(The Center Square) - State pension officials warned Tuesday that a new law allowing the Legislature to pull nearly $4 billion from a retirement plan for first responders will significantly increase the likelihood of future taxpayer bailouts.
State lawmakers created the Law Enforcement Officers’ and Firefighters’ Retirement System Plan 1, or LEOFF Plan 1, in 1969 for individuals hired before October 1977. Roughly 80% is funded by taxpayers through the state general fund, with the other 20% split between local agencies and their employees.
The retirement plan became the target of state Democrats in 2025, as they faced a multi-billion-dollar budget deficit, but the majority party didn’t pass House Bill 2034 until this year amid another shortfall.
“If I were a member and I saw that funding drop that significantly, I would imagine that there's going to be a lot of communication between them and us, saying, ‘What are you doing?’” Anthony Murrieeta, representing employers on the Select Committee on Pension Policy, said during a meeting on Tuesday.
“I really want to make sure that whatever is being done, those benefits are protected,” Murrieeta said.
HB 2034, which every Republican and even some Democrats voted against, will terminate that pension plan on June 30, 2029 and transfer 110% of its projected benefit value into a new account. The plan is expected to hold $7.7 billion, or roughly 226% of its outstanding liabilities, ahead of the 2029 transfer.
The law allows the state to pull an estimated $3.9 billion from the pension to spend in the general fund.
Many Republicans, such as Rep. Travis Courture, R-Allyn, who sits on the select committee but was not at Tuesday's meeting, have repeatedly called the upcoming transfer in 2029 a $4 billion pension "raid."
Murrieeta said the use of retirement benefits to fill the state’s general fund shortfall raises “red flags.”
The committee reviewed a fiscal note from the Office of the State Actuary that showed the likelihood of an unfunded actuarial accrued liability, or UAAL, emerging by 2045 increased from 5% to 40% due to HB 2034. The analysis was based on 2,000 economic simulations with varying investment returns.
“This represents the risk of required UAAL payments by the state increasing by a factor of roughly 8 (or eightfold) over this 20-year timeframe,” according to the fiscal note’s analysis of the simulations.
Murrieeta questioned whether leaving the reinstated pension plan at 110% of its projected liabilities, just a 10% cushion, would be adequate to fund the retirement benefits of thousands of aging retirees.
Sen. Steve Conway, D-Tacoma, said that’s a “fair” concern, and noted there will be additional reviews.
Actuary Michael Harbour said the $3.9 billion that HB 2034 allows the state to use in the general fund assumes an inflation rate of 2.75% and an investment return of 7.25%. If inflation is only 1.75%, the figure rises to $4.2 billion; but if inflation reaches 3.75%, the transfer will fall to $3.7 billion by 2029.
Similarly, if LEOFF Plan 1 investment returns only amount to 2.25%, the estimated transfer will drop even further to $2.5 billion; if returns are 12.25%, the $3.9 billion figure will increase to $5.7 billion.
“For each of these scenarios, we're only changing one variable or assumption at a time, and the actual results could fall outside of these ranges that we identified,” Harbour explained; “In other words, if you are relying on that $3.9 billion for budgeting purposes, please be aware of the potential uncertainty.”
Harbour confirmed that nothing will come out of the LEOFF Plan 1 until 2029, and that the Office of the State Actuary will continue reviewing its projections and making adjustments over the next few years.
A group of retirees, including Dave Reichert, a former congressman and King County Sheriff who lost a 2024 gubernatorial bid to Gov. Bob Ferguson, has filed a lawsuit seeking to block the transfer in 2029.
“I would say to anyone that has a public pension, teachers or public employees, you could well be next," Reichert told The Center Square in an interview a few weeks ago after filing the lawsuit.
