One Trillion Won Pension Deficit to Be Paid with Taxes in 2008

More than one trillion won from taxpayers’ money will be used to reduce the deficit in the Government Employees Pension in 2008.

The budget to fill up the shortfall in the Government Employees Pension is surging annually, from 265.7 billion won in 2003. If the current system remains, it is estimated to grow to 24.015 trillion won in 2040.

People are increasingly voicing the view that in order to reduce the taxpayers’ burden, the government should cut the number of public servants and revise the Government Employees Pension System.

According to a report from the Ministry of Planning and Budget on September 21, the government has earmarked up to 1.0532 trillion won in deficit-reducing budget funds while compiling the budget for 2008. This is up 24.6% from the government’s estimate of 845.3 billion won in 2007.

Coordinating with the Ministry of Government Administration and Home Affairs, the Ministry of Planning and Budget earmarked 368.6 billion won to fill the shortage, and decided to fill up the extra 684.6 billion won with the tax revenue from local governments.

An official from the Ministry of Planning and Budget said, “The recipients of the Government Employees Pension are forecasted to be 272,000 in 2008, up from 250,000 in 2007. This means a lot more budget funding, so the deficit has to be covered up with taxes.”

The Government Employees Pension Law, which was amended in December 2000, states that local governments should fill the deficit in the Government Employees Pension. The central government is expected to pay 35% and local governments 65% of the shortfall.

The Ministry of Government Administration and Home Affairs estimates that if the current system continues, the deficit will surge to 2.143 trillion won in 2010, 8.98 trillion won in 2020, 18.01 trillion won in 2030, and 24.015 trillion won in 2040.

There are ensuing complaints that the Government Employees Pension benefit should be cut since currently it pays twice as much compared to what employees with the same working conditions in the private sector receive. Also, there is the concern that reducing the number of public servants to become a small government is urgently needed.

Kim Jin-soo, a Yonsei University professor, pointed out, “The deficit will be increased exponentially, and if the government keeps on filling the gap with taxes, it will burden the budget further. There needs to be measures, such as a halt in paying the pension to retired public servants who get a high-paying new job in the private sector.”

The government has already acknowledged the problem and is working on ways to reform the system, but it is uncertain whether the effort will bear fruit with resistance expected from public servants.