Human Resource Management ed 16, Chapter 12, page 445 Houston is among several cities facing major issues funding their employee pension benefits. With oil prices falling over the past few years, the city's coffers have been negatively affected. Voters recently approved a cap on property taxes in Texas' largest city. This means city officials will have difficulty raising enough revenue to pay all the city's costs. Houston's problems are echoed in Dallas, which has similar issues. City employees, firefighters, and police officers are members of various labor unions with collective bargaining agreements that include substantial defined benefit retirement payments. Changing the benefit structure requires negotiating with the labor unions and the membership agreement. Since the benefits have been a part of employee compensation schemes for many years, it can be difficult to obtain their agreement on lowering their pension payments. Houston and Dallas city officials have not made payments to their pension funds at a sufficient level to adequately fund employee pension obligations. Houston underfunded its pension over the past few years by nearly $100 million. Dallas is a smaller city than Houston, and the government tried to issue bonds and reduce benefits to cover its shortfall. However, employees and their union representatives rejected that approach. Houston city officials were able to strike a deal that included employees contributing to the pension plan and accepting lower benefits. The inevitability of a financial crisis in Houston allowed city leaders to agree to share the burden of getting the pension plan in reasonable financial condition. Since pension obligations are so extensive, these two Texas cities have found it difficult to hire police reduce benefits to cover its shortfall. However, employees and their union representatives rejected that approach. Houston city officials were able to strike a deal that included employees contributing to the pension plan and accepting lower benefits. The inevitability of a financial crisis in Houston allowed city leaders to agree to share the burden of getting the pension plan in reasonable financial condition. Since pension obligations are so extensive, these two Texas cities have found it difficult to hire police officers, repair potholes, and carry out other routine operations. In addition to the ballooning obligation, investment returns have fallen short of expectations. In recent years, most investment funds have been earned far below the 8 percent built into funding plans. This increases the gap between the funds available and the benefits promised. For instance, Chicago city officials' inability to address their pension funding gap means that the city can pay for only one-quarter of its promised benefits. Therefore, Houston and Dallas can see what will come next if they cannot address their funding gap in public pensions. 2. How would you evaluate the effectiveness of GPS? What about Leaders.
Human Resource Management ed 16- Chapter 12- page 445 Houston is among.docx
1. Human Resource Management ed 16, Chapter 12, page 445 Houston is among several cities
facing major issues funding their employee pension benefits. With oil prices falling over the past
few years, the city's coffers have been negatively affected. Voters recently approved a cap on
property taxes in Texas' largest city. This means city officials will have difficulty raising enough
revenue to pay all the city's costs. Houston's problems are echoed in Dallas, which has similar
issues. City employees, firefighters, and police officers are members of various labor unions with
collective bargaining agreements that include substantial defined benefit retirement payments.
Changing the benefit structure requires negotiating with the labor unions and the membership
agreement. Since the benefits have been a part of employee compensation schemes for many
years, it can be difficult to obtain their agreement on lowering their pension payments. Houston
and Dallas city officials have not made payments to their pension funds at a sufficient level to
adequately fund employee pension obligations. Houston underfunded its pension over the past
few years by nearly $100 million. Dallas is a smaller city than Houston, and the government tried
to issue bonds and reduce benefits to cover its shortfall. However, employees and their union
representatives rejected that approach. Houston city officials were able to strike a deal that
included employees contributing to the pension plan and accepting lower benefits. The
inevitability of a financial crisis in Houston allowed city leaders to agree to share the burden of
getting the pension plan in reasonable financial condition. Since pension obligations are so
extensive, these two Texas cities have found it difficult to hire police reduce benefits to cover its
shortfall. However, employees and their union representatives rejected that approach. Houston
city officials were able to strike a deal that included employees contributing to the pension plan
and accepting lower benefits. The inevitability of a financial crisis in Houston allowed city
leaders to agree to share the burden of getting the pension plan in reasonable financial condition.
Since pension obligations are so extensive, these two Texas cities have found it difficult to hire
police officers, repair potholes, and carry out other routine operations. In addition to the
ballooning obligation, investment returns have fallen short of expectations. In recent years, most
investment funds have been earned far below the 8 percent built into funding plans. This
increases the gap between the funds available and the benefits promised. For instance, Chicago
city officials' inability to address their pension funding gap means that the city can pay for only
one-quarter of its promised benefits. Therefore, Houston and Dallas can see what will come next
if they cannot address their funding gap in public pensions. 2. How would you evaluate the
effectiveness of GPS? What about Leadership in Action? How could these programs be
improved? 3. How might you use leadership circles to faciltate other forms of talent development
in organizations? Would this approach work well in certain companies over others?
