No more local profligacy

At this time of year, a rainbow of colorful festivals spreads out across the peninsula. But they’re a little earlier than usual this year, with celebrations of blossoming flowers usually held in June moved up to May. Some local governments have lit bright lamps through the night to speed up the budding process and awaken the flowers early. The purpose: to round up votes for incumbent local officials in the June 2 elections. Political banners cover the unnaturally blooming trees. Some 230 billion won ($203 million) in taxpayers’ money was poured into these 937 provincial festivals last year.

Funding for private organizations from local government budgets has also been on the rise, with officials hoping their charity will be paid back in votes. In 2008, subsidizing civilian organizations took up 5 percent of the budget of local governments. In one district in Busan, such generosity made up 11.7 percent of the budget. The number of employees at local governments is also expanding fast. According to a National Assembly survey, Pyeongchang County, Gangwon, saw its regional population fall 3.54 percent, but its number of government officials jump 31.86 percent. Similar cases were reported in 86 districts across the country.

Local governments fund an average of 53 percent of their budgets. The other half comes from the central government, which levies and allocates taxes to local governments, not including separate subsidies of 59 trillion won. It also offers 5 percent of the earnings from the value added tax, or 1.87 trillion won, to local governments. Yet outstanding local government bonds reached 25.5 trillion won last year, and 387 public entities set up by local governments are saddled with cumulative debt worth 50 trillion won. Vanity is eroding the state finances, and such contagious profligacy is quickly spreading across the nation. With few restrictions from outside and competition within, local recklessness returns to haunt taxpayers.

Germany’s solid fiscal posture stands out among European countries swept up in the debt crisis. One of their secrets is the Federation of German Taxpayers. The association is funded by donations from 400,000 members. On its office wall, a federal debt clock ticks throughout the year. The association helps save tax waste worth 30 billion euros ($38 billion) on average a year. German politicians and public servants tensely await the release of the “black book,” a report on budget waste. The association is close to attaining its persistent demand for punitive measures on wasteful public servants. We too should no longer tolerate moral hazard in local governments. We must strengthen our alarm system to prevent mismanagement of funds and let corrupt governments go bankrupt.