Washington State L&I: Insolvency (and a 19% per year rate increase) looms
Thursday, July 5, 2012 at 9:21AM The Washington Policy Center (WPC) has a great piece on the current fiscal position of Washington State's L&I worker's compensation system.
The most recent report by the State Auditor's Office found that L&I's Contingency Reserve (difference between fund's total assets and total liabilities) is at a "historically low level and below the Department's target." The report also stated there is a 56.9% chance of insolvency within the next five years.
According to WPC: "In a June 21 meeting an L&I actuary recommended workers' compensation taxes be increased by a staggering 19 percent every year for the next ten years to plug the $3.1 billion hole in the program's budget. The shortfall is the result of the critically depleted contingency reserve funds, in need of some $1.7 billion, and a decrease in expected investment returns that increase the value of future pension liabilities by $1.35 billion."
This annual 19% increase does not include normal annual increases necessary to achieve the program's break-even costs.
The WPC states the historically low reserve is the result of L&I using contingency reserve funds to artificially suppress worker's compensation rates for more than a decade.
Much more great stuff in the article which can be found here.