Time to Create a Sustainable Reform Plan for Education Grants

Calls are growing in South Korea to reform the Local Education Grant, a system funded by a fixed percentage of national taxes and part of the education tax. The core issue is the structural disconnect between the grant's automatic increase and the dramatic decline in the school-age population.

Despite a projected 21.85% drop in students from 2016 to 2026, the education grant has surged by 76.6% from 43.2 trillion won in 2016 to an estimated 76.3 trillion won in the current supplementary budget. This trend is expected to worsen as corporate tax revenues, particularly from the booming semiconductor industry, rise. Critics argue this rigidity leads to inefficient budget allocation, with concerns about waste on non-essential projects by provincial education offices, especially when contrasted with the financial struggles of higher education and lifelong learning sectors.

Education Minister Choi Kye-jin acknowledged the need for reform, stating that while he disagrees with the premise that education budgets must shrink as student numbers fall, he is open to finding the most rational solution. Planning and Budget Minister Park Hong-keun also hinted at reforms, noting the relative financial health of local education budgets compared to central and local governments, given the declining student population and rising national taxes.

Various reform proposals are on the table for discussion at the upcoming Fiscal Operations Strategy Committee. These include distributing a combined 40.03% of national taxes (including local taxes and education grants) to local governments, or reducing the national tax-linked ratio to cover fixed costs while the state manages variable expenses. Another option is establishing a Higher Education Tax Act to boost funding for universities. The education sector counters that fixed costs like staff salaries and operational expenses constitute 70-80% of the budget and that new demands for AI education and school improvements require sustained funding.

The government is urged to present clear objectives that link education funding to the development of higher education and strategic industries, rather than simply cutting budgets based on student numbers. The education community is also called upon to collaborate with the government to find sustainable reform solutions that consider public opinion and expert advice.