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And You Thought Welfare Systems Serve the Poor?

In an article at National Review Online, posted Saturday, Kevin Williamson writes about "Kentucky's runaway pensions," highlighting a non-profit organization named Seven Counties that "that provides mental-health services in the Louisville area, and it was just bankrupted by the Kentucky state pension system." Here's the background. according to Williamson:

"Though it is not a state agency, Seven Counties joined the state pension system, Kentucky Retirement Systems (KRS), in 1979. It must have sounded like a good idea at the time, and it was in fact a great deal for many years. Like practically every other government-run pension system in the country, KRS provided generous benefits to state workers, and employees of Seven Counties, too. At the same time, they have done very little to secure its ability to meet the attendant profligate financial promises. It’s a win-win for the political class: Public-sector employees earn inflated retirement benefits, but taxpayers don’t get dinged for it immediately, because that compensation is pushed off into the future. And then the bill comes due.

"Seven Counties alone is now responsible for a $227 million shortfall in its pension funding, an amount that the organization’s president, Anthony Zipple, says it could not pay in “200 years.” That is not quite true: The nonprofit’s three highest-paid employees take home nearly $1 million a year by themselves, almost enough to cover the deficit over the period of time stated. Chew on that for a second: As I argued in The Dependency Agenda, the real beneficiaries of the welfare state are the high-income contractors who provide government-funded social services. Here we have a nonprofit that is funded mostly by Medicaid, supplemented by other taxpayer-derived sources, with an employee paid more than $325,000 a year. Who says Medicaid is a program for poor people? (emphasis added)

"It will not surprise you that Mr. Zipple said that his biggest concern about health-care reform is that it would prove “too timid,” nor will it surprise you that 100 percent of the 2012 political donations from Seven Counties employees disclosed at OpenSecrets.Org went to Barack Obama, or that 100 percent of their donations in earlier years went to Democratic candidates and Emily’s List."

For the record, let me further highlight a portion of Williamsson's article (again with emphasis added):

"As I argued in The Dependency Agenda, the real beneficiaries of the welfare state are the high-income contractors who provide government-funded social services. Here we have a nonprofit that is funded mostly by Medicaid, supplemented by other taxpayer-derived sources, with an employee paid more than $325,000 a year. Who says Medicaid is a program for poor people?

To close the story about the Seven Counties pension saga, Williamson notes that "Kentucky enacted a sham pension reform in 2008," and another "more robust pension-reform bill was signed in March" that would result in pension fund payments "that more closely reflect their underlying liabilities." Seven Counties payments would increase from $9.5 million to $15.5 million. However, "(f)aced with that reality, the nonprofit announced Friday that it would file for bankruptcy."

The story of Kentucky's pension system gets worse, and you can read about it by going to the online story, but I wanted to emphasize the portion showing who really benefits from most welfare systems. It's one thing to help the truly needy, but completely another thing when those systems are abused. Kudos to Kevin Williamson for writing the article about Seven Counties and Kentucky's pension system.

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