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Table Dynamic of Admission to Public and Non Public Universities in 20002006 (as Thos. Students) Public and municipal universities Non public univer Years Budgetary sities Total Paid admission admission 2000/01 1140.3 586.8 553.5 152.2001/02 1263.5 587.9 675.6 198.2002/03 1299.9 608.0 691.9 204.2003/04 1411.7 622.6 789.1 231.2004/05 1384.5 628.6 755.9 274.2005/06 1362.7 609.7 753.0 268.Source: Rosstat.

By the system of the high education on the whole in 200506 educational year the admission plunged at 1.6%, with the budgetary one falling at 3.0%. Meanwhile, the contraction in paid admission to the public universities accounted for a meager 0.4%. Thus, the recent admission policy provides an indirect evidence of the fact that in the conditions of the demographic decline the government has taken a course towards a relative reduction in the number of budgetary students, albeit still adhering to the framework of the legal provision, which implies that public uni versities should admit at least 170 individuals as budgetary students per 10,000 of the population. In 200506 educational year the number of students in Russia was 495 per 10,000 of the population, with the proportion of budgetary students mak ing up 210. But the proportion of the budgetary admission in the overall number of students admitted for the first year at public universities has been steadily on the decline over recent years. Because of the decline in the number of graduates from the secondary school, the contraction in the number of budgetary students in pub lic universities basically might be increased up to the rate, which would meet the requirements of the aforementioned legal provision, thus making up the number of budgetary students equal 2.452.5 m Should it happen, admission of budgetary students should make up no more than 500,000 a year (with account of those re jected). But, as the decline in the number of secondary school graduates will con tinue to the level of 850,000900,000 a year (the basic figure for 2010), the propor Section Social Sphere tion of those who will be admitted to the public universities on the paid basis should decline, at least, to 4045% (vis vis the current 55%). That would happen only providing the currently existing overhang is still there, with the volume of univer sity admission being considerably (at 1520%) superior to the number of secon dary school graduates. Otherwise, i.e. in the event the said overhang disappears, the proportion of paid students in the public universities may experience a far greater fall. This leads to a quite natural question about the future of non public universities and branches of public and non public universities (in 200506 educa tional year, the number of the former was 413, while that of the latter a. 2,000). It will be the correlation between tuition fees in the public educational sector and those in the non public educational sector that should play a critical part in their competition for students.

In 2006, schools saw the number of their students decline. In 200506 educa tional year, the number of students in schools of general education dropped by 6.0% vs. the prior year (Fig. 6).

Source: Rosstat.

Fig. 6. The Number of Students in Schools of General Education in 2000/012005/06 educational years (thousaud) In all, between 2000 and 2006 the number of students in schools of general education has fallen by nearly , which resulted in considerable cuts in the schools network and the number of teachers. Between the 200001 and 200506 educa RUSSIAN ECONOMY IN trends and outlooks tional years, the number of schools was declining at a rate of some 1,2001,units a year, and in the 200506 educational year it displayed a far intense decline, that is, by over 1,700 units. In all fairness, it should be noted that while the number of students fell by 25%, the number of schools declined by 8%, while that of teach ers by 10.1%. In the 200506 educational year alone, the number of pupils fell by 6% and that of teachers by just 2.4%. As a result, lately the number of students per 1 teacher was declining steadily: from 11.7 students per teacher in the 2000 01 educational year to 9.9 in the 2005 06 educational year. Interestingly, non public schools displayed an opposite trend in the 2005 06 educational year alone, the number of students grew by 2.8% vs. the prior year, while the number of teachers remained unchanged. For reference, the students to teacher ratio in private schools is 4 to 1. The figures evidence an inefficient organization of the sys tem of general education in Russia on the whole. To be fair, though, one should take into account the notorious Russian distances, a low population density in many regions and a poor transport infrastructure. Thus, the low efficiency of the educa tional system to a significant degree is steered by these external factors.

Because of demographic reasons, the fall in the number of students in school will continue for another several years (until 2010), followed by some stabilization (Fig. 7).

Source: Rosstat.

Fig. 7. Dynamic of the Number of Pupils in the Pre School Institutions and Schools In 2006, the preschool institutions experienced a rise in the number of chil dren, albeit a small one (see Fig.7). Underlying the process were two causes: on the one hand, the birthrate has been on the rise since the early 1990s (from 9.0 up to 10.2 births per 1,000 of the population), which resulted in the rise of the number of children attending the preschool educational institutions (PEI). On the other Section Social Sphere hand, PEI have delivered their services to an increasing number of children of the preschool age, for economic growth compelled their mothers to get back to work and leave their children with PEI. As of early 2006, by some preliminary estimates, the number of children in need of the PEI services accounted for 830,000. Mean while, only as many as 60% of the children (the average rate nationwide) at the age of 5 to 6 attends PEI, which raised the question as to whether it was appropriate to introduce a national analogue to the Western preschool system in the country, es pecially for children from the needy families, for the sake of their preparation for the general school. This would allow to equalize the starting conditions for children from different income groups and to enhance the quality of the primary school education. This work was in progress in 2006, however, no clear decision has been made as yet.

2. The growth in budgetary funding. In 20052006, both public and private sources spent more money on education. Between 2000 and 2003 the proportion of budgetary expenditures (from the budgets of all levels) on education in GDP grew considerably, and it de facto stabilized against the rise in absolute volumes of spending. The same trend was displayed by the federal budget educational expen ditures, including those on the high professional education (HPE) (Table 7)32.

Table The Federal Budget Expenditures on Education 2000 2001 2002 2003 2004 2005 2006 Federal budget expendi ture on education (as RUR 38.1 54.5 81.7 99.8 121.6 160.5 201.6 278.bn) Federal budget expendi tures on the higher educa 22.5 31.3 44.4 56.8 72.1 114.7 155.1 214.tion (as RUR bn) The share of the federal budget expenditures on 0.5 0.6 0.8 0.8 0.7 0.7 0.8 0.education in GDP (as %) The share of the federal budget expenditures on 0.3 0.3 0.4 0.5 0.4 0.5 0.6 0.the higher education in GDP (as %) The share of expenditures on education in the federal 3.8 4.1 4.1 4.1 4.9 4.6 4.7 5.budget expenditures (as %) The share of expenditures on the high education in 2.3 2.4 2.2 2.3 2.8 3.2 3.6 3.the federal budget expen ditures (as %) Source: Rosstat, MinFin RF.

Private (non public) spending on education is fixed in the Russian statistics as the volume of paid services in the educational system with account of latent and informal activities in this area. The dynamic of the volume of paid services in the As the 2007 federal budget has been already passed, the Table also includes the 2007 federal budget expenditures on education.

RUSSIAN ECONOMY IN trends and outlooks educational system exposes their steady growth, the rate of which is advancing the growth rate of the budgetary expenditures on education (Table 8).

Table The Volume of Paid Services in the Educational System in 20002006 (esti 2000 2001 2002 2003 2004 mated) Volume of paid services in the edu 41.5 56 72.9 95.4 118.7 147 183.cational system,.as RUR bn.

As % to GDP 0.6 0.6 0.7 0.7 0.7 0.7 0.Source: Rosstat, the 2006 populations spending as estimated by the author.

The year of 2006 saw a sharp rise in the federal budget spending on educa tion vis vis the prior year. The rise was particularly notable in the area of the high education, which, according to the division of powers between levels of the gov ernment now falls under jurisdiction of the federal government. In 2005, practically all the PVE institutions were re assigned to the regional level (with the federal cen ter still maintaining control over 250 PVE institutions out of more than 3,800) and so was done with a part of SVE institutions. While comparing the federal budget spending across the levels of the educational system in 2005 and 2006, one can note the situation as follows (Fig. 8).

Source: Rosstat, MinFin RF.

Fig. 8. The Federal Budget Spending on Education in 2005 and In 2005, the proportion of expenditures on the high education in the federal budget was 70%, while in 2006 it rose up to nearly 77%. With the general growth in funding of education from the federal budget accounting for 1.3 times, the expen ditures on the high school grew 1.43 times. As the number of the budgetary stu Section Social Sphere dents remained practically unchanged, the changes in funding fueled a drastic rise in the budgetary spending per budgetary student in public universities: whilst in 2004 the average budgetary spending per 1 budgetary student was just RUR 18,000, it grew up to RUR 25,600 in 2005 and 37,500 in 2006, i.e. more than dou bled in current prices over the past three years.

It should also be taken into account that in the high school the budgetary funding of tuition is based upon a peculiar ratio, that is, the weight of an internal student equals 1; that of an internal and by correspondence one 0.2, and by correspondence 0.1. In the 2005 06 educational year, the first category ac counted for 65% of the total number of the budgetary students, the second one 5%, and the third 30%. This means that in 2006 the tuition costs per 1 budgetary internal student made up RUR 54, 200, and those were just direct costs of the de livery of the educational service33 (Fig. 9). Given that, to ensure the comparison be tween the federal budget spending per 1 student (i.e. payment by the government to a university for tuition services provided to the student) and tuition fees paid by students themselves, we do not take into account costs of students stipendiums (Fig. 10).

Fig. 9. Structure of the Budgetary Funding of Universities under Jurisdiction of the RF Ministry of Education, in 2004 and The structure of the budgetary funding of universities under the jurisdiction of the RF Ministry of Education is given for 2004 and 2005, as the 2006 data is still missing, however, it can be suggested that differences in the structure should be negligible.

RUSSIAN ECONOMY IN trends and outlooks Fig. 10. Structure of Actual Costs of Universities under Jurisdiction of the RF Ministry of Education, at the Expense of Budgetary Funds, in Lately the proportion of the costs of the high education for the population in the overall volume of the populations expenses on education (by preliminary esti mates, nearly RUR 184 bn. in 2006 alone) roughly accounted for 50%.

If one compares the populations expenses on the high professional educa tion with the respective federal budgetary spending, the proportion of the former was declining steadily from 83.8% in 2003 to 59.3% in 2006 .34 of the total vol ume of the federal budget financing of the HPE system(Fig. 11).

The tax agency has recently tightened control over the targeted use of budg etary funds (i.e. they have to be spent exclusively on tuition services to budgetary students). As in 2005 and, especially in 2006, as noted above, the budgetary fund ing of the high education began to grow at a constantly increasing pace, the costs of paid educational services were forced to catch up with that, which is proved by statistical data on the rise in the costs of the paid tuition (Fig. 12, Tables 9 and 11):

In 2003, the proportion of the populations spending on the higher education relative to the re spective costs incurred by the federal budget reached its peak by making up nearly 84%, while in 2006 it fell to 59.3%. In 2007, according to our forecasts it may further decline to 58.4% Section Social Sphere Fig. 11. The Federal Budget expenditures on the high education in 2003and the populations spending on tuition at public universities Fig. 12. Budgetary Expenditures per 1 Student and Tuition Fees at Public and Non Public Universities in 2000 RUSSIAN ECONOMY IN trends and outlooks Since 2003 the tuition fees at public universities have advanced vis vis those at non public universities. It could be regarded as a manifestation of the fact that in terms of quality of education public universities had won the race with non public ones and the consumer was ready to pay more for their services than for those de livered by non public universities. This interpretation was easy to sell, for both the society and the university community share rather a common (and firm) belief of the non public education as a second grade institution. However, we have every reason to believe that underlying the public universities victory lies a different cause, that is, the rise in the budgetary spending per 1 budgetary student and, as noted above, the tax agencys stance on public universities tuition fees (which should not be lower than analogous budgetary expenditures). In 2003, the universi ties whose tuition fees had been lower than the respective budgetary expenditures where compelled to comply with the tax agencys request. To cite a particular ex ample, their tuition fees rose from RUR 912,000 (equivalent to USD 300400, by the 2003 exchange rate) to RUR 16,500 (USD 550), i.e. at 37.585%, which has posed a great increase in tuition fees for the population in subsidized regions35 (Ta ble 9).

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