The government plans to revise the formula for local education financial grants to reduce instability caused by declining school-age populations and fluctuations in tax revenue. The new formula will enhance the stability of total grants by reflecting economic growth rates and inflation while incorporating some changes in school-age population. Savings from this adjustment will be reinvested in future education and talent initiatives, including early childhood education and attracting national talent. Additionally, local grants will be linked to the Future Response Fund to strengthen support for regional growth and living conditions.
This information was presented by the government during the first Financial Operation Strategy Council meeting on August 21.
Currently, local education financial grants are structured to be 20.79% linked to domestic tax revenue. However, there have been ongoing calls for adjustments due to the decline in school-age populations. The number of school-age children dropped from 8.8 million in 2010 to 5.91 million last year, a decrease of 2.88 million (32.8%).
Moreover, the government noted the need to address the short-term excess in grants resulting from a tax revenue boom. While investment in primary and secondary education (166%) exceeds the OECD average, investment in higher education stands at only 69%, which is also a concern.
A Ministry of Economy and Finance official stated, "The local grants linked to domestic taxes have high financial uncertainty. We aim to enhance efficiency and stability through the establishment of this fund."
The government will revise the formula considering economic conditions and changes in school-age populations. The plan is to increase grants based on the previous year's total while adjusting for only 35% of the change in school-age population over the past three years, reflecting the average economic growth rate during that period. The personnel costs for teachers, which do not decrease based on student numbers (60%), will not be included in this adjustment.
With the formula revision, it is expected that grants will increase by reflecting the scale of national economic growth and inflation, thereby reducing the volatility of grants compared to tax revenue fluctuations.
Funds generated from the grant revisions will be allocated to a separate education and talent account within the Future Response Fund, focusing on investments in early childhood education and attracting national talent. The government aims to ensure a continuous increase in per-student grants and total amounts while alleviating volatility.
If the total grant amount decreases compared to the previous year, the difference will be compensated to ensure that the total does not decline, as stipulated in the grant law.
An official from the Ministry of Education emphasized, "We have established safeguards to prevent a decrease in total amounts compared to the previous year by reflecting the growth rate. The 20.79% will be invested in education and talent areas to mitigate financial volatility."
The structure of local grants, currently at 19.24%, will be maintained while adjusting the base figure. The base figure will exclude the Future Response Fund reserves from domestic taxes. Additionally, a local account will be established to comprehensively support local governments in creating growth hubs and improving living conditions. Furthermore, provisions will be added to allow for additional support to local governments based on economic conditions and financial circumstances.
* This article has been translated by AI.
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