1. Study Objectives and Method

▮Background and Purpose

￮ Tax revenues in Jeonbuk State are shrinking due to the aging of its working-age members of society and the gradual decline in its overall population. At the same time, expenses are growing because of the need to support the increasing number of elderly citizens through social welfare expenditure. Together, these factors are increasing the fiscal burden on local governments and creating fiscal uncertainty.

￮ Jeonbuk State’s low birthrate and aging population have diminished the revenue base, thereby increasing the fiscal burden of and making it more difficult for local governments to promote their own projects in response to local administrative needs. Therefore, it is necessary to find ways to maximize fiscal efficiency to ensure the sustainability of Jeonbuk’s finances.

￮ Jeonbuk State’s low birthrate and aging population have diminished the revenue base, thereby increasing the fiscal burden of and making it more difficult for local governments to promote their own projects in response to local fiscal efficiency to ensure the sustainability of Jeonbuk’s financesadministrative needs. Therefore, it is necessary to find ways to maximize.

￮ This study aims to draw policy implications to strengthen Jeonbuk State’s fiscal management efficiency. To do so, the study draws from a survey of the fiscal efficiency status of the Jeonbuk Provincial Office and 14 municipalities of Jeonbuk State and an empirical analysis of local governments. The study’s implications will inform decisions on the direction of Jeonbuk State’s fiscal policy.

▮Scope and Methods

￮ The first aim of the study is to identify Jeonbuk State’s fiscal conditions by analyzing the finances of the Jeonbuk Provincial Office and 14 municipalities. 

The second aim is to diagnose the level of fiscal efficiency and problems by analyzing the trend and status of fiscal efficiency. The third aim is to analyze the factors affecting fiscal efficiency through empirical analysis, and the fourth is to draw implications related to policy measures to strengthen fiscal efficiency.

￮ Regarding research methodology, the analysis of fiscal management efficiency utilizes a literature review and internal data of Jeonbuk State for analytic domains requiring raw data. The empirical analysis of fiscal efficiency,however, uses panel regression models to analyze the causality between fiscal efficiency and each variable.

2. Conclusion and Policy Suggestion

▮ Conclusions

￮ The results of the financial status survey show that while Jeonbuk Provincial Office’s revenue by source was somewhat stable, municipalities’ revenues by source were somewhat unstable. The financial independence and autonomy of the provincial office were the lowest among the metropolitan governments of Korea, indicating an urgent need to expand its own revenue sources.

￮ The fiscal management efficiency trends and survey results show that the provincial office’s local tax revenue ratio was the second lowest after that of Jeonnam State, and the majority of municipalities were below both the national average and the average for the same type of municipality. This suggests the need to improve the local tax revenue ratio to strengthen financial efficiency in tax revenue management and to reduce the local subsidy ratio to improve efficiency in tax expenditure managem http:// ent.

￮ The results of the empirical analysis of fiscal management efficiency show that a net budget surplus and social security benefits reduce the local tax revenue (ratio), an indicator of fiscal efficiency in tax revenue management. At the same time, depending on what is analyzed, they can either increase or decrease local subsidies (ratio), an indicator of fiscal efficiency in tax expenditure management.

▮Policy Recommendations

￮ Curbing the inefficiency of local finances due to excessive generation of net surplus requires the following. First, revenue forecasting models specific to the Jeonbuk state must be developed to improve the inefficiency of resource allocation by reducing the size of the surplus. At the same time, an advisory committee should be established to finalize revenue estimation. Second, a fiscal management strategy must be developed to solve the surplus problem from a medium- to long-term perspective, and annual fiscal management analysis should be conducted. Third, the inspection and monitoring of programs that generate excessive surplus should be strengthened in order to curb the increase in carryover due to unutilization.

￮ The following needs to be considered to mitigate the decline in fiscal management efficiency due to the increase in social security benefits. First, the subsidy rate support system should be improved to reflect differences in the amount of subsidy support between regions. Second, a management system should be established to manage social security benefits systematically at the state level. Third, the audit of social security benefits should be strengthened through the Audit Committee, a consensus-based audit body.

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