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KMID : 1124020130290030033
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Korean Social Security Studies
2013 Volume.29 No. 3 p.33 ~ p.51
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Recent Expansion of Local Government’s Social Expansion and Intergovernmental Fiscal Relationship
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Choi Seng-Eun
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Abstract
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The role of local government in provision of social services is expected to be further strengthened as child care programs transformed to provide universal coverage. Rapid development of social service sectors confirms this prediction, since local government is more suitable in provision of social services. This implies the needs for new paradigms for financial responsibilities and intergovernmental fiscal relationship. This paper suggests, in terms of intergovernmental fiscal relationship with expansion of welfare expenditure, reinforcing earmarking in financing welfare expenditure, while relaxing earmarking in narrower areas such as social services by introducing categorical block grant. This may allow to relax earmarking in individual social service programs. More specifically, matching rates for programs that are generally considered as central government`s responsibilities needs to be raised. This national minimum standards applies to the programs such as National Basic Livelihood Programs and child care programs, and other income support programs for the old. Programs which are considered as social service may be excluded in this criteria, such as child care services. After expiration of the grant for programs transferred to local government, the paper suggests to introduce block grants including more social service programs. This may imply reduction of general grant, but by reforming the formula for the general grant, the effect may be offset in some degree. Because the current formula have component to induces moral hazard such as unnecessary expansion of welfare facilities, the exclusion of the input factors such as the number of facilities and the square footage of them. Instead the welfare demand may be reflected in the formula for the adjustment grant from the state government to local government.
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KEYWORD
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intergovernmental fiscal relationship, local governments` social expenditure, block grant, matching grant
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