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TESTIMONY
OF
JOHN E. POTTER
POSTMASTER GENERAL
OF THE
UNITED STATES OF
AMERICA
BEFORE
THE
UNITED STATES SENATE
SUBCOMMITTEE ON INTERNATIONAL AFFAIRS,
PROLIFERATION AND FEDERAL SERVICES
OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS
SEPTEMBER
27, 2002
Good
morning, Mr. Chairman and members of the subcommittee.
I appreciate this opportunity to meet with you today to
report on the progress of the United States Postal Service
during the past year.
That
progress is a reflection of the efforts not only of Postal
Service employees, but of the entire mailing industry – a
$900 billion part of the national economy. Our industry runs
the gamut from entrepreneurs operating out of home offices, to
some of the largest corporations in
America
.
Over the past year, we’ve worked to build all
a foundation of trust and confidence in the
nation’s mail system. That
system has become an increasingly integrated, interdependent
national network of 99
million men and women.
We
all have a responsibility to strengthen and maintain the
public trust and confidence that has been invested in our
industry by the American people.
In
the past year, we have kept our eye on our core mission: to
provide dependable, universal mail service to every American,
regardless of where they live, where they do business and
regardless of their economic status.
I
offer my thanks to this Subcommittee for its commitment to the
Postal Service and the people it serves.
Your assistance over the last year has contributed to a
level of success that, in the first months of the fiscal year,
did not seem possible.
It
was a year marked by challenges and measured by innovation.
We focused on new ways to use the mail and control
costs. Working
with the Postal Rate Commission and our customers, we brought
about an unprecedented, negotiated rate settlement.
Together, despite the horror of September 11th and the
bioterrorism attacks, we helped keep this nation connected as
never before.
Thirteen
months ago, I laid out a business plan to refocus the Postal
Service on its core business.
Six months ago, when
we released our Transformation Plan,
I
also made two pledges. First,
I said we would continue our strong focus on improving service
performance. Second,
I promised we would do our part to make the Transformation
Plan a reality by beginning to make changes that are possible
now under the current legislation. In essence, our management
team committed to managing the business like never before.
Today,
I want to give you a progress report on those commitments.
First,
even before the tragic events of September 11th and
the anthrax attacks, we foresaw declining mail volumes, even
as the universal mail delivery network continued to expand by
1.7 million new deliveries a year.
We
knew we had to take some strong steps.
We did. They included sweeping organizational changes
that started at the top when we reduced the number of officers
by 20 percent. We
eliminated 800 Headquarters positions.
We realigned our field management structure,
eliminating 20 percent of our area offices.
We reduced administrative staffing by 10 percent –
some 2,000 positions in districts and mail processing plants
across the country.
After
the terrorist attacks, it became apparent that volumes would
decline faster than our forecast for 2002.
We focused on balancing our use of resources against
the lower workload. The
employees of the Postal Service realized that we needed to
take dramatic steps to manage our finances.
The strategy worked.
I
am pleased to report that we have pulled $2.9 billion out of
our bottom line this fiscal year by reducing workhours by more
than 77 million and reducing career employees through
attrition by more than 23,000.
Our total complement today is similar to what it was in
1995. Since then,
mail volume has risen 21 billion pieces and our delivery
network has added 12 million new addresses.
Our
operating group destroyed the myth that they couldn't react
quickly and decisively in periods of declining mail volume.
Employees
and managers rose to the challenge and delivered positive
total factor productivity for the year – as well as a 1.9
percent increase in labor productivity.
There
were service issues earlier in the year as a result of last
fall’s attacks on
America
.
Major realignments in our transportation system and
major adjustments to our national processing networks were
required.
We
are all proud of the fact that service performance across the
country rebounded in quarter three.
By the recently ended fourth quarter, we reached record
levels of performance for overnight, 2-day and 3-day
First-Class Mail and Priority Mail.
Express Mail scores are the highest they’ve been in
four years.
What
brought about the quick turnaround?
Our employees. They rose to the challenge and focused
on service.
We
made better use of our transportation partnership with FedEx
to move mail by air. And
we made adjustments to our processing-time windows in plants
throughout
America
to extend the reach
of our surface transportation.
We
made better use of our automated equipment – in particular,
the use of 530 new automated flats sorting machines. Today,
only 10 percent of flats mail in our plants is processed
manually.
The
Transformation Plan sets aggressive goals for improving
service and focusing on our core business: processing and
delivering
America
's mail and doing it
affordably with top notch service.
We are well on our way to achieving those goals.
Let
me assure you, this Transformation Plan is not the "plan
du jour." As
long as I am Postmaster General, we will use the Plan to
advance universal service and
America
's mail.
We
do face a continuing challenge – a communications challenge.
It is a challenge to keep our customers, our employees,
and members of this Subcommittee and others informed on the
progress we are making.
This
past year, we have worked with all stakeholders to gain broad
understanding of our long-term goals.
We leveraged that understanding to open a dialog with
our customers that led to an historic rates settlement.
We joined with the Postal Rate Commission (PRC) and
customer groups to discuss proposals to improve and streamline
future ratemaking.
Last
week, we filed with the PRC a negotiated service agreement
with our largest end-user of First-Class Mail to give them an
incentive to grow their business and ours.
This week, we filed another proposal with the Rate
Commission that would offer small-circulation periodicals a
way of achieving work-sharing discounts so common with larger,
mass-circulation periodical mailers.
We
listened to customers and took advantage of what we can do
under the existing laws to offer pricing flexibility to our
mailers. We are
building a foundation for future growth.
But
we must not lose sight of the fact that the Postal Service
continues to operate with an outdated business model.
The current model needs adjustment.
We
worked hard with Congress on a bipartisan reform bill earlier
this year. Although it did not move from the House Committee,
we are pleased that more and more lawmakers are showing
interest in the future of the Postal Service.
Our
ongoing discussions with the Congress and with the
Administration have made us hopeful for the future.
We
are working with our unions and management associations to
achieve a common understanding that for the Postal Service to
move forward, all parties must take an active role.
For
instance, this year we reached an historic agreement with the
National Association of Letter Carriers to work together to
advance Transformation and to explore workplace flexibility.
Looking
ahead, there are many things we can and will do in 2003.
We are focused on four objectives:
- First,
we will continue our commitment to improve service
performance. As
part of that commitment, we will continue to focus on
making improvements to reduce the risk our systems face
against another bio-terrorism attack.
- Second,
I am committed to exploring, with the Postal Rate
Commission, alternatives to the ratemaking process within
the current legislation.
Those alternatives include additional negotiated
service agreements and phased rates.
- Third,
we will use our Transformation strategy to grow our
business by enhancing existing products and services --
and expanding access and convenience to postal services.
- Finally,
we will continue to manage our finances and reduce costs.
Fiscal Year 2003 will be the second year in our
five-year Transformation commitment to take $5 billion out
of our costs by 2006.
Last
year this Subcommittee raised concern about postal debt and
asked us to put together a plan for debt reduction.
We shared those concerns and focused on finances. We
went into FY 2002 projecting a $1.35 billion negative net
income. We also forecast that we would raise our debt by $1.6
billion. However, we faced other challenges – a declining
economy, September 11th, and the anthrax attacks.
As
a result, we renewed emphases on managing our finances. For
instance, we took dramatic steps to reduce expenditures,
including a freeze on facility construction. Those and other
efforts mean our projected negative net income will be less
than $1 billion. This also means that our debt will increase
by less than $500 million.
Looking
to FY 2003, our efforts will result in a positive net income.
These projections reinforce the pledge I made six
months ago that there will be no general rate increase until
2004. This positive net income also means we will be able to
reduce our debt by almost $1 billion at the end of Fiscal Year
2003.
My
expectations are high for the Postal Service, for the nation's
economy, and for the entire mailing industry over the next
couple of years.
Keeping
our rates affordable and improving service are at the heart of
the Transformation Plan. The
need to execute the entire Transformation Plan remains as
critical today as it was 12 months ago when we faced dire
circumstances.
I
want to thank everyone – our customers, our postmasters,
managers, clerks, letter carriers, mail handlers, our unions
and management associations – and the members of the
Subcommittee – all who helped us keep our commitment to
provide universal service to the American people this past
year. Together, we
have accomplished a great deal.
We’ve begun to chart the course for the future of the
United States Postal Service and the mailing industry.
Before
I close, it is imperative that I ask your assistance in one
key area. As I
mentioned earlier, the Postal Service will continue its focus
on reducing risk from any future bioterrorist attack.
We have submitted a comprehensive Emergency
Preparedness Plan to help us identify the long-term needs to
safeguard our mail processing systems, our employees and our
customers.
The
President and Congress came to our aid earlier this year and
appropriated $750 million for costs related to the anthrax
attacks to help reduce the risk to our national mail system
from biohazardous materials.
We are grateful for this assistance in helping to
reduce the risk to the mail.
But
we continue to deal with some sensitive issues that require
your assistance. To
that end, we are considering the purchase of bio-detection and
vacuuming/filtration equipment for use at some 280 of our mail
processing facilities, using the funds generously appropriated
earlier this year.
To
facilitate the procurement of this equipment, we support and
ask for your support of Senator John Warner’s amendment to
HR 5005, the Homeland Security Bill.
This amendment would include the Postal Service among
those agencies, such as the Department of Health and Human
Services and the Department of Transportation, who are engaged
in procuring the means to reduce biohazardous risks. We
believe this is the right thing to do.
I
thank you for your support and for helping us stay the course
during the last year. And
I look forward to our continuing work in the years ahead. |