Concerns are growing that fluctuations in education funding in South Korea are increasingly tied to the performance of domestic companies like Samsung Electronics and SK Hynix. Experts suggest that the local education funding system should be adjusted to better reflect actual student numbers and educational needs.
According to relevant authorities and industry sources, the combined operating profits of Samsung Electronics and SK Hynix reached 245 trillion won ($205 billion) in the first half of this year, with Samsung reporting 146.7 trillion won and SK Hynix 98.15 trillion won. This amount represents about one-third of the government's main budget for the year.
As the semiconductor industry recovers, corporate performance and tax revenues have improved, leading to a significant increase in local education funding. The government raised its national tax revenue forecast by 25.2 trillion won, resulting in an additional 4.7694 trillion won for education funding. If the semiconductor boom continues into next year and national tax revenues exceed 500 trillion won, education funding could approach 100 trillion won.
Currently, local education funding is automatically distributed based on 20.79% of domestic tax revenues to city and provincial education offices. When tax revenues increase, funding rises, and conversely, when revenues decline, education budgets are also cut.
The issue lies in the fact that education funding is more heavily influenced by corporate performance and tax revenues than by actual educational demand. During periods of semiconductor prosperity, education offices can quickly secure large amounts of funding, but with a declining school-age population, effectively utilizing these resources becomes challenging. As student numbers decrease annually, the surge in funding leads to a greater focus on one-time projects like facility investments and fund reserves.
Conversely, when the industry faces downturns, tax revenue shortfalls can result in education offices receiving less than expected funding or needing to adjust budgets during post-settlement processes. Improvements in school facilities, educational programs, and long-term investment plans are inevitably affected by economic fluctuations. This has led to criticism that education funding operates like a 'tax revenue rollercoaster,' swaying more with economic cycles than with long-term educational policies.
To mitigate the volatility of education funding, the government is proposing a formula that utilizes the average growth rate over the past three years. This aims to soften the sharp increases and decreases in education funding due to tax revenue fluctuations. Park Hong-keun, Minister of the Office for Government Policy Coordination, stated on July 30, "Applying the new formula will allow for consistent support in line with the trends observed over the past 20 years."
However, some experts caution that changing the funding formula will not completely eliminate uncertainties in education financing. Using the average growth rate over the past three years may hinder quick responses to sudden changes in inflation or educational demand.
Experts emphasize that establishing a distribution system that aligns with actual educational needs is more critical than merely increasing the absolute size of education funding. The current structure, which sees funding fluctuate dramatically with tax booms and busts, makes it difficult to implement stable long-term educational policies.
Woo Seok-jin, a professor of economics at Myongji University, pointed out, "As student numbers continue to decline, we need to consider whether it is appropriate for the increase in tax revenue to be allocated directly to education funding." He added, "In a progressive tax structure, the growth rate of tax revenue can outpace the general growth rate, and education funding should be restructured to reflect actual educational demand rather than just tax revenue."
* This article has been translated by AI.
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