COMMITTEE ON APPROPRIATIONS

CLARENCE CANNON, Missouri, Chairman

GEORGE Y. HARVEY, Clerk

POST OFFICE DEPARTMENT

WITNESSES

MONDAY, JANUARY 16, 1950.

J. M. DONALDSON, POSTMASTER GENERAL

V. C. BURKE, DEPUTY POSTMASTER GENERAL
PAUL AIKEN, ASSISTANT POSTMASTER GENERAL

J. J. LAWLER, ASSISTANT POSTMASTER GENERAL

A. B. STROM, COMMISSIONER OF THE BUDGET, POST OFFICE DEPARTMENT

Mr. GARY. The committee will be very glad to hear at this time from Postmaster General Donaldson.

Mr. DONALDSON. Thank you, Mr. Chairman and gentlemen of the committee.

GENERAL STATEMENT

It is a pleasure to come before this committee again and supply information concerning the financial condition of the Postal Establishment and justify the amounts requested for the conduct of the postal service in the fiscal year 1951.

1951 DEFICIT

It is not at all pleasing to report a larger deficit for the fiscal year 1951 than was estimated when I was before you last year. At that time I had hopes that the Congress would increase the rates on the classes of low-revenue-producing mail and the fees on special-service transactions to bring the revenues and expenditures of the Post Office Department in closer balance. I had made suitable recommendations to the Congress to do this, but up to date no final action has been taken. However, legislation was enacted last year which resulted in increasing the annual expenditures of the Post Office Department by approximately $150,000,000. This further increases that already wide space between revenues and expenditures.

Each year, when we are faced with a large deficit, there is an inclination to reduce the amount of the appropriation requested to decrease the amount of the deficit, and this makes management more difficult and necessarily results in impairment to the service rendered to the public. This, of course, increases the number of complaints from our patrons.

I am trying my very best to give the public the best possible postal service at the least possible cost. In this program, I am having the full support of all officials in the Department and the field and the

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rank and file of the postal people. We want no unnecessary expenditure anywhere in the service. We are taking advantage of every known devise or program that is suitable in the operation of the postal service to improve the service, better the working conditions of the postal people, and reduce the operating costs.

RECOMMENDATION TO INCREASE RATES ON LOW-REVENUE-PRODUCING MAIL

I am renewing my recommendations to the Congress to revise upward the rate structure-rates on certain classes of low-revenueproducing mail and the fees on special-service transactions-which is long overdue. The rates have not kept pace with wages and

other costs.

The additional cost for increased salaries provided for by law since July 1, 1945, approximates $740,000,000. Additional costs for transportation of mail by rail and by air since July 1, 1945, approximate $125,000,000. These and other increased costs in rental for postoffice quarters and cost for equipment and supplies have brought our total additional annual expense since July 1, 1945, to the amazing total of approximately $900,000,000. This is more than the entire revenues of the postal service in 1942 and is more than one-half of the annual revenues of today. The deficit is now about 32 percent of the revenues, and this will increase unless some action is taken by the Congress to increase rates on the great volume of low-revenueproducing mail.

PROPOSED INCREASE IN RAILROAD AND AIR TRANSPORTATION RATES

About 96 percent of all expenditures in the operation of the postal service is for salaries and transportation costs. We in the Department have no control over either. Salaries are fixed by the Congress, and transportation rates are fixed by the Interstate Commerce Commission and the Civil Aeronautics Board. The remaining 4 percent of expenditures covers rentals, equipment, supplies, and miscellaneous costs. There is now pending before the Interstate Commerce Commission a petition by the railroads for an increase of 95 percent in the rates now being paid, inclusive of the 25 percent interim rate increase that has been in effect for some little time. There are also applications before the Civil Aeronautics Board for increased rates for the transportation of mail by air. The deficit will be further increased in accordance with whatever rate increases are authorized by these regulatory bodies.

POPULATION INCREASE AS IT AFFECTS VOLUME AND REVENUE

The postal service of today has become a complex enterprise of tremendous responsibility with an annual turn-over that exceeds anything else in our twentieth-century society. By 1930 the population of the country had increased to 123,000,000 and the audited postal revenues had reached the peak of $705,500,000 on an annual basis. We were then in the beginning of a depression, and those of us in the postal service at that time had some doubt as to whether the annual

revenues in subsequent years would reach the peak of 1930. The revenues decreased to a low of $586,000,000 in the fiscal year 1934, and during that year we had an audited postal deficit of $44,000,000. In the peak year of 1930 the audited postal deficit was $98,000,000, and this increased to $205,500,000 in the fiscal year ended June 30, 1932. That deficit was equal to 32 percent of the revenues of that year, and in order to reduce this deficit the Congress increased rates on first-class letter mail from 2 to 3 cents per ounce.

In the middle 1930's we served a population of about 127,000,000 people while today we are serving a population of more than 150,000,000 people. In the middle 1930's, revenues were a little more than a half billion dollars, and today they are approaching one and threequarter billion dollars. The volume of mail has increased at a rate in excess of the increase in revenues because the rates charged to the public have not kept pace with the increased costs of the postal service.

LACK OF POSTAL FACILITIES

Our paramount problem today lies in the handling of this great volume of mail with a lack of proper facilities. In all of the large centers of the country, and to a lesser extent in the smaller cities, there is a lack of workroom space, of platform space, of railroad terminal facilities, and of adequate transportation facilities for handling this large volume of mail.

GROUPS OPPOSED TO INCREASED MAIL RATES

While the subject of rates is a matter for consideration by the Committee on Post Office and Civil Service, I think that it is important for the members of this committee to have some general information concerning the tremendous opposition to increasing rates on certain classes of mail matter, especially the opposition that comes from those who still want to enjoy a generous subsidy in the field of publications. During the fiscal year ended June 30, 1949, the mailings of newspapers and magazines at publishers' pound rates or free of postage in the county of publication aggregated 2,187,000,000 pounds. The total amount of postage paid on these mailings was $39,675,000, or less than 2 cents per pound. This great volume of second-class mail was the equivalent of 54,650 carloads of 40,000 pounds each, and comprised over 20 percent of the total weight of all mail matter. The total number of individually addressed pieces of second-class mail exceeded 6,000,000,000, or more than 15 percent of all pieces of mail matter handled. The postage paid on this great volume of mail was less than 3 percent of the total amount of postage derived from all classes of mail.

There has been a great increase in the mailings of advertising matter, generally referred to as third-class mail, where the bulk mailing rate still remains at 1 cent per piece of 2 ounces or less. There has also been a great increase in the volume of fourth-class mail (parcel post) due to increases in express rates; and, as previously stated, this great volume of mail is taxing the postal service as never before because of the lack of proper facilities for handling it.

ESTIMATE, 1951

In preparing our estimates for the amount needed for fiscal year 1951, we eliminated every item of expense for any new service or expansion of service not vitally essential, with a desire to keep the total budget figure to a minimum. Our submission was reviewed by the Bureau of the Budget; and, in the line of keeping the budget of the entire Government within a certain figure, our estimates were reduced by a little more than $42,000,000. Therefore, the amount requested in the justifications submitted to this committee is $42,000,000 less than our original estimate, and in going over each and every item I cannot see where any further decreases can be made in this budget for the Post Office Department.

In stating the amount of reductions made by the Bureau of the Budget, no criticism is intended at all, as the Director of the Bureau of the Budget and his staff must necessarily review every item of anticipated Government expenditure in the light of a maximum total. It is not an easy task. I mention the reduction for the purpose of pointing out that all possible reductions have already been made and further decreases in the amount now requested will result in curtailment of postal service to the public if even the volume of mail now being handled is maintained.

While it might be somewhat repetitious, I think I should in this general statement include some statistical information and some comparisons for the fiscal years 1948, 1949, 1950, and 1951.

AMOUNT OF 1951 DEFICIT

The total of the estimates which your committee has for consideration amounts to $2,235,607,000 for 1951 as compared with the revenue estimate of $1,681,000,000, leaving a deficit of $554,607,000, to be obtained from the general fund of the Treasury. I have reviewed each item of the estimate, and it is my candid opinion that it is the absolute minimum required to handle 45,000,000,000 pieces of mail and 973,000,000 special-service transactions. The estimates provide for an employment equivalent of 480,640 persons.

RATIO OF MAIL TO EMPLOYMENT FROM 1946 THROUGH 1951

Let me present a few statistics to support my opinion that the manpower provisions of the budget are the absolute minimum requirements. I have it here in brief tabular form, showing the ration of mail to employment for the past 4 years and on an estimated basis for 1950 and 1951.