PUBLIC WELFARE COSTS VERSUS POSTAL DEFICIT

The Senate Advisory Council, quoting from the Post Office Department's cost ascertainment figures for 1955 states as follows:

Total cost of public service items__

Total of so-called postal deficit__.

Excess cost of public service items over deficit‒‒‒‒‒‒

Included in its public service items are the following:

Million

$392.4 362.7

29.7

1. Nonpostal services ($12.4 million): FCC health service, alien address reporting, United States savings bond and stamps, civil service, documentary stamps, migratory bird stamps, official mail messenger service, custodial servicepublic buildings, Department of Commerce Census Bureau, miscellaneous items, other agencies.

2. No charge items ($15.9 million): Free-in-county newspapers, free mail for the blind, free registered mail; Government agencies.

3. Preferred rate ($60.5 million): Loss on library books, loss on exempt publications, loss on books.

4. Post cards ($35.8 million): Loss on post and postal cards, loss on 1 billion Christmas cards sent unsealed. (1956 estimate, $10 million.)

5. Special services ($48.0 million): Registry paid, certified mail, insurance, collect on delivery, special delivery, money orders, postal savings, and miscellaneous expenditures apportioned.

6. Parcel post (size and weight) ($73.0 million): Loss from limiting the size and weight of parcel post.

7. Rural free delivery ($95.0 million): Free delivery to rural postal patrons. 8. Loss on post office ($51.8 million): Loss on operating cost of third- and fourth-class post offices.

CRITICISM OF POSTAL EMPLOYEES UNFAIR

Referring directly to postal employees the council stated: "We are certain that neither the Congress nor the 500,000 loyal postal employees are pleased with the criticism of the postal service. Employees of other Federal agencies would be equally concerned if reference were constantly made to Commerce Department deficits, Interior Department deficits, Labor Department deficits, and so on.

"Such unfair criticism, unless countered by the truth regarding postal expenditures, could eventually create a public clamor for the elimination of needed postal appropriations on the false assumption they are deficits. Indeed, needed funds probably already have been withheld from the Department because its functions and finances have been inaccurately portrayed.

"In the judgment of the council, the postal service was on a pay-as-you-go basis in fiscal 1955. Should the Congress find itself in agreement with the council and act to reaffirm and strengthen the principle that the postal service is a service to all the people and not a business, a proper understanding of postal financing will be achieved and the word 'deficit' abandoned."

DEPARTMENT'S POSITION ON POSTAL POLICY

Postmaster General Summerfield and Deputy Postmaster General Stans appeared before the Senate Post Office and Civil Service Committee on March 21, 1957, to refute the report of the Citizens Advisory Council and to restate the "financial policy of the Post Office Department."

Postmaster General Summerfield, claiming "substantial areas of disagreement with the (Citizens Advisory Council) report" proceeded to present the Post Office Department's philosophy concerning "the Post Office as a public service." Speaking to the Senate committee the Postmaster General stated: "I imagine it is no surprise to you that the report of the Citizens Advisory Committee was a great disappointment to me ***

**** I regret to say, after a careful study of the report, that I consider it to be unfair to the taxpayers of this country. It asks them, on incorrect premises, to continue indefinitely to carry the burden of the massive and mounting postal losses of the postwar period.

"In brief, the report makes three fundamental errors, in our opinion: "(1) It understates the current and prospective losses of the Post Office Department.

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(2) It exaggerates the services that the Post Office Department renders 'for the public welfare,' and magnifies the losses sustained through the performance of those services.

"(3) On that basis, it concluded that 'no true deficit exists at the present time.' The inference is that there is no need for postage rate increases." In further comments the Postmaster General explained: "I would like to submit that the debate is irrelevant. No one doubts that the post office renders a public service. The point to be settled is whether it is a public service to be paid by the users or a public service to be paid by the taxpayers. If the costs of the service should be paid by the actual users who benefit from it, then deficits are intolerable because they result in assessing the wrong people, the taxpayers."

Summerfield also stated, with reference to the Citizens Advisory Council, that "The majority of the seven-man advisory council are in businesses which benefit financially from low postage rates. While this conflict of interest on the part of the majority does not make objectivity impossible, it does make it difficult of achievement. The management of the Post Office on the other hand, represents no specific interest and no one segment or class of postal users. There is no reason for it to be other than unbiased and objective in its approach."

DEPUTY POSTMASTER GENERAL STANS ANALYZES COUNCIL REPORT

In his statement to the Senate committee, Deputy Postmaster General Stans objected to the report and listed areas of disagreement as follows:

(1) Instead of $362.7 million postal deficit, it "should be considered to be in excess of $651 million."

(2) Instead of $392 million public welfare expenditures, "public welfare services rendered by the Post Office Department are properly priced at about $30 million a year."

(3) "The council concludes that if public welfare items are taken into account 'no true deficit exists at the present time.' We say that even after welfare items are eliminated, the postal deficit is substantially in excess of $620 million a year."

In accounting for a large part of the $300 million difference between the deficit estimate of the council and amounts which the Post Office submits ($651 million for 1958) Deputy Postmaster General Stans listed the following:

(1) Public Law 68 enacted by Congress in 1955. "The result is that $191 million of this pay increase and other fringe benefits is now a part of postal costs but is not reflected in the deficit figure for 1955 used by the council." (2) 1956 amendments to the Civil Service Retirement Act will require the Post Office to pay 62 percent of its payroll, an amount expected to be around $131 million. "The council did not consider this item at all." Stans then proceeded to give the Department's detailed interpretation of each of the items listed by the council as its estimate of public welfare costs. As an example of Stans' analysis of these welfare items, he explains: "The council lists three categories of mail carried at little or no charge, and concludes that they represent a subsidy of $15.9 million (item 2 on chart).

"The major item in this group is free-in-county delivery of newspapers, at a cost of $13.3 million. Our measure of the public welfare in this is $800,000, since that is the amount of postage which would be received on all these mailings if they paid the regular in-county rates that would otherwise be applicable by law for second-class mail."

COST OF EMPLOYEE TURNOVER

In view of the conflicting claims made by the Citizens Advisory Council and the Post Office Department, as submitted above, the Live-Wire reiterates its position that postal salaries should be treated separate and apart from postal rates. Significantly, in all the above figures there is no reference to the shocking loss for the Post Office Department occasioned by the nationwide 25 percent average turnover of postal personnel. This situation, widely prevalent during 1956-57, entailing a loss of at least $1,000 per employee in training and indoctrination expense, has incurred an additional financial burden on the Department of approximately $125 million per year.

Mr. MACKAY. We have seen no evidence that Federal employees in other governmental agencies are being called upon to assume the responsibility for increased pay and retirement voted by Congress in 1955 and 1956 and that such items are being considered a part of any so-called deficit of such other Federal agencies.

3. The need for higher salaries: There has been some concern evident over the size of the salary increase proposed in S. 27. Statements against the measure have eminated from those who believe them to be too high. Many economists and authorities on the cost of living agree with the report of the Heller committee of the University of California, which establishes $5,800 as a minimum salary needed for a family of four. The approval of S. 27 would not only place postal employees within range of the Heller commitee recommendations but would also bring them more in line with wage rates prevalent in private industry.

We have secured many reports on pay scales now being paid employees in private industry holding positions of equal skill and responsibility to that of postal personnel. However, one of the most striking comparisons may be found in the salary schedule now in effect in the Los Angeles area for retail grocery clerks engaged in the routine handling of food items.

Mr. Chairman, we wish to submit as part of the record a copy of the contract now in effect for employees in the retail food, bakeries, candy, and general merchandising field, as represented by the Retail Clerks Union, Local 770, Los Angeles, Calif.

Senator NEUBERGER. May I ask if that is extremely long or not? I wonder if we might just include it by reference, otherwise-it is not directly pertinent to the subject here, is it?

Mr. MACKAY, I would like to include it by reference, but I would like to call the committee's attention and have appear in the record the prevailing wage rates.

Senator NEUBERGER. We will incorporate this by reference but not in full as a text.

Mr. MACKAY. Thank you, Mr. Chairman. (The excerpt referred to follows:)

ARTICLE XXVII. WAGE RATES

1956

A. 1956 Rates: The following rates shall be in effect from January 1 through December 31, 1956. (These rates do not include Sunday, night, holiday, or parttime premiums.)

2. Bakery, candy, and general merchandise wage rates (Jan. 1, 1956, to

A. THE FOLLOWING RATES SHALL BE PAID TO APPRENTICE FOOD CLERKS HIRED BEFORE MAR. 1, 1956

B. THE FOLLOWING RATES SHALL BE PAID TO BAKERY EMPLOYEES HIRED

B. 1957 rates: The following rates shall be in effect from January 1 through December 31, 1957. (These rates do not include Sunday, night, holiday, or part-time premiums.)

2. Bakery, candy, and general merchandise wage rates (Jan. 1, 1957, to

Dec. 31, 1957)

3. Old wage rates

A. THE FOLLOWING RATES SHALL BE PAID TO APPRENTICE FOOD CLERKS HIRED

B. THE FOLLOWING RATES SHALL BE PAID TO BAKERY EMPLOYEES HIRED

C. 1958 rates: The following rates shall be in effect from January 1 through December 31, 1958. (These rates do not include Sunday, night, holiday, or part-time premiums.)

2. Bakery, candy, and general merchandise wage rates (Jan. 1, 1958, to

Dec. 31, 1958)

Hourly rate (1st 40 hours)

67.60

A. THE FOLLOWING RATES SHALL BE PAID TO APPRENTICE FOOD CLERKS HIRED BEFORE MAR. 1, 1956