OLYMPIA TOOK $3.3 BILLION FROM WASHINGTON'S FIREFIGHTERS AND COPS. HERE IS WHERE IT WENT.
I spent more than 12 years as a firefighter in WA state. I know what that career costs. I know what the people who do that job give up. I know what a pension promise means. This is my motivation...
I spent more than 12 years as a firefighter in WA state. I know what that career costs. I know what the people who do that job give up. I know what a pension promise means to someone who has spent decades running toward things everyone else runs away from.
So when I read House Bill 2034, I did not read it as a policy analyst. I read it as someone who lived inside the system this bill targets. And what I found made me want to write every word of this carefully. Because the public deserves to know exactly what happened, exactly how it was done, and exactly where the money went.
This is that paper.
WHO IS IN THIS PENSION AND WHAT DID THEY ACTUALLY PAY
Before we get to the mechanics of HB 2034, we need to clear up the framing Olympia uses to defend it.
The state’s argument goes like this: the LEOFF 1 surplus is mostly taxpayer money because the state funded roughly 80% of LEOFF 1 contributions historically, with employees and employers contributing about 10% each. Therefore the surplus belongs to the state.
That argument is both technically accurate and deliberately misleading. Here is why.
The 10% figure describes a closed legacy plan. It does not describe today’s firefighters and cops.
LEOFF Plan 1 closed to new members on October 1, 1977. The roughly 5,945 remaining retirees in that plan are mostly in their 70s, 80s, and 90s. Many of them spent the majority of their careers contributing under early-era rates before the plan reached full funding and contributions were suspended in June 2000.
The LEOFF 2 Retirement Board today serves over 19,000 active and retired members. Wa These are the firefighters and police officers who represent the current and near-future retired workforce of Washington State. They are in an entirely different plan under entirely different terms.
A LEOFF 2 member contributes 8.53% of their gross salary to the plan on every single paycheck. University of Washington
That is not 10% of a pooled legacy fund spread across 50 years. That is 8.53 cents out of every dollar earned, every pay period, across an entire career in public safety.
And here is what makes that number even heavier.
Many LEOFF 2 members do not have access to Social Security. Wa For a significant portion of Washington’s firefighters and police officers, the pension is not a supplement to a parallel federal retirement program. It is the primary retirement vehicle, full stop. Every private sector worker in America earns Social Security credits alongside their 401(k). Many of the people who ran into burning buildings in this state do not.
LEOFF 2 retirees and dependents can purchase medical coverage through their city but it is not provided. Seattle.gov There is no free healthcare at retirement. A LEOFF 2 firefighter or police officer who retires after 25 years pays their own medical costs out of pocket from their pension check. At a time in life when a career in public safety has already extracted its physical toll. On a fixed income. With no employer subsidy.
The pension is not a windfall layered on top of a full benefits package. It is structured compensation for deferred wages, physical risk, the deliberate trade of Social Security eligibility, and a retirement that arrives without employer-provided healthcare.
So when the state uses the 10% aggregate contribution figure from a closed legacy plan to argue the $3.3 billion surplus is mostly taxpayer money, it is doing something precise. It is using the accounting of a 1970s plan to justify taking money from a fund that covers people who gave up far more and received far less in ancillary benefits than the framing suggests.
The state designed that compensation structure. The state recruited people into it on the strength of those pension promises. The state is now using its own historical funding decisions to argue it gets to keep the surplus.
The benefit formula and what it actually produces.
LEOFF Plan 1’s benefit formula is: 2% multiplied by years of service multiplied by final average salary, using the highest 60 consecutive months. A firefighter retiring at age 53 with 20 years of service and a monthly final average salary of $8,000 receives $3,200 per month for life. Washington Department of Retirement Systems
A 25-year career at that salary produces $4,000 per month for life. Indexed annually. With a capped 3% COLA for LEOFF 2 members. No free healthcare on top of it. No Social Security in many cases.
That firefighter who serves 25 years, retires at 53, and lives to 80, collects 27 years of monthly checks. Total pension payout alone approaches $1.3 million. Every dollar of that was earned under terms the state set and promised to honor.
The survivorship calculation adds another layer. A member who chooses survivorship protection accepts a permanent reduction in their own monthly benefit so their spouse receives continued payments after the member dies. That member pays a real, ongoing financial penalty out of every check for the rest of their life to protect their family. The state did not discount that cost when recruiting them. It should not discount it now.
THE PATTERN. THIS WAS NOT THE FIRST TIME.
HB 2034 did not happen in isolation. It is the third consecutive session in which the Olympia majority used pension fund accounting to avoid making real spending decisions. The pattern is documented.
2001: The First Attempt.
The first time Olympia seriously considered raiding LEOFF 1 was during the 2001-03 budget cycle, when a dot-com bust created revenue shortfalls. A proposed Senate bill would have restructured LEOFF 1 and divided its surplus proportionally among employees, employers, and the state based on historical contribution percentages. Employees in LEOFF paid nearly 12% of the plan’s contributions, so their share of surplus assets would have been 12%. Leoff1coalition
That proposal actually respected proportionality. Employees, employers, and the state would each get back a share matching what they put in. It did not advance. But it established that legislators had been eyeing this surplus for at least 25 years.
2025, Session 1: ESSB 5357. The Accounting Trick.
The majority could not touch LEOFF 1 directly in 2025. Both HB 2034 and SB 5085 failed to clear the chamber. But the legislature did not leave empty-handed.
The legislature passed ESSB 5357, which raised the assumed rate of return on pension investments from 7.0% to 7.25% and took a four-year holiday from paying down unfunded liabilities in PERS 1 and TRS 1. Washington became the first state since the Great Recession to raise its assumed rate of return, making it an extreme outlier nationally. Reason Foundation
By taking a holiday from paying the Plan 1 unfunded liabilities, the state avoided roughly $1.1 billion in payments over the next four years. But because that money is not being invested and the current unfunded liability continues to grow, it will cost taxpayers an additional $1.07 billion in interest over the next 15 years. Combined, these maneuvers likely created $6.5 to $7 billion in future costs that did not exist before ESSB 5357 passed. Washington Policy
The Reason Foundation called it plainly: lawmakers faced with a tight budget chose to underfund the pension system rather than trim new spending or find new revenue. This is fundamentally a spending choice. Reason Foundation
So in 2025 the legislature took a $1.1 billion contribution holiday. Kicked the bill to future taxpayers. And still came back the next session needing more.
2026, Session 2: HB 2034. The Direct Extraction.
Having failed to pass the LEOFF 1 raid in 2025, the majority reintroduced HB 2034 in 2026. It was advanced out of Appropriations without a public hearing and passed the House in a 55-39 vote. The Center Square HB 2034 passed the Senate on March 6 on a 25-22 vote. Four Democrats joined Republicans in voting no. Firehouse
State law states plainly that the purpose of the LEOFF pension fund is “to provide for an actuarial reserve system for the payment of death, disability, and retirement benefits to law enforcement officers and firefighters, and to beneficiaries of such employees.” Washington Policy
The legislature read that statute, understood it, consulted two law firms about how to get around it, and passed the bill anyway.
Three sessions. Three consecutive acts of pension manipulation. Each one building on the last. Each one made necessary by the spending decisions of the session before.
THE MECHANISM. HOW YOU TAKE MONEY FROM A FUND YOU CANNOT LEGALLY TOUCH.
This part requires precision because the state’s defenders will use the legal complexity to suggest the whole thing is routine.
It is not routine. It is a specific legal architecture designed to work around a specific federal prohibition.
IRS rules governing tax-qualified governmental retirement trusts are clear. The assets of a pension fund may only be used for the exclusive benefit of members or beneficiaries while the plan is in existence. No reversion of assets is permitted while the plan is in existence. However, once a plan is terminated, the members of the retirement system do not have an ownership interest in assets that are surplus to the actuarial needs of the system. Leoff1coalition
So the state cannot take money from the active LEOFF 1 fund. But if it terminates LEOFF 1 first, the surplus reverts to the state as plan sponsor. Then it recreates the plan smaller.
That is exactly what HB 2034 does.
On June 30, 2029, the State Treasurer transfers funds equal to 110% of LEOFF 1 liabilities into the Restated LEOFF. From the surplus, $569 million is transferred to the Climate Commitment Account. The remainder is transferred into the Pension Funding Stabilization Account, from which the legislature may direct transfers to the State General Fund during the 2027-29 fiscal biennium. Washington State Register
Terminate. Extract. Recreate smaller. Tell everyone their benefits are safe.
The state did seek legal cover. Sponsors cited analyses from the Washington State Attorney General’s office and Indianapolis-based pension law firm Ice Miller, whose analysis described the structure as an acceptable restatement. The bill also requires the Department of Retirement Systems to seek IRS guidance and to notify the governor and legislature if the IRS determines changes are needed. That last provision is not a minor technical requirement. It is an acknowledgment, written into the bill itself, that the IRS has not blessed this structure and may not.
Preliminary research suggests no other state has attempted a raid of this scale. This could trigger federal IRS violations, putting the tax-exempt status of the entire pension system at risk. Rep. Jim Walsh
The LEOFF 1 Coalition stated it will pursue legal action if the bill is signed. Their argument: LEOFF 1 operates as an IRS qualified governmental retirement trust that can only be used for members or beneficiaries, and the termination-restatement structure does not change that underlying reality.
The courts will decide whether they are right.
WHERE THE MONEY ACTUALLY GOES.
This is the part that requires the clearest language. Because the state’s defenders want this to sound like prudent fiscal management. It is not. Here is the money trail.
Step 1: $569 million to the Climate Commitment Account.
The House version of HB 2034 directed $569 million of firefighter and police pension surplus directly into the Climate Commitment Account. The CCA is funded by Washington’s cap-and-invest program, which auctions off carbon emissions allowances. The Climate Commitment Account had already received over $4 billion before HB 2034 was proposed. Rep. Michael Keaton
The CCA account has plenty of funds since CCA auctions consistently bring in far more dollars than originally expected. Rep. Jim Walsh
So the legislature proposed routing pension money into a climate account that was already flush. The Senate amendment removed this specific transfer. But the mechanism it replaced it with is not better.
Step 2: The remainder to the Pension Funding Stabilization Account. Then to the General Fund.
The CCA dollars get moved to the Working Families Tax Credit. Pension dollars get moved to the CCA as backfill. Another pot of pension dollars gets parked in a stabilization account that the legislature will likely tap for the General Fund next biennium. Washington Policy
The Washington Policy Center described this precisely: it is a shell game. Move the climate money to fund a tax credit program. Move the pension money to backfill the climate account. Park the remaining pension money in a holding account the legislature can access next session. The money changed labels three times. The bill that enabled it is called pension restructuring.
Step 3: The General Fund. Meaning everything.
The Pension Funding Stabilization Account is not a restricted fund. During the 2027-29 biennium, the legislature may transfer its contents to the State General Fund. The General Fund pays for everything. Agency budgets. Programs. Payroll. Everything the operating budget covers.
The state’s total operating budget grew 66% since 2019 and caused today’s shortfalls. There is no spending cap in either chamber’s proposal. No serious effort to unwind the programs and commitments that caused the gap. Washington Policy
The spending created the deficit. Retirees should not be the ones paying for it. Washington Policy
That is the bottom line. The legislature grew the budget 66% in six years. It could not find 3% to cut. So it terminated a firefighter pension plan, extracted $3.3 billion, routed some of it to a climate account, and parked the rest in a holding account it can spend on anything it wants next session.
THE RISK THAT DOES NOT GET MENTIONED.
The legislature’s promise is simple. Monthly benefits are safe. The new Restated LEOFF will be funded at 110% of liabilities. Every retiree keeps their check.
Here is what 110% actually protects against.
LEOFF 1 retirees receive benefits that grow every year. The LEOFF 1 COLA is uncapped, indexed annually to the Seattle-area Consumer Price Index. Seattle medical costs are among the highest in the country. About 40% of LEOFF 1 members receive disability benefits. Washington State Register These are the members who did not get to choose their retirement date. The job chose it for them. Their disability benefit is 50% of final average salary, tax-exempt, and fully indexed to CPI. It does not stop growing.
LEOFF 1 has operated without member or employer contributions since 2000. Depleting the current surplus introduces significant financial vulnerability. Should investment returns falter or medical liabilities escalate, the plan may be forced to resume mandatory contributions for the first time in 25 years. Reason Foundation
The 160% funded ratio was not there by accident. It was built as a buffer against exactly that risk. Against the uncapped COLA compounding over decades. Against the medical cost exposure of an aging population with a history of physically demanding work. Against market downturns hitting at exactly the wrong time.
HB 2034 removes that buffer. Leaves 110%. Then tells people it is fine.
Pension benefits in Washington are constitutionally protected under Bakenhus v. City of Seattle. The legislature could drain every pension fund in the state and retirees would still get their checks. The obligation would just shift to the General Fund. Saying beneficiaries will still be paid is not a justification for raiding the trust. It is a description of the legal backstop that exists precisely because lawmakers have always been tempted to do exactly this. Washington Policy
Rep. John Ley called the legislative promise a “pie crust promise.” His reasoning was exact. The same legislature passed Initiative 2111, which banned income taxes in Washington, then introduced a 9.9% income tax two years later. The same legislature passed I-2066 protecting natural gas access, then worked to amend it. The track record on keeping inconvenient promises is not strong.
THE DEMOCRATIC REPUBLIC QUESTION.
There is a dimension to HB 2034 that goes beyond the pension mechanics. It goes to how a democratic republic is supposed to work.
Washington voters have a constitutional right to petition for a referendum on most legislation. That right exists specifically as a check on the legislature when it passes laws the public would reject. A referendum requires gathering approximately 154,000 signatures. If sufficient signatures are gathered, the law goes to voters before taking effect.
Budget bills cannot be subjected to a referendum. That is an established constitutional carve-out designed to prevent voters from blocking necessary appropriations. HB 2034 is a budget bill. No emergency clause was needed. No procedural trick was required. The legislature’s budget authority alone insulated this bill from any public vote.
The bill was advanced out of Appropriations without a public hearing. The Center Square
No public hearing. No referendum path. No emergency clause needed because budget authority already provided complete immunity from public input.
The firefighters and police officers whose pension plan was terminated had no meaningful mechanism to stop it. The cities and fire districts whose employer contributions built 10% of this fund had no legal standing to block the state from taking the surplus. The voters who might have weighed in had no petition process available to them.
This is how it works. The legislature found a legal mechanism. Used its budget authority to make the bill referendum-proof. Passed it on a party-line vote. And the people most affected by it had no democratic tool to deploy in response other than organizing, speaking, and voting in the next election.
Joyce Wilms, Executive Director of the LEOFF 1 Coalition, said: “Their duty is to oversee the pension, and the pension funds can only be used for LEOFF members and beneficiaries. They made a promise. Do you see them cutting spending? I don’t. They’re not cutting the spending. They keep on spending, and they saw this coming.” The Daily Chronicle
That last sentence is important. They saw this coming. The spending trajectory that made this bill necessary did not appear overnight. The 66% operating budget growth since 2019 was a series of choices, made session by session, by the same majority that is now using a pension fund to avoid the consequences. They saw the gap building. They kept spending. When the bill came due, they found an account that firefighters and police officers spent their careers building, and they took it.
WHAT THEY’D TELL YOU. AND WHY IT DOESN’T HOLD.
The strongest version of the defense has three parts. All three deserve a direct answer.
“Every benefit promised will be paid.”
Rep. Joe Fitzgibbon said “every nickel now of benefits owed to LEOFF 1 members will be paid.” He is probably right that benefits will be paid. Pension benefits in Washington are constitutionally protected. Even if the fund runs dry, the obligation shifts to the General Fund. Washington Policy The check will arrive. The question is whether the state has the right to strip the financial buffer that protects the people who earned those checks against the risk of a market correction or a medical cost spike when they are 85 years old and cannot do anything about it.
“The surplus exceeds what the plan needs.”
The 160% funded ratio does look like excess on a spreadsheet. But the people building those spreadsheets are also the people who just raised the assumed rate of return to 7.25%, making Washington the first state in 20 years to move in that direction while the rest of the country moves toward lower, more conservative assumptions. If investments earn the previously expected 7.0% instead of the new 7.25% target, that $5.4 billion drop in liability becomes a real shortfall. Reason Foundation The surplus that looks comfortable at 7.25% looks different at 6.5%.
“Legal counsel approved the structure.”
The state consulted the Attorney General and Ice Miller. Both provided qualified approval of the termination-restatement mechanism as a legal structure. The IRS has not ruled. The bill requires DRS to seek IRS guidance precisely because no one is certain the structure survives federal scrutiny. The LEOFF 1 Coalition will pursue legal action. The outcome of that challenge is unknown. A law firm saying a novel structure is legally defensible is not the same as a court saying it is legal.
THE NUMBERS SIDE BY SIDE.
LEOFF 1 funded status before HB 2034: 160% Funded status after transfer: 110% Total surplus extracted: $3.3 billion (Senate final version) [CONFIRM BEFORE POSTING: sources cite $2.5B per WSCFF, $3.3B per WA Cities and Firehouse, $4B per Rep. Ley. Confirm against OFM fiscal note.] House version CCA transfer: $569 million to Climate Commitment Account (removed by Senate) Remaining surplus destination: Pension Funding Stabilization Account, available for General Fund transfer 2027-29 Members affected: approximately 5,945 LEOFF 1 annuitants, roughly 40% on disability benefits LEOFF 2 active and retired members: 19,000+ LEOFF 2 employee contribution rate: 8.53% of gross salary every paycheck LEOFF 2 retirement healthcare: not provided. Purchase only. LEOFF 2 Social Security access: not available for many members
Three-session pension manipulation total:
2025 ESSB 5357: $1.1 billion contribution holiday from PERS 1 and TRS 1. Future cost: $1.07 billion in additional interest over 15 years. Total future liability created: $6.5 to $7 billion.
2026 HB 2034: $3.3 to $4 billion extracted from LEOFF 1 surplus.
Running total of pension obligations created or extracted: roughly $10 billion across two sessions.
Operating budget growth that made this necessary: The state’s total operating budget grew 66% since 2019. Washington Policy
SECTION 9: DATA SOURCES
Primary bill documentation: HB 2034 E2SHB, House Bill Report as Passed House, February 13, 2026. lawfilesext.leg.wa.gov/biennium/2025-26/Pdf/Bill%20Reports/House/2034-S2.E%20HBR%20APH%2026.pdf
Senate passage and final version: Firehouse.com, “Move to Use Pensions of WA Firefighters, Cops to Help Budget Shortfall Draws Heat,” March 2026. Senate passage 25-22, March 6. $3.3 billion figure. WA Cities, “Plan to Sweep $3.3 Billion Surplus from Firefighter and Police Pensions Revived,” March 9, 2026. wacities.org Rep. John Ley, end of session report, March 2026. johnley.houserepublicans.wa.gov
LEOFF 2 member data: LEOFF Plan 2 Retirement Board. leoff.wa.gov University of Washington HR, LEOFF 2 contribution rate 8.53%. hr.uw.edu/benefits/retirement-plans/leoff-2-retirement-plan/ DRS LEOFF Plan 2 page. drs.wa.gov/plan/leoff2/ Seattle HR LEOFF comparison: LEOFF 1 medical provided, LEOFF 2 medical purchase only. seattle.gov/human-resources/benefits/retirees/leoff-fire
Benefit formula: DRS LEOFF Plan 1 benefit formula. 2% x years x FAS, highest 60 consecutive months. drs.wa.gov/plan/leoff1/ LEOFF Plan 2 Retirement Know-how handbook. leoff.wa.gov
Prior pension manipulation pattern: Reason Foundation, “Washington Lawmakers Passed a Ticking Time Bomb for Pension Solvency,” May 2026. reason.org Washington Policy Center, “A Second Chance to Restore Washington’s Pension Integrity,” December 2025. washingtonpolicy.org ESSB 5357 House Bill Report as Passed, April 23, 2025.
2001 precedent: LEOFF 1 Coalition, SB 6166 Q&A and Overview. leoff1coalition.org/sb6166_q&a.php LEOFF 1 Coalition, SB 6166 Overview. leoff1coalition.org/sb6166_overview.php
Opposition documentation: Rep. Jim Walsh, Rep. Travis Couture, Rep. Matt Marshall, joint statement, February 20, 2026. jimwalsh.houserepublicans.wa.gov Rep. Michael Keaton, legislative update, February 20, 2026. michaelkeaton.houserepublicans.wa.gov Center Square, “WA House Bill Raids Billions from Pension Plan,” February 17, 2026. Washington Policy Center, “Supplemental Budget Proposals Include an Income Tax, a Pension Raid, and More Spending,” February 2026. Reason Foundation, “Washington House Bill 2034 Redirects Pension Funds for Non-Pension Spending,” March 2026. reason.org Washington State Council of Fire Fighters, “Update on HB 2034 and LEOFF 1,” February 15, 2026. wscff.org
Constitutional protection: Bakenhus v. City of Seattle, 48 Wn.2d 695 (1956).
COULD NOT CONFIRM BEFORE POSTING: Final enrolled bill dollar amount: sources range from $2.5B (WSCFF) to $3.3B (WA Cities) to $4B (Rep. Ley). Confirm against OFM fiscal note before publishing a specific figure. Governor Ferguson signature status: As of research date the bill passed both chambers. IRS compliance: The IRS has not issued a ruling. Nor stated if this violates law. The LEOFF 1 Coalition argues it does and that the bill itself requires DRS to seek IRS guidance.
* Claude and Gemini Ai used to assist with research for this article.