No local matching funds required ... Yun Ho-jung: “Full funding is the principle for the Future Response Fund”

[Financial News] The Ministry of the Interior and Safety has reaffirmed the principle that local projects under the Future Response Fund, which sparked controversy over worsening local finances, will receive full central government funding with no local matching. The plan is to provide 3.5 trillion won of the fund as general-purpose funding and cover the rest with central government funds, reducing the burden on local governments to contribute their own budgets.
Yun Ho-jung, minister of the Interior and Safety, said this at the National Assembly Security and Public Administration Committee’s audit of the ministry that day, adding, “We are also considering leaving local governments in charge of project decision-making and policy design.”
That day, the National Assembly raised concerns that local governments, despite expecting increased local allocation tax revenues as tax receipts grew, might not receive as much as they had hoped. It was pointed out that, unlike local allocation tax revenues, which are not earmarked for specific purposes, Future Response Fund projects would require local governments to contribute local funds as matching funds, potentially reducing their leeway to spend their budgets freely.
Minister Yun explained that, of the 15 trillion won allocated to the Future Response Fund’s local government account, 3.5 trillion won would be distributed as general-purpose funding with “no strings attached,” while the rest would be disbursed from the fund to cover project costs.
He said, “We will reduce the burden on local governments of having to contribute their own budgets to the fund,” adding, “We are drawing up plans based on the principle of covering project costs in full to the greatest extent possible.”
Local governments expressed concern not only about having to contribute to project costs but also about a reduction in the funding base for the general local allocation tax. That day, the Korea Association of Mayors, County Governors and District Heads adopted its first recommendation since the launch of the ninth popularly elected local government term: a “Petition for a Full Review of Reforms to the General Local Allocation Tax Following the Establishment of the Future Response Fund.” The association called for the current funding structure for the general local allocation tax to be maintained even if the Future Response Fund is established. It argued that excluding some domestic tax revenues from the calculation base for the general local allocation tax to finance the fund would inevitably reduce the total amount of allocation tax. If a change to the calculation method is unavoidable, it called for implementation to be deferred by one year and for measures to protect local finances, such as raising the local allocation tax rate in stages each year.
There were also suspicions that the central government was seeking to control local allocation tax revenues by channeling them into the Future Response Fund. Minister Yun, however, replied, “The local allocation tax rate of 19.24% will not change at all.” He said, “We intend to secure funding for strategic investment to prepare for the future,” adding, “The idea is for local governments to join in alongside the central government, matching its contribution.”
Minister Yun identified reforming the local tax system, strengthening disaster and safety management, and improving administrative services using AI as key priorities. He said the government would newly designate depopulation areas to reflect changes in population and local conditions, and expand support for areas outside the capital region by applying a local preference index that takes regional disparities into account across its policies. In disaster and safety management, it will pursue enactment of the Social Disaster Countermeasures Act and strengthen disaster prevention standards in response to climate change.
[email protected] Lee Bo-mi Reporter