Taxes used to save failing govt hotels / KKR bailout cost 18 bil. yen over a decade

The Yomiuri Shimbun

Over the past 10 years, 17.7 billion yen in tax money has been used to cover losses incurred by hotels run by the central government workers' mutual aid organization, it has been learned.

The Federation of National Public Service Personal Mutual Aid Associations, which runs the KKR Hotels across the nation, spent between 1.5 billion yen and 2.1 billion yen a year in public funds from fiscal 2000 to fiscal 2009 to cover the hotels' debts, according to documents from the Finance Ministry, which has jurisdiction over the federation.

In June, the Mutual Aid Association of Prefectural Government Personnel--which falls under the jurisdiction of the Internal Affairs and Communications Ministry--was discovered to have covered its own hotels' losses between fiscal 2004 and fiscal 2008, with 19.3 billion yen in taxpayers' money.

According to the Finance Ministry documents, the federation has been using public money, mostly from mutual pension funds, since fiscal 1958 to cover the losses of its hotels. So far, 44.2 billion yen has been used for this purpose.

In fiscal 2009, the federation injected 1.5 billion yen into 24 deficit-ridden hotels. The ministry has not released the names of the recipient hotels.

Losses were made up with money transferred from accounts for health promotion programs--including subsidies for health checkups--to accounts for hotel operations. Half of this money came from public coffers and half from the associations' reserve funds.

There are 43 KKR Hotels in 29 prefectures, including Tokyo, Kyoto and Osaka. In the 1960s, there were about 80. Since then, the government has closed hotels that run in the red for two consecutive years and have negative prospects for the following year.

Some hotels operating in the black received compensation for potential losses and continued operations as usual, even if they had current account deficits due to reasons including construction expenses.

"We've assumed from the beginning that tax money would be used to keep these deficit-ridden hotels afloat," said an official at the Finance Ministry's Allowance Control and Mutual Association Insurance Division. "Association members get discounts at the hotels, so [the use of tax money is justified because] it's in the best interest of their welfare. There's no problem at all."

Regarding compensation for losses by hotels run by the Mutual Aid Association of Prefectural Government Personnel, Internal Affairs and Communications Minister Kazuhiro Haraguchi said at a July 23 press conference that the compensation system should be reviewed: "In principle, the hotels are supposed to be operated under a self-supporting accounting system."

An Internal Affairs and Communications Ministry official said the ministry could not comment on Finance Ministry policy.

"Using public funds to support hotels run by a public organization is another form of compensation for civil servants," said Prof. Takero Doi of Faculty of Economics of Keio University. "The hotels shouldn't receive public money from the central and local governments, and should instead be self-supporting."