Editorial: Bills offer financial health for residents, state

By The Herald Editorial Board

With just days remaining in the Legislature’s session, state lawmakers are on the cusp of adopting two pieces of legislation that could significantly improve the financial health of nearly all Washington residents, ensuring financial education for students and encouraging savings to help support residents in their retirement.

Two bills addressing those goals have now passed House and Senate, but now await final concurrence between the two chambers to negotiate proposed amendments, before being sent to the governor’s desk.

The first, House Bill 1915, would require the state’s school districts to provide at least a half-credit of financial literacy education and could require completion of that as a requirement for graduation.

The second, Senate Bill 6069, a program called Washington Saves, would require employers who don’t already offer enrollment in individual retirement accounts or pensions to allow workers to be automatically enrolled in privately managed IRAs, leaving workers the ability to opt out of the program.

Both bills were sought by State Treasurer Mike Pelliccotti. Along with his responsibility for overseeing the security and strength of the state’s investments and financial standing, Pelliccotti also has advocated for improving the financial security of state residents, which in turn strengthens the state’s economic standing.

“I have a foundational belief that folks should have economic opportunity from birth. They should have the tools to economically thrive throughout their career, and they should have retirement security later in their career,” Pelliccotti said in an interview this week. “And I view this legislation as key components to that.”

The financial education bill would require school districts to develop curriculum by the 2027-28 school year with the assistance of an already established public-private partnership on financial education. The state, in earlier budgets, has provided $9 million to assist districts in preparing the curriculum.

While the legislation passed both chambers nearly unanimously — only one senator voted against it — Pelliccotti said lawmakers have differed over the graduation requirement provision. He said he supports both provision but at least wants the curriculum requirement to become law because of what it can provide students. In backing the proposal, Pelliccotti’s office noted that generational poverty is often linked to a lack of financial knowledge on how to manage personal finances and plan for the future.

Also key to financial security, especially in later years, are adequate investments in savings and retirement accounts. The Washington Saves program intends to address the current inequity in those investments among young adults and communities of color in the state.

The state recently commissioned a report by the Pew Charitable Trusts regarding recommendations to increase retirement investments among state residents. The report noted that 43 percent of private sector workers in the state — more than 1.2 million people and many employed by small businesses — lack access to a workplace retirement plan, including nearly half of Black workers in the private sector and 63 percent of Hispanic workers in the private sector, compared to 38 percent of white and 39 percent of Asian workers without easy access to retirement accounts.

The program would automatically enroll workers whose employers don’t offer such plans in a privately managed individual retirement account. A set percentage — yet to be determined but likely between 3 percent and 7 percent — would be made as a payroll deduction, with employees able to opt out at any time, but also allowed to set the amount of the deduction.

Enrollees could then draw benefits from those plans after age 59-and-a-half. The investments would not be managed by the state, but a state governing board would select and work with an investment firm to grow the program’s pool of investments.

Similar programs have been adopted in 15 other states and are up and running in eight, including Oregon.

For the state and its taxpayers, Washington Saves has an added benefit. By securing more financial security for those retiring, the Pew report estimates, the state would save about $3.9 billion in social assistance it would otherwise need to distribute between now and 2040. Additionally, the state’s federal taxpayers would see an additional $25.9 billion in federal safety net spending avoided in the same period.

Pelliccotti, who has made a point of visiting each of the state’s 39 counties, said he’s heard supportive comments from state residents at town halls on these and other issues.

“What we heard at town halls, both from employees and employers was that (retirement saving) needs to be easy for everyone involved. And has to be reliable, he said. “The policy we’ve created, models that have been working in these 15 other states, are simply to make it easy for employees, make it easy for employers and allow people to start saving without having to think a whole lot about it.”

The bonus is that the program can get the state’s youngest workers to consider retirement investments that even at a modest percentage can grow over time to a considerable amount at retirement. For example, a 30-year-old who invests 6 percent of a $50,000 salary each year — about $3,000 — could have more than $1.1 million to draw on at retirement, assuming an average 8 percent annual growth rate.

There’s yet a third-leg of Pellicciotti’s personal financial security stool, one that has been advanced previously and that he plans to introduce again next year during the regular two-year budget cycle, specifically a proposal similar to “baby bonds” programs in other states.

The program proposed last year — the Washington Future Fund — would set aside $4,000 from the state’s general fund for each child born who is eligible for Apple Health, Washington state’s Medicaid health care program. Those funds would then be invested by the state’s investment board as it does for the state’s pension fund and other investments. Between the ages of 18 and 36, adults who qualify would be allowed to draw on the accrued value of that original investment for use for college education or pre-apprenticeship training costs, seed money to start a small business or as a down payment on property.

The intent is to address persistent and cyclical poverty in the state and place more families on a path toward financial stability, and at the same time infuse local economies throughout the state with additional capital to support businesses and communities. As with the retirement accounts, Pellicciotti sees the Future Fund as a way to ease a looming financial burden for the state in coming years.

This cradle-to-retirement approach can help Washington families and the state to better financial health. House and Senate should find the compromises necessary toward final agreement on both bills that won significant bipartisan support in each chamber.

“When all of that is in place, our economy will be functioning better,” Pellicciotti said. “People can reach their full economic potential. And that’s ultimately good for our state’s economy and our state treasury.”

Clarification: The study on recommendations to increase retirement investments by workers was performed by the Pew Charitable Trusts, not the Pew Research Center, a Pew subsidiary.