Opinion: WA Cares needs all the help it can get

Bitcoins Elizabeth New (Hovde) says that help includes an assist from SJR 8201 on Nov. ballot

Elizabeth New (Hovde)
Washington Policy Center

Senate Joint Resolution 8201 is related to the misguided WA Cares Fund, but it has nothing to do with whether or not you like the fund. It’s a question asking voters whether the state should be allowed to invest WA Cares dollars in more ways than it can now, with hopes of stronger fund growth.

WA Cares comes with a payroll tax of 58 cents on every $100 that W-2 workers earn in their working years — for a benefit many of them will never see. The Washington state tax is mandatory, and it has staying power, especially after voters last year failed to pass an initiative that would have made the long-term care program optional. SJR 8201 doesn’t change any of that, unfortunately. Instead, the question before voters in November is purely financial: Should the state continue limiting WA Cares dollars to ultra-safe, low-return government bonds and certificates of deposit, or should it allow those funds to be invested in diversified portfolios that see better growth?

Right now, the state constitution bars most public money from being invested in the stock of private companies. It’s a century-old restriction from the horse-and-buggy era of finance — long before diversified portfolios, index funds or even the Federal Reserve existed. The rule has been lifted for the state’s pension and industrial insurance funds, which are well managed by the Washington State Investment Board (WSIB) — one of the most respected fiduciary institutions in the nation.

The change proposed by SJR 8201 would simply add the WA Cares Fund to that list. The idea passed the Legislature with strong bipartisan support — 42–7 in the Senate and 86–9 in the House. Democratic Governor Bob Ferguson and Senate Republican Leader John Braun, R-Centralia, agree on the issue. They say in the official voters’ pamphlet that this is a common-sense measure that costs taxpayers nothing (unlike WA Cares itself) and that SJR 8201 ensures tax dollars go further.

Not everyone agrees the government should be putting taxpayer money in private stocks and corporations. In the statement against SJR 8201, some lawmakers point out that the market is more volatile than they are comfortable with. I get that concern. But this isn’t about a casino bet with taxpayer dollars. It’s about letting the same professional board that invests teacher and firefighter pensions — at an average 8% annual return over 25 years — manage a $2 billion WA Cares fund that currently has a projected 4% return over the next 30 years under current restrictions. WSIB also must follow state law “to maximize return at a prudent level of risk.”

As former WSIB chief investment officer Gary Bruebaker and public finance veteran Steven Hill say in an opinion in The News Tribune, “We can say with confidence that a diversified portfolio is far more advantageous than relying on low-return government bonds and treasury bills — from both a risk and return perspective.” 

Their experience backs the numbers: An additional one or two percentage points of annual return could mean an extra $67 billion to $113 billion for the fund over 50 years — money that could help protect taxpayers from future payroll-tax hikes and sustain overpromised benefits, which have been said to be unsustainable at different times since 2019.

WA Cares will need every bit of that help. The program’s design struggles not only with fairness but with solvency. And like the state’s Paid Family and Medical Leave program, which saw its payroll tax more than double in five years, WA Cares could easily see its 0.58% rate balloon if investment returns lag or claims rise faster than expected. Between the two programs, full-time workers in Washington state pay hundreds and thousands in payroll deductions for benefits that not everyone will receive and that will sometimes flow to those who don’t need taxpayer-funded support. (See your annual wages sent to WA Cares and PFML each year here.)

Allowing the WSIB to manage the WA Cares fund doesn’t fix those structural problems, but it gives the program a fighting chance to pay benefits earned without constantly dipping deeper into workers’ paychecks. It lets WSIB professionals do their job of investing prudently for sustainable growth, just as they do for other long-term trusts in the state.

So, whether you think WA Cares is visionary or a mistake (I vote “unfair mistake”), SJR 8201 is worthy of consideration. The ballot measure is not about politics, it’s about stewardship and making sure money taken from workers’ paychecks works as hard as they do.

Elizabeth New (Hovde) is a policy analyst and the director of the Centers for Health Care and Worker Rights at the Washington Policy Center. She is a Clark County resident.