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Kentucky Ends Contract With Non-Profit Looking to Get Out of State Pension System

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Last month, a judge ruled that Kentucky-based non-profit Seven Counties Services could legally remove itself from the state’s pension system. But lawmakers aren’t happy with the pension obligations—allegedly to the tune of $90 million—that the organization is leaving behind.

Seven Counties, a group that provides fostering and other family services, filed for bankruptcy in 2013, and as part of the proceedings they were hoping to get out of Kentucky’s pension system to avoid increasing contributions. The judge allowed the maneuver.

But now, angry lawmakers seem to not want the organization in the state at all. They chose not to renew Seven Counties’ contract with the state. From the Courier-Journal:

Prompted by angry legislators, state officials agreed Friday to jettison a $3.7 million contract with Seven Counties Services as the agency continues efforts to exit Kentucky’s underfunded pension system.

The contract provided family preservation services in the Louisville area, using in-home counselors to help families in crisis with the aim of keeping children at home or reuniting them with parents.

It will remain effective through Oct. 31 as families and children are transitioned, and officials “will move with all due haste” to execute a contract with a new provider, according to a letter from the Cabinet for Health and Family Services.

Seven Counties has provided the services for decades, and warned that cancelling the contract would harm at-risk children and around 300 families that participate in the program.

But last week, the Government Contract Review Committee rejected a proposal to renew the deal for two more years after lawmakers cited concerns over Seven Counties’ high-profile bankruptcy case.

Lawmakers are concerned that if the Seven Counties ruling stands, other state agencies will rush to get out of the state’s pension system. That would mean less contributions coming into the system.

From WFPL:

The state would have to cover $2.5 billion in unpaid pension obligations, Kentucky Retirement Systems executive director Bill Thielen said.

“The actuaries have determined it would increase the contribution rate over a 20 year period, it would ratchet up a little bit each year over 20 years about 6.5 percent, which would amount to about $2.4 billion of additional moneys over the 20 year period that would have to be picked up by the remaining employers in the system,” Thielen said.

In that vein, the contract non-renewal sets a precedent for other groups looking to follow in Seven Counties’ footsteps: if you leave the pension system, you leave the state too.

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