A major reform on decentralization of government authorities were carried out in 2005, resulting in the central government re-organizing the national subsidy system, by transferring of 149 national programs to the local governments. Around half of the total transferred programs were social welfare programs. Also, the Decentralization Revenue Sharing System(DRSS) was created in order to finance those transferred programs. This study focuses on examining changes in fiscal conditions of local governments that have implemented the extensive transfer of social welfare programs. According to the analysis here, the fiscal capacity of local governments have been aggravated due to the increase in social welfare expenditure due to the substantial amount of transfer of social welfare programs. In particular, the ratio of social welfare expenditure to the total expenditure is higher in low-income regions. This finding implies that current decentralization of social welfare programs would have negative impacts on inter-regional balance by widening the gap in fiscal capacity among different regions, which would result from the increase in social welfare expenditure on the part of the local governments. Therefore, a rearrangement of transfer of programs in the social welfare sector is required. For instance, income redistribution programs must be transferred back to the central government. Roles of local governments should focus on the programs that do not require control or guidance of the central government.