On the 6th, it was learned that the Ministry of Planning and Budget task force for fiscal structure reform is focusing on cutting "camel's nose budgets" and "threshold budgets." As with a camel on a cold winter night that first pushes its nose into a tent and then gradually gets its whole body inside, some projects that start with a small budget expand into large sums and burden the finances. There is also the problem that once a project is selected for the budget and steps over the threshold, it continues to receive funds for years even without justification. The goal of the fiscal structure reform task force is to reduce projects that let billions of won leak out each year in this way. In this process, groups that benefit from the projects could push back.
1) After taxes covered private school staff severance, "severance padding" emerged
In Korea, most severance allowances for private kindergarten, elementary, middle and high school staff are reimbursed from the national treasury. In principle, the "school foundation," as the employer, should bear severance allowances, but the government assumed a significant portion from the outset of the system, citing the poor finances of private school foundations.
The amount of severance allowances for private school staff borne by the state was only 6.9 billion won in 1992, the first year of the system. But it swelled to 156.6 billion won in 2000, 240.3 billion won in 2010, and 525.6 billion won last year.
There are also problems with cases in which some private kindergarten principals sharply raise their annual pay right before retirement to receive more in severance. Because the founder-operator of a private kindergarten often serves concurrently as principal, the structure allows for "self-raises."
Starting this year, the government is pursuing a plan to review the appropriateness of private kindergarten principals whose income in the year before retirement rose more than 50% from the previous year.
2) The state pays overdue wages in advance, but recovers only 30%
When wage arrears occur due to bankruptcy and other reasons, the government operates an advance payment system that pays the overdue wages to workers in place of the employer. The system began in the wake of the IMF foreign exchange crisis. In 1998, the first-year payout was 16.1 billion won, but it increased to 684.5 billion won last year.
The problem is the low recovery rate of money the state pays first and seeks to reclaim from employers. As of the end of last year, the cumulative recovery rate remained around 30%. In effect, about 70% of the money the state paid on behalf of employers has not been recovered. The government recently revised the enforcement decree to allow seizure and public auction if advance payments are not repaid.
3) Vice minister-level salaries for the symbolic North Five Provinces governors… considering conversion to unpaid
The vice minister-level courtesies for the North Five Provinces governors, who lack administrative authority, are also up for overhaul. The North Five Provinces governor is a position that symbolically maintains administrative authority over the five northern provinces not yet recovered, but in 2005 it was reclassified as a political appointee, entitling the holder to a vice minister-level salary. Under this year's local public official pay regulations, the annual salary for political appointees such as the governor is 150.47 million won.
The budget this year for the North Five Provinces Committee, including the governors' salaries, is 10.8 billion won, with personnel and operating costs accounting for about 80%.
It is understood that the government is prioritizing a plan to convert the positions of the North Five Provinces governors, who receive salaries in the hundreds of millions of won, into "unpaid honorary posts." Some argue for abolishing the organization, but the North Five Provinces Committee said, "A consensus in the provincial resident community is needed."
The Ministry of Planning and Budget task force for fiscal structure reform is currently pushing to overhaul 24 budget projects. These include recovering improper payments from public pension and social insurance, expanding the differential copay criteria for health insurance overusers, and introducing a sunset clause for underperforming agricultural policy funds.
Kim Tae-il, a professor of public administration at Korea University, said, "Fiscal expansion is being decided politically, and within that, it is meaningful to save as much as possible."