[Senate Hearing 106-676]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 106-676

 
              THE ANNUAL REPORT OF THE POSTMASTER GENERAL

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



                                HEARING

                               before the

               INTERNATIONAL SECURITY, PROLIFERATION, AND
                     FEDERAL SERVICES SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 13, 2000

                               __________

      Printed for the use of the Committee on Governmental Affairs


                    U.S. GOVERNMENT PRINTING OFFICE
66-250 cc                   WASHINGTON : 2000

_______________________________________________________________________
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       JOSEPH I. LIEBERMAN, Connecticut
TED STEVENS, Alaska                  CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine              DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio            RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico         ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi            MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania          JOHN EDWARDS, North Carolina
JUDD GREGG, New Hampshire
             Hannah S. Sistare, Staff Director and Counsel
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                     Darla D. Cassell, Chief Clerk

                                 ------                                

      INTERNATIONAL SECURITY, PROLIFERATION, AND FEDERAL SERVICES 
                              SUBCOMMITTEE

                  THAD COCHRAN, Mississippi, Chairman
TED STEVENS, Alaska                  DANIEL K. AKAKA, Hawaii
SUSAN M. COLLINS, Maine              CARL LEVIN, Michigan
PETE V. DOMENICI, New Mexico         ROBERT G. TORRICELLI, New Jersey
ARLEN SPECTER, Pennsylvania          MAX CLELAND, Georgia
JUDD GREGG, New Hampshire            JOHN EDWARDS, North Carolina
                   Mitchel B. Kugler, Staff Director
              Richard J. Kessler, Minority Staff Director
                      Julie A. Sander, Chief Clerk



                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Cochran..............................................     1
    Senator Akaka................................................     7
    Senator Levin................................................     8
Prepared statement:
    Senator Cleland..............................................    21

                                WITNESS
                        Wednesday, July 13, 2000

William J. Henderson, Postmaster General, U.S. Postal Service:
    Testimony....................................................     2
    Prepared statement...........................................    23

                                APPENDIX

List of the Postal Service's electronic commerce initiatives 
  responses to Senator Cochran's request.........................    29
E-Bay website pages submitted by Senator Akaka...................    31
Responses from Mr. Henderson:
    For questions submitted by Senator Cochran...................    38
    For questions submitted by Senator Domenici..................    44
    For questions submitted by Senator Lieberman.................    45
    For questions submitted by Senator Akaka.....................    48



                ANNUAL REPORT OF THE POSTMASTER GENERAL

                              ----------                              


                        THURSDAY, JULY 13, 2000


                                   U.S. Senate,    
              Subcommittee on International Security,      
                    Proliferation, and Federal Services    
                  of the Committee on Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:10 p.m. in 
room 342, Dirksen Senate Office Building, Hon. Thad Cochran, 
Chairman of the Subcommittee, presiding.
    Present: Senators Cochran, Akaka, and Levin.

              OPENING STATEMENT OF SENATOR COCHRAN

    Senator Cochran. The Subcommittee will please come to 
order.
    Today we have the pleasure of hearing from the Postmaster 
General of the United States, William Henderson, who is here to 
present the annual report of the U.S. Postal Service to the 
Congress, specifically to the Senate Subcommittee that has 
jurisdiction over the Postal Service.
    In 1970, Congress converted, in the Postal Reorganization 
Act, the Post Office Department of the Federal Government to an 
independently managed U.S. Postal Service. Since that time, 
there has been a tremendous amount of growth in the Postal 
Service and in its activities. It now employs over 800,000 
employees, and takes in more than $64 billion dollars in annual 
revenues.
    One of the changes that has been most significant is that 
instead of a deficit operation, year in and year out, that was 
subsidized by the taxpayers of the United States, the U.S. 
Postal Service has made major improvements in its financial 
policies and management. It has reported a positive net income 
for 5 straight years, operating without the benefit of 
taxpayers' subsidies.
    The Postal Service has also consistently improved its 
performance. It has become and is recognized as a dependable 
deliverer of mail to American citizens through the country and 
its territories.
    Despite these impressive achievements, there are still some 
interesting challenges and problems facing the Postal Service. 
There is increased competition, technological changes, 
electronic communications, to name just a few of the 
developments in recent years that affect the operation of the 
Postal Service and its capacity to continue to operate without 
subsidies from the taxpayers.
    We are pleased to have this opportunity to review with the 
Postmaster General the activities and problems of the Postal 
Service and any issues that, in his judgment, should be brought 
to the attention of this Subcommittee.
    We do hope the Postal Service will continue to pursue its 
fundamental responsibilities, providing universal mail service 
at affordable rates.
    Mr. Henderson, we congratulate you on your performance 
during the time you have been in office. We look forward to 
hearing your report.

TESTIMONY OF HON. WILLIAM J. HENDERSON,\1\ POSTMASTER GENERAL, 
                      U.S. POSTAL SERVICE

    Mr. Henderson. Thank you, Mr. Chairman.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Henderson appears in the Appendix 
on page 23.
---------------------------------------------------------------------------
    We were almost late for this hearing, because of the 
President's motorcade running around here. It has got all the 
traffic locked up.
    Senator Cochran. Thanks for the warning. [Laughter.]
    Mr. Henderson. I will submit my testimony for the record. I 
will not read back to you what you have already read.
    I will try to summarize it. There are three fundamental 
issues facing the Postal Service in the future. It is true that 
the Postal Reorganization Act in 1970 was a huge success. It 
put modern business practices into an agency that desperately 
needed modern business practices.
    Today, we face three big issues, as I said. The first one 
is affordability. We have to keep the price of postage down. 
That means that we have to undertake heroic cost cutting. That 
troubles me, as a CEO of an organization; not the cost cutting, 
but having the ability to do that, and to keep costs low.
    Because the second issue facing us is growth. We are simply 
not growing at a rate that funds our infrastructure. Last year, 
we missed our revenue targets by $600 million. That was 
primarily due to migration of advertising mail to the Internet.
    Companies have fixed budgets for advertising. When people 
saw the Internet as another channel, they took money out of 
direct mail, and prospecting with direct mail and First Class, 
and went to the Internet. The good news is, they did not get 
much out of it. Nonetheless, you can see the Internet as a 
channel that is going to be a potential substitute for 
advertising mail in the future.
    This year, we are seeing about a $700 million to $800 
million softening in our revenue, primarily due to 
consolidation of First-Class mail.
    Let me explain that. The banks have consolidated their 
billings. They use duplex printing, which means they print on 
both sides of the paper, which means mail is lighter. That is 
having an effect.
    In the future, we see the erosion in bills and bill 
payments. It is not a matter of if, but when; and $17 billion 
of the $64 billion in revenues that you mentioned are directly 
attributable to bills and bill payments. That puts the Postal 
Service, at some time in the future, in a crisis mode.
    So growth is a very important factor for us, for the Postal 
Service to watch. Because as the revenues slow, then the only 
avenue you have, if you have done extensive cost cutting, is to 
raise prices. Raising prices in today's world is not a smart 
thing to do, from a business perspective.
    Second, we believe in the Postal Service that the Postal 
Reorganization Act of 1970 needs reform. It needs reform in the 
area of more pricing freedoms for the Postal Service, faster 
ability to move products to the marketplace. The speed of 
business today is accelerating, geometrically. We are locked 
into a much slower process than what we think is necessary to 
have a viable business.
    Third, we would like some opportunity to use our investment 
monies in the marketplace to make investments, to have the 
freedom so that we can make money off those investments, as 
opposed to government securities.
    Finally, we think the issue of resolution of disputes 
between labor and management needs to be examined, both by 
labor and by management. Something other than arbitration 
should be put in place.
    These issues need to be looked at, and we look to the 
Congress for help in making those kinds of adjustments, because 
we think a healthy Postal Service is extremely important, for a 
long time to come, to America.
    That concludes my summary, Mr. Chairman.
    Senator Cochran. Thank you very much.
    You mentioned the idea of reform of the Postal 
Reorganization Act of 1970. When I first assumed the 
responsibility as Chairman of this Subcommittee, I reviewed the 
proposal that was, at that time, pending in the House of 
Representatives for reform. It is H.R. 22, a comprehensive 
reform bill.
    After a little analysis, we discovered that that was also 
very controversial. A lot of people were disagreeing with the 
proposal for various reasons. That bill is still pending in the 
House, and has not been enacted.
    We decided to try to do a more modest proposed reform, 
targeting some individual subject areas for change that we 
thought might be noncontroversial. I introduced a 
noncontroversial, modest bill, which became immediately 
controversial. It was introduced. [Laughter.]
    I came to the conclusion that there is no such thing as a 
modest, noncontroversial reform available for the Postal 
Service.
    What is your suggestion about specific changes that we need 
to consider making in the Postal Reorganization Act?
    Mr. Henderson. Well, the first one, as I said earlier, is 
pricing freedoms. The Postal Service needs the ability to 
adjust prices during the fiscal year to respond to changing 
business conditions.
    It needs the ability to negotiate prices with large 
customers. We believe in universal service at affordable rates, 
but we need pricing flexibility.
    Second, we also need the ability to go to the marketplace 
quickly to test products. When you have a full-blown hearing 
for 10 months on a product, it is not exactly innovative, by 
the time it gets to the marketplace.
    Third, as I said, we need some investment income freedoms, 
so that we can make money off of our cash flow, the monies that 
we have.
    Finally, we think we need a new model for resolving labor 
disputes, that does not put so much authority in the hands of 
one person, the arbitrator, since we are very labor intensive. 
Our customers need to be involved in this equation.
    For our employees, we are not saying that labor is broken, 
by any stretch of the imagination, but we need a new resolution 
model. I think those areas will allow the Postal Service to 
stay healthy.
    I might add that looking at other postal administrations 
and their reforms, most have come about because of a crisis, or 
some major economic change. Since we have not had a crisis, so 
to speak, and as you said in your opening remarks, we have been 
financially successful over the last 4 or 5 years, we are 
having a hard time generating the kind of interest in postal 
reform that we think should be there, if you actually looked at 
the tea leaves, 5 to 8 years out.
    But postal administrations around the world are 
modernizing. They are becoming more commercial. The German 
Post, in the fall, is likely going to have an initial public 
offering, which will make it private, to some degree.
    The German Post owns 51 percent of DHL International. They 
are the largest or one of the largest logistics organizations 
in the world. They still have a core mail business, and they 
have an express business. So the Germans are operating under a 
model.
    The Deutsche Post bought TNT and became TPG. It is now a 
publicly traded organization. It is very aggressive in the 
world. So they are not only aggressive in their countries in 
Europe, they are also aggressive in the United States.
    We look at ourselves as fairly outdated, compared to 
industrialized posts around the world. We do not think all of 
those models are wrong. We think that needs to be examined for 
the Postal Service.
    Senator Cochran. I think it is part of the Reorganization 
Act that each class of mail has to stand on its own two feet, 
so to speak. In other words, you cannot use the revenues from 
one class to subsidize the operations of another class or 
character of service.
    Does that present you a particular problem, and is there 
any proposal for change in that, that you would make?
    Mr. Henderson. The answer is no. I think that you would 
create more controversy if you allowed, say, First-Class mail 
to subsidize standard A, or vice versa. I think that getting a 
consensus in the customer community would be nearly impossible, 
without those kinds of safeguards.
    Senator Cochran. One of the criticisms that I have had 
brought to my attention from some who compete in the delivery 
of parcels and bulk items is in the international area, where 
they allege that there is just no way for you to actually carry 
the packages and the parcels the distances that you do, and not 
have some overhead expense paid for by other classes of mail or 
other operations of the Postal Service. Is that a fair 
criticism?
    Mr. Henderson. No, sir.
    Senator Cochran. If not, why not?
    Mr. Henderson. Well, as you will recall, I think a couple 
of years ago, we had a hearing on that subject, maybe in this 
very room. We committed to having an independent review of the 
cost coverage of international.
    The conclusion was that domestic mail does not subsidize 
international mail. The Postal Rate Commission looks at that 
issue at every rate filing. So we are confident that our 
international mail is not subsidized by our domestic.
    Senator Cochran. There is always concern that the price of 
postage is going to continue to go up, just for the reasons 
that we have both pointed out. The pressures from competition 
and technology, e-commerce, and the like, make it more and more 
difficult to do business at the same postage rates in the 
future.
    What do you anticipate in terms of future rate increases 
for the various types of mail that you deliver? Is it 
inevitable that we are going to see prices continue to go up?
    Mr. Henderson. Under the current regimen of 1970, I think 
it is inevitable that prices will continue to go up. They will 
continue to go up, fueled by things like internal inflation, 
the cost of fuel.
    As you can see, for example, this year alone, the increase 
in the price of fuel for the Postal Service is costing us $240 
million in unexpected costs. The rise in inflation in the 
United States, beyond what was predicted, is costing another 
$50 million.
    Those kind of pressures, along with the pressures of labor, 
inevitably translate themselves into price increases. That is 
in spite of the fact that we have the highest labor 
productivity this fiscal year that we have had in a decade.
    Senator Cochran. What do you anticipate will be your next 
increase in postage rates, and when will that occur?
    Mr. Henderson. It will occur likely in January. It will be 
for First-Class postage, a one-cent increase. For the other 
classes of mail, it will vary, based on their individual cost 
cells.
    Senator Cochran. There is some indication from a meeting 
that I had with postmasters and their representatives recently 
that there was concern that because of the arbitration clauses 
and the powers that the employee unions have, that salaries for 
some of the employees have gone up, because of those pressures, 
above the salaries that are paid to some postmasters.
    There is some concern that that is unfair. Their 
responsibilities for managing and supervising and doing the 
things that are in the job definition of a postmaster justify 
higher salaries and wages than they are getting, compared with 
some of those who are working in the post office with them, and 
whose wages have gone up because of arbitration and other 
pressures.
    Is that a legitimate concern; and if so, what is there that 
we can tell them that will be done by the management of the 
Postal Service that will respond to that concern?
    Mr. Henderson. We periodically have consultation with our 
postmaster organizations to talk about wages, pay for 
performance, and those kinds of things. If you look at our 
smaller postmasters, I understand you are getting that 
complaint. I get that complaint, myself.
    If you look at level 11, 13, and 15, those are the smaller 
rural offices, and the average salary and benefits are about 
$60,000 a year. We think that is fair compensation. But we are 
mindful of the differential for postmasters who have craft 
employees working for them. We do not have situations, to my 
knowledge, where a postmaster has a craft employee working for 
him that makes more money than they do. I am not aware of any 
situations to that extent.
    In smaller offices, where there are no craft employees, the 
postmasters are paid less; in other words, where the postmaster 
works on the window, or works, in essence, like a window clerk 
does, in a larger office. We look at those, as compared to the 
next higher level postmaster. We try to keep comparability in 
there.
    Senator Cochran. There was a lot of pressure, at one time, 
about new rules for closing post offices, and getting public 
opinion of the local community, to be sure that everybody knows 
what the plan of the Postal Service is for a particular 
location.
    Do you think the changes that have been put in place and 
the openness of the process now have served to alleviate the 
concerns? There was pressure to actually change the law, to put 
in specific requirements, by law, that you would have to 
follow, if you wanted to close or relocate a post office. Has 
that concern been satisfactorily addressed, in your opinion?
    Mr. Henderson. Yes, we have a moratorium right now on 
closing post offices. If you go in and close a post office, by 
the time you close one that the community does not want closed, 
you have lost so much good will, in the eyes of the community, 
it is simply not worth it.
    Most of the post offices that are closed now are really 
abandoned. There are post offices where the person retires, and 
has a post office in their grocery store or whatever, and they 
simply do not want to do it anymore, and we cannot find someone 
to serve it.
    But we have been working with our postmaster organizations 
to identify any opportunities in these, what we call suspended 
post offices, and that is the postal term, to reopen them. But 
by and large, we have not closed any post offices now in a 
couple of years.
    Senator Cochran. Speaking of suspension, we are going to 
have to suspend this hearing, because I am just advised that we 
have a vote occurring in the Senate, and there are only 5 
minutes remaining to cast the vote. I have to go and do that. I 
will return and we will reconvene, as soon as I can get back. I 
apologize to everybody for that.
    [Whereupon, at 2:27 p.m., the Subcommittee recessed to 
vote.]
    Senator Cochran. The Subcommittee will come back to order.
    We are pleased to be joined by the distinguished Ranking 
Member of the Subcommittee, Senator Akaka, and Senator Levin.
    Senator Akaka and I have introduced a bill, S. 2686, which 
is intended to improve the process for establishing postal 
rates for nonprofit and reduced rate mailers. The bill would 
establish a structured relationship between nonprofit and 
commercial postage rates. Some of these nonprofit groups are 
worried they will see another substantial rate increase, unless 
the current rate setting procedure is changed.
    Do you believe that changes in the law are appropriate to 
avoid unpredictable rate changes for nonprofit mailers, and 
would you support the adoption of S. 2686?
    Mr. Henderson. Absolutely; we think it is essential for the 
health of nonprofits to have that piece of legislation.
    Senator Cochran. I have one other question about the 
employment situation, and the number of employees. We 
understand that in the Postal Service, there is a plan to 
eliminate some 700 administrative positions. Are there plans to 
do this, and what specifically do you have in mind?
    Mr. Henderson. The answer to your question is yes, and that 
is the beginning and not the end. We are going to eliminate 700 
administrative jobs.
    Essentially, we are reviewing the organization and its 
structure, to get rid of duplicate work. We are also looking at 
redesigning our processes to reduce the number of employees.
    It is just the pressures of being in a competitive 
environment that make you constantly look at yourself and say, 
is there not a more efficient way to operate? This is simply 
the outcome of that.
    Senator Cochran. I have had a chance to ask a number of 
questions. I am going to yield, at this time, to the 
distinguished Ranking Minority Member of the Subcommittee, 
Senator Akaka, for any comments or other questions that he 
would like to ask.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Mr. Chairman, my good 
friend and great leader, Senator Cochran.
    As the Ranking Member of the Subcommittee, I look forward 
to receiving the Postmaster General's testimony today from Mr. 
Henderson. The Postal Service enjoys a uniquely personal 
relationship with the American people. A new Gallup poll found 
that nine out of ten American households have a positive view 
of the Postal Service.
    I applaud the dedicated career postal employees, who have 
earned their fellow citizens' appreciation, and Mr. Postmaster 
General, your leadership in this effort.
    Right now, the Postal Service is analyzing its operation, 
products, and management in order to become a key player in the 
e-commerce area, and deal with revenue shortfalls. As these 
reviews are made and decisions reached, it is critical that the 
Postal Service's mandate of universal service and commitments 
to its employees are not compromised.
    I am confident that under the leadership of the Postmaster 
General, the Deputy Postmaster General and the Board of 
Governors, the Postal Service will find answers to the diverse 
challenges that lie ahead, without sacrificing customer 
satisfaction or harming labor/management relations.
    I wish to compliment the Postal Service on its recent 
decision to donate out-of-date, stand-alone computer systems to 
disadvantaged families without computers. As a former educator, 
I am pleased that the Postal Service is working toward closing 
that digital divide. I am well aware of the great community 
services performed by postal employees, and this is yet another 
example of the Postal Service enriching the lives of those it 
serves.
    As the Postmaster General knows, I recently introduced. S. 
2703, the Postmaster's Fairness and Rights Act, which is co-
sponsored by 12 senators. I hope that you and I can work toward 
addressing the issues raised in this bill.
    My remarks would not be complete without mentioning my 
interest in a U.S. postage stamp for Duke Kahanamoku, Hawaii's 
five time Olympic medal winner, and the father of modern 
surfing.
    I have supported this effort for many years, and appreciate 
knowing that the proposed stamp remains under serious 
consideration by the Citizens Stamp Advisory Committee. The 
time has come to honor the Duke, who holds a unique place in 
surfing history, and whose Olympic skills are legend.
    I thank you, again, Mr. Chairman, for this hearing. I look 
forward to reviewing the Postmaster General's report.
    Thank you.
    Senator Cochran. Thank you, Senator Akaka.
    Senator Levin.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Thank you, Mr. Chairman.
    Senator Akaka's statistics about the favorable rating of 
the Postal Service and its employees really is quite stunning. 
Nine out of ten have a favorable view is a close second to the 
view of the U.S. Congress. I just want to commend you for not 
overtaking us. We really appreciate that. [Laughter.]
    Mr. Henderson. Does that mean we cannot wear the yellow 
jersey?
    Senator Levin. You have to work harder. If you are No. 2, 
you just try harder, that is all. [Laughter.]
    As you know, Mr. Henderson, our sweepstakes legislation 
went into effect in April of this year. This was an effort to 
end the abuses that exist in the area of sweepstakes, the mail 
that comes too often to our houses, telling us we won something 
when we did not, and with screaming headlines saying you have 
won a whole bunch of money, when in fact we have not, and other 
kinds of come-ons that mislead so many people, and have caused 
so much injury and economic hardship and misery in this 
country.
    We have some good news and some bad news, since April, when 
this new law went into effect, and, as you know which this 
Subcommittee had a great deal of involvement in making the law.
    I guess the bad news first would be this sweepstakes notice 
from McCalls Magazine. You have a copy of it in front of you 
now. This is an urgent message, in big headlines here. It says, 
``Urgent Message for `L,' you have been declared one of our 
million dollar winners. We are waiting for you to claim your 
prize money.'' That is in big print.
    Now there is a little print right above it, which is the 
hook. That says, ``No, you have not.'' The big headline says, 
``You won a million.'' Then in these big headlines down here, 
it says ``K, W, and L have been declared million dollar 
winners. We will pay the next million dollars to the people 
names, and them alone, but only if you respond to this 
notice.''
    This is the same kind of a come-on and misleading brochure 
and sweepstakes notice that existed before the law changed. The 
new law makes it very clear that it is illegal for any material 
to go out which ``represents that an individual is a winner of 
a prize, unless that individual has won such prize.''
    I would like you to look at this. I am not going to ask you 
to do that today, unless you would like to. But I would like 
you to take this back to the office, give it to your folks in 
charge of this, and let us know immediately whether, in your 
judgment, that come-on complies with the new law. Because that 
is exactly what we intended to put out of existence with the 
new law.
    Senator Collins is not here. She was very, very active in 
this law. It was the Collins/Levin initiative, with Members of 
this Subcommittee, by the way, our Chairman, Senator Akaka and 
others, being very actively supportive of it. So we are all 
familiar with this issue.
    I cannot speak for any other Senator, but I think it is 
fair to say, we had looked forward to a significant change in 
the behavior of the sweepstakes folks. So we need to know from 
you whether or not our law made a difference.
    If this is the kind of junk that is going to continue to 
bombard our mails, with these kinds of misleading statements 
that are going to deceive too many of our people, especially 
seniors, then we are going to get back to the drawing board. So 
please let us know on that.
    Now there have been some changes, however, which I think we 
want to acknowledge. That is in a Reader's Digest notice that 
went out, and there is a copy of that in front of you.
    This one does show a real change in the approach of the 
Reader's Digest. Instead of saying, ``You have won,'' it says 
it is a ``winners selection process.'' That is a lot different 
from saying that you have won. This is done a lot more 
carefully, in a number of respects.
    However, if you will look at the fine print down on the 
back, you will see it says, ``No purchase or payment necessary 
to enter or win.'' That was required by our new law to be 
prominently displayed.
    We need your folks to tell us whether or not that tiny 
little print is prominently displayed, in your judgment. I must 
say, it is not in mine; but let us know.
    Then it is interesting, because one of the things that we 
fought very hard to get into the new law was a very prominently 
displayed statement that says, ``A purchase will not improve an 
entry's chance of winning.'' That statement is even in smaller 
print, not as bold, and further down.
    Mr. Henderson. Yes, I found it.
    Senator Levin. You found it?
    Mr. Henderson. Yes.
    Senator Levin. You have your magnifiers on, then. 
[Laughter.]
    So if you could have your experts take a look at both of 
those statements, and tell us whether or not, in your judgment, 
they comply with the new law, that would be very helpful to us.
    If you would comment, I would be happy to just stop there, 
and let you have a chance to respond.
    Mr. Henderson. Well, as you know, we supported the 
legislation. We think things had gotten out of hand. Hopefully, 
the new law will curb these industry practices, and the 
industry has been cooperating. To date, we have only received 
three requests for subpoenas to look at the information.
    Senator Levin. When you say you have received subpoenas, 
what do you mean?
    Mr. Henderson. Our General Counsel has issued three 
administrative subpoenas.
    We will look at this and get back to you tomorrow.
    Senator Levin. That would be great.
    The number of complaints, then, has gone down since the new 
law had gone into effect?
    Mr. Henderson. Yes, and I would add that the industry, from 
my perspective, has really cooperated in trying to stamp out 
those deceptive practices.
    Senator Levin. Have you had any information sessions with 
sweepstakes promoters, to educate them about the new law?
    Mr. Henderson. Yes, we have.
    Senator Levin. Do you know anything about the status of the 
requirement to allow persons to be asked to be taken off the 
mailing lists of sweepstakes promotions?
    Mr. Henderson. Not off the top of my head, but I will be 
happy to supply that for the record.

 Responses to Senator Levin's Question on the Sweepstakes 1-800 Number 
             and the McCall's and Readers' Digest Mailings
    1-800 Number
          Regarding the status of the 1-800 number for sweepstakes, 
        Title 39, U.S.C. 3017, Nonmailable Skill Contests and 
        Sweepstakes Matter, requires that the sweepstakes promoters 
        establish and maintain a notification system to include an 1-
        800 number. The requirement is to provide individuals the 
        opportunity to request that their name be removed from 
        sweepstakes and contest mailing lists. The requirement is not 
        mandatory until December 12, 2000.
          The Postal Inspection Service will monitor mailings in an 
        effort to ensure companies are providing a notification system 
        as required by Sec. 3017.

    Readers' Digest and McCall's Mailings
          Postal Inspection Service officials have contacted McCall's 
        magazine and the Reader's Digest to obtain copies of the 
        complete mailings. Postal Service lawyers are reviewing the 
        mailings to ensure compliance with the Deceptive Mail 
        Prevention and Enforcement Act. The mailings are still under 
        review. Also, Inspection Service officials are arranging 
        meetings with officials from both publications to discuss their 
        compliance with the law. I understand Inspection Service 
        officials have been in regular contact with Senator Levin's 
        staff on the status of this review.

    Senator Levin. Has the volume of sweepstakes solicitations 
that go through the mail been affected by the new law, if you 
know?
    Mr. Henderson. Yes, it has. I cannot give you a hard 
number, but sweepstakes have dropped off dramatically. I might 
add, that is not just necessarily because of the law. It is 
because of the publicity that surrounded deceptive practices. 
Sweepstakes took a hit to their brand. I use that word as 
people begin to look at them in a different light, and they 
have not recovered today.
    Senator Levin. Well, in my judgment, I would have said that 
it was a well-deserved hit. If they comply with the law, its 
letter and its spirit, that will be fine.
    If we see that key information, that a purchase does not 
improve your chances of winning, if that is prominently 
displayed, as the law requires, it seems to me then, and only 
then, can the sweepstakes solicitations be justified.
    Otherwise, it seems to me, they are deceptive. But more 
important, you are the experts. We need you to tell us whether 
or not the examples I gave you fit or violate the prohibitions, 
in your judgment.
    If so, if they do violate them, then take proper 
enforcement. If they do not, let us know, because I think then 
we are going to have to tighten up the law, again.
    Should I keep going, Mr. Chairman? I have just a couple 
more questions.
    Senator Cochran. Sure, please proceed.
    Senator Levin. I do not want to go beyond my allotted time. 
I just have a couple of questions about semipostals.
    We have had a lot of discussion about this issue. We have 
seen some data on the breast cancer research semipostal stamp 
and we still need some of the cost information, which you are 
working on.
    But the fundamental question which the Congress really has 
to face is whether or not we should be authorizing 
semipostals--additional stamps that raise funds for various 
charities. We have had about 15 semipostal bills now introduced 
to raise funds for various charities and groups.
    By the way, although I voted against it in the first place, 
I think it is clear that we should reauthorize the breast 
cancer stamp, because we have a huge number apparently printed.
    It has already been authorized once. Although I don't think 
we should be issuing these stamps as a matter of principle. It 
would make sense to utilize all the balance of the stamps that 
are printed.
    Putting aside that issue, the reauthorization of the breast 
cancer research stamp, should either we or you, through your 
Citizens Stamp Advisory Committee, be issuing or recommending 
to the Postal Service, additional semipostals? If the answer is 
yes, in your judgment then, should we be doing this?
    This gets us into all kinds of political issues as to which 
of the very important charitable causes we should favor, 
politically. Should your Citizens Stamp Advisory Committee be 
doing it? Who should be doing it, if we should do more of this 
at all?
    Mr. Henderson. First, let me say that the breast cancer 
stamp has been something that has created just an incredibly 
positive view towards the Postal Service, but I think that is 
unique.
    Senator Levin. When you say the view, you mean that 
particular cause?
    Mr. Henderson. Yes. We are not in favor of semipostals. 
They are very difficult to select. I do not know what criteria 
you would use.
    The Citizens Stamp Advisory Committee does not want any 
part in that, and you know they are volunteers. They want no 
part of trying to select which charity over another ought to 
receive the support of the Postal Service. We are not 
interested in administering that, or being a part of that at 
all.
    I do not know what the reaction would be of the Citizens 
Stamp Advisory Committee if they were forced to do it, but I 
suspect it would be very negative. I know today, they are just 
not equipped, and we are not equipped. I am in the business of 
running the Postal Service. I am not in the business of trying 
to figure out which charity over which charity, or which cause 
over another cause.
    Our job, in my view, is if the Congress feels that a 
semipostal ought to be issued, that it directs the Postal 
Service, as it did with the breast cancer stamp. Then we will 
do the best job we possibly can at making the intent of 
Congress a raving success.
    Absent that, we do not want to be in a position to issue 
one semipostal a year or two or whatever. We just think that 
would be a disaster for our organization. I will not attempt to 
tell the Congress what I think they ought to do. But I do not 
believe semipostals ought to be issued.
    I think it is very difficult. I think you raised a very 
valid point. How do you select them? I mean, they are all good 
causes. Prostate cancer is a very legitimate cause. It affects 
millions of males. There are just a thousand subjects that 
really are worthy. What screening you do to put them on a stamp 
and raise money for them, I just do not have a clue.
    Senator Levin. When you say that you should not be issuing, 
what you are saying is, you do not want to do the selection, 
your Citizen Stamp Advisory Committee. But is it not also a 
fair statement that you hope that Congress does not authorize 
additional ones. Is that right?
    Mr. Henderson. That is right. That is exactly right.
    Senator Levin. Thank you.
    Senator Cochran. Thank you very much, Senator.
    Postmaster General Henderson, you have mentioned the 
possibility of expanding the products and services of the 
Postal Service, and getting into the e-commerce area, as well. 
How does offering e-commerce products promote the core mission 
of the Postal Service?
    Mr. Henderson. Well, e-commerce becomes another channel for 
customers of business and consumers to get at postal products. 
It can be as simple as looking up a ZIP code or ordering a 
priority label; or in the case of the private companies, where 
PC postage is offered, getting postage off a computer.
    It is true that the activities we have taken to date relate 
to our information platform, which we are building for internal 
reasons to enable us to cut real time costs, to build an 
activity based accounting system, and to offer our customers a 
window into the mail stream, so they can see where their mail 
is; that is the major driver, and simply for convenience.
    We have an electronic bill payment offering: We carry bills 
today, and they are in the mail. You have got your bill, you 
mail it back. We are offering a service to do that 
electronically. We have had about 75,000 people go to that 
link. About 10 percent of them have actually signed up. But 
that is just a service we are offering our consumers.
    So we see this as really an extension of our core products. 
Just another analogy is, we used to move mail exclusively on 
trains. Now we use airplanes and trucks and other things. But 
we are not getting out there into areas that are completely 
foreign to us. It is all tangential to the mail.
    Senator Cochran. You mentioned the e-bill payment program. 
Are there any other new initiatives that are considered 
important for the Postal Service, and what do you expect to 
achieve in these areas?\1\
---------------------------------------------------------------------------
    \1\ List of the Postal Service's electronic commerce initiatives 
requested by Senator Cochran appears in the Appendix on page 29.
---------------------------------------------------------------------------
    Mr. Henderson. Well, they are very similar to what we do 
today, as a matter of our core mission. For example, we have 
PosteCS, which is a secure document transmission system, that 
is a partnership between the Canada post, the French post, and 
the United States post. It is a service that we offer around 
the world. It is just the ability to send a secure document.
     The reason for my market research that folks will chose 
the Postal Service, is because they have trusted the Postal 
Service with their documents forever. This is just a natural 
extension.
    But we have several things that we are looking at. I will 
be happy to supply for you a listing of the products and an 
explanation of them, and how they relate to our business.
    Senator Cochran. Do you expect these products and services 
will cover their costs and make a contribution to the overhead 
of the Postal Service?
    Mr. Henderson. Absolutely, but we do not think that they 
will substitute for the $65 billion business that we manage on 
a day-to-day basis. In many instances, they are conveniences 
for our customers. It is just another way to access the Postal 
Service.
    Senator Cochran. Last year, you announced the service you 
referred to, PC postage, as an innovative way for customers to 
purchase and print postage, through their personal computers. 
Is this a program that is gaining in popularity? What is the 
status of it? How many customers are using it?
    Mr. Henderson. They have purchased about $26 million worth 
of postage. There are currently, I believe, 16 organizations. 
When I testified before, there were four. Now it has grown. It 
gets mixed reviews in the marketplace, but customers are going 
to PC postage.
    Senator Cochran. In the current rate case, the providers of 
PC postage are seeking a discount for consumers who use PC 
postage to prepare their mail, because it provides cost savings 
to the Postal Service. What is the Postal Service's position on 
this request?
    Mr. Henderson. We do not agree with that. To think that we 
could incrementally take the costs out of one stamp being 
purchased at a retail unit or vending machine versus a computer 
is not understanding the Postal Service's business model.
    It is just an added convenience, but it has not, as of yet, 
made any difference. We have 7 million people a day that walk 
into postal lobbies. So it has not really had an impact. They 
just handed me the numbers. There are 302,293 customers using 
PC postage today in the United States.
    Senator Cochran. The Postal Service is also developing a 
program to provide a secure electronic mailbox for every 
American household. What is the status of this program, and can 
you tell us how the service would work?
    Mr. Henderson. It is on the drafting board. Essentially, it 
would allow you to access the Postal Service and some of its 
special products through a secure mailbox. You could go in and 
you could click on, for example, a post office.
    Then electronically, you could confirm where a letter 
happened to be, if it had been read through one of our sorting 
machines. You can buy special services. It is an opportunity 
for you to visit an environment that is secure in a Postal 
Service.
    Senator Cochran. Do you have to go to the Board of 
Governors to get permission for each individual new e-commerce 
type activity, or do you get a blanket kind of approval? What 
is the process that you use in interfacing with the Board of 
Governors on this?
    Mr. Henderson. It is actually both. We have a by-law that 
requires us to go to the governors on anything that, in their 
view, would be controversial. So we have chosen to take these 
initiatives, either in writing or in person, to the governors, 
and they decide whether or not they want to vote, or whether 
they just want to let us continue.
    We keep them apprised, on a regular basis. We have a 
strategic planning committee, which is a sub-group of the 
governors, in which we discuss on a monthly basis all of our 
initiatives and what progress we have made.
    Some we get on the drawing boards, and if we decide they 
will not fly, we scratch them. But we have a group of people 
looking, as is every business, I think, in America, and every 
institution, looking at how this new channel of the Internet, 
what it means to your business, and how it can affect your 
business. So we have a group that is just doing that.
    Senator Cochran. The Postal Rate Commission is called on to 
approve any requests and changes or increases in postal rates. 
Are any of these initiatives in the e-commerce area subject to 
the approval of the Postal Rate Commission?
    Mr. Henderson. Some have been mailing online for example, 
and it was subject to the Postal Rate Commission's review. 
Others are not. Traditionally, some services have gone to the 
Postal Rate Commission for setting rates. Some, we have set 
fees, independently of the Postal Rate Commission. It varies. 
If it's a core product, all of them go to the Postal Rate 
Commission.
    Senator Cochran. Senator Akaka, do you have any other 
questions?
    Senator Akaka. Yes, Mr. Chairman, I do.
    I would like to ask the Postmaster General about the 
selling of postal collectibles on E-Bay, one of the most 
popular Internet auction site.\1\
---------------------------------------------------------------------------
    \1\ E-Bay website pages submitted by Senator Akaka for the record 
appears in the Appendix on page 31.
---------------------------------------------------------------------------
     There are currently 34 items that have been put online by 
the Postal Service, as of this afternoon.
    For instance, one of the items says that the auction starts 
on July 7 and ends July 17. The price is $500. The item is a 
Barbie stamp. I have a list here of the 34 items.
    Mr. Henderson, who in the Postal Service approves putting 
postal products up on E-Bay? Was the Board of Governors 
involved in this decision or consulted?
    Mr. Henderson. I do not know. I think we told the governors 
about it, but they would not approve something like that. We 
would do that in management.
    We are using E-Bay as a part of World Stamp Expo, which is 
going on in Anaheim, California, where we have 150 foreign 
postal administrations displaying stamps. We have collectors 
from all over the world, and we put collectibles on E-Bay.
    But from time to time, we have gone on these home shopping 
networks, and have sold postal collectibles. It has been 
everything from stamps signed by astronauts, and so on.
    It really is a way of keeping that kind of item that we 
have, that people are interested in buying, out of the post 
office, so that it does not interfere with the people who want 
to come in and mail packages. I think most of these are stamp-
related items or in connection with that. This particular E-Bay 
site is in connection with the World Stamp Expo.
    Senator Akaka. As the Postal Service looks at an eventual 
downturn of revenues, you have said that the Postal Service 
will work with the Office of Personnel Management on early 
retirement procedures. I have several questions relating to 
that issue.
    Is the Postal Service talking to OPM now about procedures, 
and do you have any timeframe as to when the cuts will actually 
take place? Also, will the Postal Service target specific 
categories of employees or specific geographic locations?
    Mr. Henderson. The answer to the first part of the question 
is yes, we have talked to OPM, and we are talking to them now. 
We will be targeting functions, not categories of employees, 
but functions. As I said, 700 positions is the beginning. We 
are looking at redesigning the work that we do to make it more 
efficient. To the degree that we have to run a reduction in 
force, we are prepared to do that.
    At the present time, I see the impact as not being 
significant. However, we have 771,000 career employees, and 700 
is not much of a dent. Later on, down the road, we are looking 
at a longer term process, as I said, of trying to change all 
the work. I can just give you an example.
    Every employee on travel has to submit a voucher. That 
travel voucher is in writing, or in some instances, it is done 
by a secretary. There is no reason to have that piece of paper 
floating around.
    The subject of requisitions, a form that we have to ask for 
supplies, in today's world, you should not have to write that 
on a piece of paper. You ought to be able to use the Internet 
to communicate.
    I was talking to Lou Gersner at IBM. He said that in their 
purchasing department alone, which is about the size of ours, 
that over a 4-year period of time, by taking paper out, he 
saved a billion dollars.
    So that is the kind of thing that we are looking at, just 
practices that we have kind of taken for granted for 30 years. 
I am very familiar with a form that is called 7381, that you 
requisition supplies on. I might be lost if I did not have one. 
But nonetheless, there is no reason to do that anymore.
    So we are trying to be more modern. That reduces 
administrative jobs. We feel we have too much administrative 
overhead, given the communication channels that we have 
available to us on the Internet.
    We are not trying to slash and burn. This is not about 
saying that a person who is sitting at a desk doing a job, that 
suddenly we are going to get rid of them because we do not like 
them. We are trying to really affect the work that is being 
done.
    Senator Akaka. Senator Lieberman, the Ranking Member of the 
Full Committee, is unable to join us today. However, he has 
asked me to pose the following question relating to the Postal 
Service e-commerce initiatives.
    The question is, how can the Postal Service ensure that it 
does not use its governmental authority to provide a 
competitive advantage; not just to its own products, but also 
to the products of its marketing partners? The second question 
is, how can Congress ensure the Postal Service does not 
regulate and compete with the private sector?
    Mr. Henderson. I think that we would say to the last part 
that we absolutely do not believe that you can regulate and 
compete in the same business, and we would not do that.
    To the part about being competitive, if you look at our 
competitors, and a playing field that is not level, we are on 
the bottom side of that playing field, not on the upper side of 
it. If you are in the business of selling products, and you do 
not have pricing freedoms, which we do not on packages, and we 
do not on Express Mail, you are at a disadvantage.
    It is like selling cars. Every other dealer can negotiate a 
price and you cannot. You know which dealer, for the most part, 
that people are going to flock to. So we are all for this 
concept of a level playing field. We think that begins by 
giving us some pricing freedoms.
    Senator Akaka. Mr. Henderson, I would like to focus on 
diversity within the Postal Service. I know there is a 
commitment by management to ensure that the diversity within 
our communities are reflected within the Postal Service.
    I am sure you are familiar with the just-released GAO 
supplement to its 1999 report about the representation of women 
and minorities in the Executive and Administrative Schedule of 
management positions in the Postal Service.
    The supplement focuses on employees in EAS levels, 16 
through 26 positions, including postmasters and managers of 
customer service and managers of postal operations.
    Hawaii and Puerto Rico were not included in the GAO 
reports, since these districts have a more specific 
classification system.
    Because the GAO report only compared women and minorities 
with white males, in preparation for this hearing, I asked for 
a breakdown, based on aggregate percentages for White, Black, 
Hispanic, Asian, Indian/Alaskan males; and White, Black, 
Hispanic, Asian, Indian/Alaskan females. Hawaii and Puerto Rico 
Postal Districts are not included in these aggregate 
percentages.
    The figures worked out by GAO indicate that White males 
make up 50 percent of the EAS levels 16 through 26, and White 
females comprise 18.5 percent.
    When African males and females were added, these four 
groups comprised a cumulative 90.9 percent of all EAS levels 16 
through 26 employees. The remaining 9.1 percent are Hispanic, 
Asian and Indian/Alaskan EAS employees.
    Overall, the Postal Service is doing a good job to ensure 
that the Postal Service better reflects the communities it 
serves. However, as the Postal Service continues to reduce its 
labor force, I want to make sure that the commitment to 
diversity is not diminished, and that the Postal Service does 
not lose sight of the progress made over the past decade.
    I want to ensure that appropriate training programs are in 
place to further career development and bolster recruitment 
efforts for all minority groups, including Asian/Pacific 
Americans, American Indians, and Alaskan Natives.
    My question is: Do you have any comments on either the GAO 
report or what steps the Postal Service is taking to train the 
diverse populations within the communities it serves?
    Mr. Henderson. Well, the Postal Service, for some time, has 
considered its diversity a very distinct, competitive advantage 
in the market place. It has worked very hard to continue its 
diversity.
    As you may know, it was recently recognized. Fortune 
Magazine published the 50 best companies in America, or 
organizations in America. They said companies, but they 
included us. We ranked ninth for all minorities in terms of the 
best place to work. We ranked fourth on that same list for 
African Americans.
    We also received a Hammer award for our efforts in 
affirmative action, and were recognized as one of the best in 
class in government.
    So we take diversity seriously. As we go through 
reductions, we are very mindful of the fact that when our 
employees and our community look at the Postal Service, they 
want to see a reflection of themselves. To the degree that that 
is humanly possible, we are committed to that.
    Senator Akaka. Thank you.
    Mr. Chairman, may I ask one more question?
    Senator Cochran. Yes, go ahead.
    Senator Akaka. Mr. Henderson, in addition to the challenges 
that the Postal Service is facing on the domestic front, I know 
that the international mail scene is providing challenges, as 
well.
    In testimony before the House Postal Subcommittee, you 
expressed support for H.R. 22, Representative McHugh's Postal 
Reform bill, based in part on your belief that it could have an 
impact on the Postal Service's international mail business. How 
would postal reform address the Postal Service's concerns 
relating to competition and international business?
    Mr. Henderson. Well, let me preface my comment. H.R. 22, we 
are supportive of it, but it is a compromise. You cannot take 
just pieces of it. In the case of international, it is re-
regulated in H.R. 22, more like the domestic. But in the 
domestic mail, we had pricing freedoms in H.R. 22, which we do 
not have today.
    We are opposed, individually, to putting us again on a 
lower playing field by regulating our international activity. I 
think I have testified in this hearing on that. We have 
committed to not having a cross-subsidy. While H.R. 22 does re-
regulate international mail, it has to be taken in the context 
of that total bill.
    We realize that in order to get pricing freedoms, in order 
to have product freedoms, in order to have investment freedoms, 
you have got to give up something. That is the nature of the 
beast that we understand. But we do not get anything if you 
just regulate international mail.
    Senator Akaka. Well, thank you very much, Mr. Chairman.
    Senator Cochran. Mr. Postmaster General, I have heard from 
some who mail periodicals that they are very concerned about 
the proposed double digit rate increase. Is this something that 
is planned? Can you tell us more about it?
    Mr. Henderson. Well, the process that exists today is that 
once you select the price for First-Class mail, and in this 
case, the rate increase is a penny, which is a modest 3.6 
percent, then a costing study that has been going on throughout 
the year is finalized and validated. That is looking backward. 
That is one of the problems.
    Obviously, each class and category of mail, each class of 
mail, must cover its cost. In the case of periodicals, the 
coverage was 92 percent, so there was a big increase. It has a 
one point mark-up, which means that it ranges from 13 to 15 
percent, which is a lot different from 3.6 percent for First-
Class mailers.
    When we saw those cost studies, we began working with the 
magazine publishers, to try to identify strategies to reduce 
costs. We think we have been successful with about $150 million 
in costs identified.
    But there is a problem for the future, if we do not figure 
out a way to eliminate those costs. These costs are going to 
recur. So it is not over with just lowering the rates in this 
rate case. It has to be what I would describe as a Herculean 
joint effort, or it is not going to happen.
    By law, all categories or classes of mail are required to 
cover their costs. Unless we have pricing reform, that is going 
to be the future.
    Senator Cochran. There are a couple of issues that have 
been brought to my attention from my State. I wanted to mention 
them to you.
    At Mississippi State University, for example, they have had 
two Postal Service Centers on the campus. They want to 
consolidate those into one facility.
    I received a letter just recently on this issue, and a 
matter of fact, this is e-commerce, it was faxed to me. Anyway, 
they want to relocate and expand the post office. Is this going 
to be caught in the moratorium that you talked about, closings 
and relocations?
    Mr. Henderson. No, sir.
    Senator Cochran. Is this going to be a problem for 
Mississippi State University?
    Mr. Henderson. No.
    Senator Cochran. Well, I hope somebody will look at this 
and see if they can help expedite it. The State of Mississippi, 
as I understand it, has already appropriated some money that 
the university is authorized to use to plan how they are going 
to do this.
    This is on state property. They will use that money to 
compliment any Federal funding that is needed to support the 
post office relocation and renovation of these facilities. They 
require the students to have a post office address. They cannot 
deliver mail to everybody's dorm room.
    Mr. Henderson. It is expensive to do that.
    Senator Cochran. It would be a tough challenge.
    So they have, it seems to me, a meritorious suggestion. If 
we pass this on to you, I hope you will have somebody in your 
organization look at it, and try to be responsive to their 
request.
    Mr. Henderson. Absolutely.
    Senator Cochran. One other thing, just to pass on, the 
tenth largest city in my State is a relatively small community 
near Jackson, Mississippi, called Pearl. I used to think it was 
a small community. Now it has become the tenth largest town in 
the State of Mississippi.
    They have been wanting their own ZIP code, because they 
have had this Jackson, Mississippi ZIP code all these years. 
They are independent and they are doing well.
    So I bring this to your attention, and ask for your help. I 
think I was going to ask for your help. Maybe I am just 
thanking you. Let me look to be sure I have got the right piece 
of paper.
    Mr. Henderson. I hope you are thanking me. [Laughter.]
    Senator Cochran. Do you get many complaints from 
communities like this, that are unhappy with their ZIP code 
boundary? Do you have a criteria that you use to establish ZIP 
codes for neighboring cities? How does that work?
    Mr. Henderson. Well, it is a density criteria. In other 
words, you have to have so much mail in order for us to allow a 
ZIP code to be used.
    There is an ongoing issue in every region in the United 
States over prestige ZIP codes. For example ``90210'' in 
Beverly Hills is prestige ZIP code. Every community has one, 
and property values are affected. They want this street moved 
or that street moved. It is one of the things that makes life 
difficult, if you are in a line management position in the 
Postal Service.
    But when ZIP codes were carved out, they were not perfect. 
Nobody had a crystal ball and would know economically what was 
going to change. So it naturally creates problems.
    Senator Cochran. Well, the good news about this was that 
the Mayor of Pearl is happy with the efforts of the local 
Postal Service officials so far. They have been cooperative and 
responsive to the concerns of the people of Pearl, Mississippi. 
[Laughter.]
    So we wanted to bring this to your attention, and let you 
know we were not just going to complain. [Laughter.]
    We are going to congratulate you when things go right, as 
well. So we thank you for the good work you are doing.
    Is there anything further, Senator Akaka?
    Senator Akaka. Yes, Mr. Chairman, may I ask my final 
question?
    Senator Cochran. Sure.
    Senator Akaka. And I also ask that I may be able to submit 
additional questions for the record.\1\
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    \1\ Questions and responses for Mr. Henderson from Senators 
Cochran, Domenici, Lieberman, and Akaka appear in the Appendix on pages 
38-50 respectively.
---------------------------------------------------------------------------
    Senator Cochran. Absolutely, without objection, it is so 
ordered.
    Senator Akaka. I understand the Customs Service and the 
Postal Service are working together on several issues relating 
to international mail. The cooperative efforts in stopping the 
illegal shipment of contraband across our borders is 
commendable. However, I know that the lack of an electronic 
manifest system by the Postal Service is of concern to the 
Customs Service.
    My question is, what steps are being taken to implement 
automated manifest information in the interest of greater 
enforcement efforts?
    Mr. Henderson. If it is an outbound piece, and the shipper 
is known, they do a manifest now. If it is an inbound package, 
which is part of what the controversy has been around, we do 
not have any requirement for a manifest, because we are not the 
shipper. We do not have any control over it.
    We are working with Customs. I think the issue of 
contraband in the mail is a significant one. We are working 
with Customs to see if we can figure out a compromise so that 
we can assure that the Postal Service is not a shipper of 
contraband.
    Senator Akaka. I want to thank the Postmaster General for 
his responses, and thank you for being with us today.
    Thank you, Mr. Chairman.
    Senator Cochran. Thank you, Senator.
    We do appreciate very much your cooperation with our 
Subcommittee, and your attention to our concerns and our 
questions. We congratulate you on the excellent job you are 
doing as Postmaster General of the United States.
    Mr. Henderson. Thank you.
    Senator Cochran. Thank you very much.
    The hearing is adjourned.
    [Whereupon, at 3:28 p.m., the Subcommittee was adjourned, 
to reconvene at the call of the Chair.]
                            A P P E N D I X

                              ----------                              


                 PREPARED STATEMENT OF SENATOR CLELAND
    Thank you Mr. Chairman for giving me the opportunity to speak at 
today's hearing and address the Postmaster General, Mr. William 
Henderson. As you know, the U.S. Postal Service (USPS) was established 
by the Postal Reorganization Act of 1970 and replaced the U.S. Post 
Office Department. The USPS was chartered to perform as a business 
enterprise, with sufficient market freedom, including providing ``non-
postal services,'' that it could deliver the mail to all parts of the 
country as reliably, quickly, and inexpensively as possible. In that 
same reform legislation, the USPS was mandated to operate on a self-
supporting, break-even basis, with particular emphasis on restraining 
postal rate increases and providing ``honest, efficient, and economical 
management.''
    During the past year, the U.S. Postal Service has delivered more 
than 200 billion pieces of mail to 130 million households and 
businesses, the most in their history. Everyone from America's 
established business community to its emerging dotconis continues to 
rely on USPS' ubiquitous presence and universal service to promote 
their images, improve their sales, and secure their revenues. 
Competition from small businesses that prepare mail for delivery, 
office supply companies, and increased use of the Internet has had a 
significant impact upon the revenues generated by USPS. Mr. Postmaster 
General, I am extremely concerned that despite improved performance and 
customer satisfaction, the introduction of technology and automation, 
and the availability of products and services in modem retail outlets, 
you forecast a potential shortfall of $700-$800 million in total 
operating revenue for the year.
    I would like to address a couple of challenges facing the U.S. 
Postal Service in the coming years and hope that you can offer feasible 
and practical solutions during your remarks to this committee. First, 
the Postal Service must address the issues that are most important to 
your customers, the ones who utilize your services and buy your 
products on a daily basis. Sure, the price of a first class stamp is 
important to them and yes, they care about whether the Postal Service 
makes a profit. However, the one issue relating to the Postal Service 
that I hear about more than any other is the lack of customer service 
and how long it takes for USPS to respond to customer inquiries on 
numerous topics from the long lines at post offices to the time of day 
that mail is delivered to homes and businesses.
    In addition, you may or may not be surprised to know that I receive 
hundreds of telephone calls and letters each year regarding the 
location of postal facilities in my state. Prompt responses from the 
Postal Service would certainly go a long way in settling some of the 
issues surrounding location of facilities and would increase consumer 
confidence in USPS. Therefore, I would like some assurances from you as 
Postmaster General that the Postal Service will re-commit itself to 
serving the needs of its customers by acting promptly on matters 
involving postal facilities. For example, among the most critical 
current postal issues in Georgia is the proposed facility in Perry, 
Georgia due to the length of time that it has taken for completion of 
the building's construction. Perry and the Postal Service have been 
trying to build a facility since the days of my predecessor, Senator 
Sam Nunn. Construction has been continuously delayed due to breach of 
contract by two separate contractors and little progress has taken 
place. The current date for completion of the project is Summer 2001. 1 
would like to receive assurances from you that your office will monitor 
the status of this post office and keep in constant contact with local 
USPS officials in order to prevent any further delays.
    Other Georgia postal issues that I wish to bring to your attention 
include Rome, which needs additional space to sort the mail; Hartwell 
and Monroe, which have experienced delays in the placement of new 
facilities; Blackshear and Pine Mountain, which are in the process of 
determining adequate locations for their facilities; and Euharlee, Fort 
Oglethorpe, Stilson, and Centerville, which have requested postal 
facilities for their growing communities. I would hope that these 
issues, which are important to me and my constituents, receive prompt 
attention from your office and swift resolution in the near future.
    Secondly, it is important that the postal service provide high-
quality, low-cost products and services. I understand the financial and 
economic pressures faced by the Postal Service but, I also realize that 
you must adhere to your basic mission which is to deliver letter mail 
to all parts of the country at reasonable and uniform postal rates. I 
think the Postal Service does a great job especially considering the 
volume of mail that it handles each year, every day in fact and with 
the price of first-class stamp at only 33 cents. Remarkable! However, I 
would like some assurances that postal rate increases will be 
restrained and not always considered first, before other options, as a 
means to increase revenue.
    Recently, USPS started to diversify its services and products in 
order to raise revenue from ``non-traditional'' sources. Currently, the 
Postal Service sells money orders, packaging supplies, phone cards, and 
retail merchandise. As long as these services do not interfere with 
your primary mission to deliver mail, keep postal products and services 
affordable for the public, and secure jobs for your workers, the idea 
of expanding revenues without increasing taxpayer subsidies is a good 
one. The Postal Service has acknowledged that this becomes more 
challenging as the revenue base from traditional first class mail 
service faces increasingly effective competition from electronic 
messageing, fax, electronic funds transfer, and bill payment, as well 
as other telecommunications methods. Therefore, postal merchandising 
programs must be well-managed, subject to a system of accountability, 
and above all, must contribute in a logical manner to the success of 
USPS's basic mission.
    Thank you for the opportunity to speak to you about my concerns. I 
look forward to your report and working with you in the future on these 
and other important issues.
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