William Isemann, chief executive officer of KidsPeace, blamed the move on the non-profit's $101 million in pension obligations, The Morning Call newspaper in Allentown, Pa., reported.
At its peak in 2006, KidsPeace was a $170 million-a-year organization serving 5,000 youths in 10 states. More than 400 patients were in residential treatment at KidsPeace headquarters in the Allentown area.
The bankruptcy filing didn't lead to layoffs and wouldn't affect services at the 130-year-old organization, which provides treatment to about 2,000 children in 10 states. In the Allentown area, KidsPeace provides education and counseling services to about 200 children living in residence halls with an additional 70-90 getting inpatient care at its hospital for children needing more intensive treatment, Isemann said.
It wasn't immediately clear, however, how pensions would fare in the process. Last year documents obtained by The Morning Call listed the pension fund as $42 million underfunded in 2010.
The recession contributed to the underfunding of the pension fund but in 2007 a review of KidsPeace operations by the Pennsylvania Department of Public Welfare determined KidsPeace counselors used force in restraining out-of-control youths. This review led the state to temporarily halt new admissions to KidsPeace's Orefield campus programs and KidsPeace revised its restraint policy.
Isemann arrived at that time pledging to reform policies and to take in fewer violent youths but the new policies caused the population at KidsPeace to plummet, reducing reimbursements, The Morning Call said.
Since then, government funding cuts and growing pension payments resulted in layoffs and budget cuts of tens of millions of dollars.