An Open Letter to Our Community
Updated March 2014
For 36 years, Seven Counties Services, Inc. has created hope and delivered solutions to persons in our community who are affected by mental illness, developmental disabilities, addiction, trauma and abuse. We employ 1,100 health care, support and administrative staff, serving more than 31,000 individuals and families each year. The services our customers count on are threatened by the burden of unsustainable mandatory employer contribution rates imposed by the Kentucky Employees Retirement System (KERS).
For years, Seven Counties has tried to resolve this burden through direct appeals to and meetings with KERS and through legislative and other administrative action, all to no avail. Therefore, on April 5, 2013, Seven Counties filed for Chapter 11 protection with the United States Bankruptcy Court, Western District of Kentucky. Seven Counties is asking the court to allow it to replace the KERS retirement plan with a stable, affordable plan for our employees. This will allow us to protect the vital services we provide and the interests of all those we serve. Seven Counties takes this action with a serious understanding of our responsibility to the thousands in our community who deal with mental illness, addictions, developmental and intellectual disabilities.
Kentucky’s community mental health centers, like Seven Counties, were created in 1966 as not-for-profit entities, rather than government agencies. Although not public employees, Seven Counties’ staff joined the system, through Executive Order, as an effort to make difficult and low-wage positions more attractive to qualified candidates. Kentucky’s state pension system now faces a $33 billion deficit. Legislative and Executive branch officials approved a schedule of sharp increases in the employer contribution rate in an attempt to save the system. The employer contribution rate climbed from 5.89% of wages in 2006 to an astonishing 26.79% in the current fiscal year. It will rise again to a whopping 39% on July 1, 2014.
Senate Bill 2 and HB 440, the 2013 General Assembly’s attempts to address the actuarial deficits of the Kentucky Retirement Systems, while commendable, do not reduce existing deficits nor projected contribution rates. They do not alter Seven Counties’ dire circumstances.
Five years ago, Seven Counties’ corporate contribution for KERS was $3.49 million – 4.3% of its overall budget. Last year, $13.8 million or 13% of the entire budget went to KERS. At a 40% rate, the KERS required contribution would eat up approximately 20% of our entire budget. Clearly, this is not a sustainable contribution level for any company.
Although the KERS employer contribution rates have increased over the past six years, state support for our services has not increased in more than 16 years. The introduction of Medicaid managed care has resulted in a drastic drop in revenue for services provided. These compound the KERS problem, contributing to a projected operating loss of more than $2 million for the fiscal year ending June 30, 2013. The projected loss for FY 14 jumps to $8.5 million. Without relief, all of our cash reserves will be wiped out in 12 to 18 months.
For the past 35 years, Seven Counties made every required contribution to KERS. We have kept our end of the bargain to our employees and to the system. We have cut services and reduced employee benefits, including making significant cuts to employee health and disability benefits. We have frozen employees’ pay rates, delayed much needed improvements and examined every area of spending in our attempt to balance the books. We cannot afford to operate under these circumstances, paying a benefit that will soon be ten times the industry standard.
Our consumers need and deserve better. And we intend to be here to make sure that they continue to be served!
Seven Counties is not going out of business. We have continued the operation of all services and all service locations since our filing almost one year ago. We look forward to continuing to serve you, your friends, your family, and our community.
Anthony M. Zipple, Sc.D., MBA President & CEO
David Holton Chair, Board of Directors
DECEMBER 8, 2014
Seven Counties Services Disclosure Statement Approved by
Creditors requested to support Seven Counties Services
First Amended Plan of Reorganization
by Voting FOR the plan
through December 30, 2014
All General Unsecured Creditors set to receive 100% of allowed claims.
Anthony Zipple, President & CEO of Seven Counties Services mailed the following letter to all Seven Counties Services Creditors:
We are pleased to announce the Bankruptcy Court’s approval of Seven Counties Services’ Disclosure Statement concerning the proposed plan of reorganization. Approval of the Disclosure Statement is an important first step in the process, but now we request your support of confirming Seven Counties Services’ First Amended Plan of Reorganization (the “Plan”) so we can emerge from chapter 11 bankruptcy a stronger and more stable organization.
To show your support for the Plan and continuation of mental health, addiction treatment, and developmental and intellectual disabilities services vital to the community, please vote to accept the Plan by completing and submitting the ballots found on the Plan Documents page of this website by December 30, 2014.
In order that you may make an informed decision regarding the Plan, our bankruptcy counsel, Seiller Waterman LLC, has made the Disclosure Statement, Plan, and other important documents available for view or download on the Plan Documents page . Ballots for voting to accept or reject the Plan are also available on the Plan Documents page.
Seven Counties Services believes that the Plan provides creditors with the opportunity to maximize their recovery. Under the Plan, general unsecured creditors will receive payments equal to 100% of their allowed claims within six (6) months of the effective date of the Plan. Seven Counties hopes that you are as pleased as we are with the opportunity for a full recovery, an unusual outcome for a Chapter 11 reorganization.
In order for your vote to be counted, your ballot must be received by Seiller Waterman LLC no later than December 30, 2014. We thank you for your support.
Anthony Zipple, Sc.D., MBA
Seven Counties Services, Inc., CEO
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