How Seven Counties Services is illustrating for lawmakers why they could not keep paying into the pension system

08/27/2014 06:43 PM

Representatives for mental health provider Seven Counties Services have been making the rounds in Frankfort to plead their case to lawmakers threatening to take away contracts if the quasi-governmental agency does not pay pension liabilities, but part of what Seven Counties representatives are doing when meeting with lawmakers is explaining just why they had to make the difficult decision to leave the retirement system.

Part of how Seven Counties is explaining their fiscal debacle is through a graph which shows revenue and expenses and then breaks down those financials with-and-without their pension payments, and for illustration purposes the full actuarial required contribution.

The graph which has been handed out to legislators shows the financials of Seven Counties since 2011 operating at a $669,254 deficit. With increasing pension contributions in 2013 Seven Counties was looking at a $1.6 million dollar loss.

Rather than going into the red into the millions, Seven Counties stopped paying into the retirement system in April of 2013 — just three months before the end of the fiscal year. The mental health agency still finished the fiscal year at a loss of $115,000 but avoided a major hit.

The agency finished fiscal year 2014 with $1.2 million in the black, but would have run an $11 million deficit according to their budgetary analysis, had they kept paying the retirement system.

The internal pressures on Seven Counties are complicated and confusing as the company’s chief financial officer Abbreial Drane explained to Pure Politics even without the additional pressures the company would not have been able to stay afloat financially.

“The increase in the employer contribution requirement along with the transition into managed care in Kentucky created a perfect storm,” Drane told Pure Politics. “Even if we had not had the negative financial impact from the transition into managed care, within 18 months Seven Counties still would have faced a going concern issue.”

Seven Counties stopped paying into the Kentucky Retirement System in April of 2013 as their contribution rates into the struggling funds grew to 40 percent of their budget. But, the issues were also compounded with billing problems with managed care organizations resulting in $1.5 million in additional operating expenses.

Drane said Seven Counties tried to stem the tide and deliver as many services as possible while still protecting the staff.

Seven Counties filed for bankruptcy protection in April of 2013 .

Representatives for Seven Counties have been talking with lawmakers on the contract review committee in an effort to keep contracts in place with the Cabinet for Health and Family Services to provide care for Kentuckians.

The contract review committee has revoked one state contract known as the Family Preservation Program which Seven Counties said provides intensive in home and family services designed to keep families together and preserve home placements for children who are in crisis.

Seven Counties is one of Kentucky’s largest providers serving more than 30,000 adults and children in the Louisville area.

The decision by a federal judge allowing Seven Counties to exit the pension system is being challenged in appeals court by the Kentucky Retirement Systems.


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