Gyeonggi Transition Committee: "Starting Administration with 7 Trillion Won Debt... Need to Transition to Subsidy-Eligible Status"

The "Fair, Innovative, and Inclusive Gyeonggi Preparation Committee," the transition committee for Gyeonggi Governor-elect Choo Mi-ae, on Monday reiterated the need to improve Gyeonggi Province's revenue structure.

During its first press conference held on June 18, the fourth day since its launch, the committee stated that Gyeonggi Province's financial situation is more serious than expected and requested the government to transition Gyeonggi Province—currently a non-subsidy-receiving local government that does not receive local shared taxes from the state—into a subsidy-eligible one. Since then, the committee has been busy seeking solutions while continuously expressing concerns over the poor financial conditions.

On the same day, the committee held a briefing for its planning and finance subcommittee at the Gyeonggi Credit Guarantee Foundation, where its office is located.

Vice Chairman Kim Young-jin, who led the briefing, said, "Governor-elect Choo's administration must start with 7 trillion won in debt," adding, "When we opened the storehouse, it was filled only with debt documents. I felt this must have been how President Lee Jae-myung felt when he declared a moratorium during his time as mayor of Seongnam."

The 7 trillion won debt of Gyeonggi Province calculated by the committee represents the principal and interest incurred by borrowing from its own funds (such as the Regional Development Fund and the Integrated Fiscal Stabilization Fund) or issuing municipal bonds to cover the deficit in general account revenues.

The principal amounts to 6.3 trillion won, including 5.1 trillion won from the funds and 1.2 trillion won in municipal bonds, while the interest is approximately 700 billion won.

In the case of the funds, which combine the 7th to 8th terms of popularly elected local governments, more than 1.5 trillion won was borrowed last year.

The Integrated Fiscal Stabilization Fund has an operating scale of 428.5 billion won this year, but with nearly 300 billion won transferred to the general account, the deposit balance stands at only 134.5 billion won.

Following the issuance of 486.2 billion won in municipal bonds last year—the first time in 19 years since 2006—Gyeonggi Province issued a total of 718 billion won in municipal bonds this year, combining the main budget (520.2 billion won) and the first supplementary budget (197.8 billion won).

The remaining balance up to this year's municipal bond issuance limit (936.7 billion won) is only 218.7 billion won.

In particular, while this year's autonomous budget (discretionary project budget) totals 3.8317 trillion won, 313.2 billion won has left unallocated due to a lack of financial resources.

This means that the actual available financial resources are in the negative.

Consequently, there are quite a few projects for which only nine months' worth of budget has been allocated instead of 12 months.

The transition committee cited the decline in local tax revenues due to the sluggish real estate market and Gyeonggi Province's designation as a non-subsidy-receiving local government as the reasons for the financial deterioration.

The financial deterioration is analyzed to be mainly driven by a sharp drop in real estate acquisition taxes, which account for half of local tax revenues, plunging by 2.9 trillion won from 11 trillion won in 2022 to 8.1 trillion won this year.

The committee emphasized the need for a rational adjustment of the local shared tax allocation method and improvements to the local corporate income tax.

Vice Chairman Kim said, "When national tax revenues increase due to the boom in the semiconductor industry, local shared taxes also increase, benefiting local governments nationwide. However, Gyeonggi Province does not benefit because it is a non-subsidy-receiving entity," adding, "Since being designated as a non-subsidy-receiving entity exerts the strongest pressure on us, transitioning to a subsidy-eligible status is necessary."

However, when asked about the specific stance on improving the local corporate income tax, he replied, "Since it could lead to disputes with other local governments, we are currently reviewing it for now."

Previously, Yonhap News obtained an internal committee document and reported that the transition committee is reviewing a plan to adjust the local corporate income tax, which currently belongs to city and county taxes among local taxes, into a joint provincial tax revenue.

Vice Chairman Kim stated, "With about 313.2 billion won left unallocated in this year's budget due to a lack of resources, we must first adjust the spending structure by reviewing projects that have less direct impact on residents' lives, and we will prioritize and implement the governor-elect's campaign pledges," adding, "We will consult with the government and the National Assembly to resolve the structural issues of Gyeonggi Province's budget."

(Photo: Provided by the Gyeonggi Governor-elect's transition committee, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.