Washington state boasts one of the strongest public pension systems in the nation, but recent legislative changes and mixed funding levels across plans are raising concerns about long-term taxpayer liability. While some retirement funds are projected to be overfunded, others still carry substantial unfunded liabilities, leading to a growing debate over investment assumptions and contribution rates.
During this year’s session, lawmakers passed Senate Bill 5357, raising the assumed rate of return on pension investments from 7% to 7.25%. The change allowed legislators to avoid additional payments into the system without affecting current unfunded liabilities. Critics argue that the move increases financial risk over time.
Emmett Mills, Legislative Coordinator for the Washington State School Retirees’ Association, said raising the assumed return is a troubling precedent. “Under investing could cost taxpayers billions of dollars while also putting retirement security at risk,” Mills warned. He cited historical precedent from the early 2000s, when underfunding during strong markets left the system exposed during the Great Recession.
Despite confidence in the state’s investment board, Mills believes lawmakers are underestimating potential long-term consequences. If returns fall short of expectations, taxpayers could be forced to cover massive shortfalls or even face reductions in promised benefits.
Meanwhile, plans like PERS 1 and TRS 1, both closed decades ago, still carry unfunded liabilities. In contrast, other plans in the system are projected to be overfunded. This imbalance has led stakeholders like Candice Bock of the Association of Washington Cities to urge caution. She warned against overfunding already stable plans at the expense of current public services, noting that surplus pension funds cannot be reclaimed once committed.
Additional disagreement emerged at a recent Pension Funding Council meeting, where lawmakers clashed over whether to adopt higher long-term inflation assumptions as recommended by the Office of the State Actuary. Sen. Chris Gildon (R-Puyallup) supported maintaining conservative projections, arguing that underfunding now will only increase costs later.
Legislative proposals to address funding disparities have so far stalled. Senate Bill 5085, introduced by Sen. June Robinson (D-Everett), sought to consolidate older plans to reduce payment obligations, but it failed to advance. Another measure, House Bill 2034, proposed transferring a $3 billion surplus from the LEOFF 1 plan to the general fund. It also did not pass.
With multiple plans facing opposite funding trajectories and economic assumptions under scrutiny, state leaders are divided on whether to spend less, invest more, or restructure the system altogether. Without consensus, taxpayers may ultimately bear the cost of miscalculated projections or delayed reforms.
