Published : 2013-09-08 20:50
Updated : 2013-09-08 20:50
Under pressure from the central government, Seoul Mayor Park Won-soon decided last week to issue municipal bonds to help finance Seoul’s day care program, which would otherwise have been suspended later this month or early next month. But the bond issue is nothing but a stopgap measure, as the Seoul metropolitan government and the central government have yet to agree on how to share the spending burden.
Under President Park Geun-hye’s welfare policy, the number of children under 5 entitled to free day care doubled in Seoul ― from 200,000 last year to 400,000 this year. Now the question is who should be held accountable for the additional spending.
Burden sharing has been a dormant issue of contention since the December presidential election. Park Geun-hye won the election on a promise to expand welfare programs. But Mayor Park, affiliated with the opposition Democratic Party, had a different agenda to push for ― debt reduction.
Seoul, which had to come up with an additional 370.8 billion won to make up for the budgetary shortfall, demanded that the central government provide the total amount in subsidies. But the central government offered to provide 142.3 billion won in additional subsidies if Seoul came up with a supplementary budget to finance the remainder, insisting that the metropolitan government honor the previous formula of burden sharing.
Seoul used to pay for 80 percent of day care costs, with the remainder subsidized by the central government. The ratio was 50 percent for other metropolitan and provincial governments, whose levels of financial independence are woefully lower than that of Seoul.
Mayor Park, whose policy priority is cutting Seoul’s enormous debt, demanded that Seoul’s ratio be dropped to 60 percent. In other words, he was saying that he would continue to pursue his debt-reduction goal and that President Park’s administration must hold itself responsible for spending more on day care.
Under his mayoralty, Seoul’s debt, which stood at 20 trillion won at the time of his inauguration in October 2011, dropped to 18.5 trillion won in June this year. Yet, he has a long way to go until he makes good on his election promise to reduce Seoul’s debt by 7 trillion won.
Expanding the day care program may have been a worthy goal to pursue. But the idea of financing it with debt could hardly be tenable. Policymakers should have exercised greater caution before deciding to extend coverage to all children aged 5 or younger.
Now, it is time for key stakeholders to debate how to finance the expanded day care program. Such a discussion should begin with a bill that is left in limbo in the face of opposition from the central government.
Last November, a relevant committee of the National Assembly approved a bill that was designed to raise the portion of central government subsidies from 20 percent to 40 percent. As the central government opposed the bill, however, the legislative process was put on hold.
Now the ruling Saenuri Party will have to start talks with the opposition party on what to do with the bill. It goes without saying that the proposed talks should involve the central and metropolitan governments as well.