Budget Reports for Investment and Contribution Agencies to Parliament Next Year... Final Plan by October
Tightening for Years... Possibility of Additional Restructuring and Consolidation Due to Ineffectiveness
The Seoul Metropolitan Government has instructed its invested and funded institutions to prepare their budgets for next year with a reduction of more than 10%. Although the '10% cut' has been a repeated budget preparation standard for several years, due to worsening tax revenue shortages and the government's austerity stance, a more stringent adjustment may be implemented next year.
According to the Seoul Metropolitan Government on the 19th, the city recently completed budget proposal reports for invested and funded institutions to each standing committee of the Seoul Metropolitan Council and has begun finalizing the budget with the relevant departments. The goal is to submit the final budget to the council by October at the latest, with the processes of council and board approvals still remaining.
Earlier, Seoul delivered the '2025 Seoul Metropolitan Government Invested and Funded Institutions Budget Preparation Standards' to each institution, focusing on sound fiscal management and operational efficiency. This included guidelines to 'boldly restructure low-performing and habitual projects,' maintaining event-related expenses at this year's level, and reducing all other expenses except mandatory costs by more than 10% compared to the previous year.
Although these austerity-based budget preparation standards have been maintained for several years, the situation is worse this year. The fiscal condition has deteriorated due to a decrease in tax revenue caused by a severe economic downturn, resulting in even the supplementary budget being halved.
Moreover, as of the end of last year, the total cash-equivalent debt of Seoul and its invested and funded institutions was recorded at 21.72 trillion KRW. Since Seoul began separately disclosing the debt status of the city hall and invested and funded institutions in 2021, the debt of these institutions has steadily increased. It surpassed 10 trillion KRW in August 2022 and has exceeded the city hall's debt several times. Although this year's settlement data has not been reflected, as of August, the debt of invested and funded institutions (11.56 trillion KRW) exceeds that of the city hall (10.6 trillion KRW).
The problem is that there is no sign of improvement in revenue conditions. Local taxes account for a large portion of the total revenue budget, and stable fiscal management requires effective collection of local taxes. As of 2023, the revenue scale is 50.7586 trillion KRW, with local taxes comprising 47%, or 23.8628 trillion KRW. Compared to the budget amount (24.1122 trillion KRW), 2.494 trillion KRW has been under-collected. Seoul attributes this mainly to a shortage in local consumption tax collection due to decreased value-added tax revenue caused by reduced consumption and imports, and a shortage in acquisition tax collection due to decreased real estate transactions caused by weakened real estate buying sentiment.
Because of this, some expect that high-intensity business restructuring of invested and funded institutions, along with additional mergers and consolidations, may take place. Earlier, Mayor Oh Se-hoon announced plans to merge and consolidate invested and funded institutions, focusing on those with similar or overlapping functions.
At the end of last year, the first restructuring occurred with the Seoul Institute of Technology being absorbed into the Seoul Institute, and the Public Health Medical Foundation into the Seoul Medical Center, but this showed limitations in trimming excess. This is because about ten new institutions were created in the ten years before Mayor Oh's inauguration, significantly increasing related subsidies and personnel. The Seoul 50 Plus Foundation escaped a merger crisis with the Lifelong Education Promotion Institute through self-help efforts.
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