Hanam mayor warns city finances in 'very grave' condition

Hanam City has launched an intensive "preemptive fiscal overhaul" as it prepares its initial 2027 budget, aiming to break free from mounting financial pressure caused by stagnant revenue and a sharp rise in mandatory and fixed expenditures. The city plans to restructure spending from the ground up — reviewing all routine outlays — and channel the freed-up funds into livelihood programs that residents can feel directly.

According to the city Friday, warning signs are flashing as slowing growth in self-generated revenue collides with surging fixed costs. Under Hanam's third supplementary budget for 2026, ordinary local tax revenue stands at 357.7 billion won ($263 million), accounting for 32 percent of total revenue. Property tax makes up 52.3 percent of that figure — the largest single share.

The slowdown in domestic and global economic activity is expected to hold ordinary tax revenue growth in 2027 to roughly this year's pace. Property tax, the backbone of ordinary revenue, offers little room for expansion given its low elasticity, and overlapping regulations that restrict large-scale corporate investment have created a structural ceiling on revenue growth.

On the spending side, mandatory outlays are climbing steeply. Personnel costs, basic infrastructure operating expenses, national and provincial subsidy-matching contributions, and social welfare spending — collectively classified as "mandatory expenditures" — are growing far faster than revenue. As of fiscal year 2024, mandatory expenditures accounted for 90.4 percent of the total budget.

That leaves the city with only about 9.6 percent of its budget for discretionary policy spending, and the real amount available is expected to shrink further once personnel costs and inflation are factored in.

External cost pressures are also intensifying. The city's matching contributions for national and provincial subsidy programs rose 31.7 billion won — a 25 percent increase — in 2025 compared with the previous year. The central government's expansionary fiscal stance for 2027 is likely to increase the number of nationally funded projects requiring local matching funds. Gyeonggi Province's declaration of a "fiscal emergency" has also raised the prospect that the city's share of some provincial matching programs will be increased, deepening the financial squeeze further.

In response, Hanam City is rolling out a phased fiscal reform plan to get ahead of the crisis. It has established a system to continuously monitor changes in provincial funding and the resulting additional burden on city coffers until Gyeonggi Province finalizes its 2027 budget. For programs where provincial support is reduced or eliminated, the city will avoid automatically replacing the funding with its own money, instead carefully prioritizing essential and livelihood-related projects.

At the same time, the city is pushing through its own spending restructuring. Business promotion and routine operating expenses will be sharply cut, and programs deemed unnecessary or showing minimal results will be sunset outright to stop fiscal leakage at the source.

In addition, the city plans to work closely with Assembly members Lee Gwang-jae (Hanam-gap), who chairs the National Assembly's Budget and Accounts Special Committee, and Kim Yong-man (Hanam-eul) to maximize the capture of central government funding. Savings from the spending overhaul will be directed first to core livelihood programs aimed at reviving the local economy and protecting residents' welfare.

"The city's fiscal situation is very grave, with revenue stagnating and mandatory costs surging, but we will lay the groundwork for sound finances through bold and preemptive spending restructuring," Hanam Mayor Lee Hyeon-jae said. "We will aggressively cut routine and unnecessary spending, and without wavering, concentrate the resources we secure on livelihood stabilization programs directly tied to residents' lives and on Hanam's future development."