"Most of the Budget Is Rigid Expenditures Like Personnel Costs" vs "Lax Management Due to Excessive Grants"... The Longstanding Conflict Over Education Grants Continues for Over a Decade

The "Automatic Allocation Structure" Tied to Domestic Taxes Remains Controversial for Over a Decade

Reform Advocates Call It a "Handout Budget"... Supporters Warn of a "Real Fiscal Crisis"

The Local Education Finance Grant (education grant) was designed in 1971 to automatically allocate a certain percentage of domestic taxes. Currently, it consists of 20.79% of domestic taxes plus an education tax. The conflict over this "automatic allocation" structure has continued without resolution for more than a decade.

Reform Advocates: "School-age Population Declines, but Grants Are Surging... They Should Be Reduced"

Proponents of reform argue that despite the decline in the school-age population, the automatic distribution structure has caused the size of the education grant to surge. The number of elementary, middle, and high school students fell by 17.6% over the past 10 years, from 6.08 million in 2015 to 5.01 million last year. In contrast, the education grant budget jumped by approximately 66%, from 43.2 trillion won in 2016 to 71.6 trillion won (main budget) in 2026. This surplus of funds has led to criticism of lax management and inefficient spending. Examples include providing tablet PCs to every student and accumulating surplus funds in municipal and provincial education office reserves because there is nowhere to spend the money. Professor Lim Sangsoo of the Department of Economics at Chosun University stated, "Korea's education finance has an abnormally high share of public education spending on primary and secondary schools compared to the size of the economy and the OECD average, while investment in higher education is extremely low. Reform of the grant system is urgently needed."

According to a 2024 report by the Korea Development Institute (KDI), if the current structure linked to domestic taxes is left unchanged, the size of the education grant is projected to reach 85 trillion won in 2030 and 113 trillion won by 2040. Kim Haksoo, senior research fellow and author of the report, pointed out, "The system linking the grant to domestic tax revenue should be abolished, and the allocation should be based on performance and demand." Furthermore, if the current "expansionary fiscal policy" stance is maintained, this amount will increase even more. In fact, with the latest supplementary budget, the education grant amount grew by 4.8 trillion won compared to the main budget, reaching 76.4 trillion won.

Opponents: "75% Goes to Personnel Costs... In Reality, It's a Fiscal Crisis, Grants Should Not Be Reduced"

Those in the education sector counter that this is a "distortion of reality based on surface figures and selective statistics." According to the Council of Education Superintendents of Korea, an average of 75.1% of education grants over the past 10 years—since 2015—has gone to personnel costs, making most of the budget "rigid." They also argue that the funds held by education offices are not surplus cash, but "emergency funds" set aside to cover tax revenue shortfalls. In 2023–2024, when tax revenue was insufficient, about 13.8 trillion won from these funds was used to barely cover personnel costs and essential programs. They further insist that cases of lax management are rare but have been excessively highlighted.

Although the number of students has decreased, the number of schools has actually increased, so the education community believes it is premature to reduce funding. Indeed, over the past five years, the number of elementary, middle, and high schools steadily rose every year—from 11,710 in 2020 to 11,871 last year. An education sector official pointed out, "The amount of support per school has actually stagnated," and questioned, "If budgets should be cut just because the number of people is decreasing, why does national spending continue to rise even when the population is stagnant?" In addition, demand for new policies such as the Neulbom School program, the basic academic competence guarantee program, expansion of digital education including artificial intelligence (AI), and the implementation of the high school credit system, is surging, leading to even greater fiscal pressure. This is another key argument against reforming the education grant system.

Will Education Grant Reform Happen This Time?

Until now, the education sector has repeatedly blocked reform attempts with strong organizational unity. Regardless of whether they are conservative or progressive, superintendents and teachers' organizations have consistently maintained opposition. If the government actually attempts to reform the education grant system, it is expected that the education sector will again rally together to mount a full-scale defense.

However, without touching the education grant, it would be virtually impossible to achieve the "50 trillion won expenditure restructuring" and "10% cut in mandatory spending" pledged by Budget and Planning Minister Park Hongkeun. This is because, out of this year’s 388 trillion won in mandatory spending, the education grant accounts for about 18.5% (71.6 trillion won, main budget basis). The reform directions currently under discussion include: lowering the domestic tax linkage ratio; additional conversion to special accounts for support of higher and lifelong education; and adjusting the education grant in conjunction with increasing the share of local taxes. A government official stated, "The principle of reviewing all fiscal programs from scratch is firm," and added, "Major institutional improvements are likely to be pursued to increase the efficiency of mandatory spending."

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