As the state hits pause on the long-term care program, Washington’s Paid Family and Medical Leave program may provide a cautionary tale regarding entitlements. The Washington Research Council has been following recent events and has two posts we want to call to your attention. We’ll quote a few bits here, but suggest you dig into the WRC posts for more information.
At a Ways & Means (W&M) Committee work session on Jan. 18, the Employment Security Department (ESD) provided an update on the paid family and medical leave program. According to the update, “ESD is currently concerned about the fund’s solvency.” They expect the account to have a cash deficit in March or April. (As I’ve noted, the premium rate for the program was increased to 0.6% for 2022, but the increased premiums aren’t due until April.)
WRC senior analyst Emily Making has some charts showing premium projections and how the account has been drawn down. She adds,
Gov. Inslee’s budget proposal would appropriate $82.0 million from the general fund–state, if needed to keep the family and medical leave insurance (FMLI) account from being in deficit. At the W&M meeting, ESD noted that November payments were about $90 million and December payments were a bit less than that. ESD said that a three-month reserve would be ideal over the long run, but that for now, the one-month reserve included in Gov. Inslee’s budget would be sufficient. However, at the Jan. 26 meeting, ESD said that, at this point, they don’t know if the $82 million would be enough.
Additionally, at the W&M meeting, ESD said that as they were developing the rate increase for 2022, they realized that it was “difficult to project the fund balance very far out into the future.” They expect to have an actuary hired in March who would help with projections and provide “some options for potentially changing the rate structure.” (Gov. Inslee’s budget proposal includes $100,000 from the FMLI account for an actuary “to conduct a market analysis of the Paid Family and Medical Leave program and to perform five enrollment and fund solvency projections annually.”)
In developing the PFML program, the state relied on microsimulation models. This work indicated that a 0.4% premium rate would cover program costs in a given year, but there doesn’t appear to have been an actuarial analysis looking at whether the adopted rate structure would be sufficient over the long run.
Her next post gets into that a bit more.
In response to the emerging paid family and medical leave (PFML) program financial situation, legislators have modified SB 5649. Originally, the bill would have made various benefit changes to the program.
Yesterday the Senate Labor, Commerce & Tribal Affairs Committee approved a substitute bill that would make fewer benefit changes and would add several actuarial and reporting requirements related to the family and medical leave insurance (FMLI) account.
She details the changes in her brief post.
Again, cautionary. It’s easier to launch a new entitlement program than to plan for and ensure it’s long-term sustainability.