South Korea’s local governments face tighter finances next year despite a semiconductor-driven increase in national tax revenue. The government’s 2027 budget proposal sets local shared tax at 77.1899 trillion won, up 11.3% from this year’s initial budget, while national tax revenue is projected to rise 49.8% to 584.4 trillion won. The gap reflects a new formula under which funding for a 162.3 trillion-won future response fund is deducted before local shared tax is calculated, reducing the grant by an estimated 30.5 trillion won compared with the existing formula. Including lower education grants, the restructuring of mandatory spending totals 69 trillion won. Local governments also face rising welfare costs and matching contributions for state-subsidized projects, limiting funds available for their own priorities. Daegu Mayor Choo Kyung-ho has opposed the financing plan, warning it could weaken local fiscal autonomy and services. The government plans to place 15.3 trillion won in a regional account, including a 3.5 trillion-won local future growth support fund, but municipalities want greater control over its use and less reliance on local matching funds.