Park Han-sol reports on Korea's financial regulators, along with fintech and insurance. She previously wrote about the art world, from biennales and exhibitions to fairs and auctions, with a focus on Seoul and the figures shaping the scene. Before joining The Korea Times, she spent a year at ABC News' Seoul bureau, contributing to coverage of major Asia-Pacific events.
Semiconductor tax windfall revives debate over Korea's education funding formula
Budget Minister Park Hong-keun, left, speaks at a public forum co-hosted by the Ministry of Planning and Budget and the Ministry of Education on reforming the current education funding formula at Government Complex Seoul, Wednesday. Education Minister Choi Kyo-jin, right, also attended the forum. Yonhap
By Park Han-sol
Korea earmarks 20.79 percent of each year's domestic tax revenue to fund elementary, middle and high schools across the country under a decades-old formula designed to insulate education spending from economic and political fluctuations.
This year, however, an unprecedented semiconductor boom is set to swell corporate tax receipts, automatically channeling a substantial share of the windfall into education.
Yet the allocation has already more than doubled over the past decade — rising from 39 trillion won ($25.9 billion) in 2015 to a projected record high of over 80 trillion won this year — even as the school-age population shrank from 6.4 million to 4.92 million.
That growing disconnect has fueled calls from fiscal authorities to overhaul the current formula.
At a public forum co-hosted by the Ministry of Planning and Budget and the Ministry of Education on Wednesday, government officials and experts debated whether the half-century-old system still makes sense in today's demographic and fiscal realities.
Budget Minister Park Hong-keun said the current funding system no longer reflects the country’s evolving education priorities.
“While the school-age population is shrinking, demand is growing for investment in areas such as artificial intelligence (AI) skills development and lifelong learning,” he said, arguing that a system focused almost entirely on compulsory primary and secondary education leaves little room to support other parts of the education sector.
Park noted that money freed up through reform could instead be redirected to long-neglected priorities, including universities, lifelong learning and programs to curb the outflow of skilled workers.
Kim Hag-soo, a senior fellow at the Korea Development Institute, echoed the call for change. “We are simultaneously confronting an AI-driven industrial transformation, a record-low birthrate and rising welfare costs associated with an aging population. As the number of students continues to decline, is it fiscally sound to keep automatically transferring ever-larger sums to schools simply because tax revenue has increased?”
Kim also disputed the notion that linking education funding to tax revenue provides greater stability.
“Korea relies heavily on corporate taxes, which rise and fall with corporate earnings and global economic conditions. Rather than stabilizing education finance, the current formula can actually make it more volatile,” the researcher said.
Education officials and experts defended the current formula, stressing that education spending should not be tied solely to student numbers as schools face increasingly complex demands.
Lee Sun-ho, director-general at the Korean Educational Development Institute, said declining enrollment does not necessarily translate to lower spending needs.
“Schools today do far more than provide classroom instruction,” she said. “They are responsible for after-school care, mental health support and student safety, while the number of multicultural and special-needs students continues to grow.”
She also noted that much of the education budget is inflexible, with personnel and facility costs continuing to rise regardless of enrollment.
At the same time, demographic shifts have created stark regional disparities, as small schools in rural areas face closure while those in major cities and new towns struggle with overcrowded classrooms, according to Lee Han-seop, policy chief at the Korean Teachers and Education Workers Union.
He added that improving educational quality will require greater investment in specialized staff, including special education teachers, counselors, librarians, nutrition teachers and instructors for remedial and multicultural education.
Education Minister Choi Kyo-jin likewise warned against reducing the debate to a question of demographics.
“It is deeply concerning that the discussion is being framed around the notion that a smaller number of children automatically warrants lower spending. Treating education simply as a budget item risks eroding both the educational safety net we have built over decades and the country's future growth potential.”