Washington capped the paid-leave tax at 1.20% — its own actuaries say that isn't enough

Washington built Paid Leave as a payroll-tax insurance fund: workers pay in, the state pays out when someone takes family or medical leave, and a premium formula resets the rate every year to keep the account solvent.▸ The formula has one flaw the legislature wrote into the statute itself — the rate can never exceed 1.20%, no matter what the math says the program actually needs. The state's own actuaries now say the math needs more.

In fiscal 2025 the Paid Leave account took in $1,986 million and paid out $2,144 million — a $158 million net loss, more than five times the $31 million lost the year before.▸ The gap was covered the only way an insurance fund can cover it: by spending down the cushion. The Employment Security Department's Office of Actuarial Services put the resulting combined ratio — expenditures divided by revenue — at 107.9% for FY2025, up from 101.8% the year before. Above 100% means the premiums collected did not cover what went out the door.

Read the far-left bars: $1,986 million came in from premiums and investment income, but a further $158 million had to be drawn from the account's reserve just to cover the year.▸ That reserve — the difference between the account's assets and its liabilities — fell from $393 million at the end of FY2024 to $236 million at the end of FY2025. The actuaries' own benchmark for what a fund this size should hold, based on National Association of Insurance Commissioners standards for comparable insurance risk, is roughly $1,050 million. The account is running at less than a quarter of that. Cash on hand fell even further, from $230 million to $36 million over the same twelve months — "the program no longer maintains an adequate contingency reserve to support solvency under immediate adverse conditions," in the actuaries' own words.

This isn't the first time.▸ Washington hit an account deficit once before, in 2023, and the legislature closed it with a $200 million one-time cash injection from the state general fund. That was a bailout, not a fix — the underlying premium formula still only looks backward at what the program spent last year, not forward at where it's headed.

The other half of the story is not a budget failure — it's the program doing exactly what it was built to do, at a scale the 2019 formula never priced in.▸ More than 218,000 people had already claimed Paid Leave benefits in 2025 as of the department's fall rate announcement, and by fiscal year-end, 269,508 claims had been approved and paid — up 16% from 232,192 the year before, and nearly six times FY2021's total.

Of the 321,426 total claim applications Washington workers submitted in FY2025, 84% were paid — 55% for the worker's own serious medical condition, 45% for family leave.▸ The premium rate is recalculated each October using a formula fixed in statute: 140% of the prior year's benefits and administrative costs, minus the account balance, divided by taxable wages. Run that formula on FY2025's $2,014,431,850 in benefits paid and it produces 1.13% for 2026, up from 0.92% in 2025 — Washington's Employment Security Department confirmed the increase in November 2025. The formula is reactive by design: it prices last year's claims, not next year's, so a program growing at double digits is permanently a year behind its own bill.

Here is the part the legislature can't formula its way around.▸ The statute caps the total premium rate at 1.20% — RCW 50A.10.030 — and the actuaries project the calculated rate reaches that ceiling in 2027 and stays there through at least 2029. Their own modeling, in the same report, states plainly that "the projected adequate rate required for 2027 and later exceeds 1.20%." The cap that was supposed to protect workers and employers from open-ended tax increases now guarantees the fund cannot charge enough to break even.

Running the capped rate forward, the actuaries' cash-flow model projects the account climbing to a peak of $361 million in August 2027, then falling to a trough deficit of $477 million in April 2029, ending that fiscal year at −$353 million.▸ After the 2029 premiums are collected in early 2030, the model puts the account at −$992 million — the equivalent of 3.6 months of the program's own regulatory reserve target, in the hole. The projected combined ratio climbs from 96% in 2026 to 118% by 2029: a program that pays 96 cents in claims and costs for every dollar collected today, and $1.18 for every dollar four years from now, under the same capped rate.

Fiscal-year figures follow Washington's July–June fiscal year unless noted; calendar-year premium rates follow the state's Jan. 1 effective dates. Projections beyond FY2025 are the Office of Actuarial Services' central cash-flow model as published in November 2025 and are not a guarantee of future account balances.