Incheon Metropolitan City Government Wields Scalpel on Welfare and Cash-Based Support, Seeks KRW 374.9 Billion in Savings Over Four Years

【Financial News, Incheon = Reporter Han Gap-su】 The Incheon Metropolitan City Government will undertake a major overhaul of welfare and cash-based support programs to strengthen fiscal soundness. In particular, it plans to redesign its own cash-based programs to save KRW 374.9 billion over the next four years and invest the savings in future growth sectors such as transportation and industry.
The Incheon Metropolitan City Government held a press briefing at City Hall on the 29th and announced the recommendations of the Financial Budget Reform Task Force.
The Financial Budget Reform Task Force was launched on July 10 to assess the city’s finances as a whole and devise measures to strengthen fiscal soundness amid worsening conditions, including the suspension of Incheon e-Eum. It consists of 10 members, including four external experts, and worked for approximately 80 days through internal meetings and interviews with working-level departments. 
The core of the task force’s recommendations is to clarify how limited resources should be prioritized. It called for regular fiscal strategy meetings chaired by the mayor to first determine the overall fiscal scale, the direction of allocations by sector and the priorities of each bureau and office. Each department would then formulate its programs within the predetermined budget limits.
The city introduced the total spending cap system for discretionary programs on a trial basis this year and held its first fiscal strategy meeting on the 21st.
Management of the budget formulation process will also be strengthened. New programs will require advance planning before budget requests are submitted, with funding to be allocated in stages according to each program’s level of readiness. For state-subsidized programs, the city’s financial burden will be reviewed before applications are submitted, while the local government cost-sharing structure under existing agreements will also be reconsidered. These criteria are scheduled to apply beginning with the formulation of the 2027 main budget.
One of the most notable recommendations concerns management standards for welfare and cash-based support programs. The share of the Incheon Metropolitan City Government’s budget allocated to social welfare rose from 20% in 2014 to around 40% in 2026. The task force recommended managing it at no more than 45% over the medium to long term.
It also proposed limiting the city’s own cash-based programs to no more than 5% of own-source revenue. Based on the Incheon Metropolitan City Government’s average own-source revenue of KRW 7.2 trillion over the past five years, this would amount to approximately KRW 360 billion.
Meanwhile, budget allocations for future infrastructure sectors such as transportation and industry will be maintained at a minimum of 10% over the medium to long term to address population growth and urban expansion.
The structure of cash-based support programs will also be overhauled. The task force pointed out that once such programs are implemented, they are difficult to scale back, while the number of beneficiaries automatically expands each year.
Accordingly, it recommended evaluating programs based on six reform principles, including whether they overlap with national policies, their efficiency and fiscal sustainability. It also called for a shift away from providing the same support to all citizens toward a structure that concentrates benefits on groups with relatively greater needs.
As national cash-based support related to childbirth and children is set to expand next year, the city’s own programs that overlap with national programs were also included among the targets for reform. The city estimates that this will enable it to save a total of KRW 374.9 billion over the next four years.
However, the task force did not view the causes of the fiscal burden solely as internal local government problems and also called for institutional improvements at the central government level. It recommended that the government be urged to raise the statutory local share tax rate from the current 19.24% to 22% and establish the principle that the central government should first bear the costs arising from expanded national policies, such as care services. It presented a total of seven institutional reform measures, including a proposal to restrict unilateral cuts to the national subsidy rate.
The recommendations are expected to initiate a full-scale discussion over how the Incheon Metropolitan City Government, facing worsening fiscal conditions, should allocate resources between welfare spending and future investment.
Song Hyun-suk, head of the Financial Budget Reform Task Force, said, "As Incheon is a growing city with a rising population and expanding urban area, investment for the future must continue. I hope that the task force’s recommendations will ensure that welfare benefits go more substantially to citizens who truly need them and that the savings are channeled into future investment to create synergies for growth."

[email protected] Han Gap-su Reporter