The supplement to the following report contains a table of current unfunded mandates. The table is based upon the data of the inquest conducted by Ministry of Finance of RF in the regions in order to take stock of unfunded expenditure responsibilities. The regions were offered to name which items of the federal legislation they consider as expenditure responsibilities for their budgets. Among all legislative acts enlisted in the table some were mentioned more often, others more seldom, the rest of them weren’t mentioned by the regions inquested at all. The difference in opinions the regions expressed on the problem of federal mandates’ constituents proved the assumption stated above that an incredibly large value of expenditure responsibilities entitled to subnational budgets by the federal legislation diminishes the degree of responsibility towards each of them. Thus, the list of standard acts given in the table does not consider all resolutions of the federal legislation, formally entitling expenditure responsibilities to sub-national budgets but those, which are treated as such by the regions. Although such an approach proves to be subjective while outlining the scope of unfunded mandates, as a rule it reflects actual situation, which is explicit to show that federal financial responsibilities are true provided that regional authorities recognize them.
In fact, the Federation currently exerts control over the execution of a narrow range of federal laws, mostly those, financing of which is included in the list of regional expenditure needs while distributing financial aid (FL of «The Veterans», « Social Protection of the Disabled», «Federal Family Subsidies»). Considering the fact that up to 2001 the funds assigned for the purpose of these laws financing were provided for the regions along with general transfers, federal control did not prevent regional budgets from accruing debts for federal mandates funding. 7 The execution of other expenditure responsibilities by the Subjects of the Russian Federation, which resulted from other federal laws, proves to be out of federal control, which makes it possible for the regions to evade the expenditure liabilities. The only up-to-date method of federal mandates enforcement consists in proceeding against regional budgets for the recovery of the respective funding by beneficiaries of this or that social transfer provided for by the federal legislation.
The contextual analysis of the expenditure responsibilities enlisted in the table, which are entitled by the federal legislation to sub-national budgets, makes it possible to conclude the following:
1) A considerable part of federal mandates (15 out of 57) refer to the sphere of federal competence, determined by i. 84 of BC.
Among them, the following expenditure liabilities should be noted: defense (lines 5,33,36,52 of the table), the provision of activity exercised by the federal authorities (lines 18,20,35,44,49), the federal judicial system functioning (lines 28, 43, 54), federal security (lines 32,37,40). In our opinion, respective expenditure responsibilities entitled to sub-national budgets must be supported by full offset of the corresponding expenditure needs provided by the federal budget.
2) A large scope of federal mandates has been concentrated in the sphere of education, health care, and culture.
These functional perspectives of the federal expenditures do not refer, within the Budget Code, to the responsibilities of any budget system level. But at the same time, the Budget Code confirms that funding of institutions and organizations owned by the Federation, its subjects, or municipal authorities be an exclusive responsibility of the budgets at each level. Such principle of distributing expenditure responsibilities can be regarded as a fair one provided that the jurisdictions of the federal, regional, and local authorities within the scope of entities mentioned are carefully outlined. But currently this distribution is not sequentially carried out. Considering the regional and local authorities as those qualified to provide financing for health care, education and cultural institutions, the legislator outlines minimum expenditure needs necessary to support these entities. For instance, the federal legislation regulates payroll level for public employees regardless the budget the latter receive their salary from.8 The fact that Total Payroll Net (TPN) hasn’t been mentioned in the table seems to be strange for it determines subnational budget expenditures, which are of considerable value. One of the possible reasons for it might consist in including expenditures for municipal entities calculated on the basis of TPN into transfers received by the RF subjects from the FFFSR, and can’t be regarded as unfunded. But the expenditures based upon the laws of «Veterans», « Social Defense of the Disabled», «Federal Family Subsidies» were also referred to while calculating federal transfers allocated within FFFSR, which didn’t prevent them from being included in the table. Therefore, we fail to find satisfactory explanation to such a blank in the table.
Coming back to the problem of distributing expenditure responsibilities for education, health care, and culture among the budgets of different levels, it must be noted that it would be reasonable:
firstly, to enumerate all these significant budget expenditure perspectives on the list of expenditure liabilities imposed upon the budgets of different levels;
secondly, to limit the application of the principle «financing should be provided by the budget owing or controlling the given entity», for the federal center has a right to define national standards for health-care, education, and culture financing.
3) Most of the federal mandates (24 out of 54) refer to the sphere of social protection provided for the population, i.e. to the sphere of common expenditure competence of budgets at different levels. Besides, social mandates comprise the dominating part of total sub-national expenditures determined by legal regulations of the federal legislation.
It is this sphere that provides the widest range of possibilities to reduce budget responsibilities by means of regulating social benefits system, and outlining funding for special purposes. In particular, we consider that the federal mandates mentioned in lines 6, 9,11,25,27,29 of the table require a precise revision. They prove to be either out-of-date (e.g. The Resolution of UCEC and SPC RFSSR on «Benefits provided to qualified employees in rural and workmen settlements» adopted in 1930 under collectivization and does not fit the current economic situation) or contradicting the principle of social aid rendered for a special purpose. In particular, death benefits, family subsidies, dependent benefits provided for the families raising 1-2 year-old children, offsets for higher food-cost provided for students of secondary and professional schools do not coincide with subsidy-recipients’ income. Such federal mandates should be either revised or eliminated.
While distributing expenditures of common competence between the federal and local budgets, only some of these mandates could be referred to exclusive federal competence. These mandates should include, first of all, the social expenditures, which are distributed among the RF subjects regardless of their share of total population, e.g. expenditures for social benefits received by those who suffered from either nuclear catastrophes or were repressed, for those who have merits of national value. We distinguished 8 social mandates of this category (lines 4, 10, 14, 15, 30, 31, 55, and 56). In our opinion, the expenditures, which resulted from the mandates of this kind, must be compensated to all the regions regardless their budget revenue level.
It turns to be a more complicated problem as soon as the recipients of social benefits defined by the federal legislation are distributed among the regions pro rata to the population of the latter, which causes a collision of the federal and regional interests in the matter of expenditures entailed by the benefits financing. Such benefits comprise the most valuable expenditures in the structure of federal mandates adopted by the federal laws of «Veterans», « Public Service Provided for the Elderly and the Disabled», «Federal Family Subsidies», «Social Defense of the Disabled», etc. The distribution of responsibilities between RF and its subjects might follow one of the two ways:
1) It can be based upon the principle of function integrity in standard regulations and financing within the spheres of common accountability. It means that while having a right to define expenditure responsibilities for sub-national budgets, the Federation is assigned to offset the corresponding expenditures to the latter. Thus, the expenditures, assigned to the sphere of the federal competence, are to be compensated to all regions through special purpose subventions regardless of their budget revenue level. Unless the Federation provides subventions to cover the respective expenditures in the full amount, another rule, which entitles the regions to provide funding for federal expenditure mandates within the limits of the federal offset value, takes effect. Direct financing, provided by the federal budget to cover the respective expenditures through the system of regional representatives of the federal authorities, proves to be another variant of the same approach.
The benefit of such an approach consists in formal equality achieved by all the RF subjects (none of the regions takes on unfunded expenditure responsibilities). It is nothing but formal equality for the increase in disposable funds of non-subsidized regions could be achieved by a considerable reduction in the federal social standard, i.e. in order to provide a compensation for the well-to-do regions it would be necessary to reduce the level of their financing for the poor regions. It might result in further disintegration at budget revenue levels of the Russian regions. Besides, it sets a dangerous political precedent for the refusal of the Federal authorities to make mandatory decisions for unsubsidized regions
2) It might be based on the premises of unfunded mandates, i.e. the differentiation between the functions of standard regulations in the spheres of shared responsibilities provided by the Federal Constitution and the functions of funding expenditures assigned by the legislation designed for this purpose.
In our opinion, such a method proves to be more available within the current constitutional concept on responsibilities shared by the Russian Federation and its subjects, which regards the sphere of shared liabilities as a zone of intersected interests of the Federation and its subjects, within which bounds any distribution of authorities turns to be of a conventional character, rather than as a sphere of mere «undistributed» jurisdictions. Regarding the fact, that regions display no less objective interest in shared expenditures (e.g. expenditures for social defense of the population) than the federal center does, it is hardly reasonable to entail the federal budget compensating for the shared expenditures defined by the federal legislation without any reference to the regional revenue amount.
At the same time, it is provided that some measures against the possible abuse of power on the part of the Federation be taken to shoulder expenditure responsibilities upon subnational budgets. First of all, it is necessary that the current federal legislation be correlated with i. 75 of the Constitution, which deals in the matters of shared responsibilities and regulates «all federal laws and other laws adopted in accordance with federal laws as well as legal regulations acts of the RF subjects». Thus, the federal laws on shared responsibilities should determine general principles but not detail legal regulations. Within the framework of the transformations done over the federal legislation in accordance with i. 76 of the Constitution, it is essential that elimination of too rigid federal legislation norms as well as extending of regional authorities in compiling the list of recipients, and defining the order, conditions, and amount of financing provided for expenditure needs be carried out.
Secondly, unfunded expenditure responsibilities shouldn’t be levied upon subnational budgets due to the federal legislator’s whim, but should result from preliminary study of funding recourses. Alongside with that, the offset provided by the federal budget in order to cover additional regional expenditure needs should be based upon differentiation of the regions according to their revenue amounts, e.g. the compensation might be delivered only to recipient-regions, as long as donor-regions will cover additional expenditures by their own-source revenues. The benefit of this method consists in keeping the federal social standard at the same traditional level. The disadvantage of this approach lies in the expenditure authority constraints inflicted upon recipient regions.
In order to release interbudgetary relation strain concerning the problem of unfunded mandates, it is necessary that some rules of establishing the latter be fixed in the budgetary legislation. These rules should specify certain mechanisms of co-ordinating standard acts projects, which provide for funded or unfunded additional expenditures of subnational budgets in reference with the order and rules of the corresponding compensation if necessary defined in the legislation, with the RF subjects.
The Forms of federal financial aid provided for RF subjects.
According to i 133 of BC federal budget financial support can be provided for the regions as follows:
the provision of subsidies for equalization of minimum budget level of RF subjects;
the provision of subventions and subsidies for some special purpose expenditure financing;
the provision of budgetary credits;
the provision of budget loans for the purpose of covering temporary budget gap, which might occur while the RF subject budget performance.
Subsidies for equalization of minimum budgetary level of RF subjects
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