               THEATTORNEYGENERAL
                       OF TEXAS
                            Au-.       .lkx~s         7S7ll




                                   September    19,    1974


The Honorable Roy W Mouer                              Opinion No.   H-   405
Securities    Commissioner
State Securities  Board                                Re: Promotion and merit
709 L. B. J. Building                                  salary increases  under the
Austin,    Texas                                       General Appropriation   Act
                                                       for the 1974-75 biennium.

Dear   Commissioner     Mouer:,

        Your opinion request involves the merit salary increase and
promotion provisions   contained in the General Appropriations      Act
for the current biennium.   (Acts 1973, 63rd Leg.,   .ch. 659, p. 1789)
Relevant to your request are the following subsections     of Section 1 of
Article V, then General Provisions   article of the Act!   :,

                     d. MERIT SALARY INCREASES.             It is expressly
                provided that Departments        and Agencies haying,
                appropriations    for classified   salaries  and wages may
                grant to classified,employees       merit salary increases   in
                recognition  of an encouragement       for “continued and/or
                satisfactory   career service” with the State of Texas
                as provided herein:

                     (1) ‘Continued and/or satisfactory     career’ service”
                as used in this Act shall mean service with consistent
                performance      equal to that normally   expected or required.
                “Merit Salary Increase” as used in this Act shall mean
                advancement      to a higher numbered Step in the same
                Salary Group of the Classification      Salary Schedule.

                . . .




                                        p.   1891
The Honorable   Roy W.    Mouer       page 2      (H-405)




                      (3) For the biennium beginning September 1, 1973,
                the maximum monthly rate or expenditures for merit
                salary increases     shall not exceed:. (a) an amount equal
                to 3.4% of the total amount specifically         appropriated
                for the biennium for salaries       of classified   positions
                divided by twenty-four      (24), or (b) such amount as
                may otherwise be appropriated for the biennium for
                the specific purpose of granting merit salary increases
                divided by twenty-four      (24), or (c) where this Act
                appropriates     a lump sum or estimated amount for
                salaries and operating expenses,         the maximum monthly
                rate or expenditure for such merit salary increases              shall
                not, during the first year of the biennium,          exceed    3.4%
                of the average monthly payroll for salaries           of regular
                fulltime employments       in classified   positions,    for the
                six-month     period March 1, 1973 through August 31,
                1973; nor during the second year of the biennium exceed’
                 3.4% of such average monthly payroll for the six-month
                period March 1, 1974 thorough August 31, 1974.

                . . .             .   ,~


                     e. PROMOTIONS         A promotioumeans     a change in
                duty adsignment     of an employee within an agency from
                a ~position in one classification  to a position in another
                classification   in a higher salary group requiring
                higher qualifications    such as a greater skill or longer
                experience,    and involving a higher level or responsibility.
                When an employee is promoted to a position in a higher
                salary group, he will receive at least a rate oneincrement
                higher than his salary rate before promotion or the
                minimum rate of the new salary range, whichever is
                higher,    and may, at the discretion   of the agency
                administrator,     receive an annual rate up to and including
                the rate designated by the same step number which
                designated his former rate.




                                           p.   1892
The Honorable   Roy W.   Mouer    page 3      (H-40,5)




        Your first question arises when an employee in a classified      salary
position receives  a merit salary increase   to a higher step in his salary
group and then subsequently    receives a promotion to the same,     or lower,
step in a higher salary group.    You ask whether the previously    granted
merit salary increase lapses at the time of the promotion thereby making
more funds availab1.e for use in paying merit salary increases     to other
employees   within the agency.

        Merit salary increases    should not be confused with promotions.
Attorney General Opinion H-106 (1973).      They are awarded in recogni-
tion of continuing satisfactory  service on the job and result in a higher
rate of pay for. doing the same job.    Promotions,  on the other hand,
elevate the employee .to an entirely nea, job involving :more responsibility
or requiring grater skill and experience.     Upon receiving a promotion,
the employee is paid more because he is classified     in a new, higher
salary group.     A ,p,romotion meffect  .means a new job for the employee
while a mer,it salary incrgase   merely means continuation    of the old job
at a higher rate .of ,pay. <.~.

          When,an employee receives       a promotion,   his old job in the lower
salary group terminates      insofar as he is conce~rned, and any merit salary
increase he has received in recognition        of the manner in which the old job
was .performed lapses .along with it .       His new salary in its entirety .is
the product of the promotion and ie not in any respect due to a merit salary
increase.    Since none of a newly ~promoted employee~‘s salary is due to a
merit salary increase,      none of it should be counted against an agency’s
maximum monthly quota of expenditures           for merit salary increases,
Therefore,    fin our opinion; funds that would have been used to continue
paying an increase     previously   granted an employee are freed upon his
promotion,and     become available for use in paying merit salary increases
to other employees     within the agency..

        Your second question concerns only those agencies which in their
appropriations    have been given a Lump sum or estimated amount to be used
for salaries and operating,expenses.      With respect to such agencies, sub-
section (3) (c) of the merit salary increase provision provides:. “the maximum




                                      p.   1893
The Honorable    Roy W. Mouer      page 4     (H-405)




monthly rate of expenditure for such merit salary increases        shall not,
during the first year of the biennium,     exceed 3.4% of the average monthly
payroll for salaries  of regular full-time    employments  in classified  posi-
tions, for the six-month   period March 1, 1973 through August 31, 1973;
nor during the second year of the biennium exceed 3.4% such average
monthly payroll for the six-month     period March 1, 1974 through August
31, 1974. ‘I

         You ask whether the merit salary increases   awarded by such agencies
in the first year of the biennium count against their maximum monthly rate
of expenditures  for such increases  during the second year of the biennium.

         Your question was ‘answered    in Attorney     General   Opinion   H-106
(1973) in which. we said:

                  It must be recognized   that a merit salary raise has
                  long term consequences.      The administrator  must
                : be able to budget funds to cover any raise for every
                  remaining month in the biennium.     Any increase will
                  cause charges against the monthly maximum for all
                  succeeding months.    H-106 at p. 501.

Subsection   (3)(c) does not change our answer in this regard.       It,merely
sets out the formula to be used by an agency having a lump sum or
estimated amount appropriation      for salaries   and operating expenses in
calculating  its maximum montly rate of expenditures        for merit salary
increases.    It does not, however,    provide that increases    granted in the
first year of the biennium become classified       salaries  at the end of the
year thereby freeing funds budgeted for their payment for use in paying
increases   to other employees.    In our opinion the conclusion we’reached
in H-106 applies with equal force to agencies having .either a lump sum
or estimated amount appropriation       for salaries   and operating expenses:
any increase    awarded during the first year of the biennium will count
against the agency’s    monthly maximum for all succeeding months of the
biennium.




                                       p.   1894
The Honorable   Roy W.   Mouer      page 5    (H-405)




                                    SUMMARY

                    A merit salary increase    granted in the first year
                of the biennium will count against an agency’s monthly
                maximum for all succeeding months of the biennium.
                However,    when an employee who has previously      been
                granted an increase   receives  a promotion,  his old
                job in the lower salary group terminates,    and any
                increase he has received lapses along with it.      Funds
                that have been budgeted for continued payment of his
                increase are freed and become available for use in
                paying merit salary increases    to other employees
                within the agency.

                                                  fiVery   truly yours,




                                                    Attorney   General    of Texas




DAVID M. KENDALL,        Chairman
Opinion Committee


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                                      p.   1895
