As student numbers continue to decline, education budgets are paradoxically increasing, raising concerns about South Korea's educational finance direction. The National Assembly Budget Office's report on the '2025 Fiscal Year Settlement Analysis by Committee (Education and Culture, Sports and Tourism Committees)' reveals the contradictions within the current education finance structure. Despite a decrease in the school-age population, the local education funding system, which is tied to domestic tax revenues, continues to grow, highlighting the urgent need for reform.
[Part 1] Funding increases despite declining student numbers: A warning on 'per-student funding of 13.71 million won'[2nd Part] Breaking the promise of free education, structural contradictions hinder university innovation... Struggling higher education finances
[3rd Part] Government takes credit, but local governments bear the burden? The unintended consequences of universal free education for 5-year-olds
"While the number of children in classrooms is decreasing, the budget continues to grow." This is the most paradoxical situation facing South Korea's education finance. A report released on July 10 by the National Assembly Budget Office starkly illustrates this paradox with alarming figures.
Local education funding is a budget allocated by the government to support local governments in establishing and managing educational institutions and administrative bodies to promote balanced educational development. This funding, which is automatically linked to domestic tax and education tax revenues, is now at odds with the significant decline in student numbers, prompting calls for fundamental reform.
Local education funding is a budget allocated by the government to support local governments in establishing and managing educational institutions and administrative bodies to promote balanced educational development. This funding, which is automatically linked to domestic tax and education tax revenues, is now at odds with the significant decline in student numbers, prompting calls for fundamental reform.
Empty classrooms: While student numbers drop 15% over 10 years, schools and teachers increase
Local education funding is distributed to provincial education offices and utilized in primary and secondary education. The issue lies in the fact that the key indicator for calculating this funding—the number of students in primary and secondary education—continues to decline.
According to the report, from 2016 to 2026, the total number of students is projected to decrease by a staggering 15%, reflecting an average annual decline of 1.6%. However, the foundational infrastructure in education has been expanding. During the same period, the number of schools and classes has increased by 2.5% and 5%, respectively, with an average annual growth rate of 0.2% and 0.5% for teachers.
While students are leaving classrooms, the number of school buildings, classes, and teachers has been growing, creating a distorted structure that has persisted for a decade. Particularly concerning is the sharp decline in birth rates over the past ten years, which is expected to lead to an even steeper drop in student numbers in the future. The number of births in 2025 is projected to be 254,457, showing a recent upward trend, but this figure represents a 42% decrease compared to 438,420 births a decade ago in 2015. The ongoing decline in student numbers in primary and secondary education is an unavoidable and painful reality.
According to the report, from 2016 to 2026, the total number of students is projected to decrease by a staggering 15%, reflecting an average annual decline of 1.6%. However, the foundational infrastructure in education has been expanding. During the same period, the number of schools and classes has increased by 2.5% and 5%, respectively, with an average annual growth rate of 0.2% and 0.5% for teachers.
While students are leaving classrooms, the number of school buildings, classes, and teachers has been growing, creating a distorted structure that has persisted for a decade. Particularly concerning is the sharp decline in birth rates over the past ten years, which is expected to lead to an even steeper drop in student numbers in the future. The number of births in 2025 is projected to be 254,457, showing a recent upward trend, but this figure represents a 42% decrease compared to 438,420 births a decade ago in 2015. The ongoing decline in student numbers in primary and secondary education is an unavoidable and painful reality.
The trap of the domestic tax-linked structure: Per-student funding skyrockets to 13.71 million won, second highest in OECD
Despite the sharp decline in student numbers, the perception of abundant education funding is misleading, rooted in a rigid 'domestic tax-linked structure.' The general funding from local education funding is derived from 96.2% of the total domestic tax revenue for the year, which is 20.79%, along with education taxes. As tax revenues increase, funding automatically rises regardless of student numbers, resulting in an average annual increase of 5.6% in local education funding over the past decade (2016-2025).
When compared to student numbers, the reality of this financial bloat becomes even clearer. The per-student funding amount, which was only 7.16 million won in 2016, has rapidly increased to a staggering 13.71 million won by 2025, reflecting an average annual increase of 7.5% over the decade.
When compared to student numbers, the reality of this financial bloat becomes even clearer. The per-student funding amount, which was only 7.16 million won in 2016, has rapidly increased to a staggering 13.71 million won by 2025, reflecting an average annual increase of 7.5% over the decade.
This phenomenon is starkly confirmed by international statistics. As of 2022, South Korea's per-student public education expenditure for primary and secondary students was $21,476, significantly surpassing the OECD average of $12,438, making it the second highest among OECD countries, following Luxembourg ($29,531). In contrast, investment in higher education remains very low, revealing a serious imbalance in education finance across different school levels.
As tax revenues decline, the 'fund reserves' begin to dry up: Urgent need for fundamental structural reform
During periods of tax revenue surpluses, local education offices accumulated substantial reserves due to unspent budgets. These offices established integrated financial stabilization funds through regulations to manage surplus resources and adjust financial imbalances across fiscal years. This fund saw explosive growth during the budget increases in 2021 and 2022, reaching a balance of 11.5845 trillion won by the end of 2022.
However, these reserves, built like a sandcastle, are crumbling under the pressure of declining tax revenues. Due to tax shortfalls, the budget for local education funding was unspent in 2023 and 2024, and a budget cut occurred in 2025, leading to a continuous decrease in fund balances. By the end of 2025, the balance of the integrated financial stabilization fund is expected to shrink to approximately 3.7493 trillion won. The total amount of funds held by local education offices, including the education facility improvement fund, peaked at 21.3811 trillion won at the end of 2022 but plummeted to about 7.7311 trillion won by the end of 2025, just three years later.
This rollercoaster of finances clearly illustrates the limitations of the current funding calculation method. The National Assembly Budget Office emphasizes the need for serious discussions on reforming local education funding, considering the rapid increase in per-student funding due to the decline in student numbers, the need for integrated early childhood education, and investments for future education and environmental improvements.
Im Jae-woong, a budget analyst at the National Assembly Budget Office, stated, "While local education funding has increased by an average of 5.6% over the past decade (2016-2025), per-student funding has risen by an average of 7.5%. From 2016 to 2026, the number of students is expected to decrease by 15% (an average annual decline of 1.6%), while the number of schools and classes has increased by 2.5% (an average annual increase of 0.2%) and the number of teachers by 5% (an average annual increase of 0.5%)."
However, there is significant resistance to funding reform, particularly cuts, from the field. The National Association of Provincial Education Superintendents and major teacher organizations maintain that even with a declining school-age population, the current level of funding is insufficient when considering the need for quality investments in future education and improvements in educational environments. They argue that reducing schools or classes immediately due to declining student numbers is not feasible, and that more resources are needed to effectively implement large-scale national policies, such as comprehensive renovations of aging school facilities, expanding special education infrastructure, and fully introducing integrated early childhood education.
An education sector official remarked, "Ultimately, finding a consensus between the clear data on declining student numbers and the future investment needs for education is crucial. It is essential to not only reduce the funding calculation method but also to engage in comprehensive and societal discussions on how to redesign the financial sharing structure between the national and local governments to meet the increasingly complex educational demands."
However, these reserves, built like a sandcastle, are crumbling under the pressure of declining tax revenues. Due to tax shortfalls, the budget for local education funding was unspent in 2023 and 2024, and a budget cut occurred in 2025, leading to a continuous decrease in fund balances. By the end of 2025, the balance of the integrated financial stabilization fund is expected to shrink to approximately 3.7493 trillion won. The total amount of funds held by local education offices, including the education facility improvement fund, peaked at 21.3811 trillion won at the end of 2022 but plummeted to about 7.7311 trillion won by the end of 2025, just three years later.
This rollercoaster of finances clearly illustrates the limitations of the current funding calculation method. The National Assembly Budget Office emphasizes the need for serious discussions on reforming local education funding, considering the rapid increase in per-student funding due to the decline in student numbers, the need for integrated early childhood education, and investments for future education and environmental improvements.
Im Jae-woong, a budget analyst at the National Assembly Budget Office, stated, "While local education funding has increased by an average of 5.6% over the past decade (2016-2025), per-student funding has risen by an average of 7.5%. From 2016 to 2026, the number of students is expected to decrease by 15% (an average annual decline of 1.6%), while the number of schools and classes has increased by 2.5% (an average annual increase of 0.2%) and the number of teachers by 5% (an average annual increase of 0.5%)."
However, there is significant resistance to funding reform, particularly cuts, from the field. The National Association of Provincial Education Superintendents and major teacher organizations maintain that even with a declining school-age population, the current level of funding is insufficient when considering the need for quality investments in future education and improvements in educational environments. They argue that reducing schools or classes immediately due to declining student numbers is not feasible, and that more resources are needed to effectively implement large-scale national policies, such as comprehensive renovations of aging school facilities, expanding special education infrastructure, and fully introducing integrated early childhood education.
An education sector official remarked, "Ultimately, finding a consensus between the clear data on declining student numbers and the future investment needs for education is crucial. It is essential to not only reduce the funding calculation method but also to engage in comprehensive and societal discussions on how to redesign the financial sharing structure between the national and local governments to meet the increasingly complex educational demands."
* This article has been translated by AI.
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