Issues and Reform Directions for the Future Response Fund
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Writer
CFE
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The Future Response Fund is a large-scale national fund proposed to mitigate tax revenue volatility caused by economic fluctuations and to use additional and excess tax revenues generated by factors such as the semiconductor boom in the areas of youth, growth engines, local development, education, and talent. The government has presented a plan to use KRW 162.3 trillion in additional tax revenue in 2027 to invest KRW 45.4 trillion in four key areas, manage KRW 104.4 trillion as surplus funds, and use KRW 12.5 trillion to reduce new government bond issuance.
The underlying concern—preparing for economic downturns by not exhausting boom-period tax revenues in single-year spending—aligns with the purpose of fiscal stabilization. However, if fiscal stabilization, welfare and policy spending, local and education resource reallocation, and strategic industry investment are combined within a single fund, a separate review is needed because the operating principles for each function may become mixed.
Rather than simply judging whether the Future Response Fund should be maintained or abolished, this report evaluates the general account and the four special-purpose accounts separately by function. The general account should have its character clarified as a rules-based fiscal stabilization mechanism that responds to economic fluctuations, and it is necessary to specify the formula for additional tax revenue, standards for accumulation and withdrawals, priority relative to national debt, and National Assembly oversight.
For the youth account, one possible alternative is to streamline programs that overlap with existing support for jobs, housing, asset formation, and childbirth, and to focus on temporary investments that strengthen labor market entry and self-reliance.
For the growth engine account, rather than maintaining it as a policy expenditure account in which subsidies and contributions are mixed with investment and equity participation, a possible option is to separate it into a strategic sovereign wealth fund with a cyclical structure of investment, recovery, and reinvestment. Ireland’s ISIF, Singapore’s Temasek, and Norway’s GPFG differ in purpose and character, but they provide common design elements: commercial discipline, professional management, joint investment with the private sector, separation of principal and returns, parliamentary oversight, and information disclosure. A Korean-style strategic sovereign wealth fund could be designed by selecting recoverable investment-type projects from the growth engine account as seed capital, reinvesting recovered funds, dividends, and investment returns, and pursuing co-investment with private capital.
For the local account, it is necessary to consider going beyond simply reducing overlap with existing systems and instead moving toward integrating regional earmarked finance itself. As of 2026, the Local Extinction Response Fund is operated with an annual government contribution of KRW 1 trillion and is divided into a metropolitan support account and a basic support account, and under current law the relevant provisions remain effective through the end of 2031. The Special Account for Balanced National Development is the basic fiscal platform for balanced regional development projects, and since the 2026 legal revision requires the establishment of a special supra-regional account, it would be possible to consider an integration plan under which, rather than newly creating a separate local account within the Future Response Fund, the functions of the Local Extinction Response Fund are absorbed into a “Local Extinction Response Account” within the Special Account for Balanced National Development. If the principle is clearly established that general resources are handled through local allocation tax and earmarked resources through the balanced development special account, fiscal channels can be simplified while also designing local autonomy and accountability together.
For the education and talent account, rather than maintaining it as a separate account, fully incorporating it into the existing education finance system would provide a clearer division of roles. Existing systems could be used, such as the Local Education Grant for elementary and secondary basic education and general resources, the Special Account for Higher and Lifelong Education Support for universities, lifelong education, and university-based talent development, and the Special Account for Early Childhood for early childhood education and childcare. For projects with a strong whole-of-government priority character—such as developing national strategic talent in AI and semiconductors and attracting outstanding global talent—it would be possible to consider organizing them as medium-term programs within the Ministry of Education’s general account. This is an approach that, instead of adding an education and talent account, clarifies policy responsibility and National Assembly budget review within the existing accounts.
In sum, the direction for improving the Future Response Fund lies in a functional redesign: refining the fiscal stabilization function of the general account, separating growth engines into a strategic sovereign wealth fund, and integrating local development and education and talent into the existing fiscal system. The government should present a functional map for each account, business consolidation and integration, integrated performance management, and asset management principles, while the National Assembly needs to specify standards for accumulation, withdrawals, transfers, and account integration through amendments to the National Finance Act and related special laws. The proper criteria for evaluating the Future Response Fund should not be its size itself, but whether fiscal instruments suited to each function were selected, whether overlap with existing systems was reduced, and whether performance and accountability can be transparently verified.
Structure and Main Uses of the Future Response Fund by Account
Account
Main Resources
Main Uses
General Account
Additional tax revenue
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Excess tax revenue
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Budget surplus
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Deposits
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Investment returns, etc.
Transfers and deposits to other accounts, funds, and special-purpose accounts
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Fiscal stabilization
Youth Account
Transfers from the general account
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Investment returns
Jobs
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Startups, housing, asset formation, marriage
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Childbirth, living
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Culture
Growth Engine Account
Transfers from the general account
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Investment returns
Support for growth engines such as AI, national strategic technologies, and R&D
Local Account
Transfers from the general account
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Deposits,
investment returns, etc.
Regional industry infrastructure,
settlement conditions,
rural and fishing villages,
local government support
Education
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Talent Account
Transfers from the general account,
transfers from the general account
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Deposits, etc.
Early childhood,
higher
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lifelong education,
advanced talent development
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attraction, etc.
Source: Compiled based on Articles 5 through 9 of the “Proposed Act on the Establishment and Operation of the Future Response Fund.”
I. Overview of the Future Response Fund: Structure of the Government Proposal
II. General Account: Designing the Fiscal Stabilization Function
1. Current Structure and Issues 2. Problems and Evaluation 3. Direction for Improvement
III. Youth Account: Distinctiveness from Existing Youth Policies
1. Current Structure and Issues 2. Problems and Evaluation 3. Direction for Improvement
IV. Growth Engine Account: Review of Conversion into a Strategic Sovereign Wealth Fund
1. Current Structure and Issues 2. Problems and Evaluation 3. Alternative for Conversion into a Sovereign Wealth Fund
4. Comparison with Overseas Cases and Implications 5. Plan for Establishing a Strategic Sovereign Wealth Fund
V. Local Account: Integrated Redesign of Regional Earmarked Finance
1. Current Structure and Issues 2. Problems and Evaluation
3. Need to Integrate the Local Extinction Response Fund and the Balanced Development Special Account 4. Integration Plan and Implementation Path
VI. Education and Talent Account: Full Integration into the Existing Education Finance System
1. Current Structure and Issues 2. Problems and Evaluation
3. Functional Integration Principles 4. Division of Roles and Implementation Plan
VII. Conclusion: Improving the Government’s Future Response Fund System and Legislative Tasks for the National Assembly
1. Conclusion and Recommendations 2. Government Institutional Improvement Tasks
3. Legislative Tasks for the National Assembly 4. Phased Implementation Plan
References
Original title: 미래대응기금의 쟁점과 개선방향
Author: Gwang yong Go
Date: 2026-09-17
Source: https://www.cfe.org/bbs/bbsDetail.php?cid=report&pn=1&idx=29547