State has already spent $1.2 million trying to force charitable agency to remain in the public pension system

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The state already has spent $1.2 million trying to keep Seven County Services, a mental health agency – from leaving the Kentucky Retirement Systems.

U.S. Bankruptcy Judge Joan A. Lloyd, who granted the agency’s request to leave the system, summed it up in her 83-page opinion when she said that the agency cannot continue to both make huge pension payments to the public system while still providing mental-health services to its 32,000 clients.

“Seven counties can perform its charitable mission or pay System contributions that will force it to terminate operations. It cannot do both,” Lloyd wrote.

The Bluegrass Institute warned in its recent “Future Shock” series of reports that by allowing nonpublic entities to mooch at the taxpayer-funded public pension trough, some state politicians may have reaped some short-term political benefits, the long-term consequences could be staggering.

The state estimates that the permanent exit of Seven Counties and its 14,000 employees from KRS would cost the pension system an additional $2.4 billion over the next 20 years. And this doesn’t include all of the other nonpublic agencies that no doubt are looking for a way to escape strangling pension payments.

State officials say they are considering an appeal of the judge’s ruling. Even if they are allowed to do so, what do they hope to gain? If they force Seven Counties to remain in the system and the agency is no longer able to provide services, it will likely be the same – or even a worse – outcome.