Section The Monetary and Budget Spheres Russia has been measuring the effectiveness of executive branches of the government of the constituent territories of the Russian Federation, which serves as a framework for allocation of grants to most “efficient” regions (based on their performance measured in 2010, 10 constituent territories of the Russian Federation received grants within a range of Rb 63m to Rb 116m in 2011). The experience gained over the previous periods shows that performance measurement of government bodies is a challenge. A monitoring of 329 parameters is currently under way, which is subject to annual changes in methods. For example, in 2007–2008, the regions were ranked on the basis of an effectiveness achieved by regional government bodies. As a result, a group of 10 regions was formed, whose composition remained unchanged for two years. Later, in 2009, a decision was made to measure the effectiveness of regional government bodies through the dynamics of indicators. Such an approach also failed to stand up for criticism, and from 2010 they started measure the effectiveness on a comprehensive basis, i.e. both in terms of dynamics and level. Today, the Ministry of Regional Development of Russia highlights the following top-priority lines in the development of methodology: reducing the number of applicable indicators; taking more account of regional specifics; providing a more flexible approach towards materiality of factors which have an effect on the comprehensive assessment; enhancing ways of encouragement of the regions1.
The developers of the method of measurement of the effectiveness of regions which have achieved best results in increasing taxable capacity, appreciated the weaknesses of the method of the Ministry of Regional Development of Russia. However, federal government bodies may face the same problem in using this method, namely it is impossible within the framework of a specific method to take account of all the specifics of a parameter to measure (taxable capacity in this context). As a result, efforts in making the most adequate measurement would result in increased number of indicators in the method thus making it overloaded, complex and non-transparent.
The method of the Ministry of Regional Development of Russia employs 329 parameters whereas the taxable capacity measurement method has only six parameters. Both methods basically employ economically objective parameters. However, regardless of the applicable methods of measurement of the performance of regional government bodies, the same results will be obtained annually. Today about 10 constituent territories of the Russian Federation can be highlighted, which eventually will be found in the group of leaders regardless of the activities of certain governors in the field of regional economics. Such regions as Moscow, St. Petersburg, the Republic of Tatarstan, the Tyumen Region, etc., initially had favorable opportunities for a good start in their development, therefore most of other regions would not be able to catch up with them by virtue of objective factors.
In general, both measurement of the effectiveness of executive bodies of the constituent territories of the Russian Federation and measurement of regions which have achieved best results in increasing taxable capacity, have a series of critical weaknesses. First, such measurements can’t reflect the current status of regional economic policies, because the results of decisions made by government bodies are normally not short-term (e.g., the results of current large investments can be seen in five years), or assessed economic indicators depend little from the decisions made by federal government bodies. Second, stimulation through allocation of grants to financially successful constituent territories of the Russian Federation is ex http://www.minregion.ru/press_office/news/1763.html – The Ministry of Regional Development of the Russian Federation.
RUSSIAN ECONOMY IN trends and outlooks posed to extra risks of increasing differentiation among the regions and generating interregional contradictions. In addition, a small amount of allocations with a relatively small number of the constituent territories of the Russian Federation subject to rewards, results in dispersion of budget funds. This arrangement can’t have a significant effect on the creation of priorities for regional government bodies. Third, the federal government bodies’ efforts in improving a specific method would result in making constant updates thereto thereby preventing the regions from defining correct priorities in the long-terms period.
It should be emphasized that the practice of financial support to the regions on the basis of their economic and financial performance is quite disputable. For example, to obtain more reliable measurements of the performance of government bodies, the system of indicators would be widened. More indicators will result in distortion of the real system of goal-setting on the side of government bodies of the constituent territories of the Russian Federation, which would replace the performance-based work with the indicator-based work. As a consequence, regional government bodies would tend to achieve currently high indicators (better vs. the previous period) without actually working on long-term strategic development plans. It should be emphasized that the aforesaid effects are similar and result from efforts to introduce different systems of result-based budgeting in the public sector both at the government level and at the level of certain ministries and departments1. To reduce the likelihood of facing the aforesaid issues, it is necessary to give up financing of the constituent territories of the Russian Federation on the basis of their economic and financial performance results, but keep up enhancing the measurement systems themselves. The measurement system is needed to build up a data bank which allows regional processes to be detected in terms of different aspects of regional development for the purpose of identifying, disseminating and applying the best regional practice among the constituent territories of the Russian Federation. Furthermore, it should be noted that revival of the institution of direct elections and early resignation of governors may become the best stimulus and measurement of the performance of regional government bodies, including taxable capacity improvement.
2.3.4. Establishing road funds of the constituent territories of the Russian Federation in Under Federal Law No. 68-FZ, dd. April 6, 2011, “On the Amendments to the Budget Code of the Russian Federation and the Selected Legal Acts of the Russian Federation”, a provision on the establishment of road funds at all tiers of authority was set up for the purpose of financing road activities with regard to public motor roads from 20122. To observe the federal legislation requirements, each region had to develop till January 1, 2012 a regulatory act providing for the establishment of the road fund of a constituent territory of the Russian Federation3. In addition, regional government bodies had to approve a procedure for financing and use of road fund budget allocations as well as update their regional long-term programs For details refer to, e.g., de Bruin H. Performance-Based Management in the Public Sector. M.: The Institute for Complex Strategic Studies, 2005.
The Russian legislation requires mandatory creation of the Federal Road Fund (it was stipulated in 2011 under Federal Law No. 357-FZ, dd. December 13, 2010, “On the Federal Budget for 2011 and Planning Period for 2012 and 2013”) as well as road funds of the constituent territories of the Russian Federation, since 2012. In addition, municipal road funds may be created by a decision of the representative body of a municipality.
Sixty eight of 83 constituent territories of the Russian Federation adopted special laws on the creation of regional road funds while the other 15 updated their effective regulations for budgetary process.
Section The Monetary and Budget Spheres on road facilities (their parameters were to be brought in accordance with the amounts of financing from the road fund of a constituent territory of the Russian Federation). Pursuant to Clause 4, Article 179.4 of the Budget Code of the Russian Federation, the following revenues are considered as sources of financing of regional road funds:
- revenues from excise duties on motor gasoline, straight-run petrol, diesel fuel, oils for diesel and gasoline (injection) engines manufactured on the territory of the Russian Federation, payable as revenues to the budget of a constituent territory of the Russian Federation;
- transport tax revenues.
While working on the draft law, some of the regions encountered a problem which was conditioned by the fact that transport tax was included into the sources of financing of the road fund of a constituent territory of the Russian Federation. This tax, however, was long ago placed under the jurisdiction of local government bodies. In analyzing Article 179.4 of the Budget Code of the Russian Federation, one may infer that two specified sources of revenues (transport tax and excise duties on oil products) must be mandatory sources of financing of the road fund of the constituent territories of the Russian Federation. This is because under Clause 1, Article 56 of the Budget Code of the Russian Federation transport tax revenues shall be 100% paid to the budget of a constituent territory of the Russian Federation. Moreover, Article 179.4 of the Budget Code of the Russian Federation specifies that the size of a regional road fund shall be established under the budget law of a constituent territory of the Russian Federation for the ensuing fiscal year (the ensuing fiscal year and planning period) in an amount which should be at least equal to the forecast amount of budget revenues of a constituent territory of the Russian Federation. This leads to the conclusion that if the transport tax single standard is transferred to municipal budgets, this source will cease to be a regional budget revenue and, consequently, may not be a souce of financing of the road fund of a constituent territory of the Russian Federation1. Following are the regions in which transport tax was assigned to the municipal level: the Vladimir Region, the Voronezh Region, the Kaluga Region, the Lipetsk Region, the Vologda Region, the Krasnodar Territory, the Orenburg Region, the Perm Territory, Khanty-Mansi Autonomous Area, the Republic of Tyva, the Republic of Dagestan, the Republic of North Ossetia (Alania), the Stavropol Territory and the Chechen Republic.
As a rule, the decision on assignment of transport tax (in full or in part) from the regional to the municipal level of authority was made to maintain fiscal capacity at a certain level and create additional stimuli to enlarge the tax base in municipalities. The practice shows, however, that regions which initially assigned transport tax to municipalities, included afterwards transport tax as a source of financing of such funds, through amendments to already adopted laws on road funds. Therefore, forced abolition of transport tax single standards since 2012 in a series of Russia’s regions can be regarded as an adverse effect of the adopted legal regulations concerning road funds. At the same time, transport tax revenues assigned to municipalities could be sources of financing of municipal road funds (however, local government bodies are only entitled rather than obliged to create road funds).
In general, the idea to revive road funds was initiated by the Government of Russia on the basis of analysis of the situation in the road construction sector over the recent 20 years. Advocates of this idea (above all, the Ministry of Transport of Russia and the Federal Road http://bujet.ru/article/153917.php – Creation of Road Funds: Pros and Cons.
RUSSIAN ECONOMY IN trends and outlooks Agency under the Ministry of Transport of Russia) often provide the following data. In 1991– 20011, when a system of financing of road facilities through road funds was in place, about 6,000 to 7,000 km of roads was constructed annually vs. about 2,000 km after the transfer to budget financing. It should be noted that road funds were abolished basically because of a great deal of corruption schemes and reports on improper use by government bodies of accumulated financial resources. Refusal of this type of financing was a logical stage in enhancing the budget policy. However, advocates of road fund revival believe that in spite of a great deal of road funds’ inherited problems, volumes of construction and financing of road facilities were bigger when road funds were in place. In general, over the recent 11 years without road funds, expenditures on road facilities have decreased to 0.7% from 1.6% of GDP and even a bigger decline to 0.6% from 2.7% of GDP took place at the regional level. The data presented in Fig. 20 shows that expenditures on road facilities decreased in real terms after the Federal Road Fund of the Russian Federation was liquidated in 2001. However, these expenditures increased in the period between 2005–2008 and reached the max. value in 2008.
Therefore, steady downward trend in expenditures on road facilities was overcome long before road funds were established in 2012. Furthermore, the following should be emphasized.
The single undisputable advantage of special purpose road funds against budget financing is a higher degree of “transparency” for car owners – actual taxpayers who form a road fund, because such approach allows them to “see” a price of the actual benefit as motor roads. Financing of road facilities could have been increased without creating special purpose road funds, as partially evident by the “pre-recession” dynamics of the relevant expenditures.
Source: M.Y. Blinkin. Strategy – 2020. Development of the Transport Infrastructure.
Fig. 19. Amounts of financing of road facilities from the budgets at all levels in comparable prices (1996 = 100%) It was the financial and economic crisis that was basically responsible for interfering with further increase in expenditures on road facilities (after 2008). Subnational budget expendi The Federal Road Fund was abolished in 2001. Regional road funds existed until 2003, when they were liquidated upon the abolishment of road tax.
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