PENSIONS
Of the 15 state retirement plans, only two, PERS 1 and TRS 1, do not receive yearly automatic cost of living adjustments. (COLA). Led by the Washington State School Retirees Association, a coalition has struggled and fought each year for either the restoration of an annual COLA or for an ad-hoc COLA. Their efforts have been partly successful. That was not the case this year.
HB 1292/SB 5113 would have provided a 3% benefit increase to certain retirees of the public employees’ retirement system plan 1 (PERS 1) and the teachers’ retirement system plan 1 (TRS 1). Costs would be amortized over a 15-year period. These bills were request legislation from the Select Committee on Pension Policy. (SCPP). Neither bill advanced.
Funding an increase has always been the challenge in granting a COLA. Some bills addressed this:
Background: The Law Enforcement Officers’ and Firefighters’ Retirement System Plan 1 (LEOFF 1) with 6,000+ retiree members has a surplus in excess of $3 Billion dollars. Legislators are struggling with what to do with those dollars. Cities and counties want the dollars for paying for their share of retiree health benefits. Some legislators want those dollars to be put into the general fund for use as determined. And some, see below, had other designs.
SSB 5085 would have merged the assets, liabilities, and membership of LEOFF 1, (6,000+ members) with PERS Plan 1, and TRS Plan 1 membership (60,000+) into the new Legacy Retirement System.
It would have created an annual cost of living adjustment to the retirement benefits of retirees in the PERS Plan 1 and TRS Plan 1, of up to 3 percent and eliminated the remaining unfunded actuarial accrued liability and benefit improvement rates.
The fiscal note offers details including projected employer rates on the proposal.
Savings for the General Fund and Local Governments in the short-term range (four years) from $600 Million to $475 million.
This bill was sponsored by Senator June Robinson and had active support with her leadership. The House, however, did not support the bill and it died via negotiations during the last days of the session.
ESSB 5357 reduced employer normal cost contribution rates for the Public Employees’ Retirement System (PERS), the Public Safety Employees’ Retirement System (PSERS), the Teachers’ Retirement System (TRS), the School Employees’ Retirement System (SERS), and the Washington State Patrol Retirement System for fiscal year/school year 2026 and reduced the Plan 2 member contribution rates for PERS, PSERS, TRS, and SERS for fiscal year/school year 2026 because it changes the assumed rate of investment return from 7.0% to 7.25%. It also reamortizes the PERS Plan 1 and TRS Plan 1 benefit improvement contribution rates over 11 years and suspends all unfunded liability rates for these plans for four years. The same rate will remain for July 2025-2029.
This bill passed and was signed by the Governor, effective July 1, 2025.
The good news about this bill is that employer rates will decrease in the short term. The bad news is that costs will increase in the long term.
This bill was a budget ‘gimmick’ to save dollars. Sadly, given the risks of underfunding pension obligations, it puts the future possibility of funding a COLA for Plans 1 members at extreme risk.
Other:
A proviso in the budget reads: Section 107:
The appropriations in this section are subject to the following conditions and limitations:
The select committee on pension policy shall study and report on the tax, legal, actuarial, pension policy, and administrative implications of merging the legacy pension systems as contemplated in Substitute Senate Bill No. 5085 (closed retirement plans) and terminating plan 1 of the law enforcement officers’ and firefighters’ retirement system as contemplated in Substitute House Bill No. 2034 (LEOFF 1 restatement). The department of retirement systems, the attorney general’s office, the office of the state treasurer, the Washington state investment board, and the office of the state actuary shall provide the select committee on pension policy with assistance as requested. The select committee on pension policy shall submit a report to include key findings to the fiscal committees of the legislature by January 9, 2026.
Comment: This was obviously the compromise agreed to during budget negotiations to placate Senator Robinson and other Senate leaders who supported SB 5085 referenced above. The SCPP has laid out a plan to study the issue and potentially make a recommendation to the legislature. Meanwhile, the $3+ billion-dollar surplus in LEOFF 1 remains to be addressed.
HB 1936 extended the expiration of certain school employee postretirement employment restrictions.
Until January 1, 2030, retirees from the Teachers’ Retirement System are permitted to collect retirement benefits for the first 1,040 hours per calendar year when either: (1) are employed in a non-administrative position; or (2) having retired before January 1, 2022, are employed in a second-class school district as a district superintendent or an in-school administrator position. Retirees from the School Employees’ and Public Employees’ Retirement Systems continue to receive retirement benefits for the first 1,040 hours per calendar year while employed in non-administrative positions until January 1, 2030.
Signed by the Governor, effective 5/15/2025.
There were numerous fund transfers to the General Fund that HCA assured the PEBB and SEB boards were excess funds and did not place either program in jeopardy. Time will tell. Public Employees’ and Retirees’ Insurance Account ($18.2 million), School Employees’ Insurance Account ($2.6 million).
HEALTH CARE/OTHER BENEFITS
Retiree Insurance Subsidy: The health care authority, subject to the approval of the public employees’ benefits board, shall provide subsidies for health benefit premiums to eligible retired or disabled public employees and school district employees who are eligible for Medicare, pursuant to RCW 41.05.085. For calendar years 2026 and 2027, the subsidy shall be up to $183 per month or half the total premium amount (whichever is less), per month, per subscriber.
SB 5478 permits the Public Employees’ Benefits Board to study and, subject to available funding, offer additional insurance products as employee-paid, voluntary benefits. Examples include:
- emergency transportation
- identity protection
- legal aid
- long-term care insurance
- noncommercial personal automobile insurance
- personal homeowner’s or renter’s insurance
- pet insurance
- specified disease or illness-triggered fixed payment insurance, hospital confinement fixed payment insurance, or other fixed payment insurance offered as an independent, noncoordinated benefit regulated by the OIC
- travel insurance
Signed by the Governor, effective 7/27/25.
RE: SEBB/PEBB (Budget Provisos)
Other areas of potential fiscal impact and (often, unfunded) to districts:
Below are selected titles and brief summaries of proposed bills that may have potential impact on the business operations of districts.
SHB 5041 allows individuals unemployed due to a labor strike to receive up to 6 weeks unemployment insurance (UI) benefits following a specified disqualification period and the waiting week, provided that the labor strike is not found to be prohibited by federal or state law in a final judgment.
Signed and effective 7/27/25.
SB 5101 expands the protections of the Domestic Violence Leave Act to employees who are, or whose family members are, victims of hate crimes.
Signed and effective 1/1/2026.
SSB 5412 allows a school district that is in binding conditions or under enhanced financial oversight may take a temporary interfund loan from its capital projects fund, subject to various conditions.
Signed and effective 7/27/2025.
E2SHB 1213 extends employment protection rights in PFML. It affects employers under staggered timeline to implement from companies/businesses with 25 employees to 8 employees.
Signed and effective 1/1/2026.
SHB 1308 requires an employer to provide an employee or former employee with a copy of the employee’s personnel file within 21 days of a request and requires a public employer to do so in accordance with the requirements and procedures of the Public Records Act.
It also requires a private employer to provide to a former employee, upon request, a statement of the employee’s discharge date and reasons, if any, for the discharge. It creates a private cause of action with statutory damages for enforcing the requirements for private employers to disclose personnel files and provide written discharge statements.
2SHB 1524: requires the Department of Labor and Industries to enforce requirements for employers of isolated employees.
Signed And effective 1/1/2026.
Some Budget Provisos of Note
SPI: $2,000,000 of the general fund—state appropriation for fiscal year 2026 is provided solely for school districts that have been removed from their insurance risk pool due to district financial trouble for the difference between the previous cost of insurance provided through the Washington schools risk management pool and the cost of purchasing private insurance. Priority shall be given to the school district that has been in binding conditions for the longest period.
$477,000 of the general fund—state appropriation for fiscal year 2026 and $477,000 of the general fund—state appropriation for fiscal year 2027 are provided solely for the leadership internship program for superintendents, principals, and program administrators.
$810,000 of the general fund—state appropriation for fiscal year 2026 and $810,000 of the general fund—state appropriation for fiscal year 2027 are provided solely for the development of a leadership academy for school principals and administrators.
$750,000 of the general fund—state appropriation for fiscal year 2025 is provided solely to review and update the rules for school environmental health and safety. The state board of health and the department shall conduct the review in collaboration with a multi-disciplinary technical advisory committee. The proposed new rules shall establish the minimum statewide health and safety standards for schools.
SPI: $150,000 of the general fund—state appropriation for fiscal year 2025 is provided solely for the office to hire staff to support school districts applying for grants funded by the state of Washington and grants from other public or private sources for which the school district may be eligible. The office must prioritize supporting school districts with smaller student enrollments, tax bases, and operating budgets, and other factors that may preclude or otherwise limit the ability of a school district to apply for grants for which it may be eligible.
Selected Financials
Unless noted otherwise, funds are apportioned for ‘allocation purposes’ only.
Substitute Teachers: Four (4) days per formula generated staff at $151.86/day.
Fringe Benefits/ Formula Generated Staff:
Certificated/Administrative Range:
- 2025-2026 15.39-16.02%
- 2026-2027 15.39-16.02%
Classified Staff Range:
- 2025-2026 14.72-18.07%
- 2026-2027 14.72-18.07%
SEBB Insurance Benefit per Formula Generated Staff:
PEBB Insurance Benefit per Formula Generated Staff:
- FY: 2026; $1,333.
- FY: 2027; $1,350
Health Care Remittance Paid to HCA:
- Per FTE $67.61 Sept. 1. 2025
- $77.56 Sept. 1, 2026
Part-Time Staff:
- $68.41 Sept. 1, 2023
- $80.32 Sept. 1, 2024
What Will the Future Hold?
Predictions are an exercise in fantasy, but what the heck!
As an aside, the budget allocated to charter schools $1,500 per pupil in 2026. $7,715,000 of the opportunity pathways account—state appropriation is provided solely for enrichment payments to charter schools.
The Federal Government (read “Trump”) will continue its cost cutting in Medicaid, Medicare, SNAP, and more, moving costs to states. This will place a financial burden on the budget leading to intense lobbying and pressure on the next session’s Supplemental Budget.
There may be court challenges to the revenue bills passed and signed. These could be HB 2081 which increases B & O tax rates and HB 5813 which adds another layer to the capital gains tax. Both bills hit large companies and big investors. As a note: ESSB 5814 applies the retail sales tax to more services which will pass those costs onto the buyer. (read ‘school district’).
The Federal Government may institute Social Security reforms including raising the early retirement age from 62 to 65 years of age. An increased payroll tax on incomes above $250,000 may also be instituted.
The ‘progressive’ wing of the Democrat Party (based in King County) will continue to advocate for socially liberal policies. This has led to the fracturing of unanimity within the caucus as the more moderate Democrats object. This internal conflict is exploited by the R’s whose positions often are supported by the more moderate D’s. Stay tuned.
Money was appropriated to the Department of Health to continue to adopt rules, policies and procedures dealing with Group B water systems which many rural, smaller districts maintain.