▪ This year, Korea celebrates 30 years of local democracy; local finances have grown significantly but now face serious challenges: weak spending authority, population shifts, and regional gaps.

▪ Current fiscal capacity measures (e.g., fiscal independence/autonomy ratios) guide financial assessments and fund allocation, so we must verify if they truly capture the local financial reality.

▪ The main measures of local fiscal capacity are fiscal independence ratio and fiscal autonomy ratio.

▪ Fiscal independence and autonomy ratios should reveal local financial health and freedom, but using planned budgets instead of actual results creates gaps with reality, missing the true local fiscal situation.

▪ Since fiscal capacity indicators determine how the central government distributes money to local areas, these must be fixed to better capture real financial conditions.

▪ Since fiscal independence and autonomy ratios measure revenue-side autonomy, they fail to reflect expenditure structure, such as mandatory and statutory expenditure proportions.

▪ Measuring real fiscal capacity requires looking beyond autonomous resource amounts to include own-project spending, autonomously executable available resources, and expenditure-side budget execution autonomy.

▪ Fiscal capacity indicators need structural fixes to better show real local fiscal autonomy and build trust in numbers.