Editorial: Yes on SJR 8201 a prudent investment for WA Cares

By The Herald Editorial Board

Unless your the sort who enjoys poring over 401(k) and retirement investment account reports — not that there’s anything wrong with that — the one statewide measure on the Nov. 4 ballot this year might leave you shrugging and moving on to your local races.

Don’t. Here’s why a yes vote for SJR 8201 should matter to you: It involves an estimated $36,500 that will be available to you for long-term care expenses if you’re participating in the state’s WA Cares program. And most of us are.

Voters are not once again having to vote on the program itself; they successfully defended WA Cares last year when Initiative 2124 sought to give residents the ability to opt-out of the program, a move that threatened the financial stability of WA Cares and could have led to its end. More than 55 percent of the state’s voters understood the threat and voted the initiative down.

This time, with the program’s long-term financial stability assured for at least the next 75 years, voters are being asked to allow a change in how the fund is invested, likely granting even greater stability for an even longer term, the possibility of an increased benefit for aging adults and those with disabilities who need long-term care, while reducing the need in the future to increase the rate of WA Cares’ payroll deduction.

But before digging into the ballot measure, let’s get a refresher on WA Cares:

WA Cares was created by the state Legislature in 2019, with changes made since then, adopting a payroll deduction of 58 cents for every $100 of gross pay that began in July of 2023. The fund is intended to ultimately provide a supplemental benefit of up to $36,500 — in effect up to $100 a day for a year in current dollars — for expenses for long-term care for seniors and those with disabilities to help pay for a range of services and needs, including in-home care, residential facility care, respite care for family caregivers, medical equipment and even home modifications, such as wheelchair ramps or shower grab bars.

To be clear, that $36,500 — which will be adjusted for inflation over time — won’t cover the entirety of long-term care needs for most people; the monthly costs for a home health aide as of 2024 in Washington state was estimated at $8,000; a month of assisted living was $7,000; while a month in a private room in a nursing home was estimated at nearly $14,000.

(We would have provided a more official estimate for what most Americans can expect to pay for annual long-term care costs, but the current administration for the U.S. Department Health and Human Services has removed that webpage because of department “restructuring.”)

The intention of WA Cares, however, was to provide a basic level of assistance, using a reasonable level of payroll deductions. It’s meant to supplement what individuals and families can provide either through their own retirement and other investments and private long-term care insurance, although the typical high cost and reduced availability of such insurance was one of the justifications for creation of WA Cares in the first place.

What voters are being ask to consider this time around is how the WA Cares fund is invested to assure its long-term stability and its ability to meet beneficiaries’ changing needs with a more generous benefit.

Current law and the state constitution allows the fund to be invested only in fixed-income securities such as government and corporate bonds and certificates of deposit, investments that while less volatile also don’t offer much better than about a 4.4 percent rate of return. Again, that still assures the fund’s viability for at least the next 75 years, but with a lesser average rate of return of 3.4 percent, the fund could be fully depleted after that 75-year mark in 2092.

SJR 8201 would allow the WA Cares fund to be managed by the Washington State Investment Board, which manages the pension and retirement funds for 18 accounts for public employees, school employees, police, firefighters, judges and others. Currently the investment board — which includes the state treasurer, Labor & Industries director, state retirement system director, two state lawmakers and representatives of five public employee retirement pension systems — manages total assets of more than $222.5 billion.

Ranked as one of the lowest cost and highest performing investors in the world by international bench-marking studies, the state investment board showed a five-year return on investment of 11 percent and a 10-year return on investment of 9.3 percent as of this June. The investment board is mandated by state law to “maximize return at a prudent level of risk.”

Even a 1 percentage-point increase in return over the 4.4 percent baseline estimate would increase the WA Cares fund balance by $67 billion over the coming 50 years.

While the measure had bipartisan support this session — with lawmakers voting 42-7 in the Senate and 86-9 in the House to place it on the ballot — a handful of lawmakers have continued objections to the proposal to hand over the fund to the investment board.

In their statement and rebuttal against the measure in the state voters’ pamphlet, the lawmakers criticize the move as too risky, pointing to the board’s investment losses in 2008 (-26.9 percent during the Great Recession) and 2022 (-12.9 percent during a global bear market), warning that’s “how the stock market works.”

During short-term downturns, yes, that’s how the market works. But myopic one-year assessments of market returns — again, looking at the investment board’s record since its funds’ inception in 1992 — don’t reflect the overall long-term health of those markets or the board’s diversified management of funds that include U.S. treasuries and corporate securities, tangible assets, real estate, public equity and private equity and securities.

The measure’s opponents also point to a similar resolution in 2020 that voters defeated with 54.4 percent voting against. But that measure was placed before voters who were less familiar with WA Cares and still stinging following the uncertainty of the covid pandemic. The 55 percent support for WA Cares demonstrated by voters last year should be seen as an indication of greater understanding of its provisions and necessity.

Voters should keep in mind that boilerplate line common to investment management advertisements: “Past performance is not a guarantee of future results.” There are risks to all such investments.

But putting WA Cares, its vital assistance and its long-term viability in the prudent hands of the state investment board — already trusted with the pension funds of public employees and retirees throughout the state — is a reasonable risk, and one that voters should take with a yes vote.