As I’ve written, the operating budget did not include a backfill for the state liability account, even though the Legislature knew that the account could end the 2023–25 biennium with a shortfall of up to $580 million. We’ve identified this as one of the choices the Legislature made that contribute to the unsustainability of the operating budget.

According to the Office of Financial Management (OFM), at the end of 2023–25 (which ended June 30, 2025), the liability account shortfall was $592 million. OFM has issued a new authorization for the account to be in a temporary cash deficiency of up to $1.01 billion for 2025–27.

While the amount involved has increased considerably, the account has been having problems for the past decade at least. In 2021, the Department of Enterprise Services (DES) said, in its budget request for the 2022 supplemental, that net income to the liability account had been negative since FY 2015. The enacted 2022 supplemental appropriated $217.0 million from the general fund–state (GFS) for the account because it was otherwise projected to end the biennium with a negative fund balance.

The 2023–25 budget appropriated $25.0 million from liability account for “the Self-Insurance Liability Program due to increased costs for excess liability insurance policies, legal defense fees, and liability settlements and judgments resulting from tort claims made against state agencies and employees.”

DES’s budget request for 2025–27 estimated that the shortfall at the end of 2023–25 would be $159.3 million. The budget that was passed by the Senate on March 29 would have provided $391.7 million from the GFS. But ultimately no appropriations were made to address an estimated shortfall that had grown by April to $580 million.

Jim Brunner of the Seattle Times reported in May that “Ferguson’s office told lawmakers they could get away with not adding the money” in the biennial budget. As Brunner wrote earlier this week, state liabilities are expected to continue to grow.

This is something that will have to be addressed in the 2026 supplemental. OFM’s new deficit authorization letter notes,

Due to the amount of this deficiency, prior to any future authorization of cash deficiency in this account, and before the next legislative session, DES must work with its actuarial services provider, OFM, legislative staff, and other appropriate agencies to review the rates, funding structure, and other potential solutions to address this fund’s insolvency.

It is important to review the funding structure and find a long-term solution. In the meantime, though, the Legislature should have set aside funds this year to backfill the account rather than using the funds to add new policies.