A Washington agency that manages the state’s lawsuit payouts is seeking a one-time infusion of nearly $570 million to address skyrocketing liability costs.

And without a more permanent fix to funding the state’s self-insurance fund, the Department of Enterprise Services warns its gap could grow to more than $1.3 billion by mid-2027. By mid-2029, the deficit could be anywhere from $2 billion to $3.2 billion.

The department is also asking the governor to propose adjusting the insurance fund’s ongoing funding to minimize this shortfall. This would mean hundreds of millions more dollars per year to offset the state’s payouts.

The request is among those state agencies have submitted in recent days to Gov. Bob Ferguson’s office as he prepares a budget proposal ahead of the 2026 legislative session.

Premiums paid by state agencies finance the liability account, but those premiums haven’t kept pace with surging costs associated with legal claims against the state. In the 2023-25 biennium, the state paid nearly $800 million in settlements and court judgments. Another $110 million went toward legal fees.

In the most recent fiscal year that ended June 30, the liability fund brought in just under $230 million, mostly from premiums, while spending $595 million, mostly for payouts and legal costs, according to state data.

This predicament has left the account financially underwater, according to the Department of Enterprise Services.

The state previously poured more than $200 million into it in fiscal year 2022. But the problem has grown worse since then, and the account is now being allowed to operate in a temporary deficit up to about $1 billion with authorization from the budget office, Office of Financial Management spokesperson Hayden Mackley said.

The shortfall represents the extent to which the state is being held to account for decades of alleged misconduct, from wrongful terminations to deaths in prison and mishandled child welfare cases. For example, a Spokane County jury recently ordered the state to pay a woman $42 million for failing to protect her from years of childhood sexual abuse.

So far this year, Washington has paid out about $89 million in these cases, not including that recent $42 million verdict, according to the Department of Enterprise Services.

The deluge of lawsuits over the past few years shows no signs of slowing down. Last June, an actuary estimated the state faced $2.5 billion in liability from pending claims, straining an already-reeling state budget.

This year, lawmakers skirted the issue of the state’s ballooning payouts as they dealt with a multibillion-dollar budget shortfall.

By not spending to shore up the liability account, lawmakers punted the issue into next year’s legislative session, which begins in January.

Legislators next year will pass a supplemental budget, making adjustments to the two-year spending plan approved earlier this year.

Setting the issue aside for this year, “gives us time to work with state agencies to solve this problem over a longer horizon,” said Mackley, with the Office of Financial Management.

“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,” Ferguson’s budget director, K.D. Chapman-See, wrote in July to the acting director of the Department of Enterprise Services.

Mackley said the Office of Financial Management will review the budget request.

The issue has lawmakers’ attention.

Senate Republicans’ budget lead called the liability payouts “one of the fastest-growing line items in the state’s budget.”

“If there’s bad conduct at state agencies and we’re losing lawsuits because of it, we need to hold folks accountable and the Legislature needs to step in and do its rightful job in that,” Sen. Chris Gildon, R-Puyallup, said during a panel hosted last week by the Association of Washington Business.

Rep. April Berg, D-Mill Creek, responded that she hopes to see “some good bipartisan legislation that addresses some of our tort liability.”

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