Basic Report

Although the financial situation of local authority would not face financialoppression or crisis or reach the bankrupt condition like that of enterprises, yet it canface unavoidable condition as its original role of providing public service shrinks.Rapid decrease of local tax revenues due to changes in local finance tax revenues ·annual expenditure structure, increase of welfare expense, collapse of local economy,macro economy stagnation and such, functions as a serious fiscal crisis element.If the category and idea of fiscal crisis is expanded to financial oppression andfinancial agony, the previous step of financial bankruptcy, local finance of Koreamight go under this.There are municipal bond management and finance regulation for fiscal crisismanagement system of local authority. Finance analysis · evaluation system amongfinancial regulations in advance is an important system helpful towards usual inspectionsystem and analysis, construction of systemic basis related to political countermeasuresafter fiscal crisis; can be used as the method for inciting self- prediction or preventionof fiscal crisis for local authority, according to the future development degree.Fundamental direction of systemic re-maintenance plan for fiscal crisis managementconsidering such conditions are arranged like the following.First, fiscal crisis management system emphasizing direct · beforehand regulation formshould be switched to indirect · post-factum regulation form; second, beforehand-regulationand post-factum regulation should be established as complementary relationship. Third, itis necessary to propel big reform of local finance analysis · diagnosis system forimprovement of budget account system and construction of regulation system. Forth,anticipative preparation to take countermeasure for fiscal crisis related to external shockescaped from regulation range of local authority, such as collapse of local economy orforeign exchange crisis, along with the system maintenance keeping side effects likeductile budget restriction and moral laxity in view is needed. Also in case of the totalamount limitation system, direct regulation form should be developed by the advancedmanagement method of normative or market regulation types. And as for the improvementplan of local finance analysis and diagnosis system, first, financial evaluation is to keepthe form of combining quantitative evaluation and qualitative evaluation, yet it isnecessary for national policy for qualitative evaluation to decrease the weight ofadministration. Second, quantitative evaluation is to be re-established as political measureof regular examination for the overall operation of local finance. For this, re-establishmentfor the field and within the field of analysis object is demanded. Third, the developmentof financial soundness index (tentative name) is requested to perform early warningfunction of fiscal crisis. Forth, financial diagnosis is to improve application method touplift effectiveness. Also introduction of early warning system as beforehand-preventivemeasure for financial soundness can be examined. Along with such improvement,financially oppressed local authority is to manage and classify local finance analysis ·evaluation system and the total amount limitation system related to financial soundnessunder capital recognized objects, despite the modification of the total amount limitationsystem; and to prohibit the issue of municipal bond in principle for financially agony localauthority. Lastly above all things, preparation of legal basis for systemic propulsion andmanagement of such fiscal crisis management system is needed.