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



 
              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





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              COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
J. DENNIS HASTERT, Illinois          TOM LANTOS, California
CONSTANCE A. MORELLA, Maryland       ROBERT E. WISE, Jr., West Virginia
CHRISTOPHER SHAYS, Connecticut       MAJOR R. OWENS, New York
STEVEN SCHIFF, New Mexico            EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California          PAUL E. KANJORSKI, Pennsylvania
ILEANA ROS-LEHTINEN, Florida         GARY A. CONDIT, California
JOHN M. McHUGH, New York             CAROLYN B. MALONEY, New York
STEPHEN HORN, California             THOMAS M. BARRETT, Wisconsin
JOHN L. MICA, Florida                ELEANOR HOLMES NORTON, Washington, 
THOMAS M. DAVIS, Virginia                DC
DAVID M. McINTOSH, Indiana           CHAKA FATTAH, Pennsylvania
MARK E. SOUDER, Indiana              ELIJAH E. CUMMINGS, Maryland
JOE SCARBOROUGH, Florida             DENNIS J. KUCINICH, Ohio
JOHN B. SHADEGG, Arizona             ROD R. BLAGOJEVICH, Illinois
STEVEN C. LaTOURETTE, Ohio           DANNY K. DAVIS, Illinois
MARSHALL ``MARK'' SANFORD, South     JOHN F. TIERNEY, Massachusetts
    Carolina                         JIM TURNER, Texas
JOHN E. SUNUNU, New Hampshire        THOMAS H. ALLEN, Maine
PETE SESSIONS, Texas                 HAROLD E. FORD, Jr., Tennessee
MICHAEL PAPPAS, New Jersey                       ------
VINCE SNOWBARGER, Kansas             BERNARD SANDERS, Vermont 
BOB BARR, Georgia                        (Independent)
ROB PORTMAN, Ohio
                      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     CHAKA FATTAH, Pennsylvania
    Carolina                         MAJOR R. OWENS, New York
BENJAMIN A. GILMAN, New York         DANNY K. DAVIS, Illinois
STEVEN C. LaTOURETTE, Ohio
PETE SESSIONS, Texas

                               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





                            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


              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.
    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 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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    [GRAPHIC] [TIFF OMITTED] 43747.002
    
    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.
    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:]
    [GRAPHIC] [TIFF OMITTED] 43747.003
    
    [GRAPHIC] [TIFF OMITTED] 43747.004
    
    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.
    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 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 expending 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 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 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 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.
    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.
    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 this becomes even more important now that 
reclassification is pretty 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 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?
    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.
    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-of-the-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 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.
    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.
    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 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 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. 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 
resume 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 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.
    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 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 
mentioned 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.
    The Postal Service has had a long history of having very 
hard working people who somehow in their relationships with the 
management things just don't seem to work perfectly and that 
continues 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.
    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 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 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, 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 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?
    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.
    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.
    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 
management-labor 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 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 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 2\1/2\ million people in Brooklyn; 2\1/2\ 
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 versus 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.
    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 2\1/2\ 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 2\1/2\ 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 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 management-labor 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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