'Are we just leaving the auto-transfer in place?' — Government kicks off debate on education grant overhaul

The government has formally launched discussions on overhauling the local education finance grant system in response to a shrinking school-age population and shifting education demands. At the center of the debate are the long-term viability of a system that automatically ties grant funding to domestic tax revenue — causing allocations to grow even as student numbers fall — and proposals to extend education spending to cover early childhood, higher and lifelong education.

The Ministry of Planning and Budget and the Ministry of Education said Wednesday they co-hosted a forum titled "Opening New Channels for Education Finance: Reforming the Local Education Finance Grant for Future Generations" at the Government Seoul Complex.

Planning and Budget Minister Park Hong-keun, Education Minister Choi Kyo-jin and Seoul Metropolitan Office of Education Superintendent Jeong Geun-sik attended, along with experts from the education and fiscal policy fields. The forum came as calls have grown to restructure the grant allocation system after the local education finance grant — currently set at 20.79 percent of domestic tax revenue — continued to expand despite a declining school-age population.

Two broad camps emerged at the forum: one calling for the grant distribution formula to be adjusted to reflect falling student numbers and for investment to be extended to early childhood, higher and lifelong education; the other arguing that rather than overhauling the system itself, the focus should be on improving the efficiency of how existing funds are managed, taking into account new education demands and the need for stable local education finances.

Park said the school-age population was shrinking rapidly while new investment demands — such as nurturing AI talent — were rising. "A comprehensive and balanced investment approach is needed across the entire education spectrum, from early childhood through primary, secondary, higher and lifelong education, as well as a multidimensional approach to developing core talent," he said.

He added that it was time to examine whether the current system of allocating 20.79 percent of domestic tax revenue to the education grant was sustainable, and whether there were better ways to deploy limited resources more effectively and equitably.

Park outlined four principles for any reform: a sustained increase in both the total grant and the per-student grant to meet future education demands; reduced fiscal volatility caused by fluctuations in domestic tax revenue; balanced investment across education sectors including early childhood, higher and lifelong education; and adjustments to reflect changes in the school-age population.

In the discussion, Kim Hak-su, a senior research fellow at the Korea Development Institute, said the formula for calculating education finances needed to be restructured into a more rational and flexible resource-allocation model to reflect changes in the policy environment and objectives.

Kim compared the current grant system to an automatic bank transfer. "It is like parents with a high school student and a middle school student continuing to automatically transfer more money for education costs simply because their salary went up, even after their eldest child has gone to university," he said. "Rather than leaving the automatic transfer in place as student numbers fall, we need to carefully work out how much education spending is actually needed."

Education Minister Choi said the ministry agreed that a rational overhaul of education finances was needed to reflect the declining school-age population and changing education environment, but drew a line at any approach centered on budget cuts. "It is deeply concerning if the discussion is driven by one-sided economic logic — the idea that fewer children means less spending — or by a focus on numerical efficiency alone," Choi said.

"Reforming education finances should not simply be a matter of cutting budgets," Choi added. "It must be a process of educational innovation — thinking carefully about how to allocate precious resources most wisely for the future of our children."

Lee Seon-ho, head of the future education research division at the Korean Educational Development Institute, proposed setting clear goals for an education system suited to an era of population decline and building a sustainable education finance framework to support them.

A range of views on how education funds should be directed also emerged. Seoul Superintendent Jeong and Lee Han-seop, policy director of the Korean Teachers and Education Workers Union, called for stronger support for students with special needs and other educationally vulnerable groups, and for improvements in education quality through expanding the teaching workforce.

Yoo Jae-jun and Kang Dae-jung, both professors at Seoul National University, and Hwang Ok-kyung, director of the Korea Institute of Child Care and Education, said investment should be extended to early childhood, higher and lifelong education to promote balanced development across the sector. Woo Kyung-im, an editorial writer at the Dong-A Ilbo, said the automatic grant distribution system alone was unlikely to win broad public support and called for greater reinvestment in other areas of education.

Education groups also held a series of press conferences ahead of the forum, calling on the government to halt discussions on reducing education finances. The Korean Teachers and Education Workers Union, the Teachers' Union and the Korean Federation of Teachers' Associations called for stable funding guarantees for primary and secondary education, the establishment of finance standards that reflect actual education demands, and separate government funding responsibility for national policy projects.

The government plans to continue gathering input from schools and the education community based on the forum's discussions, develop a reform plan for the local education finance grant system, and pursue institutional improvements to ensure education funds are used more effectively and accountably.