A Seoul district government is calling for changes to a subsidy system under which fiscally weaker districts in the capital shoulder a heavier burden for state-subsidized programs than better-funded local governments elsewhere. Instead of applying uniformly lower state subsidy rates simply because a district is in Seoul, support levels should vary according to actual fiscal conditions, the district says.
"This proposal is not a request for special treatment for Nowon, but a call for reasonable fiscal management by narrowing the gap between the system and reality," Nowon District Mayor Seo Jun-oh said on the 12th. "We will continue to urge the central government to improve the system so that a reasonable subsidy rate structure suited to Nowon District's fiscal conditions can be established."
Under the current enforcement decree of the Subsidy Management Act, Seoul receives standard subsidy rates 20 to 30 percentage points lower than other regions for some state-subsidized programs. A differential subsidy rate system based on fiscal conditions exists, but because Seoul's standard subsidy rate is itself low, it fails to sufficiently ease the burden on districts with weak finances, according to the district.
Nowon District's fiscal self-reliance ratio stands at 14.1% based on this year's main budget, the lowest among Seoul's 25 districts. Social welfare spending accounts for 67.9% of its total budget of 1.35 trillion won ($948 million), the highest share in the city. By contrast, Gangnam District, with a fiscal self-reliance ratio of 53.6%, allocates 42.3% of its budget to social welfare — yet both districts receive the same 60% state subsidy rate for major welfare programs.
The disparity widens when compared with other regions. For basic livelihood security benefits, Nowon District covers 12% of costs while the state covers 60% and the Seoul city government 28%, leaving the district to fund 17.6 billion won of the 146.2 billion won program from its own revenue. Seongnam and Hwaseong in Gyeonggi Province, both with fiscal self-reliance ratios above 50%, receive 90% from the state and 7% from the province, leaving their own share at just 3% — or 3.7 billion won and 1.9 billion won, respectively.
The fiscal burden on local governments from state-subsidized programs has drawn controversy recently. When the government set up fuel price relief payments this year, it applied a 70% state subsidy rate to Seoul and 80% to other regions, raising questions about the funding burden on local governments. Last year, local government objections led the National Assembly to raise the state subsidy rate for consumer coupons aimed at supporting household spending during its budget review.
Similar rate gaps apply to other health and welfare programs, including childcare fees for infants and toddlers, the national immunization program and after-school care. Nowon District warns that as local funding for welfare programs rises, less money remains for long-sought community projects and upgrades to aging infrastructure.
The district has proposed that Seoul districts with fiscal self-reliance ratios below the national average, or below 20%, receive the same state subsidy rates as other regions. It also suggested expanding the differential subsidy rate system for districts carrying heavy welfare costs, such as those where social welfare accounts for more than 60% of spending.
Nowon District expects that improved state subsidy rates would reduce its own spending on welfare programs, freeing up funds for local issues closely tied to residents' daily lives and for upgrades to aging infrastructure. The district plans to continue pressing the central government for changes to the system.