Soaring Drug Costs Squeeze Public Programs
population and rising medical costs.
(see Drugs, page 2)
U.S. health-care expenditures grewby 5 percent a year. Consequently,drug spending accounts for a growingshare of overall health-care spending.
State Leaders Use Statutory Powers
To Raise Prison Guards’ Salaries
Maryland School of Pharmacy, U.S.
prescription drug expenditures willincrease by 15-18 percent per year other employees of the TexasDepartment of Criminal Justice employees like correctional officers.
year of the biennium to the first year.
Justice, Alfred M. “Mac” Stringfellow, authorized TDCJ to adjust salaries toimplement the new position and to (see Guards, page 10)
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(Drugs, from page 1)
pharmaceutical response to a medical condition and isprotected by a patent from being copied by other inadequate access to needed drugs through state benefit manufacturers. A patent gives the company exclusive programs end up in emergency rooms and hospitals.
rights to the drug for 20 years from the date of filing,usually when the drug is discovered. However, the The House Public Health Committee met on May 23 amount of time a drug is protected by its patent once it to hear an overview of issues involving the pharmaceutical hits the market depends on how long it took the drug to and biotechnology industries, drug distribution and reach the market, a period that includes not only the pricing, Medicaid and other public health-benefit manufacturing process but also research and development programs, and a new law enacted by Maine to limit (R&D) and obtaining approval from the federal Food Pharmaceutical expenditures, the committee learned, Generic drugs, the chemical and therapeutic are a function of drug pricing and drug usage. Within equivalent of name-brand drugs, enter the market once those two parameters, however, lawmakers must consider patents expire. These drugs can be much less expensive many factors in trying to establish control over public because the manufacturer incurred no R&D and marketing costs to bring the product to market, butgeneric drugs are not always cheap. Witnesses told theHouse Public Health Committee that the first generic Drug pricing
drug to replace a name-brand drug in the marketplacemay be priced only a few pennies lower initially and In the United States, drug prices are set by a may lower its price significantly only as more generics marketplace that comprises multiple purchasers, or similarly effective name-brand drugs appear.
distributors, and pricing and purchasing methodologies.
Drug manufacturers establish a drug’s wholesale price, Drug prices include relatively large R&D costs. The but the actual cost to consumers largely depends on industry estimates that it costs about $500 million on whether the consumer is covered by a health-benefit plan average and takes about 10 to 15 years to move a new and on the plan’s purchasing and negotiating power.
drug from the laboratory to the drugstore. According to Health-benefit plans or their contracted prescription Robin Strongin of the National Health Policy Forum at benefit management companies (PBMs) can negotiate George Washington University, U.S. pharmaceutical discounted rates from drug manufacturers on the basis of companies are expected to spend about $26.4 billion in anticipated purchase volumes. Consumers without drug- 2000 to discover and develop new medicines.
benefit coverage, however, must pay the full retail pricefor prescription drugs.
Drug prices also include marketing and advertising costs, which rose dramatically in the 1990s. After Drug prices for citizens in many other developed enactment of the federal Food, Drug and Cosmetic Act countries are established either directly, by price controls, in 1938 and subsequent federal actions, pharmaceutical or indirectly, through insurance and other systems that companies primarily promoted their products to doctors limit drug reimbursement or drug companies’ profits.
and pharmacists through personal sales contacts and For example, Canadian drug prices are based on journal advertising. Since the 1980s, however, calculations of the median prices of drugs in six pharmaceutical companies increasingly have used European countries and the United States.
“direct-to-consumer” or DTC advertising, causingmarketing expenditures to soar.
Competition among similar drugs treating a particular medical condition also affects pricing. However, the Experts say DTC advertising has grown because of effect of competition in lowering prices is reduced when factors that include competition in the pharmaceutical one drug is outstandingly effective or is the sole industry, growing consumer interest in health-care HOUSE RESEARCH ORGANIZATION
June 23, 2000
page 3
information, and business-friendly regulatory and Some critics suggest that price controls are needed political environments. Drug-company expenditures on because the market for prescription drugs is not as DTC advertising may have exceeded $2 billion in 1999, competitive as the market for other manufactured goods.
about a fivefold increase over 1994 spending, according Drug purchases are usually a medical necessity, if not a to estimates cited in a recent article in Health Affairs, a life-saving measure, so the consumer often cannot postpone or choose against a drug purchase. Suchconsumers are not very price-sensitive — that is, theyfeel compelled to buy the drug at any price or face dire Cost-control proposals
Price controls. Critics of the pharmaceutical
Critics also say that free-market principles do not industry say drug companies have acted too greedily in apply to pharmaceuticals because consumers do not have setting prices and that U.S. consumers are paying too direct access to drugs as they do, for example, to much for drugs compared to the rest of the world. They wheelbarrows. They must rely on doctors to prescribe say exorbitant prices are driving the increases in drug the drug, and their health-benefit plans often limit where private buyers. Officials at thefederal Health Care Financing inflated wholesale prices set by drug manufacturers.
are not “reasonably comparable” to the average lowestcost for the same drugs sold in the state to other Critics also say the pharmaceutical industry is among purchasers. An earlier version of the bill, which passed the most profitable in the nation and that the industry the Maine legislature but did not receive the governor’s exaggerates the cost of recouping R&D expenses. As approval, would have required Maine drug prices to be reported by Robin Strongin, Stephen Schondelmeyer of comparable to Canadian drug prices by October 2001.
the University of Minnesota School of Pharmacy Maine’s Sen. Pingree presented data to the Texas House estimated that for every $100 spent on a drug, roughly committee showing that, on average, consumers in $10 to $15 goes toward paying manufacturing costs, $20 Maine paid 72 percent higher prices for drugs than did toward R&D costs, $15 toward taxes and administrative their Canadian neighbors and more than twice as much costs, and $30 toward advertising and marketing, leaving The Maine legislation establishes a 12-member State Sen. Chellie Pingree of Maine told the Texas advisory commission to review drug pricing and access House committee that public taxes support more than issues that affect all state residents. It authorizes the half the cost of R&D, so there is no basis to drug state attorney general to seek civil remedies, injunctive manufacturers’ claims that they must recoup all R&D relief, and civil penalties of up to $100,000 per act of costs through pricing. Most critics say that part of the any manufacturer or distributor that demands an reason why U.S. drug costs are so high is that other “unconscionable price” or “unreasonable profit” or that countries are paying only for the manufacturing and intentionally prevents or limits the sale or distribution of production costs related to their own consumption, drugs in Maine because of drug price-control laws. As leaving U.S. consumers to pay for all R&D costs.
its rationale for limiting profiteering, the new law alsorecognizes the vulnerability of most citizens when HOUSE RESEARCH ORGANIZATION
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Interim News
purchasing drugs, stating: “Prescription drugs are a Industry representatives told the House committee that price controls, by reducing the industry’s recoveryof R&D costs, would reduce growth in the Texas economy Purchasing pools. Others suggest that Texas
related to the burgeoning biotechnology industry. Retail should optimize its purchasing power in the same way drug chains told the committee they are making only that large health plans and other purchasers do in about 2 percent net profits because of fierce competition negotiating prices with drug companies. Maine’s new and that price controls would hurt drug retailers more purchasing program, Maine Rx, will negotiate lower drug prices for its members, including people who areuninsured, elderly, on Medicaid, or whose benefit plans do Strongin of the National Health Policy Forum told not cover drug costs. The program seeks to achieve lower the committee that the United States leads the world in prices through manufacturer rebates and pharmacy developing new medicines and that U.S. companies discounts. The rebates will be deposited to a dedicated developed nearly half of the 152 major medicines fund that will be used to reimburse pharmacies for passing launched worldwide over the past 20 years. Industry on discounted prices to Maine Rx beneficiaries and to representatives emphasize that R&D expenditures are cover program and other administrative costs.
not only large but also risky because there is no Program, the Uniform Group Insurance Plan for state products to finance ongoing R&D.
employees, and the Teacher Retirement System’s health-benefit plan, TRS-Care. Rep. Patricia Gray, chair of the Industry backers also say that most studies comparing House Public Health Committee, said she had heard that U.S. drug prices with those of other countries overstate the State of Texas has more purchasing power than all of price differences because they do not account for Canada. Researchers from Boston University presented important factors such as greater use of generic drugs that information to the U.S. House Prescription Drug and the product-liability environment in the United States.
They also say that because foreign governments often act astheir country’s sole purchaser of drugs, manufacturershave little leverage to resist these governments’ demands Opposition to pricing changes
to pay only the manufacturing and production costsrelated to their own consumption.
Representatives and supporters of the pharmaceutical industry say competition is working efficiently in the Industry economists also say that price differentials marketplace and that price controls would undermine between the United States and other countries and essential R&D efforts and the high quality of care between different purchasing groups within the United received and expected in the United States. They say States actually create a public benefit. They say that that even though prescription drugs are playing a larger charging different customers different prices according role in treating health problems, drug costs still to what each is able to pay, called differential pricing, constitute a relatively small proportion of all health-care maximizes revenue for the seller by charging a lower price to price-sensitive (relatively less wealthy) customersand a higher price to price-insensitive (relatively wealthier) HOUSE RESEARCH ORGANIZATION
June 23, 2000
page 5
customers. If prices were set uniformly and covered all contribute to lower expenditures over the long term in costs, these economists say, price-sensitive customers other health-care areas, such as doctor visits and either could not afford the drugs or would have to pay hospitalizations, and to lower societal costs, such as lost prices that, in effect, subsidized wealthier customers.
wages or lost productivity due to health-related absences.
Therefore, they say, under differential pricing, more However, there is little data to support this belief.
people gain access to the drugs they need and allconsumers benefit, especially if the lower price includes Prescription drug usage also is increasing because of at least some contribution to R&D expenses. They say the emergence of “lifestyle” drugs such as Viagra, which that such differential pricing not only would allow more treats male sexual impotence, and Propecia, which treats poor people in places such as Mexico and African male hair loss. Some new drugs, often called “me-too” countries to buy drugs but also would help make the same drugs, are produced to compete with existing drugs to which they are pharmacologically similar but notidentical.
Finally, some industry experts say that drug prices may drop soon without government intervention because “Dosage creep” associated with the introduction of patents will expire for many new drugs around 2004. This new drugs also tends to increase drug usage. Marissa should increase competition by allowing a large number Schlaifer, a pharmacist representing the Texas Health of generic drugs to be produced and substituted for name- Plan Association, told the House committee that the brand drugs that now command high prices.
average prescription strength of a new drug often increasesthe more the drug is used. For example, Augmentin, anoral antibiotic, was introduced first in 1995 in two Factors that increase drug usage
strengths, 250 milligrams and 500 milligrams, whichthen were prescribed equally. Three years later, the most Most experts agree that drug usage is increasing as prescribed dosages were either 875 or 500 milligrams, new drugs and medical breakthroughs hit the market.
with minimal use of the 250-milligram dose. Dosage One study funded by the National Pharmaceutical Council creep, increasing average prescription strength, increases and published in Health Affairs found that most of the the drugs’ prices and therefore overall drug spending.
increase in drug expenditures is due to the greater volumeof drugs purchased rather than to drug prices.
Finally, many observers say that DTC advertising plays a large role in increasing patients’ demand for drugs.
One major factor in increased drug usage is the aging of the population. In Texas and the rest of the country, Managed-care plans and public health-benefit the elderly account for a growing percentage of the overall programs already use various methods to control drug population. They use more prescription drugs because of usage and costs. The questions at hand are whether and diseases and medical conditions associated with aging to what extent these controls may help achieve cost and a lifetime of lifestyle choices and environmental savings without sacrificing appropriate pharmaceutical factors. Robin Strongin told the House committee that treatment, whether controls used in the private sector the elderly account for about 12 percent of the overall may be applied to public-sector programs, and whether population but for 34 percent of all drug expenditures.
new controls are needed to meet contemporary trends,such as the introduction of “lifestyle” drugs and the Another major factor in increased usage is the emergence of new drugs that can treat medical conditionsthat formerly were untreatable without surgery or otherexpensive treatments. New drugs also are emerging to Proposed controls on usage
replace older drugs that are less expensive but alsoconsidered less effective. While these new drugs are Increase copayments. A common form of
increasing drug expenditures, they also are thought to controlling drug expenditures is to require the consumer HOUSE RESEARCH ORGANIZATION
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Interim News
to shoulder some costs, usually in the form of copayments, profitable name-brand drugs were behind a nationwide which are set fees that a consumer must pay out-of-pocket legislative push to make generic substitution more for each service or purchase without reimbursement by a difficult so they could retain their market share once health-benefit plan. According to Schlaifer, before 1973, health-benefit plan coverage for drug purchases wasinsignificant, but today it is considered a standard Use formularies. Health-benefit plans and PBMs
also control usage through formularies, which are lists ofpreferred prescription drugs. A closed formulary restricts Copayments are applied widely to drug benefits on coverage to the selected drugs and requires beneficiaries the assumption that they will make consumers cost- to pay the full cost of drugs not on the list. An open copayment levels to control drug expenditures and plan manufacturers in exchange for the inclusion of their costs. Starting in September 2000, ERS will keep generic drug copayments at $5 but will raise andrestructure name-brand copayments to $20 for drugs on Set caps on prescriptions. Some health-benefit
a list of ERS-preferred drugs and $35 for those not on plans contain their drug-related expenditures by setting a maximum dollar amount or number of prescriptions foreach beneficiary covered by the plan. For example, the Substitute generic drugs. Another way to control
Texas Medicaid program pays for a maximum of three usage is to encourage the purchase of lower-cost generic prescriptions per month per recipient.
drugs instead of their name-brand equivalents. Many planscreate incentives to do this by structuring copayments, as Control DTC advertising. The FDA requires all
in the example above, and by encouraging physicians to advertisements to be accurate and not misleading.
substitute, when possible, a generic drug for a name-brand Advertisements must include a summary of information about a drug’s side effects and effectiveness and a fairbalance of the benefits and risks of using the drug.
Last session, the Texas Legislature heard consumers’ However, drug manufacturers meet these broad concerns about switching from name-brand drugs to requirements in many ways, and critics say the FDA generics. Federal officials say that consumers need not does not have enough oversight and enforcement authority worry about switching among name-brand drugs and to make sure that consumers are receiving accurate, their generic equivalents because of the extensive tests unbiased, and beneficial information.
that generic drugs undergo for approved labeling andbecause of the FDA’s routine evaluations of the quality Critics say DTC advertising should be monitored of drugs in the marketplace and investigations of reported closely because consumers lack the technical knowledge problems. The FDA has uncovered no documented to evaluate the message and can be manipulated easily.
examples of a generic product manufactured to meet its They say such advertising can inspire false hopes, cause approved specifications that could not be used confusion or misperceptions about a drug’s effectiveness interchangeably with its name-brand equivalent. Critics or safety, and increase demand for new, costlier drugs of the industry say that some drug companies with when less costly drugs would be equally effective. DTC HOUSE RESEARCH ORGANIZATION
June 23, 2000
page 7
advertising, critics contend, can push more expensive plan. Usage controls, they say, most likely will not solve “me-too” drugs that offer few advantages over older the problem of improving access to needed pharmaceuticals drugs and have safety profiles that are less well for those without the resources to pay for them. Opponents understood. Also, they say, such advertising can promote also say that health-benefit plans and PBMs have little the idea of “a pill for every ill,” even when an alternative, incentive to strive for community or statewide health such as a dietary change, can be equally beneficial. Even improvements over the long term, because they are though patients must obtain prescriptions from their focused on profits and containing costs.
doctors, most doctors find it disagreeable to spend timecountering patients’ demands for a certain drug and Raising copayment requirements generally is viewed recommending alternative courses of action. Instead, as reducing a beneficiary’s health-benefit coverage and critics say, doctors often end up prescribing the demanded is particularly onerous on people with fixed incomes, name-brand drug if the patient’s health-benefit plan pays such as the elderly, or those with meager income growth.
for it and if using the drug would cause no harm.
If a copayment becomes too large, such people most likelywill postpone or avoid making even necessary drug Review drug usage. Drug utilization review (DUR)
purchases, or they may buy the drugs instead of paying programs use computer data bases to analyze patterns of another essential living expense. Opponents say that high a patient’s drug usage to guard against inappropriate use copayments defeat the purpose of a drug benefit, which of medications due to the patient’s medical condition, is to encourage the purchase of medically necessary age, and use of other medications and to profile physicians’ drugs that, in the long run, will prevent future medical prescribing practices and pharmacies’ dispensing practices.
conditions that are more expensive to treat.
DUR may be conducted prospectively, retrospectively,or at the time the pharmacist fills the prescription. Such Some consumers fear that not all generic drugs are reviews, proponents say, can improve quality of care, alike in their replication of a name-brand drug’s effects.
prevent unnecessary health costs, reduce drug interactions, Other critics of widespread use of generics say that and encourage physicians to prescribe less costly switching from a name-brand to a generic drug may increase a patient’s visits to the doctor to make sure thegeneric drug is working as effectively. Some also are Other methods of controlling drug usage and costs concerned that the differences in a generic drug’s color, include prior authorization — requiring a doctor to obtain size, or shape when compared to the name-brand drug can the incidence of hospitalization or complications in some slowing the adoption of new, more effective drugs and diseases, such as asthma and diabetes.
therapies. According to the Pharmaceutical Manufacturersand Research Association, a survey of Tennessee doctorsfound that two-thirds of the physicians who were forced Opposition to usage controls
to switch their patients’ medications because the drugswere not on a formulary said the switch caused problems Opponents say the benefits of usage controls are for patients. Also, opponents say, the private determination limited because they primarily affect consumers with of formularies by health-benefit plans and PBMs excludes some form of drug coverage through a health-benefit competing drugs and may not be acceptable for a publicly- HOUSE RESEARCH ORGANIZATION
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funded health-benefit program in which an open and fair off-formulary drug prescriptions increases physicians’ decision-making process is expected. In addition, drug administrative costs and burdens and often limits manufacturers and others could charge that the decision physicians’ choice and freedom in treating patients in to include a specific drug on a public plan’s formulary the manner they deem most effective and appropriate.
was based more on political pressures than on the drug’s Usage controls may be focused more on profit than on meeting the needs of sick patients, they say.
Critics say the most significant problem with caps on prescriptions or prescription coverage is that these Issues ahead
caps may be set arbitrarily and result in penalizingbeneficiaries who have medical needs that exceed the set Witnesses told the House Public Health Committee limit. They say that beneficiaries who exceed the set cap that conditions in the prescription drug market most likely usually end up paying higher prices on drugs, and elderly will change significantly if Congress enacts a drug benefit and low-income individuals often forgo the needed for Medicare beneficiaries. For example, because Medicare beneficiaries numbered more than 38.8 million in fiscal1998, the federal government would have tremendous Proponents of DTC advertising say it better educates power to negotiate lower prices with drug companies, patients about treatment options and that, because which could have either an upward or downward ripple physicians must prescribe the drugs, controls are in effect on the prices that state programs and private plans place to curb excessive or inappropriate usage. They say pay. Some say that if Congress does not enact a drug DTC advertising and consequent increased drug usage benefit, the difference between prices in the United States actually can decrease drug expenditures in some cases and those in Canada and Mexico will become a significant — for example, by informing untreated patients of the political issue, especially in border states such as Texas, existence of a helpful drug, thus preventing a disease or as the population ages and drug demands increase.
further medical complications. DTC advertising proponentsinsist that consumers today understand that advertisements The House committee also was told that ongoing are not the “last word” on any product, including drugs, studies conducted by private labs and the U.S. government and that consumers usually investigate more fully before to map the entire human genome or set of genes could taking medications, whether by researching on the Internet lead to new ways to address medical conditions and or by talking to their friends and doctors.
could cause radical changes in U.S. health-care practices,including reliance on prescription medications. For Opponents of DUR and similar controls say that the example, future gene-related therapies may prevent or reviews and subsequent mandates or incentives to reduce the medical problems associated with chronic or physicians to change prescribing patterns reduce congenital illnesses and disabilities, thereby reducing the physicians’authority and control over patient care. They need for some prescription medications.
say that the requirement to obtain prior authorization for by Kristie Zamrazil
June 23, 2000
page 9
Court Fees Will Pay for Trigger-Lock Program
Funding for Gov. George W. Bush’s plan to distribute juvenile-justice programs. Beyond that restriction, the CJD free child-safety locks for firearms will come from state has wide discretion in how it spends the funds.
funds appropriated to the Governor’s Criminal JusticeDivision (CJD) and distributed at the division’s discretion.
The remaining 80 percent of the division’s funds The money, part of the criminal justice planning fund, come from the federal government. Most of this money comes from court fees paid by people convicted of breaking is earmarked for specific types of projects or programs state laws. The CJD will receive about $46.4 million such as juvenile justice and delinquency prevention, safe and drug-free schools, or prevention of underage drinking.
Texas is one of about 20 states that use a statewide The governor’s program, announced in May 2000, agency to administer state criminal-justice funds and a will be set up as a multi-year grant to provide $1 million large block of federal criminal-justice grant funds, per year for five years for the locks, primarily for gun according to the CJD. Other states divide the responsibility owners whose firearms could be accessible to children.
The CJD is accepting applications from organizations todistribute the locks to local law enforcement agenciesand could award the grant by mid-July. Although the CJD projects
program is designed to last five years, funding beyondfiscal 2000-01 depends on future appropriations.
In fiscal 1998-99, the CJD distributed about $200 million in state and federal funds for local, regional, andstatewide projects. The division estimates that it will Funding sources
distribute more than that in the current biennium.
Government Code, sec. 772.006 establishes the CJD About 90 percent of the grants are awarded to local and lists 10 duties of the division, which include and regional projects and the rest are used for statewide administering the criminal justice planning fund, also projects, such as the new trigger-lock program. Other called Fund 421. Money in Fund 421, a general-revenue statewide projects include Project Spotlight, in which dedicated account, comes from court fees paid by people law-enforcement officers and probation officers work convicted of criminal offenses. For example, in general, together to supervise youths on probation in the state’s a person convicted of a felony pays a special court cost seven largest counties, and the Texas Exile program, of $80, a person convicted of a Class A or B misdemeanor which funds state prosecutors who work with federal pays $40, and a person convicted of an offense punishable officials to prosecute felons caught with illegal guns.
only by a fine pays $17, in addition to any fine assessedas a penalty for the offense. The CJD receives about 29 In general, funds for local projects are awarded percent of the fund, and the rest is divided among various through a grant process that includes community planning law-enforcement and criminal-justice programs specified teams formed by local councils of government (COGs).
in Code of Criminal Procedure, art. 102.075.
These teams can include law enforcement, juvenile justice,and mental health professionals. Each team ranks grant About 20 percent of the CJD’s funding comes from applications from its area, and the CJD distributes funds Fund 421. Code of Criminal Procedure, art. 102.056 by considering the rankings from the COGs. For statewide requires the Legislature to determine and appropriate the projects, the CJD directly considers and awards the funds, necessary amount from this fund to the CJD for spending some through a competitive grant process.
on state and local criminal-justice projects. The CJD mustallocate at least 20 percent of the Fund 421 money for by Kellie Dworaczyk
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(Guards, from page 1)
who previously received merit raises already were earningmore than the top salary for Group 11, Step 6 employees. In TDCJ estimates that on July 1, 2000, about 15,000 effect, this will allow all employees at the same pay grade correctional officers and 2,900 other employees with at to receive about the same percentage pay increase.
least 36 months of service will receive the raise. Another3,000 employees will become eligible for the highersalaries by August 31, 2001. These increases will raise Statutory authority
the amount paid for TDCJ salaries by nearly $36 millionover the amount budgeted in HB 1.
The governor’s authority to create new state- employee positions comes from Government Code, sec.
The governor’s order creating the Correctional 654.012(8)(A), which excludes from the state position Officer IV position expires August 31, 2001. This means classification plan employment by executive order of the that the position — and the pay increases that go with it governor. The classification plan groups most state- — will not be permanent unless the 77th Legislature employee positions into three job schedules for which salaries are set by the appropriations act.
This gubernatorial authority most often is used to Why an executive order?
create high-level or management positions in stateagencies. For example, in January 1999, Gov. Bush In his executive order, Gov. Bush said he was created eight senior manager positions for the General creating the position of Correctional Officer IV to Land Office at a maximum annual salary of $101,328. In provide for the retention of experienced correctional October 1998, he authorized three deputy directors for officers and to benefit public safety. Rather than grant the Texas Workers’ Compensation Commission at annual merit raises to approximately 18,000 employees, the governor and legislative leaders instead agreed to createa new position at a higher salary.
In SB 174 by Ratliff, the 76th Legislature codified provisions about exempt positions created by the governor Article 9 of HB 1 placed correctional officers with that previously were in the general appropriations act.
higher seniority (Correctional Officer III) in Schedule A, Government Code, sec. 654.0125 prohibits the use of Group 11 of the state classification salary schedule.
appropriated funds to pay the salary of a person in an Rider 11 for the TDCJ budget caps correctional officers exempt position created by the governor unless it is a at Step 6 of this salary group, so that after 20 months on bona-fide new position that was established to accomplish the job, a guard’s annual salary tops out at $26,724. The duties that were not anticipated and therefore not funded governor’s order creates another step in the career ladder under the appropriations act. The statute also prohibits for correctional officers with at least 36 months of service the creation of new positions solely to adjust the salary and, in general, sets their maximum salary at $28,380, an In a statement released with the executive order, The governor’s order also allows the salaries of some Gov. Bush said, “I am pleased to sign the executive correctional officers in the new position to exceed $28,380 order creating a new guard position. I believe this by authorizing salaries up to 6.1 percent higher than the immediate pay increase is justified and will improve the employee was earning on the date of promotion to the recruitment and retention of guards.” The governor also new position. This will apply to about 432 Correctional certified that the position created was a bona-fide new Officer IIIs who previously had received merit raises position. The letter from the governor, lieutenant from TDCJ. Under Rider 11, only correctional officers governor, and House speaker to the chairman of the and sergeants who are receiving the highest salary allowed Texas Board of Criminal Justice calls the new position by the career ladder are eligible for merit raises. Those “an additional career ladder opportunity.” HOUSE RESEARCH ORGANIZATION
June 23, 2000
page 11
Raises for sergeants and other employees
other emergencies occur, including expendituresnecessitated by public safety.
As authorized by the governor and legislative leaders, TDCJ also will increase the salaries of sergeants and of These fund transfers must receive the prior approval some food-service and laundry managers.
of the governor and Legislative Budget Board (LBB).
Because the salary increases do not take effect until July Under TDCJ policy, sergeants, who fall in the B5 1, TDCJ has not yet requested formal approval. The salary group under the appropriations act, now earn a agency says it expects to make the formal request later.
salary of $28,380. State leaders authorized TDCJ to give During fiscal 2000-01, the agency also will seek additional sergeants a one-step increase of $965, about 3 percent, funds to address a larger-than-anticipated need for prison bringing their salary to $29,345. TDCJ says the increase for sergeants is necessary to maintain a difference in thesalaries of sergeants and the newly created Correctional To cover the additional salary costs for fiscal 2001, TDCJ anticipates requesting an emergency appropriationwhen the 77th Legislature convenes in 2001. TDCJ often As authorized by the governor, lieutenant governor, receives emergency appropriations when prison populations and House speaker, food-service and laundry managers are greater than projected, including one of $26.7 million in with at least 36 months of service will receive a two-step March 1999 for additional prison capacity and contracts increase from their current salaries, which are limited to with counties to provide temporary capacity.
specific steps in the Schedule A classification. Currently,Food Service Manager IIs (Group A13) average $26,724 So far, the governor and LBB have not used their annually; Food Service Manager IIIs (Group A16), budget execution authority to authorize a spending shift $31,068; Laundry Manager IIs (Group A11), $25,176; to pay for the raises because TDCJ already has authority and Laundry Manager IIIs (Group A14), $27,540.
under its Rider 55 to “spend forward” and plans to make Increases for these positions will range from $1,548 to up any shortfall with an emergency appropriation next $1,920 annually. TDCJ says these workers will receive year. Budget execution authority allows the governor raises because, like correctional officers, they are and LBB, acting together, to make certain changes in uniformed, trained personnel who supervise and guard state agency appropriations when the Legislature is not inmates working in prison kitchens and laundries.
in session. (For more details, see Writing the StateBudget, House Research Organization State FinanceReport No. 76-1, February 19, 1999.) A budget execution Paying for the raises
order may prohibit an agency from spending funds, changethe purpose for an appropriation, change the time that an With the salary increases, TDCJ’s spending on appropriation is distributed to an agency, or transfer an salaries for fiscal 2000-01 will be about $35.7 million appropriation from one agency to another.
higher than the amount appropriated by the 76thLegislature. The executive order, which takes effect July Other agencies, such as the Texas Department of 1, 2000, will result in additional spending of about $5.1 Mental Health and Mental Retardation and the Texas million in fiscal 2000 and $30.6 million in fiscal 2001.
Commission on Alcohol and Drug Abuse, are anticipatingbudget shortfalls in certain areas or programs. So far, these For fiscal 2000, TDCJ plans to make up the needed agencies have handled the shortfalls by shifting money amount by spending money appropriated for fiscal 2001.
within their budgets or from other health and human Rider 55 of TDCJ’s section of the appropriations act services agencies as authorized by HB 1.
authorizes the agency to transfer appropriations of up to$150 million from fiscal 2001 to 2000 if correctionalpopulations exceed the department’s capacity, the amount by Kellie Dworaczyk
of certain federal funds is not as large as expected, or HOUSE RESEARCH ORGANIZATION
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Interim News
Steering Committee:
Tom Whatley, Director; Greg Martin, Editor; Rita Barr, Office Manager; Kellie Dworaczyk, Patrick K. Graves, Hope E. Wells, Kristie Zamrazil,Research Analysts


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