Rate per pound

(non-advertising

Present and Projected Postage Costs of National News By Zone

(1972 average).

26,880 lbs..

Zone 5

Key advertising

rate per pound based on 1972

Total number

1972 average

of pounds

Showing the Percentages of Postage in the National News Budget

$105,675.12

$ 21,104.48

$ 84,570.76

The CHAIRMAN. At this time we are fortunate in having a distinguished House Member. Please step forward Mo.

STATEMENT OF HON. MORRIS K. UDALL, A U.S. REPRESENTATIVE IN CONGRESS FROM THE STATE OF ARIZONA

Mr. UDALL. Mr. Chairman I appear here today, some 2%1⁄2 years after the enactment of the Postal Reorganization Act, to discuss how I believe the Congress should deal with a serious, though unintentional, consequence of that act-inordinately large and sudden postage rate increases for second-class mail. In the Postal Reorganization Act, the Congress endorsed the principle of a largely self sustaining postal system, where the users of that system paid, in the form of postal rates, their fair share of the costs of operating the Postal Service. I would like to say at the outset that I do not believe there is any reason for retreating from that principle, and do not believe that we need to discard that principle in order to accommodate the threat facing the magazine and newspaper industry because of steeply increasing postal rates.

In the Postal Reorganization Act, the Congress tried to deal with the problem that would face mailers who were suddenly asked to pay their full share of postal costs; we attempted to ameliorate the effects of this by phasing what we understood would be substantial rate increases over a 5-year period. This, it was believed, would be an adequate period of time for mail users to adjust to these increases. At the same time, we recognized that the new Postal Service which we were creating would not overnight operate at the highest efficiency; be able to modernize and provide the service the American people require and deserve in this latter part of the 20th century. Consequently, we believe it would be inequitable to impose sudden and steep rate increases upon mail users when there was no corresponding improvement in efficiency, modernization and service.

Operating under congressional mandate, the Postal Rate Commission has issued a decision on rate levels which requires that, on the average, regular rate second-class publications must pay a 127 percent increase in their postal rates over a 5-year period. In my judgment, the Postal Rate Commission was merely doing its job, applying the ratemaking principles which the Congress established. Accordingly, I want to make clear that my remarks here today and my sponsorship of legislative relief for second-class are in no way a criticism of the actions and generally excellent and sound decision of the Postal Rate Commission. However, I think it is equally clear that we in the Congress who were most closely involved in the evolution of the Postal Reorganization Act had no realization that the effect of our legislative actions would be to cause this type of increase for secondclass mail. In my judgment, had we had such advance knowledge, we would, in the Reorganization Act itself, have made specific provision for relief to this class through additional congressional appropriations. I have introduced legislation, H.R. 1248, which attempts to ameliorate the drastic nature of these increases and yet still preserves the basic principles embodied in Postal Reorganization. H.R. 1248 contains five basic provisions:

1. It provides that the rate increases required by the recent Postal Rate Commission decision would be phased in over the next 9 years rather than the next 4 years as is provided under current law. According to the Postal Service's own estimates, the average annual cost of this provision would be $34.5 million. This particular provision for

10-year phasing is already applicable, under the present law, to the preferential categories of second-class mail, primarily publications of nonprofit organizations.

2. Since the preferential rate categories would receive no additional relief from the provision for 10-year phasing, the bill provides that one-half of the currently scheduled rate increases which will be required to be paid by the preferential rate publications over the next 10 years will be paid for one-half by the users and one-half through congressional appropriations.

3. The predicament facing the publishing industry derives not alone from the fact that they are faced over the next years with already scheduled rate increases of substantial percentage increments each year, but also from the fact that, realistically, one has to assume that within the next 5 to 10 years there will be additional rate increases imposed on second class. Consequently, rather than merely facing a 127 percent increase in postage rates over a 5-year period, second class may in fact be facing 200 percent increases over the next 4 years. Therefore, H.R. 1248 provides that future rate increases that are in addition to those already scheduled to take effect over the next 9 years will be paid one-half by the user and one-half by congressional appropriations.

4. The burden of these rate increases has fallen most heavily upon those publications with small circulation and little advertising revenues. The average 127 percent increase facing the regular rate second-class publications is but an average. Many publications, particularly those which are physically small in size, face far more staggering increases than that, primarily because the rate structure provides for a minimum per piece charge. Thus, to take the example of a medium weight publication, all editorial in nature, weighing 8 ounces, the rate prior to the new rate increases was 1.7 cents per piece. Because of the imposition of the per piece surcharge, this rate will increase at the end of 5 years to 5.2 cents per piece or roughly a 206 percent increase. Or let us take the example of a nonprofit publication weighing 1 ounce containing all editorial material. The old rate before the rate increases was 0.2 cents per piece. Under the approved rate schedule that rate will increase over the next 10 years to a final rate of 1.8125 cents per piece, which is an 856 percent increase. While it may seem that the actual per piece rates do not appear large, when multiplied by the volumes that are involved, the amounts loom quite substantial. There is then a peculiar problem faced by those publications with small circulation, those with 250,000 or less copies per issue. H.R. 1248 provides that as to those first 250,000 pieces, the mailer only be required to pay two-thirds of the otherwise applicable rate. The Postal Service estimates that this provision will cost an average of $44 million a year over the next 9 years. In fact, the cost of this provision next fiscal year would be substantially less than that. It would increase over the 9 years, but, at the same time, other subsidy amounts for second class will be declining, so that the only remaining subsidy after the phasing period will be a relatively small amount for small circulation regular rate publications and a rather larger amount for nonprofit publications. And the total will be a great deal less than the $230 million we have appropriated for second class in the current year. It is true, nevertheless, that this is the most costly provision of H.R. 1248. But it directs

the money to where the greatest need is. Even with this relief, many small publications will be faced with enormous percentage increases. In the last example I cited where the rates will increase from 0.2 cents per piece to 1.8125 cents per piece, through the application of the various provisions of H.R. 1248, the effective rate on that publication would be an increase over the 10 years from 0.2 cents to 0.667 cents. still an increase of over 30 percent a year; but, nevertheless, an increase which the publications may be able to live with.

It is my understanding that the Postal Service estimates that all publications, except for some 200 odd, would fall into the category of having less than 250,000 per issue. Thus, it can be seen that the major recipients of relief under this particular provision are the thousands upon thousands of small magazines and newspapers which account for the strength and diversity of our communications media. 5. The final provision of H.R. 1248, suggested by the Postal Service itself, attempts to deal with the problems that have occurred the last several years in the appropriation mechanism for funding the amounts that the Congress has legislated that it will pay to the Postal Service. The measure merely makes the appropriations for these authorized amounts a permanent appropriation, thereby avoiding the necessity that the President make a request to the Congress for these moneys. We have seen in the last several years a disposition on the part of the Office of Management and Budget to intervene its own judgment in the place of the Congress as to whether or not a particular class of mail deserves to have an appropriation which the Congress has already authorized. Twice now the OMB has elected not to ask for the full amounts authorized by the Congress. We believe that this measure, which was proposed by the Postal Service, would accommodate this problem.

On analysis, I believe it will become clear that the several provisions included in my bill afford proportionately much greater relief to small publications and to nonprofit publications. This is as it should be because these are precisely the publications which are most endangered and which find it most difficult to pay the staggering rate increases they face. These publications are also far more dependent upon revenues from circulation rather than from advertising, and therefore find it least possible to pass on postal rate increases in the form of higher subscription prices. At the same time, however, I would like to state emphatically that it is not only those small publications which find themselves in financial distress; nor is it only those publications which the American people depend upon for the free flow of information and intelligence in our democratic society. We have seen in recent years the demise of two great national circulation magazines: Look magazine and Life magazine. Understandably, the Postal Service and the Postal Rate Commission are most sensitive to any suggestion that postal rates were the causative factor for their demise. But there is simply no way of getting around the fact that, while there certainly were other financial problems that afflicted these magazines, postal increases were a compelling factor in the decision to discontinue publication of those magazines. And what is most disturbing about their death is that they died, not because the American people did not want to read these magazines; the record on that is quite the opposite. These magazines had no difficulty in increasing their circu