Reduction Of Transfers To Regions In The 2026 State Budget Is Considered To Disrupt Fiscal Justice

A number of vehicles passed on Jalan Sudirman, Jakarta, Tuesday (15/10/2024). (ANTARA)

JAKARTA - Activist from the New Jakarta Observers Coalition (KATAR), Sugiyanto, believes that the policy of cutting Transfers to Regions (TKD) in the 2026 State Budget has the potential to weaken the implementation of regional autonomy.

According to him, the ideal composition for the division of state spending between the central and regional governments is 75 percent for the central and 25 percent for the regions, as has been going on in the last three years.

"The 75:25 ratio between central and regional spending has proven to be logical, realistic and fair. This is a form of fiscal balance between national efficiency and regional fiscal needs that must be maintained," said Sugiyanto, quoted by ANTARA, Thursday, October 9.

He said, based on data from the 2023 State Budget, state expenditures were targeted at IDR 3,041.7 trillion with the Transfer Allocation to Regions and Village Funds (TKDD) reaching IDR 811.7 trillion or around 26.58 percent of the total state expenditure.

This figure shows the government's commitment to fiscal balance between the center and the regions.

In the 2024 State Budget, state spending reached IDR 3,325.1 trillion. Of this amount, TKDD was allocated IDR 857.6 trillion or 25.79 percent, while central government spending amounted to IDR 2,467.5 trillion or 74.21 percent.

"This composition is relatively balanced and consistent with the fiscal pattern of the previous year," he said.

Likewise in the 2025 State Budget, state expenditures were set at IDR 3,621.3 trillion, consisting of central government and TKDD expenditures. The TKDD allocation reached IDR 919.9 trillion or around 25.40 percent, while central government spending was allocated IDR 2,701.4 trillion or around 74.59 percent.

However, this balance changed drastically in the 2026 State Budget. Based on the 2026 State Budget Law which was passed by the DPR on September 23, 2025, the TKD allocation was only around Rp. 693 trillion or 18.03 percent of the total state expenditure of Rp. 3,842.7 trillion.

In contrast, central government spending increased sharply to IDR 3,149.7 trillion or 81.95 percent.

"This means that there has been a decrease in the allocation of transfer funds by around Rp. 267 trillion from the previous year. This is a clear reduction of up to 29.34 percent which will have a broad impact on the region," he said.

Sugiyanto explained that TKD is not a form of subsidy from the central government, but a tangible manifestation of fiscal justice and decentralization as mandated by the 1945 Constitution and Law Number 1 of 2022 concerning Financial Relations between the Central Government and Regional Governments (UU HKPD).

According to him, cutting large amounts of transfer funds will reduce regional fiscal capacity in carrying out public service functions, paying employee salaries and financing basic infrastructure.

He also reminded that many regions still have low fiscal capacity so they are very dependent on central transfer funds.

If the transfer funds are cut that deep, the regions will find it difficult to maintain the sustainability of public services. "This risks increasing fiscal inequality between regions and contradicting the spirit of equitable development," he said.

Sugiyanto added that the central government does need a large budget for national priority agendas such as food security, energy, education, health and a free nutritious eating program, however. This policy should not sacrifice regional fiscal capabilities.

"Maintaining a composition of 75 percent for the center and 25 percent for the regions is a form of healthy fiscal justice. If the portion for regions decreases by only 18 percent, it is clearly unbalanced and can weaken the spirit of regional autonomy," he said.

He also supports the steps taken by a number of governors who are members of the Association of Indonesian Provincial Governments (APPSI) to submit a request for a review to the Minister of Finance Purbaya Yudhi Sadive so that the 2026 TKD allocation is not cut too drastically.

"We hope that the central government will listen to regional aspirations. Don't cut TKD because maintaining a ratio of 75:25 means maintaining the constitutional mandate, strengthening regional autonomy, and ensuring equitable development throughout Indonesia," said Sugiyanto.