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Planning and Budgeting in Social Welfare. John M. Kim Center for Fiscal Analysis Korea Institute of Public Finance. Outline. Overview of Korean welfare budget Nature of welfare spending Welfare planning as forecasting Planning vs. budgeting. Overview of Korean Welfare Budget.

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planning and budgeting in social welfare

Planning and Budgeting in Social Welfare

John M. Kim

Center for Fiscal Analysis

Korea Institute of Public Finance

outline
Outline
  • Overview of Korean welfare budget
  • Nature of welfare spending
  • Welfare planning as forecasting
  • Planning vs. budgeting

John Kim / KIPF

overview of korean welfare budget
Overview of Korean Welfare Budget

Growth of Welfare Budget (tr. won, %)

John Kim / KIPF

overview of korean welfare budget4
Overview of Korean Welfare Budget

Composition of Welfare Budget (% of GDP)

John Kim / KIPF

overview of korean welfare budget5
Overview of Korean Welfare Budget
  • Factors Underlying Welfare Spending Growth
  • Population aging
    • Public pensions
    • Health-care spending
  • Deteriorating income distribution
    • Transfers & training for disadvantaged
  • Korea faces “rich-country” problems,

but without the “riches” to cope yet

John Kim / KIPF

2 nature of welfare spending
2. Nature of Welfare Spending

Technology Development & Economic Growth

Infectious

High

Extended

Informal

Diseases

Birth & Death Rates

Population Age Structure

Family Type

Support Networks

Chronic

Low

Nuclear

Formal

John Kim / KIPF

2 nature of welfare spending7
2. Nature of Welfare Spending

Technology Development & Economic Growth

Korea

Public Health

Sanitation

Hospitals

Medicine

Nutrition

Short-term

Planning &

implementation

Welfare Programs

Welfare Budgeting

Social Insurances

Pensions

Health Care

Unemployment

Social Assistance

Long-term

Forecasting

John Kim / KIPF

3 welfare planning as forecasting
3. Welfare Planning as Forecasting
  • Threats to Stable Fiscal Management:

Social & political pressures in late 1990s forced very large and unforeseen jumps in welfare spending

  • To restore stability to fiscal management:
    • Better forecasting of welfare needs & costs (MTEF)
      • Avoid large sudden shifts in intersectoral resource allocation by anticipating welfare requirements
    • Top-down approach to budgeting
      • Enforce spending envelope and improve predictability
      • Delegate details of social welfare management

John Kim / KIPF

3 welfare planning as forecasting10
3. Welfare Planning as Forecasting
  • Dual nature of long-term forecasts
    • Projections: Best guess, ensuring needs are met (MTEF)
    • Spending ceilings/targets: Allocation decisions (Top-down)

John Kim / KIPF

4 planning vs budgeting
4. Planning vs. Budgeting
  • Different Pressures on Welfare Budgeting
    • Long-term pressures driven mainly by pensions and health care

(may approach 20% of GDP by 2030)

    • Immediate pressure from low-income and disadvantaged groups for more social assistance

John Kim / KIPF

4 planning vs budgeting12
4. Planning vs. Budgeting
  • Reconciling Long-term Projections and Annual Budgets
    • Old approach: Line-item, bottom-up, incremental budgeting (full control)
    • New approach: Top-down, incremental budgeting (partial control)
      • Different from full autonomy: Top-down, program-oriented budgeting with autonomy within spending envelopes (programs)

John Kim / KIPF

final remarks
Final Remarks
  • Need to improve capacity for long-term policy analysis (at least several decades)
    • Hampered by lack of both analytical techniques and extensive, detailed statistical data on socioeconomic and biomedical factors
  • Referring to other countries’ experiences may be second-best alternative
    • Korea’s welfare spending in 2030 will be roughly equivalent to OECD average circa 2000.
    • Caution: population aging and welfare growth can be quicker than in “forerunner” countries

John Kim / KIPF

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