Seoul Mayor Park Won-soon announced Thursday that the city will issue municipal bonds to finance child care services as the central government has continued to refuse further support.

The plan would offer temporary relief from the budget woes that had threatened to scuttle the expanded welfare scheme applied to all children aged 5 or under.

The city was expected to run out of budget for the program by this month. 

It decided to make up the budget shortfall through around 200 billion won ($182 million) in debt and 135.5 billion won in government subsidy.

It would be Seoul’s first bond issuance in four years.

Seoul City and the central government have been in dispute over the financial responsibility for free child care.

Out of 25 Seoul districts, five including Gangnam and Jongno have applied for supplementary funds and received government subsidies. The other districts were expected to run out of child care funds by the end of this month unless Seoul and the central government aided them.

While the city has repeatedly asked for subsidies from the central government, Cheong Wa Dae has insisted that public funds were only available if the city applied for a supplementary budget.

“This needs to be the first and the last time of issuing municipal debt for free child care,” said Mayor Park.

“Welfare programs like child care should be the central government’s complete responsibility.”

Mayor Park also requested the central government and the ruling party to raise the proportion of government subsidies from 20 percent to 40 percent.

Unlike other cities that receive 50 percent of the funds for free child care, the cost burden for Seoul City is 80 percent due to relatively high financial independence. The ratio was unilaterally set by the central government from the beginning.

Child care services have been expanded to all children aged 5 or younger since this year. Previously, the government provided state subsidies to only the bottom 70 percent of income earners. About 408,000 children are currently benefiting from the child care services.

By Lee Hyun-jeong  (rene@heraldcorp.com)