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It is worth noting that in the course of debates of legislative innovations associated with changes in the teachers social status the trade unions have succeeded in keeping the provision on the pedagogical staffs right for a free housing with heating and lighting in the countryside and settlements of urban type, and for a priority provision of housing to them.

But the amount, conditions and procedure of compensation for the costs associated with provision of the noted social support measures have to be set by the RF Subjects legal statutes, which raises doubts about the actual provision of these rights.

The aforementioned amendments to the educational law have formally brought it in a due consistence with the Civil and Budget Codes of RF, Federal Law of 4 July 2003 No 95 FZ On Introducing Amendments to the Federal Law On General Principles of Organization of Legislative (Representative) and Executive Bodies of State Power of Subjects of the Rus sian Federation, Federal Law of 6 October 2003 No 131 FZ On General Principles of Or ganization of Local Self Governance in the Russian Federation. Notwithstanding this, the priority of education declared by numerous program documents has failed to find the re spective legislative fundamentals in the new version of the law On Education.

Identification of the Future Government Policy Priorities At its meeting on December 9, 2004, the RF Government considered the present educational reform priority avenues until 2010 for the purpose of securing the countrys socio economic development on the basis of the capacity and by means of the educational sphere. As well, the Government concluded interim results of the 2001 Concept for Mod ernization53. It was noted that the implementation of the Concept for Modernization through 20012004 has allowed:

to secure the growth of budget expenditures on educational needs;

to intensify the work on the legislative and legal provision of development of the educa tion system;

to conduct a number of large scale experiments on introduction of new mechanisms of financing, assessment of students progress, provision of accessibility of the higher education.

The 2001 Concept for Modernization of Russian Education through 2010 identified enhancement of the quality, accessibil ity and efficiency of education as principal objectives of its development.

Section 3.

The real sector At the government meeting it was also noted that the Russian education system does not meet the respective requirements due to the following reasons:

an insufficient orientation of vocational training to labor market demands;

lack of consistency education;

absence of due connection between education and science;

an insufficient level of public and government control over the quality of education;

a low level of teachers labor compensations;

an insufficient participation of the general public in the educational reform underway;

a poor integration of Russian education into the international educational community.

The Government also identified priorities of the present government educational pol icy, which would allow to successfully find solutions to the objectives set by the Concept for Modernization of the Russian education, as follows:

development of a modern system of the consistent vocational training;

improvement of quality of vocational training;

provision of accessibility of a qualitative general education;

increasing investment attractiveness of the sphere of education.

It was also noted that one of the most promising avenues of creation of conditions of increasing of economic independence of educational institutions is to encourage the vari ety of their organizational and legal forms.

Transformation of financial economic mechanisms that provide for conditions of im plementation of the noted priorities, is primarily associated with the attempt to refuse the estimate based procedure of the budget financing of educational institutions, because this procedure hamper incentives to improve the quality and efficiency of educational services.

In the budget reform framework, it is proposed to finance the education system basing on the performance oriented management principle. Such an approach requires from any education development program funded from the budget to comprise a strict list of per formance indicators, which would allow to increase the efficiency of the budget spending.

The strategy of the government implies the development and employment of various mechanisms of financing educational institutions from the budget, particularly: 1) stan dardized per capita financing that allows to secure transparency of allocation of budget funds and to tie the volume of financing directly with the consumer of a given educational service; 2) universities financing on the basis of state nominal financial obligations (SNFO).

A complete transition to the standardized per capita financing is mainly impeded by the absence of the much needed legislative basis, practical methodologies of calculation of standards across educational levels, types and kinds of educational institutions. In addi tion to that, some Russian regions (Samara oblast, Chuvash Republic, Yroslavl oblast) positive experience in this sphere allows to argue about the efficiency of application of the given financing mechanism and the necessity of its further extension to other regions.

In compliance with the government recommendations that were discussed at the government meeting in December 2004, it is proposed to approve the system of differenti ated standards of budget financing within the framework of application of standardized per capita budget financing: according to the USE results, international, nationwide, regional competitions; across training avenues, with account of regional specifics.

Due to its complexity and scathing criticism on the part of some rectors of leading univer sities, the ongoing experiment on universities financing on the SNFO basis requires further specification and suggests inclusion of a greater number of participating universities.

The fundamental institutional modifications in the area of regulation of organiza tional legal and financial economic relations in the sphere of education that were ap proved by the strategic government documents compel this particular sphere to focus on a RUSSIAN ECONOMY in trends and outlooks more pro active integration in market relations. This requires a thorough monitoring of on going changes and evaluation of socio economic risks associated with the planned re forms.

3.6.3. The Start of Restructuring the Budgetary Institutions Network The task of reforming the budgetary institutions network was formulated in the RF Presidential Address to the RF Federal Assembly of RF in May 2003. It was further speci fied in Principles of the Budget Sector Restructuring in the Russian Federation in 2004 and for the period until 2006, drafted by the RF Ministry of Finance and approved by the RF Government in September 2003.

In 2004, the Government made attempts to implement this mission by starting with the federal institutions network.

Since July 2004 the RF Government has initiated an intense discussion on measures on optimization of the federal budgetary institutions network and reorganization of budget institutions. The Government worked out proposals on two new organizational legal forms:

autonomous institution and public (municipal) autonomous non profit organization.

In July 2004, the Government Commission on administrative reform approved the procedure of organization of work on optimization of the network of federal state unitary enterprises and federal public institutions subordinated to federal executive agencies.The Government Commission suggested to break the noted organizations into groups and prepare, accordingly, four arrays of organizations subjected to: 1) remaining in the federal property; 2) transfer to the RF Subjects and municipal property; 3) step by step privatiza tion; 4) an additional consideration after adoption of legal acts on the procedure of privati zation of federal public institutions or their transformation into other organizational legal forms.

The Government Commission paid a special attention to public educational institu tions. It also emphasized appropriateness of a transfer of educational institutions that cur rently remain in the federal property, as a rule, to the purview of the Federal Agency for Education. However, the RF Ministry of Health Care and Social Development and the RF Ministry of Culture have succeeded to save medical universities and universities of culture and arts from this lot.

The Government Commission suggested to include in list (3) organizations that man aged real estate and other property fixed with the federal agencies, in list (4) organiza tions exercised functions on the material technical and social household provision of civil servants operations and institutions whose operations were funded from the budget, al beit these funds appeared extrabudgetary, as they result from contracts between such in stitutions and public agencies.

Overall, the government has demonstrated rather modest progress in this particular reform area. The majority of federal public institutions fell under list (1), while the main part of institutions of elementary and secondary vocational education that had earlier belonged to the federal property is currently included in list (2).

In late October 2004, the RF Government approved the list of institutions of elemen tary and secondary vocational education (EVE and SVE, respectively) assigned under the regions competence. Consequently, the Government started the process of assignment of these institutions to the regional level. By 1 January 2005 as many as 2,517 institutions of elementary and 299 ones of secondary vocational education were assigned to the RF Subjects. In all likelihood, the assignment process would result in the restructuring of the Minutes of the meeting of the RF Government Commission on administrative reform of 13 July 2004. No 18.

Section 3.

The real sector EVE and SVE institutions network with account of budget capacity of the RF Subject and actual needs in the respective qualified staff demonstrated by regional labor markets.

Basing on the experiences of Nizhniy Novgorod oblast, Novgorod oblast, Samara oblast and the city of St. Petersburg that had taken EVE and SVE institutions under their competence in late 90 s, the RF Ministry of Education and Science expects positive changes the given innovation should generate nationwide. The experience of Nizhniy Nov gorod oblast exemplifies such a model of the EVE and SVE regional system, under which regional enterprises by themselves select the needed specialists, provide for a production base and tutors, set regional increments to their labor compensations and, consequently, have qualified workers. In addition to that, the oblast has preserved the vocational colleges network, implemented their partial optimization by means of their integration with NVE in stitutions and regional universities. As a result, during their training students already re ceive labor compensations up to 5,000 Rubles.

Design of Forms of New Public Organizations The design of proposals on transformation of budgetary institutions into other organ izational legal forms became an independent critical avenue of the preparation for the budgetary sector reform.

In the 90 s, prior to the implementation of the new Budget Code, budget institutions de facto had enjoyed a high degree of independence in exercising their economic opera tions, capital attraction and spending budgetary and extrabudgetary resources. The situa tion has started to change recently. With the government pursuing the policy aimed at strengthening the financial discipline in planning and spending budget funds, the implaca ble logic compels it to restrict the independence of public institutions. The government has consistently attempted to bring this array of rights in conformity to the model of budget or ganization laid down in the organizational legal form of a given institution. The milestones of this process became: the transition to the treasury execution of operations with the budget funds of public institutions; the adoption of a new, detailed, classification of budget expenditures, in compliance with which the budget financing of institutions and approval of their expenditure estimate are executed; and, finally, the likewise transition of institutions extrabudgetary revenue and expenditure operations to the treasury execution, which im plies a strict control over every item of the institutions revenue and expenditure estimate on the part of its founder.

For the majority of budgetary institutions such the above will lead to the gap between the volume of rights they will enjoy and requirements to their efficiency caused by actual conditions of their functioning. This concerns the institutions whose revenues are formed by compensations from the budgetary and extrabudgetary sources for the services they provide. The array of such institutions comprises health care institutions that participate in the compulsory medical insurance system and receive funds from it according to the vol ume and quality of the medical assistance delivered; vocational education institutions and institutions of culture and arts, whose revenues to a significant extent are formed by ex trabudgetary receipts, etc.

Excessive restrictions of such institutions operations will result in a weaker motiva tion to adequate accounting of demands of consumers of their services and efficient utili zation of their capacity. That is why there exists an actual need in the public sector having both administratively controlled budget institutions and those that enjoy the legislatively set right for independent economic operations.

RUSSIAN ECONOMY in trends and outlooks The document entitled Principles of restructuring of the RF budget sector presents two variants of transformation of budget institutions:

1) into a specialized public or municipal non profit organization;

2) into a public or municipal autonomous non profit organization.

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