Issues and Tasks of the Local Education Finance Grant System in Response to Local Government Restructuring

Abstract

This study aims to analyze the major issues and tasks surrounding the reform of the Local Education Finance Grant(LEFG) system in response to changes in the educational environment, including the restructuring of local government systems. To this end, the study examines the current state of revenues and expenditures in local education finance, and reviews the impacts and issues that administrative integration poses for local education finance. The findings reveal that the current LEFG system is highly vulnerable to tax revenue volatility, thereby limiting the stable operation of education finance. Furthermore, a reduction in local education finance is anticipated due to the strengthening of fiscal decentralization. The major issues identified in the reform debate include: the transition to a grant calculation method that reflects the declining number of students; the removal of fiscal barriers; the compensation for grant revenue losses; and legislative gaps in statutory transfer provisions. In response to these issues, first, mechanisms to ensure the stability of education finance operations must be established. Second, given the inevitability of resource sharing with higher education, rational approaches to resource management warrant serious consideration, including the conversion to an integrated education grant, the transformation of statutory transfers into discretionary transfers, and the establishment of a local government-centered governance framework for higher education finance. Third, fiscal neutrality in education finance must be preserved in the course of advancing fiscal decentralization, and appropriate measures must be taken to prevent inequities between integrated special metropolitan cities and other city and provincial offices of education. This is because the essence of LEFG reform lies not in reducing financial resources, but in ensuring stable support for educational activities and preparing for the future of education.