![Park Hong-keun, minister of the Ministry of Planning and Budget [Yonhap]](https://wimg.heraldcorp.com/news/cms/2026/07/20/rcv.YNA.20260713.PYH2026071302080001300_P1.jpg)
If the current local education grant system — which automatically allocates 20.79 percent of domestic tax revenue to education — remains unchanged, the grants could approach 100 trillion won ($67.2 billion) next year.
The Ministry of Planning and Budget is pushing to scrap the tax-linked formula in favor of one that reflects the school-age population and economic growth rate, while the Ministry of Education insists on keeping the existing 20.79 percent linkage — and the two ministries remain deadlocked, making a reform package difficult to finalize.
According to the Ministry of Planning and Budget on Monday, domestic tax revenue next year is expected to exceed 500 trillion won.
Minister Park Hong-keun made the projection at the National Fiscal Strategy Conference held Monday, saying a large surge in tax revenue beyond the long-term trend is anticipated.
Assuming the ratio of domestic taxes to total national taxes holds at 88 percent — the same level as in this year's supplementary budget — and that 20.79 percent of domestic taxes flows to the grants under the grant law, the arithmetic puts the grant pool at more than 91.5 trillion won.
With the semiconductor boom potentially pushing income and corporate tax receipts above forecasts, and education taxes added on top, the grants are projected to approach 100 trillion won.
The grants, a primary revenue source for regional education offices, are funded by 20.79 percent of domestic taxes plus a portion of the education tax collected from national taxes.
The portion under debate is the domestic-tax-linked component, which makes up the bulk of the grants.
Because economic growth and inflation push domestic tax revenue higher each year, the grants have kept expanding — even as the number of kindergarten, elementary, middle and high school students eligible to benefit has steadily fallen due to the low birth rate.
When the tax-linked formula was introduced in 1972, annual births were close to 1 million; last year that figure had shrunk to 250,000, a quarter of the earlier level.
Despite that demographic shift, the linkage has remained in place, and because the grants can only be spent on kindergartens and elementary through high schools, regional education offices have faced persistent criticism for distributing the money indiscriminately.
With a semiconductor supercycle expected to generate a large tax windfall, keeping the rigid grant formula in place could make the problem of loose spending even more acute.
Critics have also long pointed to the instability the formula creates — grant levels fluctuate with tax conditions — and called for fixes.
The Ministry of Planning and Budget wants grant levels set by factoring in inflation and economic growth. It has also laid down the principle that the overall grant pool will not shrink and that per-student allocations will rise every year, while pledging to reinvest funds more broadly across long-underfunded areas such as higher education, lifelong learning and early childhood education.
The Ministry of Education and the broader education community, however, want the tax-linked structure preserved. Their argument is that even as the school-age population shrinks, new town development keeps adding new schools, and new classrooms are being built to ease overcrowding.
They also argue that fiscal returns on education investment are not immediate and that the case against the current formula takes too narrow a view.
Amid the standoff, the Ministry of Planning and Budget recently announced a new principle: it would guarantee grant levels in line with the long-term trend line. At a presidential briefing held at Cheong Wa Dae on Wednesday, Minister Park said, "We will guarantee grants at a level close to the long-term trend line going forward," adding, "Revenue collected beyond that will be invested in the balanced development of higher, lifelong and early childhood education."
Earlier, on July 8, Park noted that grants had grown at an average annual rate of 6.5 percent over the past 20 years. Applied to this year's supplementary-budget grant baseline of 76.4 trillion won, that figure could be interpreted as a commitment to guarantee roughly 81.5 trillion won next year. That would mean next year's grants come in about 20 trillion won lower than they would under the current linked formula.
Per-student grant allocations would still rise under the proposal. Based on median population projections from the Ministry of Statistics, the per-student grant for children aged 3 through 17 — from kindergarten through high school — would increase 10.9 percent, from 13.42 million won this year to 14.89 million won next year.
The two ministries responsible for the reform — Planning and Budget and Education — remain at an impasse, however, leaving the ministry's plan to reduce mandatory spending and ease the fiscal burden on future generations stalled.
There had been speculation that a reform package could be unveiled at the National Fiscal Strategy Conference held Monday, but the two sides failed to reach a conclusion amid their sharp disagreement.
"It is not easy to overhaul a system that has been in place for more than 50 years all at once," a ministry official said. "We are in constant dialogue with the education community and will try to have a reform plan ready by the time the budget proposal is announced at the end of August if at all possible."
oskymoon@heraldcorp.com
