Copyright 1999 Federal News Service, Inc.
Federal News Service
FEBRUARY 11, 1999, THURSDAY
SECTION: IN THE NEWS
LENGTH:
1486 words
HEADLINE: PREPARED STATEMENT OF
POSTMASTER GENERAL WILLIAM J. HENDERSON
BEFORE THE
HOUSE COMMITTEE ON GOVERNMENT REFORM
SUBCOMMITTEE ON THE POSTAL SERVICE
BODY:
Good morning.
Mr. Chairman, you have
entitled H.R. 22 "A bill to modernize the postal laws of the United States."
Postal modernization is important for a number of reasons, which I'd like to
discuss today. This will underline where the Postal Service is
coming from on this legislation, and why we are so serious about pursuing
postal reform at this time.
First, the
Postal Service matters. That's why all of us in this room are
here-- + the nation's largest customer base, and its largest civilian labor
force + over 765,000 career employees + serving all of America, more than 130
million households and businesses daily + delivering, on average, 630 million
pieces of mail every day + about 41 percent of all the mail volume in the world.
America's business -- much of it, obviously -- is in the mails. Our
generation of Americans has inherited the best postal system in the world. Mail
is a central part of the national infrastructure on which the U.S. economy's
global competitive advantage is based, heading into the twenty-first century --
which leads to the second point: The new century will absolutely require
competitively superior methods and results from postal systems everywhere. This
is inevitable. The pace of technology, the globalization of markets, the
supremacy of the consumer -- all demand it. Keep up or stand aside -- those are
the alternatives in all phases of the economy, including ours.
The more
forward-looking postal administrations around the globe are aggressively
restructuring. They are getting ready to prove they can perform to private
sector, market-driven standards of efficiency and customer service. And still
cover their traditional social obligations for universal service, at the same
time.
In the United States we have the advantage of the strongest revenue
base plus a good start under the structures put in place by the Postal
Reorganization Act. We may have the lead in embracing the benefits of
technology, and customer-driven methods such as work-sharing. Our challenge is
to find the right mix of forward-looking reforms so that
twenty-first century postal services will match twenty-first
century expectations. We must accomplish this in a manner consistent with the
values and traditions of this country.
H.R. 22 is the mark of your efforts,
Mr. Chairman, to move the postal community toward an
acceptable, modern package of reforms. The diversity of
interests involved in postal issues makes it impossible to get
the perfect outcome from any of our perspectives. But our common stake in this
system bonds us together in the need to make progress. Even our competitors all
depend on regular mail service.
H.R. 22 offers a framework for building a
coherent and useful reform package to start the next century. The directions
taken in the bill may not be the only way to pursue reform, or
the end point where the Postal Service will need to be some
years from now. But we think the bill's principle elements can provide a basis
for positive, sensible reform.
* A price cap feature, along with baskets,
indexing, productivity offsets, and incentive-based compensation, has the
potential for improving efficiency and providing our customers more
predictability for their postage costs.
* Some modest additional pricing
flexibility should increase opportunities for our customers, by improving our
responsiveness to market conditions.
* Transparency in the costs and
financing of competitive service offerings should provide public reassurance
that these services will avoid cross-subsidies and make a reasonable
contribution to institutional costs. Our competitors and our customers are
entitled to this protection.
* Universal service requirements would be
retained, assuring that all of America will continue to have good access to
postal services, with some further study and definition.
The bill would
radically alter the way the Postal Service has been financed -- in recent years
with considerable success. Some say the legislation gives the Postal Service too
much: too much freedom, too much flexibility, too much comfort. As I see it,
this view misses the point. The object of a price cap is to eliminate
cost-of-service ratemaking. For the first time, there would be no legal
guarantee that the Postal Service can meet its costs and pay its bills by
raising rates. Financial success will depend on performance. In an economy where
high tech now drives advances in productivity, can a labor- intensive delivery
service keep up? I think we have to. The concept of the bill adds only some very
circumscribed pricing and testing flexibility, to help the Postal Service
respond to the market, and where our services are competitive, to allow us to
compete fairly.
Why give up a financing structure that still works pretty
well? Because like everybody else, the Postal Service has to learn to be more
efficient, more nimble, more customer-focused, more market-driven in the years
ahead. But before we abandon a ratemaking system that is getting the bills paid,
in order to try something more challenging, let's make the new structure as fair
and as realistic as we can. A postal system that matters to America depends on
it.
Going back to last year, the Postal Service has shared several specific
areas of concern where we are convinced progress remains to be made for the core
elements of H.R. 22 to fulfill their promise in a workable and realistic form.
We have circulated a number of specific amendments for the consideration of the
postal community and the Subcommittee.
* The central division of postal
services into competitive and noncompetitive categories, and the rules that
apply need to be more pragmatic. Pricing structures should be able to reflect
the changing demands of the marketplace, while affording protection both for
competition and for customers. We would restructure the division of products for
more balance. We would accept the artificial equal cost coverage rule with some
clarification, as a starting point for a transitional period.
* During the
transitional period the Postal Service would develop, and with approval of the
Postal Rate Commission would implement a process for separating the costs,
revenues, and financing of competitive products from those of noncompetitive
products.
* We can accept the concept of a corporation to provide additional
separation for nonpostal activities. This could be a test vehicle for future
reforms, provided the corporation has reasonable access to sufficient funding.
* The basket and rate band provisions associated with the price cap for the
noncompetitive category should respect traditional protections for particular
types of mail. At the same time, drawing on experience in other regulatory
systems, the process should promote efficiency through a moderate amount of
pricing flexibility around the rates for commercial mail. Negotiated Service
Agreements should have workable boundaries so that they will provide incentives
for productivity.
* The bill should strike a balance between a reasonable
regulatory role for the Postal Regulatory Commission, and an appropriate
management role for the Postal Service Board of Directors. We respect the
Commission's need for increased authority in some areas, commensurate with its
responsibility to monitor proper function of the price cap on the noncompetitive
side of the house, and to protect against cross subsidy. For the legislation to
deliver the internal incentives for efficiency and productivity which it strives
to instill, it must also assure that the Board has the room to manage the Postal
Service and to structure its competitive product offerings.
The Postal
Service has sought to engage with all interested parties -- our employees, mail
users, competitors, and with the Subcommittee's staff -- to explain our concerns
and proposals and to search for common ground. The Postal Reorganization Act has
achieved notable success over nearly a 30-year period, by and large, because of
the broad consensus that developed around the directions of the
reforms undertaken by that Act. A reorientation of the
Postal Service to a higher level of expectation in terms of
efficiency, market orientation, and competitiveness, will not be comfortable --
as I've said -- or easy. Substantial agreement within the
postal community about what should be achieved by
reform, and how to go about it, is essential to reach the
progress that is needed, in my opinion. While discussions so far have been
useful, more remains to be done to reach the level of consensus that seems
required.
Mr. Chairman, the Postal Service is committed to
see this reform effort through. We will assist the Subcommittee
and work with all of the stakeholders in every way we can to complete this work.
For the twenty-first century, no less than before, America deserves the best
postal services in the world.
END
LOAD-DATE: February 12, 1999
