Regional budgets are down a quarter, and one province says it cannot pay staff

TKD is the money the central government sends down to provinces, districts and cities. It pays for a large share of what local offices actually do: schools, health clinics, road repairs, and the wages of local staff. This year that pot is set at Rp693 trillion, down 24.6 per cent from the Rp919.87 trillion allocated to the regions in 2025. Measured against all state spending, the regions' slice falls from about 28 per cent in 2023 to roughly 17 per cent in 2026.

Writing for Indonesia at Melbourne, the researcher Testriono says the effects are already visible. Deputy Home Affairs Minister Bima Arya has acknowledged that the cuts are affecting public services in 138 local governments. At a June meeting with DPR Commission II and the Home Affairs Ministry, North Maluku Governor Shelly Tjoanda said her province is losing 20 to 25 per cent of its transfers, about Rp709 billion to Rp800 billion this year, and may not have enough left to pay its contract civil servants, the staff hired on PPPK terms, through to December.

A budget cut turns into unpaid salaries this fast because most regions raise very little money themselves. Testriono puts it at about 90 per cent of Indonesia's 546 provinces, districts and municipalities having low fiscal capacity, meaning local taxes and fees cover only a small part of the bill and Jakarta covers the rest. Two laws narrowed local room further: Law 1 of 2022 rewrote how central and regional finances are shared, and the 2020 Omnibus Law on Job Creation pulled business licensing and environmental approvals back to the centre. Research by CORE Indonesia ties the savings drive partly to paying for the free meals programme. The duties stayed with local government, and the money moved to national schemes.

Why it matters

If you deal with a district office, a local clinic, or a school that runs on local budget lines, this is the money behind them, and in 138 places it is already thinner. Staff on PPPK contracts are the most exposed, because their pay comes out of the same shrinking pot. Watch the revised budget talks later this year: if the transfers get topped up, this was a squeeze for one year, and if they do not, districts will start charging more in local fees or quietly doing less.