Removing Education Finance Barriers After 50 Years

Accumulating Elementary to High School Grants Due to Low Birthrate, Allocated to University Support

[Asia Economy Sejong=Reporters Kwon Haeyoung and Han Jinju] The government has initiated a reform of the Local Education Finance Grant system, which has been used exclusively for elementary, middle, and high school budgets for 50 years. The core of the reform is to abolish the partition by establishing a new 'Higher and Lifelong Education Support Special Account' worth 11.2 trillion KRW annually, allowing part of the education grant funds to be used for higher education such as universities.

On the 15th, the government announced the establishment of the Higher and Lifelong Education Support Special Account to expand higher education finances by 11.2 trillion KRW annually. The funds will be composed of 8 trillion KRW transferred from existing projects in the higher and lifelong education sector and an additional 3.2 trillion KRW increased through the transfer of education tax. The budget created by the special account will be invested in expanding general financial support in a comprehensive manner for universities' autonomous innovation, focusing on fostering local universities, improving university education and research conditions, and teacher retraining. ▶Related article Grant reform for the first time in 50 years... Budget for diagnostic evaluation support to double from 2025

This special account establishment is part of ongoing education finance reforms pursued since the previous administration. In South Korea, besides the education tax, 20.79% of domestic taxes are automatically allocated as grants and used only for kindergarten, elementary, middle, and high school education budgets. Due to economic growth, the grants introduced in 1972 have increased to reach 81 trillion KRW this year alone, but the problem is that funds are left unused due to low birth rates and a declining school-age population. Last year, the unused budget of city and provincial education offices nationwide amounted to 3.83 trillion KRW, and the amount accumulated in funds due to lack of spending reached 5.32 trillion KRW (as of 2021). Meanwhile, universities are facing financial difficulties due to the declining school-age population. According to the Organisation for Economic Co-operation and Development (OECD), South Korea’s per capita public education expenditure for elementary and secondary education is 1.4 times the OECD average, which is very high, but higher education expenditure is only 0.6 times the average.

Choi Sangdae, Vice Minister of Strategy and Finance, stated, "Despite the decrease in the school-age population, grants for elementary and secondary education have continued to increase, but due to the partitioned structure of education finance, the investment imbalance between elementary and secondary education and higher education has widened, leading to continuous demands for system reform. The government will promote the establishment of the Higher and Lifelong Education Support Special Account by utilizing part of the education tax portion of the education grant and additional support from the general account to stably support the strengthening of university competitiveness."

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