A unique bankruptcy dispute concerning Kentucky’s underfunded public pension system won’t be resolved in the federal courts alone, according to a Wall Street Journal commentary. Instead, Kentucky’s highest state court will decide whether employers can use U.S. bankruptcy law to exit the Kentucky Employees Retirement System, a question with enormous consequences for retirees and taxpayers in the Bluegrass State. The dispute concerns Seven Counties Services Inc., a network of mental and behavioral health clinics dating to the 1960s that took over services previously provided by the state. Seven Counties became part of KERS to offer employees, most of whom had worked for the state, an attractive retirement option. As recently as 2000, KERS had all the cash it needed to meet its promises to future retirees. But after years of inadequate contributions by the state, the flagship pension fund for employees who aren’t in hazardous jobs now estimates its assets will cover just 13.6 percent of what it owes retirees, a $27 billion financial hole that weighs heavily on Kentucky’s finances.
