Educational finance in korea

The size of the central government’s education budget is 20.2 trillion won, which was 20.0 per cent of the central government’s total budget in 2001. Of the 20 trillion-won annual educational expenditures of the central government, 83.1 per cent was transferred to the metropolitan and provincial offices of education for funding elementary and secondary education, the remaining 16.9 per cent was directly managed as national funds by the central MOE&HRD. Table 1.4 shows the trend and structure of educational finance of the Republic of Korea.

Financial structure

The wide coverage of the education system and the strong academic achievement of students are remarkable. The Korean education system has a balanced structure, and the financing arrangements promote efficient options in schools and achieve a relatively high level of equity in the distribution of public spending on education.In the structure, the pattern of costs reveals a clear emphasis on primary education. Private education plays an important role at the post-primary levels. The private share is over 40 per cent at the secondary level, and it is over 70 per cent at the tertiary level. Therefore, a substantial amount of funding comes from the private sector, such as households and private foundations for secondary and higher education. Due to budget constraints, the government has encouraged private foundations to establish secondary schools and higher-education institutions. Private financing accounts for about two-thirds of the total direct costs on education.

The central government distributes the local education grant based on the estimated difference between standard fiscal demand and standard fiscal revenue of each local government. The main purpose of the local education grant is to guarantee equal educational expenditure for all students in each province. Local governments distribute the funds to country offices of education and high schools. Offices of education are then responsible for distributing funds for elementary and middle schools. In principle, each municipal and provincial office of education has its own distribution mechanism, such as, unit cost per school, per class, and per student.

The ratio of educational expenditure to GDP of the Republic of Korea in 1998 was 7 per cent, which is 1.3 per cent higher than the OECD average.¹ Large private expenditure financing the rapid expansion of tertiary education has been the main factor that makes the Republic of Korea a country spending a large sum on education.