The Kentucky Supreme Court has ruled that a nonprofit mental health provider can’t use bankruptcy to escape its financial obligations to the state pension system.
The unanimous ruling on Thursday could help protect the financial viability of one of the country’s worst-funded public pension systems. Louisville mental health provider Centerstone owes an estimated $130 million to the Kentucky Retirement Systems, which manages the state’s pension fund.
The court ruled that Centerstone had a statutory obligation to pay into the system, which bankruptcy does not erase. Centerstone had argued that it had a contractual obligation.
A concern for state officials was whether other nonprofits remaining in the system would use bankruptcy to leave if the Supreme Court ruled in favor of Centerstone.
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