City’s bond issue to fund day care

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City’s bond issue to fund day care

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The Seoul city government will float a municipal bond issue to keep the city’s foundering day care programs afloat. The budget for the facilities has been exhausted, and the program faced the threat of being shut down.

In a press briefing yesterday at City Hall, Mayor Park Won-soon said the city will issue 200 billion won ($183.2 million) of bonds to keep things going.

After the program was expanded this year, total day care spending for the city was increased from last year’s 547.4 billion won to 1.06 trillion won, nearly double the prior figure. But because the national government has only provided 147.4 billion won, about a quarter of the additional funds needed, the city had to find 370.8 billion won to keep the program afloat. By August, the 694.8 billion won in the budget for the year had been exhausted.

Park has championed several welfare programs, including the provision of free lunches for all students in elementary and middle schools, but has mixed feelings about this one.

“I want to make clear that this is only an emergency measure for this year,” he said at the press conference, criticizing the central government for not spending more on the program. “The reason we decided to do this isn’t because our financial condition is healthy,” the mayor continued. “We just didn’t want to see this important welfare program paralyzed. We will keep urging the central government to increase its support for the program. The central government and the National Assembly agreed to expand this welfare program without local governments’ consent and that forced us to provide the money.”

As of now, the city government pays 80 percent of the cost of day care programs, with district offices and the central government paying the rest. Park wants the central government to pay 40 percent of the costs.

The brewing money crunch has been on the horizon for some time. In March, all parties agreed to expand the previous day care policy to cover all children under the age of 5. Day care was previously free for children under 3 years of age and for 5-year-olds. A bill authorizing the central government to subsidize more day care costs was considered by the Assembly’s Legislation and Judiciary Committee, but has been stalled there ever since.

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Park Won-soon

“Because we decided to issue municipal bonds, we will soon receive 135.5 billion won in additional support from the Ministry of Health and Welfare,” said Cho Hyun-ok, director of the city government’s family policy division. That came about because the national government had told the city it would pay that much additional money for the program, but only if the city and its 25 district offices funded the rest through a supplementary budget.

For those keeping track, that leaves another 30 billion won or so to plug the budget holes. The city said it would get that money by transferring money from other projects and going after delinquent taxpayers more aggressively.

“The city is forecast to have a deficit of 400 billion won by the end of the year because of expanded welfare programs without corresponding support from the central government,” Park complained. “But the central government has been totally ignoring the city’s requests over the past few months to discuss the issue.”

Some observers were not impressed. “This is the mayor’s political show,” said Kim Hyun-suk, a member of the Seoul Metropolitan Council from the ruling Saenuri Party. “The city has about 3.3 trillion won in funds it did not spend between 2010 and 2012. He would have been able to solve this problem much more easily by allocating those funds rather than by issuing municipal bonds.”


BY KWON SANG-SOO [sakwon80@joongang.co.kr]

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