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Creation of equal starting opportunities for and the rise of availability of a qualitative general education. That will allow lowering the social dif ferentiation, laying down the necessary fundamentals for enhancement of the quality of education and social, territorial and educational mobil ity of children and the young. The creation of equal staring opportuni ties and increase in availability of a qualitative general education neces sitates introduction of a compulsory pre school education and lowering the level of students load, in parallel with the extension of opportunities for receiving a complementary education.

Increase in the investment attractiveness of education, which will al low solving the problem of shortages of qualified personnel in the edu cation area, promote its managerial capacity and securing development of its resource base, as well as introduction of new technologies to the education process. The task of increasing the sectors investment at tractiveness necessitates:

- Creation of conditions of increasing education institutions eco nomic independence by multiplying the variety of their organiza tional and legal forms;

- Creation of conditions of lowering investment risks in the education sector by fostering the respective public management institutions;

- Securing a greater transparency for founders of processes of fi nancial and economic management of educational institutions;

- Creation of conditions of enhancing the quality of management of educational institutions.

The main reform avenues of the education system will be considered in a greater detail below.

4.2.2. Restructuring the budget network in the educational area The restructuring of the budget network in the area of education im plies the existence of two components that is, optimization of the budget network and introduction of new organizational and legal forms of educational institutions' operations.

The main directions of optimization of the budget network in the sec tor for education are:

- The restructuring of the network of urban and rural schools;

- The transfer of primary and secondary vocational training institu tions (hereinafter referred to as PVT and SVT, respectively) to the regional level;

- The transfer of the bulk of federal universities and specialized sec ondary education institutions remained at the federal level under the purview of the Federal Agency for Education.

Restructuring the urban and rural school network The restructuring of the urban and rural school network is dictated by two major reasons: namely, a small number of students and/or a small number of rural schools, and the introduction of a profile educa tion in the senior forms.

Today, because of a small number of students in a rural school and/or the small number of such schools, the rural school's costs per student capita are 35 fold greater than those of the urban school, while the quality of tuition, as a rule, is lower, as evidenced by results of the 2003 Uniform State Examination (USE). A special research in Sam ara oblast exposed that once the greater number of students attend a school, the higher the average USE score is: more specifically, with the average number of students in a school up to 500, the average USE score of its graduates, as a rule, falls short of the respective oblast av erage indicator, while if there are more than 500 students in a school, the USE score is higher than the oblast average one. The efficacy of consumption of resources grows side by side with the rise in the quality of education: the costs of 1 USE mark falls along with the rise in the number of students117.

Today, there exist a few restructuring models of the rural school network, such as the implementation of the School Bus program, de velopment of the network of basic rural schools to which students from neighbouring villages are transported, organization of educational and resource centres, formation of cultural and education complexes or centres. However, the existing ban on a joint founding of budget institu tions by different agents of the budget system complicates the combi nation of resources and concentration of operations for the sake of boosting efficiency and quality. The problem can be remedied in par ticular by developing various associations and new organizational and legal forms of operations. Moscow oblast exemplifies the development of inter municipal associations in the education area, but so far their operations have lain primarily in the methodological area (holding con ferences, seminars, and staff training).

Another factor of the restructuring of the network of general (school) education is the transition to the profile education in senior forms, which is going to start in 2006. Meanwhile, because of shortages of re sources, this particular reform will end up in a failure, as it implies a re duction in the number of subjects and provision of students with a right to pick up a most suitable curriculum. It is most likely that the reform effort will be reduced to a typical form of school with an intense tuition of certain courses, albeit only those that the tutor corps will be able to teach, while most schools would embark on the so called general pro file. In some cases it may become possible that primary, basic and sen ior schools will co exist as separate education institutions. The effects from such a restructuring have not been computed and efficiency has not been identified. In principle, it seems that given the transition to the comprehensive higher school, the planned transition to the 12 year schooling will be a mere waste of resources and the two levels of higher This means that a small school should spend between 150 and 300 Rb. to increase the UPE result by 1 mark vis vis 50 to 150 Rb. spent by a big school (with over 500 stu dents), while a school with a yet greater number of students (over 750), the costs of UPE mark falls below 100 Rb.

education the senior school and the Bachelor level will be solving es sentially the same tasks (see below for more details).

The transfer of the PVT and SVT institutions to the regional level The need for transferring the PVT and SVT institutions to the regional level is associated with the reform of the system of division of powers between the Federation, its constituent (alias Subjects) and municipali ties, i.e. it appears de facto driven by the financial model that has emerged over recent years and particularly by the nature of the inter budgetary interaction.

The level of power that owns a given institution should ensure its fi nancing. To ensure the founders responsibility for financing the institu tion and exclude conflicts within the budget system, the law does not allow different public establishments and/or private individuals to jointly found budget institutions. However, the mechanism of co founding was designated to encourage an inflow of budget and extra budgetary re sources from different sources into the education sector. The only mechanism of participation of a superior level of power in funding insti tutions is the one of subventions. It has already begun being worked out with financing schools. The municipalitys mandate dictates mainte nance of a school building located in its territory, while the Subject of the Federation fund organization of the educational process and, pri marily, teachers wages. For the sake of that, the regional budget allo cates education subventions to municipal budgets.

The authors of the reform justify the transfer of the PVT and SVT in stitutions from the federal level to the one of the RF Subjects by the need to have these particular institutions focus primarily on the regional and local labour markets. As they service the needs of a certain terri tory, accordingly, they should be financed from its budget. However, considering that in compliance to the law, PVT and SVT should be pro vided for free to all the students keen to receive them, the transfer of the respective institutions to the regional level may cause grave legal and economic problems. Should an educational institution begin being funded from a regional or municipal budget, its services would become free only for residents of this municipality or region, while residents of other regions and municipalities will have to pay for those. This critical issue was omitted when the PVT and SVT institutions were transferred to the level of the Federations Subjects, with the federal level keeping only inter regional educational institutions or those whose training courses for personnel serviced federation wide needs.

Meanwhile, one should take into account that the PVT and SVT insti tutional network had emerged yet in the Soviet time and the institutions would often found themselves associated with enterprises that either have recently been closed down, or changed their owner, or profile.

Once the transfer is over, the federal centre will no longer support the institutions' functioning, while lacking funds, they will not be able to se riously adjust themselves to match local needs. That will open numer ous, currently latent, challenges within thee system. Plus, today, the institution see the contraction of their contingents that is caused by the demographic decline, while at the start of a demographic rise the edu cational system will unlikely to be in possession of the material and technical base that would otherwise allow a painless provision of PVT and SVT. That means that in the future the quality and efficiency of pro vision of educational services by the PVT and SVT institutions may fall.

Thus, at present it is necessary to design arrangements that would allow to either boost the efficiency of consumption of resources without contracting the volume of services, or secure the growth in the number of sources of budgetary and extra budgetary funds for the educational system.

The transfer of the bulk of federal universities and secondary specialized educational institutions under the purview of the Federal Agency for Education The transfer of universities and the remaining on the federal level secondary specialized educational institutions under the aegis of the Federal Agency for Education (below referred to as Rosobrazovanie) poses an equally complex problem. The heir of the former Russias Ministry of Education, Rosobrazovanie is now in control of 333 public universities of their totality of 665 (with yet another 21 universities being controlled by Subjects of the Federation). It means that Rosobrazovanie has to receive under its control from other federal ministries and agen cies roughly as many universities as it controls now, without regard to their innumerous affiliates.

At first glance it may appear that once over 2,000 PVT and SVT insti tutions were transferred to the regional level, there should not arise analogous problems with secondary specialized educational institu tions. In practice, however, prior to the transfer of PVT and SVT institu tions they were funded by the principal manager of budget funds, i.e.

the former Ministry of Education. The Ministry carried out the task by Subjects of the Federation, i.e. earmarking was made by 89 agents that in turn provided funding across specific institutions. Today, Rosobra zovanie has to directly fund over 1,200 PVT and SVT institutions re mained on the federal level.

In all likelihood, in addition to organizational challenges, the agency will have to cope with profound conceptual ones that are associated with the concentration of all the institutions under a single agency and with shortages in resources in particular. Thus, in many medical univer sities tuition is carried out chiefly on the existing clinical base that will remain under control of the Ministry of Health Care, while Rosobra zovanie will control the universities themselves. Clinics presently do not charge the universities for using their base for tuition, while once the symbiosis is split, a considerable part of universities' funds will be spent on payments for students practice at clinics. That would ensure short term financial benefits to the health care system, but at the same time generate negative effects for the tuition process and, consequently, quality of future medical staff's training. Should universities that have clinics in their structure (38 out of 59 ones) will be transferred under the control of Rosobrazovanie, they will face the problem of funding their clinical activity.

This situation would likewise emerge with regard to universities cur rently being under control of the Ministry of Culture, Ministry of Agricul ture and Ministry of Transportation of RF.

A joint founding of higher schools by several ministries could help solve the problem, but the effective law bans it.

The existing concept for new organizational and legal forms of edu cation institutions operations that is, AI and PANO also rests upon the ban of joint founding. This does not allow encouragement of re gions, municipalities, and employers to fully take part in managing and financing educational institutions. Plus, it does not allow extension of the practice of setting government orders for personnel training and their tender based placing with federal, regional and municipal educa tional institutions created in different organizational and legal forms.

Introduction of new organizational and legal forms of universities operations One of critical missions in the area of education is creation of mechanisms of and incentives for private and corporate investment in this particular sector. That will both help improve the general financial and economic situation in the educational system and ensure condi tions of growth of its receptivity to demands from the society and labour market. The main instrument of boosting the investment attractiveness of the educational sector is creation of conditions of the rise in educa tional institutions economic independence and responsibility for their final outputs by raising the variety of their organizational and legal forms. Once over, the mission would enable one to lay down fundamen tal conditions of increasing the efficiency and transparency of the fi nancing of the educational sector. In light of the above, the objectives of the budget network restructuring in the educational sphere are:

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