Education Finance 'Partition Walls' Removed... Surplus Elementary and Secondary School Grants Allocated to Universities

Government Allocates Special Account of 11.2 Trillion Won for Higher and Lifelong Education Support

[Asia Economy Sejong=Reporters Kwon Haeyoung and Han Jinju] The government is set to establish a 'Special Account for Higher and Lifelong Education Support' worth 11.2 trillion KRW annually, marking the first reform of the local education finance grant system in 50 years. The main goal is to remove the financial barriers that restrict education grants to kindergartens, elementary, middle, and high schools, allowing these funds to be used for higher education institutions such as universities. This aims to resolve the financial imbalance in education by channeling surplus grants, caused by a declining school-age population, into universities facing financial difficulties, thereby strengthening the competitiveness of higher education.

On the 15th, the government announced plans to expand higher education finances by establishing the Special Account for Higher and Lifelong Education Support, with an annual budget of 11.2 trillion KRW. The funding will be composed of 8 trillion KRW transferred from existing projects in the higher and lifelong education sectors and an additional 3.2 trillion KRW raised through the transfer of education taxes.

This special account establishment is part of ongoing education finance reforms initiated by previous administrations. Since 1972, South Korea has automatically allocated 20.79% of domestic taxes, in addition to education taxes, as grants exclusively for kindergarten, elementary, middle, and high school education budgets. This amount reaches 81 trillion KRW this year alone. Although economic growth has increased these grants, the problem lies in the growing surplus of funds due to low birth rates and a declining school-age population, leaving no place to spend the money. Last year, the unused budget of city and provincial education offices nationwide amounted to 3.83 trillion KRW, and the funds accumulated in reserves due to lack of spending reached 5.32 trillion KRW (as of 2021). In total, over 9 trillion KRW is being left idle. Meanwhile, universities are experiencing financial difficulties due to the declining school-age population.

Statistics from the Organisation for Economic Co-operation and Development (OECD) clearly reveal South Korea's educational finance imbalance. According to the OECD, in 2019, South Korea's per capita public education expenditure was 142% of the OECD average for elementary and secondary education, which is very high, whereas for higher education it was only 64%.

A Ministry of Economy and Finance official stated, "In a rapidly changing environment such as the 4th Industrial Revolution and digital transformation, the role of universities is crucial, but universities have reached their limits due to financial difficulties caused by the sharp decline in the school-age population," adding, "investment in higher education has been relatively insufficient due to the financial barriers and investment imbalances between education sectors."

The government plans to closely pursue related discussions to ensure that the special account establishment plan passes within the regular National Assembly session and can be implemented starting next year. Once the special account is established, the budget execution autonomy will be increased to promote universities' independent innovation, with focused investment on fostering regional universities, improving university education and research conditions, and re-educating faculty members.

Some voices argue that more fundamental reform of the grant system is necessary for a transition to sound fiscal management. With national debt exceeding 1,000 trillion KRW, reaching 50% of the Gross Domestic Product (GDP), the grant system is seen as an obstacle to fiscal soundness. Currently, more than 20% of domestic taxes are automatically paid as grants, but urgent and stronger measures are needed, such as significantly lowering this ratio in line with demographic changes.

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