In spite of the spiraling debt crisis several local governments face, the Executive Yuan is mulling a 3 percent pay raise for the public sector, which would cost local governments an extra NT$10 billion (US$319.06 million) in personnel expenses.
Payrolls already take up nearly half of local governments’ budgets, legislators and local government officials said, adding that the central government’s proposed pay hike could damage the fiscal health of local governments.
The Executive Yuan said it would decide whether the proposed salary increases for military personnel, civil servants and public schoolteachers would go into effect before it announces the budget for the next fiscal year at the end of next month.
Any changes would not go into effect until after elections are held in January next year.
According to the estimates of the Executive Yuan, it would cost central and local governments about NT$7 billion to raise public sector wages by 1 percent — or NT$21 billion for a 3 percent pay raise.
Public sector workers received a 3 percent wage increase in July 2011, and the central government subsidized local governments with NT$5.27 billion in personnel expenses for the second half of that year.
Extrapolating from the central government subsidy in 2011, local governments would be expected to shoulder at least an additional NT$10.54 billion of the latest proposed pay raise, excluding a corresponding increase in year-end bonuses and performance bonuses.
According to the latest report by the Ministry of Civil Service, local governments’ combined personnel expenses totaled NT$497.9 billion in 2013, which accounted for 47.84 percent of their total expenditure for that year.
Payrolls took up more than half of the total expenditures of the governments of Taipei and Kaohsiung; the cities of Keelung, Hsinchu and Chiayi; and Changhua, Nantou, Pingtung, Hualien and Taitung counties, according to the ministry’s report.
The debts owed by the Miaoli and Yilan county governments are unsustainable, while those owed by Yunlin, Pingtung, Chiayi, Keelung and Nantou have reached an “alarming state,” according to the Ministry of Finance.
The proposed pay raise might be the last straw that breaks the finances of those governments, analysts said.
Local governments are expected to meet personnel expenses from their own resources, but the central government offers grants-in-aid to meet any shortfalls, a Directorate-General of Budget, Accounting and Statistics official said.
“The central government said it has offered grants, but I have no idea where those grants are,” Tainan Department of Finance Director Chang Shao-yuan (張紹源) said.
The central government apparently injected funds following a pay raise for public workers in 2011, but since 2012 there has been no substantial increase in tax revenues or grants distributed by the central government to local governments, Chang said.
Spending on social welfare and development has been squeezed by the 2011 pay raise, which has seen a large proportion of resources disappear from limited budgets, he said.
Democratic Progressive Party (DPP) Legislator Huang Wei-cher (黃偉哲) said that local governments might have to shoulder a sum greater than the estimated NT$10.54 billion cost of the pay raises, since the number of civil servants employed in local governments has increased following the creation of four more special municipalities since 2010.
The proposed salary hike is “a Chinese Nationalist Party [KMT] bid to buy votes at the expense of local governments controlled by the DPP,” and would worsen the mountain of debt facing local governments, he said.
Saying that the nation would struggle to show 3 percent GDP growth this year, Huang called on the Executive Yuan to think twice before implementing the proposed pay raise, which it could pay dearly for in the elections.
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