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The optimization of the budget network suggests, first, assigning to the regional and local levels a part of the federal health care institutions, except for those that provide highly specialized medical assistance to consumers through all the regions of the country. As well, it is neces sary to assign the network of departmental health care institutions un der the competence of the Federal Agency for Health Care. Ideally, all the public health care institutions should belong to an agency whose performance should be estimated using indicators of the populations state of health. Yet another direction of optimization of the budget net work is the redistribution of capacities and resources from the inpatient sector in favour of the outpatient one.

Introduction of new organizational and legal forms in the health care sector suggests identification of the array of institutions that should re tain their current organizational and legal form and those that should become subject to transformation into PANOs, AOs, or privatization. At this point, there can be singled out two conditions of keeping such insti tutions in their current organizational and legal form that suggests the estimate based financing: their core operations cannot be adequately measured by volume (resulting) indicators, and it appears more impor tant to secure their possibility to deliver a necessary medical assistance than optimize the loading rate of their capacities. The following health care institutions meet these conditions: sanitary and epidemiological supervision centres, infection and psychiatric hospitals, T.B. prophylac tic centres and drug rehabilitation clinics.

The bulk of other medical institutions are suggested to be trans formed in a compulsory manner (i.e. on the founders initiative) into AOs.

The transformation of a medical institution into PANO is permissible in the event it does not hold a monopolist position, there is the need in optimizing capacities of institutions of that particular profile, and there exists a managerial capacity that ensures such institutions independ ent economic operations.

It is proposed to privatize health care institutions in the event their operations practically are not funded from the budget and they can be exercised by organizations of any organizational and legal form.

The development of a new model of the national education system is presently underway. The model suggests reforming all the levels of education. In the area of general education, it is intended to accom plish the transition to the 12 year schooling, with profile education in senior forms. We believe that given the actual mass nature of higher education, this measure is inefficient, as the Bachelor level training es sentially exercises the functions which are intended to be assigned to the profile schooling. In any case, one should not carry out the transi tion to the 12 year schooling with profile education in parallel with keep ing the mass higher education, as that would result in doubling expendi tures on solving the same problem without any additional effect. A par ticular task in the general education area is to equalize starting oppor tunities for children from different social strata, which necessitates in troduction of the compulsory preschool education.

In the higher education area, there nation should accomplish the transition to the two level model that is, Bachelor=s and Master=s.

This should allow a partial optimization of costs of training specialists in higher school and bridging the currently existing gap between the paid and budgetary education. The mission of the Bachelor level education is to lay down fundamentals of professional culture, while the Master level education should focus on training specialists able to organize new areas of activity, research and management.

The reform of higher school should be carry out in conjunction with shaping the system of continuous vocational training which would en able the educational system to meet rapidly changing needs of individ ual, the society, and the economy.

The main instrument of increasing investment attractiveness of the education sector is creating conditions of the rise in the education insti tutions economic independence and their responsibility for their final outputs by means of increasing the variety of their organizational and legal forms. As well, the planned modifications of their organizational and legal forms and the budget financing methods would help bridge the gap between the public and non government universities.

The main avenues of optimization of the budget network in the edu cational system are: restructuring the rural and urban school network;

re assignment of PVT and SVT institutions to the regional level; reas signment of the bulk of federal universities and special secondary edu cation institutions that currently remain on the federal level under the competence of the Federal Agency for Education.

The system of financing the educational sector is to undergo drastic changes. As far as the preschool institutions are concerned, the financ ing of their educational programs should be exercised by providing mu nicipalities with subventions form the regional budget, while the financ ing of their social services should be co funded by the municipality and parents. In the general education system, the main task is to ensure a consistent transition towards the standardized per capita financing of educational institutions. The financing of PVT and SVT institutions should be based upon standards of budgetary financing differentiated according to their profiles of professional training.

In the are of higher education, the GPEL system should be used only on the Bachelor level, with a different method of budgetary financing to be applied to the Master level that is, according to a standard being uniform for all the students enrolled in the second level of higher educa tion (with a possible differentiation by specialties and with regard to re gional specifics). Given the above, the admittance to the Master level on the basis of the budgetary financing should be reduced roughly to 10% of the graduates from the Bachelor level, with other students bound to pay for their education.

It is also suggested to use government subsidies to train the future budget employees. To earn the eligibility to such a subsidy, the enrolee should sign a contract on holding a mandatory commissioned non prestigious, poorly paid job in the budgetary sector upon graduation, otherwise the subsidy is subject to repayment to the budget.

In the area of science and research, there may become possible two scenarios of the budget network reform. They differ by the extent to which the budget network should be reduced and in terms of a quantitative correlation between different organizational and legal forms into which research institutions should be transformed.

The first scenario suggests a relatively merciful reform, with the number of budgetary institutions being cut by 50% by transforming them into other organizational and legal forms. By contrast, the radical scenario provides for a 2/3 contraction in the budgetary institutions net work (primarily by reforming the RAS system).

Given the existing record of creation of TRCs and RECs, integrating research institutions into universities forms a promising task and one of possible reform avenues in the academic research sector.

It is equally important to reform federal unitary enterprises that con sume the lion's share of the budgetary financing. They are intended to be partly reorganized into joint stock companies with the 100% gov ernment participation, and partly into PANOs.

In the are of culture and arts, it is proposed to optimize the existing budget network by reassigning non profile federal institutions under the competence of the respective profile ministries; to transform them into AOs and PANOs, while keeping, at the same time, their departmental affiliation; and to reassign a part of federal institutions to the regional level.

Yet another promising avenue of the reform of institutions of culture and arts is to separate functions of provision of services in the sphere of culture from those associated with control over the public property complex designated for the provision of such services, providing that such a property complex should be given for use to organizations of culture basing on results of an open tender. The tender conditions should comprise the cultural organizations obligations with respect to the volume, quality and costs of services they are going to provide.

Such a measure would allow creating additional opportunities for pri vate companies that deliver cultural services to enter the market and ensure a higher quality of the services in question.

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