has to

be what I would describe as a Herculean joint effort, or it is not

going to happen.

By law, all categories or classes of mail are required to cover

their costs. Unless we have pricing reform, that is going to be the

future.

Senator COCHRAN. There are a couple of issues that have been

brought to my attention from my State. I wanted to mention them

to you.

At Mississippi State University, for example, they have had two

Postal Service Centers on the campus. They want to consolidate

those into one facility.

I received a letter just recently on this issue, and a matter of

fact, this is e-commerce, it was faxed to me. Anyway, they want to

relocate and expand the post office. Is this going to be caught in

the moratorium that you talked about, closings and relocations?

Mr. HENDERSON. No, sir.

Senator COCHRAN. Is this going to be a problem for Mississippi

State University?

Mr. HENDERSON. No.

Senator COCHRAN. Well, I hope somebody will look at this and

see if they can help expedite it. The State of Mississippi, as I understand it, has already appropriated some money that the university is authorized to use to plan how they are going to do this.

This is on state property. They will use that money to compliment any Federal funding that is needed to support the post office relocation and renovation of these facilities. They require the

students to have a post office address. They cannot deliver mail to

everybody’s dorm room.

Mr. HENDERSON. It is expensive to do that.

Senator COCHRAN. It would be a tough challenge.

19

1Questions and responses for Mr. Henderson from Senators Cochran, Domenici, Lieberman,

and Akaka appear in the Appendix on pages 38–50 respectively.

So they have, it seems to me, a meritorious suggestion. If we

pass this on to you, I hope you will have somebody in your organization look at it, and try to be responsive to their request.

Mr. HENDERSON. Absolutely.

Senator COCHRAN. One other thing, just to pass on, the tenth

largest city in my State is a relatively small community near Jackson, Mississippi, called Pearl. I used to think it was a small community. Now it has become the tenth largest town in the State of

Mississippi.

They have been wanting their own ZIP code, because they have

had this Jackson, Mississippi ZIP code all these years. They are

independent and they are doing well.

So I bring this to your attention, and ask for your help. I think

I was going to ask for your help. Maybe I am just thanking you.

Let me look to be sure I have got the right piece of paper.

Mr. HENDERSON. I hope you are thanking me. [Laughter.]

Senator COCHRAN. Do you get many complaints from communities like this, that are unhappy with their ZIP code boundary? Do

you have a criteria that you use to establish ZIP codes for neighboring cities? How does that work?

Mr. HENDERSON. Well, it is a density criteria. In other words,

you have to have so much mail in order for us to allow a ZIP code

to be used.

There is an ongoing issue in every region in the United States

over prestige ZIP codes. For example ‘‘90210’’ in Beverly Hills is

prestige ZIP code. Every community has one, and property values

are affected. They want this street moved or that street moved. It

is one of the things that makes life difficult, if you are in a line

management position in the Postal Service.

But when ZIP codes were carved out, they were not perfect. Nobody had a crystal ball and would know economically what was

going to change. So it naturally creates problems.

Senator COCHRAN. Well, the good news about this was that the

Mayor of Pearl is happy with the efforts of the local Postal Service

officials so far. They have been cooperative and responsive to the

concerns of the people of Pearl, Mississippi. [Laughter.]

So we wanted to bring this to your attention, and let you know

we were not just going to complain. [Laughter.]

We are going to congratulate you when things go right, as well.

So we thank you for the good work you are doing.

Is there anything further, Senator Akaka?

Senator AKAKA. Yes, Mr. Chairman, may I ask my final question?

Senator COCHRAN. Sure.

Senator AKAKA. And I also ask that I may be able to submit additional questions for the record.1

Senator COCHRAN. Absolutely, without objection, it is so ordered.

Senator AKAKA. I understand the Customs Service and the Postal

Service are working together on several issues relating to international mail. The cooperative efforts in stopping the illegal shipment of contraband across our borders is commendable. However,

20

I know that the lack of an electronic manifest system by the Postal

Service is of concern to the Customs Service.

My question is, what steps are being taken to implement automated manifest information in the interest of greater enforcement

efforts?

Mr. HENDERSON. If it is an outbound piece, and the shipper is

known, they do a manifest now. If it is an inbound package, which

is part of what the controversy has been around, we do not have

any requirement for a manifest, because we are not the shipper.

We do not have any control over it.

We are working with Customs. I think the issue of contraband

in the mail is a significant one. We are working with Customs to

see if we can figure out a compromise so that we can assure that

the Postal Service is not a shipper of contraband.

Senator AKAKA. I want to thank the Postmaster General for his

responses, and thank you for being with us today.

Thank you, Mr. Chairman.

Senator COCHRAN. Thank you, Senator.

We do appreciate very much your cooperation with our Subcommittee, and your attention to our concerns and our questions.

We congratulate you on the excellent job you are doing as Postmaster General of the United States.

Mr. HENDERSON. Thank you.

Senator COCHRAN. Thank you very much.

The hearing is adjourned.

[Whereupon, at 3:28 p.m., the Subcommittee was adjourned, to

reconvene at the call of the Chair.]

(21)

A P P E N D I X

PREPARED STATEMENT OF SENATOR CLELAND

Thank you Mr. Chairman for giving me the opportunity to speak at today’s hearing and address the Postmaster General, Mr. William Henderson. As you know, the

U.S. Postal Service (USPS) was established by the Postal Reorganization Act of

1970 and replaced the U.S. Post Office Department. The USPS was chartered to

perform as a business enterprise, with sufficient market freedom, including providing ‘‘non-postal services,’’ that it could deliver the mail to all parts of the country

as reliably, quickly, and inexpensively as possible. In that same reform legislation,

the USPS was mandated to operate on a self-supporting, break-even basis, with particular emphasis on restraining postal rate increases and providing ‘‘honest, efficient, and economical management.’’

During the past year, the U.S. Postal Service has delivered more than 200 billion

pieces of mail to 130 million households and businesses, the most in their history.

Everyone from America’s established business community to its emerging dotconis

continues to rely on USPS’ ubiquitous presence and universal service to promote

their images, improve their sales, and secure their revenues. Competition from

small businesses that prepare mail for delivery, office supply companies, and increased use of the Internet has had a significant impact upon the revenues generated by USPS. Mr. Postmaster General, I am extremely concerned that despite

improved performance and customer satisfaction, the introduction of technology and

automation, and the availability of products and services in modem retail outlets,

you forecast a potential shortfall of $700–$800 million in total operating revenue for

the year.

I would like to address a couple of challenges facing the U.S. Postal Service in

the coming years and hope that you can offer feasible and practical solutions during

your remarks to this committee. First, the Postal Service must address the issues

that are most important to your customers, the ones who utilize your services and

buy your products on a daily basis. Sure, the price of a first class stamp is important to them and yes, they care about whether the Postal Service makes a profit.

However, the one issue relating to the Postal Service that I hear about more than

any other is the lack of customer service and how long it takes for USPS to respond

to customer inquiries on numerous topics from the long lines at post offices to the

time of day that mail is delivered to homes and businesses.

In addition, you may or may not be surprised to know that I receive hundreds

of telephone calls and letters each year regarding the location of postal facilities in

my state. Prompt responses from the Postal Service would certainly go a long way

in settling some of the issues surrounding location of facilities and would increase

consumer confidence in USPS. Therefore, I would like some assurances from you as

Postmaster General that the Postal Service will re-commit itself to serving the

needs of its customers by acting promptly on matters involving postal facilities. For

example, among the most critical current postal issues in Georgia is the proposed

facility in Perry, Georgia due to the length of time that it has taken for completion

of the building’s construction. Perry and the Postal Service have been trying to build

a facility since the days of my predecessor, Senator Sam Nunn. Construction has

been continuously delayed due to breach of contract by two separate contractors and

little progress has taken place. The current date for completion of the project is

Summer 2001. 1 would like to receive assurances from you that your office will monitor the status of this post office and keep in constant contact with local USPS officials in order to prevent any further delays.

Other Georgia postal issues that I wish to bring to your attention include Rome,

which needs additional space to sort the mail; Hartwell and Monroe, which have experienced delays in the placement of new facilities; Blackshear and Pine Mountain,

which are in the process of determining adequate locations for their facilities; and

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Euharlee, Fort Oglethorpe, Stilson, and Centerville, which have requested postal facilities for their growing communities. I would hope that these issues, which are important to me and my constituents, receive prompt attention from your office and

swift resolution in the near future.

Secondly, it is important that the postal service provide high-quality, low-cost

products and services. I understand the financial and economic pressures faced by

the Postal Service but, I also realize that you must adhere to your basic mission

which is to deliver letter mail to all parts of the country at reasonable and uniform

postal rates. I think the Postal Service does a great job especially considering the

volume of mail that it handles each year, every day in fact and with the price of

first-class stamp at only 33 cents. Remarkable! However, I would like some assurances that postal rate increases will be restrained and not always considered first,

before other options, as a means to increase revenue.

Recently, USPS started to diversify its services and products in order to raise revenue from ‘‘non-traditional’’ sources. Currently, the Postal Service sells money orders, packaging supplies, phone cards, and retail merchandise. As long as these

services do not interfere with your primary mission to deliver mail, keep postal

products and services affordable for the public, and secure jobs for your workers,

the idea of expanding revenues without increasing taxpayer subsidies is a good one.

The Postal Service has acknowledged that this becomes more challenging as the revenue base from traditional first class mail service faces increasingly effective competition from electronic messageing, fax, electronic funds transfer, and bill payment,

as well as other telecommunications methods. Therefore, postal merchandising programs must be well-managed, subject to a system of accountability, and above all,

must contribute in a logical manner to the success of USPS’s basic mission.

Thank you for the opportunity to speak to you about my concerns. I look forward

to your report and working with you in the future on these and other important

issues.

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