CHANGWON — South Gyeongsang Province's expected increase in ordinary local tax grants for 2027 will shrink by more than 3 trillion won under the government's newly created Future Response Fund, according to provincial estimates. The province and its 18 cities and counties issued a joint statement on the 21st urging the government to secure funding for local tax grants before operating the fund.
In the statement, titled "The Future Response Fund Must Not Encroach on Local Finances," the province and the 18 municipalities said national investment for the future should be pursued in a way that does not undermine the foundation of local finances. They called for guaranteeing local tax grant revenues first and advancing substantive fiscal decentralization.
At issue is how the grants are calculated. Under the current system, the fixed-rate portion of local tax grants is funded by 19.24% of internal taxes. The government plans to keep that rate but first deduct contributions to the Future Response Fund from internal taxes, then calculate the grants as 19.24% of the remainder. As a result, the fixed-rate portion of local tax grants in 2027 would be 69.7 trillion won after the fund's creation, down 30.5 trillion won from the 100.2 trillion won it would reach under the current formula.
Based on the province's 11.4% share of ordinary local tax grants this year, South Gyeongsang Province and its 18 municipalities would receive 11.08 trillion won in 2027 if the current formula were maintained — 3.5 trillion won more than the 7.58 trillion won under this year's supplementary budget. Under the new formula tied to the fund, the figure falls to 7.71 trillion won, just 123.1 billion won more than this year's supplementary budget. That amounts to a 3.37 trillion won reduction in the expected increase compared with keeping the current system.
The burden falls more heavily on the cities and counties. The provincial government's own share would fall by 532.8 billion won, from 1.75 trillion won to 1.22 trillion won, while the 18 municipalities would see a 2.84 trillion won decline, from 9.33 trillion won to 6.49 trillion won. The figures are based on an analysis of the 2027 government budget proposal and ministry-level budget plans announced on the 1st of this month, and actual allocations could differ depending on the government's final budget and the grant calculation process.
The province and municipalities said they do not oppose the purpose of the Future Response Fund itself, but argued that national investment in the future should proceed while guaranteeing local fiscal autonomy and sufficiency. They warned that if local tax grants — a core source of independent revenue — decline while matching-fund burdens grow because of expanded national policy projects and new Future Response Fund initiatives in 2027, locally tailored projects and future investments that local governments can pursue on their own could be curtailed.
They set out three demands: that local tax grants due under statutory standards be guaranteed first, with only the remaining revenue used for the fund; that the state funding share for government-led projects be raised; and that measures to expand local finances, including higher local consumption tax and local tax grant rates, be pursued promptly along with improvements to the fiscal burden-sharing structure between the central and local governments.
The province said it plans to work jointly with the cities and counties to ensure the three demands are reflected in the government's discussions on the Future Response Fund and fiscal decentralization.
Earlier this month, the government announced plans to create the Future Response Fund to secure future growth engines and improve fiscal sustainability, with investments starting in 2027 in young adults, growth engines, regional development, education and talent. The fund is set at 162.3 trillion won in next year's government budget proposal.
