"Rigid Spending Funded by Boom-Era Tax Revenues... Future Fund Management and Oversight Should Be Consolidated"

Experts in the field of public finance have expressed concerns over the financing, management methods, and sustainability of the Future Response Fund included in the government's 2027 budget proposal, issuing sharp criticism that "the budget proposal should be completely overhauled."

The Korean Association of Public Finance and Policy, the Korean Association for Public Finance, the Korean Association of Local Finance, and the offices of lawmakers Park Soo-young and Ahn Do-geol jointly hosted a policy symposium titled "Evaluating the 2027 Budget Proposal: Balancing Future Investment and Fiscal Sustainability" at the National Assembly Members' Hall in Yeouido, Seoul, on the afternoon of November 6.

Park Myung-ho, president of the Korean Association of Public Finance and Policy, said in his keynote presentation, "The semiconductor boom may last longer than expected, but the cycle will eventually reverse, and tax revenues could drop significantly." He added, "If we treat boom-era tax revenues as permanent revenue and increase rigid spending, there is a high risk that the pressure for spending adjustments and fiscal burdens will grow during a downturn."

Regarding "additional tax revenues," the primary funding source for the Future Response Fund, he stated that "it is difficult to distinguish between temporary and sustainable tax revenue increases based solely on past trends," and emphasized the need to establish an independent fiscal agency to verify the government's tax revenue forecasts and actual reserve capacities.

He also added that a fiscal rule is needed to support the implementation of mid-term fiscal targets and to guide adjustments and returns when those targets are deviated from.

Explaining that a distinction must be made between necessary projects and the role of assets in preparing for future fiscal risks, he noted that necessary projects should be pursued within existing budgetary frameworks, such as general and special accounts, in accordance with economic conditions.

"Reserves should be accumulated with surplus funds without borrowing," he stressed, explaining that "through expenditure restructuring, all expenditures including necessary investments and local statutory financial resources should be covered by revenues, and only a portion of the funds remaining after going through statutory debt repayment procedures should be reserved."

He further added that the Future Response Fund should focus on accumulating and managing short-term reserves and long-term investment assets rather than directly expanding projects.

Kim Woo-chul, president of the Korean Association for Public Finance, pointed out the fund structure as an "accounting trick," saying, "While it looks like the fund is being filled with tax revenues on paper, in reality, it is about 104 trillion won in cash secured through debt."

Kim noted, "While monetary policy is tightening, fiscal policy is expanding faster than during times of crisis, and that spending is irreversible, permanent spending," pointing out that "the sequence for processing fiscal surpluses, the limits on changing fund expenditures, the Constitution, the National Finance Act, the principle of gross budget appropriation, and accumulation rules have been compromised."

He also expressed concern that the accumulation, execution, management, and oversight of the Future Response Fund are concentrated in a single ministry, making it impossible to evaluate whether the objectives of the fund are being achieved.

Criticizing the proposal, Kim said, "Looking at overseas cases, funds accumulated from surpluses and placed in safe foreign assets survived, while funds relying on debt and domestic investments ended in losses," adding, "Since this is a budget proposal that cannot be fixed through partial amendments, the National Assembly should demand a complete overhaul, and the government should accept it."

(Photo: Capture of poster, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.