In next year's government budget plan, the share of funds—which are relatively less controlled by the National Assembly—within total expenditure is set to rise to 38.5%, up from 34% in this year's main budget. While total expenditure increases by 23.7 trillion won (4.9%), funds including the Future Response Fund increase by 69.4 trillion won (28.2%). At this pace, the fund share could surpass 40%.
Experts said, "It is inappropriate to make large-scale fiscal expenditure through a fund whose operating period is not even specified," and noted it is "tantamount to creating a second general account."
◇ With the launch of a 160 trillion won Future Response Fund, next year's fund growth rate is 28%
The Ministry of Planning and Budget released the "2027 budget plan" on the 1st, saying it will increase next year's total expenditure to 820.9 trillion won, up 12.8% from this year. Of that, the budget expands 4.9% to 505 trillion won, and funds rise 28.2% to 315.8 trillion won. The growth rate of total expenditure through funds was reported to be at a record high.
The reason is the "Future Response Fund," which the government will launch next year at 162.3 trillion won. The government said it will accumulate additional tax revenue that exceeds the recent 10-year national tax growth rate (about 6%) into the fund to invest in boosting potential growth, and use it as a fiscal stabilization tool to shore up the general account in case of revenue shortfalls. The Future Response Fund's expenditure next year is 45.4 trillion won.
As a result, the fund share within total expenditure jumped to 38.5%, sharply higher than 34% in this year's main budget. Like the budget plan, funds submit an annual fund management plan to the National Assembly for review. However, changes of about 20%–30% in key expenditure items can be made by the government itself without National Assembly review. The Future Response Fund is specified in the fund law to allow self-changes of up to 30%.
◇ Ministry of Planning and Budget says "no special favors"... "Creating a second general account"
The Ministry of Planning and Budget's position is that "the Future Response Fund, like other government funds, is reviewed by the National Assembly, so there are no special favors." The issue is that the Future Response Fund is not only larger than other funds but also has a broad range of uses. The Future Response Fund allows spending on projects related to ▲ youth ▲ growth engines ▲ regions ▲ education and talent.
However, the fund law also allows expenditure on "projects that the presidential decree defines as related to the field." On this, critics say that because the Future Response Fund's eligible uses are themselves abstract and broad, delegating to a presidential decree effectively allows unlimited expansion of uses. Unlike laws that the National Assembly enacts and amends, presidential decrees can be easily enacted and amended by the government.
Lee Sang-min, senior research fellow at the Korean Fiscal Policy Institute, said, "Ignoring the general account system, which is the basic framework of national fiscal management, and trying to do everything through funds is creating a second general account." He added, "Funds should be used for their function as a fiscal stabilization tool to reinforce the general account when there is a revenue shortfall, and rather than operating them indefinitely, they should have an operating period of about five or ten years."