Stop the blame gameMinister of Health and Welfare Moon Hyung-pyo and Minister of Security and Public Administration Chong Jong-sup responded defensively to warnings of a default crisis in local governments due to snowballing welfare costs. They said they will form a joint government task force to examine the financial state of local governments and will issue a stern warning to municipal and provincial heads. The association of municipal governments and district offices held a press conference to say that they are teetering on the brink of insolvency, and to demand that the central government provide more subsidies for the costly universal welfare programs that have been created under the Park Geun-hye government.
In response to their press conference, the two ministers told the municipal heads that they don’t have funds left to finance welfare programs. They said they have subsidized the local governments enough already by raising their capacity to use revenue from local sales tax to 11 percent from 5 percent late last year and increasing subsidies for child day care programs. The local governments, however, insisted that the government must do more by raising the sales tax ratio to 16 percent from 11 percent.
The two sides should stop playing the blame game and start studying the problems. The central bank must examine whether its subsidy program was sufficient. The burden of universal welfare programs is undeniable. The self-sufficiency rate of local governments has fallen to 44 percent this year from 63 percent in 1995. Many cannot even pay employees with their own tax revenue.
Local governments must also be sure that they are not wasting funds. Taxpayers have seen their money squandered on building high-speed railroads and luxury city halls.
The overall gap in public finances across administrative jurisdictions also requires attention. A recent public debate over opening a new betting complex in Yongsan district, central Seoul, underscored some of the problems. The Korea Racing Authority paid 2 billion won ($1.9 million) in tax, but Yongsan district got just 200 million won of the revenue. Local governments do not see their rightful share regardless of lucrative businesses in their jurisdiction.
In universal welfare, burden-sharing should be evened out among local and central governments. If the central government cannot afford to finance universal programs, it must seek tax hikes or other means to afford them. Overall, the public finance system should be examined.
JoongAng Ilbo, Sept. 4, Page 30