Several regional governments in Indonesia have recently acknowledged difficulties paying the salaries of Government Employees with Work Agreements (PPPK), exposing deeper weaknesses in fiscal governance. While the central government has urged regional administrations to find more creative ways to increase locally generated revenue (PAD), academics argue that simply generating new revenue streams cannot resolve the issue. Instead, they say it requires comprehensive reforms to the fiscal relationship between the central and regional governments, along with a reassessment of budget efficiency measures and national spending priorities.
Professor Agus Pramusinto, a professor in the Department of Public Policy and Management at the Faculty of Social and Political Sciences, Universitas Gadjah Mada (Fisipol UGM), said the difficulty in paying PPPK salaries reflects poor synchronization between central government policies and the fiscal capacity of regional governments. When local administrations are no longer able to meet these obligations, he argued, the central government ultimately bears responsibility as the national policymaker.
“When regional governments are unable to fulfill these obligations, responsibility rests with the higher level of government. Therefore, the central government must address the problem,” he said on Friday (July 17).
According to Professor Agus, budget efficiency measures the government introduced partly caused the current situation, due to a lack of comprehensive planning. Before implementing such policies, he said, the government should have conducted broader consultations on spending priorities involving both ministries and regional governments.
He cited the Free Nutritious Meals (MBG) Program as one example. Although the program absorbs a substantial portion of the national budget, he believes its target beneficiaries were not sufficiently defined. As a result, some financially capable households continue to receive assistance, reducing the program’s efficiency and leading to unnecessary spending.
Professor Agus also argued that government policymaking has tended to be reactive rather than addressing underlying structural problems. He pointed to the establishment of Sekolah Rakyat (Commoner’s Schools) in response to children dropping out of school, despite opportunities to improve the governance of existing schools. A similar pattern, he noted, can be seen in the creation of the Koperasi Desa Merah Putih (Kopdes Merah Putih), even though Village-Owned Enterprises (BUMDes) already exist and could instead be strengthened.
“In many cases, the government prefers creating new programs rather than optimizing existing institutions,” he said.
Regarding the government’s call for regions to identify new sources of revenue, Professor Agus stressed that increasing locally generated revenue should not come at the expense of placing additional tax burdens on the public.
“If the government seeks new tax revenue, it is the people who will bear the burden. Layoffs are occurring everywhere, jobs are becoming harder to find, and the prices of goods continue to rise. People should not be burdened with even more taxes,” he said.
Professor Agus also called for a review of the regulation limiting personnel expenditure to a maximum of 30 percent of regional budgets (APBD). In his view, the rule has become less relevant after budget efficiency measures significantly reduced the fiscal capacity of regional governments.
He explained that if a regional budget falls from 100 to 70, the 30 percent cap on personnel spending automatically decreases from 30 to 21. Salary obligations, however, cannot be reduced proportionally, making it increasingly difficult for regional governments to meet their commitments.
Looking ahead, Professor Agus said the government should reassess the actual staffing needs of the civil service before opening new PPPK recruitment. Recruitment should continue where additional personnel are genuinely needed to support public services, particularly in education and healthcare. At the same time, he said, the government should restructure its institutions by eliminating positions that are no longer relevant and reallocating employees to sectors facing greater staffing shortages.
“If schools still need teachers, then the government should certainly recruit more teachers. If healthcare services still require medical personnel, then recruitment should continue. At the same time, we must restructure positions that are no longer relevant so that we can utilize human resources more effectively,” he explained.
Professor Agus warned that if regional fiscal challenges remain unresolved, the quality of public services could deteriorate as local governments struggle to maintain adequate staffing levels, particularly in education and healthcare. Addressing the problem, he said, requires more than simply suspending PPPK recruitment; it demands reforms to financing mechanisms and a realignment of government spending priorities.
As one possible funding source, he proposed restructuring allowances for senior public officials. One option, he suggested, would be reducing the performance allowances of first- and second-echelon officials by 20 percent. He also argued that officials who simultaneously serve as commissioners of state-owned enterprises should no longer receive additional remuneration, noting that similar practices have already been adopted in several other countries.
According to Professor Agus, the substantial commissioners’ fees and bonuses currently received by some officials could instead be redirected to finance PPPK salaries.
“Imagine commissioners receiving between IDR 200 million and IDR 300 million per month, along with bonuses worth tens of billions of rupiah. If the government redirected those funds to pay PPPK employees, how many additional personnel could be employed? The government could even reduce members of parliament’s allowances to help finance PPPK salaries,” he said.
Professor Agus concluded that resolving the issue of PPPK salary payments requires the government to reassess national spending priorities comprehensively. Better synchronization between central and regional government policies, organizational restructuring within public institutions, and a realignment of personnel expenditure, he argued, would provide more sustainable solutions than simply encouraging regional governments to generate additional revenue. Such reforms would help safeguard the quality of public services without placing additional pressure on regional finances or the public.
Author: Zabrina Kumara
Editor: Gusti Grehenson
Post Editor: Priyanandaningrat
Photo: Beritasatu