[Exclusive] Education Office Hit by 'Donbyeorak'... Surplus Grants Overflow, Unspent Budget Last Year Reaches 40 Trillion Won

Decrease in Student Numbers but Growing Grants
Estimated Carryover and Unused Funds of 3.8341 Trillion Won
Urgent Need to Reform 50-Year-Old Grant System

The above photo is not related to the article. May 2, 2022. Photo by Joint Press Corps

[Asia Economy Sejong=Reporters Haeyoung Kwon and Hyunju Lee] It has been identified that nearly 4 trillion won of the budget allocated by the 17 metropolitan and provincial offices of education nationwide last year remained unused. While the number of students is decreasing, the Local Education Finance Grant (education grant) has ballooned like a snowball, resulting in a lack of places to spend the money. Calls for urgent reform of the education grant system, which was established 50 years ago, are growing louder.

According to data submitted by the Ministry of Education to the office of Seo Byung-soo, a member of the National Assembly's Education Committee from the People Power Party, the total budget of the special education account for metropolitan and provincial offices of education nationwide in 2021 (based on the supplementary budget of 84.9199 trillion won) that either carried over to this year or reverted to the national treasury due to non-use is estimated at 3.8341 trillion won. Among this, the carryover budget postponed to this year was 2.4501 trillion won, and the unused budget was 1.384 trillion won. When education offices receive education grants, they allocate part of it to funds to exhaust the budget, but even with this, about 4 trillion won remains idle due to a lack of spending opportunities.

Last year's unused and carryover budget of education offices has somewhat decreased compared to 6.5 trillion won in 2017. However, considering the deteriorated fiscal conditions such as deficit bond issuance during this period, it is difficult to avoid criticism that a massive scale of leakage is still occurring.

The net surplus, excluding expenditures and central government subsidies, also increased to 1.7721 trillion won from 1.6902 trillion won the previous year. At the end of last year, the net surplus of the Seoul Metropolitan Office of Education was 458.2 billion won, and that of the Gyeonggi Provincial Office of Education reached 570.3 billion won, increasing by around 100 billion won compared to a year earlier.

With the budget surplus, the amount of money that metropolitan and provincial offices of education nationwide have tied up in bank fixed deposits for periods ranging from six months to one year reached 847.7 billion won as of the end of last year. The deposits of education offices in bank fixed deposits amount to around 1 trillion won annually. The education office budgets have grown uncontrollably due to the education grant, which mandates that 20.79% of domestic taxes be spent on kindergartens and elementary, middle, and high schools each year. Although tax revenue and grants increase with economic growth, the declining birthrate and decreasing number of students have left education offices with no place to spend the funds.

In particular, when part of the national tax was incorporated into local taxes in 2020, the government increased the proportion of the education grant to compensate for the revenue loss. According to the National Assembly Budget Office, the number of students decreased by 19% over ten years from 6.57 million in 2013 to 5.32 million this year. Meanwhile, the education grant doubled from 41 trillion won to 81 trillion won during the same period.

The government is currently promoting a plan to establish a 'Higher and Lifelong Education Support Special Account' to allow education grants, which are currently only usable for kindergartens and elementary to high schools, to be used for universities and other higher education. However, with the total fertility rate dropping to 0.75 in the second quarter of this year and the increasing national fiscal burden due to low birthrate and aging population, the need for expenditure restructuring is growing, making this plan insufficient as a fundamental solution. With national debt surpassing 1,000 trillion won, reaching 50% of the Gross Domestic Product (GDP), there are calls for urgent fundamental reform of the current system that automatically allocates more than 20% of domestic taxes as education grants.

Assemblyman Seo Byung-soo said, "As the surplus education grants continue to increase, it is necessary to consider various alternatives, such as utilizing the funds for the long-standing issue of integrating kindergartens and daycare centers in the education sector to strengthen national education responsibility emphasized by the government."