[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
                 TREASURY, POSTAL SERVICE, AND GENERAL
                     GOVERNMENT APPROPRIATIONS FOR
                            FISCAL YEAR 1998

=========================================================================

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                              FIRST SESSION
                                ________

  SUBCOMMITTEE ON THE TREASURY, POSTAL SERVICE, AND GENERAL GOVERNMENT 
                             APPROPRIATIONS

                      JIM KOLBE, Arizona, Chairman

FRANK R. WOLF, Virginia          STENY H. HOYER, Maryland
ERNEST J. ISTOOK, Jr., Oklahoma  CARRIE P. MEEK, Florida
MICHAEL P. FORBES, New York      DAVID E. PRICE, North Carolina
ANNE M. NORTHUP, Kentucky        
ROBERT B. ADERHOLT, Alabama      

 NOTE: Under Committee Rules, Mr. Livingston, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.

Michelle Mrdeza, Elizabeth A. Phillips, Jeff Ashford, and Melanie Marshall,
                            Staff Assistants
                                ________

                                 PART 2

                      UNITED STATES POSTAL SERVICE

                              

                                ________

         Printed for the use of the Committee on Appropriations
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
40-791 O                    WASHINGTON : 1997

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             For sale by the U.S. Government Printing Office            
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                       COMMITTEE ON APPROPRIATIONS                      

                   BOB LIVINGSTON, Louisiana, Chairman                  

JOSEPH M. McDADE, Pennsylvania         DAVID R. OBEY, Wisconsin            
C. W. BILL YOUNG, Florida              SIDNEY R. YATES, Illinois           
RALPH REGULA, Ohio                     LOUIS STOKES, Ohio                  
JERRY LEWIS, California                JOHN P. MURTHA, Pennsylvania        
JOHN EDWARD PORTER, Illinois           NORMAN D. DICKS, Washington         
HAROLD ROGERS, Kentucky                MARTIN OLAV SABO, Minnesota         
JOE SKEEN, New Mexico                  JULIAN C. DIXON, California         
FRANK R. WOLF, Virginia                VIC FAZIO, California               
TOM DeLAY, Texas                       W. G. (BILL) HEFNER, North Carolina 
JIM KOLBE, Arizona                     STENY H. HOYER, Maryland            
RON PACKARD, California                ALAN B. MOLLOHAN, West Virginia     
SONNY CALLAHAN, Alabama                MARCY KAPTUR, Ohio                  
JAMES T. WALSH, New York               DAVID E. SKAGGS, Colorado           
CHARLES H. TAYLOR, North Carolina      NANCY PELOSI, California            
DAVID L. HOBSON, Ohio                  PETER J. VISCLOSKY, Indiana         
ERNEST J. ISTOOK, Jr., Oklahoma        THOMAS M. FOGLIETTA, Pennsylvania   
HENRY BONILLA, Texas                   ESTEBAN EDWARD TORRES, California   
JOE KNOLLENBERG, Michigan              NITA M. LOWEY, New York             
DAN MILLER, Florida                    JOSE E. SERRANO, New York           
JAY DICKEY, Arkansas                   ROSA L. DeLAURO, Connecticut        
JACK KINGSTON, Georgia                 JAMES P. MORAN, Virginia            
MIKE PARKER, Mississippi               JOHN W. OLVER, Massachusetts        
RODNEY P. FRELINGHUYSEN, New Jersey    ED PASTOR, Arizona                  
ROGER F. WICKER, Mississippi           CARRIE P. MEEK, Florida             
MICHAEL P. FORBES, New York            DAVID E. PRICE, North Carolina      
GEORGE R. NETHERCUTT, Jr., Washington  CHET EDWARDS, Texas                 
MARK W. NEUMANN, Wisconsin             
RANDY ``DUKE'' CUNNINGHAM, California  
TODD TIAHRT, Kansas                    
ZACH WAMP, Tennessee                   
TOM LATHAM, Iowa                       
ANNE M. NORTHUP, Kentucky              
ROBERT B. ADERHOLT, Alabama            

                 James W. Dyer, Clerk and Staff Director








                TREASURY, POSTAL SERVICE, AND GENERAL
                 GOVERNMENT APPROPRIATIONS FOR 1998

                              ----------                              

                                         Wednesday, March 12, 1997.

                      UNITED STATES POSTAL SERVICE

                               WITNESSES

MICHAEL COUGHLIN, DEPUTY POSTMASTER GENERAL
MARY S. ELCANO, SENIOR VICE PRESIDENT, GENERAL COUNSEL

                     Opening Comments by Mr. Kolbe

    Mr. Kolbe. The Subcommittee will come to order.
    We will take Mr. Hoyer's opening statement as soon as he is 
able to get here, but we will go ahead and proceed. Hopefully, 
we can complete the hearing as rapidly as possible.
    This morning, we are going to hear from the United States 
Postal Service. The Postmaster General is home recovering from 
the flu and is unable to be with us today, and he is replaced 
by the Deputy Postmaster General, Michael Coughlin, who is with 
us. We welcome you, Mr. Coughlin.
    The Postal Reorganization Act of 1970 converted the Post 
Office Department into the U.S. Postal Service, which makes it 
an independent organization within the executive branch. 
Operations of the Postal Service are paid from the Postal 
Service fund. For fiscal year 1998, obligations of the fund are 
estimated to be $63.1 billion, offset by $59.9 billion in 
revenues, and $4.9 billion in borrowing.
    Therefore, the only amount which the Congress of the United 
States appropriates to the Postal Service is the amount that is 
commonly known as the revenue forgone and obligations which 
were incurred under the implementation--which were incurred 
before the implementation of the Postal Service Reorganization 
Act.
    For fiscal year 1998, these prior amounts and the revenue 
forgone total approximately $126 million.
    As I said, I will ask Mr. Hoyer to make any opening 
statement when he comes.
    I would ask Mrs. Meek if, in the absence of Mr. Hoyer, if 
she wants to make any opening comments.
    Mrs. Meek. Well, just to greet them again, I was on the 
Postal Service Authorizing Committee the last time. Good to see 
you.
    Mr. Kolbe. To see them from this side.
    Mrs. Meek. Yes.
    Mr. Kolbe. Mr. Coughlin, I will ask you to go ahead with 
your statement. As always, this full statement will be placed 
in the record. If you would like to summarize your statement, 
we would appreciate it. Then we can go to questions.

             Deputy Postmaster General Coughlins' Statement

    Mr. Coughlin. Good morning, Mr. Chairman. It is good to be 
with you today.
    Joining me is senior vice president and general counsel, 
Mary Elcano.
    Before I begin, I do want to express Marvin Runyon's 
sincere regrets at not being able to attend this hearing 
because of the flu. I know he values the efforts of this 
subcommittee and looks forward to working with you in the 
future.
    I have prepared a full statement, which I want to submit 
for the record, but in the interest of time, though, I just 
want to hit the highlights for you right now.
    First, I am pleased to report that the Postal Service has 
set a new winter service record for local First-Class Mail 
service, an on-time score of 91 percent. That is 4 points 
higher than the record reported to you last year, and that is a 
dozen points higher than where we stood three years ago, and it 
was local mail service that led the way.
    Southern Maryland scored a 92 percent for the second 
straight quarter, a 10-point increase over last winter.
    Washington reached an all-time high of 91 percent, tying 
the national mark.
    Northern Virginia improved 14 points, also up to 91 
percent.
    I might add, Mr. Chairman, the Tucson service area did even 
better, beat the national average with 92 percent.
    Once again, our employees pulled together and pulled off a 
new service record. That is a significant milestone because it 
comes during the most demanding time of the year when holiday 
mail volumes crest, temperatures plunge, and winter weather 
hits the hardest.
    At the same time, the past two years have been the most 
profitable in our history, by far. We ended 1996 with a net 
income of $1.6 billion. That followed on the heels of an 
historic $1.8 billion we earned in 1995.
    Through February 28th, our net income for 1997 stands at 
$888 million. That is $62 million ahead of expectations.
    If we finish in the plus column, and we believe we can, it 
will only be the second time in the past quarter century that 
we have had three straight years of positive net income.
    As you know, the Postal Service receives no tax money from 
the Federal Government, except for reimbursements for services 
that are prescribed by the Congress. Today, the Postal Service 
requests a total appropriation of $126,507,000 for fiscal year 
1998. Of that amount, we request $91,657,000 for revenue 
forgone for free and reduced postage rates for certain types of 
mail as set forth by the Congress. Most of this amount, 
$55,296,000, reimburses the Postal Service for the costs of 
providing free mail for the blind and overseas voting.
    The Postal Service also requests $34,383,000 to reimburse 
past-year shortfalls in revenue forgone funding. The bulk of 
this request, $29 million, is the fifth payment in a series of 
42, authorized for this purpose in the Revenue Forgone Reform 
Act.
    The remainder, $5,383,000 is requested in fiscal year 1998 
to compensate for a revenue forgone reform funding shortfall in 
fiscal year 1997. We have requested a similar amount to cover 
this shortfall as a supplemental appropriations request for 
fiscal year 1997.
    Consistent with the law, our request includes a net 
reconciliation adjustment to appropriations in previous years. 
Each year, appropriations for free and reduced rates are based 
on estimated mail volumes. When final audited mail volumes 
become available, these figures are then reconciled with those 
estimates. Our request for $1,978,000 covers adjustments 
through fiscal year 1995.
    The President's budget agrees with our request for current 
revenue forgone funding, but it makes no provision for covering 
last year's revenue forgone reform reimbursement shortfall.
    Our request also includes an appropriation of $34,850,000 
to cover workers' compensation payments for employees of the 
old Post Office Department. This appropriation funds the 
compensation paid to 1,828 individuals or their survivors for 
injuries which occurred before July 1, 1971.
    It should be noted that this appropriation is not in any 
way a subsidy to the Postal Service. These expenses are 
directly related to the operations of the former Post Office 
Department and remain a liability of the U.S. Government.
    The President's budget recommends the transfer of these 
Post Office Department liabilities to the Postal Service. This 
could require us to accrue immediately the full future cost of 
these liabilities, some $240 million. We strongly believe that 
to ask today's mailers to absorb liabilities that date back 
more than a quarter of a century would be abreach of the 
legislative contract that Congress signed with postal customers.
    Finally, an annual public service appropriation of $460 
million, authorized by law, is not requested. We have not 
requested, nor have we received that authorization, since 1982. 
By not using these funds, the Postal Service and this committee 
have saved the Federal Government some $6 billion.
    Thank you, Mr. Chairman. I will be happy to respond to your 
questions.
    [The prepared statement of Mr. Couglin follows:]

[Pages 4 - 9--The official Committee record contains additional material here.]


                      transitional appropriations

    Mr. Kolbe. Thank you very much.
    Let me start with a couple of questions from your 
statement. I was going through it as I was listening to you 
here.
    On the recommendation in the President's budget for 
transferring the Post Office Department liabilities to the 
Postal Service, which liabilities are we talking about, and 
what amount is being recommended to be transferred?
    Mr. Coughlin. We are talking about the $34-million-plus for 
the----
    Mr. Kolbe. But that is just the annual payment. That is not 
the liability.
    Mr. Coughlin. No. The liability is estimated to----
    Mr. Kolbe. What is the liability?
    Mr. Coughlin. The liability is estimated to be some $240 
million right now.
    Mr. Kolbe. $240 million.
    Mr. Coughlin. $240 million. That is the present value 
expected of the benefits that would be paid out over the 
lifetime of these people.
    Mr. Kolbe. All of these go back before 1971. There is still 
1,828 individuals.
    Mr. Coughlin. Yes, there are.
    Mr. Kolbe. And some of these are individuals that were in 
the Postal Service, and many are survivors?
    Mr. Coughlin. Most were actually in the Postal Service. 
Some are survivors at this point, yes. They were in the Post 
Office Department.
    Mr. Kolbe. Okay. These are not retirement benefits?
    Mr. Coughlin. No. These are worker's compensation benefits.
    Mr. Kolbe. Workers comp. There really shouldn't be survivor 
benefits under workers comp, are there?
    Mr. Coughlin. It depends on the nature of the injury. There 
could have been some fatalities in there that would have been 
survivor benefits.

                            revenue forgone

    Mr. Kolbe. Okay. And that is the liability. You have plural 
there. That is why I was a little confused. You have the Post 
Office Department ``liabilities.'' It is that one. We are 
talking about the single thing, the worker's comp.
    Mr. Coughlin. Yes. The other piece that the President has 
not included in the current budget is the $5 million that was a 
shortfall from last year's revenue forgone reform funding.
    Mr. Kolbe. That is the reconciliation amount?
    Mr. Coughlin. No. That is the piece that was there that was 
not included last year.
    As I think you know, the Revenue Forgone Reform Act 
provided a series of 42 payments of $29 million.
    Mr. Kolbe. Oh, 42 payments.
    Mr. Coughlin. Last year, there was only roughly $23 million 
provided of the $29 million, and it is that $5 million that is 
not included in the President's budget.
    Mr. Kolbe. You are making it up.
    Mr. Coughlin. Yes.
    Mr. Kolbe. The full amount for this year is included?
    Mr. Coughlin. We have included the $29 million, plus the $5 
million from last year, yes.
    Mr. Kolbe. The President's budget has the 29----
    Mr. Coughlin. Yes.
    Mr. Kolbe [continuing]. But not the additional 5 million?
    Mr. Coughlin. That is right.
    Mr. Kolbe. Well, I could have predicted at the time that 
Congress said they were going to make 42 payments to you that 
you would be living in looney-tune land to think that Congress 
would ever follow through and do that for 42 straight years. We 
have never done anything for 42 straight years on anything like 
that.
    Mr. Coughlin. I assume that doesn't call for a comment.

                          capital investments

    Mr. Kolbe. Let me ask you this. Your revenues this year are 
$59.9 billion. Your borrowing is $4.9 billion. Is that 
borrowing all for capital?
    Mr. Coughlin. Most of it is driven by----
    Mr. Kolbe. Is it operating cost?
    Mr. Coughlin. No. All of our borrowing is driven by the 
major capital investment program we have, yes.
    Mr. Kolbe. So you have a capital fund where you amortize 
your costs over a period of years on capital. Is that right?
    Mr. Coughlin. That is right.
    Mr. Kolbe. You are adding $4.9 billion. What is your total 
outstanding debt, the long-term debt that you have?
    Mr. Coughlin. The current debt that we have--and I am going 
to--correct me--behind me is Richard Porras, our comptroller.
    Richard.
    Mr. Porras. At the end of last year, 1996, it was $5.9 
billion. We are going to add to that this year, but right now--
--
    Mr. Kolbe. Wait a minute. Let me see if I understand that. 
You only have a total of $5.9 billion, and you are adding $4.9 
million on this? You are adding almost as much as that total.
    Mr. Coughlin. No. The difference here is the way the cash 
is flowing. The debt that Richard is referring to, the $5.9 
billion is outstanding debt as of the end of our last fiscal 
year with the Federal Financing Bank.
    In fact, the flow of funds out of the Postal Service to pay 
for current capital projects will be somewhere in the 
neighborhood of $4.3 billion in FY 1998.
    We had a $3.2 billion commitment of capital this past 
fiscal year. That is a commitment, not a cash flow, and we will 
begin to pay as those buildings are built, or as those pieces 
of equipment come on line.
    The President's budget reflects that cash flow as well as 
commitments. That is the difference here that we are dealing 
with.
    Mr. Kolbe. I am having trouble. Excuse me.
    Mr. Coughlin. Yes. It is complicated.
    Mr. Kolbe. It does not sound with the way you are 
describing it--it does not sound to me as though you do, do 
long-term financing. You do short-term financing.
    Mr. Coughlin. We very much do long-term financing.
    Mr. Kolbe. Then you would have more than $5.9 billion of 
outstanding debt if that were the case.
    Mr. Porras. Let me clarify a little bit about the whole 
borrowing program. What we do, of course, is look at the 
depreciation. That helps us in terms of financing our capital 
program.
    We also pay back some of the debt that we owe. You end up 
with a net change in terms of what your capital requirements 
are, and your debt won't necessarily always go up.
    We have a limit on the net capital borrowing of $2 billion 
per year. So you can't go up more than that in terms of your 
debt, but your capital expenditures can go above that, but you 
pay for the difference through either net incomes or the 
retainedearnings we earn as an organization. Depreciation helps 
us fund our capital program. So there is more than just one source of 
funds that we use to fund the capital program.
    I am confusing you more.
    Mr. Kolbe. I don't understand exactly how this is working. 
It just seems to me that an organization of this size with that 
amount of a budget, to have only a $5.9-billion debt, it 
strikes me that you are doing it as the U.S. Government does 
with its capital programs, the financing as you go, pay as you 
go, that it is all up front. You pay for it in advance. You pay 
for capital improvements that a lot of people have talked 
about----
    Mr. Coughlin. No. We have obligations.
    Mr. Kolbe [continuing]. Namely the capital budget, but you 
don't have a capital budget.
    Mr. Coughlin. We very much have a capital budget each year. 
We go before our board and have it approved each fall.
    Mr. Kolbe. Financed by long-term borrowing, 30-year 
borrowing bonds?
    Mr. Coughlin. Financed by long-term borrowing. We try to 
match the repayments of the borrowings to the life of the 
assets and the purchase. We do it from internal operations. We 
have had two successive years of significant surpluses here 
recently. We have actually brought our outstanding debt down by 
about $3 billion over the last two years.
    Now, we expect that to begin to reverse itself over the 
next couple of years, as we begin to put more emphasis in some 
capital investments, but it might help, I suppose, Mr. 
Chairman, if we had some of our people sit down with your staff 
and go through this process in more detail.
    Mr. Kolbe. It has been a long time since I got my MBA, and 
I thought I understood some of these things of financing, but I 
am having great difficulty following how it is done here.
    Mr. Porras. It also ties into our whole cash management 
program which we have to integrate into the capital program. We 
have a lot of cash, and our organization doesn't have a 
commerical line of credit, of course. So we have a lot of cash, 
and we balance that together with our capital and operating 
requirements. So it does get a little more complex.
    I was just going to add, in our annual report, on page 64, 
we have each of the listings of each of the borrowings that we 
have, and they are explained there in terms of the duration.
    Mr. Kolbe. All right. I have a few other questions I will 
ask, but let me see if Mrs. Meek had some questions.

                        Revenue Forgone Funding

    Mrs. Meek. I don't really have a question, Mr. Chairman. I 
have a comment.
    From knowing the history of Congress' failure to meet its 
promises with the Postal Service, I think it is high time that 
this Committee make some recompense for some of that, and I 
thought I would put in my plug early to you, so that each year 
they come before us, that this foregone funding which they talk 
about in all of their reports, that we will have shown a little 
bit more fiscal attunement by making some adjustment to that, 
and that is all I have to say.
    Mr. Kolbe. Thank you. I appreciate that, Mrs. Meek. I am 
sure the Post Office also appreciates it.
    Mrs. Meek. Because the competition out there is really 
strong, and pretty soon, you are going to see that the 
situation with the Post Office is going to be much worse than 
it is now because the marketplace is full of other competitors 
that are delivering the same kinds of service, and many times, 
in a more expeditious manner because of the funding that they 
get.
    Mr. Kolbe. Thank you. I have a couple of questions that I 
will come back to on the changes in the volume of mail, what is 
referred to in your statement here, but let me call Mrs. 
Northup for questions.

                          Global Package Link

    Mrs. Northup. Thank you.
    I would like to follow up on the same line of questioning 
in terms of private competition and where the Post Office is 
going in terms of its investment and its efforts to compete 
with the private sector. That alarms me a great deal.
    I think that there is a very important role for the Post 
Office, and I think that competing with the private sector is 
not one of those roles, especially because the Post Office has 
the ability to take overhead and apply it in different ways, as 
every company does that has different divisions.
    A company that has different divisions can decide to 
allocate management cost different ways, allocate technology 
costs different ways, and if you choose in the area that you 
compete with the private sector, you can choose to allocate 
very little overhead to those operations, and consequently 
undercut the private sector.
    So I already have a very strong concern about the the Post 
Office moving in that direction, and I quite honestly believe 
that Congress should move to limit your ability to compete in 
the private sector because of those concerns about overhead.
    Specifically, though, I want to ask you today about the 
Global Package Link service that you are offering. Do I 
understand that you have negotiated with the Japanese Post 
Office a way that you can bypass or cut down on the costs of 
the Customs charges, and especially for customers that mail a 
large number of packages?
    Mr. Coughlin. We have some arrangements with the Japanese 
government on a product called Global Package Link. You may not 
think in reference to passing. The comment about our being able 
to lower the Customs charges, that is simply not the case.
    I think we have been able to work out a streamline way of 
moving product through the Japanese Customs. I simply don't 
know all the details of the service.
    Mrs. Northup. Well, I would like to know some specifics 
about that. I would like to know if the State Department was 
involved in helping you negotiate that.
    Mr. Coughlin. Not that I am aware of, no, not offhand.
    Mrs. Northup. Was the Customs Service?
    Mr. Coughlin. I just don't know.
    Mrs. Northup. Well, can we get somebody to answer those 
questions for us?
    Mr. Coughlin. Absolutely, sure.
    Mrs. Northup. Well, I guess that the most important thing 
here, of course, is that UPS, Federal Express, and other 
companies don't have the ability to negotiate special deals 
with Japan. I understand that you are expanding this to 10 more 
countries and maybe to 25 and that you are out to capture the 
large quantity shipment market. This is of grave concern, Mr. 
Chairman, that they could come in, use their position as a 
Government agency, have access to negotiate special Customs 
bypass, so that they don't incur these costs and can literally 
run the private companies out of the market in these countries.
    Now, sure, if I as one person that wants to mail one 
package to Japan, I am not going to get the specific service 
that you provide, and so they are competitive. But what you are 
doing is capturing the bulk market to the bulk countries by 
using your ability to negotiate a special arrangement with 
another country and taking the private enterprise that can pump 
competition out of the system, and I, for one, would very much 
like to see us eliminate that ability of the U.S. Post Office 
that is contrary to all the laws of free market that we believe 
in.
    Mr. Coughlin. Let me just say, we will be glad to provide 
you more detailed information, but I would be reluctant to 
characterize our rather limited arrangement with Japan at this 
point as somehow overwhelming the private marketplace out 
there. That is simply just not the case.
    Mrs. Northup. Well, is this for customers that ship at 
least 25,000 packages a year?
    Mr. Coughlin. It is for bulk shippers, yes.
    Mrs. Northup. Okay. Are you expanding this to 10 other 
countries?
    Mr. Coughlin. We are talking about doing that, yes.
    Mrs. Northup. Talking about it.
    Mr. Coughlin. Yes.
    Mrs. Northup. And what you want is no interference by us to 
keep you from doing that, I assume.
    Mr. Coughlin. No. Nobody has said that.
    I have just now offered to provide you whatever information 
you would like to have.
    Mrs. Northup. Well, I guess what I would like is for you to 
provide the same sort of express through Customs as the same 
price for every other private shipment.
    If our Government is going to get into the business of 
negotiating with Japan or any other country, some bypass 
through Customs for shippers of packages over 25,000, then I 
think it ought to make it available to every company that is in 
the shipping business. Otherwise, I don't think the United 
States Post Office has any business providing it for their own 
agency, Mr. Chairman.
    Mr. Kolbe. Do you want to respond?
    Mr. Coughlin. I don't know what else I could say, Mr. 
Chairman.
    We will provide you the information----
    Mrs. Northup. Okay.
    Mr. Coughlin [continuing]. That you have asked for.
    Mrs. Northup. Thank you.
    [The requested information follows:]

    I do want to initially clarify that in establishing Global 
Postal Link (GPL), the Postal Service did not negotiate 
arrangements with any country for bypassing customs procedures. 
Those procedures are the responsibility of the destination 
country, and were in place long before the creation of our GPL 
service. GPL is designed to expedite our customers' compliance 
with those procedures.
    GPL is an air export parcel delivery service that provides 
customers an easy way to ship volume packages internationally. 
It has differing levels of service which vary by country. GPL 
saves customers time and money as the United States Postal 
Service does virtually all of the paperwork. Customer mailing 
information is provided to the Postal Service through a 
computer link. All a customer need do is apply shipping labels 
and we do the rest through our proprietary software called 
Customs Pre-Advisory System (CPAS). This type of service is not 
available for single piece or low volume mailers.
    This system helps speed packages through customs by 
enabling customs officials in a foreign country to review the 
contents of the package either electronically, or by reviewing 
the CPAS generated customs declaration on the package. Although 
CPAS provides declarations of contents and value of all 
packages, all packages are subject to inspection at the 
discretion of customs agents in foreign countries.
    Currently, a mailer must meet an annual minimum volume 
requirement for each county to which it sends parcels; 25,000 
parcels to Japan and 10,000 parcels to Canada and the United 
Kingdom. We are in the process of changing this minimum volume 
to 10,000 parcels to all countries combined. Rates are based 
upon the number of parcels sent annually, with numbers of 
parcels in excess of certain thresholds eligible for reduced 
prices. These thresholds vary by country.
    GPL allows the Postal Service to offer customers a full 
product line of international direct mail services, including 
catalogs, and merchandise delivery. It is the type of delivery 
service that customers have requested for years. Our customers 
have told us their international business has grown and that 
this growth is due, in part, to the ease of doing business by 
using GPL. This business growth is a plus for the Nation's 
economy as it increases American exports by making it easier 
for volume mailers to send merchandise internationally.
    GPL is currently available to Canada, Japan and the United 
Kingdom. Service will be offered to Brazil, Chile, China, 
Germany and Mexico in the near future. Future service is also 
contemplated to France, Korea and Singapore based upon mailer 
demand.
    With respect to GPL service to Japan, the parcels are sent 
via one of three levels of service; Express Air, Standard, or 
Economy. They are received by Japan Post as all other postal 
parcels are received from the Postal Service. Each package is 
cleared through customs by Japan customs in accordance with its 
procedures and the customs declaration attached to the package. 
As noted, the Postal Service did not negotiate any procedure 
for bypassing customs with Japan or with any other country. We 
developed a service that employs electronic data interchange to 
speed the customs process. The use of electronic data 
interchange for this purpose is available to private carriers 
as well as the Postal Service. Global Package Link is a Postal 
Service offering to its customers. While both the State 
Department and the U.S. Customs Service are fully aware of GPL, 
neither was involved in its establishment.

    Mr. Kolbe. Mrs. Northup, do you have other questions right 
now?

                       postal retirement funding

    Mrs. Northup. I have one other one.
    I understand about the workers compensation appropriation 
that is included in here, but don't we have a change from past 
years about in terms of retirement benefits for Post Office 
employees? Isn't there about a $37-million appropriation that 
Congress would be expected to make?
    I think maybe it was for retirement benefits for former 
employees. This is pre-'72 obligations that are not included in 
the President's budget.
    Mr. Coughlin. Not that I am aware of.
    Mrs. Northup. Okay. Thank you.
    Mr. Coughlin. It is certainly not a part of our request.
    Mrs. Northup. Okay.
    Mr. Kolbe. Let me just follow up on that, if I might. She 
raises a point. We have an obligation for prior worker's comp. 
What about retirement benefits, pre-1972? How are those paid?
    Mr. Coughlin. Those are now paid by the Postal Service.
    Mr. Kolbe. So you would assume those obligations?
    Mr. Coughlin. Those were passed onto us in a series of--no, 
excuse me.
    Mr. Porras. We had a series of omnibus budget 
reconciliation acts, in which we picked up the retirement cost, 
and we ended up with a very complex formula. Any employee who 
retired, who was on the retirement roles in 1971, we are paying 
the full cost. It is pro rated, through, for Post Office 
Department time and Postal Service time. So we have actually 
split that cost, but we paid for the whole universe of 
employees who were on retirement from 1971, and we pro rate it. 
So we are paying forward, and the Government is paying 
backwards for those employees.
    Mr. Kolbe. Wait a minute. Then the Government is paying the 
pre-1971 retirement cost?
    Mr. Porras. It is pro rated for that cost, right.
    Mr. Kolbe. Where? By appropriation?
    Mr. Coughlin. Yes. It goes through the Office of Personnel 
Management.
    Mr. Kolbe. It is an OPM appropriation?
    Mr. Coughlin. Yes.
    Mr. Kolbe. Okay.
    Mrs. Northup. And is that in this year's budget?
    Mr. Kolbe. It is not in their budget.
    Mr. Coughlin. It wouldn't be any of ours, no.
    Mrs. Northup. All right.
    Mr. Kolbe. That explains why it doesn't show up here.
    Mrs. Northup. All right.
    Mr. Kolbe. That is true of every agency.
    Mr. Hoyer, we missed you at the opening, but we would 
certainly like to hear your comments and any questions you 
might have.

                         statement of mr. hoyer

    Mr. Hoyer. Mr. Chairman, I apologize for my lateness. I was 
with Secretary Rubin. I have spent a lot of time with him 
lately. So I apologize for being late.
    I appreciate having this hearing.
    Mr. Deputy Postmaster, I want to first of all welcome you 
to the Committee and express my concern about the Postmaster 
General. I know the committee sends him our best wishes for a 
speedy and full recovery. I know he has been under the weather 
for a little bit of time now. I am sorry that he can't be here.
    As you know, previous appearances by Mr. Runyon from time 
to time involved some acrimony and confrontation with this 
committee and significant concerns about performance, and I was 
one of those leading the charge. So I am always pleased to be 
able to do the opposite.
    You will recall that back in 1994, Maryland's on-time 
delivery rating was a 63-percent rating, 63 percent of the 
Postal Department's established formula. That was 16 points 
below the national average, which was then pretty low at 79 
percent. We had a whole lot of horror stories, including a 
couple of tractor-trailers, as you will recall, full of mail, 
that were sitting out in Maryland undelivered.
    That was the bad news, and we had a lot of hassle about it. 
The good news is that, today, the Postal Service has turned 
this around very, very substantially. I don't have my '92 
button on. I notice we have a '90 button here. That is out of 
date, Mr. Chairman. I don't know if you have one of those.
    The Washington metropolitan region, you announced 
yesterday, is at 91 percent. Now, for those of you in other 
regions of the country, we were down in the sixties, and people 
were rightfully angry and the performance was unacceptable. We 
made that point.
    Some people wanted the Postmaster General at that point in 
time to resign. These include people with whom I serve--
colleagues of mine and friends of mine who represent the 
district next to me, as you will recall.
    Yesterday, you announced that Southern Maryland was at 92, 
and the region as an average was at 91. That is an 
extraordinary accomplishment in a relatively short period of 
time.
    I was concerned when we started getting pretty good. Now, 
on the one hand, the glass is nine-tenths full because we have 
been at 92 now for two quarters, and I guess one could expect 
us to go ahead. But as I said, at some point in time, you are 
going to get where batting .400 is pretty darn good and you 
can't expect .450 or .500. The fact that we are maintaining 
that delivery and just didn't peak by some sort of special 
infusion of resources either in terms of manpower or machinery, 
I think, speaks well.
    So, as one who was very critical and very harsh in my 
comments with reference to a demand for a performance, I want 
to at this point in time, Mr. Chairman and members of the 
committee, to say to Mr. Coughlin, and to all the Postal 
Service, to management, to the letter carriers, to the postal 
workers, to everybody who is involved from the first time the 
letter is dropped in the box until it is delivered to the 
addressee, that you have done an excellent job, and I look 
forward to seeing that continue.
    Obviously, there are ongoing problems, and this committee 
will be looking at those. Mrs. Northup left, but our 
relationship to the Postal Department is somewhat tangential in 
terms of appropriations, as we all know, because it is limited, 
to the contribution towards the preexisting liability to the 
Postal Department coming from the public sector to the quasi-
private sector, and then the payment that we make so that you 
can deliver some mail in a preferred status.
    Mr. Chairman, let me say that I am hopeful that this 
committee will meet that obligation. Unfortunately, in the 
past, Mr. Chairman, you may not have watched it as closely, but 
since I have been on this committee, we were inclined to, not 
meet our obligations to the Postal Department, expect preferred 
mail to be given a lower rate, notwithstanding its cost, take 
credit politically for that, and then not pay the bill. That 
was not, fair of us to do. Some years ago, we made a deal, in 
effect, with the mailers, with the Postal Department, with 
everybody else, and we need to keep that deal, if we are going 
to makeaccommodations in the future, and that deal was that we 
would make our full payment. I don't know what the figure is. It is 
usually around 130. This year, it is $126 million.
    I am hopeful, Mr. Chairman, that as we mark up this bill, 
the 126 is a given because it is what we owe based upon what we 
have told the Post Office to do in terms of preferred rates and 
based upon the obligations we undertook when we transferred to 
the Postal Department some liabilities and we maintained our 
own liabilities.
    So with that statement, and congratulations and commitment 
on this member's behalf, I want to make sure that we meet our 
commitment to the postal department. Recognizing that my good 
friend Jim Rogers is here, there obviously is a healthy 
competition and concern in the private sector that we do not 
adversely impact on the private sector their ability to compete 
and do the job they do. I happen to think they do a very good 
job and are a great corporate citizen of our country.
    So I share Ms. Northup's concerns. We need to work with 
Larry Speakes, who worked for one of the great advocates of the 
private sector and who I know cares deeply about the private 
sector and their ability to compete fairly, and that the 
Government not subsidize, Mr. Chairman, competition that 
undercuts our private sector. But at the same time, it is my 
belief and strong conviction that for the United States Postal 
Service is an absolutely essential service to the public.
    I used to live in the urban areas. I now live in the rural 
areas, and I can tell you, it is even more important in the 
rural areas where it may not be as cost effective as it would 
be in Prince George's County where you can deliver a whole lot 
of mail real quickly and cheaply. But when you get out, and my 
closest neighbor is about 500 yards away from me, and his 
closest neighbor is another 500 yards from him, it is a little 
more difficult to do it in a cost effective basis.
    The United States Postal Service, Mr. Chairman, if you do 
not know this figure, is 40 percent more productive than the 
second best postal department in the world; 40 percent ahead in 
terms of productivity. Number two is Japan, and I like to say, 
Mr. Chairman, that if we did as well in computers and 
electronic gear as we are doing in postal service in competing 
with Japan, you would not have a Hitachi--what are those 
cameras? Sonys. They would be U.S. made cameras, not Japanese 
made cameras.
    So we share, I think, a justifiable pride in the 
performance of the United States Postal Service, particularly 
recently when its performance has risen. And not only in the 
Washington metropolitan area where I raised a lot of heat, but 
all over the country. The average is now at 91, 92?
    Mr. Coughlin. The national average was 91 in this last 
quarter.
    Mr. Hoyer. 91, and Southern Maryland is one point ahead of 
the national average. That is the way we want to keep it. Thank 
you.
    Thank you very much, Mr. Chairman. I appreciate it.
    Mr. Coughlin, and all of your people, thank for what you 
are doing.
    Mr. Coughlin. Thank you, Mr. Hoyer.

                    postal service--irs cooperation

    Mr. Kolbe. Let me, Mr. Coughlin, ask you a couple of 
questions in a couple of areas here. We have, as you know, had 
a lot of discussions and concerns with the Internal Revenue 
Service about their operations and ways in which we can improve 
their productivity. There is no doubt that the error rate and 
the problems of IRS could be reduced or eliminated altogether 
if we get to electronic filing. We are not very good in that 
area; about 15 percent of our returns are filed electronically. 
Australia is about 75 percent, 80 percent.
    Australia, one of the reasons it is easier to file 
electronically is you can do it at the post office. They have 
made arrangements with their tax collecting body, whatever they 
call it, their internal revenue service to have this kind of 
communications system set up in many of the post offices. Not 
all of them, I think, but many of the major ones where people 
can do the electronic filing.
    Have you had any conversations at all with IRS about this?
    Mr. Coughlin. Yes, we have.
    Mr. Kolbe. Would you tell us what you have----
    Mr. Coughlin. I can tell you a little bit about it and if 
you desire more, I can have our people provide you more 
information about it. We have had a series of discussions over 
the last three or four years really about how the Postal 
Service and the IRS might work together to improve both our 
situations. It appears that there are two areas where there 
might be some possible things we could do jointly.
    One is, the IRS has a need, as I understand it, for what 
amounts to an electronic postmark on electronically-filed 
returns. We have been doing some work in that area ourselves to 
develop such a capability. It is not at the point yet where it 
could be used by the IRS or others, but we hope that it will be 
shortly. At this point, we have kind of jointly concluded there 
is nothing we can do with each other right now in this area, 
but we are going to continue to explore it.
    The other thing we have going is a kiosk program. We have a 
test going on in Charlotte, North Carolina that involves an 
interactive kiosk which allows a citizen of this country to 
come into a local post office, use that kiosk to obtain 
information on an interactive basis from other Government 
agencies. I do not recall offhand which agencies are involved 
with this. I do not think IRS is one of them. But that is 
something that we think has the possibility to expand as well. 
But we continue to talk to agencies about this, including the 
IRS, and I think the kind of interest you are expressing in 
this area would be helpful to us in trying to expand that.

                              dollar coin

    Mr. Kolbe. I would like more information as you develop it 
about the conversations you are having and where you are going 
with these proposals because I do think they help us. 
Obviously, they keep you in the marketplace and competitive. 
But it also would help us with the IRS.
    Let me to turn to another issue here. It is a little thing 
that I have been interested in, the coin dollar. The post 
office used to be the biggest user of the Susan B. Anthonys. 
You were discharging them there as change when people would 
come in with a $20 bill and getting stamps and stuff. Are you 
still consuming Susan B. Anthonys?
    Mr. Coughlin. Yes, as I understand it we use about 400 
million dollar coins a year, primarily through our vending 
operation.
    Mr. Kolbe. That is the turnover, $400 million?
    Mr. Coughlin. Yes.
    Mr. Hoyer. I have not seen any----
    Mr. Kolbe. Oh, yes, they are out there.
    Mr. Coughlin. Yes, they are out there.
    Mr. Kolbe. Let me just educate my distinguished ranking 
minority member. The number of Susan B. Anthonys has declined 
so they, the U.S. Mint, is going to have to resume production 
of them. The Mint has no choice under the law but to resume 
production because we have not been able to come up with a 
better design and a better coin, although I have been calling 
for it for some time.
    Mr. Hoyer. The ranking member is well aware of the 
Chairman's interest.
    Mr. Kolbe. One of the reasons is because as natural 
inflation takes place you just have to have a coin. So as bad 
as it is, they are using the Susan B. Anthonys in the Postal 
Service.
    Mr. Coughlin. Particularly for us in our vending operation 
they allow us to make change in certain kind of vending and do 
it in a way using the coin so that we do not either require a 
larger purchase on the part of the customer than the customer 
might want to make, or giving them less than the full change 
available. We have about 30,000 vending machines out there that 
handle dollar coins, and we have about 8,000 that provide 
dollar coins in change.
    The Postal Service is just so big, and its range and its 
scope is so enormous that when you talk about something like 
this it is hard for the Postal Service not to be one of the 
largest, if not the largest, user.
    Mr. Hoyer. Mr. Chairman, I was just observing, it did not 
occur to me and I have not been focused as you have on this, 
but I cannot remember getting a Susan B. Anthony in change or 
in the course of my travels for years.
    Mr. Kolbe. They are more prevalent in certain areas. For 
example, some transit systems use them, so if you go to New 
York City you are going to find more of them in that area, and 
Dallas I think uses them quite extensively. It just depends on 
where you are and whether they are being used there.

                      INTERNATIONAL POSTAGE RATES

    I would like to ask one other question here and let me see 
if there are any questions from the other members here. This is 
one that I am just curious about. Being new to this 
Subcommittee, I am educating myself. The setting and the way 
overseas postal rates work, the Department of Transportation, 
as I understand, sets the overseas postal rate?
    Mr. Coughlin. No, the Department of Transportation sets 
international transportation rates; the rates we pay airlines 
for transporting overseas.
    Mr. Kolbe. What is the basic overseas rate now?
    Mr. Coughlin. 60 cents per half ounce.
    Mr. Kolbe. When I put on a 60-cent stamp, you get all that 
revenue? None of it goes to England or----
    Mr. Coughlin. No, we collect all of the revenue for the 
mailing of that piece. We have settlement arrangements with 
foreign countries called terminal dues where we pay them----
    Mr. Kolbe. You have a settlement arrangement with each 
country?
    Mr. Coughlin. Yes. There is a universal postal union 
standard terminal dues rate, but then we have individual 
bilateral arrangements with different countries.
    Mr. Kolbe. Would it not be easy to say, you mail the piece 
in London, you get the postage there and we deliver it here, if 
somebody mails one to England, we get the postage here and you 
deliver it?
    Mr. Coughlin. That is right. That is basically what happens 
and did happen until about 1974, I think it was, when it 
occurred to people that, for example, a country like the United 
States which is by far the largest exporter of mail, we are 
collecting the postage on the mail going to England. England is 
doing more of the work and incurring more of the cost 
associated with that. Because of the imbalance there was this 
terminal dues solution that was created. It became a universal 
agreement on how we were going to pay each other for the 
exchange of mail and imbalances in the exchange of mail.
    One of the problems with that is, there are no real good 
fixes on the costs of operations in different postal 
administrations, and the rates themselves do not really reflect 
cost. That has long been a concern of ours. As Congressman 
Hoyer said, this is the most productive postal system in the 
world and has the lowest costs in terms of its handling 
charges, yet we are being charged higher rates than we think we 
ought to pay in some cases.
    We do collect all the revenue, but then we later have this 
settlement arrangement with foreign countries to handle the 
costs.
    Mr. Kolbe. Thank you.
    Mr. Hoyer.
    Mr. Hoyer. Let me yield--I made a long statement. Let me 
yield to Ms. Meek, and then I have a number of questions.

                           EMPLOYEE TRAINING

    Mrs. Meek. I guess most of my attention in terms of the 
Postal Service is not clearly related to the budgetary process. 
But naturally, your appropriations would in some way determine 
how well you train your people. There has been quite a few 
personnel problems within the framework of the Postal Service 
operation, and of course, much of that has been seen and 
demonstrated by the performance and also some of the problems 
within the post office itself. This is down to the real people 
who are delivering the service and the people who are inside 
the post office.
    I am just wondering, how well is that operation going in 
terms of correcting it and working on it through the years? In 
terms of your studies, have your studies revealed any 
improvement in the regular workplace environment of your 
workers?
    Mr. Coughlin. I guess there are several ways to respond to 
that. Let me say first of all that most of the credit for the 
good service and financial performance that the Postal Service 
has achieved over the last couple of years goes to our 
employees. It was the hard work of the employees, for example, 
here in the Washington metropolitan area that raised those 
scores. That above all else is what accounted for that.
    Now some of that, a good deal of that has been helped, I 
think, by the level of training that we have brought back into 
the system over the last couple of years. We have put a great 
deal of effort into making sure all of our employees, for 
example, understand what it is we are trying to achieve 
locally. We have put a large investment in the training, 
particularly here in the Washington area, but in some other 
parts of the country as well, in process management. That is 
primarily our employees learning how to effectively operate in 
their area of responsibility to benefit the customer, because 
that is really what this is all about.
    At the same time, I think it is clear that we do have some 
relationship problems in some parts of the system, and Iknow 
that the Postmaster General and I and the senior management of this 
organization are concerned about and continue to try to work with our 
employee organization heads to try to deal with some of those issues.
    Mrs. Meek. So in terms of your budgetary needs, that is 
very clearly covered and you feel that what you are doing now 
is adequate?
    Mr. Coughlin. Yes. This is not a budgetary issue as far as 
we are concerned.
    Mrs. Meek. Thank you.
    Mr. Kolbe. Are you finished, Mrs. Meek?
    Mrs. Meek. Yes.
    Mr. Kolbe. Mr. Hoyer.

                          SERVICE PERFORMANCE

    Mr. Hoyer. Thank you very much, Mr. Chairman.
    Mr. Coughlin, I talked about your performance; 91, 92 in 
that range. What stumbling blocks do we see to getting closer 
to 100 percent? Obviously, at some point in time, as human 
beings, we are not going to get to 100 percent. But what 
stumbling blocks do we have to improvement from this 
standpoint?
    Mr. Coughlin. I think in terms of a general situation we 
still have, I think it is around 300 letter sorting machines, 
for example, electromechanical letter sorting machines in the 
system. We have eliminated about 600 of those, about two-thirds 
of those over the last few years and those have helped us 
improve the quality of the delivery we are providing. Having 
those remaining machines still in the system remains a 
stumbling block because they are a source of error. We are 
continuing to push those out of the system.
    The other big thing in terms of what we need to do and 
expand on is our process management activity that I referred to 
earlier. We are now at the point where we are trying to close 
that gap, take care of that 8 or 9 percent that is not getting 
delivered on time, and to focus our efforts on that. Of course, 
the smaller that number becomes, the more difficult it becomes 
to get at, the more challenging. It is a technique, a process 
control tool like process management that will help us identify 
the specific causes.
    We have done a good deal of work in the Washington area on 
that. We will continue to do that and we are expanding it 
around the country.
    The second big area is we have had some good success with 
our overnight service, as we have told you, but we need to do 
more in a couple of other areas of our service. We need to do a 
better job on second and third day delivery of First Class 
Mail, and we will be concentrating a considerable amount of 
attention on that in the coming year to try to improve that as 
well.
    Mr. Hoyer. What fear do you have, if any, that something is 
going to happen, that we might fall back? As you know, one of 
the reasons I was so angry in 1994 was, if you have looked at 
the record in the Washington metropolitan area on which I was 
focused, and I think probably in other parts of the country as 
well, there would sort of be the squeaky wheel spike. There 
would be a problem. Somebody would holler about it, and service 
would come up. Then somebody else would holler and, frankly, 
there was a transfer of personnel and/or other resources other 
than people to some other area and that would spike up and then 
fall back down.
    The challenge of keeping it at 90 percent or better is a 
very substantial one, I would think. Tell me about how 
confident you are that we are going to be able to do that.
    Mr. Coughlin. I am very confident, particularly in terms of 
the current leadership of the organization and its commitment 
to service. I am also confident because of the commitment of 
the governors of the Postal Service to quality in this effort.
    My greatest fear is that at some point we fall into that 
service or budget trap again; that it has got to be one or the 
other. I think we have demonstrated over the last two to three 
years that it does not have to be that way; that you can have 
strong financial commitment, strong cost control, and high 
quality service. We believe strategically for the Postal 
Service that if we are going to succeed as a viable 
organization in the competitive marketplace of the future, we 
have to provide both high levels of quality and competitive 
rates. They go hand in hand. My greatest fear would be if we 
lost sight of that.

                 APPROPRIATIONS--IMPACT OF ELIMINATION

    Mr. Hoyer. I guess we need to keep you focused on that. 
There has been some discussion about the President's proposal. 
What would be the income impact and other impact of a change in 
the present contribution towards the Postal Service?
    Mr. Coughlin. If it were to be eliminated?
    Mr. Hoyer. Yes.
    Mr. Coughlin. The immediate year impact would be about a 
$600 million accounting charge to the bottom line of the Postal 
Service. We would be forced to recognize under generally-
accepted accounting principles the full long-term liability 
associated with both the worker's compensation payment and the 
revenue foregone funding payment, simply because it would be a 
known fact that we were not going to get it paid for from the 
source it had been paid from. So that would be the immediate 
effect, about a half-cent on a first class rate.
    Mr. Hoyer. Half a cent. That would accelerate, I take it, 
the need for an increase?
    Mr. Coughlin. In all likelihood, yes.
    Mr. Hoyer. But still, are we not approximately on a four-
year cycle on our rates?
    Mr. Coughlin. Our last cycle was a full four-year cycle. We 
clearly are not going to have any new rates through 1997. We 
are looking at our situation as we look out a year to 18 months 
ahead to 1998 and beyond. We are going to try to do everything 
we possibly can to hold our rates through 1998. It is going to 
be a tough challenge, and we will continue to watch it almost 
on a month-by-month basis. But something like this could 
probably push us over the edge, to do what you suggested.

                              MARKET SHARE

    Mr. Hoyer. You mentioned earlier losing market share. How 
much is due to competition and how much is due to decreased 
overall demand?
    Mr. Coughlin. I think it is really competition in two ways. 
I think it is all competition. There are really two kinds. One 
is ordinary marketplace competition you see from companies like 
UPS and FedEx and the hundreds, or thousands of courier 
companies that are around the country. That is kind of what I 
call the normal marketplace competition that is out there and 
intensifying every day.
    The other is the technological competition that comes from 
alternative forms of communication. Both of those are 
interacting together to have some effects on our market share. 
But the market overall is a pretty rapidly expanding market. 
Where it is going, though, tends to be more to otherforms of 
communication or other forms of competition than the Postal Service. 
Even though our total volume is continuing to grow in total, our share 
of that expanding market is declining.

                            stamp production

    Mr. Hoyer. The last question that I would like to ask, last 
week during a hearing with the Bureau of Engraving and Printing 
I talked about stamps, stamp production, and the volume of 
stamps being done by the Bureau of Engraving and Printing, and 
the volume contracted out. As you know, we are talking about 
plans for a new facility for BEP.
    If that were to occur, what would be the Postal Service's 
stance vis-a-vis using BEP as opposed to contracting out?
    Mr. Coughlin. I think the Postal Service is going to want 
the best deal it can get in terms of printing its stamps. I 
know there are some ongoing discussions, and have been with the 
leadership of the Bureau of Engraving and Printing about our 
long-term plans for stamp production and theirs. So that they 
have a good idea of where we are trying to go, and we are 
trying to understand fully how they might meet our needs. I 
think those discussions are going reasonably well from what I 
can tell.
    But what I think both the Bureau would need to know and we 
would need to know is, what are our long-term plans and what 
can we count on there in terms of long-term prices? And we 
could probably arrange some type of an agreement or an 
understanding of what we are going to do. I would not want to 
see a facility built and then have us walk away. I am sure that 
is your concern.
    Mr. Hoyer. Right.
    Mr. Coughlin. If we knew going in what we thought the 
approximate level of usage would be, I think we would be all 
right.
    Mr. Hoyer. Thank you.
    Thank you, Mr. Chairman.

                           mail volume trends

    Mr. Kolbe. On that, you noted in your statement this year 
that you had the smallest increase in the volume of mail. I 
think that's what you said.
    Mr. Coughlin. Yes, it is one of the smallest.
    Mr. Kolbe. Do you expect that trend, are you projecting 
that trend to continue, to level off? Are you projecting an 
actual decline or what?
    Mr. Coughlin. Our volume change overall in 1996 was 1.1 
percent. This year we are running about 2.5 percent ahead of 
last year. We think some of that is because of the quality of 
service, some of it is because of the extended period without 
new rates. The longer the period of time goes, the more 
competitive it becomes from a price point of view. Right now we 
are projecting our growth next year to be between 2 percent and 
3 percent. In fact, if we look out five years we think it is 
going to be in the 2 percent to 3 percent range.
    But the fact is that over the last 10 or 12 years we have 
seen a steady decline in the rate of growth of mail volume and 
that is a matter of some real concern. But short term anyway, 
we are----
    Mr. Kolbe. You do not see any end to the kinds of changes 
that are taking place technologically of more use of E-mail and 
electronic transfers. Paying bills electronically is going to 
become much more common.
    Mr. Coughlin. That is right.
    Mr. Kolbe. Right now I do most of mine by mail, but I am 
starting to get into more electronic transfers for payments of 
bills and stuff.
    Mr. Coughlin. As are we in the Postal Service, Mr. 
Chairman.
    Mr. Kolbe. Right, as are you in the Postal Service. So 
those trends are likely to continue, are they not?
    Mr. Coughlin. Yes, and we are watching them very, very 
closely. This is a subject that you cannot really jump to 
conclusions about on an overall basis. You really need to 
analyze the individual types of transactions that are going on, 
first on paper and then moving to electronics. We are watching 
that pretty closely to see where the real threats are in that, 
and too, where we can, defend our core business volumes out 
there. We are not here to stand in the way of progress, but 
there are some things we can do, we think, to defend the core 
business products we have.

                        CHANGE OF ADDRESS FRAUD

    Mr. Kolbe. Final question, I know there has been some 
concern about the fraud that occurs in the change of address 
process. Can you tell us what progress you have made in dealing 
with this? I think you initiated a process of requiring a 
confirmation of change of address.
    Mr. Coughlin. That is right.
    Mr. Kolbe. Is that working?
    Mr. Coughlin. Yes, it really does appear to have helped 
stem that problem that popped up a little over a year ago. We 
started last April to provide a written confirmation of every 
change of address to both the new and old address. So if 
someone who had a change of address recorded at the post office 
got this confirmation letter and in fact they knew they had not 
moved, they would notify us and our Postal Inspection Service 
goes to work on investigating the issue right away. So far I 
think we have seen a drop in those kinds of activities because 
of this change. We think we have got the problem solved right 
now anyway.
    Mr. Kolbe. Any questions?
    Mr. Hoyer. No.
    Mr. Kolbe. If not, thank you very much. We appreciate it. 
We will have a few questions for the record which we will 
submit. Appreciate your coming before us today.
    Mr. Coughlin. Thank you, Mr. Chairman.
    Mr. Kolbe. The Subcommittee is adjourned.
    [Questions for the record and selected budget justification 
material follow:]

[Pages 27 - 71--The official Committee record contains additional material here.]







                               I N D E X

                              ----------                              
                                                                   Page
Appropriations--Impact of Elimination............................    24
Budget Justifications............................................    45
Capital Investments..............................................    11
Change of Address Fraud..........................................    26
Deputy Postmaster General Coughlins' Statement...................     2
Dollar Coin......................................................    20
Employee Training................................................    22
Global Package Link..............................................    13
International Postage Rates......................................    21
Mail Volume Trends...............................................    25
Market Share.....................................................    24
    Ms. DeLauro..................................................    36
Opening Comments by Mr. Kolbe....................................     1
Postal Retirement Funding........................................    16
Postal Service--IRS Cooperation..................................    19
Prepared Statement of Deputy Postmaster General Coughlin.........     4
Questions Submitted for the Record by Congressman Forbes.........    37
Questions Submitted for the Record by Congresswoman Meek.........    44
Questions Submitted for the Record by Congresswoman Northup......    39
Questions Submitted for the Record by the Committee..............    27
Revenue Forgone Funding..........................................    13
Revenue Forgone..................................................    10
Service Performance..............................................    23
Stamp Production.................................................    25
Statement of Mr. Hoyer...........................................    17
Transitional Appropriations......................................    10