Washington voters have a big financial decision to make on their November ballots.
A constitutional amendment measure on the ballot asks voters if they want to allow state money earmarked to provide nursing home care to residents to be invested in private stocks.
Here’s what you need to know about Engrossed Senate Joint Resolution 8212:
The Washington Constitution prohibits investing most public money into private companies, though there are several exemptions, such as public pension or retirement funds, industrial insurance trust funds and funds that benefit people with developmental disabilities.
In order to allow a public fund to be invested in private stocks, a Constitutional amendment is required.
The Legislature passed the resolution related to nursing homes last session, with only three opposed in the Senate and one opposed in the House, and now it’s up to the voters.
After the Legislature passed a law in 2019 that provided long-term care insurance, Washington employees start paying premiums for the insurance through a payroll deduction in 2022. The deduction is based on 0.58% of their wages.
Beginning in 2025, a Washington resident who needs assistance with three or more daily activities, such as eating or bathing, can receive benefits in units of $100 each. The beneficiary can receive as much as $36,500 in a lifetime.
Those premiums are deposited into a new Long-Term Services and Support Trust Account, which currently cannot be invested in stocks. This amendment would change that, allowing for money in the trust account to be invested in stock, if the Legislature authorizes it.
Effect of the amendment
The ability to invest those funds in private stock could allow for more money to be provided for long-term care benefits.
Currently, public money that is not allowed to be invested in private stock can only be invested in cash and short-term instruments, which generally don’t generate as much return as private stocks would, said Chris Phillips, spokesman for the Washington State Investment Board.
The State Investment Board would decide how to invest this money, as it does with other public funds that can be privately invested. A constitutional amendment was required for all public money that can now be invested privately.
In 1968, a constitutional amendment ballot measure to allow retirement and pension funds to be invested passed. In 1985, voters passed an amendment allowing industrial insurance funds, or worker’s compensation, to be invested privately. In 2000, public funds for those with developmental disabilities was added to the list.
“You as a voter of Washington have the final say,” said state Sen. Mark Schoesler, R-Ritzville, who co-sponsored the bill.
Members of aging organizations and health care associations, including AARP Washington State and the Washington Health Care Association, wrote an argument for the resolution in the state voter guide.
The measure would ensure the Long Term Care Trust Fund can pay benefits in the long-term, the statement wrote.
If public money is a part of a long-term program, such as the care benefits, it is better to invest the money in the stock market, so it has a higher rate of return, Phillips said in an interview. This program will likely last for decades, which is a long time for a large sum of money to be sitting in cash.
“With time, the investment returns are going to be such that we’ll appreciate it,” Schoesler said in an interview.
Cash investments are a low-risk option, Phillips said, but it does not generate the necessary returns that investing privately would.
“It’s prudent to put that money to work,” he said.
The State Investment Board knows how to take the proper amount of risk that is appropriate when investing, Phillips said, adding the board is confident in its ability to invest.
“It’s what we do,” he said. “Some level of risk is necessary in order to generate some level of investment return.”
State Sen. Mike Padden, R-Spokane Valley, and state Sen. Bob Hasegawa, D-Beacon Hill, wrote an argument against the resolution in the state voter guide.
The senators argue the potential losses of risky investments outweigh the benefits. Because there is so much money in play, the statement reads, “we must not lose sight of the stock market’s high risk along with the questionable bottom line ethics of some Wall Street brokers.”
The voter guide statement claims that a better idea might be to invest public money into federal, state and municipal bonds.
“Don’t gamble with the people’s hard-earned money,” it reads.
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