Resolution of PPPK Issues Deemed Merely a Patchwork Solution

The government has decided to extend the transition period for implementing the maximum personnel expenditure limit of 30% of the Regional Revenue and Expenditure Budget (APBD), following reports that many local governments are unable to pay Government Employees with Work Agreements (PPPK). However, this move is being viewed as merely a short-term solution.

Herman N. Suparman, Executive Director of the Committee for the Monitoring of Regional Autonomy Implementation (KPPOD), believes the government should provide long-term policy certainty regarding the PPPK issue. “The solution offered, or even decided by the Minister of Home Affairs, is like a short-term fix, only to extinguish the fire for a moment. Because later, it could trigger social unrest in the regions,” Herman stated on Tuesday.

According to him, while extending the transition period may reduce fiscal pressure on local governments, the policy does not address the core issue regarding the personnel expenditure limit regulated under the Law on Financial Relations between the Central Government and Regional Governments (HKPD). Herman suggests the government should evaluate the HKPD Law, as extending the transition period within the 2027 State Budget discussions could potentially result in a temporary solution that leads to renewed uncertainty in the future.

Furthermore, KPPOD argues that the 30% maximum limit is being applied with an overly uniform approach, despite the fact that fiscal capacity and needs vary significantly across regions. “If we look at it, 30% for Jakarta is certainly different from 30% for NTT, NTB, Papua, or other regions, because the fiscal capacity of each region is different,” he noted.

Herman suggested that the central government should consider the specific characteristics and fiscal capacities of each region. This would allow targets for personnel expenditure efficiency, including PPPK, to be adjusted to the real conditions of local governments without compromising public services. He also highlighted that regional fiscal conditions have become increasingly strained over the last year and a half due to cuts in Transfers to Regions (TKD).