The main problem of budgeting policy in 2010 – 2012 will be the adoption by the government of certain obligations which it will be then unable to cancel. Here we mean, first of all, changes in the revenues and expenditures of off-budget funds in 2010:
- the revenues of off-budget funds in 2010 will be reduced approximately by 10 % (about 0.5 % of GDP) due to the threshold established in 2010 for the charging to wages and salaries of the contributions to compulsory pension, medical and social insurance at the level of thousand rubles, while the basic rate of the contributions remains at the level of 26 % (its increase to 34 % is planned for the year 2011);
- valorization of pension rights in 2010 and a raise of the basic pension level up to the subsistence level at the end of 2009. Taken together, these measures are going to increase the federal budget expenditures earmarked for the payment of pensions by nearly 1.5 % of RUSSIAN ECONOMY: TRENDS AND PERSPECTIVES GDP (more than 1 % of GDP will be required to finance the valorization, and more than 0.4% of GDP – to raise the basic pension up to the subsistence level).
Thus, the obligations assumed by the government only in the sphere of pension provision will mean growth of federal budget deficit in 2010 by nearly 2 % of GDP.
As the possibilities available to the State in terms of financing its pension system in the years to come are going to be significantly limited, it appears feasible that the spending of its resources should be focused on the most important goal. The main priority in the sphere of pension provision in the next few years will be to eliminate poverty among pensioners – that is, to bring the level of the basic part of pension up to a pensioner’s subsistence level. Due to the accelerated indexation of the basic part of pension as a result of increasing the size of social pension to a pensioner’s subsistence level and slowdown of the growth rate of wages and salaries in 2009, the ratio of average labor pension to average salary in this country will increase significantly - from 22.8 % in 2007 to 27 % in 2009 – 2010.
The bringing of the basic part of pension up to the subsistence level and subsequent indexation of the basic pension in relation to the growth rate of consumer prices will make it possible to ensure stability of pensioners’ real incomes and to lower the risks of poverty among the senior age groups of the population.
In this connection, the equalization of the basic part of pension with the subsistence level and the subsequent maintaining it on this level will require substantial spending of financial resources, and thus it appears feasible to abstain, in the nearest future, from implementing any other measures designed to increase the level of pension provision. We mean, first of all, the reevaluation of the rights acquired by the moment of onset of pension reform. The onetime overall increase by 30 % of the insurance part of labor pension early in 2010 may be fraught with an upsurge of inflation.
4. The priority of supporting the population over giving support to businesses It appears that federal budget expenditure should be strictly oriented to supporting the population, in order to prevent any dramatic decline of living standards and the quality and availability of budget-funded services. So, it would be feasible to minimize the volumes and areas of support provided to businesses. This is conditioned by a number of reasons, the core ones among which are as follows:
- uncertainty of the economic of some or other enterprises in this particular phase of the crisis;
- lack of any reason in a policy aimed at actual support of inefficient owners and managers who failed, during the period of rapid economic growth, to make sufficient reserves that could be used for surviving in a more difficult economic situation;
- the impossibility to ensure transparency of the criteria and procedures for actually rendering this support.
It appears that direct support to enterprises can be feasible only in exceptional cases, and primarily in infrastructure-related sectors and mono-towns.
At the same time, it would be feasible to provide sufficiently significant support to businesses in indirect ways - because in conditions of crisis they can be relieved of the administrative burden of sustaining excessive employment. The State must take it upon itself to ensure employment. Thus, one of the most important barriers in the way of restructuring enterprises and their adaptation to the new economic situation will be removed.
5. More significant cuts in the financing of non-priority budget expenditure items (or those expenditure items the financing of which in previous years has been artificially inflated) instead of proportional reduction of all spending obligations. If some expenditure items of the Russian budget are compared with the similar items in the 2008 budgets of the OECD ON THE PRINCIPLES OF RESPONSIBLE BUDGETING POLICY...
countries, it become possible to notice certain reserves for cutting the spending under such items as national security, law enforcement activity, and the national economy. The consolidated budget expenditure of the Russian Federation earmarked for law enforcement activity in 2008 amounted to 2.63 % of GDP, whereas the OECD countries in 2003 – were spending on these purposes, on the average, 1.8 % of their GDP. The consolidated RF budget expenditure earmarked for national economy in 2008 was 5.42 % of GDP, while the OECD countries in 2003 – 2007 were spending on the same item 3.,9 % of their GDP. When the financing of these items of the federal budget is cut, it will become possible to increase the financing of national defense expenditure items, in order to ensure the 100% switchover to the manning of the Armed Forces of the Russian Federation on a contractual basis.
Military reform will be of an anti-crisis nature, because it will have a positive influence on the structure of employment: unemployed citizens will be able to find jobs in the Armed Forces, while those specialists for whom there is a demand in the national economy will be able to continue their training or work in civil sectors.
6. Organization of performance-based budgeting process The organization of the budgeting process has significant reserves for improving the quality of managing budget resources. However, for these resources to be implemented in actual practice, it will be necessary to improve the budgeting process in a comprehensive manner, so as to cover a variety of directions, the main ones among which are as follows:
- separate planning of the existing and newly assumed obligations;
- the use of adequate instruments for estimating the effect of budget expenditures in terms of performance, and incorporation of this estimation principle in budget planning.
Separate planning of the existing and newly assumed obligations means that priority should be given in the budget to the financing of the already existing spending obligations.
New spending obligations can be assumed only to the extent of the difference between the volume of the existing obligations and budget revenues, and the sources of financing to cover the budget deficit in a planning period. Separate planning of the existing and newly assumed obligations will have the following positive results:
- improved financial discipline, that is, avoidance of situations when, alongside a failure to fulfill the already assumed spending obligations, new obligations are assumed, as a result of which the burden on the budget increases significantly;
- certain competition will arise between the subjects of budget planning in the course of budget resources being distributed among the assumed obligations, which will increase their incentives both for efficient spending on the existing obligations and for improving the quality of applications for budget allocations to newly assumed obligations;
- a mandatory estimation will be envisaged for the effect that the spending obligations assumed during a given budgetary cycle can produce on the important existing obligations, thus making it possible to understand to what degree these obligations can be financed at the expense of forecasted budget revenues.
The budgeting process must be organized in such a way so as to ensure the orientation of budget expenditure not to the support of the existing budgetary network, but to the rendering of budget-funded services and the achievement of socially important results.
Such an orientation of budget expenditures can be achieved by various methods: through the preparation, by subjects of budget planning, of their reports on the results and main directions of their activity; by increasing the quality of target programs, etc. However, no matter which method is selected, it will be necessary, within the framework of the budgeting process, to perform the following tasks.
1. Performance-based qualitative estimation of budget expenditures implemented by subjects of budget planning, which should reflect both the volume and quality of the services RUSSIAN ECONOMY: TRENDS AND PERSPECTIVES rendered (direct results) and their effect on the overall socioeconomic situation (end-results).
The selected quantitative indices should comply with the following requirements:
- to remain strictly within the powers of the relevant level of authority;
- to maximally reflect the independent efforts of a subject of budget planning, and not to depend on external circumstances;
- to be determined by the activity of a subject of budget planning within the framework of a planning period.
2. Analysis of the performance level of subjects of budget planning during a reporting period, identification of the reasons for their failure to achieve certain performance indices.
In this case it is important to estimate both the fact of achieving the indices demonstrating direct results and their influence on the forecasted dynamics of end-results. At the same time, a failure to achieve certain performance indices should by no means result in an automatic change of the volumes of financing allocated to a subject of budget planning (either upward or downward), but be treated as an evidence of performance-related problems with expenditures in a given sphere, to which adequate solutions must be provided.
3. The dependence of the distribution of the budget resources allocated to assumed obligations on the level of performance and the forecasted contribution in the achievements of the established priorities of the socioeconomic policy pursued by the bodies of authority of the Russian Federation. In this connection, it will be necessary to introduce some elements of competition between the subjects of budget planning for budget allocations to finance their assumed obligations, in order to eliminate any incentives for them to underestimate their performance indices, while simultaneously establishing responsibility for resorting to “dishonest competition” though unjustified overestimating these indices.
4. Mandatory participation in the estimation of the performance level of subjects of budget planning of a broad spectrum of related participants, as well as mandatory publicity of that process. This can be achieved on condition that the key role in the performance estimation is to be played by the Commission for Improving the Efficiency of Budget Expenditures, or another similar body incorporating representatives of the legislative and executive authority, the public, experts, etc.
If the mechanisms for estimating performance are applied in the budgeting process, then the following goals can be achieved:
- elimination of those expenditures that fail to provide adequate solutions to the issues the Russian Federation is actually faced with;
- the concentration of resources on socially important priorities, instead of their dispersion in small amounts between a multitude of existing problems, without actually solving any of them;
- the organization of a comprehensive dialogue between all the related parties, thus placing a barrier in the way of purely populist projects.
The implementation of all the aforesaid principles will make it possible to turn the RF budget into a mechanism for institutional modernization of this country, instead of an object for trade between branch-related lobbyists.
MUNICIPAL REFORM AND VERTICAL OF POWER...
MUNICIPAL REFORM AND VERTICAL OF POWER:
THE FINAL DIAGNOSIS I.Starodubrovskaya, N.Mironova The State Duma has approved the President’s amendments to legislation on local selfgovernment which envisage the dismissal of heads of municipal formations without considering the population’s opinion on this matter. The discussion around these amendments has revealed the presence of conceptual disagreements between the proponents and opponents of these innovations not only with regard to issues of local self-government, but also to the principles of building the whole system of authority.
The most important event of the first months of 2009 in the sphere of local self-government has become the discussion on the amendments to the Federal Law “On the general principles of the organization of local self-government in the Russian Federation” put forth by the RF President in late January 2009. These amendments envisaged the emergence of a new institution of “removing from office” the heads of municipal formations, in addition to the previously existing mechanism of their dismissal. In contrast to the latter procedure, the new mechanism envisaged an extrajudicial procedure for the dismissal of heads of municipal formations on the initiative of the representative body of a municipal formation or of the supreme administrative officer of the Federation’s subject. At the same time, the grounds for dismissal were formulated with insufficient precision, and their list was an open one. In an event of the head of a municipal formation disagreeing with the decision concerning his or her dismissal, the latter was granted the right to express this special opinion in writing. In an event of the relevant initiative being declined by the representative body of a municipal formation, this issue could be once again submitted to it one month later.
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