Larger welfare policies blasted

Facing enormous pressure to implement expanded welfare programs, an association of municipal governments and district offices held a press conference yesterday in central Seoul, during which they demanded more help from the central government in paying off soaring welfare costs, going so far as to threaten a possible default on such programs.

“Because the central government relegated this huge monetary burden to regional governments to implement all basic welfare programs, local government offices are deeply troubled financially, to the extent that they can’t execute basic administrative affairs like repairing roads or sewer systems,” Suncheon City Mayor Cho Choong-hon said yesterday during a briefing at the Press Center in central Seoul, flanked by other heads of local governments.

Emphasizing the need for the central government to expand its fiscal assistance, Cho even warned about potential default on widening welfare programs.

“If the government does not step in, default is inevitable for the local governments that cannot continue to pay for welfare policies.”

Cho’s sentiment was one widely shared by other municipal government chiefs and detailed in a statement issued by 226 local government chiefs. Those 226 include city mayors, district office chiefs and county office heads.

Local governments’ increasing concerns about defaulting aren’t entirely unsubstantiated. Among the 224 municipal governments, 127 could not pay their workers through their own budgets, which are funded by taxpayers’ money.

The fiscal self-reliance of local governments dropped on average to 44.8 percent this year from 63.5 percent in 1995, according to government figures.

In the statement, the 226 municipal office heads called on the central government to take up a 90 percent share in paying for basic pension plans for people aged 65 and older. They also urged the central government to raise its share of coverage for childcare up to 70 percent to ease the financial weight on local governments.

Under the basic pension program for seniors - which was heavily touted in the 2012 presidential election campaign by both the ruling and opposition candidates and implemented in July - those aged 65 and older in the bottom 70 percent income bracket are entitled to receive up to a 200,000 won ($196) monthly allowance. This year alone, 7 trillion won is required to carry out the welfare policy.

In a desperate attempt to raise the country’s birth rate, the government in 2013 also expanded free childcare coverage for toddlers aged 0 to 5. Previously the service was only offered for infants to 3-year-olds. To effectively carry out that program, an additional 7 billion won is needed.

In response to local governments’ demands and the warning of an all-out default, two welfare and public administration ministers refuted the association’s claims point by point, even criticizing them for their lax monetary management.

“The local governments can manage the current basic pension plan since the central government raised the consumption tax rate to 11 percent from 5 percent [this year],” Welfare Minister Moon Hyung-pyo said in a follow-up press briefing yesterday at the central government complex, standing next to Public Administration Minister Chong Jong-sup.

Under the current pension program, the central government is responsible for paying 74 percent of the cost of the basic living plan, while the rest is covered by local governments.

The welfare minister also rejected the association’s demand that the government increase its input in the free childcare program, pointing out that it had raised its contributions by 15 percent last year.

BY CHANG SE-JEONG, KANG JIN-KYU [jkkang2@joongang.co.kr]