Separation of Budgetary Power between the National Assembly and the Executive Branch: Towards a New Balance in Korea

The core issues of fiscal management in many Western countries have undergone significant changes over time since the emergence of the modern state. In the early period of transition from absolute monarchy to the modern state, a key task was to reduce the tax burden by requiring parliamentary deliberation and approval of budgets and adherence to the principle of balanced budgets. However, by the nineteenth century, the United States and France began to recognize that parliamentary dominance in fiscal management had paradoxically resulted in lax and deceptive budgetary practices. To address these problems, the United States established an executive-centered budget system in the 1920s, while France undertook constitutional amendments in the 1950s that effectively neutralized parliamentary budgetary power.

From the 1960s onward, all Western countries operated executive-centered budget systems and adopted Keynesian fiscal management, which actively accepted fiscal deficits to achieve full employment. This approach ultimately led to economic crises in the 1970s, marked by stagflation—simultaneous increases in inflation and unemployment following two oil shocks—as well as rising welfare expenditures and public debt that threatened fiscal sustainability. Reflecting on these outcomes, countries began in the 1980s to recognize the need for legislatures to impose strict fiscal rules on the executive. By the 2000s, many experts came to view an appropriate separation of budgetary powers between the legislature and the executive, alongside political institutions, as a crucial means of reconciling competing fiscal demands and promoting social prosperity.

Gradually, scholars began comparing countries that experienced fiscal crises with those that did not, seeking best practices for the appropriate allocation of budgetary powers between legislatures and executives. Through case studies not only of OECD countries but also of Latin American and Asian nations, efforts were made to identify optimal models of budgetary power separation. The prevailing conclusion is that: (1) legislatures should lead strategic discussions on overall budget ceilings and sectoral allocation of fiscal resources; (2) executives should systematically review competing budgetary demands based on established principles and prepare the budget; and (3) legislatures should exercise oversight over the executive through ex post audits and settlement reviews, focusing on the efficiency, effectiveness, and legality of individual programs.

The long historical experiences of Western countries, along with valuable examples drawn from major economies worldwide, offer important implications for contemporary Korea. Since the introduction of direct presidential elections in 1987, Korea has achieved significant political democratization. Beginning in the 2000s, however, an increasing number of political demands and conflicts have emerged in relation to budgetary and fiscal management. Beyond sectoral allocation issues—such as rising welfare expenditures, demands for balanced regional development, expansion of R&D budgets, and adjustments to education spending—specific programs such as large-scale development projects, public utility price reductions, and price stabilization of essential goods have increasingly attracted political attention. In this context, persistent calls have arisen to strengthen the National Assembly’s budgetary authority.

Demands to strengthen parliamentary budgetary power have been raised across party lines, with proponents commonly citing the introduction of “budgetary legalism” and the adoption of a “fully American-style budget system” as core arguments. They argue that by treating the budget as a legislative act under budgetary legalism, the executive’s budget formulation authority should be effectively neutralized and parliamentary intervention in budget preparation strengthened. They also claim that Korea should adopt the U.S. presidential budget system, in which fiscal authority is constitutionally vested in the legislature. However, these arguments largely remain grounded in interpretations of the U.S. Constitution as of 1788 or pre–World War II constitutional debates in Germany and Japan.

This study aims to propose a normative direction for Korea’s separation of budgetary powers based on the historical experiences of OECD countries that have developed fiscal democracy through prolonged trial and error, as well as international comparative research on best practices. The study divides the budget cycle into four stages—budget formulation, budget approval, budget execution, and settlement review—and conducts a broad comparison between Korea and major advanced economies. The findings for each stage are summarized as follows.

First, budget formulation is led by the executive branch in all countries worldwide. In major countries such as the United Kingdom, Germany, and France, legislatures are prohibited from proposing budget increases or revenue-reducing bills. Unlike these countries, Korea’s National Assembly faces no restrictions on enacting or amending budget-related laws, including legislation exempting projects from preliminary feasibility studies. While the United States grants Congress virtually unlimited budgetary authority, it should be noted that this is a globally unique case. Moreover, despite the fact that legislatures in most OECD countries play a substantive role in determining overall fiscal ceilings and sectoral allocation, Korea’s National Assembly has opposed the enactment of fiscal rules—an issue that warrants attention.

Second, budget approval is naturally a legislative prerogative in democratic systems. However, the extent of amendments made by Korea’s National Assembly to executive budget proposals is unprecedented by global standards. Furthermore, Korea allows unilateral budget cuts by the legislature, which can lead to governance instability under divided government. In parliamentary systems, budget amendments by the legislature are extremely limited, as they may trigger parliamentary dissolution. Even under France’s semi-presidential system, parliamentary budgetary power is effectively constrained, resulting in minimal legislative amendments.

Third, budget execution should be carried out by the executive, and legislative intervention should be avoided. Legislative approval of a budget signifies authorization for spending, not an obligation to spend. This reflects the significant discretion granted to the executive in budget execution. In most OECD countries, legislative approval distinguishes between legislative items and administrative items. In Korea, however, this practice has not been firmly established, likely because the executive hesitates to exercise discretion out of concern for legislative backlash.

Fourth, settlement review is a core legislative function and a key indicator of fiscal democracy. Rather than focusing on political disputes over project selection, settlement review should primarily assess whether effectiveness, efficiency, and legality were properly observed in execution. This process, known as policy auditing, should feed back into subsequent budget formulation. Unfortunately, Korea’s National Assembly has not effectively fulfilled this function in settlement reviews.

Based on the problems identified across the four stages of the budget cycle, this study proposes five key reform tasks for Korea’s separation of budgetary powers. First, codifying legislative leadership in determining overall budget ceilings and sectoral allocation. Second, establishing a practice that prohibits legislative acts that increase budgetary demands or reduce revenues. Third, strictly distinguishing legislative items from administrative items to clearly delineate legislative and executive responsibilities. Fourth, formalizing parliamentary budget amendment procedures during annual budget deliberations to enable effective media scrutiny of so-called “pork-barrel” spending. Fifth, separating and strengthening the National Assembly’s settlement review committee to ensure effective policy auditing.



Prologue

I. Introduction

II. Background of the Debate – Existing Discussions

1. Fiscal Constitutionalism in Korea

2. International Comparative Institutional Studies

III. Budget Formulation Stage

1. Practices in Major Advanced Economies

2. Current Status in Korea

IV. Budget Approval Stage

1. Practices in Major Advanced Economies

2. Current Status in Korea

V. Budget Execution Stage

1. Practices in Major Advanced Economies

2. Current Status in Korea

VI. Settlement Review Stage

1. Practices in Major Advanced Economies

2. Current Status in Korea

VII. Basic Direction for the Separation of Budgetary Powers in Korea

1. Legislative Leadership in Budget Ceilings and Sectoral Allocation

2. Prohibition of Legislative Acts Increasing Spending or Reducing Revenue

3. Strict Distinction Between Legislative and Administrative Items

4. Formalization of Parliamentary Budget Amendment Procedures

5. Separation and Strengthening of the Settlement Review Committee

References

Appendix 1: France’s Annual Finance Act (Lois de finances)
Appendix 2: Germany’s Annual Budget Act (Das jährliche Haushaltsgesetz: HG)
Appendix 3: U.S. Authorization Acts and Appropriation Acts
Appendix 4: Results of the National Assembly’s Review of the 2023 Budget Proposal (Number of Cases)
Appendix 5: Annual Amendments to Revenue and Expenditure Budgets by the National Assembly

Korean version: https://www.cfe.org/20250515_27651