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the budget funding of the educational system continued to increase both in nominal and real terms (after a two year-long contraction in real expenditures on education). Thee factor generated a specific effect, that is, universities being increasingly focused on budgetsponsored students, rather than on those who pay for themselves, and the competition for the latter category intensified;

yet another milestone development in the educational system became a proposal, in the frame of renewal of the Strategy-2020, on reforming the system of vocational education and school. Debates on these issues on numerous expert platforms stirred a fairly considerable public interest, which, however, is gradually dying, as no ideas emerged in this respect;

the discussion of the bill On education in Russian Federation is under way, but as the document has been drafted for several consecutive years already, with no serious progress, the at-large publics reaction to new modifications therein was extremely amorphous;

a federal act was adopted which engaged non-state universities in the process of assignment of the state order and, consequently, of budget allocations. The state universities opposed the Act adamantly, for given the demographic decline, it can affect their financialstanding.

That said, it was clear to everyone that access to the budget pie would be granted to no more than 40 out of 452 state universities at best. The number of budget-sponsored students Corresponding amendments were introduced in the RF Tax Code and the RF Federal Law On the Legal Status of Foreign Citizens in the Russian Federation.

Section Social Sphere at private universities should not exceed 4,500, ie. some 0.8% of the aggregate budgetsponsored admission.

5.3.2. Demographic Factor and Its Impact As noted above, the demographic factor currently is atop of the list of factors affecting the educational systems advancement and functioning. In the pre-school sector, the number of children was on the rise, which entailed an increase in the unsatisfied demand for kindergartens, with more than 10,000 children on the waiting list in Moscow alone. The authorities have so far fallen short of solving the problem. Whats worse, the problem of organization of the pre-school, primarily for children from the needy households, has not been solved as yet.

It was assumed that pre-school institutions would ensure an equal starting point for firstgraders, as they appear to have different social and cultural background, thus discriminating the first-graders with a poor one against those who have come from the families in possession of the said resources. It is the pre-school which was set to give much-needed initial knowledge and skills to children from low-income families, thus the shortage of kindergartens has the strongest adverse effect on this social group.

As far as school is concerned, the number of students in the primary school was on the upsurge, while the figures for the secondary one continued to plummet. Some deceleration of the pace of decrease of school-age cohorts along with the continuous fall in the number of teachers resulted in some rise in the pupils-per-teacher ratio from 10.1 in 2010 to 10.3 in 2011.

The cohorts in the primary and secondary vocational education continued to decline in 2011, and the pace of the process was accelerating, which can be explained by two causes:

first, it is fueled by the demographic situation, as the number of the 15-17-aged and 15-19aged cohorts, which are the main source of supply of students to the institutions in question, is plunging. The other cause is the recently noted stabilization of the proportion of teenagers who opt for the said institutions: it accounts for some 22.5% and 23.4% of each age group, respectively.

In the university education, the number of the respective cohorts was down for the third consecutive year, as the age cohort of 17-25 years which forms a major source of supply of university students has shrunk consistently. As a result, the university student cohort (both in public and municipal universities) has been nearly 5.9% down from its peak figures in (6.2mn). In parallel with that, the number of budget-sponsored student has been in decline, too it has dwindled 4.3%.

Meanwhile, as the overall admission was tumbling at a pace greater than the budgetsponsored one, the 2011 share of the budget-sponsored admissions was up to 42.3% vis--vis the 2010 figure.

5.3.3. Financing of Education In 2011, the budget spending on education continued rising both in nominal and real terms.

(Table 8, Fig. 11). That proved a reverse trend, as in 2009-10 the expenditures were growing in nominal terms but were down in real terms, which apparently can be ascribed to the Duma election in 2011 and preparations for the presidential one due in 2012. Thanks to that and to a favorable situation in the foreign trade area, educational expenditures once again increased at a pace greater than the one of inflation, having added 22.1% by the end of the year. Meanwhile, the 2011 federal budget spending on education was up by 26.5% vs. its 2010 figures, while the one of consolidated budgets of the Subjects of the Federation was up by 20.8%.

RUSSIAN ECONOMY IN trends and outlooks Table Budget Spending on Education in 2005 2005 2006 2007 2008 2009 2010 2011* Consolidated budget for education, as Rb bn., 801.8 1033.3 1342.3 1664.2 1783.5 1893.9 2330.including:

Federal budget for education 162.1 201.6 278.5 354.9 418. 0 442.8 559. Consolidated budgets of RF Subjects for 628.6 831.7 1063.8 1309.3 1365.5 1450.9 1770.education Consolidated budgets spending on education, as 3.7 3.9 4.1 4.1 4.6 4.4 4.% of GDP, including:

0.8 0.8 0.8 0.8 1.1 1.0 1. Federal budget for education 2.9 3.1 3.3 3.3 3.5 3.5 3. Consolidated budgets of RF Subjects for education Proportion of spending on education in Russias 11.8 12.3 11.9 11.8 11.1 11.2 12.consolidated budget, as % Proportion of the federal budget expenditure on 2.4 2.4 2.5 2.5 2.6 2.6 2.education in the spending from the federal consolidated budget, as % Proportion of spending on education of the con- 9.4 9.9 9.4 9.3 8.5 8.6 9.solidated budgets of RF subjects in the spending from the federal consolidated budget, as % * The aggregate budget breakdown with account of amendments therein as of 01.11.2010.

Source: the Federal Treasury.

2330,1664,1893,1342,3 1783,Consolidated budget for education, as Rb bn 1395,1033,801,8 1202,1234,1255,Consolidated budget for education, inflation 1134,961,1 factored into 801,2005 2006 2007 2008 2009 2010 Fig. 11. Dynamic of Consolidated Budget Expenditures on Education in Nominal and Real Terms in 2005Rb bn Section Social Sphere The 2011 budget expenditures on education in real terms were in excess of the 2008 figures (when with the start of the economic crisis in September, driven by inertia, the expenditures still were on a high level). While in 2010 the consolidated budget expenditures on education in real terms accounted for 95.8% of their 2008 level, in 2011 they proved at 11% over the 2008 benchmark. So, in 2011, the educational system basically found itself in a safe harbor, and it took it just two years to get out of the trouble.

As to the sphere of fee-based services, the educational system faces a situation worse than with the budget funding (Fig. 12). While residents nominal education expenses kept rising, the real ones were in decline. This can be explained, first, by the fact that in 2011 the populations incomes were increasing at a far slower pace than in the pre-crisis period. Second, the bulk of fee-based educational services is formed by those in the tertiary education area, and the sector in question faced a certain fall in the fee-based cohorts, albeit not drastic yet. The volume of fee-based educational services in 2005-2001 is depicted in Table 9.

Table Volume of Fee-Based Services in the Educational System in 2005 2005 2006 2007 2008 2009 2010 2011* Volume of fee-based services in the educational system, 147.0 189.6 231.7 281.2 306.0 326.0 344.as Rb bn as % of GDP 0.7 0.7 0.7 0.7 0.8 0.76 0.*preliminary data.

Source: Rosstat, the RF Ministry of Finance.

344,281,231,250 210,2 210,205,202,189,176,4 194,2005 2006 2007 2008 2009 2010 Volume of fee-based services in the educational system, as Rb bn Volume of fee-based services in the educational system, inflation factored into Fig. 12. Volume of Fee-Based Services in the Educational System in the Nominal and Real Terms in 2005Having dwindled by 3.6% vs. their peak value of 2009, the populations expenses in real terms were back roughly to their 2007 level (Fig. 12). At this point, it is also worth noting the inertia-driven processes in the fee-based educational services system: in the heyday of the crisis they kept rising, as residents were keen to honor their obligations to pay for education, and it was only in 2010 when they started tumbling.

Rb bn RUSSIAN ECONOMY IN trends and outlooks Table Volume and Structure of Budget Expenditures Across Tiers of the Educational System in 2005 2005 2006 2007 2008 2009 2010 2011* 1 2 3 4 5 6 7 Consolidated budget for Education, 801.8 1036.4 1342.3 1664.2 1783.5 1893.9 2330.as Rb bn.

Preschool education (PE), as Rb bn 113 145.3 189.7 254.5 287.5 321.3 410.Share of spending on PE in the consolidated 14.1 14 14.1 15.3 16.1 17 17.budget for education, as % Share of expenditures on PE as % of GDP 0.52 0.54 0.57 0.61 0.74 0.75 0.Increase rate of budget spending on PE (year- 123.2 128.6 130.6 134.2 113 111.8 127.on-year) as, % General education (GE), as Rb bn 356 475.9 599 737.1 795.7 827.4 1043.Share of spending on GE in the consolidated 44.4 45.9 44.6 44.3 44.6 44.5 44.budget for education, as % Share of expenditures on GE as % of GDP 1.65 1.77 1.8 1.78 2.04 1.93 1.Increase rate of budget spending on GE (year- 119.4 133.7 125.9 123.1 108 104 126.on-year) as, % Primary vocational education (PVE), 39.4 47.4 57.6 65.5 66.8 61.7 64.as Rb bn Share of spending on PVE in the consolidated 4.9 4.6 4.3 3.9 3.7 3.3 2.budget for education, as % Share of expenditures on PVE as % of GDP 0.18 0.17 0.17 0.16 0.17 0.14 0.Increase rate of budget spending on PVE (year- 110.7 120.3 121.5 113.7 102 92.4 103.on-year) as, % Secondary vocational education (SVE), as 43.3 55.3 70.4 93.9 102.2 102.1 116.Rb bn Share of spending on SVE in the consolidated 5.4 5.3 5.2 5.6 5.7 5.4 5.budget for education, as % Share of expenditures on SVE as % of GDP 0.2 0.21 0.21 0.23 0.26 0.24 0.Increase rate of budget spending on SVE (year- 142 127.7 127.3 133.4 108.8 99.9 114.on-year) as, % Tertiary and postgraduate vocational train- 125.9 169.9 240.2 294.6 347.2 377.8 423.ing (TVT), as Rb bn.

Share of spending on TVT in the consolidated 15.7 16.4 17.9 17.7 19.5 19.9 18.budget for education, as % Share of expenditures on TVT as % of GDP 0.58 0.63 0.72 0.71 0.89 0.88 0.Increase rate of budget spending on TVT (year- 163.7 134.9 141.4 122.6 117.9 108.8 112.on-year) as, % * Aggregate budget breakdown with account of modifications therein, as of 01.11.2010.

Source: the Federal Treasury.

It was budget spending on preschool education which posted the highest year-on-year growth rate (by 27.6%) and general education (up by 26.1%), while the opposite pole was formed by budget expenditures on PVT (which added just 7.3% over the period in question, ie. continued to plunge in real terms) (Fig. 13). The structure of the consolidated budget for education also underwent substantial changes: the proportion of expenditures on tertiary education was down 1.5 p.p., on primary vocational training by 0.6 p.p. and on secondary vocational training by 0.4 p.p. By contrast, the proportion of expenditures on preschool education was up 0.6 p.p., while the one on general education up by 0.3p.p. Overall, instructural terms, it was tertiary education which suffered at most.

As to the overall picture across all the tiers of the educational system (except for PVT), in 2011 all of them saw budget expenditures on education rise both in nominal and real terms (Fig. 13 and 14).

Section Social Sphere Preschool education General education 450 0 2005 2006 2007 2008 2009 2010 2004 2005 2006 2007 2008 2009 2010 Volume of fee-based services in the educational system Budget expenditures on general education, nominal Volume of fee-based services in the educational system, inflation Budget expenditures on general education, with account of factored into inflation Fig. 13. Budget Expenditures on the Preschool and General (School) Education in Nominal and Real Terms in 2005SVT PE 2005 2006 2007 2008 2009 2010 Budget expenditures on SVT, nominal Budget expenditures on SVT, with account of inflation TVT 2005 2006 2007 2008 2009 2010 Budget expenditures on TVT, nominal Budget expenditures on TVT, with account of inflation Fig. 14. Budget Spending on PE, SVT and TVT in nominal and real terms in 20055.3.4. Uniform State Examination After a long period of pilot tests (2001-2008), in 2009, the Uniform State Examination (USE) was in regular operation mode.

During the pilot phase, the squall of criticisms was stirred by contents of the examinations per se and procedures of the USE and assessment of its results. At this point, it should be noted that scared by the prospect to trigger parents, school leavers and the schoolteacher communitys negative reaction in the course of deploying USE in a fully operational mode, the RF Ministry of Education and Science and Rosobrnadzor crafted far more lenient re Rb bn Rb bn Rb bn Rb bn RUSSIAN ECONOMY IN trends and outlooks quirements to school leavers competencies in the compulsory subjects, namely the Russian language and mathematics (Table 11).

Table Proportion of School Leavers Who Scored 2by the Five-Grade Scale by Compulsory Subjects of USE in 20062010, as %2 (by the five-grade scale) Subject 2006 2007 2008 2009 The Russian language 7,91 8,81 11,21 2,76 2,Mathematics 19,99 21,14 23,48 3,04 3,Source: Rosobrnadzor.

Table 11 displays a drastic fall in the number of 2-s in mathematics and Russian in and 2010, when USE was already run in a routine mode. Meanwhile, as the data above show, the period of 2006-2008 was seeing an absolutely opposite trend, with the number of 2-s rising steadily.

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