This November, Washington voters have the opportunity to strengthen the financial viability of the WA Cares Fund, which is the nation’s first state-operated long-term care insurance program. Senate Joint Resolution 8201 would allow the WA Cares Fund to invest in stocks and other equities, an important reform that enhances returns, preserves the sustainability of the program, and importantly reduces pressure for future tax increases on hard-working Washingtonians.
WA Cares comes with a payroll tax of 58 cents on every $100 that W-2 workers earn in their paychecks. We can debate the merits of such a tax and its negative impact on workers, but the real question of this ballot measure is purely financial.
Currently, the fund is restricted to investing in bonds and other fixed-income securities. While bonds are generally considered conservative investments, they carry a hidden long-term risk. In a world of low interest rates and central bank-driven monetary debasement, the fixed returns of bonds often fail to keep pace with inflation, gradually eroding the real value of the fund over time. As a result, the purchasing power of money invested solely in bonds can decline in real terms, threatening the program’s ability to provide promised benefits in the future.
This exposure could force the state to raise taxes or reduce benefits to meet its obligations, a scenario that would burden both taxpayers and beneficiaries. Limiting the fund to bonds is simply shortsighted in the face of modern economic realities.
Investing in equities provides a solution. Historically, stocks have outpaced inflation and generated higher long-term returns than bonds, enabling funds to grow more robustly over time. Since 1929, U.S. stocks have delivered an average annual return of over 9%, compared to around 4.5% for bonds. By allowing the WA Cares Fund to invest in a diversified portfolio that includes equities, the state can maximize the value of the resources it already collects from payroll taxes.
Higher returns strengthen the fund without imposing new taxes, ensuring that the program can meet growing demand while protecting taxpayers from additional financial strain. This is much needed relief for Washingtonians, who already shoulder one of the highest tax burdens in the country.
According to recent data from the U.S. Census Bureau, Washington’s state and local taxes per capita ranked 14th highest in the country. The last decade has witnessed a surge of new tax hikes enacted by state lawmakers on everything from property to cellphones and even plastic bags. From 2014 to 2023, state tax collections more than doubled, ballooning from $17.9 billion to an eye-watering $36.4 billion.
Out of control healthcare costs present another challenge for shoring up the WA Cares Fund. Healthcare spending has consistently outpaced inflation for decades and is expected to keep rising for the foreseeable future. Care workers, adult day programs, and nursing facilities are expensive, and, without the fund, many families would face catastrophic out-of-pocket costs. Preserving this program is therefore essential, but it must be done with the interests of an already burdened tax base in mind.
Demographic trends make this reform even more urgent. Washington’s population is aging, and the number of residents requiring long-term care is projected to rise steadily over the coming decades. By 2050, the population of Washington residents aged 65 and older is projected to grow by a whopping 64%. The fiscal demands of meeting that growing need will increase significantly if the fund’s investments fail to keep pace with inflation.
The idea behind this measure passed the Legislature with strong bipartisan support: 42–7 in the Senate and 86–9 in the House. In today’s politically-polarizing times, it’s a rarity for good policies to receive such widespread support across the political spectrum.
Allowing the WA Cares Fund to invest in equities positions it to remain viable for generations of Washington residents. By voting yes this November, voters can ensure that the WA Cares Fund continues to provide critical long-term care benefits, remains solvent in the face of demographic and economic pressures, and does so without placing additional burdens on hardworking taxpayers.