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For the issue of financial aid to the regions rendered from the federal budget, the federal budget expenditures should be considered in the territorial context in particular. Evidently, actual federal budget consumption is carried out within the domain of particular regions, which creates a possibility of viewing them as a way of indirect financial support to the RF subjects. Thus, the federal expenditures execution for representing the federal authorities in the regions, for law-enforcement activity, for the State defence, or for funding certain facilities of the federal standing results in the economic activity growth within the region, and consequently (for the regional tax base growth) - in the revenue growth for the budgets of the RF subjects. It is notable, that the current legislation basically confines itself to committing funds to some special expenditure targets, or even to some particular social facilities, however, neither the common policy of the federal expenditures for the regions, nor the federal regional policy of funding particular programs for social, political and economic develpment are sufficienty grounded. Nor are the statistic data on the federal budget funds consumption in common access, which impedes to evaluate the interregional structure of the funds consumed.

Thus, above the direct channels of delivering federal support to the regions, there are some other ones to be itemized. Dotations to the federal Road Funds funds appear to be the most transparent of them, however, they also fail to be allocated on the basis of a unified and formalized . Total for funding transferred both as dotations from the federal Road fund and under the federal programs of regional development doesn't exceed 0,2% of GDP. Planning and executing federal expenditures in the regional context requires a special approach, since such structure planning should be based on the consideration of the regional policy tasks.

Federal Support to the Regions System in 2001.

The 2001 Federal budget law, adopted end-2000, pressupposes the introduction of an additional kind of the federal financial aid to be rendered to the regional budgets - transfers form the Fund for Compensation granted for a special purpose. The above fund was created within the budget at the expense of the funds obtained through VAT revenue centralization, while the federal aid amounts from this fund are allocated among all the Subjects of the Federation and are directed for a special purpose at funding some federal expenditure mandates, namely, at the implementation of the federal laws like On allowances to individuals raising children and On social protection of the disabled in the Russian Federation.

The transfers (grants) from the Offset fund are received by all the regions without an exception and are distributed according to the scheme with regard to the consumers quantity of the budget services awarded in this way and the number of social transfer recipients, as well as the average per capita cost of such services and the per capita grant total. The lack of special expenditure accounting for the Disabled State Support federal legislation performance in the RF subjects before January 1, 2001 adds to the problems of estimating the Federal Compensation Fund expenditures. For this reason, a transfer amount to be calculated for a region under the Fund allocations is based on the estimates of Russia's average for expenditures adjusted for the regional differentiation. Changes introduced into the budgetary>

As previously informed, the Offset Fund sourced its funding in the federal budget's supplementary resources gained by a complete centralization of VAT revenues within the federal budget. For Russia as a whole, the estimates we've made come to illustrate that the proportion is mostly kept: the amount of the Offset Fund (projected at 41,7 bln roubled for 2001) is just a little less than the potential revenues of the regional budgets according to the normative 15% of VAT assessments to the budgets of the RF subjects for 2000 (43,3 bln roubles)11. While estimating the correlation of VAT revenues in the budgets of the Rf subjects and the grants coming from the Compensation Fund in the regional context (by the data and on the terms of 2000), it is notable that the mechsnism of funding some regoinal expenditures adopted for 2001 causes an essential interregional resource re-allocation. Thus, the replacement of entering 15% of VAT in the budgets of the RF Subjects by the federal budget grants has mostly affected the regions with the fiscal capacity level traditionally high, such as the city of Moscow and St petersburg, the Samara, Sverdlovsk and Perm regions, the republics of Tatarstan and Bashkortostan, the Khanty-Mansy and Yamalo-Nenets Autonomous okrugs. At the same time, the amount of resources allocated to the highly-subsidized RF subjects, has significantly increased: the positive balance of the funds extracted from the regional budgets by VAT centralization and those additionally gained as dotations from the Offset Fund reaches the maximum per capita rates in such regions as the republic of Daghestan, Tyva, Sakha, North Ossetya, The Chuckchi, Komi-permyatsky, Ust-Ordinsky and Agynsky Buryatsky aoutonomous okrugs, the Altaisky krai, the Amur, Magadan and Bryansk regions.

During the preparation of the 2001 federal bidget bill some changes were introduced into the scheme of transfer distribution from the Fund for financial Support to the Regions, which has brought along the below results. First, the number of no-transfer-recipient regions has displayed a minor increase: this number is 19 compared to the 18 for the previous year data (the regions that hadn't received the transfers one year before were joyned by the Nenets Autonomous region, also by the Orenburg and Belgorod regions, while the Moscow and Chelyabinsk regions were excluded from the regions that didn't receive the transfer in 2000. If to regard the FFSR assignments interrregional structure, a significant funds as compared to the previous year would be noticed plan. Thus, among the aggrieved RF subjects, (the FFSR share of which has diminished by more than one thrid), there are the following regions to be named: the Mourmansk region, The Irkutsks region, The Tomsk region, the Astrakhan, the Novgorod, the Kemerovo, the Sakhalin, the Smolensk, the Oryol regions and the republics of Udmurtiya and Karelya. The regions which were lucky to benefit from the modification introduced into the (the planned FFSR share has increased by obe third in their case) comprise the Volgograd, the Omsk, the Kurgan, the Leningrad and the Kirov regions, also, the Taimyr autonomous okrug, the republics of Altai, Sakha and Kalmykiya, the Primorsky Krai, the Chuvash and the Chechen republics. Thereby the FFSR share for the Chechen republic and the Leningrad regions have grown more than twice as much. At the same time, the bulk of the FFSR first-rate recipients hasn’t altered: in 2001, approximately 28% of the transfers (compared to 24% for 2000) was accounted for by 5 regions – the Rostov region, the Prymorsky and the Altaysky Krai, the republics of Sakha and Daghestan.

It is noteworthy, that the list of the regions that happened to have benefited from the modification to transfer allocation scheme comprises more regions that have traditionally been less prosperous in the long run, inclusive of those aggreived ones, which manifests the optimisation of funds redistribution, caused thereby.

As to the Fund for Compensation grants, the redistribution of these also comes to exhibit a high interregional difference rate: the estimated per capita grant value to the top-rate recipient (the Ingush republic) surpasses the amount subsidized to the region having the least value of the latter. Regarding the funds allocation structure, the city of Moscow proves to be a top-rate Offset Fund appropriations recipient (6,1% of the Fund assets), while the least grant was awarded to the Evenkee Autonomous region (0,03%). Thereby, the 20 regions having the maximum population rate (52% share of total for Russia’s population) happened to receive around 50% of the Compensation Funds assets, which prompts that the distribution of the funds was basically pro rata to the population rate within the regions.

The analysis of the fund for Compensation transfers draws our attention to such fedeteral item of expenditure as grants to the RF Subjects’ budgets for the compensation of the losses inflicted by the changes in the order of the Offset fund formation and amounting, which accounts for around 25% of total for the Offset Fund assets12. Thereby the above extra grants allocation is subject to a particular RF subject: some of the regions happen not to be the recipients of this financial aid at all, while the amounts appropriated to some other regions tend to exceed the major Compensation Fund transfer value (the Ivanovo and the Voronezh regions and the Komy-permyatsky autonomous okrug). Taking into account, that the Offset fund was first introduced in 2001 as part of the Federal Budget, the extra transfers could be supposed to reward the regions for the approval of the Offset Fund calculation modification, since now based on objective expenditure requirements, the very transfers calculated on the basis of the actual budget expenditures consumed by the subsidized federal laws implementation in the regions.

If to regard the combined total for the federal aid of bothe the Offset Fund and that for the Financial Support to the regions for the period of 2001, it is notable, that the federal support distribution structure is practically the same as that of FFSR transfer distribution (especially regarding the aspects of minor- and top-rate recipients). On the other hand, the biggest per capita financial aid amounts are directed to the least-numbered and most backward regions of Russia: the Republics of Tyve and Altai, the Taimyr, the Koryak, the Chuckchee and the Evenkee autonomous okrugs, while the regions having the least per capita financial aid amounts mostly comprise regions of high industial development and fiscal capacity.

In accordance with the interbudgetary relations reforming Concept for 1999 through to 2001, a Fund for Regional development was created as part of the 2001 Federal Budget Law (for the purpose of accumulating the funds assigned to the regions for investment purposes) alongside of the Fund for Regional Finance Development (establisged to render the federal aid to the regional authorities for improving the quality of the federal funds’ regional administration). However, the order of assigning the above funds remains utterly non-formalized, since the authorities to provide and consume the funds mentioned rest with the RF government, while the latter hasn’t got any kind of a formalized alculation scheme developed13.

Reviewing the develop [ment of the interbudgetary relations in Russia for the recent years, it would be important to emphasise a continious formalization process of the federal aid distribution besides the tendency towards eliminating the skewness phenomena in the budgetary status of the various-level interbudgetary relations subjects. It should be also noted, that the measures taken within the tax and budgetary policy bounds in 2000 aspire to reduce the fiscal capacity interregional differentioation and to reallocate the budget revenues in favour of highly-subsidized reagions. At the same time, the reforming rates for the relations of various-level budgets and for the regional finance administratios were below the required ones. Despite the pro forma accomplishement of most tasks, the federal government has failed to gain the due rigidity of budgetary restrictions for the authorities of the rf subjects, nor has it gained control over the resource efficiency at the regional level, nor has it attained a due growth of interbudgetary relations formalization. all these are the problems set for the rf government within the medium-term measures program for the nearest years.

1 Due to the 1993 autumn disturbances, the bill On the Federal Budget for 1994 was finally approved of by the State Duma as late as June 24, 1994 and came into effect since July 1 1994

2 The federal budget loans for 1997 could be trated as the federal financial aid, since the funds allocated to the regions throughout this period for the purpose of paying salaries to public employees were not repaid to the federal budget, but numerous delays and installments were granted for them. (For more detail see The Record of the Interbudgetary Relations’ Development in the Russian Federation, 2000, CEPRA, Moscow)

3 Ibid.

4 Here the equalization capacity is understood as the ability of the federal financial aid to smooth away the interregional disparities in the per capita distribution of the budget revenues.

5 To provide the compatibility of the calculation results the values of the living standards and the budget expenditure guideline for 1999 were applied.

6 The expedience of singling out a criterion like that for outlining highly-subsidized regions (in contrast to setting forward a marginal criterion, exceeding which ranks an RF Subject with a number of those highly-subsidized ones) is accounted for by the fact, that the notion of a highly-subsidized region signifies its specific status within the system of interbudgetary relationships. In case a criterion to define the marginal expenditure share financed by the federal aid happens to unwarrantably rank many more RF Subjects with those highly-subsidized, this will evidence just a higher extent of the vertical misbalance within the budgetary system.

7 The scheme of FFSR funds allocation and the genesis of its key counterparts are considered in more detail in the following paper: I. Trounin, The of the interbudgetary relationships in the Russian Federation, 2001, CEPRA, Moscow.

8 This group comprised the RF Subjects, entitled to receive the transfer of 20% FFSR both in 2000 and 2001.

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