COVER STORY Why Gyeonggi Province is under financial strain

Gyeonggi Province, Korea's most populous province, narrowly averted disruptions to essential welfare programs with the passage of a supplementary budget on Monday. But restoring funding for the rest of 2026 has not resolved the fundamental problem behind the crisis: falling revenue, growing spending obligations and fewer resources to bridge the gap.

With the provincial government required to submit next year’s budget proposal by Nov. 11, residents and welfare providers remain concerned and question whether the province's Gov. Choo Mi-ae can prevent further funding shortfalls.

What did Monday’s agreement resolve?

The provincial council approved the supplementary budget after last-minute negotiations restored 21.6 billion won ($16 million) for livelihood-related programs, including support for child care and postpartum care.

The agreement broke a monthlong impasse over funding needed to keep essential services running through the final quarter. Some welfare programs had been allocated only nine months of funding, leaving them facing suspension this month and prompting protests by child care workers, teachers and residents.

The dispute followed Choo’s declaration of a fiscal emergency in early August. The province subsequently proposed 546.5 billion won in spending cuts and restructuring.

Monday’s deal restored some essential funding. It did not create a lasting revenue source to pay for those programs.

How did financial strain develop?

Gyeonggi’s consolidated fiscal balance has remained in deficit since 2022, which means spending has consistently exceeded revenue on that measure.

At Tuesday’s parliamentary audit of the provincial government, Choo attributed the rising debt to COVID-19 pandemic relief under then-Gov. Lee Jae Myung, the current president, and expansionary spending under his successor, Kim Dong-yeon. Falling property acquisition tax revenue compounded the pressure, she said.

Borrowing helped cover funding gaps, but increased the cost of servicing debt.

“We have issued municipal bonds on five consecutive occasions, and our daily interest burden amounts to 390 million won this year and will rise to 480 million won next year,” she said.

The province’s budget has exceeded 40 trillion won, but this doesn’t mean it has ample discretionary funds. Choo said the budget’s size could mask the extent of rising debt when expressed as a percentage of the huge total.

Gyeonggi’s debt rose from approximately 4.5 trillion won in 2023 to 6.1 trillion won in 2025, an increase of more than 36 percent — roughly three times the average increase of 12.7 percent among metropolitan and provincial governments nationwide — while the liabilities-to-assets ratio exceeded 15 percent, the highest in the country, she added.

Why are revenue and spending out of balance?

Beyond rising debt, the province faces a mismatch between unstable tax revenue and growing welfare needs.

"More than half of Gyeonggi's some 16 trillion won in local tax revenue comes from property acquisition taxes," Choo said, adding that this structure leaves its finances vulnerable to property markets.

Demand for essential services, however, continues to grow. Over the past four years, the province’s population increased by about 300,000, while the number of residents aged 65 and older rose by roughly 600,000. Around 77,000 babies were born there last year, she added. These changes create demand for elderly care and child care regardless of property market conditions.

The chip industry presents another imbalance. As major semiconductor companies' plants are located in the province, the provincial government has helped fund infrastructure serving the industry, but corporate local income taxes go to the cities and counties hosting the businesses, not the provincial government, according to the relevant taxation laws. The industry’s prosperity, as a result, does not automatically mean more revenue for the province.

"We need more money to spend while the revenue base to support this remains unstable. It is time to fundamentally reform this fiscal structure," Choo said.

Why has Choo drawn criticism?

The debate also concerns how fairly austerity is being shared.

While her administration has cut staff expenses citing a fiscal emergency, the province arranged an apartment lease deposit of approximately 1.2 billion won for her official residence. A 77 million won official vehicle has also drawn criticism.

Choo defended the residence at the audit, saying the deposit will be returned when the lease ends.

“I don’t think it would be fair to describe that as lavish or extravagant,” she said.

She also said the vehicle purchase had been decided before she took office.

Could another funding dispute happen?

For now, Monday’s agreement relieved the sudden funding depletion for welfare programs, but concerns remain about next year’s funding.

Choo has called for changes to local taxation and the province’s fiscal structure to secure a more stable revenue base. Without a lasting solution, essential programs could face funding shortfalls again.

A provincial assembly member said legislators were determined to prioritize child care and education spending, particularly funding affecting teachers’ pay and working conditions, but could not guarantee next year’s allocations.