Local Governments' Financial Independence at 45%... Rapid Momentum Gaining for Disaster Basic Income

Gangwon, Seoul, Jeonju Disaster Basic Income Payment Plan
National Local Governments' Fiscal Independence Only 45.2%... "Need to Establish Funding, Delivery System, and Legal Basis"

[Image source=Yonhap News]

[Asia Economy Reporters Jang Se-hee and Won Dara] As calls for the introduction of disaster basic income to respond to the novel coronavirus infection (COVID-19) grow mainly among local governments and political circles, the atmosphere for implementing 'disaster basic income' is becoming increasingly realistic. However, if disaster basic income is to be implemented at the national level, securing funding and establishing a clear delivery system must precede.

◆Local Governments' Financial Independence Rate Only 45.2%= According to government departments on the 19th, the average financial independence rate of local governments nationwide this year is only 45.2%. Local governments rely on central government support through local finance grants and subsidies, excluding general resources, so an increase in national debt is inevitable. Professor Kim Sang-bong of Hansung University’s Department of Economics pointed out, "Even Seoul, which is considered to have a relatively good financial independence rate, is only at 80%. Ultimately, the government will have to provide subsidies."

According to the government, based on the 2020 main budget, South Korea’s national debt is expected to reach 805.5 trillion won, with the national debt-to-GDP ratio projected at 39.8%. Adding the largest supplementary budget in seven years (11.7 trillion won) will push this ratio beyond the 40% threshold considered the limit. A government official said, "If local governments reach a level where they cannot handle their finances, they will inevitably request help from the central government. If they first spend from their own budgets and then systematically ask for reimbursement later, that could also become a very difficult situation."

The National Assembly Legislative Research Office’s report titled 'Discussion and Key Issues of Disaster Basic Income' also pointed out the need for securing funding. The report stated, "A significant portion of the currently discussed disaster basic income overlaps with existing welfare programs," and emphasized that "funding plans need to be thoroughly discussed." The report also noted, "In Switzerland, a 2016 referendum on whether to provide basic income to all citizens was rejected by 76.7% of voters," adding, "The reason Swiss citizens opposed it was that they would have to pay at least two to three times more in taxes, and many current social welfare programs would disappear."

◆Challenges in Delivery System and Legal Basis= The need for a central government control tower to manage disaster basic income has also been raised. Since there are no past cases of disaster basic income introduction, the delivery system is not clearly defined. Professor Sung Tae-yoon of Yonsei University’s Department of Economics said, "Ultimately, the central government may have to provide grants to local governments," and added, "It would be desirable for the central government to establish the delivery system and for local governments to execute it."

Establishing a legal basis is also necessary. The currently discussed disaster basic income lacks legal grounds. Article 4 of the 'Framework Act on Disaster and Safety Management' stipulates that the state and local governments have the responsibility to protect citizens' lives, bodies, and property from disasters and other accidents, and must establish and implement plans to promptly respond to damages incurred.

However, since the interpretation of financial support under the legal basis is unclear, legislation is also needed. An official from a local government budget office said, "Because the current legal basis is unclear, local governments are changing the name of disaster basic income to suit their own circumstances when providing it."

This content was produced with the assistance of AI translation services.