[Editorial] Local Governments on the Brink of Moratorium Must Come Up With Painful Self-Rescue Measures

As soon as Gyeonggi Province Governor Choo Mi-ae took office, she declared a "fiscal emergency." The province said it would draw up a supplementary budget cut of 770 billion won because it could not handle debt amounting to 7 trillion won. Due to worsening finances, major projects have reportedly come to a standstill. The situation is so serious that even long-term care costs for the elderly and school meal expenses, both directly tied to ordinary people’s lives, cannot be paid immediately.
Fiscal deterioration is not limited to Gyeonggi Province. Last year, the outstanding balance of local government debt nationwide reached a record high of about 42 trillion won. Local finances are now in the worst possible state, with moratorium looming just around the corner. Several newly elected local government heads in the 9th local administration are also complaining of financial distress, much like Governor Choo. Rather than securing funds to carry out campaign pledges, they are in an emergency situation that requires budget cuts first. This is not an exceptional case for a single local government, but a structural problem emerging simultaneously across the country.
Whenever a local government leader changes, blame games over the predecessor’s responsibility inevitably follow, as in Gyeonggi Province. Of course, reckless management and inefficient fiscal operations by previous local leaders may have been part of the problem. But this is not an issue that can be reduced to the fault of one person. The urgent task is to identify the root causes of the accumulated fiscal deterioration and establish a fundamental plan for local fiscal self-reliance.
The first cause is reckless fiscal management. In many local governments, the cooling real estate market has sharply reduced tax revenue, including acquisition taxes. Even so, they pushed ahead with large-scale infrastructure projects such as civil engineering works and new government office buildings. On top of that, they have greatly expanded populist welfare programs. As revenue falls and spending rises, fiscal conditions are bound to worsen.
As funding shortages deepened, local governments did not stop their excessive projects and welfare spending, instead borrowing through local bond issuance and other means. This kind of reckless budgeting accumulated over several years and eventually caused serious trouble. As the situation worsened, some have even turned to the central government for help.
What local governments must do first is make their own efforts to recover. They should not be asking for support while engaging in blame games over the predecessor’s responsibility. Through thorough audits, they must merge or abolish similar and overlapping projects, and carry out internal restructuring by boldly eliminating programs with poor results. They also need to cut unnecessary routine expenses and present painful self-rescue measures. Only by doing so can they pull themselves out of the abyss of fiscal collapse and show the kind of leadership expected of responsible administrators.
Newly appointed local government heads must not repeat the mistakes of their predecessors. The cause of local fiscal collapse lies in misguided administration that overuses populist policies in pursuit of re-election and visible achievements. Unless this kind of fiscal populism is rooted out, the local fiscal crisis cannot be overcome.
Local finances are not a bottomless well. Today's reckless spending will eventually be passed on as debt to the next generation and the next administration. Local government heads must work tirelessly to normalize debt-ridden finances and restore the trust of local residents.