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As regards the newly created settlements, the procedure for settling, by them, the issues of local importance shall be annually determined by the laws of a subject of the Federation. Their powers can be delegated, partly or in full, to municipal raions. In this case, it is permitted to transfer the sources of income, consolidated to the settlements (including local taxes land tax and personal property tax) to a regional budget. In that event, the revenues and expenditures of the settlements can be included into the budget of a municipal raion, which means that the financing of the settlements will be effected in accordance with a budget of expenditures.

Also, certain considerable alterations were introduced in the mechanisms of financial equalization.

Initially, in Law 131-FZ and the amendments to the Budgetary Code it was envisaged that subsidies to both municipal raions and settlements be allocated, first of all, for the purpose of equalizing budget sufficiency. Only over the course of a certain period of time, a limited and ever decreasing proportion of subsidies were to be allocated to cover the difference between actual or forecasted revenues and expenditures. In accordance with the adopted amendments, the whole amount of subsidies can be distributed with the use of the indices of actual or forecasted revenues and expenditures. As regards the municipal raions and municipal okrugs where the corresponding proportion had to be reduced from percent in 2006 to 20 percent in 2008, a new scale was also introduced: with the use of the indices of actual or forecasted revenues and expenditures, 100 percent of subsidies from a regional fund for financial support can be distributed in the year 2006, 80 percent in the year 2007, and 50 percent in the year 2008.

The requirement as to the gratuitous transfer of property after the distribution of powers, contained in Law 131-FS, has been preserved; however, the time for the transfer of property is postponed until January 1, 2008. During the period of transition, the authorities of a corresponding level have the right to gratuitously use that property for the purpose of executing their powers until the title to the property is registered.

A number of less significant alterations were also introduced in the transition-related clauses of Law 131-FZ.

The impact of the adopted amendments on the progress of municipal reform An analysis of the adopted amendments indicates that they are capable of significantly influencing the rate, direction, and conditions of the conduct of municipal reform.

Firstly, the very ideology of this reform has been considerably changed in the part concerning the relationship between the decisions to be taken by the Federation and by subjects of the Federation in the course of its implementation. Law 131-FZ envisages that all the major parameters of the reform, including the measures aimed at preparing its implementation, should be determined by federal legislation. The degree of freedom of subjects of the Federation has been substantially reduced. As a result of the adoption of the said amendments, the influence of the decisions to be taken at the regional level in the part regarding the distribution of powers between municipal raions and settlements, as well as regarding the introduction of new financial equalization mechanisms, becomes predominant. The range of the possible variants, with respect to the newly created settlements, is extremely wide: from the transfer to them of the whole set of powers envisaged by Law 131-FZ and the formation, in each settlement, of an independent local budget as early as 2006, to the transfer to raions of a significant proportion of the issues of local importance concerning the settlements, and the settlement of them within the budget during the period up to the year 2008 inclusive. The range of the possible policies with respect to interbudgetary relations with municipalities is also rather wide: it is possible to rapidly introduce new financial equalization mechanisms, while, on the other hand, it is also possible to make full use of the easy solutions envisaged by the amendments.

Secondly, the implementation of reform in various spheres will become inevitably decelerated by comparison with the rate suggested by Law 131-FZ. Thus, a rapid introduction of the mechanisms for budget sufficiency equalization would inevitably induce municipal formations to restructure their budget network, and also to use other measures aimed at improving the effectiveness of budget expenditures. The prolongation of the period of reform and the softening of the mechanisms of transition to a new system of interbudgetary relations can be considered as a form of granting the municipalities some additional time for implementing budget expenditures optimization in such a way that will not affect the quality of budget-funded services, which is quite reasonable. However, on the other hand, the same actions can be interpreted by the authorities of both the municipal and regional level as a departure from the equalization policy formulated in the course of municipal reform and aimed at forming a number of financial incentives to optimize budget expenditures. As a result, interbudgetary relations may continue to be built out of necessity, in order to maintain the existing budget network and the existing level of expenditures without stimulating any improvement of their effectiveness.

Thirdly, the uneasy relations between settlements and municipal raions, typical of the present twotier system, may further deteriorate under conditions when elected authorities are being formed at the level of settlements for the purpose of acting in the interests of the electorate, which they simply cannot do in actual practice, because an absolute majority of powers and sources of revenues are consolidated to municipal raions. The experience of the raions in the pre-reform period, when their situation was exactly the same, points to considerable flaws in this model of municipal administration. The existence of elected authorities at the level of settlements will produce a fundamental change the situation, as compared to the raion model, which was typical of the majority of the regions prior to the beginning of municipal reform, even if the powers of settlements are reduced to those performed by village soviets (councils), volosts, and other sub-municipal structures without municipal status, and their financing will be implemented under the expenditure items of a budget.

The regions response Subjects of the Federation differed in their response to the respite they had been granted. Some of them announced their readiness to introduce the whole volume of municipal legislation from January 1, 2006 onward. Other regions were ready to use the respite for one year only, or to gradually introduce the reform, with the rate of its implementation differing from one municipal raion to another.

According to the available information, approximately 30 regions will start implementing the full volume of Law 131-FZ in the year 2006. The geographical distribution of these regions is uneven: thus, their numbers include most of the regions of the Central Federal District 10 out of 18), while in the Far-Eastern Federal District only one region, Amur Oblast, where the municipalities at the level of settlements had already existed in the pre-reform period, declared its readiness to implement the full volume of Law 131-FZ in the year 2006. Cheliabinsk Oblast announced that it was planning to introduce Law 131-FZ in full in the year 2007. In all likelihood, the poorest regions will be the last to introduce the new legislation.

At the same time, it is still unclear what each of the regions understand as the full-scale introduction of Law 131-FZ. Under conditions when the possibility to transfer powers from settlements to municipal raions is embedded in the very structure of Law 131-FZ, while the allocation of subsidies to finance the difference between the actual (or forecasted) revenues and expenditures is permitted to continue until the year 2009, the differences between the complete and incomplete introduction of the Law can be rather speculative. There is unlikely to appear any justification for a region to consider itself to have introduced the full volume of Law 131-FZ if, after having transferred most of the powers from settlements to municipal raions, it does not even formally envisage the formation of local budgets at the level of settlements, and plans to effect the financing of settlements in accordance with estimates. But as regards all the other aspects, the transfer of powers can take place on the basis of uniform agreements prepared at the regional level, local budgets being absolutely formal and deviate only slightly, if at all, from the estimates of expenditures (a number of regions have accumulated the experience of such pseudobudgets even before the beginning of municipal reform). Thus, the issue of the actual scale of the introduction of Law 131-FZ cannot be resolved on the basis of interpretations offered by the regions. It can be resolved only on the basis of an analysis of the normative base and the practice of organizing the relations existing between regions and settlements, as well as between municipal raions and settlements in the year 2006.

I. Starodubrovskaia, N. Mironova Issues Considered at the Session of the RF Government on December 22, At the December Session (December 22, 2005) of the RF Government the Minister of the economy and trade Gref G.O. presented the materials on preliminary results of implementation of the RF Presidents Address to the Federal Assembly for 2005 (hereinafter Address), which reflected main activities in such spheres as modernization of education and healthcare, youth policy, overcoming poverty, raising the quality of life of citizens, solving demographic problems, development of civil society institutions, the reform of State control, tax reform, improvement of the mechanisms of budgetary policy, etc.

* * * It was stressed in the report that a number of legislative acts were accepted in 2005 in the sphere of education, directed to combining the procedures of taking final examinations at school and entrance examinations to the higher education establishments, strengthening links between the educational sphere and the labor market, involvement of the interested and competent public members in planning activities for improvement of professional training. The draft federal law was prepared that provided for introduction in the RF of the system of higher professional education (with Bachelor's and Masters degrees). The Ministry of Defense Science of Russia approved 30 state educational standards of the elementary level of professional education of secondary generation. Experiments were conducted on perfection of the general education system, including restructuring of the network of educational institutions located in rural areas, measures were developed of the targeted social support for students of professional education institutions.

To implement the main purpose (of the Address) of modernization of the healthcare enhancing an access and quality of medical service for people at large The Ministry of Healthcare and Social Development of Russia prepared a draft guidelines of the healthcare development for a period of 20062010. Work is continued on standardization of medical technologies, that provide for specification of the guaranteed volumes of medical assistance and raising the quality of medical services on the basis of sectoral medical standards. The development of measures is continued for improvement of additional pharmacological support of individual categories of citizens, work is under way to develop dispensary-policlinic units. The RF government approved the State Guarantee Program for rendering a free medical support to the RF citizens for 2006, that provides for strengthening of measures aimed at carrying out prophylactic immunization, preventive examination according to the Compulsory Medical Insurance Program, an increase of financial expenditure standards per unit of volume of medical assistance, an increase of per capita financing of the Program (in per capita terms annually).

The task was set in the Address to raise 1,5 times, during three years, the incomes of public sector employees. During 2005 wages of the workers of the federal government institutions was increased twice: 1,2 times since January 1, 2005, and 1,11 times since September 1, 2005. The draft Federal law "On federal budget for 2006", it is provided for ensuring in 2006 indexation of the tariff rates (salaries) on payment for labor of the staffers of the budgetary sphere since May 1, 2006, no less than by 15%; since October 1, 2006, no less than by 11%. The summarizing increase over 2006 should make no less that 27,65%.

According to estimates, the share of population with incomes less than the size of subsistence minimum, will make, in 2005, 15,8% or 22,6 mln people vs. 17,8% (25,5 mln people) 2004. Reduction of poverty of population in 2005 to a large extent is determined by growth of real disposable incomes of population, which, among other things, is associated with an increase of minimum size of pay since January 1, 2005 to Rb 720 per month and since September 1, 2005 to Rb 800, as well as respective increase of tariff rates (salaries) of the staffers of budgetary sphere. Improvement of pension fund scheme made a substantial contribution to the reduction of poverty of population in 2005.

According to 9the preliminary data, an average size of the assigned pensions in January-September 2005 made Rb 2306, which by 22,9% exceeds the respective value of the corresponding period of previous year. Since August 1, 2005 the base and insurance part of the labor pension are indexed 1,times, and the insurance part of the labor pension is additionally increased by a rate of 1,048.

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