(The Center Square) – A brand new report from the Reason Foundation is shedding light on debt in Washington state. The report said there was nearly $150 billion in combined liabilities in fiscal year 2024, leaving an estimated $19,407 in debt for every resident.
But one of the biggest contributors to Washington’s debt isn’t traditional government borrowing. Instead, it’s the state’s workers’ compensation system.
“Washington is unusual in that the single biggest item on its books is workers’ compensation, at about $44 billion, because the state insures most workers itself,” said Jordan Campbell, managing director of government finance at Reason Foundation and one of the authors of the Foundation’s State and Local Government Finance Report.
The report examined financial statements from state and local governments all across the country for all of 2024, the most recent year with complete data available.
Campbell told The Center Square on Friday that the program fully funds its regular claims, but much of the reported shortfall actually comes from cost-of-living increases for workers who were injured, which state law requires the government to pay as they come due.
Washington reported approximately $43.7 billion in workers’ compensation claims liabilities as of June 30, 2024, according to the state’s Annual Comprehensive Financial Report. More than $27 billion of that amount was tied to supplemental pension cost-of-living adjustments for injured workers.
Those payments are funded on a pay as you go basis and are not required by state law to be fully funded. The remaining $16.48 billion in claims liabilities was fully funded through long-term investments.
Washington’s combined state and local liabilities totaled approximately $150 billion, ranking 13th nationally in debt per resident at $19,407. Those numbers are above the national average.
At the state government level alone, Washington reported approximately $100.22 billion in liabilities, falling seventh nationally in total debt and ninth overall in debt per resident at $12,970.
Across the country, state and local governments reported around $6 trillion in total liabilities and almost $5 trillion in long-term debt.
New York state had the highest combined state and local debt per capita at $37,006, followed by its neighbor, New Jersey at $35,100. Connecticut followed at $33,189, Illinois came in with $31,582 and Hawaii was next at $30,759.
After workers’ compensation, bonded debt is the second-largest component of Washington’s state government liabilities, at approximately $29 billion. That number includes outstanding bonds, loans and other borrowing.
Unfunded pension and retiree health care obligations account for approximately $5.6 billion at the state level, according to Campbell. When local governments are mixed in, those obligations total approximately $11.7 billion.
Campbell told The Center Square that Washington has historically maintained relatively low pension debt compared with other states. Pension debt across Washington’s state and local governments averages $670 per resident which comes in as the third-lowest per-capita figure in the entire country.
But Campbell warned that recent decisions from the legislature could put that ranking in jeopardy.
In 2025, lawmakers increased the assumed rate of return on pension investments and paused payments toward unfunded liabilities in the oldest public pension plans for four years.
In 2026, lawmakers also approved legislation moving surplus funds from the Law Enforcement Officers’ and FireFighters’ Retirement System Plan 1, known as LEOFF 1, into an account lawmakers can use for general spending.
“Big picture, Washington has done what many states haven’t and kept its pension debt low, but it still owes nearly $13,000 per resident at the state level,” Campbell said. “Being disciplined about public pensions isn’t the same as being disciplined about all debt.”
He also warned that if the state begins accumulating more pension debt, it could worsen Washington’s financial position.
Washington owes more than Oregon and Idaho
Washington also carries much more combined state and local liabilities than its neighboring states.
According to the Reason Foundation analysis, Washington has approximately $150 billion in combined liabilities, compared with $71.5 billion in Oregon and $11.5 billion in Idaho.
When you look at the per-resident basis, the report shows Washington at $19,407, Oregon with approximately $16,800 and Idaho numbers show $6,200. That is the lowest combined state and local debt per capita in the nation.
The report also found big differences in the types of liabilities carried by the three states. Pension obligations account for around 3% of Washington’s total liabilities, compared with 26% in Oregon and 29% in Idaho.
Campbell told The Center Square that the liabilities represent financial obligations that will have to be paid, potentially putting pressure on future state budgets.
“Every dollar of debt is a claim on future tax revenue,” Campbell said. He pointed out that money used to cover prior obligations leaves less resources available for schools, roads and even public safety.
Without dedicated assets or revenues to cover those commitments, taxpayers could face higher taxes, reductions in government services or both.
Campbell also cautioned that raising taxes brings risks, including the possibility that businesses and higher-income earners could relocate to states with lower tax burdens. That is something to watch for in the November 3rd general election, especially with the Millionaire’s tax. He believes that Washington’s tax base would make existing obligations much more difficult to cover.
Campbell said Washington lawmakers should focus on limiting spending growth and ensuring future retirement and insurance benefits are funded as they are earned.
“Saving options are already on the table. Agencies that identified potential reductions, and a freeze on non-essential hiring have been in place since late 2024 and it should remain so,” Campbell said.
He recommends returning to more conservative investment assumptions and continuing efforts to identify government spending reductions.
The Center Square reached out to Washington state agencies and the governor’s office for comment about the findings and the state’s financial obligations, but did not receive a response by publication.