TAIPEI (Taiwan News) — Premier Cho Jung-tai (卓榮泰) on Friday addressed criticism over the central government’s decision to cut local government subsidies by an average of 25%, totaling NT$63 billion (US$2 billion).

Cho attributed the cuts to reductions made by legislators representing constituencies across Taiwan, per ETtoday. He also pointed to the improved financial condition of many local governments, suggesting they are capable of handling the reduced funding.

Cho said local governments facing shortfalls in this fiscal year should borrow and manage their finances accordingly. He added that new amendments to the law governing revenue allocation, scheduled to take effect next year, would help local governments repay loans.

The Cabinet’s decision sparked backlash from local officials nationwide, with criticisms largely aligning with political affiliations, per UP Media. KMT mayors and magistrates criticized the Cabinet, while DPP officials blamed the opposition-controlled Legislative Yuan for initiating the budget cuts.

Academics on Thursday also raised concerns, per UDN. National Taipei University of Business Professor Huang Yao-huei (黃耀輝) said the budget cuts approved by the Legislative Yuan were aimed at the central government, not at local subsidies. He said the central government lacks the authority to reduce local government funding without local-level actions that would justify such cuts. 

Huang also warned that lowering this year’s subsidies could create a precedent that would reduce the baseline for next year’s allocations. Shih Hsin University Associate Professor Fang Kai-hung (方凱弘) said current laws do not permit the central government to reduce local subsidies in response to cuts made to its own budget. 

National Chung Hsing University Associate Professor Chi Ho-chun (紀和均) added that providing subsidies to local governments is a legal obligation and not subject to unilateral reduction.

In response to these legal arguments, Cabinet Spokesperson Michelle Lee (李慧芝) maintained, on Thursday, that the central government acted within its legal rights, per Liberty Times. She noted that the Directorate-General of Budget, Accounting and Statistics had previously informed local governments that adjustments could be made depending on the budget outcome.

Meanwhile, opposition lawmakers are planning to propose a resolution demanding the central government reverse the subsidy cuts, per RTI. KMT Legislator Wang Hung-wei (王鴻薇) said the subsidies had already been included in local governments' 2025 budgets.

DPP Legislator Wu Szu-yao (吳思瑤) countered, asserting that the legislative budget cuts were responsible for the Cabinet’s decision. She accused the opposition of attempting to shift the blame.

TPP Chair Huang Kuo-chang (黃國昌) said the legislative cuts targeted central government expenses, not local government subsidies, per CNA. He argued the Cabinet overstated the impact of the reductions and estimated that the real cut, excluding Taipower-related grants, was about 3.4% of this year’s national budget. 

Huang also challenged the claim that the legislative actions directly led to the local funding shortfalls.