1. Local Expenditure and Local Fiscal Management System in Korea
HeeJae Lee & JeoungSeoup Seo
Korea Research Institute for Local Administration

2. Contents Local Expenditure Consolidated Balance of Local Gov.
By Characteristics
By Function
Consolidated Balance of Local Gov.
Local Fiscal Management System
Local Investment Appraisal System
Local Bond Ceiling System
Local Fiscal Analysis
Local Fiscal Crisis Alert System

3. 2015 Expenditure in Korea Local Expenditure
Source: MOGAHA(2015) Summary of Local Budget for FY2015(I), p.24
retrieved from
2015 Budget Use = Central Gov. (42.3): Local Gov. (42.8): Local Edu(14.9)
Local Expenditure
2015 Total of Budget: Trillion won
2015 Net Budget: Trillion won

4. 2015 Local Expenditure by Characteristics
Source: MOGAHA(2015) Summary of Local Budget for FY2015(I), p.191
retrieved from

5. 2015 Local Expenditure by Function
Source: MOGAHA(2015) Summary of Local Budget for FY2015(I), p
retrieved from

6. Trends Increasing rate of Social Welfare spending => 11.3% per year
Increasing rate of SOC spending => 0.3% per year
Social Welfare spending increased large amount every year in Korea
Now it is over 1/4 of local expenditure
SOC spending has been of little importance

7. Trends
Korea increases existing social welfare institutions and makes new social welfare institutions
Social welfare spending of local government have increased 30.8 trillion won since 2008
Reforming Basic Old-age Pension(2008) to Basic Pension(2014): 7.8 trillion
Establishing Home Care Allowance(2009): 1.8 trillion
Establishing Pension for the Disabled(2010): 0.7 trillion
Expanding Infant and Children Care Allowance(2011): 10.6 trillion
National Basic Living Security: 9.9 trillion

8. Consolidated Balance of Local Gov.
2015 CLGB: (-) 11 trillion won
Local Fiscal Management System is needed to manage these kinds of problem
Consolidated
Local Revenue
Local Expenditure
Total
156.9
168.1
Revenue
155.4
Expenditure
165.6
Loan Collected
1.5
Loan
2.4
Source: MOGAHA(2015) Summary of Local Budget for FY2015(I), p.12
retrieved from

9. Local Fiscal Management System
Ex ante Management
Local Investment Appraisal System
Local Bond Ceiling System
Ex post facto Management
Local Fiscal Analysis
Local Fiscal Crisis Alert System

10. Local Investment Appraisal System
Evaluating economic feasibility, validity and effectiveness of Local Investment
Coming into effect in 1992
Leading planned and effective use of financial resources
Reducing overlapping investment for local governments
The manual of this system groups the type of objects into six categories; General investment, Government Office, Local Event, Public Information Hall, Local Museum and Gym, Act of Bearing the Obligation, etc.

11. Local Bond Ceiling System
Making Local Bond Ceiling in the presidential decree considering fiscal status and size of existing debt
If Local Bond to be issued is below the ceiling, local council can decide alone whether issuing or not the bond
If Local Bond to be issued is over the ceiling, approval of the Minister of Government Administration and Home Affairs is required before local council’s decision

12. Local Fiscal Analysis
Aiming at efficient and sound financial management
Conducting comprehensive analysis of financial reports of local governments annually
Analyzing indicators by classification
Calculating overall aggregate indicators
The results of the Fiscal Analysis are to be open to the public and stakeholders
Based on the results of the Fiscal Analysis, local governments in poor fiscal condition are selected to be scrutinized on their financial condition and financial management

13. Local Fiscal Crisis Alert System
To prevent local governments being in fiscal insolvency or moratorium
Coming into effect in 2012
Monitoring seven local fiscal status which may be connected directly to fiscal crisis
Deficit Consolidated Balance of Local Gov.
Debt to local revenue
Debt repayment ratio
Current local tax revenue by quarterly
Current balance in the safe by quarterly
Debt to revenue ratio in local public enterprise
Debt to revenue ratio in individual local public enterprise

14. Thank You