Magazines and the Mail
Postmaster General John E. Potter, in testimony before the Subcommittee on Treasury and General Government Committee on Appropriations of the United States Senate, requested up to $5 billion dollars. In the category of direct impact of the terrorist attacks, he estimated costs to be $3 billion or more. For revenue losses incurred, he is asking as much as $2 billion. Potter's testimony left no doubt that the Postal Service does not believe the ratepayers, such as magazine publishers, should bear the costs associated with the recent terrorist attacks. He emphasized that the USPS does not intend to raise postal rates before Fall 2002. Magazine Publishers of America (MPA) strongly supports the request for emergency financial assistance.
"Now more than ever, America needs a postal system that is safe, secure, and financially stable," said Nina Link, president and CEO of MPA. "We agree wholeheartedly with Postal Service Board Chairman Rider that, in the national interest, the Service should be made whole for the extraordinary costs it has been incurring as a result of terrorist acts. The Postal Service has the MPA's full support."
Potter's full statement is as follows:
Good morning, Mr. Chairman and members of the Subcommittee. I appreciate the opportunity to meet with you today to discuss the unanticipated financial burdens that have been placed on the Postal Service as a result of the attacks of September 11 and the subsequent use of the mail as a vehicle for bio-terrorism.
I am extremely grateful that this subcommittee has acted so quickly to convene this hearing to explore our needs. Your willingness, both as a Committee and individually, to hear from the Postal Service says a great deal about your interest in protecting this basic and fundamental communications service provided to the American people by the government.
As you have recognized, the Postal Service is a critical element of the nation's infrastructure. It is the lynchpin of the $900 billion mailing industry that employs nine million people and is responsible for eight percent of the gross domestic product. It is the one element of our national government that has a daily presence in virtually every community in the nation - from the smallest towns to our largest cities.
Our employees have found themselves on the front lines of a new kind of war. It is not a role they have sought, but it is one they have accepted. They have become quiet heroes simply by doing their jobs. We mourn for two of them, while we pray for the health of seven others who have suffered from this attack.
I must acknowledge the cooperation and assistance of our employee unions and management associations through this difficult period. Along with my management team, they have been very helpful in keeping postal employees aware and, through that awareness, contributing to their understanding and safety.
Mr. Chairman, the Postal Service is doing everything humanly possible to bring this tragic episode to a close and to prevent similar problems in the future. There is nothing more important to us than to protect our employees, those who use the mail, and the mail itself.
But we cannot do it without help at this time.
I am confident that the investigations being conducted by the Federal Bureau of Investigation and the Postal Inspection Service will result in putting those responsible for these terrorist acts behind bars.
We appreciate the efforts of Secretary Thompson of the Department of Health and Human Services, the Centers for Disease Control and Prevention, and the many state and local health departments who have worked to share information and treatment with affected postal employees and the public. We are also grateful for the leadership of Governor Ridge and the Office of Homeland Security in helping to coordinate the many issues that involve so many different agencies.
Mr. Chairman, despite the leadership and support we have received - and continue to receive - there is a need for financial aid, as well.
The attacks that began on September 11 were acts of war. They have resulted in costs and business impacts that simply could not have been anticipated.
The Postal Service was affected by the initial strikes on the World Trade Center and the Pentagon. They damaged our buildings, destroyed equipment and changed the way we move mail.
As we strove to recover from the first wave of terrorism, we learned that anthrax had been sent through the mail. Tragically, this resulted in illness and death to our employees and others, as well as contamination of some postal facilities and other locations. Ultimately, because of our national scope and the nature of our network, the Postal Service was affected more than any other organization.
Within this context, we urge Congress to recognize that emergency funding is required as part of the effort in defending homeland security. It is vital that the Congress and the Postal Service work together to preserve and protect America's universal postal service, those who provide it and those who rely on it.
The adverse financial impact we have experienced falls into two categories. The first is made up of those costs related directly to the attacks of September 11 and the subsequent use of the mail for bio-terrorism. The second category reflects the costs related to the business impact of these incidents.
In the category of the direct impact of the terrorist attacks, we estimate our costs to be $3 billion, or more. The major elements include:
Damage to facilities and equipment loss in New York
Medical testing and emergency treatment of employees exposed to anthrax
Protective equipment for employees (masks and gloves)
Environmental testing and, where necessary, cleanup of postal facilities
Communication and education of employees and customers
Purchase of equipment to sanitize mail entering our system Disruption of operations and mail rehandling costs
Implementation of new security procedures
The most significant of these expenses are the purchase of equipment to sanitize mail, and the modification of our systems and processes necessary to accommodate the new security measures. Some discussion of our approach may be helpful.
With the assistance of Dr. John Marburger, Director of the President's Office of Science and Technology, we have been able to assemble experts from various federal agencies, as well as research facilities throughout the United States. They have helped us to identify available technology and what best fits our operational requirements, determine how it can be applied to our systems and, finally, ensure that it is properly implemented.
The support from these experts helped us to effectively activate the electronic beam irradiation facility in Ohio. With their help, we established effective dosing levels to ensure anthrax is killed. In addition, we established a strict process and monitoring system that was, in turn, verified by these experts.
As we move forward to establish permanent solutions, we will seek the assistance of those most knowledgeable in this field. We continue to assess the use of electronic beam irradiation, x-ray irradiation, and gaseous sanitization using chlorine dioxide. Our needs require a technology that kills biohazards and, at the same time, allows us to maintain our operational capability to provide service, without harm to our employees or customers.
Beyond the sanitization of the mail, we also need to deploy detection technology and a combination of improved cleaning and filtration systems. We believe the detection technology provides an extra level of safety to ensure that sanitization is working or has not been circumvented. Cleaning and filtration systems provide the final layer of defense for a safe work environment for our employees.
As I have noted, the direct costs of responding to these incidents is only one of two types of financial consequences we are facing. The second is the large - and negative - impact on our business. This is reflected in significant declines in mail volume and revenue that are related to, and impacted by, the terrorist acts that began in September.
For our first accounting period, which covered September 8 through October 5, mail volume was down 1.1 billion pieces - 6.6 percent below the previous year. That translated into below plan revenues of $300 million.
Not only did this trend continue in our next accounting period, covering October 6 through November 2, but it worsened. Revenue was below plan for this four week period by $327 million.
We believe this could affect our bottom line by as much as $2 billion this fiscal year. This is on top of the loss of $1.35 billion that was projected as we entered fiscal year 2002 - and before the terrorist attacks. I should note that the original projected deficit for this fiscal year reflects an aggressive program of cost management, including significant work hour reductions, a restructuring that that is resulting in streamlining of administrative functions, and the consolidation of some mail processing operations and facilities.
This is the first time since postal reorganization that we have seen this significant a decline in mail volume. While we are optimistic that the value of mail in the long term will sustain future volume growth, we require assistance in coping with this year's impact. We are, therefore, requesting a one-time appropriation of up to $2 billion for this purpose.
Mr. Chairman, the financial impacts I have described are the consequences of terrorist attacks on the nation. Unfortunately, they have had terrible and direct effects on the nation's mail system. They should be considered costs of homeland security.
Users of the mail should not be burdened with these extra costs through the price of postage. This could quickly threaten the foundation of a universal postal system serving all Americans, and damage the mailing industry and other businesses that depend on the mail, ultimately harming the economy as a whole.
The Postal Service must be able to implement and pay for the measures that are required to maintain safe, efficient, and affordable mail service. We fully recognize that we have an obligation to proceed as sensibly and carefully as we can during the emergency, and to protect the public against unnecessary expense. We continue our work with Dr. Marburger and other experts to do this.
The Postal Service is doing everything it can to keep the mail safe. This is imperative if we are to maintain the levels of trust and confidence necessary to protect the viability of this national communications system.
I can assure you that we will deliver on this expectation. We will do everything possible to protect the lives and safety of our employees and customers. And we will keep the mail moving. This is vital to the nation, it's economy and the entire mailing industry. I look forward to working with this Committee to do that.