WASHINGTON’S PAID LEAVE PROGRAM FACING UNCERTAIN FUTURE

Washington’s paid family and medical leave program is heading toward a major financial shortfall, with a projected $350 million deficit by 2029 unless significant changes are made. The program, which launched in 2020, allows workers to take paid time off for serious medical conditions, to care for a family member, or to bond with a new child. From July 2024 to June 2025, over 320,000 applications were submitted representing a 15% increase from the previous year. During that time, more than $2 billion in benefits were paid to over 240,000 residents.

Funding comes from a payroll tax split between employers and employees. The current rate is 0.92% of wages, set to rise to 1.13% in 2026. However, state law caps the rate at 1.2%, a threshold expected to be reached by 2027. Once that cap is hit, the program’s funding will be unable to keep pace with growing demand and wage increases.

The system already experiences periodic shortfalls as benefit payments often exceed incoming premium revenues each quarter. In 2023, lawmakers used $200 million in general fund dollars to stabilize the program temporarily, but future bailouts are unlikely due to broader state budget challenges.

A key criticism is how the premium rate is calculated. Currently, it’s based on past data, rather than future projections. A 2024 audit found this backward-looking model contributes to long-term financial instability. The Employment Security Department and some lawmakers support switching to an actuarial, forward-looking approach used in other states and in Washington’s own workers’ compensation system.

Senate Bill 5292, which aimed to implement that change, passed the Senate but stalled in the House. A late amendment to raise the premium cap to 2% by 2033 contributed to the bill’s failure. Advocates hope to revive it in the 2026 legislative session.

However, not all lawmakers support raising the cap. Senator Curtis King argues that doing so would overburden workers, especially lower-income earners who are already paying into the new state long-term care program. He suggests the state should consider reducing the length of paid leave or narrowing eligibility criteria instead.

Another option under discussion is raising the taxable wage base, currently set at $176,100, so higher earners would contribute more, without increasing the premium rate for all workers.

With usage still climbing and newly expanded job protections expected to boost demand further, lawmakers face tough decisions to ensure the program’s long-term sustainability. Without changes, the program may face reduced benefits or service disruptions in the years ahead.