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Federal law No. 24-FZ of March 2, 2007, On the introduction of amendments to certain legislative acts of the Russian Federation as concerns the elaboration of requirements to the persons holding state or municipal offices, as well as state or municipal public servants.

RUSSIAN ECONOMY IN trends and outlooks Besides, the federal legislation determined the requirements to the activities of representative bodies of local self-government and penalties for the failure to meet these requirements, including the dissolution of respective representative bodies by decisions of subjects of the Russian Federation141. It should be noted that control over the activities of representative bodies of local self-government was introduced not only at the municipal, but also at the regional level.

The reforming of financial and economic principles of local self-government was also carried out across several avenues. In the sphere of property relations there were adopted amendments aimed at the expansion of the list of permitted types of properties for municipal entities142. Municipalities of all types may now have the property designated for the development of small and medium sized businesses. There was also elaborated the issue related to the ownership of objects created at the expense of government investments and aimed at the development of the social and engineering infrastructure of municipal entities, which, since that moment, should, on compulsory basis, be transferred in the municipal ownership143.

In 2007, there was significantly altered the budgetary legislation. Federal law No. 63FZ144 introduced significant amendments to the RF Budget Code, such as:

Alteration of the requirement criteria pertaining to the distribution of revenues generated by lease and sale of the plots of lands, the state ownership of which was not divided, among municipal budgets. More specifically, 50 per cent of revenues derived from the use of the plots of land were transferred to the budgets of municipal districts in stead of the budgets of settlements, as it had been the case earlier;

More precise determination of the sources of non-tax revenues of local budgets;

Introduction of tighter control measures with respect to the activities of the bodies of local self-government in recipient municipal entities;

Alteration of the mechanisms, governing the provision of targeted transfers aimed at the resolution of the issues of local importance, more specifically, the merger of the funds of municipal development and co-financing of social expenditures into the regional fund of co-financing of expenditures;

Introduction of an opportunity to provide grants from the regional funds of financial support of settlements proceeding not only from the number of residents, but also fiscal capacity of the settlement145;

Federal law No. 101-FZ of June 18, 2007, On the introduction of amendments to certain legislative acts of the Russian Federation as concerns the issue of activities carried out by legislative (representative) bodies of state power of the subjects of the Russian Federation and representative bodies of municipal entities.

Item 20 of article 26 of law No. 230-FZ.

Article 19 of law No. 230-FZ.

Federal law No. 63-FZ of April 26, On the introduction of amendments to the Budget Code of the Russian Federation as concerns the regulation of the budgetary process and harmonization of certain legislative acts of the Russian Federation with the budgetary legislation of the Russian Federation.

It should be noted that the amendments permitting to equalize the fiscal capacity of settlements were introduced only to the first part of article 137. In the third part of the analyzed article there was retained the stipulation of the law being previously in force that the amount of the said grant should be determined for each subject of the Russian Federation eligible for the reception of the grant proceeding from the number of residents of the settlement on per capita basis. As a result, the issue, which of the two provisions of the law should use regions determining their policies towards settlements, remained unregulated.

Section Institutional Problems Granting of the right to delegate certain budgetary powers of the financial bodies of settlements to the financial body of the municipal district on the basis of agreements;

Change of the official term for the negative transfer from subvention to subsidy. Among other changes introduced to the federal legislation concerning local selfgovernment there should be also noted the resolving of the issues related to the organization of local self-government in the territories with special status. In particular, there was expanded the list of territories, for which there were established specific features of organization of local self-government. Such a status was granted to the territories situated in the areas of the Far North and the territories with the similar status characterized by limited time of delivery of goods (products). For such territories, it was established that the powers related to the ensuring of deliveries of certain goods (fuel and energy resources, food products and goods for production and technical purposes), which should be delivered on the centralized basis, should be exercised by the executive authorities of the RF subjects146. Significant changes were also made with respect to federal law No. 3297-1 of July 14, 1992, On the closed administrative and territorial entity147.

The introduction of article 18.1 on the assessment of the effectiveness of activities of the bodies of local self-government, which envisaged that at the expense of the financial resources of the subject of the Russian Federation to municipal entities there should be provided grants aimed at the facilitation and (or) encouragement of attainment of the best values of the indicators of efficiency, in law No. 131-FZ, may be seen as the continuation of the trend towards the centralization of power. It should be noted that the list of indicators is approved in accordance with the procedures determined by the President of the Russian Federation. In fact, this article envisaged that the federal and regional authorities should assess the activities of municipal authorities, which, in accordance with the RF Constitution, are separated from the system of state authorities in the Russian Federation.

5. 6. 2. Changes in the Regional Legislation In accordance with federal law No. 129-FZ of October 12, 2005, the deadline for the full scale implementation of the municipal reform was put off until January 1 of 2009. Prior to that date there should be in force a transition period, during which regions should annually adopt laws setting the procedures governing the resolution of local issues by newly created settlements, including the amount of powers vested in such settlements, organization of funding of resolution of local issues, and so on.

An analysis of the regional legislation in this sphere in 2006 based on the rates and scale of implementation of the municipal reform permitted to identify four groups of regions:

Those, where, in accordance with the regional legislation, the municipal reform should be implemented in full since January of 2006. According to the official data presented by the RF Ministry of Regional Development, in 2006 47 regions implemented the municipal reform in full; however, basing on the research carried out by IET, it may be concluded that the number of such regions was somewhat less and amounted to 45148;

Item 21 of article 26 of law No. 230-FZ.

Article 36 of law No. 230-FZ.

According to the data obtained in the course of a study conducted by IET, in 2006 such regions as Moscow, St. Petersburg, the Tyumen oblast and the Sakhalin oblast were removed from, while the Astrakhan oblast and the Leningrad oblast were added to the list of the RF Ministry of Regional Development, since the latter introduced RUSSIAN ECONOMY IN trends and outlooks Those, in which some issues of local importance in all newly created settlements, were assigned to municipal districts. This group included 26 regions. It should be noted that in 2006 from 3 to 24 issues of local importance were transferred to newly created settlements;

Those, which had set different rates of implementation of the municipal reform for different groups of newly created settlements. This group included 9 regions;

Those, which in fact failed to start the implementation of the municipal reform in and delegated all issues of local importance to the level of municipal districts. Such a policy was pursued by 3 regions.

In 2007, the regional legislation concerning this issue changed rather significantly.

Among major changes, there should be noted the following:

1) The number of regions, where the municipal reform was implemented in full, has increased;

2) As concerns the regions, where the municipal reform had not yet been fully implemented, a typical feature of such regions was an expanded list of local issues delegated to the level of settlements;

3) In the regions failing to fully implement the municipal reform there was observed a trend towards singling out of certain territories, where the municipal reform is implemented in full as an experiment;

4) Regional laws on the procedures governing the resolution of local issues paid more attention to the problems of distribution of municipal property between municipal districts and settlements.

The distribution of regions across the four groups as registered in 2006 changed as follows.

According to the information presented by the RF Ministry of Regional Development, in 2007 the number of regions comprising the first group, i.e. the regions, where the municipal reform was implemented in full, made 57 subjects of the Russian Federation. In comparison with the data for year 2006, 11 regions were added to the list and the Sakhalin oblast was removed from it. Taking into account the merger of the Taimyr (Dolgano-Nenets) and the Evenk autonomous okrugs with the Krasnoyarsk krai, it may be said that the group of regions, where the municipal reform was implemented in full, amounted to 55 regions. The authors deem that this group consists of 55 regions (taking into account the territorial transformations in the Krasnoyarsk krai this group is comprised of 53 regions); it should be noted that some of them were included in this group with certain reservations149. The authors of the survey belimitations on the independence of an insignificant number of newly created settlements. The factors behind the differences in the list of regions, which implemented the municipal reform in full, are described in detail in Munitsipalnaya reforma v 2007 g.: osobennosti realizatsii [Municipal reform in 2007: the specifics of implementation] (to be published). However, on the whole it may be said that the RF Ministry of Regional Development primarily oriented towards the letter of the law, whereas the authors proceeded from the spirit of the law.

The authors still insist that the cities of Moscow and St. Petersburg, as well as the Tyumen oblast, should not be included in the first group and can not agree with the inclusion of the Republic of Karelia, where the regional legislation delegated 2 key issues of local importance to the district level, in the first group. At the same time, the Leningrad and Tomsk oblasts are viewed as those, where the municipal reform was implemented in full, on the basis of the fact that there limitations on the independence were imposed on only an insignificant number of newly created settlements. It should be also noted that the inclusion of the Republic of Komi, where some tax and Section Institutional Problems lieve that the number of regions belonging to this group increased by 10 in comparison with the data for year 2006. It should be noted that 4 regions of the second group and 6 regions of the third groups joined the first group.

In 2007, the second group of regions, where some local issues to be resolved by newly created settlements were vested in municipal districts, comprised 19 regions. Since 2006, this group has diminished by four regions, which were entered in the first group, and by six regions now being in the third group; however, two regions from the fourth group were entered in the first group that year (the Yaroslavl and Magadan oblasts). In 2007, the settlements newly created in the regions of this group were vested with the resolution of 3 to 32 local issues. A significant number of regions have substantially expanded the list of local issues vested in the newly created settlements. Such regions included, among other subjects of the Russian Federation, the Nizhny Novgorod, Novgorod, Pskov, and Ryazan oblasts, the Republic of Karelia, the Republic of Khakassia, and the Udmurt Republic.

At the same time, the fact that although the list of local issues assigned to settlements expands, the ratio between the regions, which finance newly created settlements on the basis of budgets and financial estimates remains practically the same, gives rise to serious concerns.

In 2007, only 9 out of 19 regions comprising the second group transferred budget powers to the newly created settlements. It should be noted that in the Samara and Yaroslavl oblasts it was done only partially: the powers concerning the approval of budgets and control over the administration thereof, whereas the municipal district were vested with the powers related to the formation and administration of budgets. In the Republic of Bashkortostan it was legislatively established that settlements should exercise tax and budgetary powers in the full amount. At the same time, the legislation envisaged that bodies of local self-government of settlements should have the right to delegate these powers to municipal districts on the basis of agreements.

As concerns the third group of regions, which set different rates of implementation of the municipal reform for different groups of newly created settlements, 6 regions of this group moved to the first group. At the same time, this group grew by 5 regions at the expense of the second group of regions (the Kemerovo, Murmansk, Saratov, Tver oblasts and the KhantyMansi autonomous okrug (KhMAO). Therefore, in 2007 this group comprised 8 regions.

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