Gyeonggi Province’s Budget Grows, but Funds to Spend Remain Scarce... Own Investment Funding at Around 5%

Gyeonggi Province said its expenditure structure is becoming increasingly rigid, with only around 5% of its total budget available for the province’s own investment projects due to rising national subsidy programs, welfare spending and legally mandated expenses.

On November 6, Gyeonggi Province released the third issue of its “Gyeonggi Fiscal Brief,” which said that local matching costs for national subsidy programs, growing welfare demand driven by population growth and an aging population, and legally mandated transfers are among the main factors limiting available funds.

Focusing on the question “Why Can’t Gyeonggi Province Cut or Change Its Expenditures?,” the report examined the structural reasons why the province lacks funds for its own projects for residents, even as its budget continues to grow.

According to the report, based on Gyeonggi Province’s second supplementary budget for 2026, national subsidy programs and related spending accounted for 55.5% (KRW 20.9 trillion) of the province’s KRW 37.6115 trillion general account expenditure budget. Legally mandated expenses transferred to cities and counties, education offices and other provinces accounted for about 22% (KRW 8.2 trillion). Together, the two categories made up more than three-quarters of the total budget. By contrast, investment projects planned and implemented directly by the province amounted to KRW 3.4 trillion, just 9% of the total.

As national subsidy programs expand, the amount Gyeonggi Province must contribute has also been rising rapidly. Based on the original budget, national subsidies increased 43.7%, from KRW 11.5423 trillion in 2022 to KRW 16.5865 trillion in 2026. Over the same period, the province’s matching costs rose 55.5%, from KRW 1.6222 trillion to KRW 2.5219 trillion. The increase in 2026 alone was KRW 401.6 billion compared with 2025.

The report said national subsidy programs help ensure a basic level of welfare and safety nationwide. However, because the national government sets the eligible recipients and support rates, Gyeonggi Province has limited ability to adjust spending independently. It added that the costs of operating and maintaining facilities after their construction, as well as the costs of continuing programs after national funding ends, create additional burdens for local finances.

Growing welfare demand driven by population growth and an aging population was also identified as a major factor behind rising expenditures. As of May 2026, Gyeonggi Province had a population of 14.24 million, more than one-quarter of the nation’s total. The population aged 65 and older also grew by 650,000, from 1.88 million in 2021 to 2.53 million in June 2026. With 31% of the nation’s daycare centers located in Gyeonggi Province, demand for both elder care and childcare is increasing.

Gyeonggi Provincial Government

Basic pensions, long-term care and medical aid are examples of mandatory spending for which local governments’ costs rise as the number of recipients increases. These are items whose spending levels Gyeonggi Province has little ability to adjust independently. Accordingly, based on the original budget, welfare spending rose from KRW 14.0528 trillion in 2022 to KRW 19.6007 trillion in 2026. Its share of the total budget also increased over the same period, from 41.8% to 49.0%.

Legally mandated transfers, including adjustment grants to cities and counties and transfers to education offices, are another factor limiting available funds. Even when revenue increases, a portion must be transferred to cities and counties, education offices and other provinces, making it difficult for revenue growth to translate fully into additional funds for the province’s discretionary investments.

The report also warned that growing reliance on borrowed funds could increase repayment burdens in the future. Based on the second supplementary budget for 2026, about KRW 1.5 trillion of the approximately KRW 3.4 trillion allocated to the province’s own investment projects was financed through borrowing from the Regional Development Fund, local government bonds and the consolidated account. Excluding those funds, the report estimated that the scale of investment projects the province could choose to fund with its own resources amounted to only around 5% of the total budget.

To improve these fiscal conditions, the report proposed that the central government consult sufficiently with local governments about their share of costs when introducing or expanding national subsidy programs; raise the standard subsidy rate for national welfare programs; and apply differentiated subsidy rates based on population size and program scale.

The report also stressed the need for Gyeonggi Province to manage its own spending. It said the province should set priorities by assessing each program’s necessity, performance and potential overlap, and prioritize including budgets for residents’ livelihoods in the original budget. It also recommended distinguishing between investments in facilities used over the long term and recurring annual operating expenses when deciding how to finance them using funds and local government bonds.

Gyeonggi Province Governor Choo Mi-ae said, “A large budget does not necessarily mean there are ample funds that can actually be used. I hope we will carefully review spending priorities so we can continue providing programs that are essential to residents’ lives, and that understanding and consensus among residents will grow around ways to share the fiscal burden between the central and local governments more reasonably.”

This content was produced with the assistance of AI translation services.