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Another Missed Budget Bill Deadline?

Posted December. 26, 2005 03:12,   


National Assembly lawmakers are finding it hard to smoothly manage state affairs, and one of them is to pass a budget bill. Some worry that a “reference-based” budget might be drawn up for the first time since the establishment of the Korean government.

On December 25, Jeong Se-gyun, the chairman of the Uri Party, issued a virtual ultimatum to the Grand National Party (GNP). “For the last 45 years, not a single budget bill had failed to pass the National Assembly. If an alliance with non-GNP opposition lawmakers to have the bill approved is what it will take, that is what we’ll do,” Jeong said.

Still, the GNP is holding fast to its position of not being present in parliamentary sessions for budget approval. The GNP thinks that the Uri Party should acknowledge its responsibility for conflicts in the National Assembly. For instance, the GNP says the Uri Party forced the amendment bill of the Private School Act through the National Assembly against the will of non-Uri legislators.

Some in the GNP view the Uri Party’s worries over any potential failure to pass the budget bill within this year as exaggerated because the main opposition thinks that in case of a delay, the government has an alternative of adopting and executing a “reference-based” budget.

Nonetheless, the unanimous opinion of economists is that the “reference-based” budget planning has never been implemented since its birth. Moreover, they point out that politicians should avoid adopting a “reference-based” budget with no proper legal tools in place.

Budget Bill Delays–

The constitutional deadline for the passage of a budget bill in the plenary parliamentary session is December 2. The deadline is firm because it takes about a month to raise the amounts as specified in the approved budget bill.

However, between 1990 and this year, the National Assembly could meet the deadline only five times in 1993, 1995, 1996, 1998 and 2003. Last year, the lawmakers barely managed to pass the budget bill for this year just an hour before the midnight on December 31. This year’s budget bill has already missed the deadline.

The “reference-based” budget planning was first introduced after the April 19 Revolution in 1960, when the parliamentary government was established.

According to the Constitution at the time, the entire cabinet had to resign and the Lower House had to be dissolved in case a budget bill fails to be approved before the start of a new fiscal year. To keep the country running, therefore, the government devised the “reference-based” budget planning. Under this system, a minimum sum can be raised for a budget “in reference to” the budget of the previous year.

Afterwards, Korea went for a presidential system with the “reference-based” system still in place. Yet, the system has not been put to use for the last 45 years.

The “reference-based” planning is different from the “tentative” budget planning because the two systems are based on two different assumptions. The former assumes the dissolution of the National Assembly; the latter assumes a failure to adopt a budget bill. Under the latter system, legislators draw up a budget plan on a weekly basis.

What are the obstacles to actually implementing the “reference-based” system?

“If a “reference-based” budget is drawn up, the scale has to be limited only to allow the country to ‘perform its basic functions’ because there are no specific implementation guidelines,” said Jeong Hae-bang, a senior official in the Ministry of Planning and Budget.

The basic functions do not include the assistance to welfare facilities, the creation of public-sector jobs, and child-rearing subsidies and related projects. These kinds of government assistance plans and projects will be beyond reach until a budget bill passes in the plenary session of the National Assembly.

For local governments and agencies, they, too, will have to base their own budget plans on estimated government subsidies and grants, which means they will have to repeat budget planning at later times. Inevitably, large-scale projects will be promoted more slowly.

“The adoption of a ‘reference-based’ budget never helps in the smooth running of the country because the system is almost nonexistent. The lawmakers must approve the budget bill one way or another within the fiscal year. But, in preparation against the similar situation in the future, they must consider bringing in the same kind of tentative budget planning as in the U.S.,” said Bae Sang-geun, a researcher at the Korea Economic Research Institute.

Joong-Hyun Park In-Jik Cho sanjuck@donga.com cij1999@donga.com