Opposition within the Democratic Party of Korea has emerged as the government prepares to announce a sweeping overhaul of the local education grant system — one that would end the automatic allocation of 20.79 percent of domestic tax revenue to regional education offices.
Rep. Baek Seung-a of the Democratic Party, a member of the National Assembly's Education Committee, told reporters after a party-government consultative meeting on the Future Response Fund at the Assembly on Thursday that education committee members broadly favor keeping the 20.79 percent link to domestic tax revenue intact. She said she conveyed that position to the government side.
Democratic Party policy committee chair Kwon Chil-seung said the meeting was limited to hearing the government's explanation and exchanging views, adding that no decisions had been made. Planning and Budget Minister Park Hong-keun declined to say whether the meeting had produced any agreement on the grant formula.
The local education grant, a primary source of revenue for provincial and metropolitan education offices, is currently set by law at 20.79 percent of domestic tax receipts. The automatic link was introduced in 1972, with the rate rising from 13 percent in 2001 to 20.46 percent in 2019 before reaching the current level in 2020.
Despite resistance from the education sector, the Ministry of Planning and Budget and the Ministry of Education have aligned behind abolishing the formula — a move that would end the 54-year-old mechanism. The government argues that tying education finances to the fluctuations of domestic tax revenue undermines fiscal stability. Education groups counter that scrapping the link would erode both funding stability and learning conditions.
The grant is expected to be recalculated using a formula that reflects long-term trends, including changes in the school-age population. The leading proposal would apply the previous year's grant adjusted by the average nominal growth rate over the preceding three years and 35 percent of the year-on-year change in the school-age population. Under that formula, next year's grant would fall to around 80 trillion won — about 20 trillion won less than under the current automatic link. This year's grant, based on the supplementary budget, stands at 76.4 trillion won.
Adding the roughly 20 trillion won ($14.3 billion) in savings from the reform, the Future Response Fund could exceed 100 trillion won, analysts say. The fund is designed to set aside revenue from corporate and income taxes swelled by a semiconductor boom — separating those receipts from the general budget to build a pool of medium- to long-term investment capital. Legislation to establish the fund is expected to be packaged with amendments to the National Finance Act and the Local Education Grant Act and processed together.
The Future Response Fund is planned to be divided across four areas: youth, future growth engines, regional development and talent. The government is also considering creating a separate account within the fund for early childhood and lifelong education — a concession to the education sector — where savings from the grant reform would be deposited.
The government is set to announce the plan to establish the Future Response Fund and overhaul the grant formula on Friday. The Democratic Party will hold a joint policy coordination meeting the same day, bringing together the National Assembly's Budget and Accounts Special Committee, the Finance and Economy Planning Committee and other relevant standing committees to receive the government's proposal and discuss the fund's establishment and operating direction.
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