Mr. CUNNINGHAM. I know the postal employees are quite disturbed. They feel embarrassed because they receive all these complaints. I have a stack of telegrams from my district. I am wondering whether their morale is injured to the point where they would not have the gumption to work up to their full capacity and that that would be quite expensive to the Department. Would you say that would be

the case?

Mr. GRONOUSKI. I think, sir, that in this administration-it is continuing with my administration of the Post Office Department-we have created the best labor-management climate in the history of the Post Office Department. As I go around the country-and I do this very frequently-meeting with postal employees, I find nothing to lead me to believe anything but that morale is very high. I think that the fact that the President has fought so hard, along with many of you, for the pay raise bill for postal employees has been very much appreciated by the employees throughout the country.

We feel very strongly that the postal employees should have comparable wages with private enterprise. This is what we are trying to do, what the administration has been trying to do, with its pay raise bill.

Mr. CUNNINGHAM. You were directed by this committee and the Congress in the last pay bill to follow the comparability principle. Mr. GRONOUSKI. Of course, it is the Congress that passes pay raises. I do not. I am very happy that this House has seen fit to pass it. The point I make is that essentially I feel that we have had I have many letters from State and local and national officers of the postal unions which reflect this feeling-that we have a very good climate of labor-management relations. Nothing so epitomizes that more than the recent labor-management conference we just concluded, and which we are about to sign in a week or so, where we have met in free and full discussion and hammered out

Mr. CUNNINGHAM. I think that is a nice step forward, frankly. The only thing is they have never had a forum before and a close working relationship between them-the employees and management. They have an awful long way to go to work out some of the problems. I did mention the many telegrams that I have received from my district where they are quite disturbed about the cutback.

Mr. GRONOUSKI. I might say I have personally expressed on numerous occasions-I express it again today-that I feel very strongly that if we did not have the employee organizations and the kind of program we have with these employee organizations, we would have to invent one because I think there is nothing more important to the selfrespect of employees and nothing more important to the Postmaster General and the Post Office itself than having a good working arrangement with employees, having a vehicle for them to express their concerns and having a table which we can sit around and discuss those concerns. I feel very strongly about that.

Mr. CUNNINGHAM. What is the deficit in the various categories now, first-, second-, third-, and fourth-class mail?

Mr. GRONOUSKI. May I provide this for you?

Mr. CUNNINGHAM. Which is the biggest?

Mr. GRONOUSKI. May I ask Mr. Nicholson to get out his sheaf of data?

Mr. CUNNINGHAM. Which is the biggest?

Mr. NICHOLSON. After all postal rates that have now been enacted are in effect, on a dollar basis they are pretty close. The total deficit. in second-class mail will be $204 million, in third-class mail $207 million. This is a comparison of revenues from those services with fully allocated costs to these services.

Mr. CUNNINGHAM. Third-class mail is preferential mail. It has to be worked in after the preferential mail. Are not newspapers given comparable treatment to first-class mail?

Mr. NICHOLSON. About 42 percent of our second-class mail is given what we call "red tag" or news value treatment.

Mr. CUNNINGHAM. Mr. Postmaster General, you referred to the criticisms from the editorials. Would you consider recommending an increase in their rates for newspapers?

Mr. GRONOUSKI. We have expressed ourselves on this matter in our annual report to both Houses on April 15. We felt that given the state of our budget and given the economies that we have introduced and are carrying out, that it was not necessary for us to recommend a rate increase.

Mr. CUNNINGHAM. You do not recommend a rate increase for second class?

Mr. GRONOUSKI. I hope you are not implying that editorial policy would have anything to do with my rate posture.

Mr. CUNNINGHAM. It might

Mr. GRONOUSKI. It does not, sir.

Mr. CUNNINGHAM. It might ring a good note in the ears of a lot of Congressmen who might support such a rate increase for newspapers, but we are in the same position as you are at the moment.

Mr. GRONOUSKI. While on the one hand I do not succumb to pressure, on the other hand pressure does not make me vindictive.

Mr. CUNNINGHAM. With this new pay bill, tell me what your next fiscal year deficit will be.

Mr. GRONOUSKI. The pay bill is to cost about $235 million a year for the Post Office Department.

Mr. CUNNINGHAM. What will be the total deficit?

Mr. GRONOUSKI. Not counting the public service feature, counting the net deficit, it is $306 million, given the present $71 million plus. Mr. CUNNINGHAM. $306 million. Is it your intention to recommend an increase in postal rates?

Mr. GRONOUSKI. I hope not, but I have to study it more carefully. I have not looked at the budget for next year as carefully as I will have to before making a judgment.

Mr. CUNNINGHAM. Thank you.

Mr. DULSKI. Mr. Daniels.

Mr. DANIELS. On your directive of April 10, 1964, ordering curtailment in the parcel post delivery service and post office window service on Saturday, you said it would result in a saving of 697 city carrier jobs and 1,103 clerk jobs. Could you tell this committee just how you expect to effect a saving in those jobs? Would it be accomplished by laying off employees who are presently employed in the Post Office Department or by not hiring substitutes and temporary employees on Saturdays?

Mr. GRONOUSKI. Actually, for fiscal year 1965, we anticipate not a reduction but an increase of about 4,800 employees in our work force. Obviously, we hire many more than that in a year. We have about 60,000 employees that we hire every year on turnover because they retire or leave the service for one reason or another.

What is our established and fixed policy is that no regular employee will be laid off as a result of this action but, rather, we will curtail our hiring of employees, new employees. In effect, it will come from attrition. No regular employee in the Post Office Department will be affected.

Mr. DANIELS. Will it result in a reduction of work hours of the present employees?

Mr. GRONOUSKI. Not of regular employees. They are running about 40 hours a week.

Mr. DANIELS. You expect to hire 4,800 more employees during fiscal 1965. How does that compare with your declared policy of reducing the work force by 5,000?

Mr. GRONOUSKI. What we were looking at last October, November, December, and January is what was the kind of employment force we would need in fiscal year 1965. We had about 595,000 employees on November 22, I think that was the cutoff date, 1963. We felt that we could legitimately and reasonably get down to 590,000 employees by June 30 this year.

Our increase of 4,800 approximately to take place as our volume increased about 2.5 billion during 1965, and what we have done we have already done this-is we have gotten down to our 590,000. Now we will be adding to this as demand and volume increases.

Mr. DANIELS. New employees will not be put on the payroll unless the volume of work warrants it?

Mr. GRONOUSKI. That is right.

Mr. DANIELS. The 697 employees' jobs that will be saved will be saved in the parcel post delivery service area?

Mr. GRONOUSKI. Yes. What we are talking about is this. We have about 16,000 full-scale parcel post delivery routes, about 9,000 of those are regular, 7,000 are part time. We also have about 25.000 motorized mailster routes. We are adding, starting in November, about 10,000 more of these mailster routes, which will take a lot of the pressure off parcel post because they carry regular parcel post deliveries.

We have rural routes that are motorized, and these also carry full parcel post service on a 6-day basis.

What we are talking about is a reduction from 6 to 5 days in these particular routes which handle about 6 percent of the parcel post, which are fully parcel post and the employees we have, these 697 employees, are assigned to openings as they develop, and they are developing every day. There is not a one of these being laid off. I want to make that point clear. None will be laid off as long as I am Postmaster General.

Mr. DANIELS. You say this original directive was literally interpreted by some of your postmasters and as a result worked certain inequities.

Mr. GRONOUSKI. Yes. As a matter of fact, as I said in my prepared statement, I take full credit for a misinterpretation because, as

I reread the order, subsequent to its issue, while there was a provision which asked the postmasters to ask for adjustments in the event this worked a particular local hardship, this was not emphasized. The emphasis was on what I regarded as a rigidity in this picture.

Mr. DANIELS. In other words, you are now asking your postmasters throughout the country to reevaluate their operations?

Mr. GRONOUSKI. Yes.

Mr. DANIELS. What are the peak hours of services that would necessitate having a window open and when may they curtail service? What may be in effect in Miami might not necessarily be true in a small town like Oshkosh; is that right?

Mr. GRONOUSKI. That is right. I might say, by the way, that I have met many postmasters since this time that I made this revision of the May 4 order, and I find nothing but delight coming from them because they feel, and they have long felt, that the central office has not taken them into full partnership in management. This is one of the things I have been trying to develop.

For instance, I have had the 68 largest postmasters in to the office to discuss their own postal problems since I have been in office. I intend to have them in on other occasions. I want them to feel, and they want to feel, that they are not totem poles sitting out there, that they have some brains themselves, and they do have brains, and they do have ingenuity and ideas. I want them to bring to bear and they want to bring to bear on their local problems their local abilities and their local understandings.

I want them to relay this back to us. I want them to have their imputs into this thing considered and recognized. This is exactly what I am trying to develop here. It is something the postmasters have long asked for. It is something that I feel to be necessary because all brains do not originate in Washington. These guys run the post office. I am not kidding myself. They are on the firing line.

Mr. DANIELS. We all realize the importance of economizing and saving $9 million. However, the post office primarily renders service to the public. When it comes down to a question of service to the public or saving $9 million, which should have priority?

Mr. GRONOUSKI. This is almost like: When did you stop beating your wife? Let me make this point. I suppose if we had 24-hour service every day in Oshkosh, there would be some people who would like this and would want improved service. This would probably double our budget if we did this around the Nation.

I think you can always add hours and add employees and add some marginal amount of service. I think there always has to be a judgment as to where does that line cut off.

Mr. DANIELS. I did not mean to throw you a hot potato.

Mr. GRONOUSKI. My genuine thinking is the line cuts off where I have cut it off, obviously, or I would not have done it.

Mr. DANIELS. One further question. You indicated earlier in your testimony that you proposed to save in fiscal 1965 a total of $150 million.

Mr. GRONOUSKI. Yes, sir.

Mr. DANIELS. This package here will cover a total sum of $12,700,000, $9 million by virtue of curtailment of parcel post delivery service and post office window service. From what other areas do you expect to save and economize?

Mr. GRONOUSKI. The first thing we looked at very carefully and made substantial savings in were such things as our transportation budget where we asked for something like $15 million less than we would have asked for on the basis of growth in 1965 in volume of mail. We have cut in our building program something like $33 million before we ever got to this kind of thing. My memory is failing me now.

I might say, for instance, we just had a team of 15 of our most competent production skilled inspectors look over the whole detail of the Chicago post office where we have had some problems. We found, for instance, that better scheduling of mail in and out of that post office was in order because this is a central point for the transportation system, the working of some of the mails over the weekend which had not been done in sufficient quantities before. For instance, that will permit carriers to go out with a full pack on Monday where they previously did not have a full pack. Just on the clock time, the average carrier in Chicago, there are 8,000 to 10,000 of them, was punching in 55 minutes early on Monday because we did not have mail to give them. Yet there were tons of mail sitting in the post office over the weekend. If 55 minutes is clock time, I should imagine, because all human beings are alike-I would be like that on this situation, toothere is probably more time saved because if a carrier goes out with a light load, because there is no mail to give him, he will probably slow down in his travel around the route. It is a natural human reaction, and I do not criticize him. Even the punch-in time of these 8,000 to 10,000 carriers, 55 minutes early, they came in just because they did not have the mail because we were not working over the weekend.

Mr. DANIELS. How much would that save in the Chicago office? Mr. GRONOUSKI. About 10,000 hours, about $2.50, about $25,000 every Monday.

Let me give one example. We had a study at Houston just recently. A management team saved 73 temporary employees without any effect on service just by rescheduling workhours. This is the sort of thing that is going on all the time. It is not the sort of thing you can make a big news story out of because this is a piecemeal management study. This is the kind of thing we are doing to improve the efficiency of our post office.

Mr. DANIELS. Thank you, Mr. Postmaster General. I think you are doing a fine job.

Mr. DULSKI. Mr. Johnson.

Mr. JOHNSON. Mr. Gronouski, I notice in the pay raise bill that has just passed the House, 10 percent of the costs are supposed to be absorbed by you people, or $23.5 million, during the coming fiscal year. How do you propose to absorb $23.5 million? Are you going to curtail services further in order to save that?

Mr. GRONOUSKI. This is a matter that will ultimately have to be taken up with the Bureau of the Budget. I understand as the bill is written this is a Government-wide absorption, not pinpointing each department. We are in a particularly vulnerable position in this case because 78 percent of our total costs are payroll, whereas in many other areas of Government this is not the case.

We are hopeful that we can convince those that are involved in the allocation that we need not bear the full 10 percent in our particular Department because I think this would be very serious for us.