Postal News
FOR IMMEDIATE RELEASE
March 13, 2002
STATEMENT OF POSTMASTER GENERAL/CEO JOHN E. POTTER
BEFORE THE SUBCOMMITTEE ON TREASURY, POSTAL SERVICE,
AND GENERAL GOVERNMENT, COMMITTEE ON APPROPRIATIONS
U.S. HOUSE OF REPRESENTATIVES
MARCH 13, 2002
Good afternoon, Mr. Chairman and Members of the Subcommittee.
With me today are Richard Strasser, Chief Financial Officer and Executive Vice President, and Tom Day, Vice President, Engineering.
We appreciate the opportunity to discuss the Postal Service's appropriations request for fiscal year 2003.
Before discussing that, however, I believe it is helpful to frame that request within the context of the unique role played by the Postal Service in the life of our nation and extraordinary burdens it has carried since our last appearance before this Subcommittee.
I have had the privilege of being employed by the Postal Service for 23 years. And before me, my father also served. His career spanned 40 years, first in the Post Office Department and then in the Postal Service. Some of my earliest memories are about the mail and what it meant - to my family, to my neighborhood and, as I got older, to a much wider world.
My childhood and my own career have been colored by an appreciation of the power of our national postal system. Where I grew up, one of the local highways was U.S. 1. Some folks called it the Boston Post Road. Only later did I learn that there was a very powerful history in its unusual name.
It was the post roads, used by the earliest mail carriers that were at the heart of the information network of an infant nation. They provided our founding fathers with the means to inform the citizens of 13 disparate colonies that independence had been declared; that a war for freedom had been won; and that a convention of their representatives had written a Constitution that brought them together as united states.
That same Constitution created a federal postal system. That system continued to grow and serve the communication needs of a nation as the path of its development pushed west, north and south. Every resident of every community - no matter how small, no matter how isolated, with means or without - was granted unfettered access to this great national carrier of ideas, of commerce and of education.
The United States Postal Service continues that great and democratic tradition today. Its men and women - in post offices as diverse as the thousands of communities they serve - continue to fulfill the mission they have always had. They work to bind a great nation together by providing affordable, universal mail service.
As you know, the Postal Service is an independent establishment of the executive branch of the United States Government. Its operations are funded - and have been for more than a generation - by the American people through their purchases of postal products and services. It has been 20 years since Congress has provided a public service subsidy for postal operations.
As Postmaster General, I am extremely pleased that we have been able to operate, fundamentally, on a "pay as you go" basis. In creating the modern Postal Service in 1970, it was Congress' intention that the new organization operate on a businesslike model. For its time, the legislation that made this possible was innovative and forward looking and the basis for decades of success.
The continuation of that success has been threatened by events beyond the control of the Postal Service, indeed, beyond anyone's control. Like many American businesses, the Postal Service was hard hit by the downturn in the economy. Unlike those businesses, the Postal Service has not only suffered financially - but in many other ways as well - because of bioterrorism. The result for us has been a significant downturn in mail volume and revenue.
We are continuing to take aggressive and successful actions to manage costs within this difficult financial environment. In the last two fiscal years, we removed $2.5 billion in costs from our system.
At the same time, we remained true to our mission. We maintained record levels of customer satisfaction and quality service. And, as we have since the beginning, we continued to serve the needs of a growing nation, expanding our delivery network to reach an additional 1.7 million homes and businesses.
The story is not simply about numbers. It is about the Postal Service's role as a critical part of the nation's infrastructure. It is about the Postal Service's ability to continue performing its mission of providing universal service - equally - to everyone in the nation.
Ultimately, our ability to do that is dependent on the efforts of our people - the more than 750,000 women and men who move the mail in virtually every city and town in America.
Individually and collectively, they have been tested as never before. Tragically, two of our own were taken from us when the mail was used as an instrument of terror. Yet through it all, the people of the Postal Service have maintained the world's finest postal system. Never have I been prouder to include myself as one of them. They stood united and continued on their daily rounds - in lower Manhattan, here in Washington, D.C. and in places that became potential targets of a vicious and deadly attack.
The people of America share my pride. They let our employees know - in ways both large and small - just how much they are appreciated. From personal notes left in individual mailboxes, to proclamations from mayors, governors and members of Congress, the people we serve expressed their thanks to those who were unimaginably thrust onto the front lines of this attack and continued to deliver.
Despite the disruptions our people and our system experienced - both as the result of transportation changes following September 11 and the later anthrax attacks - the Postal Service was able to deliver its 17th straight quarter of overnight delivery performance of 93 percent or better. At the same time, customer satisfaction continued to rise.
We were concerned, however, that people might lose their trust in the mail. Shortly before the September 11 attacks, 98 percent of those surveyed told us they had positive feelings about sending and receiving mail. During the height of the anthrax crisis this figure fell to 82 percent. Today, that number has jumped back to 96 percent.
Clearly, the Postal Service is important to the life of our nation. People continue to welcome mail in their homes and businesses. They continue to see it as a vital connector - for their personal and business communications.
While the post roads of the past have been supplemented by rail, by modern superhighways and by air, the heart of what we do and what is expected of us has never changed. There is simply nothing that can replace the Postal Service's ability to physically link more than 138 million homes and businesses and carry messages, merchandise and payments from any one of them to any other.
Our ability to do this, however, does not come without enormous costs. These include financial requirements that grow from specific obligations that have been defined by law.
Today, the Postal Service is requesting appropriations in three distinct areas for fiscal year 2003. It is not our intention, now or in the future, to seek any general taxpayer subsidies or to return to the time of public service appropriation.
The first request is for $29 million for revenue forgone reimbursements. This would be the tenth payment in a series of 42 annual payments authorized for this purpose by the Revenue Forgone Reform Act of 1993. The purpose of these funds is to pay for a portion of the postage for reduced rate mail, as provided by the law, as the result of insufficient amounts appropriated for previous fiscal years.
By fully paying the Postal Service for its current and past services in this area, Congress will support the viability of our national mail system during an extremely difficult financial time. This will help to preserve access to our universal delivery system not only for those who are directly affected by free and reduced-rate mailing, but for every other American who relies on the mail as well.
The second part of our request is for $48,999,000 for free mail for the blind and overseas voting materials. This provides funding for the free mailing of materials used by the blind and others who cannot use or read conventionally printed materials. It also includes absentee balloting materials that can be mailed free by members of the armed forces and other United States citizens residing outside of the United States, and balloting materials that can be mailed in bulk between state and local election officials.
The amount requested for free mail, based on the estimated volume of such mail in fiscal year 2003, has been reduced by a reconciliation adjustment of $17,985,000 for an overpayment in a previous year. Each year, appropriations for free rates are based on estimated mail volumes. When final audited mail volumes become available, these estimates are updated to reflect actual volumes.
The third element of our request is for $928,174,000 for the remaining balance of the total authorized amount of the revenue forgone reimbursement. These funds would be used for capital projects.
Last year, as we adjusted to an extremely difficult financial climate, we froze our facilities budget with exceptions only for safety, health and legal issues. This action has considerably reduced our ability to build new post offices and to replace older ones that are no longer adequate to meet our needs or those of our customers. It has affected projects that serve people in more than 800 cities and towns from coast to coast.
This was a difficult but necessary decision. But it is not an approach that is sustainable in the long term. In the 11 months since we imposed this freeze, the delivery network supported by post offices and processing plants has expanded, on average, by 142,000 new addresses each month. We cannot put off these critical infrastructure needs indefinitely. Our request for the balance of the revenue forgone reimbursement would allow us to address the capital projects that we have deferred.
Under these circumstances, we believe it is appropriate to ask the Government to accelerate payment of the remaining balance due to the Postal Service. This represents money owed for services that have already been provided and for which payment was promised under the Revenue Forgone Reform Act.
As I mentioned earlier, despite the unprecedented challenges of last fall, the Postal Service has performed remarkably well in maintaining universal service to everyone, everywhere. The Postal Service is the only entity that binds our nation together with secure, affordable communications accessible to all. By granting our appropriations request, you will help us continue that tradition in the years to come.
If we have learned anything from the financial pressures we are facing, it is that we can no longer rely on past strategies of raising rates for long-term success. We are in a situation that has been amplified by the range of competitive choices, traditional and electronic, now available to consumers and businesses.
Consider, for a moment, the size of the mailing industry. It generates $900 billion in revenue each year. It employs nine million people. And it accounts for nine percent of the gross domestic product. Continuous upward pressure on rates that results in declining mail volumes will also mean a declining mailing industry. It would affect envelope manufacturers, catalog mailers, magazine publishers, printers, paper producers, the banking and credit card industries and everyone involved in producing what moves through the mail.
Both Congress and the General Accounting Office have recognized the severe financial and other challenges faced by the Postal Service. At their request, we are developing a comprehensive Transformation Plan. Put simply, we were asked to develop a blueprint for our future - a plan that looks at how we can transform ourselves, gain financial stability, and set a long-term vision for America's postal system. We are now completing the Plan and it will be submitted to Congress next month.
Beyond the business and structural challenges faced by the Postal Service, this organization, its people and its finances were also affected by the terrorist attacks of the fall. The sheer size of our system can give you some appreciation of the magnitude of the mail security issues we face.
Each day, almost 680 million pieces of mail enter our system through, literally, millions of entry points. This mail funnels through some 335 central processing locations that, in turn, feed 38,000 post offices, stations and branches. It is a daunting, expensive and challenging proposition to protect a system so accessible and so ubiquitous against the threat of a new kind of war - bioterrorism.
However, as we have learned, the very lives and health of postal employees, the American people, their leaders and their communicators can be placed in jeopardy if we do not take the proper actions to limit the vulnerability - and the extent - of any future terror attacks using the mail.
When we learned that the mailstream had been used to carry anthrax, we acted quickly. Our first concern was for the health of our employees and customers. We worked closely with public health officials to address the medical needs of our employees. We closed contaminated facilities. We tested others and, when necessary, cleaned them. We provided our employees with masks and gloves. We changed maintenance processes to limit the potential spread of anthrax in our buildings. We acquired, as quickly as possible, the means to sanitize mail that might be tainted with anthrax. And the Postal Inspection Service joined with the FBI and other law enforcement agencies in the ongoing investigation of this crime.
The Postal Service is extremely grateful to this Committee, to Congress and to the Administration for its financial assistance in helping us to strengthen America's mail system against this type of attack. The $175 million provided to us by the White House in October was a tremendous help in addressing our immediate needs. The recent Congressional appropriation of $500 million will help us to provide greater levels of security and safety. The Postal Service has always supported and contributed to the defense needs of the United States. Never before, though, have we been thrust directly into an active defense role.
As requested, we have created and presented to Congress an emergency preparedness plan to guide us in using these funds in the most effective way possible. In creating our plan, we discussed our needs and the equipment and processes available to meet them with many organizations. They include the Office of Homeland Security, the White House Office of Science and Technology Policy, the National Academy of Sciences, the Centers for Disease Control and Prevention, the Environmental Protection Agency and a variety of agencies within the Department of Defense.
We were extremely gratified with their cooperation and the information they shared about the technology that is available and being developed to support our plan. Our spending will be prudent. It will focus on acquiring only the tools that offer realistic and effective protection and deterrence.
Our plan is balanced. It recognizes the need to maintain an accessible system that is consistent with the traditions of a free and open society. It also works to provide the enhanced security necessary to limit the potential of high-risk mail from anonymous senders entering the mailstream.
The plan addresses six distinct activities: prevention; protection and health risk reduction; detection and identification of threat; intervention; decontamination; and investigation. These activities are further classified into those that can be implemented today or in a reasonably short period, those that can be evaluated and deployed during the next 24 to 36 months, and those whose deployment is dependent on the successful development of new technologies over the next four to five years.
We estimate that the total investment needed for this year would be $762 million. Over the next two years, our projected investment for these activities is $1.7 billion.
Our emergency preparedness plan makes optimal use of the appropriated funds. The combination of process changes and technology applications supporting prevention, detection and risk reduction will provide maximum protection for our employees and the people and businesses that rely on the mail.
As Congress has recognized, these are costs related to the Postal Service's role in enhancing homeland security. They should not be borne by ratepayers. And, while the $500 million appropriation I have discussed will be crucial to our ability to strengthen our system through the remainder of this fiscal year, additional funding will be necessary this year and over the next several years.
Mr. Chairman, to summarize, today we are requesting appropriations in three areas: $29 million for revenue forgone reimbursements; $31,014,000 for free mail for the blind and overseas voting materials; and $928,174,000 for the remaining balance of the total authorized amount of the revenue forgone reimbursement. We also have provided our estimates for investments associated with homeland security.
Before I close, I would like to emphasize that our appropriations request is being made for one simple reason. The Postal Service has the obligation - and the privilege - of providing every American in every community with equal and universal access to a system of affordable, dependable mail service.
The people of our nation rely on the mail. They welcome it. They expect it. After all, the Postal Service, alone among carriers, is a vital public service provided to them by their government. It is crucial that we maintain our national infrastructure so we can continue to serve all users - urban and rural, rich and poor, business and consumer. That is the promise of universal service. And it is the only reason the Postal Service exists.
Mr. Chairman, let me again express my gratitude for the funding we have received to protect the nation's postal system from bioterrorism. Let me reiterate the critical need for current and previous-year revenue forgone appropriations to maintain our vast, national delivery system. And, finally, I look forward to your support and leadership, and that of every member of this Subcommittee, as the Postal Service continues its essential work of binding this great nation together.
Thank you, Mr. Chairman. I will be happy to answer any questions.
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