[Senate Hearing 105-754]
[From the U.S. Government Publishing Office]
S. Hrg. 105-754
ANNUAL REPORT OF THE POSTMASTER GENERAL
=======================================================================
HEARING
before the
SUBCOMMITTEE ON INTERNATIONAL SECURITY, PROLIFERATION, AND FEDERAL
SERVICES
of the
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
__________
OCTOBER 1, 1998
__________
Printed for the use of the Committee on Governmental Affairs
U.S. GOVERNMENT PRINTING OFFICE
51-708 CC WASHINGTON : 1999
_______________________________________________________________________
For sale by the Superintendent of Documents, Congressional Sales Office
U.S. Government Printing Office, Washington, DC 20402
COMMITTEE ON GOVERNMENTAL AFFAIRS
FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware JOHN GLENN, Ohio
TED STEVENS, Alaska CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine JOSEPH I. LIEBERMAN, Connecticut
SAM BROWNBACK, Kansas DANIEL K. AKAKA, Hawaii
PETE V. DOMENICI, New Mexico RICHARD J. DURBIN, Illinois
THAD COCHRAN, Mississippi ROBERT G. TORRICELLI,
DON NICKLES, Oklahoma New Jersey
ARLEN SPECTER, Pennsylvania MAX CLELAND, Georgia
Hannah S. Sistare, Staff Director and Counsel
Leonard Weiss, Minority Staff Director
Lynn L. Baker, Chief Clerk
------
SUBCOMMITTEE ON INTERNATIONAL SECURITY, PROLIFERATION AND FEDERAL
SERVICES
THAD COCHRAN, Mississippi, Chairman
TED STEVENS, Alaska CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine DANIEL K. AKAKA, Hawaii
PETE V. DOMENICI, New Mexico RICHARD J. DURBIN, Illinois
DON NICKLES, Oklahoma ROBERT G. TORRICELLI, New Jersey
ARLEN SPECTER, Pennsylvania MAX CLELAND, Georgia
Mitchel B. Kugler, Staff Director
Ann C. Rehfuss, Professional Staff Member
Linda J. Gustitus, Minority Staff Director
Julie A. Sander, Chief Clerk
C O N T E N T S
------
Page
Opening statements:
Senator Cochran.............................................. 1
Senator Stevens.............................................. 2
Senator Levin................................................ 2
Senator Collins.............................................. 10
Prepared statement:
Senator Cleland.............................................. 3
WITNESSES
Thursday, October 1, 1998
Hon. William J. Henderson, Postmaster General, U.S. Postal
Service........................................................ 3
Prepared statement........................................... 4
APPENDIX
Questions submitted by Senator Levin and responses from Mr.
Henderson...................................................... 19
ANNUAL REPORT OF THE POSTMASTER GENERAL
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THURSDAY, OCTOBER 1, 1998
U.S. Senate,
Subcommittee on International Security,
Proliferation, and Federal Services,
of the Committee on Governmental Affairs
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:02 p.m. in
room SD-342, Senate Dirksen Building, Hon. Thad Cochran,
Chairman of the Subcommittee, presiding.
Present: Senators Cochran, Stevens, Levin, and Collins.
OPENING STATEMENT OF SENATOR COCHRAN
Senator Cochran. The Subcommittee will now come to order.
Today our Subcommittee meets to receive the annual report
of the Postmaster General. This hearing offers the Postmaster
General the opportunity to report publicly on the state of the
U.S. Postal Service and to answer our questions about the
operation and management of the Service.
Congress passed the Postal Reorganization Act of 1970 for
the purpose of converting the Post Office Department from a
taxpayer-subsidized, Executive Branch Department to a self-
sustaining, independently managed service. This has not been an
easy transition, but it has enabled the Postal Service to
become a more efficient and reliable provider of mail services.
After having served for several years as the agency's chief
operating officer, William J. Henderson was appointed in May to
serve as Postmaster General. With approximately 800,000
employees and more than $60 billion in annual revenues, today's
Postal Service far exceeds the size and scope of most U.S.
companies. Competition from electronic alternatives and private
sector competitors has presented the U.S. Postal Service and
its Postmaster General with a big challenge.
New postal rates have been approved and are scheduled to
take effect on January 10 of next year. This was the third
increase in postal rates approved by the board of governors
during this decade. The new increase is expected to generate
$1.3 billion in revenue and result in an average increase of
2.9 percent across all domestic services.
Among other subjects of interest to me, I would be
interested to hear what impact on the use of U.S. postal
services this rate increase will have, and whether you expect,
Mr. Postmaster General, your competitors will be raising their
rates, too. Mr. Henderson, we welcome you, and we look forward
to hearing your report on the state of the U.S. Postal Service.
Our distinguished colleague, who is the senior Member of
this Subcommittee, to all of us, the distinguished Senator from
Alaska, Ted Stevens, is here. And I yield to him for whatever
comments he might like to make.
OPENING STATEMENT OF SENATOR STEVENS
Senator Stevens. Thank you very much, Mr. Chairman.
I welcome the Postmaster General. We had a delightful trip
to Alaska this year when we dedicated the Klondike Gold Rush
stamp. I look forward to having him come back to our State. I
would urge you to join us on one of those trips, so you can see
more of the rural parts of Alaska.
I look forward to seeing your 1999 performance plan and how
that ties in to the changes in your 5-year plan.
I would be very pleased to hear the answers to the
Chairman's questions, too, Mr. Postmaster. But we've got a bill
on the Floor and I must leave. So I have to beg your pardon on
that, and tell you that I do look forward to visiting with you.
One of the issues I think we should visit with you on, the
Chairman and I and perhaps the Ranking Member, Senator Levin,
would be the Y2K issue and how that's going to affect the Post
Office and how far along you are on making the changes that
will be necessary because of that in your automated programs. I
assume you've got a task force working.
Let me just ask one question. Have you been in touch at all
with Senator Bennett and his committee, the Y2K Committee,
about postal problems?
Mr. Henderson. No, I have not. But we do have a huge effort
on Y2K going on.
Senator Stevens. I look forward to talking about that. And
again, please excuse me.
Senator Cochran. Thank you very much, Senator.
Senator Levin, do you have any comments or remarks before
the Postmaster General commences his annual report to us?
OPENING STATEMENT OF SENATOR LEVIN
Senator Levin. Just to join you and Senator Stevens in
welcoming our new Postmaster General. I know this is the first
you've appeared on the annual report, at least, before this
Subcommittee. You've been before this committee many times
before in different capacities, I think. But this is the first
as Postmaster General, as far as these annual oversight
hearings are concerned.
You are also the first postal employee to be named
Postmaster General in the last dozen years or so, and that
experience is going to be of great importance to the Postal
Service and of great value to the Nation. So we look forward to
your comments today.
But again, as I've indicated to you in hearings and
privately, we look forward to your service and your tenure as
Postmaster General.
Mr. Henderson. Thank you.
Senator Cochran. Senator Cleland has submitted a prepared
statement for the record.
[The prepared statement of Senator Cleland follows:]
PREPARED STATEMENT OF SENATOR CLELAND
Mr. Chairman, it's good to have the opportunity to review the
progress of the U.S. Postal Service. I would like to express my
appreciation to Mr. Henderson for testifying today, and for the
leadership that he has provided to the Postal Service. I have been very
impressed with the direction that he has set for the Post Office in the
relatively short time that he has been Postmaster General. The
initiatives that he has taken to incorporate technology into the Postal
System, including the information management platform, exemplify the
vision that is needed as the Postal Service enters the next millennium.
I want to take this opportunity to again stress my strong support
for the issuance of a commemorative stamp to honor the contributions
and achievements of Lieutenant Henry O. Flipper. Lt. Flipper was the
first African American to graduate from the U.S. Military Academy, West
Point. This year at the NAACP convention in Atlanta, supporters
collected 2,546 signatures urging the Citizen's Stamp Advisory
Committee to issue a stamp. I have a copy of the petitions with me
today if Mr. Henderson would be so kind as to give them to the
Subcommittee.
In the next several years, the Post Office faces many challenges
brought about by changing technology and the increasingly competitive
marketplace for information. The Postal Service must find a way to
remain relevant in an electronic age. I feel confident that Mr.
Henderson has the ability to deal with these challenges fairly and
effectively.
Senator Cochran. Mr. Postmaster General, you may proceed.
STATEMENT OF HON. WILLIAM J. HENDERSON, POSTMASTER GENERAL,
U.S. POSTAL SERVICE
Mr. Henderson. Thank you, Mr. Chairman, Senator Levin.
I will hit the highlights of my prepared statement.
First of all, from an overall perspective, the Postal
Service is in good shape. We have enjoyed 15 consecutive
quarters of improved postal services and occupy a strong
position in the marketplace. Two and 3-day mail service is up a
remarkable eight points. That's the biggest leap we've ever
made in one category in 1 year.
So things are really on the right track. We're very proud
of the fact that we'll probably have in this year between $500
million and $600 million net surplus. And at the same time, we
postponed a rate increase until January 10, and that 2.9
percent increase will be the smallest in our history. This
delayed rate increase has saved the ratepayers of America $800
million. So we're very pleased.
We still see challenges in the area of labor relations.
We're actively involved right now in labor negotiations with
our unions. It is our hope to improve labor relations
significantly in the coming years. I think there is a
commitment from both labor unions and postal management to do
that.
So things are very good right now. We do have a major
initiative that we announced in our customer forum, a major
technology platform that we'll be putting in place that will do
essentially three things. It will provide the Postal Service
with better operating information so that we can make the
correct decision before it's a mistake that we have to correct.
It will provide us a better, activity-based accounting system,
and it will provide an information platform through which our
customers can monitor their mail. We think that will be a great
advantage for us in the marketplace.
So we think the Postal Service is on the right track. We
appreciate the support of this Subcommittee. I'll be happy to
answer any questions you might have.
[The prepared statement of Mr. Henderson follows:]
PREPARED STATEMENT OF MR. HENDERSON
Good morning, Mr. Chairman and Members of the Subcommittee. I
welcome this opportunity to talk with you today.
I want to thank you, Chairman Cochran, and all the Members of the
Subcommittee, for your support and your oversight of the U.S. Postal
Service. I appreciate the time and energy you invest in helping us
fulfill our fundamental mission of delivering to everyone, everywhere,
every day.
I am pleased to report that the men and women of the Postal Service
are doing a fine job of succeeding at this mission. We have just ended
Fiscal Year 1998, and the early results show it was one of our best.
Service was up. We now have the results from our final quarter, and
I want to announce them today. Nationally, 93 percent of local First-
Class Mail was delivered overnight. That is one point better than a
year ago, and marks our 15th straight quarter of improvement. Combined
2- and 3-day service also improved to 87 percent. That is an 8-point
increase over last year and our highest mark ever.
Our customers asked us to expand our measurement system for First-
Class Mail. We have responded. Last month, we began extending our
coverage from 62 percent to 80 percent of destinating First-Class
volume. The expansion process will be completed and the results
publicly reported in the spring of 1999.
Priority Mail service performance has also improved. Both consumers
and commercial customers continue to find great value in Priority Mail.
We are investing significant resources in this product to make it even
stronger. We are also working very closely with our customers to
improve service for periodicals and advertising mail.
We have gone to great lengths to get ready for a banner fall and
holiday mailing season. We began our preparations early in the year.
Working with our customers, we developed our most extensive set of
plans ever. These plans were implemented in July. So far, performance
has been solid. We will make every effort to keep service high
throughout the season and into the new year.
Hurricane Georges has made that task extremely difficult in the
Caribbean and the Gulf Coast. It effectively cut off the flow of mail
in a number of locations. By Tuesday, postal operations in Puerto Rico,
the Virgin Islands, and Florida were mostly back on line. Because of
heavy flooding and damage, we were forced to close facilities and
suspend deliveries in New Orleans and several locations in Alabama and
Mississippi this week. Our employees are going the extra mile to get
mail delivered despite the elements and working to restore service as
quickly as possible in the affected areas.
Financially, we expect to end 1998 with a surplus of $500-$600
million. We have made a great deal of money over the past 4 years, but
there are nearly $4 billion in accumulated losses since 1971 still to
be recovered.
Originally, we planned to put our 2.9 percent rate change in place
over the summer. This would have helped us restore our equity more
quickly. However, the postal governors and management decided that
delaying new rates past the holidays was the right thing to do. It
shows America that we are committed to being responsible and
responsive. We listened to our customers. Stable rates for a fourth
straight holiday season will help our customers grow their businesses
during this most critical time of year. Overall, this is an $800
million dividend for the Nation.
It also poses a challenge to the Postal Service. Our revised 1999
budget calls for a $200 million surplus. I have asked our field and
headquarters managers to increase that amount by several hundred
million dollars by operating smarter and tapping into our employees'
good ideas. We need this additional net income to help restore our
equity, continue building our infrastructure, and keep next year's
rates in place at least 2 years.
Overall, I am pleased with our progress. Still, we have some work
to do to get ready for the dynamic marketplace of the 21st Century.
Over the last 4 years, the Postal Service has become a performance-
driven and customer-centered organization. This focus will not waver.
We will continue to deliver improvement and innovation. That means more
reliable and timely deliveries, better customer service, new product
features, and higher overall efficiency and value.
In fact, on Wednesday we provided the President and the Senate and
House with copies of our 1999 Annual Performance Plan. This plan was
created within the framework of the Government Performance and Results
Act and carries forward our updated 5-year Strategic Plan.
Over the next 5 years, technology will be a key to our success. The
electronic revolution has and will continue to divert billions of
dollars in business from the mail stream. However, technology has also
been a God-send. Over the past 2 decades, it has created a postal
revolution--automation. Automation has saved the American people
billions of dollars. It has helped keep postage rates in line with
inflation and given businesses and non-profit organizations the ability
to narrowly target their messages and advertisements. The result is
that mail has continued to grow. In 1999, mail volume is expected to
reach 200 billion pieces for the first time, more than double what it
was in 1971.
Now, we are taking the next step to keep mail strong and vibrant in
the next century. On August 21, I announced a major technology
initiative for the Postal Service. I committed to building an
information management platform in 5 years. This platform will add a
new level of sophistication and value to hardcopy mail. I named a new
Chief Technology Officer to begin leading a coordinated effort to link
together new and old information systems into a vast electronic
network.
This platform will have three key benefits. First, it will give the
Postal Service real-time information--instead of yesterday's reports--
on which to base decisions. This will drive billions of dollars in
costs out of our system and improve service.
Second, it will revolutionize pricing through a true activity-based
accounting system. Knowing our true costs will help us manage them
better and price more effectively.
Third, it will give customers access to information about their
mail. The mail will ``talk'' to customers. It will tell them what kind
of mail it is, where it is in our system, and when it will be
delivered. This will enable customers to better manage staffing,
inventories, cash flows, and other critical business factors.
We have just started to build our information platform, but it will
be a key force in improving the value of mail for the American people
in the years to come.
I believe the Postal Service is on the right track for 1999. Our
employees are focused and ready to deliver for the holidays. We are
committed to embracing technology and process management and using
these tools to drive our performance to the next level. We are proud to
serve every American, everywhere, every day, and we look forward to
working with this Subcommittee to continue that mission in the 21st
Century.
Thank you, Mr. Chairman.
Senator Cochran. Mr. Henderson, I first of all want to
congratulate you and the employees of the Postal Service for
improving the on-time deliveries of the mail. I'm curious to
know whether this is something that can be sustained, this
performance level, over a long period, or even improved upon in
the future.
What is the outlook for continuing to meet these goals?
Mr. Henderson. It is our goal to not only sustain it, but
to continue to improve it. It pays for itself in the
marketplace; our products become more and more competitive
because of the quality we provide. Our customers respond by
using the Postal Service more. And that's a great testament to
postal employees across this country, that they have rallied to
the cause of service.
Senator Cochran. There's a question that I worked into my
opening remarks about the postal rate increase and whether or
not you expect your competitors to also raise their rates. What
is the outlook, in your view, of that?
Mr. Henderson. Our competitors, traditionally, have had
annual rate increases. Our 2.9 percent increase is the first
increase in 4 years. It's a third of the inflation rate. We
think we'll characterize it as a speed bump. We don't see that
it will affect our volume. We worked with our customers on this
rate increase. We're very proud of the fact that it's the
lowest in our history.
Senator Cochran. When I was home during the August recess,
in my State of Mississippi, there were some who came to meet
with me to express concerns about the effect on small town
newspapers and other mailers of that kind, of the rate increase
that was going to take effect. What impact will it have on your
customers of that kind, and what can be done to help ease the
burden that they have?
Mr. Henderson. Well, it's about the least amount of impact
that we could have on periodicals mailers still and have a rate
increase. They can work with their local post offices to make
sure they're taking advantage of any and all discounts that
they might be entitled to. And I would urge them to do that.
But 2.9 percent is a very small increase.
Senator Cochran. There was a statement you made recently
about a plan to link the major information systems. If I
understood that right, could you tell us what you're talking
about, and what is the purpose of these changes and the
benefits that you expect from the changes?
Mr. Henderson. As I said in the opening statement, we
intend to put an information platform in place in the Postal
Service which first of all provides operating managers with
real-time information about what's going on. Rather than see
the report hours or in some cases days later, they'll be able
to get real-time information.
The platform will also provide more of an activity-based
accounting system, so that we can attribute our costs more
accurately. And third, it will provide a window for our
customers to see what information they would like to know about
their mail.
So the system will pay for itself in better operating
decisions.
Senator Cochran. In connection with the recent decision by
the Postal Rate Commission to approve a rate increase, it was
observed by the Commission that the Service did not spend as
much on program expenses as was expected in 1997. Why were
monies not expended as planned, and were the revenue
requirements accurate that were presented to the Postal Rate
Commission?
Mr. Henderson. The aggregate of those slippages was about
$540 million. They occurred because management made decisions
that it needed to slow up technology, to fine-tune it. An
example was the tray management systems, that's probably the
largest example, that we planned on deploying last fiscal year.
I slowed it up, personally, because I wasn't satisfied with the
performance of the prototypes in several post offices.
So there's a variety of reasons why we slow up the
deployment of technology. With an organization our size, you
can't expect to hit a home run every time you're at bat. Some
of these technologies sound better than they actually work. And
when we do find that is the case, we stop them at that point.
Senator Cochran. What about the revenue requirements? Were
they accurate as presented to the Commission?
Mr. Henderson. Well, the revenue requirements were adjusted
by about $700 million, based on the real-time assessment. I
think the Rate Commission did the right thing in making that
adjustment. At the time we planned the rate case, we planned on
that technology, those capital expenditures to work in a
fashion that probably wasn't realistic, in hindsight.
So the revenue requirement was adjusted. For example, the
Postal Service did better in the field operationally by about
$300 million. That's $300 million on $50 billion in revenue.
That's a fraction, but the money's there.
Inflation was less than what we had projected, and that was
worth about $500 million there. So when you add it all up, and
then the $800 million that we gave back to the customers
because of the rate increase delay, it's going to end up
between a $500 million and $600 million surplus. But there's
not one single reason for all that. It's multiple.
Senator Cochran. Thank you. Senator Levin.
Senator Levin. Thank you, Mr. Chairman.
A few years back, there were major stresses in terms of the
relationship between management and employees. We had a number
of tragic incidents in post offices in my home State, Michigan.
I know that's something you are very conscious of. And I'm
wondering if you could tell us the kinds of efforts that you're
making to work with employees to remove, reduce stress levels,
and also to have a harmonious relationship between management
and employees, so it's not the military-style command that's
given, but rather more of a partnership.\1\
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\1\ Questions by Senator Levin and responses from Mr. Henderson
appear in the Appendix on page 19.
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There obviously needs to be a boss and there needs to be an
employee. There needs to be a supervisor and there needs to be
someone who will carry out instructions. But there's also a
tone which can be created in post offices. And because the
demands are so great on these employees, I'm wondering what
efforts you're making to see if we can have a harmonious work
place.
Mr. Henderson. Your point is well taken. People ask you, is
there one thing that wakes you up at night and worries you. It
is the labor climate in the Postal Service and the atmosphere
that may surround a lot of our clients. There are two
fundamental ways that we're looking at this. One is a
leadership model, in which we're going to measure
characteristics of our managers in terms of promotions and
model the kind of behavior that we want in a work place, which
is certainly more participative.
The other avenue is really a systems approach, a process
approach. We're trying to redesign some of our antiquated
processes, like the way we manage city delivery, as an example.
There's a tension, it's not a violent tension, but there's a
tension between the carrier and the manager. We have a
memorandum of understanding to go out and redesign with the
NALC the way we manage city carriers all across America.
We're very committed to taking the tension out of the
system. We think that if you take the tension out of the
system, you'll get more productivity, because you'll get more
discretionary effort out of the employees.
But we have a huge effort that involves outside
consultants, it involves our employee assistance program, which
I think is world class. It involves engineers redesigning work.
It involves new ways of doing labor relations and new ways of
settling disputes. We have a new dispute resolution process
that Janet Reno recently recognized in a meeting as being best
in class.
So we're really trying to attack it on several different
fronts. And it really starts here in this chair. This is where
you model a non-militaristic, more participative style of
management.
Senator Levin. What is the status, by the way, of the
negotiations between the Postal Service and the employee unions
on new labor contracts?
Mr. Henderson. We're in the presentation stage of
negotiations. We just recently finished a summit meeting at
Federal Mediation. I think the dialogue thus far has been good.
There is a strong commitment on both sides, it appears, to
reach a settlement. So we're very hopeful, not being naive, but
hopeful.
Senator Levin. We recently had a hearing of the
Subcommittee on the problem of fraudulent or misleading
sweepstakes mailings. The House Postal Subcommittee is going to
be holding similar hearings, I believe, next year. I think
there was a press conference either today or yesterday on that
subject, which I believe you and the FTC were involved in.
I'm wondering if you would first discuss your views on the
seriousness of the sweepstakes problem and the role of the
Postal Service in preventing it. Then second, would you comment
on a bill which I've introduced that now has the co-sponsorship
of a number of Members of the Subcommittee, including Senators
Collins and Durbin, I believe, which would eliminate deceptive
practices by prohibiting misleading statements and would impose
a much stiffer penalty for each deceptive mailing, as well as
giving the Postal Inspection Service subpoena authority.
So on both of those issues, in general, what is your
position on this, how big a problem is it, what are you doing
about it, and do you support S. 2460, which I introduced and
just described?
Mr. Henderson. First, it is a problem. And it's a problem
for the Postal Service in a number of ways. It's a problem for
our consumers, but it's also a problem for our good name. We
don't want to be associated with fraudulent mailings.
I know everyone in the mailing industry I've had
conversations with are really concerned about it, too. It's not
condoned by any of the mailing associations, and they're trying
to police it.
The difficulty that we have with it, from a postal point of
view, is that we don't want to kill advertising mail.
Obviously, that's very important to the health and well-being
of the Postal Service on the one hand. On the other hand, we
absolutely do not want fraudulent mailings in the mail. So
we're trying to balance those two, and I think you've had some
very constructive, as I understand, discussions with the
mailing industry about ways to police sweepstakes mail, as an
example, without killing off the legitimate sweepstakes
mailings.
My approach is to have a balance between the mailing
industry and the consumer in this regard, so that the interest
of the Postal Service in keeping mail in the mail stream is
pursued. I'm not as familiar as I should be with your bill.
But, as I understand it, your bill is a compromise and the
mailing industry does support it.
Senator Levin. I'm not sure they support all of it.
[Laughter.]
I think parts of it they may support.
Mr. Henderson. We're very concerned about killing off the
legitimate sweepstakes, or making it so difficult that that
type of mailing will go away. We're equally concerned, and the
Postal Inspection Service, as you know, is very diligent on
that, policing fraud that exists in sweepstakes mailings.
Senator Levin. I want to again thank Senator Cochran for
holding hearings in this area. It's a very significant problem
where I come from. And we want to give the Postal Service the
tools to go after the violations, the people who are using
deceptive practices instead of legitimate practices. There are
just too many of them.
The tools that you have in current law are not adequate.
The penalties are just the price of doing business, too often.
And we cannot rely on the industry to police itself. Although
it's helpful, we have to have some very good tools in your
hands and willingness on your part to use them.
So I would appreciate, if you would, a formal response to
that bill indicating your comments on it.
Mr. Henderson. I will do that.
Senator Levin. Several weeks ago, the Senate voted to adopt
an amendment to the fiscal year 1999 Treasury Postal
Appropriations Bill that would establish guidelines that must
be followed by the Postal Service before you could close or
open or relocate a post office. You opposed the amendment. I'm
curious as to why and what alternative proposals you could
offer to ensure that the opinions of the public will be taken
into account when a post office is going to either be closed or
opened or relocated.
Mr. Henderson. I opposed that, Senator, because it would
put our facilities program in gridlock. If every dispute in the
United States over where a facility was located had to be
settled in Washington, DC, it would just put a huge burden, it
seems to me, on the process.
Now, we did redesign the process we use so that there is a
public hearing and communities involved have a voice. And it is
our policy to try to go along with communities wherever
possible. But to have a formal procedure, so that if I want to
build a post office in location A and one person objects, and
it therefore comes to Washington, DC to be resolved, it seems
to me to be an unnecessary regulation of the building process.
And I have gone around and tried to explain this, what
happens if we don't hold those capital monies for a delayed
project resolution; there's an expense associated with holding
capital funds. So we go on to the next project. And if there
are no complaints about that project, we'll build that post
office in that community.
That will deny some places that need legitimate help with
that legitimate help. And I just think it's an unnecessary
regulation of our organization. When you put a post office in a
community where they don't want it, they never forgive you.
They bring that up time and time again. It's not worth it.
And if the community wants the Postal Service, which most
do, there is a way to resolve these kinds of issues, and that's
what we intend to do. We want to be a good citizen.
Senator Levin. My last question has to do with the recent
issuance of a stamp that focuses on breast cancer awareness, a
stamp where there's a surcharge in order to raise funds for
research in breast cancer. I'm wondering if you have any early
returns, whether it's just too early to know whether or not
that is producing the hoped-for income. There was some question
as to whether in fact it would be productive enough to do and
the precedent that it would set. I was troubled by both those
aspects of it, as a matter of fact. Are there any early returns
that you have that you can tell us?
Mr. Henderson. We have some early returns, I don't remember
what they are. But I'll be glad to provide those to you.
In general, though, it has created a great deal of
awareness of breast cancer issues, and has been remarkably well
received all across this country. The genuine identification
with this issue, the real tenacity to whip this issue, it's
been almost overpowering.
Senator Levin. There's a tremendous public interest,
obviously. The question is whether or not that's going to
translate into purchases and sales of stamps so it really
produces the money. That's the issue. So if you could give us
for the record any of the returns.
Mr. Henderson. I will.
Senator Levin. And as it goes along, perhaps give us a 6-
month report on it, that would be helpful. Because we're
looking at that in terms of future issues of the same kind,
whether we ought to start down that road. We already have
started down it, whether we ought to continue down that road in
using postage stamps to produce revenue for very good causes. I
don't know of a better one than breast cancer awareness and
research.
So it is important in terms of whether we want to, whether
we raise enough money in that process to use this mechanism of
raising funding for other important issues as well.
Senator Cochran. The distinguished Senator from Maine,
Senator Collins, has been a leader in the effort to do
something about these misleading mailings, deceptive practices,
fraudulent, overreaching of postal customers. And she was an
active participant in the hearing we held, and then she chaired
hearings in the investigation subcommittee.
We're glad you joined us for the hearing today. You may
proceed.
Senator Levin. Can I ask the Senator from Maine to yield so
I can correct my oversight, thanking her also for holding those
hearings. They were terrific, indeed.
OPENING STATEMENT OF SENATOR COLLINS
Senator Collins. Thank you very much. Thank you, Mr.
Chairman, and thank you, Senator Levin, for your kind comments
as well.
The Chairman held hearings that all three of us
participated in, and Senator Levin has alluded to, on the issue
of deceptive mailings. This is an issue that is of great
concern to all of us. I'm particularly concerned about what I
call government look-alike mail. It always comes in the kind of
envelopes that government checks come in, they're always that
kind, they frequently say, buy savings bonds, often they have
an eagle on it.
They have various notices to the Postmaster General, all of
which are intended to deceive people into thinking that these
are mailings from official government agencies, and of course
they're not. They're inevitably solicitations. I got one myself
this week at home. Little do they know I'm now saving every one
I get. [Laughter.]
Similarly, I had a constituent in Washington County, Maine,
that received this mailing saying, official business, special
notification of cash, currently being held by the U.S.
Government, is ready for you as long, of course, as you send
$9.97 by return mail. We see cases where, and I'm even more
concerned about those than I am the sweepstakes mailings,
although we've seen a lot of deception and fraud in sweepstakes
mailings as well.
We also see mailers using look-alike postal cards to try to
deceive consumers. Your return receipt card is almost
identical, except in color, to this ``blue return receipt
card,'' I put that in quotes, that was used for this mailing.
This one is a sweepstakes mailing. And it seems to me that
you're mainly dependent on cease and desist orders, of ordering
people to cease this kind of activity. And that doesn't seem to
be very effective to me. Oftentimes, if you put someone out of
business, they crop up elsewhere, for example.
So I want to follow up on the work the Chairman's done and
Senator Levin, in inviting you to tell us more about your
enforcement efforts in this area, but also to ask you to work
with us in the next Congress to develop legislation to really
crack down on these deceptive mailings. I know you have a
balance, because you don't want to curtail legitimate mail. And
yet, we just see a huge increase in these kinds of fraudulent
and misleading mailings that are really of great concern to us.
Mr. Henderson. As we said a couple of days ago, we are
stepping up our enforcement efforts. But we are very happy to
work with you and others to try to work out a solution to this
problem. Obviously, as I said earlier, these kinds of deceptive
mailings not only hurt the individual, they also hurt our
organization, devalue the quality of the mail service. So we're
very concerned.
Senator Collins. Do you believe that legislative changes
are needed to give you additional authority, whether it's
subpoena authority or the ability to impose civil penalties,
for example, after due process, after hearings, perhaps?
Mr. Henderson. Our Postal Inspection Service is of the
belief that they need more authority in dealing with these
sorts of things. The specifics of that I really can't get into.
It's more of a law enforcement issue. But they do feel that
they need more authority and broader powers.
But we've got to be careful we don't cross the line of
censorship. We're very concerned about that. Our job is to
deliver the mail. Where we draw the line in the sand that says,
this is mail that we ought to do something about, that we ought
to somehow censor, is concerning to us not only as an
organization, but to myself as a citizen in a free country. So
we must strike a balance here. But we certainly don't condone
those deceptive practices, and we are out trying to chase them
down.
Senator Collins. I would ask that you provide the
Subcommittee with some specific recommendations for statutory
changes over the next few months, in the hopes that we continue
to work with the Chairman on legislative remedies. We want to
make sure that anything we come up with doesn't cross that
line, and yet really takes care of what I'm convinced is a
growing problem.
Mr. Henderson. We'd be more than willing to do that.
Senator Collins. The second issue I want to raise with you
is one that's near and dear to my heart, coming from a large
rural State. And that is the issue of small, rural post
offices. I understand that the Postal Service has imposed a
moratorium on the closing of small post offices. And in my
State, many of these post offices, which are in small towns,
remote areas, such as Frenchboro, or Cliff's Island, are really
the source of community pride. They are central to the identify
of rural communities in Maine.
One constituent told me, ``It's what puts us on the map.''
Another recounted how during the terrific ice storm that we had
in January, everyone gathered at the community post office to
find out what was going on, and to exchange information.
So they're really not only important from a mail service
point of view, and in keeping with our commitment to universal
service, but there's a very important role that they play in
small communities.
I'd like to know your plans for keeping the moratorium, and
what you see coming as far as the role of small, rural post
offices.
Mr. Henderson. I agree with you 100 percent. I was a big
driver for putting the moratorium on. They are in some ways the
soul and fabric of America. Communities only mourn as a
community two events, in my association with the Postal
Service. The first is if their newspaper closes, they think
they've lost their identity. And second, they have lost their
identity if their post office closes.
So you're not going to see me lifting or modifying the
moratorium, period. I think that, while small post offices cost
money, they provide intangible benefits. Communities are loyal
to this organization at a grass roots level, because a
postmaster does the right thing every day to customers in their
small community.
And we're glad that people gather at their post offices to
talk and to even play checkers, which where I grew up, that's
what they did in the small post office, they played checkers.
And we're very proud that our post offices are part of the
fabric of the communities. So you're not going to see any
reduction of that moratorium while I'm around.
Senator Collins. I'm very glad to hear that. And I really
appreciate the commitment that you have. I do think it's so
important.
A related problem that we've seen in a lot of small towns
in Maine is when a postmaster or postmistress retires, and
sometimes there is difficulty in finding someone to take the
place, or find new real estate to have a post office. In some
little villages in Maine, the post office is part of the
postmaster's house.
How do you deal with situations like that, because that's a
concern that I hear from a lot of my constituents? I realize
that's not a case where you've initiated a closure, but the
impact can be just the same.
Mr. Henderson. We generally hold those post offices in
suspension and try to find a location. We go around and talk to
grocery stores, if there is one, and every other place, to try
to find a location for the post office. And we keep trying to
find a location and somebody who will run the post office.
In some instances, we're not successful, over long periods
of time. But generally if we make it known to the community
that they don't have a post office unless we've got a roof,
somebody will supply a roof.
Senator Collins. I'm pleased to hear that you are going to
pursue that as well. Because the results can be the same, the
loss of that very important community tie and service.
The final issue I want to raise with you is the renovation
of post offices. When I was running for the Senate in 1996, I
went to Castine, Maine. And I swear that every citizen in
Castine came up and talked to me about the post office's plans
to move the post office out of the historic building in which
it was located, which had been the oldest continuously
operating post office, I believe, in the United States. And
there was much to do about taking it out of the downtown,
taking it out of this historic building.
This particular saga had a happy ending, and the Postal
Service agreed to do some necessary renovations, to keep the
post office located in town. But it created a lot of anxiety
among the citizens that it was going to be moved out of the
downtown, that it would no longer be in this historic building,
and then what would become of this historic building.
How does the post office consult with communities when it's
deciding the location of a post office, or when it believes
that there is a need for significant renovations?
Mr. Henderson. We just recently issued new guidelines that
require not only consultation with the community, but a public
hearing on our plans. As I said earlier, it is the goal of the
Postal Service to be a great citizen. When you put a post
office in a place where the community doesn't want you, they
never forgive you. They never forgive the Postal Service.
So it really is our goal to have a Postal Service that the
community rallies around. So it's not our intention to try to
buck the community. We often find there are disputes between
landholders, who want that piece of property. But most of the
time, if everybody involved is well-intentioned, that is, they
want the Postal Service and they're willing to move, we are
more than willing to cooperate with the community. And our
guidelines are pretty strict about being aboveboard in public
hearings and very open. So we're trying to be a good citizen
here.
Senator Collins. Thank you very much, Mr. Chairman.
And again, I wish you good luck in your new position, Mr.
Henderson, and I look forward to working with you.
Mr. Henderson. Thank you.
Senator Cochran. Thank you, Senator Collins, very much, for
your participation and for your leadership.
Mr. Henderson, in the 1997 annual report, revenues were
shown from international mail to have declined from 1996. What
do you attribute this decline to, and what do you expect the
benefits and rate of return will be from the new international
service centers?
Mr. Henderson. The decline primarily is due to just pure
electronic erosion. People have different ways of communicating
now, and the mom and pop international letters that were the
bulk of international mail are simply being replaced.
Our commercial product, Global Package Link, which was a
subject of a hearing some time back, has also suffered some
declines because of the economics of the Asian market. We're
seeing about a 25 percent drop in Global Package Link.
So overall, internationally, the world is not in the
booming economy that the United States is. And the impact of
that is hard to tell at this point in time. We're still, as
everyone is, hopeful that there will be a huge rebound, and
that once again, the Asian economy will be bouncing and
rolling. But we don't see any signs of that right now.
Senator Cochran. What about the benefits from the
international service centers? Anything to tell us about?
Mr. Henderson. That's a pure service issue. It's not a
financial issue, it's a service issue. We have a goal of being
the leader in the world in international service scores, and
we're not there yet. It's our belief that we have to isolate
that mail in these international hubs, but we're not nearly far
along enough to see an impact of that today.
Senator Cochran. Competitors of the Postal Service have
raised concerns about whether the Postal Service is competing
fairly. We hear that from time to time in private meetings and
in public hearings as well. And this is specifically with
respect to differences in application of certain laws, such as
Customs treatment or anti-trust immunity.
How do you respond to these concerns, and how can they be
addressed as competition continues to increase?
Mr. Henderson. Well, just to comment on international
service, we're treated like a postal service, not like a
commercial shipper. So we have different rules, not necessarily
better rules. But different rules. And they do not give us a
real competitive edge in the marketplace. They actually slow
the process.
I will tell you that the Postal Service does nothing today
that it hasn't done for the last 25 years except, and this is
one very big exception, the quality of the service of the
Postal Service is very competitive in the marketplace. We don't
operate fundamentally any different today than we did in 1975,
except that our package business, our priority business, our
mail business, is of a much higher quality.
And that quality service is the reason our competitors are
worried. They see us as a real competitor, because our products
are of a much higher quality today. Citizens don't use the
Postal Service as a deliverer of last resort. They see us as an
alternative to the private sector competitors. And what that's
saying is that we represent good government. That's what we are
all about, is improving the levels of service that we provide
the American people.
And we've done it in such a dramatic fashion that those
private sector competitors, who are in the same marketplace as
we are, are seeing a loss of volume, simply because of the
quality of service we provide. That's it in a nutshell. It's
the quality of service the U.S. Postal Service provides the
American public today.
And we would argue with our competitors who say that we
ought to not provide that quality of service, which is really
nonsensical. We ought to get better. So we see it as an example
of pure good government.
Senator Cochran. Tell us what the role of the universal
postal union is, and what benefits does our country get from
participating in the universal postal union?
Mr. Henderson. The primary role, from my perspective, of
the UPU, is to determine the exchange of monies for
international mail. In other words, when Great Britain mails a
letter to the United States, there are certain monies that
change hands, tariffs, if you will, that are imposed between
countries, and the UPU is the vehicle to determine those
exchanges. That's the primary role from our perspective.
Senator Cochran. Recently, a foreign postal administration
announced that it planned to acquire a local mail-forwarding
company. I believe this was the United Kingdom, I may be wrong.
What impact will this have on the U.S. Postal Service's revenue
and volume? And does the Postal Service plan to respond in any
specific way to this development?
Mr. Henderson. There are a number of countries that are in
the United States trying to ship mail as freight to their
country and then convert it to postage and deliver it to
wherever around the world. The Dutch are very active here, and
Royal Mail is in New York and Chicago.
Senator Cochran. Royal Mail, is that the United Kingdom?
Mr. Henderson. Yes. And the Swedish are here. They're
investing in American companies that are related to mail.
The Royal Mail has a goal of getting about $80 million of
revenue out of the United States. I think the Dutch are
probably in that same neighborhood today.
Our response has been to do a better job, through the
international service centers, to do a better job with U.S.
mail. Our customers, U.S. businesses, are really looking at
service as an issue. That's why we're very focused on
increasing and improving our international service.
We are active, also, in foreign markets, looking at the
opportunities. But quite frankly, it's more of a nationalistic
issue than it is a real dollar and cents issue. Because in
effect, $80 million on a $62 billion budget is not much of an
impact. It's more in your face than it is real impact.
Senator Cochran. What is the status of the Postal Service's
efforts to develop electronic communications services? What
role should the Postal Service play in this area, given the
fact that private companies are also providing these services?
Mr. Henderson. We're in the early stages of looking at some
secure electronic services now, including a desktop post
office, which provides mailing labels. It can also provide some
very limited addressing. It's designated for the small office,
home office market. We have an electronic stamp that's pending
that we just received a patent on.
But these efforts are in their infancy. They're not very
sophisticated and they're not driving any revenue. There is an
issue about what our role ought to be in the electronic
services. We are getting inquiries from the private sector
about being a trusted third party. There is some concern that
if remittance mail, for example, gets into the hands of a
private sector company who has an electronic platform, there's
no effective way to regulate the tariffs that will be charged
on that platform.
And private sector interests have asked the Postal Service
if we would be willing to provide that sort of platform because
the PRC provides some public oversight and regulation. And
we're discussing those issues, but we haven't taken any
initiatives.
But it is an interesting role that the Postal Service might
play in the future, because we are a public entity.
Senator Cochran. Last year, the Postal Service filed a
request with the Postal Rate Commission to offer ``pack and
send'' as a new postal service. In April of this year, the PRC
approved a 2-year test of this service, but it encouraged the
board of governors to consider the financial consequences of
entering into competition with existing owner-operated small
business that provide similar services.
Has the board looked into this issue, to your knowledge,
and what is the current status of pack and send?
Mr. Henderson. It's currently on hold. We're having a
series of discussions with Jim Amos who is the head of
Mailboxes, Etc., a partnership experiment with them. Pack and
send is all a part of that discussion. There again we're trying
to get a partner here, and not a foe. We think there's an
opportunity for the Postal Service to generate some revenue and
for Mailboxes, Etc. to generate some revenue, to work in tandem
at the local level with the Postal Service. So we're in
discussions right now, we have 270 test sites that we'll be
kicking off beginning in November.
Senator Cochran. Last year, also the Postal Service
reported plans to build 150 wireless communication towers on
postal property. We understand because of some public criticism
the Postal Service has been reviewing the program. What's the
status of that program and how many antennas, if any, have been
constructed, and how many do you anticipate building?
Mr. Henderson. There's 25 that have been constructed, and
we're in some discussions with the organization, UniSite, as to
future plans.
Senator Cochran. The Postal Service has attempted over the
last several years to introduce a variety of new products, some
things are sold in the post offices now, people complain that
they're not really postal-related.
What is your policy on this issue? How do you determine
what new products are appropriate to market and which ones
aren't? What steps do you take to ensure that the Postal
Service doesn't undertake creating an unfair relationship with
other businesses in the process?
Mr. Henderson. We have a retail group that approves and
specifies what can be sold in post offices. I think we have
sold some merchandise, such as ties and tee shirts, that I
would call inappropriate for a post office. We shouldn't be
marketing stamps on ties and tee shirts at a post office, we
should be marketing them through a catalog. So we've taken
those products and separated them, and I think you'll see a lot
more discipline now in our retail units than you have in the
past.
Senator Cochran. Senator Levin asked you a question about
the labor relationships. You have four unions, I think, that
you've begun negotiations with. What's the status of these
negotiations? Do you think you can reach contracts with them
and avoid the use of arbitration or other devices to settle
disputes?
Mr. Henderson. We're currently negotiating with the
American Postal Workers Union, the National Association of
Letter Carriers, and the Mail Handlers Union. It is our hope
that we can reach a settlement, but it takes two parties. Right
now, I think both sides, from my perspective, appear to be
committed to reaching a settlement. It depends on, in the final
hours, what the terms are.
Senator Cochran. The General Accounting Office reported
last year the number of employee grievances continues to
increase. It has been doing that over the last several years.
Is that something we should be worried about? What's being
done to deal with this problem?
Mr. Henderson. It is one of the hot subjects of
negotiations. It is our belief in management that the grievance
process is broken, it's too long and too cumbersome, and has
too many layers. And we're actively engaged with the unions in
trying to streamline it, to offer a quick route to justice, if
you will, to the people who are complaining. We're very hopeful
we'll come out of these negotiations with a much better system.
Senator Cochran. There's an awful lot of new emphasis in
the work place on training and making people sensitive to
harassment issues and diversity issues and the like. What do
you think the record of the Postal Service is on these things?
Are you doing what you need to be doing to ensure that these
issues are dealt with in a fair way and an appropriate way
across the country?
Mr. Henderson. Yes. We have a huge, ongoing effort.
Everything from training programs like Looking Glass, in which
you learn to appreciate diversity, to seminars and training on
sexual harassment and those sorts of things.
It is something that's not fixed. It's forever ongoing. You
have to continuously train people, and make them very sensitive
to those kinds of issues.
Senator Cochran. What's the status of your efforts to
implement the new process known as redress to expedite
resolution of EEO complaints?
Mr. Henderson. We're rolling that out nationwide. Mary
Eleano, our general counsel, was recognized by Janet Reno as a
dispute resolution expert in government. This is really Mary's
child. She's done a heck of a job with the Redress Program, and
we think that's really going to unclog a process that's been
horribly clogged for a long time in the Postal Service.
Senator Cochran. One of the Postal Service's initiatives
that's recently raised some concerns is the contract for
processing priority mail. What's the status of the
implementation of the priority mail processing centers?
Mr. Henderson. We have five centers on the east coast.
They've shown dramatic improvement in the quality of priority
mail. That's an active subject of labor negotiations, as you
might expect. And we're going to see what comes out of labor
negotiations before we draw any judgments or make any decisions
about the future.
Senator Cochran. Can you tell us if there will be many
postal employees affected in an adverse way by this new
program? Does it have high cost associated with it?
Mr. Henderson. There's virtually no impact on postal
employees. What it represents is, as your service gets better,
you get new business, new packages come in, packages that were
carried by others are now carried by the Postal Service. It's a
net positive; it's growth for the Postal Service. We don't see
it as having an impact on postal employees.
In terms of how much it costs and that sort of thing, it
will depend primarily on whether we out-source it, or we build
the facilities ourselves.
Senator Cochran. Do you have any plans to bring a certain
number of these priority mail processing centers on-line? Do
you have specific plans for how many you want?
Mr. Henderson. Yes. We have a plan that says in order to
service the entire Nation, we need about 20 more facilities. We
haven't decided on locations. But it takes about 20 more
facilities to service beyond the test area that we have now.
We have not gone to the governors of the Postal Service to
ask for approval. We implemented the test to establish two
things: One, the threshold question, could we dramatically
improve service. And the answer to that question is, yes, we
have. And the second is once we've dramatically improved
service, can we in fact grow our revenue with this improved
service, attract more people in the marketplace. And the answer
to that is yes, too.
So we are in the process, and as I say, it's being
discussed in negotiations. We are preparing to go back to the
governors to talk about the success we've had in phase one.
Senator Cochran. You've been on the job now 5 months? Has
the time gone pretty quickly, or does it seem like you've been
there 10 years now?
Mr. Henderson. No, it's actually passed rather rapidly. I
tell everybody it's more fun than being the chief operating
officer, because you have somebody to yell at. [Laughter.]
Senator Cochran. Who is your chief operating officer?
Mr. Henderson. Clarence Lewis.
Senator Cochran. Do you yell at him like Mr. Runyon used to
yell at you?
Mr. Henderson. No. It's just a stress releaser. It's not
real. [Laughter.]
Senator Cochran. I know I may have omitted some questions
that I should have asked you, and if some occur to us that we
should submit, I hope you'll be helpful to us and respond in
writing for the record.
I know also Senator Stevens had asked you a question about
the Y2K effects on postal operations. And I'm not sure we got
an answer. If you could, provide us for the record what you are
doing, what the status of that effort is and what you think the
outlook is for dealing with it in the Postal Service.
Mr. Henderson. I'd be happy to do that. Thank you.
Senator Cochran. Mr. Henderson, you've done an excellent
job. We thank you very much.
Mr. Henderson. Thank you.
Senator Cochran. The hearing is adjourned.
[Whereupon, at 2:55 p.m., the Subcommittee was adjourned,
to reconvene at the call of the Chair.]
A P P E N D I X
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