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43–747 CC 1997

GENERAL OVERSIGHT OF THE U.S. POSTAL

SERVICE

HEARING

BEFORE THE

SUBCOMMITTEE ON THE POSTAL SERVICE

OF THE

COMMITTEE ON 

GOVERNMENT REFORM 

AND OVERSIGHT 

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS

FIRST SESSION

APRIL 24, 1997

Serial No. 105–41

Printed for the use of the Committee on Government Reform and Oversight

(

(II)

COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT 

DAN BURTON, Indiana, Chairman 

BENJAMIN A. GILMAN, New York 

J. DENNIS HASTERT, Illinois 

CONSTANCE A. MORELLA, Maryland 

CHRISTOPHER SHAYS, Connecticut 

STEVEN SCHIFF, New Mexico 

CHRISTOPHER COX, California 

ILEANA ROS-LEHTINEN, Florida 

JOHN M. MCHUGH, New York 

STEPHEN HORN, California 

JOHN L. MICA, Florida 

THOMAS M. DAVIS, Virginia 

DAVID M. MCINTOSH, Indiana 

MARK E. SOUDER, Indiana 

JOE SCARBOROUGH, Florida 

JOHN B. SHADEGG, Arizona 

STEVEN C. LATOURETTE, Ohio 

MARSHALL ‘‘MARK’’ SANFORD, South 

Carolina 

JOHN E. SUNUNU, New Hampshire 

PETE SESSIONS, Texas 

MICHAEL PAPPAS, New Jersey 

VINCE SNOWBARGER, Kansas 

BOB BARR, Georgia 

ROB PORTMAN, Ohio 

HENRY A. WAXMAN, California 

TOM LANTOS, California 

ROBERT E. WISE, JR., West Virginia 

MAJOR R. OWENS, New York 

EDOLPHUS TOWNS, New York 

PAUL E. KANJORSKI, Pennsylvania 

GARY A. CONDIT, California 

CAROLYN B. MALONEY, New York 

THOMAS M. BARRETT, Wisconsin 

ELEANOR HOLMES NORTON, Washington, 

DC 

CHAKA FATTAH, Pennsylvania 

ELIJAH E. CUMMINGS, Maryland 

DENNIS J. KUCINICH, Ohio 

ROD R. BLAGOJEVICH, Illinois 

DANNY K. DAVIS, Illinois 

JOHN F. TIERNEY, Massachusetts 

JIM TURNER, Texas 

THOMAS H. ALLEN, Maine 

HAROLD E. FORD, JR., Tennessee 

———

BERNARD SANDERS, Vermont 

(Independent) 

KEVIN BINGER, Staff Director 

DANIEL R. MOLL, Deputy Staff Director 

JUDITH MCCOY, Chief Clerk 

PHIL SCHILIRO, Minority Staff Director 

SUBCOMMITTEE ON THE POSTAL SERVICE

JOHN M. MCHUGH, New York, Chairman 

MARSHALL ‘‘MARK’’ SANFORD, South 

Carolina 

BENJAMIN A. GILMAN, New York 

STEVEN C. LATOURETTE, Ohio 

PETE SESSIONS, Texas 

CHAKA FATTAH, Pennsylvania 

MAJOR R. OWENS, New York 

DANNY K. DAVIS, Illinois 

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California 

DAN BLAIR, Staff Director 

HEEA VAZIRANI-FALES, Professional Staff Member 

ROBERT TAUB, Professional Staff Member 

STEVE WILLIAMS, Professional Staff Member 

JANE HATCHERSON, Professional Staff Member 

JENNIFER TRACEY, Clerk 

CEDRIC HENDRICKS, Minority Professional Staff Member 

(III)

C O N T E N T S 

Page 

Hearing held on April 24, 1997 .............................................................................. 1

Statement of: 

Motley, Michael E., Associate Director, Government Business Operations 

Issues, U.S. General Accounting Office, accompanied by Teresa Anderson, Assistant Director, Government Business Operations Issues, U.S. 

General Accounting Office ............................................................................ 10

Runyon, Marvin T., Postmaster General, and CEO, U.S. Postal Service, 

accompanied by Michael Coughlin, Deputy Postmaster General, U.S. 

Postal Service ................................................................................................ 52

Letters, statements, etc., submitted for the record by: 

Davis, Hon. Danny K., a Representative in Congress from the State 

of Illinois, prepared statement of ................................................................ 8

Fattah, Hon. Chaka, a Representative in Congress from the State of 

Pennsylvania, prepared statement of .......................................................... 4

Motley, Michael E., Associate Director, Government Business Operations 

Issues, U.S. General Accounting Office: 

Followup questions and responses ........................................................... 43

Information concerning post office closures ............................................ 32

Prepared statement of ............................................................................... 14

Runyon, Marvin T., Postmaster General, and CEO, U.S. Postal Service: 

U.S. Postal Service Ethics Program ......................................................... 66

Prepared statement of ............................................................................... 55

(1)

GENERAL OVERSIGHT OF THE U.S. POSTAL 

SERVICE 

THURSDAY, APRIL 24, 1997 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON THE POSTAL SERVICE, COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT, Washington, DC. 

The subcommittee met, pursuant to notice, at 1:05 p.m., in room 

2247, Rayburn House Office Building, Hon. John M. McHugh 

(chairman of the subcommittee) presiding. 

Present: Representatives McHugh, Gilman, LaTourette, Fattah, 

Owens and Davis. 

Staff present: Dan Blair, staff director; Heea Vazirani-Fales, Robert Taub, Steve Williams, and Jane Hatcherson, professional staff 

members; Jennifer Tracey, clerk; and Cedric Hendricks, minority 

professional staff member. 

Mr. MCHUGH. We understand that Mr. Fattah is on his way, and 

in order to expedite it at least a little, let me formally begin today’s 

hearing, by offering a brief opening statement. 

Let me begin, as I always try to do, on behalf of the entire subcommittee, welcoming everyone here this afternoon as we continue 

our general oversight hearing agenda. 

Today’s session is really a holdover, a rescheduling of an earlier 

hearing that was postponed because of a personal situation with 

the Postmaster General. We are delighted that he is here with us 

today in person and looking robust and well. 

Our first panel, however, is made up of two individuals, which 

will include Mr. Michael Motley, no stranger to this subcommittee, 

who is Associate Director of the Government Business Operations 

for the General Accounting Office. He will be accompanied by the 

Assistant Director for Government Business Operations, Teresa 

Anderson. 

Over the past 2 years, GAO has proven to be a most productive 

partner with the subcommittee in reporting to us on a broad range 

of postal operations. I think it is important to note that the GAO 

has identified a number of initiatives the Postal Service could undertake to improve its performance. I look forward to Mr. Motley 

today highlighting these initiatives, especially to the extent to 

which the Service has followed up on the questions raised by GAO 

in its past reports to Congress. 

Further, I understand GAO has a number of assignments pending. I hope Mr. Motley will report to us the status of these assignments and the impact these reports will have on assessing the productivity and efficiency of the Postal Service. 

2

Our second panel of witnesses today is Postmaster General 

Marvin Runyon, who will be joined by Deputy PMG Michael 

Coughlin. 

The last 2 years have been a banner financial period for the 

Postal Service. We have seen the Postal Service’s ledger move from deficit spending to reporting surpluses of almost $43.5 billion since 

the end of 1994. 

Gentlemen, if the past financial performance of the Postal Service is an indicator of future results, your management of postal operations will stand as an example of how to best bring an organization around to sound business practices. Never in the 26-year history of the Postal Service have significant financial achievements 

of this magnitude been obtained. 

But storm clouds do appear on the horizon. I note for the record 

that the recent accounting report for period 6, which is February 

1st through February 28th, shows volumes and revenues less than 

projected. Recent new accounts speculate the Postal Service will 

seek a general rate increase sometime this summer, and postal officials have publicly projected a revenue surplus of $55 million for 

this fiscal year. That is a marked decrease from last year’s $1.7 billion surplus. 

Press reports on other service activities have not been positive, 

either. We have seen questions raised regarding last year’s marketing department’s budget overruns, and questions of ethics have 

dogged postal officials and cast a shadow over postal operations. As 

chairman of the subcommittee over the past 2 years, I have seen 

the organization post a strong financial performance. But Congress 

and the American people demand accountability from all facets of 

this institution. Questions regarding these operations only provides 

fodder to opponents of postal reform who use these instances as excuses to erect roadblocks to passage of our reform agenda. 

While today’s hearing is not specifically devoted to reform issues, 

I hope we will engage in a dialog which further provides a positive 

record on which this subcommittee can proceed in improving the 

postal service to this great country. Through that and our oversight 

efforts, we will continue to build a record in identifying necessary 

reforms in pursuit of ways to strengthen the one organization, the 

U.S. Postal Service, devoted and directed to performing the mission 

of providing affordable and universal mail service. 

And with that, I gratefully acknowledge the arrival of the ranking member, the gentleman from Pennsylvania, Mr. Fattah. I 

would be happy to yield to him for any comments that he would 

like to make at this time. 

Mr. FATTAH. Thank you, Mr. Chairman. I would like to have a 

prepared opening statement entered into the record, and thank you 

for convening this hearing. 

I look forward to hearing the testimony from the Postmaster 

General in response to a whole range of issues. One is that obviously there has been a lot of success under the management that 

he has put in place and his team has put in place, but there are 

areas of concern, and we think that today’s hearing is an appropriate place to both look at the successes and some of the issues 

that remain to be resolved. There are some questions that the public and this committee need to have answered relative to changes 

3

in some of the procurement procedures, issues relative to the overall financial performance that I think obviously the Postmaster 

General is in the best position to answer, and I look forward to his 

testimony. 

Mr. MCHUGH. I thank the gentleman. 

[The prepared statement of Hon. Chaka Fattah follows:]

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Mr. MCHUGH. As great an admirer of the Postal Service as I am, 

I should be accurate. I said $48.5 billion in surpluses; $3.4 billion 

I believe is more correct. But we have set the bar for you, Marvin. 

Mr. RUNYON. Thank you very much. 

Mr. MCHUGH. As I said, I thank our ranking member. 

I also am pleased we have been joined by the gentleman from 

Ohio, Mr. LaTourette. I would be happy to yield to him for any 

comments he might wish to make at this time. 

Mr. LATOURETTE. I look forward to the testimony today from 

GAO and also the Postmaster. 

In my part of the world, there are a number of questions. Although we commend the Postal Service for the righting of the fiscal 

ship, there are a number of questions regarding the closure of 

small post offices and how we deal with that situation in the future, as well as some questions about compensation packages that 

occurred during the course of the end of last year. But to move the 

hearing along, I would ask unanimous consent that my full opening 

remarks be included in the record of this proceeding. 

Mr. MCHUGH. All Members will have the opportunity to submit 

opening statements for the record in their entirety. 

He has not yet had a chance to settle in, but I am grateful that 

Mr. Davis has joined us here today. I would be happy to yield to 

him at this time if he would like to make any opening comment. 

Mr. DAVIS. Well, I would, indeed. Thank you. Thank you very 

much, Mr. Chairman. I appreciate the opportunity to make a few 

remarks as we begin these proceedings. 

I would also like to express appreciation to those who are going 

to be giving us information. As I understand it, the U.S. Postal 

Service’s net income for fiscal year 1996 was $1.6 billion, which 

was the second most profitable year in its history. I certainly would 

acknowledge and commend all of those who contributed to this remarkable year, from the Postmaster General and Inspector General 

to the frontline men and women postal employees. It is illustrative 

of the hard work that all of them have done. 

I am interested in hearing today, in sort of an information-sharing process, and would want to raise a couple of concerns. They are 

mostly based upon information that I pick up from people as I travel throughout the district where I live and work. 

I have some concerns relative to the alleged proposals to contract 

out services for the manufacturing of postal uniforms that may end 

up involving union shops. And while I am not suggesting that we 

only look in a certain direction, to certain kinds of activity, I do 

have some concerns about what I am hearing, relative to what the 

possibilities might be. 

I also raise the concern and have some concerns about constituents of mine who are fearful that they may end up losing their jobs 

to substandard manufacturers if we go in certain kinds of directions. And I also have some concerns relative to the whole question 

of how we view affirmative action at the very highest level of the 

system.

7

And so those are the three major concerns that I have, and I certainly appreciate the opportunity to lay them out and hopefully we 

will hear responses to them in the testimony as the day proceeds. 

[The prepared statement of Hon. Danny K. Davis follows:]

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Mr. MCHUGH. I thank the gentleman both for his presence and 

his expression of concern. 

With that, I would welcome Mr. Motley and Ms. Anderson to the 

front table. 

Please be seated. Before we undertake the committee rule of 

swearing in those who are about to testify, we have been joined by 

my fellow New Yorker, Mr. Owens. I would be happy to yield to 

him for any opening comments he might wish to make at this time. 

Mr. OWENS. No, I have no opening statements. 

Mr. MCHUGH. I thank the gentleman for joining us. 

Stand please. 

[Witnesses sworn.] 

Mr. MCHUGH. The record will show that both of the witnesses 

answered the oath in the affirmative. 

Thank you very much, both of you, for being here. I noted in my 

opening comments about the relationship between the GAO and 

you as individuals and this subcommittee. We are very appreciative 

of the very valuable information, and analyses you have provided 

us. A small sampling of that work is contained on the side table 

near the entrance, if some folks would like to take any or all of 

those differing documents. I think they will see very clearly how 

GAO has been a very productive partner in this oversight function. 

So we welcome you here as colleagues and as friends. And we are 

very interested in the comments that you have to share with us 

today. Mr. Motley I would yield to you and you may proceed as you 

deem fit. Thank you.

STATEMENT OF MICHAEL E. MOTLEY, ASSOCIATE DIRECTOR, 

GOVERNMENT BUSINESS OPERATIONS ISSUES, U.S. GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY TERESA ANDERSON, ASSISTANT DIRECTOR, GOVERNMENT BUSINESS 

OPERATIONS ISSUES, U.S. GENERAL ACCOUNTING OFFICE 

Mr. MOTLEY. Thank you very much, Mr. Chairman. I appreciate 

those kind comments about the work we’ve done over the last several years, and we, too, have enjoyed the relationship that we have 

had not only with the subcommittee here but with the Postal Service as well. 

While you introduced Ms. Anderson, I’ll mention that Ms. Anderson is the focal point for our postal activities within the Government Business Operations Issues area. 

With that, Mr. Chairman, I would like to state I would like to 

summarize my statement today but ask that it be included in full 

in the record. 

Mr. MCHUGH. Without objection, so ordered. 

Mr. MOTLEY. Mr. Chairman, and members of the subcommittee, 

we are pleased to be here today to participate in the subcommittee’s oversight hearing on the U.S. Postal Service. My testimony 

will focus on the performance of the Postal Service and the need 

for improving internal controls and protecting revenue in an organization that takes in and spends billions of dollars each year, and 

I’d like to also highlight some of the key reform and oversight 

issues that continue to challenge the Postal Service and Congress 

as they consider how U.S. mail service will be provided in the future. 

I will also provide some observations from our ongoing work. 

11

First, I would like to discuss both the reported successes and 

some of the remaining areas of concern related to the Postal Service’s performance. Last year, the Postal Service reported that it had 

achieved outstanding financial and operational performance. Financially, the Postal Service had the second most profitable year in its 

history. According to the Postal Service, its fiscal year 1996 net income was $1.6 billion. Additionally, the Postal Service continued to 

meet or exceed its goals for on-time delivery of Overnight Mail, 

with its last quarter of 1996 showing a delivery rate of overnight 

local residential mail at 91 percent at on-time or better service. 

Also, in fiscal year 1996, the Postal Service mail volume exceeded 182 billion pieces and generated more than $56 billion in revenue. 

While these results are encouraging, other performance data suggests that some areas of concern warrant closer scrutiny. For example, last year’s delivery of 2- and 3-day mail at 80 and 83 percent, respectfully, didn’t score as high as overnight delivery. Such 

performance has raised the concern that Postal Service’s emphasis 

on overnight delivery is at the expense of 2- and 3-day mail. 

Additionally, although its mail volume continues to grow, the 

Postal Service is concerned that customers increasingly are turning 

to its competitors or alternative communications methods. In 1996, 

mail volume increased by about one-half the Service’s anticipated 

increase in volume. 

Containing costs is another key challenge that we reported on 

previously. Labor costs, which include pay and benefits, continue to 

account for almost 80 percent of the Postal Service’s operating expenses, and the Postal Service expects that its costs for compensation and benefits will grow more than 6 percent in 1997. Overall, 

the next 5 years the Postal Service plans to devote more than $14 

billion in capital investments to technology and infrastructure improvements in customer service and revenue initiatives. 

The Postal Service’s continued success in both operational and financial performance will depend heavily on its ability to control operating costs, strengthen internal controls, and ensure the integrity 

of its services. However, we found several weaknesses in the Postal 

Service’s internal controls that contributed to unnecessary increased cost. We reported in October 1996 that internal controls 

over Express Mail corporate accounts were weak or nonexistent, 

which resulted in the potential for abuse and increasing revenue 

losses over the past three fiscal years. 

Specifically, we found that some mailers obtained Express Mail 

services using invalid EMCAs and that the Postal Service did not 

collect the postage due. Consequently, in fiscal year 1995, the Postal Service lost Express Mail revenue of about $800,000 primarily 

because it did not verify EMCA accounts that were later determined to be invalid. Since our report was issued, the Postal Service 

has taken action or developed plans to address these deficiencies. 

Similarly, we reported in June 1996, the weaknesses in the Postal Service controls for accepting bulk mail prevented it from having 

reasonable assurance that all significant amounts of postage revenue due were received when mailers claimed presort/prebarcode 

discounts. We reported that during fiscal 1994, as much as 40 percent of the required bulk mail verifications were not performed. 

Bulk mail totaled almost one-half the Postal Service’s total revenue 

12

of $47.7 billion in fiscal year 1994. At the same time, we found that 

less than 50 percent of the required followup verifications to determine the accuracy of the clerk’s work were being performed by supervisors. 

Another area of recent concern has been the overall integrity of 

the Postal Service’s acquisitions. We concluded in our January 

1996 report that the Postal Service did not follow required procedures for seven real estate or equipment purchases. We estimated 

that these seven purchases resulted in the Postal Service’s expend- ing about $89 million on penalties, unusable, or marginally usable 

property. Three of the seven purchases involved ethics violations 

arising from the contracting officer’s failure to correct situations in 

which individuals had financial relationships with the Postal Service and with certain offerors. 

We also pointed out that the Office of Government Ethics was reviewing the Postal Service’s ethics program and reported that all 

areas required improvement. The Office of Government Ethics subsequently made a number of recommendations designed to ensure 

that improvement of the Postal Service’s ethics programs continue 

through more consistent oversight and management support. 

Since our January 1996 report, the Office of Government Ethics 

has completed three reviews to followup on its open recommendations. Recently, the Postal Service developed guidance for avoiding 

conflicts of interest and filing financial disclosure reports as well as 

established procedures to ensure that the Office of Government 

Ethics is notified about all conflict of interest violations that are referred to the Department of Justice. As a result of these actions, 

the Office of Government Ethics closed its remaining open recommendations. 

Recently, we issued a report that described how the Postal Service closes post offices and provides information on the number of 

closed since 1970, over 3,900 post offices. In addition, yesterday we 

issued a letter to you, Mr. Chairman, about the emergency suspension of post offices which states that about 470 post offices currently are in emergency suspension status. These 470 have been in 

this status anywhere from a few days to over 10 years. 

The second area I would like to discuss is the pending postal legislation. This legislation, if enacted, might place the Postal Service 

in a more competitive arena with its private sector counterparts 

and has raised some key reform issues for consideration. One such 

issue relates to proposed changes in the private express statutes. 

These statutes were set up to ensure that the Postal Service has 

enough revenue to provide universal access to postal services, to 

the general public, and that certain mail such as First Class will 

bear a uniform rate. 

In our September 1996 report, we emphasized the importance of 

recognizing the statutes’ underlying purpose in determining how 

changes may affect universal mail service and uniform rates. Most 

important among the potential consequences is that relaxing the 

statutes could open First Class Mail services to additional competition, thus possibly affecting postal revenues and rates and the 

Postal Service’s ability to carry out its public service mandates. 

Mr. Chairman, as you are aware, we also have a number of ongoing reviews relating to postal reform. For example, in concert with 

13

your focus on the future role of the Postal Service, we are currently 

reviewing the role and structure of the Postal Service’s Board of 

Governors in order to determine its strengths and weaknesses. 

Another issue important to postal reform that we are reviewing 

involves access to mailboxes. Congressional oversight remains a 

key to improving the organizational performance of the post office. 

Generally, the long-standing labor management problems we 

identified in 1994 still remain unresolved despite the initiatives 

that have been established to address them. For example, the number of grievances requiring formal arbitration has increased 76 percent, from 51,000 in fiscal 1993 to over 90,000 in fiscal year 1996. 

These difficulties continue to plague the Service primarily because 

the major postal stakeholders cannot all agree on common approaches to addressing their problems. 

The Government Performance and Results Act provides a mechanism that may be useful in focusing a dialog that could lead to a 

framework agreement. GPRA provides a legislatively based method 

for the stakeholders, including Congress, to jointly engage in discussions that focus on an agency’s mission and on establishing 

goals, measuring performance, and reporting on mission-related accomplishments. GPRA can be instrumental to the Postal Service’s 

efforts to better define its current and future role. 

Finally, several other areas will likely continue to require the attention of both the Postal Service and Congress. One such area is 

the Postal Service’s automation efforts. The Postal Service has 

spent billions of dollars to ensure that an increase in productivity 

and an adequate return in planned investments are realized. 

Another area is the Postal Service’s 5-year capital investment plan from 1997 to the year 2001. It calls for investing $14.3 billion 

of which $3.6 billion is designated for technology investment. Also 

included is $6.6 billion for planned infrastructure improvements 

such as maintaining and improving over 35,000 postal facilities and 

upgrading the vehicle fleet of more than 200,000 vehicles. In addition, customer satisfaction in both the residential and business levels will continue to be critical areas as the Postal Service strives 

to improve customer service in order to remain competitive. 

The Postal Service has made considerable progress in improving 

its financial and operational performance. Sustaining this progress 

will be dependent upon ensuring that key issues that we identified 

such as controlling costs, protecting the revenues, and clarifying 

the role of the Postal Service in an increasingly competitive communications market are effectively addressed by the Postal Service 

and Congress. 

Mr. Chairman, that concludes my statement, and we would be 

happy to respond to any questions you or any of the other members 

of the subcommittee may have. 

Mr. MCHUGH. Thank you very much, Mr. Motley. I appreciate 

your testimony. 

[The prepared statement of Mr. Motley follows:]

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Mr. MCHUGH. Let me begin by getting to one of the, I think, key 

components of both the studies that you have been doing, and certainly one of the key questions that this subcommittee has been 

looking at, and that is trying to structure postal service for the 21st 

century. 

Any number of your reports, as you have recounted here today, 

in recent months have pointed out some difficulties, at best, and 

some might argue very serious operational difficulties within the 

Postal Service. You talked about in past reports and in your testimony today the internal controls over Express Mail corporate accounts. You have talked about the bulk mail acceptance practices, 

as you noted here this afternoon, that perhaps placed as much as 

$9.5 billion of revenues at risk. And you talked about the ethics situation that particularly pertained to acquisitions and how that has 

been very problematic. 

In your testimony you noted—and as I read the Postmaster General’s testimony that he will present later to us—that the post office has begun to move on these findings. 

Mr. MOTLEY. Yes, sir. 

Mr. MCHUGH. The words used was ‘‘taken action’’ or ‘‘developed 

plans’’ here today, and that is a positive thing. 

Mr. MOTLEY. Yes, sir. 

Mr. MCHUGH. That is what I suppose you feel you are in existence for, to have that statement and then the subsequent reaction. 

Mr. MOTLEY. That’s right. 

Mr. MCHUGH. The question that we have to look at in providing 

the Postal Service with more flexibility is, do they deserve it and 

can they be trusted with it? 

I was just going to say, beyond having taken action or developed 

plans, in your judgment, or are you able to form a judgment, have 

those actions been enough? Will they be sufficient? Are they still 

falling short? And do they deserve more flexibility? 

Mr. MOTLEY. I think, Mr. Chairman, there are a lot of ways to 

respond to your question. I think it’s important to note at first that 

all the areas that we’ve looked at, the ones that you have mentioned, bulk mail, EMCA accounts, and the ethics issues and the 

procurement, all of these areas had internal controls in place. And 

it was the Postal Service and the management in the Postal Service that didn’t give proper attention to those existing management 

and internal controls that resulted in the kind of problems that existed. 

Our reports, I think, brought these things further to the attention of the Postal Service, and as a result of those they’ve said that 

now is the opportunity for us to strengthen those controls to 

change some of our policies. 

I think it’s important, Mr. Chairman, at this point the watchword for the GAO, I believe, as well as the subcommittee, is continued oversight. I think we need to continue to watch how these 

kinds of management actions are being implemented by the Postal 

Service. See if these internal controls really are effective, that 

they’ve been put in place, and continue to revisit these issues 

through continued oversight. 

Your question about whether or not they should have greater 

flexibility and responsibility becomes a difficult one. I think with 

31

that greater flexibility and responsibility, continued oversight is 

also necessary. So I wouldn’t suggest that in any way that we 

should just let the Postal Service go on and take on more and more 

responsibility, but there should be a partnership that exists with 

the subcommittee as well as other oversight entities within the 

Postal Service itself, to keep a watchword on these things. 

Mr. MCHUGH. So it is a work in progress? 

Mr. MOTLEY. Yes, sir, I would say so. 

Mr. MCHUGH. You don’t have any particular criticisms to levy at 

this point, but urge oversight and caution; is that right? 

Mr. MOTLEY. I would say so. If I were to say anything, Mr. 

Chairman, with regard to a watchword, is GAO’s been auditing the 

Postal Service for a very long time. I know that table over there 

is fairly large but we probably could have brought in about 350 

GAO reports that deal with the Postal Service, and I would suggest 

to you that many of them are on the same issues. 

With regard to ethics issues that are addressed in our testimony, 

and that you mentioned, if you look at what the Office of Government Ethics did, I mean, if you went back to 1978, many of these 

issues were brought to their attention; its now 1997, it’s taken a 

long time for changes to take place. 

Mr. MCHUGH. I have no doubt you could fill that table, and any 

number of others. 

Let’s take a few steps into the future. You mentioned oversight, 

and I suppose that is related in some ways to participation in forming the future. I am thinking specifically about the GPRA. 

You noted in your testimony one of the more troubling aspects 

of the current postal situation is the continuous strife between 

labor and management. I couldn’t agree more. You offer the hope 

that GPRA can provide a means by which to begin to settle some 

of those issues. 

Mr. MOTLEY. Yes, sir. 

Mr. MCHUGH. Provide a framework for the beginning. 

Do you have any opinions at this time as to how serious an effort 

may be provided? There seems to be some discussion as to when 

a pre-draft of the final Postal Service report may be available and 

if it will be available in a timeframe that makes meaningful input 

and discussion possible? Have you had a chance to look at that 

question? 

Mr. MOTLEY. We’ve had some discussions, a fair number of discussions, actually, with the Postal Service, and we have been coordinating with the subcommittee. And as you know, GPRA provides a fair amount of guidance with regard to the kind of goals 

and strategies that will be looked for by the Congress, I think, 

when the final reports arrive on September 30th. However, GPRA 

has some very significant milestones in it. I would conclude that 

those milestones include having conversations and consultations 

with the oversight entities up here on the Hill as well as with their 

individual stakeholders. 

The discussions that we’ve had to date, the Postal Service is not 

at a point where they have a draft document that can be a forum 

for consultation to a great degree in identifying what their goals 

are and the actual strategies in getting to those goals. As a result, 

the stakeholders don’t have that opportunity either to get a better 

32

understanding of what the Postal Service’s goals are nor the strategies which could have a significant impact on them, so the draft 

document becomes a very important one. Here we are in this time 

of the year, and September is coming up on us very quickly, so I 

would suggest, Mr. Chairman, that having that draft sooner than 

later is going to be a very important factor. 

Mr. MCHUGH. Well, maybe there are some people in this room 

who heard that. I did. 

Mr. MOTLEY. OK. 

Mr. MCHUGH. I was hoping that the ranking member who had 

to step out momentarily would be able to be back before I yielded 

but obviously his business is taking a bit more time. We have a 

number of Members who have very kindly joined us so I want to 

be sure to yield them time. And according to the rules, I now yield 

to Mr. LaTourette for any questions he might have. 

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

As I looked at your written testimony today, and also the report 

of March of this year regarding post office closings, I had a couple 

of questions; one, about the grievance procedure, and, two, about 

post office closings. 

As I looked at the statistics in the March report, and I focused 

on the number of post office closings that were appealed, it appeared to me, if I read your statistics accurately, that of the appeals filed in the vast majority of cases, the post office was permitted to proceed with whatever its original plan had been, and 20 

percent of them, roughly 2 out of 10 were sent back to the Service 

for review and further disposition. 

Has there been any followup to that? Is there any success rate 

at all I guess is what I am asking you when a community appeals 

the closure of its postal facility? 

Mr. MOTLEY. I don’t have the numbers at my fingertips, Congressman LaTourette, but we can certainly provide those for the 

record. There are instances where the Postal Service does decide to 

reopen the facility, but I will provide those for the record. 

[The information referred to follows:]

In our report on post office closures, we stated that according to the Service, of 

the 296 post office closure decisions appealed to the PRC, 58 closure decisions were 

remanded back to the Service by PRC. According to the Service, as of May 27, 1997, 

27 or 47 percent of these post offices remain open and the Service has no immediate 

plans to close them. For 9 other post offices that remain open, 6 are in the final 

stages of being officially closed and 3 are under review for a final determination of 

whether or not to officially close. The Service has officially closed the post offices 

for the remaining 22, or 38 percent, of the post office closure decisions remanded 

by PRC.

Mr. LATOURETTE. And, I guess the difficulty that I have with, 

certainly not with the report because it is very well done, but with 

this concept, and what people always come up to me at home and 

say ‘‘the Postal Service is more than a business.’’

And what they are concerned about—everybody applauds the fact 

that we have had a net income of $1.6 billion and this is the second 

profitable year and things are going good, but the senior citizen 

who relies on the opportunity to cross the street and go to her or 

his post office and buy stamps and knows the postal clerk, that it 

is more than just somebody handing out letters or stuffing stuff in 

their mailbox. 

33

And as you looked at the closing procedure, it appeared that it 

was almost an attrition type thing. That the Postal Service wasn’t 

taking affirmative action but when a Postmaster resigned or retired or was transferred or the lease on the building ran out that 

is when the vast majority of closings were occurring. 

Mr. MOTLEY. That is generally what triggers or causes the Postal 

Service to consider the closing action, yes, sir. 

Mr. LATOURETTE. The last question is on the appeal process. Do 

you have a sense that the concerns of the affected community are 

adequately and fairly heard by the Service as they go through the 

appeal process in reaching their eventual conclusion? 

Mr. MOTLEY. Actually, we were looking at the process and the 

various things in the process. We didn’t look behind, as you might 

suggest, really the concerns that the community brought up. 

The role that the Postal Rate Commission plays in that way is 

to look at whether or not the Postal Service in some way has addressed the concerns of the community, and if they believe that 

they have not, then they remand it back to the Postal Service for 

further work. 

Mr. LATOURETTE. OK. 

The second set of questions I have deal with the grievances, because that is something that has been brought to my attention. 

And just three sets of separate news stories that I saw over the 

course of the fall, one was the $1.6 billion net income by the Postal 

Service. 

The second one that appears in a number of stamp collector magazines and other articles had to do with bonuses being paid to supervisors in the Postal Service, and then the third, which you reflect in your report, has also been in print other places, that we 

have had an increase, a 76 percent increase in grievances filed 

against the Postal Service. 

Some would argue, and some in Ohio that contact me from time 

to time, say that those three events are not unrelated. And in that 

the pressure to turn a service that has been financially troubled 

into a money maker, if you will, has led to the need to incentivize 

supervisors and hand out bonuses which has placed pressure upon 

those supervisors to become—I am at a loss for the words, ‘‘stringent’’ comes to the mind, but I think you know what I mean—upon 

the rank and file postal worker that has led to a 76 percent increase in grievance filings. 

Is there anything from your study that reflects on that one way 

or another? 

Mr. MOTLEY. I might take you back a little bit, to an earlier 

study that GAO did. It was in 1994. It was issued in September 

1994. That dealt with the labor management relations in the Postal 

Service. 

That report characterized the Postal Service as having an autocratic management style. And that particular report recognized the 

problems that existed in the labor management relations on the 

workroom floor level. We had a variety of recommendations in that 

particular report that addressed specifically some of the concerns 

that you mentioned about supervisors and how those supervisors 

might interact with workers on the workroom floor. 

34

The Postal Service has generated a variety of initiatives to try 

and address those problems. But as I highlighted in the testimony, 

a lot of times the Postal Service and its unions and management 

associations are not able to agree on how to go forward with some 

of these initiatives, and this is why I indicated that GPRA has been 

an avenue for these people to come a little bit closer together and 

agree on the goals that they would like to achieve in the long term. 

We are currently looking at the initiatives, and at the request of 

the chairman, relooking at those and trying to make a determination of whether or not they have been effective in some degree in 

trying to help. 

Mr. LATOURETTE. That answers my question. Thank you, Mr. 

Motley, and thank you, Mr. Chairman. 

Mr. MCHUGH. I thank the gentleman. 

Mr. Davis. 

Just for the edification of the audience as well as the Members, 

the committee rules provide that Members are recognized in the 

order of the appearance of the time the gavel came down and then 

by seniority. 

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

Mr. Motley, you indicated in your testimony that there were 

some areas of weakness in terms of internal controls that you 

found. 

Mr. MOTLEY. Yes. 

Mr. DAVIS. Then you indicated that afterwards there had been 

some movement toward correction. Did you find this to be significant or do you think that it will actually move in a serious way to 

correct the problem? 

Mr. MOTLEY. Mr. Davis, I believe that the actions taken by the 

Postal Service in most of the cases that we looked at, especially, 

let me particularly address EMCA and the bulk mail services, I 

think they’re fairly significant actions that they’ve taken. I think 

they’ve tried to recognize very fully the concerns on the Express 

Mail corporate account level. The concern we expressed in our report was about the Postal Service being able to identify applicants 

and having some kind of verification of their addresses when they 

apply for Express Mail corporate accounts. They have taken action 

to raise the limits for opening a corporate account as well as the 

amount that’s required to be maintained in the balance of the corporate account. And they’ve taken some additional actions and sent 

out directives to the various locations throughout the United States 

for Postal employees to pay more attention to these things. 

If I were to suggest an area that maybe needs some additional 

attention, as we suggested in our report, one of the big problem 

areas is in accepting express mail in the mail processing facilities 

where there was no way or sometimes very little time to process 

the corporate account information. The Postal Service has indicated 

that they plan to put some terminals in place, but we have no guidance as to what kind of timeframe might exist but it appears to us 

they are trying to make some headway in that area. 

Very similarly, in the bulk mail area they are instituting additional training as well as taking other efforts to ensure that the 

kind of problems that we identified are caught early on. I think 

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ty much in full swing because more and more businesses will be 

using the opportunity to use bar codes and things of that sort that 

the Postal Service will be required to check at those bulk mail facilities. 

Mr. DAVIS. You also indicated that there was a significant 

amount of difference between overnight delivery and 2- or 3-day. 

Mr. MOTLEY. Yes, sir. 

Mr. DAVIS. That overnight, 91 percent; 2-, 3-day, 80 to 83. 

Mr. MOTLEY. Yes, sir. 

Mr. DAVIS. Is the 80 to 83 representing cause for concern or is 

it just a difference between the two? 

Mr. MOTLEY. I think in an organization that is tending to pride 

itself as a premiere organization in delivering the mail, those 

things are important not only from the Postal Service’s perspective 

but the mailer’s perspective as they put that mail into the mail 

stream. 

The concentration by the Postal Service over the last several 

years has been on overnight delivery. They’ve done a good job of 

improving those statistics, and I believe it’s significant now that 

they turn their attention to some of these other areas. 

Mr. DAVIS. Oh, OK. But we are not suggesting that we are in 

some serious difficulty there because of the lower rate in productivity? 

Mr. MOTLEY. I wouldn’t suggest that it is a serious difficulty, but 

I believe it’s an area that the Postal Service has to give attention 

to. 

Mr. DAVIS. Certainly something to look at and be concerned 

about? 

Mr. MOTLEY. Yes, sir. 

Mr. DAVIS. You also mentioned about possibly looking at the 

Board of Governors in terms of the way in which they operate. Oftentimes, I know that when we review, we do so with something 

in mind. Sometimes we review for the sake of knowing, but we also 

review with an idea in mind or something specifically that we 

might be looking for. 

Are we looking specifically at or for something in this instance? 

Mr. MOTLEY. I think really what we are looking for here, Mr. 

Davis, is whether or not there are opportunities for improvement; 

whether or not there are opportunities in comparison to other federally charged agencies that have similar organizational structures 

as the Postal Service with board of directors involved as to whether 

or not there is some particular thing that might draw us to the requirement or need for legislative change or something that might 

make the operations of the Postal Service more efficient or effective. And I think that’s really what we are looking for in those 

things. 

We didn’t have a particular goal in mind in terms of if it’s wrong 

or right but we wanted to see if there were opportunities for something better. And we got through talking to all the Board of Governors, as well as many of those that have been in that position 

before the current ones. 

Mr. DAVIS. When you are reviewing agencies, do you also look at 

things that may not be specifically outlined, just in terms of what 

36

might be overall goals and directions of the Nation—like affirmative action and how performance might be with those agencies? 

Mr. MOTLEY. We look at a variety of those things, yes, sir, Mr. 

Davis. 

Mr. DAVIS. Did you observe anything with the Postal Service? 

Mr. MOTLEY. We haven’t specifically honed in on that. I meant 

to infer that the charge that the Congress provides us either 

through the chairman or ranking minority members or other interested parties here on Capitol Hill, we look into almost any individual issues in agency activities and operations. We have not 

looked specifically at the kind of issue that you might be addressing here. 

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

Mr. MCHUGH. I thank the gentleman. Mr. Owens. 

Mr. OWENS. Thank you, Mr. Chairman. 

I think I heard you say that $1.5 billion was the net revenue? 

Mr. MOTLEY. I believe it was $1.6 billion. 

Mr. OWENS. $1.6 billion was the net revenue. What was the gross 

revenue? 

Mr. MOTLEY. Fifty-six billion. Keep in mind, Mr. Owens, that the 

Postal Service is intended to be a break-even organization, and a 

lot of times generally what happens is it is sort of cyclical. The first 

year or so after a rate increase you will see a fairly substantial 

profit. The next year, you generally see something along the lines 

of break even. 

Mr. OWENS. No, I am going in a different direction. You spoke 

about the important oversight responsibilities of Congress. 

Mr. MOTLEY. Yes, sir. 

Mr. OWENS. The oversight responsibilities of Congress boil down 

mainly to this subcommittee. We once had a whole committee that 

was responsible for the oversight of the post office. 

Do you think, as things go, the ratio of congressional oversight 

to the large size of this agency and the importance of it is a proper 

one? Should we have a subcommittee really as the main oversight 

body or should we not have a major committee, considering the size 

of the agency’s budget, the size of the operation and the importance 

of it to every American citizen? 

Are we—the question is, you know, in the scheme of things do 

we have appropriate, effective oversight capacity? 

Mr. MOTLEY. Well, that’s a question I don’t know that I’m in a 

position to answer directly about whether or not there should be 

a full committee or just a subcommittee. I would contend, Mr. 

Owens, that this subcommittee has done a tremendous job in the 

last several years charged with the responsibilities it has.

Mr. OWENS. We have an extraordinarily hard working chairman, 

and I take off my hat to him. But the amount of staff he has and 

the budget he has is far different from the committee that once had 

oversight for the postal services and I wondered if you had any——

Mr. MOTLEY. No particular thought. I really believe that is a policy decision for the Congress to make. 

Mr. OWENS. Regular delivery is lagging behind overnight because 

overnight is competing with the private sector and they put a lot 

of emphasis on that. 

Did you do audits of Price Waterhouse or did you accept their figures and are you quoting their figures? 

37

Mr. MOTLEY. We accepted the Price Waterhouse figures, Mr. 

Owens, that are published by the Postal Service. And this overnight delivery is the overnight residential 1-day delivery First 

Class Mail, which is your 32 cent mail. 

Mr. OWENS. Do you think that the Price Waterhouse auditing 

mechanism is an appropriate one? Should we have several different 

auditing firms or should we change auditing firms every year? It 

is a contract that has gone on for some time now. Would you comment on that? 

Mr. MOTLEY. We have not really looked at the Price Waterhouse 

contract. 

Mr. OWENS. It is a situation where the same contractor has the 

contract to evaluate the same organization over a long time. Is that 

a sound way, a GAO way of looking at things? 

Mr. MOTLEY. I think a lot is determined by how the contract 

awards are made. And I do not know if this is a sole source or competitive contract. But I think it would make a significant difference 

as to how this was put out on the street. And we have not looked 

at that. 

Mr. OWENS. If it is competitive, it is all right to have it be the 

same one for 10 years? 

Mr. MOTLEY. I wouldn’t suggest that if it is sole source it would 

be OK. 

Mr. OWENS. On principle, the fact that you are paying for service 

from one entity doesn’t set up a situation for conflicts of interest? 

Mr. MOTLEY. I don’t believe so. I think those things are within 

the bounds of the contracting regulations that the Postal Service 

operates under. 

Mr. OWENS. On labor management, did you look at racial discrimination and its impact on the situation at all? 

Mr. MOTLEY. We didn’t. 

Mr. OWENS. You didn’t look at any of the grievances bought by 

black groups and Hispanic groups and that phenomenon? 

Mr. MOTLEY. We haven’t. 

Mr. OWENS. There are several suits, as I understand. 

Mr. MOTLEY. We have not. 

Mr. OWENS. Why did you not? 

Mr. MOTLEY. What we have been concentrating our efforts on in 

the labor management area are the initiatives that have been 

started by the Postal Service, and the actions that have been taken 

under those initiatives by the various postal unions as well as its 

management associations, so we have looked at it from a very topical point of the initiatives themselves and what has taken place 

in the agreements that they’ve reached under those initiatives and 

whether or not we believe, as well—based on talking to the union 

officials and Postal Service officials, whether or not there has been 

progress in that area. 

Mr. OWENS. Did you compare their due process procedures with 

other agencies of comparable size? 

Mr. MOTLEY. If you’re referring to the arbitration process, it is 

a fairly common one throughout the Government. 

Mr. OWENS. When an individual has a grievance and the process 

it goes through; it is comparable? 

Mr. MOTLEY. It is very similar to most agencies. 

38

Mr. OWENS. Is it as good as the Army’s? 

Mr. MOTLEY. I’m not familiar with the Army’s. 

Mr. OWENS. Did you look at the training at all? This is a huge 

organization, large budget, large numbers of moving parts and 

large number of employees, large amount of investment in state-ofthe-art technology. What are the training procedures? Did you look 

at the training procedures for employees? Sensitivity training in 

terms of labor management or any training procedures? 

Mr. MOTLEY. We have looked at some of the training procedures 

as it relates to some of the specific initiatives that they have under 

way, but we have not looked at their entire training activities. 

Mr. OWENS. I asked this question 2 years ago of I think the Postmaster General. You didn’t see any films, any videos, any web sites 

or classes that are regularly run as a system for training? You 

didn’t notice—— Mr. MOTLEY. I’m aware, not very heavily aware, I am aware that 

the Postal Service has an extensive training program, and that 

they do use videos and things of that sort. 

Mr. OWENS. I have been trying to get a copy for 2 years of some 

training films. 

Mr. MOTLEY. Well, I am sure if they are available Mr. Runyon 

will make them available to you. If you need our assistance in 

doing that, we will be happy to help you. 

Mr. OWENS. I have one video that deals with ‘‘This is your post 

office,’’ a nice film, you know, for introducing children to the post 

office, or adults. But it is not a system of training that an organization of that size you would expect would have. 

So personnel development and training for personnel you didn’t 

see figured into that whole labor management problem? 

Mr. MOTLEY. I actually think that is a part of the whole labor 

management process, Mr. Owens. What I am suggesting is that we 

didn’t look at that whole process in the work that we have done 

to date. 

Mr. OWENS. Thank you. 

Mr. MOTLEY. Yes, sir. 

Mr. MCHUGH. I just want to make sure I got this straight. More 

budget and more staff, and I would be a full committee Chair? We 

should talk. 

Mr. OWENS. Are we both New Yorkers? 

Mr. MCHUGH. We may have to strike that. 

Mr. Gilman. 

Mr. GILMAN. Mr. Chairman, I regret that I had to be at another 

meeting earlier, and I commend you for continuing these series of 

oversight on the Postal Service. I welcome listening a little more 

about the proposal to centralized uniform purchasing procedures. I 

strongly support the Postal Service’s attempt to have cost efficiency; however, it is important that the Postal Service provide 

adequate protection to guard against adversely affecting our U.S. 

garment industry as well as to prevent the utilization of sweatshops in this process. 

And I look forward to hearing the testimony of Postmaster General Runyon concerning the issues he is confronted with and providing service and cost efficiency. But let me ask a question of our 

GAO. Some economists specializing in postal issues have raised 

39

doubts whether the Postal Service can remain viable in its current 

form. Would you care to comment on that? 

Mr. MOTLEY. Well, that probably is an understandable concern 

that they might have, Mr. Gilman. The Postal Service has been 

threatened by competitors for an awfully long time now, and something that I won’t say is new on the scene but in the last 10 years 

or so, the telecommunications market has started to cut into the 

Postal Service quite extensively. I think Mr. Runyon in leading the 

Postal Service has recognized this and attempted in a variety of 

ways to create a better service and to try and see how he might 

be able to stem some of the concerns that exist there. 

I believe in the future, as communications through the computer 

and as households start to afford these more and more, you’ll see 

some of the mail stream such as First Class, which is a very large 

revenue generator for the Postal Service, start to change significantly. I know that this is one of the reasons that the chairman has 

expressed concern and proposed H.R. 22 as a reform measure—beginning of the reform measures for the Postal Service. 

Mr. GILMAN. In your testimony, you mentioned how the Postal 

Service goes about closing post offices. Coming from a district that 

I have that includes many small, rural services and substations, I 

wonder if you can comment on how such closings affect service in 

the more rural areas. 

Mr. MOTLEY. We have not directly looked at those closings and 

the rural areas in the services that were provided. However, the 

process that the Postal Service is supposed to follow is that when 

services are either terminated as a result of the close of a facility 

or the emergency suspension of operations, they are supposed to 

provide alternate services and notify those customers. 

Mr. GILMAN. And have you tried to do some oversight on whether 

that is being done? 

Mr. MOTLEY. At this point, Mr. Gilman, we’ve just looked at the 

process related to both the closing and the emergency suspensions. 

We have not looked at the details of what actually happens. 

Mr. GILMAN. I would hope at some future date you undertake an 

overview of that process to make sure that we are not deteriorating 

the service in the rural areas. Thank you. 

Thank you, Mr. Chairman. 

Mr. MCHUGH. I thank the gentleman. Now we are pleased to 

turn to the esteemed ranking member, Mr. Fattah. 

Mr. FATTAH. Thank you, Mr. Chairman. I am going to be brief 

so that we can move on, but there are a couple of things. 

One is that I do want to underline something that I agree with 

in your testimony on page 10, where you said that one of the most 

important areas for oversight is labor management relations. 

Mr. MOTLEY. Yes, sir. 

Mr. FATTAH. And you thought that congressional oversight was 

very important in that area and you talked about its drag on productivity to the degree that some of these longstanding grievances 

are not resolved. But you point to the Government Performance 

and Results Act later on in your testimony as perhaps a vehicle or 

the context under which you know some of these issues might get 

handled. 

40

I am not—I understand the thrust of your comments, but you are 

aware that, at least as to active, structure labor organizations are 

not indicated as being stakeholders even though from a 

commonsensical viewpoint we would think of them in the Postal 

Service context as major stakeholders. 

Mr. MOTLEY. Mr. Fattah, we might differ in that view somewhat. 

My feeling, as GPRA was structured, my sense is that the agency 

is supposed to coordinate with its stakeholders. And in consultations with the Congress as well. And I would view both the unions, 

the management associations, major mailers, as stakeholders in 

the direction that the Postal Service might go. 

Mr. FATTAH. Well, I don’t think we would disagree. I would 

agree. I don’t think the act is as specific as identifying labor organizations as one of the stakeholders, even though, as I said from a 

commonsensical point of view one would hope that they would be, 

but I just wanted to make that point. 

I understand all of your testimony. I want to see if you can help 

the committee to understand why you think the Postal Service has 

been so financially successful under the Postmaster General’s and 

the management team’s work there. 

Mr. MOTLEY. Well, I think there are a variety of things that 

point to the success of the Postal Service financially. Some of those 

can be attributable to a long-term automation program that was 

put in effect many, many years ago that I think you are starting 

to see. You are starting to see some changes over time. 

I think there are some efficiencies that the Postal Service has 

tried to make I think in some markets that are substantial revenue 

generators for the Postal Service. You have seen increased emphasis, and as a result, you have seen a fairly substantial increase in 

the volume in those mail categories. 

For example, Priority Mail. Priority Mail is a fairly strong revenue generator, even though it is a small piece of the large revenue 

pie that the Postal Service has. But there has been a long-term emphasis in that area, and, as a result, the Postal Service has done 

fairly well. 

Express Mail is another area, again small. Where you have seen 

additional revenue generation is at the First Class Mail level 

where the rate of growth has not been substantial in the past 

years, but there is still some growth in that First Class Mail category. 

Mr. FATTAH. In your testimony you talk about First Class for a 

minute. You talk about the high rate of performance there, but you 

said that some customers were concerned that perhaps in the 2- to 

3-day mail that we were at about an 80—80-something performance rate there. 

Mr. MOTLEY. Yes, sir. 

Mr. FATTAH. Maybe there was some prioritization in which First 

Class, was, you know, a management priority to the detriment of 

these other categories. May have to set some priorities. 

Mr. MOTLEY. Yes, sir, I agree. 

Mr. FATTAH. So I wasn’t clear from your comment whether you 

were just acknowledging that some customers may have made that 

complaint or whether the GAO was saying that if that was a 

prioritization, that it was inappropriate. 

41

Mr. MOTLEY. No, sir, I was not inferring it was an inappropriate 

one. We don’t have evidence to suggest that there was emphasis on 

First Class to provide some detriment to the Second and Third Day 

Mail. It’s just that customers have expressed that concern. 

Mr. FATTAH. I understand. But let me say this, that I am sure 

there have been a lot of complaints. At least my office has gotten 

all kinds of complaints about the Postal Service. I mentioned that 

one in your report and so that is what drew me to it as if you were 

suggesting that either it was accurate or if it was accurate, that 

it was inappropriate. And I haven’t been able to elicit from you a 

judgment yet. If, in fact, that was the case, would that be inappropriate? 

Mr. MOTLEY. I would—I would fail to—I would be failing in the 

audit work that we have done to suggest that it was inappropriate, 

Mr. Fattah. I would suggest that if the Postal Service intends to 

be the First Class organization that it would like to be that it 

needs to put the kind of emphasis on 2- and 3-day mail it has put 

on the First Class 1-day mail. 

Mr. FATTAH. This is my last, Mr. Chairman, last question. You 

refer to the Canadian circumstance and the reforms that have 

taken place. And you also talk about the fact that even though they 

have maintained uniform postal rates for the, I guess for what 

would be comparable for First Class delivery to residents, that they 

have scaled back the frequency of delivery and they have also 

closed down many of their postal outlets in rural areas. 

Could you speak any more specifically to what they have done, 

especially in terms of this issue of reduction of delivery, that they 

moved from a daily delivery to something—— Mr. MOTLEY. Let me give you an example, in some of the business deliveries in the Canadian postal system they were delivering 

as many as five or six times a day, and what they have done is 

cut that back to generally fewer times, sometimes just one time a 

day. And so, from a cutback from that standpoint, they have been 

able to save additional funds. 

With regard to the rural closings in many instances, one of the 

approaches the Canadian Post has used is contract post offices. 

That is, they have contracted these out to the private sector to ensure that they continue to fulfill their universal service mandate. 

Maybe Ms. Anderson would like to add some more to that. 

Ms. ANDERSON. About the concern on the closings of rural post 

offices, as we understand it, the Canadian Post imposed a moratorium on any further closings in rural areas. 

Mr. FATTAH. That is, the Canadian Government imposed the 

moratorium, but the CPC would have proceeded forward absent the 

moratorium. 

Ms. ANDERSON. That’s correct. 

Mr. FATTAH. I thank the chairman. 

Mr. MCHUGH. I thank the gentleman. 

There are many other questions that deserve our attention at 

this hearing, but we do have the Postmaster General very patiently 

waiting and I would like to move along to him. 

As you have so graciously done in the past, I would ask that you 

please assist us again by responding in writing to questions that 

both I and the other members of the subcommittee will submit in 

42

writing, so those answers will be on the record. We look forward 

to working with you. 

As you note in your testimony, you do have a number of studies 

under way dealing with the authorities of the Postal Board of Governors, for example, and others. So as much as we have enjoyed 

our relationship in the past, we are looking forward to an even 

more productive one in the future. Thank you again for being here. 

Mr. MOTLEY. Thank you, Mr. Chairman. Appreciate it. 

[Followup questions and responses follow:]

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Mr. MCHUGH. With that, we can immediately start our second 

panel. Before our two gentlemen are seated, let me administer the 

oath. 

[Witnesses sworn.] 

Mr. MCHUGH. The record will show that both gentlemen responded to the oath in the affirmative. 

Gentlemen, welcome. I noted in my opening statement, at least 

financially, you have had a very successful year. You heard a question earlier as to how the recent success of the Postal Service has 

come about, and I suppose there are many answers to it. Certainly, 

the workers who have done an absolutely incredible job through 

some less than ideal weather conditions, particularly as of late, and 

meeting those proverbial appointed rounds. 

But as I noted as well, a good share of that credit has to fall 

upon the management and the efforts that you have made. So, as 

the two top representatives of that management part of the team, 

we thank you and we welcome you here today and we look forward 

to your testimony. Postmaster General Runyon I welcome you 

again and say that our attention is yours, sir. 

STATEMENT OF MARVIN T. RUNYON, POSTMASTER GENERAL, 

AND CEO, U.S. POSTAL SERVICE, ACCOMPANIED BY MICHAEL COUGHLIN, DEPUTY POSTMASTER GENERAL, U.S. 

POSTAL SERVICE 

Mr. RUNYON. Thank you, Mr. Chairman. 

With me today is Deputy Postmaster General Mike Coughlin, 

and in the interest of time I would like to summarize the testimony 

that you received and ask that the full testimony be received into 

the record. 

Mr. MCHUGH. Without objection, so ordered. 

Mr. RUNYON. I am pleased to report to the committee that the 

state of the Postal Service is very good. Financially, we expect to 

turn a third consecutive year profit. Our volume continues to climb, 

although behind what we had hoped. We had rather feeble growth 

in First Class Mail and that is of particular concern to us. We 

think it is a sign of the growing challenge that we face from rapidly 

developing communication technologies. We also face key challenges to raise our 2- and 3-day First-Class service scores and to 

improve labor management relations. 

Customer satisfaction and customer support remain extremely 

strong. We are making steady progress implementing Customer 

Perfect!, our effort to bring the Baldridge principles of management 

to the Postal Service. We are integrating the new Office of the Inspector General into the organization. We continue to work closely 

with major customer segments getting their input and their perspective. That is especially true when it comes to legislative reform. 

Legislatively there are four key pillars that we think are necessary: Any bill must preserve universal service; the second, it 

must provide practical incentives to control costs; third, it must 

support products that meet changing customer and marketplace 

needs; and, last, it must modernize the ratemaking process. 

For the immediate future, we’re working closely with the Governors examining the revenue needs and the rate structure for next 

year and beyond. During his appearance last month, Chairman del 

53

Junco indicated the Governors would likely have a decision within 

60 to 90 days, and I believe the board will hold to that schedule. 

Mr. Chairman, that’s a quick snapshot of the Postal Service 

today, and I would like to ask, as I say, the full testimony to be 

entered into the record. 

Also, Mr. Chairman, I would like to ask your permission to make 

another comment at this time. You asked a question of the Governors when they were here if they cared to say anything about the 

Coke matter that is under investigation by the Department of Justice. I would like to respond to that question at this time, if I could. 

Mr. MCHUGH. Please do, yes, sir. 

Mr. RUNYON. I’d like to give you the facts as they relate to myself 

in this matter. 

In 1977, I invested less than $13,000 in Coca-Cola stock. In 12 

years later, I went to the Tennessee Valley Authority. That stock 

was placed in a blind trust. When I left there in 1992, it was still 

in a blind trust. 

In December 1992—in December 1993, I met with my financial 

advisor. Each time he told me that he thought that I should get 

out of that blind trust if possible because the returns on the blind 

trust were not meeting market value. I talked to my—in 1994, I 

talked to my general counsel and ethics advisor and asked them if 

it was necessary as a Postmaster General to have a blind trust. I 

was told that that was not customary and wasn’t necessary, at 

which time they helped me with the Office of Government Ethics 

to remove myself from that blind trust, which I did. 

At that time I was assured that if there were going to be conflicts 

they would inform me of it. Later, the alliance with Coke was originated by our marketing department. I did not ask that that be 

done. I didn’t think of that idea. It was something the marketing 

department had. I attended a few of those meetings. 

After one of those meetings, a lawyer from the general counsel’s 

office in her behalf came to me and said that I should recuse my 

Coke stock—recuse myself from dealing in the Coke matter because 

I owned Coke stock and I might consider divesting myself. I 

recused myself immediately; never entered any other discussions 

with the Coca-Cola matter. 

I immediately asked my general counsel to assist me with the Office of Government Ethics to divest myself of the Coke stock. I got 

the permission to divest myself of that Coke stock, and at that 

time, when I got it, I immediately divested myself. 

So, I did both things that were recommended both to recuse myself and divest the stock. I was told I might ought to do one or the 

other. I did both. And when I divested myself of that stock, I did 

not receive any profit as a result of it because the Coke alliance 

never took place. There was a thought that I would receive money 

in excess of what the stock was worth because of the alliance between the Postal Service and Coke. That didn’t happen. I did not 

receive any profit. 

I have been in public service now for 9 years. I was in private 

business for 43 years before that and I have never had a question 

asked about my ethics before. This is really a rather traumatic 

thing with me. It is something that I would never have expected. 

54

It’s not something that I’m really thrilled about. I don’t really like 

to talk about it, but the fact is it’s there and it shouldn’t be there. 

I’m in Government service not to make money. I didn’t come here 

to make money. I came here because I had an opportunity to come. 

And I feel that if people have an opportunity to provide Government service, they should take it. 

I owe a lot to this Government. It has been very good to me for 

72 years. It’s given me more opportunities than you could imagine. 

When President Reagan and his Chief of Staff Howard Baker 

asked me to serve as chairman of the Tennessee Valley Authority, 

I saw that as an opportunity to do just what I said, and that is to 

give something back to my country. I did serve during World War 

II in the service as many of us did. But I think that more is required if you can provide it. I saw that as an opportunity. 

I also saw it as an opportunity to give something to my Government, because if we could prove that Government could operate as 

efficiently as a business, then that would be a big benefit to the 

Government. We proved that at TVA. And we are doing a pretty 

good job of doing that at the Postal Service at the present time. 

So I saw this as the opportunity to repay a debt that I felt I 

owed. I think that basically covers everything about the facts. 

As you know, the Department of Justice has an ongoing inquiry. 

It has been ongoing now for 8 months, and will continue for I don’t 

know how long. I’m sure the chairman can appreciate the sensitivity connected with this inquiry. I have nothing to hide, and 

that’s why I’m here today prepared to answer questions if you 

would have any questions on this matter. I would appreciate, 

though, the chance, if you ask very detailed questions, to provide 

detailed answers in writing so that there could be no misinterpretation about what those answers were. 

So with that, Mr. Chairman, I would be glad to take any questions, if you have any on that subject, if not, then Mike and I would 

be glad to talk about the post office. 

[The prepared statement of Mr. Runyon follows:]

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Mr. MCHUGH. Well, I thank the gentleman for his comments. As 

I believe you indicated, they were not part of your prepared testimony, and I wasn’t aware you were going to make them, but I was 

pleased to have the subcommittee give you that chance. 

Let me first start by saying I, certainly as an individual, never 

in my mind questioned your motivations as to why you are serving 

in the position that you hold. Anyone with a second grade ability 

to read the English language and caring to read a re ́sume ́ would 

understand that you have probably been in far more lucrative positions in the past than you are now. 

I admire the devotion and dedication to your country that you 

bring to this job. As you indicated very correctly, I provided the 

Postal Board of Governors the opportunity to comment should they 

so choose. I did so because we are an oversight committee by definition. And no matter how distasteful this circumstance is to you 

personally, and I fully understand that, it is nevertheless a topic 

that, as a legitimate oversight committee, we are forced to face. I 

wanted the record to show what was obvious to everyone who 

knows anything about the Postal Service that this issue was out 

there. And that, insofar as I was concerned, I felt it best for everyone’s interest—the taxpayer, the Postal Service, its customers, this 

subcommittee, and probably most importantly, you—to let that 

Justice Department investigation continue and hopefully reach a 

timely conclusion. 

My opinion in the intervening time from that last hearing to this 

has not changed. I was going to provide you the opportunity to 

make a comment, as I did the Postal Board of Governors, with the 

same assurance to you that I made to them. That is, if you choose 

not to, I understand that. 

I am very hesitant to, at this time and in this situation, begin 

a detailed hearing on that circumstance. I am not aware that we 

have half the facts, let alone all of them. I don’t believe you came 

prepared, truly, to answer those questions. If you did, that is fine. 

But I wouldn’t want to make that guess. 

And so, I, as the chairman, would suggest to my fellow Members 

here—and we run a democracy on this subcommittee, and if I am 

overruled so be it—that we take your statement for the record as 

you made it today, and that we continue to allow the Justice Department to finish. And then, we will go into this matter because 

it is far too important for us to overlook. 

I would also say that, while it is my opinion we should let the 

Justice Department continue its work, I don’t think that should be 

forever. Eight months is a long time. We had a meeting yesterday, 

the subcommittee staff, and we decided we will express our interest 

in seeing this brought to a timely conclusion. I would hope you 

would support that kind of initiative. 

Mr. RUNYON. I certainly would. 

Mr. MCHUGH. Justice delayed is justice denied in my opinion, so 

I would on that topic yield to any other Members who may have 

any comments on that, and certainly to the gentleman from Pennsylvania, Mr. Fattah. 

Mr. FATTAH. Well, Mr. Chairman, we discussed this somewhat at 

the last hearing. My feelings have not changed which is that I 

think that Washington is too—is too—too enmeshed in destroying 

64

people’s reputations without any facts. If there is an investigation, 

it should be brought to some conclusion and expedited. I think the 

Justice Department has a responsibility to do that. And I think 

that as a Member of Congress, at the least we should give you and 

anyone else appearing before us, or as part of the Federal Government, the protections that you fought for in the war, which is that 

in America you are innocent until proven guilty. And absent any 

charge, you should, I mean, not even be, I think, put into a position 

in which these matters are commented on in the way that they 

have been in the press and other places. 

I think that for our committee we should be focused on the systems involved. I would assume that the Board of Governors has in 

place ethics and accountability procedures that would touch upon 

every aspect of the Postal Service, and to the degree that that is 

not in place, we should, as part of our oversight responsibilities, try 

to help think through that. 

But we should not assume because of the headline, either related 

to you, the President of the United States—we talk about justice 

denied, justice delayed. I mean, they are still looking at matters 

relative to 10 years ago when he was in Arkansas. I think that—

or the Speaker of the House, anyone else, I think that these matters really rub against the whole spirit of your comment about the 

desire of people to want to be involved in public service. And I don’t 

think we encourage many more to want to offer themselves to 

make a contribution when they see the kind of examples that are 

set and the way that some of these matters are handled. So I thank 

the chairman for the opportunity to comment. 

Mr. MCHUGH. I thank the gentleman for his comments. 

Any other Member choose to address this at this time? 

Mr. OWENS. I really would like to support your manner of handling this, Mr. Chairman, and say that as public officials we are 

well aware of the barracuda approach taken by the media on these 

kinds of perceived wrongdoings, and it is most unfortunate. I think 

the American people would like to have the media direct most of 

its attentions on the operation of the post office. There is a love affair with the post office. Everybody needs it and wants and everybody has high expectations. I have lots of interaction and complaints about the Postal Service. I think that is why I am here for 

and that particular matter is quite minor compared with the overall work of this committee and of this agency. 

Mr. MCHUGH. I thank the gentleman. 

With that, we will put aside that issue to another day. An uncertain day, but another day at some point. 

Mr. RUNYON. Right. 

Mr. MCHUGH. It does, I think, take us back to one of the topics 

that the GAO has talked about and that was the focus of their testimony here today, at least in part. It is the problem of procurement and less than well-defined ethical standards where management employees procured certain items where there was a conflict. 

And that, in turn, ties into the other reports that they have issued 

with respect to Express Mail corporate accounts and the problems 

they have delineated, and also to the bulk mail business acceptance 

practices issue. 

65

You heard Mr. Motley respond to your efforts to address the concerns raised in those reports I described as a work in progress. I 

think it is very important that you are able to assure this subcommittee and, probably even more important, that you are able to 

assure the constituent groups and public at large that that kind of 

internal oversight is a primary focus of this new administrative 

team. And that that, in turn, shows your—not just need for but 

rather your ability to handle even more flexibility that is an important part of the reform effort. 

Do you want to talk about those reports, the ethics standards 

with respect to procurement, bulk mail, and EMCAs? 

Mr. RUNYON. Yes, sir, I would like to talk about some of those. 

First, I would like to ask to you accept into the record the program 

that we have. 

Mr. MCHUGH. Without objection, that document will be filed in 

its entirety. 

[The information referred to follows:]

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Mr. RUNYON. The program we have is the result of an OGE report that is 2-years old. We worked very diligently with OGE. They 

have approved what we have, and they have given us a letter recently, which I’d also like to submit for the record, although you 

may have that. Although if you don’t, I would like to supply that 

for the record. 

Mr. MCHUGH. We have a copy. 

Mr. RUNYON. Where they have given us a clean bill of health on 

the things that they had in their letter. 

I would like to say further that when I first came to the Postal 

Service, I was a little surprised to find out that we had three separate entities in the Postal Service who were doing purchasing. We 

changed that. We have one purchasing organization now that does 

all the purchasing. The way it was, it just was not being done properly. 

Some of the things that they talked about, I think that the GAO 

talked about, are purchases that cover a number of years. I think 

Mike, can you help me with the kinds of things they’re talking 

about? Some of the property that you’re talking about have been 

many years in coming. 

Mr. COUGHLIN. If I recall, there were seven procurements involved in the thing and they went back I think as far as 1986, if 

I am not mistaken, and maybe the last one was around 1993 or so. 

Mr. MOTLEY. I believe that is right. 

Mr. MCHUGH. Well, if I might, I suppose that’s true, but what 

is troubling to me, and I think what was at the core of Mr. Motley’s 

responses, is that none of this is new. Certainly it predates your 

coming in as the PMG, but it seems to have a pattern of reacting 

and then letting things slide again. 

I mean, if you look at the Office of Government Ethics oversight 

activities with respect to this issue over the years, as early as August 1995, the office report said that some improvements have been 

made, but more work was needed. Now you have the letter. 

Are you going to continue to be vigilant, is the question. Are you 

going to continue to be vigorous trustees of this very important internal oversight activity, not just on the procurements but on bulk 

mail? 

And where we can argue with you about the figures, I think the 

reality is pretty clear that you are losing a lot of money, or have 

very recently lost a lot of money, because of not sufficiently stringent oversight and checking and the issue of the Express Mail corporate accounts. That is what we are concerned about. Not that 

you are reacting and you got a letter, but that you are going to continue to be vigilant in that area. 

Mr. RUNYON. We definitely are. You know it is not to our advantage to let money just slide through the cracks. Any time we find 

a place that we can improve our revenues, we definitely are going 

to do that. And if it’s just changing a procedure or stopping somebody from doing something that they’re not doing in the right way 

or having them do it in the way they should do it and checking it 

more often, we definitely are going to do that because we don’t 

want to give up revenue unnecessarily. We don’t want people to be 

able to pass mail through at less price than they should pay. So 

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we have several groups that are working on that at the present 

time. 

Mr. COUGHLIN. I might add, Mr. Chairman, that there’s another 

group that performs some pretty heavy oversight besides this committee that probably doesn’t get the attention that it deserves, particularly in the last year or two, and that is the audit committee 

of our Board of Governors. They have looked at each of the items 

that were mentioned by GAO here this afternoon as well as a number of others. And as somebody who attends those meetings that 

they hold almost every month, they give considerable intense attention to ensure that this Postal Service is following up and putting 

into place the internal controls that GAO found lacking in those reports. 

Mr. MCHUGH. Well, let me cite a specific. You had, as is men- tioned in several of the GAO reports, a $46 million overrun in your 

advertising account. 

The thing that I find most troubling about that is that apparently, as I understand the issue, came to light only after there was 

an internal audit that your controller had somehow—and I would 

really be interested in someone explaining the logic—someone had 

somehow convinced your controller, don’t pay attention to the advertising account individually, just look at the bottom line, so if we 

overspend in one area, that is all right just so we come out all right 

in the end. And we are talking 1996, so this is not ancient history. 

Mr. RUNYON. No it’s not. 

Mr. MCHUGH. I spent a little time in Government finance back 

when I had a real job and real life and worked in city government. 

Some could argue that wasn’t a real job, too. But to me it was. 

That is a pretty incredible arrangement to have. I can imagine 

traipsing down to the second floor in the city hall in Watertown, 

NY, and trying to convince the city auditor to forget about the internal accounts and the end of the year will come out all right. He 

would have thrown me out the window. 

Mr. RUNYON. Mr. Chairman, I can guarantee you that does not 

exist any longer. That will not happen in any other department. 

That is now controlled totally by line item and will be controlled 

by the controller. 

You are right; there was a mistake made. There were controls 

changed in that particular area. They are now in place and they 

will guarantee that that won’t happen. 

Mr. MCHUGH. That is good to hear. As I said, faith and trust in 

your ability—and by ‘‘you,’’ I mean generically the Postal Service—

to handle the issues that you have is essential if we are going to 

argue and proceed on other kinds of internal flexibilities. 

I would be happy to yield to the ranking member, Mr. Fattah. 

Mr. FATTAH. Thank you, Mr. Chairman. 

Postmaster General, obviously some things are going very well 

with the post office but part of oversight is to delve into some matters that are yet to be successfully handled, and I want to ask you 

about the principal matter that concerns me, which is the whole 

issue of labor management relations. 

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ues to today. There is also the problem of the fact that with no 

ability to strike, there is a grievance procedure which seems to 

have had a backlog that is, you know, part and parcel of the whole 

design of it. And I would like you to speak generally to what your 

plans are, what you envision, how you think you might be able to 

improve the relationships between labor and management. And 

also, on this issue of the grievance procedure itself and the backlog, 

if you could specifically respond to that. That would be helpful. 

Mr. RUNYON. We have started having meetings under the summit title and Mr. John Calhoun Wells, who is the Director of the 

Federal Mediation and Conciliation Service, is leading those meetings. He has convened us three times now I think. In addition to 

that, we are having separate meetings, individually with unions. 

And one of the first things—the first thing that we are working 

on is grievance procedure. We need to get the process fixed. The 

process, in my opinion, is not right right now. It’s not working. And 

so we need to fix the process, and we are working very diligently 

at this time to do that. 

I’m meeting with Mr. Sombrotto and Mr. Biller to address these 

things, but that is at a different level. We have other people working at a working group level to try to resolve how we go about solving these process problems. 

One of the reasons that we have a lot of grievances these days 

is that we are undergoing a lot of change. Automation is causing 

people to be concerned. And so that creates some problems. So we 

do have those kinds of problems and we are trying very desperately 

to resolve them. 

Do you want to speak to that, Mike? 

Mr. COUGHLIN. I don’t think there is much I can add that Mr. 

Runyon hasn’t already said. It’s the combination of change. I think 

we have to admit that management itself has been inflexible at 

times and in certain locations around the system, and I would suggest that there may well be a third element to the problem and 

that is some structural problems or perhaps political problems 

within the union organizations themselves. It is a complex problem 

and to try to overgeneralize about what the cause might be is probably dangerous. 

Mr. FATTAH. As part of the reform effort of the Congress, at some 

point we may consider structurally the Board of Governors and 

whether there is any opportunity there as we have seen in other 

major labor-intensive corporations that may be put on the Board of 

Governors some representative of labor or working people so that 

the board might be more sensitized, or sensitive I guess is the 

proper way to say it, to those issues. And I may not have an immediate reaction to this notion but we have seen it with some other 

major enterprises in our country that this has led to some level of 

improvement. 

Mr. COUGHLIN. I might just—I don’t think I would know enough 

about the experiences in those other industries where union representation has been on the board. I think I’d want to look at that 

before I swung one way or the other on the issue. 

Mr. FATTAH. Let me ask a question that I know was covered earlier with the other witnesses, but you would probably be better able 

to respond to it. 

81

I represent Philadelphia and I know my colleagues are from New 

York, both the chairman and Mr. Gilman probably have had the 

similar issues raised with them about the notion of this centralized 

procurement and how it would impact potentially in terms of the 

purchases of uniforms. And I know that, you know, we may seem 

like we are working at cross purposes here. We want you to make 

as much money as you can make, but the other thing we don’t 

want to see happen is there to be a negative impact in terms of 

the garment industry in terms of American workers who are earning livable wages making uniforms for postal employees. So, I put 

it on the table; I would be interested in your response. 

Mr. RUNYON. I would like to respond. At the present time, with 

the exception of footwear, there is no requirement for domestic 

source. 

Mr. FATTAH. Well, we would like to have a domestic source. 

Mr. RUNYON. Yes, the change that we are going to be making is 

that there will be a requirement for domestic source for all uniforms under the new arrangement. So we are changing that from 

not a requirement for domestic source to a requirement for domestic source. 

We now have some 200 uniform manufacturers around this country. And the majority of them are nonunion manufacturers. Three 

of our five largest uniform manufacturers are union manufacturers. 

Our idea is to award these contracts on a best value basis and not 

low bid. You can get low bid and be buying clothes more often. But 

we are going to be going on a best value basis. I think that’s what 

we’re planning to do. 

Mr. FATTAH. Well, I won’t prolong it but I would like to be kept 

informed as you proceed through this. I have an interest and there 

are people who have been earning a living, are sending their children to college, buying postage stamps in Philadelphia, through 

making these uniforms, and so I have an interest in it. So if you 

would keep me informed, I would appreciate it. 

Mr. RUNYON. We will do that. 

Mr. OWENS. Will the gentleman yield? 

Mr. FATTAH. Yes, I will yield. 

Mr. OWENS. You say that you will be awarding contracts or is 

there going to be one contract? 

Mr. RUNYON. It won’t be just one. 

Mr. OWENS. It will be a whole series of contracts? 

Mr. RUNYON. I don’t know. I can’t believe that would be just one, 

but I’ll check on that and supply it to you for the record. 

Mr. MCHUGH. I thank the gentleman. 

So you are going to establish a domestic content requirement. I 

don’t either want to, nor do I need to, put the words in the mouth 

of either of the two distinguished gentlemen on my right. Well, 

there are three distinguished gentlemen; only two of them spoke on 

this issue. But I think a big concern is that we have heard a lot 

in the news about forced labor, child labor, sweatshops, all of it offshore. That would be very, very troubling to any of us to know that 

the Postal Service were acquiring uniforms from that kind of 

source, not the least of which is to say that the U.S. Postal Service 

wouldn’t look a heck of a lot better to most of us in American-made 

82

uniforms. But you are not going to buy offshore. For the first time 

you are going to have a domestic content requirement? 

Mr. RUNYON. That’s right. 

Mr. MCHUGH. We all agree with that but I, too, would appreciate 

being kept advised as this goes forward. 

With that, I yield to Mr. LaTourette. 

Mr. LATOURETTE. Thank you, Mr. Chairman. 

I will begin with some praise today and then will get into some 

issues that concern me and time will permit me to talk about only 

two of those. 

Where I am from, Cleveland, OH, you put Don Peterson in 

charge and he has been very responsible and responsive to the concerns of the folks where I am from, and I appreciate that very 

much. And I think when somebody does a good job they should get 

mentioned and I wanted to mention that to you. And I think originally he was posted in Tennessee or Kentucky, if I remember correctly, and he has come up to the North and he has done a fine 

job getting along with all of us Northerners, and I appreciate that 

very, very much. 

The two issues that I wanted to talk about, I mentioned in my 

opening remarks the tension that I hear from my constituents 

about the Postal Service going into the postal business. And it 

again relates to the net income figure. It relates to service as opposed to turning a profit. It relates to, I think, some of the labor 

management items that are under discussion. And I just want to 

throw up two things for your comment and observation, if you 

want. 

And one is that I directly asked Mr. Motley—I receive a lot of 

mail and a lot of correspondence from people who pay attention to 

postal issues in my district and they read the article, and say, I 

think it’s swell that the Postal Service has a net income of $1.6 billion and is making money, if you want to look at it and I think it 

is making money. They then read articles about supervisors and 

others in the hierarchy in the Postal Service receiving tens of thousands of dollars in bonuses toward the end of last year and then 

they read the articles about the fact, and Mr. Motley touched upon 

it, that there has been a 76 percent increase in grievance filings 

in the recent history. 

Now, some skeptics in my district, and in Ohio, argue that all of 

those things are all related. And that in order to turn a profit, the 

squeeze has been put on supervisors and regional directors to come 

in under budget or to turn that profit, and in order to earn a bonus 

and as a result they put the squeeze on the rank and file postal 

worker which has led to the elevation of grievances. 

I was wondering if you have an observation or a thought on that 

as to whether or not those people are just being skeptical; whether 

there is some interrelation or what your thoughts are? 

Mr. RUNYON. First, I’d like to point out that in becoming more 

businesslike, the first thing that we’ve told all our employees is 

treat the customer like a customer. Provide better service. Service 

is what our business is. Our service has improved, and times I talk 

about the fact that we made some money last year, I also talk 

about the fact our quality improved last year. Over the past 3 

years, our quality has improved about 9 points. So that we are at 

83

91 percent now. I think probably this quarter we will be higher 

than that because we are working at that. And that’s the most important thing. 

Now, one of the things in the Postal Service when I came here, 

I was told that we can do service or we can do cost, but we can’t 

do both; so which one do you want? And so I said, I want service, 

and cost went west. 

And then I said, well, you have got to have some cost, service 

goes west. We now realize that service and cost go hand in hand. 

When you eliminate problems, the cost gets better. When you 

don’t have to repair something, and you only do the right thing 

right the first time, you don’t have to do it the second and third 

time. It costs less. So you can do service and you can do profits at 

the same time. And that’s what we are doing. So those people that 

say we don’t pay any attention to service, I don’t believe that. We 

are paying attention to service because that’s one—the only way a 

person can get that bonus that you’re talking about, and I’ll speak 

to that in a minute, is to make the service targets. If they don’t 

make the service targets, they don’t get the bonus. 

Mr. LATOURETTE. I guess that is the point that the bonuses are 

tied to service improvement and not cost containment or cost elimination. Is that what you are telling me? 

Mr. RUNYON. Both. The economic value added system that we 

have has three areas in it. One is the revenue, one is service, and 

one is employees. And we put employees in there because we recognize that when you say to somebody you need to make this money, 

they might do it on the backs of employees. So we put some measurements in there on employees to see if we could, you know, control that, because if you are beating up employees to make the 

money or get the service, that’s not the way we want to run the 

business, and so they get graded on all three and they only get the 

bonus on that basis. 

Mr. LATOURETTE. And I am glad to hear that because that answers exactly the question that I get from back home. Are they all 

three equally weighted? 

Mr. RUNYON. Yes, one-third. A third, a third, a third. 

Mr. LATOURETTE. And if I could beg the chairman’s indulgence, 

the second part of that goes to the existence of post offices, and I 

am referencing page 4 of your testimony, how you have to leverage 

your postal outlets in the country. 

We have 89 communities in my congressional district. The post 

office often is the heart and soul, it is on the town square, and it 

has been there for as long as anybody can remember. And that, 

again, brings up the question of service versus business. 

When you make your closing decisions is the fact that it is an 

identifiable part of the fabric of that community given equal weight 

to the fact that you only have X number of transactions walking 

out the window and you have so much money to keep the postal 

clerk there at the window? 

Mr. RUNYON. Yes, the fact that it may not be an economic post 

office has nothing to do with it. We have probably—I don’t know 

the exact number, but I’ll provide it for the record—we have several thousands of post offices where we spend $4 in cost to make 

$1 in revenue. And it might be those 89 that you are talking about, 

84

if they are as small as you say, fall in that category. But the law 

that set up the U.S. Postal Service said you cannot close down a 

post office for economic reasons. I mean, it is in law. So the first 

thing we cannot do is violate the law, so that can’t happen. 

I’d like to get back to the outlandish bonuses or however you 

used that word. 

Mr. LATOURETTE. I didn’t say outlandish. I said they were large. 

Mr. RUNYON. Large. Mr. Coughlin, who makes $148,000 as a 

Deputy Postmaster General, got a $400 bonus. It’s not because he 

did not do his job; it’s because he can’t make more money than 

that. 

We had several officers who did not get their entire bonus. I 

think that it’s very appropriate when you make $1.6 billion better 

than what the plan was, to spend $169 million, which was how 

much was spent on bonuses last year. And I think it’s an appropriate number. I don’t think it was—I don’t think it was even 

large. 

Mr. LATOURETTE. So I am not misunderstood. I didn’t say it was 

inappropriate. What I suggested was if bonuses were given based 

upon cost reduction only or on the backs of the working force, I 

thought that was inappropriate and outlandish. 

Mr. RUNYON. Right, I would agree with that. 

Mr. LATOURETTE. I was questioning how that came about and 

you answered that and I appreciate it. 

Mr. MCHUGH. Thank you. I think the gentleman raised the point 

about bonuses, and our bill, in Subsection 3783, sets up a structure 

to provide bonuses for all employees, which I believe the Postmaster General supports. That may help address what is a very legitimate question or legitimate concern. 

We have a vote and I would propose that we suspend this hearing while we go vote and try to return as quickly as we can, if you 

could bear with us please, gentlemen. We will be back. We will 

stand in recess. 

[Recess.] 

Mr. MCHUGH. I think, for the sense of expediency, we will continue. I know some of the other Members had to go on to other 

meetings and won’t be able to return, and others are on their way. 

I know your time is valuable, Mr. Postmaster General, and I appreciate that. 

I would like to talk a minute about your revenues. I made the 

comment last week as I was reading the economists’ testimony that 

I was continuously reminded why I didn’t become an economist, basically because I didn’t have the analytical ability. I am truly trying to understand your budget, and I don’t mean to be either flippant or facetious. 

But, as I understand from your testimony, you expect to end this 

year with a $55 million surplus. 

Mr. RUNYON. That was our budget. We expect to end it in about 

$500 million. 

Mr. MCHUGH. Surplus? 

Mr. RUNYON. Yes. 

Mr. MCHUGH. OK. Well, that answers the question. Because I 

was walking through the figures and based upon what you had told 

85

me your revenues are through March, your net income of $1.1 billion was $243 million over budget, over your plan. 

Mr. COUGHLIN. That’s right. 

Mr. RUNYON. Yes. 

Mr. MCHUGH. As you were approaching the slow season. 

Mr. RUNYON. We had the slow season. 

Mr. MCHUGH. No matter how slow it could be, go from $243 to only a net of plus $55. So you are saying now it is about $500 billion; $500 million, actually. 

Mr. RUNYON. By the way, the forecast is something like a little in excess of $200 million a period for four periods, which would be 

$800 million. 

Mr. COUGHLIN. Loss. 

Mr. RUNYON. Loss. That’s the slow season. It gets—— Mr. MCHUGH. I am sorry, would you repeat that? 

Mr. RUNYON. You said we’re going into the slow season, and we 

are. 

Mr. MCHUGH. Well, as I understand it, you are. 

Mr. RUNYON. That’s true. 

Mr. MCHUGH. Yes. 

Mr. RUNYON. And the way the revenues come in at the Postal 

Service, during these months that are coming up, vacation periods 

and replacements and low mail volumes and things of that nature, 

we have losses. And our projected losses, and I’ll provide these to 

you for the record, but it’s something like $200 million on average. 

That’s just a round number. But that’s $800 million from the $1.1 

would be $300 million. And I’m saying that we think we’re going to be able to not lose that much and end up with $500 million. 

Mr. MCHUGH. OK. Well, that is an important change. 

Mr. RUNYON. Uh-huh. 

Mr. MCHUGH. When did this change, in your estimate, occur? I 

mean, is pretty recent? 

Mr. RUNYON. Well, of course it changes almost every month as 

you get what you’ve got. I guess what you’re thinking about is why 

we’re going to lose some money next year. 

Mr. MCHUGH. I am considering that. I am also wondering to 

what extent this new information may or may not have an effect 

on the deliberations you mentioned in your opening statement that 

the Board of Governors are currently going through with respect to 

a rate increase. 

Mr. RUNYON. Right. The facts are that, about a year ago, we expected we were going to lose about $2.2 billion last year. Then we 

went to work to see what we can do to increase revenues and lower 

our cost. By the time it was necessary to submit our budget to the 

President, we had that down to $1.8 billion, and that’s what we 

submitted to the President. 

At this time, we’re at about a $1.4 billion loss next year. And 

we’re looking for ways to offset that, and we haven’t got much time 

to find them. And that’s why we, you know, we got the 60 to 90-

day period that the board was talking about. If we can’t find them, 

we’ve got a real problem, I mean, running a loss. We don’t want 

to run a loss. We should not be running a loss. And if it comes out 

that way, then we’ve got a problem we have to deal with. Do we 

run a loss that year or do we change the price of mail? 

86

Mr. MCHUGH. Assuming the $500 million holds, let me ask two 

questions based on that. That is a $450 million adjustment in your 

projection, roughly? 

Mr. RUNYON. Yes. 

Mr. MCHUGH. What was the major cause of such a change? I 

mean, your volumes are down. Your revenues are up over projections. What is the dynamic at work here? Will it take a $450 million plus on your net revenues from your plan? 

Mr. RUNYON. Our volumes actually have all of a sudden started 

increasing. 

Mr. MCHUGH. Well, of course they always increase. They weren’t 

increasing as much as you thought they should. 

Mr. RUNYON. Yes. 

Mr. MCHUGH. Now they are increasing more than you thought 

they would. 

Mr. COUGHLIN. Let me try to add to this. The latest accounting 

period, which I think was eight, we had all of a sudden a strong 

surge in First-Class Mail. In fact, I think we actually got $200 million better than the plan in this accounting period eight. That’s 

part of this sudden resurgence of revenue, which we have to see 

whether it holds, is part of it. There were also some adjustments 

that were made, some accounting adjustments that were clear that 

we were able to make that amounted to a couple hundred million 

dollars in the process. 

And the fact is that expenses are running almost $400 million 

better than plan. We’ve been able to hold those back and offset 

some of the revenue shortfall. We still do have a small revenue 

shortfall against our plan. But it’s primarily on the expense side 

that this is occurring. 

Mr. MCHUGH. I am confused. How can you have a shortfall on 

your revenues if your plan just went from an expected $55 million 

net income to $500 million? 

Mr. COUGHLIN. It’s just two sides of the ledger. And we’re doing 

much better on the expense side than we had expected. And we’re 

not doing quite as—quite up to the original plan at this point. 

Now, we could exceed it before the end of the year. Our projection does not anticipate it, but it’s primarily on the cost side. It’s 

almost exclusively on the cost side where we’re doing better. 

Mr. MCHUGH. So, we haven’t seen a great change in what you 

are handling and the kinds of business you have been doing? 

Mr. COUGHLIN. Well, it’s a little hard. See, the volume is actually 

up this year so far, 3.2 percent. That’s a marked change from what 

we’ve been experiencing over the last few years and certainly over 

the last couple of years. Now, some of that is the result of the, is 

the result of the reclassification last year. It’s had—it’s had a—it’s 

encouraged more of certain kinds of volume. It’s also changed the 

revenue per piece, the mix of how much revenue we’re getting per 

piece. At the same time, though, it’s helping the system in terms 

of its efficiency. And that was the purpose of reclassification, to 

make the mail stream more efficient. 

Mr. MCHUGH. OK. Let me finish the second part of the question, 

and then I will yield to my colleague from Illinois. 

87

The next logical question, at least in my mind, is, if you now have $500 million rather than $55 million, what are you going to 

do with that $500 million? 

Mr. RUNYON. We’ll use that for capital instead of having to borrow money. 

Mr. MCHUGH. I am sorry, instead of—— Mr. RUNYON. Having to borrow for our capital spending. 

Mr. MCHUGH. I think I could probably go through the audience 

and find a lot of people who say, you know, what you ought to do 

with that revenue is forestall a rate increase to the greatest extent 

possible. There is a, no surprise to you, a real philosophical argument within the mailing community. Where does your first responsibility lie, to retire your outstanding debt or to keep your rates as 

low as possible and keep the system as affordable? So you now 

have $450 million; you may have $450 million more than you 

thought. Are you going to use it to retire your debt or are you going 

to use it to hold down rates? 

Mr. RUNYON. Well, when you say ‘‘hold down rates,’’ $500 million 

would be worth about a third of a cent. And depending on what our 

need is, a third of a cent might do it. But, you know, unless we 

get much better than where we are right now, we’re working looking for more than a third of a cent. 

Mr. MCHUGH. Yes. 

Mr. COUGHLIN. The $500 million, Mr. Chairman, will become 

part of the asset base of the Postal Service at the end of the year, 

assuming that is what we make. It will be part of the equity asset 

base of this organization. It could be in the form of cash. It could 

be in the form of additional physical assets of some kind in the system. That’s really what equity is in this situation. Debt, on the other hand, our debt total is something like $5 billion. All of it at this point is placed with the Federal financing 

bank, and there’s a schedule for repayment of it. I don’t recall offhand whether any of it just calls for repayment this year. There 

are probably small pieces of it. But it is two different things we’re 

talking about here. I know it’s a confusing subject to talk about. 

Mr. MCHUGH. No. I understand it. I mean, you have gotten 

agreement, or plan whereby, you are going to retire debt in a set 

number of years. And to do that, you have got to put a certain 

amount of cash toward the debt retirement. 

The question becomes if you—and your plan provided for whatever your, your next year’s requirement out of this, the end of this 

fiscal year’s budget was, if you have $450 million more than you 

thought you did, you have got more than your plan called for to do 

something. Either you are going to put it against debt or are you 

going to put it toward something else? And a third of a cent, I 

agree, is not up to where you need. But it is not chump change, 

either. 

Mr. RUNYON. Absolutely. 

Mr. MCHUGH. So you are not going to tell me. OK. 

Mr. RUNYON. I thought we told him. 

Mr. COUGHLIN. I’m not sure what we didn’t tell you, Mr. Chairman. 

Mr. MCHUGH. I think you know exactly what you didn’t tell me. 

I would be happy to yield to, I believe, Mr. Davis. 

88

Mr. DAVIS. Thank you very much, Mr. Chairman. With that 

chump change terminology, you sound like you may have been to 

Chicago. 

Mr. MCHUGH. I have. 

Mr. DAVIS. Let me thank you very much, and I certainly want 

to thank you, Mr. Postmaster General, for being here with us this 

afternoon. And I would certainly concur with parts of your statement and others who have indicated that you have certainly made 

a lot of progress in the last 2 years. And I don’t think that you 

have an awful lot to be ashamed of, but there is always, as we all 

know, room for improvement. And there is always an effort to move 

beyond where we are. 

I think most of us would agree that two of the challenges facing 

the Service and facing the system is how do we improve management-labor relations while, at the same time, control cost? My 

question is: Do you view that as an inherent thorny area of difficulty or do you view it as something that can really be accomplished without the idea of winners and losers? 

Mr. RUNYON. It will only be accomplished if we don’t have winners and losers. That’s, that’s the big problem. In managementlabor relations in any business that you’re in, if you’re going to 

have winners and losers, it’s not going to work. You’ve got to have 

winners and winners. And we have to get more into that arena of 

working with each other to accomplish that. And we’re working 

with the conciliation board at the present time, with the heads of 

the unions too, to try to accomplish that. They’ve outlined five 

things that they thought—let me tell you a little bit about how 

they went about doing this. 

The conciliation board went around and talked to several people 

in each of the unions and the management associations and found 

out what they felt their problems were. Then they put all those 

problems together and they came to the Postal Service. They put 

all those problems together and came up with five things they 

thought we ought to be working on. And I can’t repeat that at this 

moment, but I’ll give you a copy of what those five things they 

thought we should be working on together. 

We have set up work groups on three of those things. We haven’t 

reached agreement yet to agree on—to work on all of them. I would 

like to work on all of them. I would. I think we should. We haven’t 

reached agreement to do that yet. We need to reach agreement to 

work on those and then reach agreement to come up with solutions. 

Now, one of the things that we had agreed upon to work on is 

the grievances, and we are working very hard at trying to change 

the way we handle grievances and try to get that out of a win-lose 

situation. So that’s what’s going on. 

Mr. DAVIS. So three out of five, in terms of beginning to start certainly is not anything to scoff at. 

Mr. RUNYON. Right. 

Mr. DAVIS. So you are making progress—— Mr. RUNYON. Yes, sir. 

Mr. DAVIS [continuing]. In that direction. 

I also have some concerns about the whole question of the uniforms and the manufacturing of those and how we acquire them 

and where we acquire them. But I don’t necessarily want to belabor 

89

that point. I would just associate myself with the remarks and comments of the gentleman from Pennsylvania and let it suffice at 

that. 

That is an area of concern that we certainly have some real reservations about in terms of what I am hearing and the way, at 

least, some of the manufacturers feel and some of the unions and 

some of the workers feel that it is headed. And so we will leave it 

at that. 

The other question that I have is, in terms of affirmative action, 

and when I talk of affirmative action, I am really just simply talking about a playing field that kind of levels itself out and give 

small businesses, gives women-owned businesses, minority-owned 

businesses an opportunity to play in the big arena. 

Could you share with us what the Postal Service’s position is relative to that? 

Mr. RUNYON. I would like Mr. Coughlin to answer that, if he 

could. 

Mr. COUGHLIN. Yes, Mr. Davis. 

When Mr. Runyon became Postmaster General in 1992, he put 

together—he broadened the whole effort in this area from what had 

been largely complaint processing and affirmative action to the diversity effort, which still incorporates or includes both of those elements but goes beyond that. 

Emphasis is in four broad areas. One is the whole outreach effort 

to get more minorities and women involved in contracting as suppliers and potential suppliers of the Postal Service. The second is 

this whole area of training and development for supervisory employees. The third is the idea of creating opportunities for job 

growth and development for all employees at all levels. And most 

recently, there’s been a considerable special emphasis, on the whole 

problem of sexual harassment in the workplace, with a considerable amount of attention and effort in that area. 

I think we’ve had some success in the whole area of involving 

more minorities and women in contracting. I can supply the detailed statistics for you for the most recent years here if that will 

help you in that regard. 

Mr. DAVIS. Well, I certainly appreciate your response, because I 

know that there are serious efforts in many quarters and in many 

places to take the position that there is not the need for this kind 

of activity, that we have reached a sufficient level. And I am not 

one who agrees with that. And I certainly want to commend you 

for recognizing what I consider to be one of the great needs that 

still exist in our country. And I commend you for it. And I would 

certainly want to see the absolute numbers. And I appreciate your 

testimony. 

Thank you very much, Mr. Chairman. 

Mr. MCHUGH. I thank the gentleman. 

I have to yield to the gentleman from New York, Mr. Owens. 

Mr. OWENS. Yes. I, too, don’t want to be redundant but on the 

uniforms, I hope you will have more than one source and consider 

having a source from each region of the country. There are a lot 

of uniforms to be made. And I think that the value of the uniform 

as a piece of cloth can be enhanced in terms of a value in terms 

90

of producing some jobs in these various areas, and I applaud your 

commitment to buy America policy. 

On the question of training, I hate to keep bringing up the subject, but I just refuse to accept that there are available materials 

of a superior quality, and I can’t get my hands on them. So I want 

to go back to that and ask, can you make available a copy of your 

training system, how it works, and the whole setup and some examples of what you use for training in terms of videos or film or 

whatever, because I have not been able to get my hands on very 

much in 2 years? 

Mr. COUGHLIN. Mr. Owens, that kind of amazes me, because I 

must get two or three videos a week on my desk to look at that 

are part of my training system. I’ll make sure you get more videos 

than you’ll probably ever want to look at. 

Mr. OWENS. Room 2305. 

Mr. COUGHLIN. As well as a clear description of our training policy. 

Mr. OWENS. Room 2305 in this building. And I appreciate that. 

And I won’t bother you with the subject anymore. 

The more difficult subject, however, is the matter of revenue 

service and employees that you talked about, revenue targets 

versus service targets. And I applaud the provision in the law 

which says that no post office should ever be closed down on the 

basis of revenue. I applaud the nobility of spending $4 for $1’s 

worth of revenue if that has to be the case to provide postal service 

in certain parts of America. 

My problem is that my constituents think that it has gone to the 

extreme in terms of they are subsidizing somebody somewhere. We 

have 21⁄2 million people in Brooklyn; 21⁄2 million people is large 

enough to have a First Class postal operation. 

And first of all, we have a structure, which I talked to Postmaster General about. You have been kind enough to come to my 

office and talk about this so I am not going to go into the same 

kind of detail. But the feeling is that there is a tremendous profit 

being made, and this, you know, in the area where the density of 

the population is great, a number of people who are immigrants is 

great. They are sending mail all over the place. And, yet, our service is inferior. 

You know, it goes around, it comes around. I have certainly tried 

with your postal employees at the local area level to work closer 

with them. And they are very nice people generally, the managers. 

I have no complaint about their attitude. They have gone to town 

meetings with me and talked about the problems to my constituents, so much that in the last election one of my opponents accused 

me of having sold out to the post office and trying to whitewash 

the post office. 

So, you know, people feel very strongly about it, and their experience is, you know, frequent with the post office, so let’s see if we 

can get to the bottom of—you know, Brooklyn service ought to be 

First Class service, because, after all, there are enough people that 

pay for it. 

You talked, when I spoke to you earlier in my office, Mr. Postmaster General, you said you would check to see if you have profit 

centers, and you can tell me the revenue situation in Brooklyn verVerDate 0ct 02 2002 04:44 Oct 07, 2002 Jkt 010199 PO 00000 Frm 00094 Fmt 6633 Sfmt 6633 W:\DISC\43747 43747
91

sus the—the intake versus the outgo, and I wonder if you had a 

chance to deal with that and you have those figures? 

Mr. RUNYON. I don’t have the figures today, no, sir. We will give 

you those. 

Mr. OWENS. But is it possible to get it by region, by area? 

Mr. RUNYON. I’m looking now to see. We do not have revenue by 

area. It’s very difficult to do. You see, what can happen is that we 

have some parts of the country where there are big mailers, big 

printers. They print up a lot of material, and they mail it. And the 

way they mail it is they take it to the BMC, which is a large area, 

and they give it to them. They send it to places like Brooklyn. They 

deliver the mail. The revenue for that stays where it is. Now, we’re 

trying to figure out how to reallocate that revenue. It’s very difficult to do. So we’re trying to figure that out, how we reallocate 

that revenue so that we can have people have revenue goals. Because it’s very important to me for people to have revenue goals. 

If they don’t have revenue goals, how am I going to measure their 

performance? So we’re trying to figure that out. But I don’t think 

I——

Mr. OWENS. Well, you have some glitches here and there, but you 

can tell people send a lot of parcels in my district. I have 150,000 

noncitizens—582,000 people in the congressional district, and 

150,000 are noncitizens where there are relatives in West India 

and other places, and they are sending parcels all the time. So I 

suppose you can figure out how much the revenue for parcel sending is from the source, and you could break it down to certain—

you can indicate how much flows out of various post offices. 

Mr. RUNYON. It might be possible—yes, it might be possible to 

find out the total amount of revenue that you have in that area 

and also the total amount of expense. My guess is that the total, 

and this is only a guess, is that the expense would be more than 

the revenue. But we need to find that out, and I can find that out. 

I can’t tell you. 

Mr. OWENS. I don’t know why you have to guess, Mr. Postmaster 

General, when you just said you have some post offices in the 

United States where you are spending $4 for $1’s worth of—with 

$1’s worth of revenue, you are actually spending $4. So you know 

that from some sources. Why is it difficult for Brooklyn? 

Mr. RUNYON. Well, I can probably go and study every one of 

those post offices in Brooklyn and tell you that. 

Mr. OWENS. I don’t know if you can probably go. You already 

have—you have the data on the others. 

Mr. RUNYON. No, we——

Mr. OWENS. Why don’t you have the data on these? You have 

data on the small ones that are subsidized. Why don’t you have 

data on all of them? 

Mr. RUNYON. We don’t have data on 38,000 post offices on what 

they’re doing. We are right now starting a system for incentive pay 

by trying a new system in each post office, and we—I think we’ve 

got three post offices that are running this test. So that they run 

as a, as if they were an individual business. And we measure their 

revenue and their expense to see if we can actually measure a post 

office that way. So that, that we’re doing. 

92

Mr. OWENS. Well, I don’t think that is hard. I don’t think you 

need a rocket scientist to do that. You just made a very strong 

statement that you probably will find that the expenses are greater 

than the revenue. You just made a strong statement there. I challenge that statement. I say it is probably that the revenue is greater than expenses. 

So how many days will it take for us to prove who is right and 

who is wrong? Can I get a commitment to have some kind of data, 

response? 

Mr. RUNYON. I’ll give you some data and response to that, yes, 

sir. You’re asking me when. I’m not—I don’t do the numbers myself. I need to have some financial people tell me. But I will tell 

you in 2 days how soon you can have it. 

Mr. OWENS. Thank you. 

I have been in this position for 15 years. Post offices have been 

an issue for all those 15 years. I have tried very hard to cooperate, 

and I will continue to try to cooperate, but I think I need to be able 

to give some hard answers to the people who ask those hard questions in my district. 

I talked about the fact that we have an ongoing problem with the 

delivery of mail. And we found out at one point that you have a 

large number of casuals. Casuals are people who are paid half as 

much of the regular carriers. They have no fringe benefits, so they 

must make revenue—well, the costs go down when you have lots 

of casuals versus regular carriers, and the service, of course, goes 

down also because they really don’t know what they are doing. 

They don’t really care. And we have talked about that. And they 

insist that they have a large number of casuals. 

When I talked to you, you had a figure that said about 5 percent, 

you know, but the people out there in any district said that they 

don’t have regular mailmen the way they did 20 years ago. They 

don’t have it, and they still don’t have it even after I was promised 

that the casuals would be phased out completely. 

You know 5 percent is still casuals, but they don’t think it is 5 

percent, they think it is much higher. And I get these complaints 

over and over again and it goes around and around. We think we 

have solved the problem, and then it comes back. 

And I told you I think it is a management problem there in 

terms of Brooklyn has 21⁄2 million people, and, yet, in your management structure, it was subsumed under a system and combined 

with Queens, which has fewer people. And the people in Brooklyn 

have to travel to Queens to get an application for a postal job or 

to get an interview. And there is something wrong with a structure 

which treats a place with 21⁄2 million people, which would be the 

fifth or sixth largest city in the United States, if it was a city unto 

itself, as if it was, you know, a unit of something else. 

So I won’t go into all of that again. I just would like to have a 

response that gives me something to go back to my constituents 

with that I can say is concrete and we can have a dialog which is 

a reasonable dialog. Otherwise, you have got a revolution coming 

in Brooklyn demanding that our post office give us a whole new 

shake-up here. Thank you. 

Mr. RUNYON. Mr. Owens, as a result of my visit to your office, 

I contacted Mr. Soloman who is acting in that area of capacity 

93

there. He is trying to make an appointment with you to see you 

and come to your office and tell you the answers to some of those 

questions that you’ve asked. 

Mr. OWENS. I look forward to that. 

Mr. RUNYON. Yes. 

Mr. OWENS. Thank you very much. 

Mr. MCHUGH. Think of how tough he would be if he didn’t roll 

over like his opponents. 

We have run quite a while here, almost 3 hours and we all have 

other engagements, I know. I wanted to make two quick points. I 

know you heard Mr. Motley is and my exchange with respect to the 

GPRA and the need to have a draft document sooner rather than 

later. 

Mr. RUNYON. Uh-huh. 

Mr. MCHUGH. I think the GAO makes very cogent observations 

when they point out the possibilities that this process can bring toward healing all kinds of scars and wounds, not the least of which 

is at least putting us down the right path on some managementlabor issues. So, I would only urge you to get that document out 

and available to the public and to your constituent groups as quickly as you can. 

And, second, a question I asked the Board of Governors I will ask 

you. What is the status on pack and send? 

Mr. RUNYON. The status on pack and send is that we did have 

it in 260 locations. PRC ruled that was a postal-related product 

and should come before them for pricing. We, as a result of that, 

immediately stopped the pack and send operation. We’re now 

studying the pack and send operation to determine what we need 

to go back to our board with. So a decision hasn’t been reached, but 

it will be reached in the next couple of months that we’ll take to 

the board. 

Mr. MCHUGH. The decision either to go forward with it or 

some——

Mr. RUNYON. If we go forward——

Mr. MCHUGH [continuing]. Or not? 

Mr. RUNYON [continuing]. Then we have to go to the Postal Commission with the rate case. And we’re looking at that. 

Mr. MCHUGH. OK. 

Mr. Fattah, any thoughts, comments, questions? 

Mr. FATTAH. I think I have had enough for 1 day. 

Mr. MCHUGH. OK. I thank you for being here, as always. 

Gentlemen, thank you. We appreciate you being here. As I noted, 

Mr. Motley, we would appreciate the opportunity to file some questions, several which have to do with the great State of New York 

and the 24th congressional district. We look forward to your responses. 

With that, the hearing stands adjourned. 

[Whereupon, at 4:42 p.m., the subcommittee was adjourned.] 

[Followup questions and responses and additional information 

submitted for the hearing record follows:]

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