Back in January, the Employment Security Department (ESD) estimated that the paid family and medical leave (PFML) program would be in cash deficit in March or April. At a meeting of the PFML Advisory Committee on Wednesday, ESD said that cash flow has fallen below zero this month. Indeed, on Wednesday, the account’s balance was negative $10.5 million.

The 2022 supplemental operating budget includes $350 million for expenditure into the family and medical leave insurance (FMLI) account on June 30, 2023 (sec. 723). However, the money may only be used to the extent necessary to keep the account out of deficit at the end of the 2021–23 biennium. In the meantime, ESD said that the Office of Financial Management (OFM) granted ESD approval to essentially overdraw the account, under the assumption that this is a cash flow problem. If the problem persists, the $350 million would be available at the end of the biennium.

Although the account balance has been negative, ESD expects it to be back up to around $200 million in early May. (Premiums are remitted quarterly.) It is too early to tell if they will need to draw on the $350 million.

The program data for the first quarter of 2022 show that the gap between premiums and benefits continued to widen. (The April 13 presentation from ESD has not been posted yet—it will be available under “Past meetings” here. The charts below are screen shots I took of the presentation during the meeting.)

PFML premiums increased from 0.4% to 0.6% for CY 2022. Premiums for the first quarter of 2022 (the first to reflect the higher premium rate) aren’t due until April 30 (in the second quarter). ESD estimates that these premiums might be in the $300 million range for the quarter (compared to about $188 million last year).

ESD is still estimating that the premium rate will increase to 0.8% in 2023.

Meanwhile, as enacted this year, 2SSB 5649 requires various actuarial activities:

• By Oct. 1, 2022, OFM must report on the experience and financial condition of the account, recommendations for options to maintain long-term solvency of the account, and a comparison to similar programs in other states.
• A legislative task force on PFML premiums is established to make recommendations (by Dec. 30, 2022) for modifications to the premium structure.
• The Joint Legislative Audit and Review Committee must conduct a performance audit of the program’s implementation by Oct. 1, 2024.
• An Office of Actuarial Services is established at ESD.