BRANCH-WISE ECONOMY

UDC 37.014.543(470) LBC 65.261.55(2Rus) © Avetisyan I.A. The problems of financing of higher education in modern The article deals with the financing of higher education in the current conditions on the materials of state universities in the Russian Federation. The author proves that education in general, including higher education, cannot be considered as a commercial service sector and universities as commercial organizations. He believes that it is a sphere of intellectual and spiritual activities that creates public goods, which must be provided by the state on a par with other public goods (ensuring of the state and social security, social security of the population, environmental security, etc.). This article presents the problems in the improvement of education expenditure planning and financing according to the objectives of modernizing the country at the new stage of its development. Higher , financing, commercialization of universities, organization of student admitting and training, academic teaching staff salaries.

Ishkhan A. AVETISYAN Doctor of Economics, Professor of the Vologda State Technical University, Honorary Figure of Russian Higher Education

The course for the modernization of society sphere are called higher education institutions declared in Russia should be implemented due (institutes of higher education) that have the to the transition to an innovation economy. So, forms of a university, academy, institute, etc. improving the quality of human capital that Prior to the adoption of the new Federal depends directly on the education of public Law “On education” that will become effective at large takes a particular importance in this since 2013, legislative and legal principles of process. The modernization of society is impos- state policy in the field of education in Russia sible without qualified specialists and talented are regulated by the federal laws “On Edu- scientists, without acquiring knowledge and cation” dated January 13, 1996 No. 12-FL high-quality education of people who are, in and “On Higher and Postgraduate Educa- turn, the sources of high and sustainable rates tion” dated August 22, 1996 No. 125-FL, the of . National Doctrine of Education Development In this regard, a key role is assigned to higher approved by the Government Resolution dated professional education (HPE) – the highest level October 4, 2000 No. 751, as well as by the sub- of the educational system that provides a person ordinate legislations of the Ministry of Educa- with the guarantees of higher education and tion and Science of the Russian Federation, the qualification in the chosen field of professional Ministry of Finance of the Russian Federation, activity. The institutions of this educational the Federal Treasury of Russia, etc.

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There is no need to prove that the stable of students were not paid on time. There was functioning of universities, the development no budgetary financing of expenditures for of higher education and improving the quality the organization of the educational process, of training of qualified specialists depend the maintenance and use of buildings, buying largely on timely financing for the above pur- and repairing equipment. State universities’ pose. Since the development of higher educa- arrear with the payments for public services tion was considered as a national problem, it and energy supply increased, and there were was financed mainly from the federal budget of no actual mechanisms and sources to repay Russia. According to the 2004 data, nationwide the debt. Due to the acute deficiency of gov- sphere of state higher education received 93% ernmental funds, the budgetary financing of of funds from the federal budget of Russia, 6% state universities reduced under the pretence from the budgets of the federal subjects of Rus- of rationalization and efficient use of budget sia and 1% from local budgets1.However, there funds, the need for “the transparency” of bud- is a trend to decrease in the nationwide share get financing, the intensification of state func- of government financing of higher education in tions in the budget process. These measures recent years: the share of federal budget in the have resulted in the following: financing of state universities’ expenditure has – reduction in the number of state funded accounted for 70 – 75%2. The share of extra- organizations that was resulted in the closure budgetary funds, particularly the revenue from and / or consolidation of state universities, as paid educational services, has increased due to well as transferring the functions of university strengthening the commercialization of state financing to the regional budgets; universities’ activity. Thus, the share of bud- – detailed distribution of budgetary funds get financing in the structure of financing the by federal authorities between the items of Vologda State Technical University’s (VSTU) budget classification already at the stage of expenditures was 49.7% in 2003 and 43.9% in budget quarterly breakdown; allocation of bud- 2012, the share of non-budgetary financing was getary funds for the specific expenditure items 50.3% in 2003 and 56.1% in 2012. According to without the right to redistribute them, etc. recent statistics, more than 2/3 of the total cur- In order to solve the situation, state univer- rent expenditures of the University are financed sities were allowed to search for additional by the funds received from paid educational (non-budgetary) funding sources to cover the services. financing gap, especially in the current This dynamic has its own history. In the expenses. The government stimulated the period of transition to a market economy (the development of universities’ entrepreneur- 1990s of the 20th century), the educational ial activity that favoured the increase in the system on the whole and higher education in amount of revenue from paid educational particular had to survive due to the sustained services from year to year and allowed the state reduction of government financial support universities to turn into the market-based orga- for social sphere. Sometimes, the low wages nizations. Moreover, market-based state policy of lectures and other employees in the state in the field of higher education resulted in the universities, as well as the meager scholarships increased number of non-state commercial universities and their branches that throve in 1 Gurov V.А., Sigova S.V. On financing of education. our country over the past two decades. Finances. 2006. No. 8. P. 49-52. In all fairness it has to be added that the 2 Kalashnikova О.V. Financing of higher education in reduction of the state financial support for the transition to an innovative economy. Author’s abstract. Ivanovo, 2011. P. 11. higher education was a necessary measure in

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the 1990s because of the chronic economic Russian state universities for research was no decline and deterioration of the financial situ- more than 0.04% of GDP, while it amounted ation in Russia due to thoughtless economic to 0.25 – 0.4%4 in the developed countries. reforms. However, there was an economic The quality of specialist training in Russia growth in the country after the 1998 default. has dropped sharply over the recent two decades Annual average GDP growth rates accounted that is proved, for example, by the following for 5 – 6.5% in the period from 2000 to 2008. facts. The Times Education has published the During those years, Russia’s GDP grew by World University Rankings 2011 – 2012 based 68%, and the country ranked the 6th in the on the special score evaluation. According world according to GDP gross volume. The vol- to this ranking, Lomonosov Moscow State ume of Russia’s consolidated budget increased University that was among 50 top universities manifold during that period, the federal budget in the world until recently found itself in the of Russia became surplus, there was an increase group of universities that ranked from 276th to in gold and foreign exchange reserves3, etc. 300th. St. Petersburg State University, followed It would seem, Russia had an opportunity to the Moscow State University, found itself in mobilize the financial support for higher edu- the group of universities rounded out the list cation due to the significant improvement of (351st – 400th positions)5. macroeconomic and financial indicators. It is our firm belief6 that one of the main However, it did not happen. Scanty scholar- reasons for the sharp decline in the quality of ships were persisted. It was not implemented higher education in Russia today is the com- the provision of the 1996 Russia’s law “On mercialization of state universities and a grow- education” that the average wage rates of aca- ing trend to increase the number of students demic teaching staff should be two times higher who pay for their education due to reducing than the average wage of industrial workers. the share of free education. In fact, there is According to this law, the share of expenditures non-compliance with the requirements the RF on higher education should be at least 3% of the Constitution (Article 43) that “everyone shall expenditure side of the federal budget, however, have the right to receive, free of charge and it was actually accounted for 2.5% on average on a competitive basis, higher education in a in 2000 – 2004. There was no radical progress state or municipal educational institution or in the subsequent years. enterprise”7. As we see, there is no paid higher Table 1 shows that the share of financing of education clause on a non-competitive basis in higher education expenditures in the total the Constitution. expenditures of Russia’s federal budget Moreover, a number of laws run counter to increased slightly – up to 3.3% in 2009, i.e. the Constitution and aimed at strengthening the growth was only 0.9% for six years. The the commercialization of state higher educa- share of budget financing of higher education tion institutions have been adopted in the expenditures accounted for 0.8% of GDP in country in recent years. For example, the Law 2009. At the end of 2011, it had dropped to of the Russian Federation “On Autonomous 0.7% of GDP, which was two times lower than in developed countries (average rate of the 4 Kalashnikova O.V. Ibid. P. 12. 5 Version. 2012. No. 11. March 19 – 25. P. 5. OECD countries – 1.3%).Budget amounts of 6 The author of this article has been teaching in the state universities for 47 years. Of which, he had been working as a 3 See: Avetisyan I.A. Issues of the state regulation of the pro-vice-chancellor for academic affairs for 12 years in the processes of income distribution and use in today’s Russia. economic university (in Soviet times). Economic and social changes: facts, trends, forecast. Vologda: 7 Constitution of the Russian Federation. Moscow: RF VSCC CEMI RAS, 2009. Iss. 1 (5). P. 109-111. MIA Joint Editorial Board, 1998. P. 17.

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Table 1. Dynamics of higher education expenditure financing by the federal budget of the Russian Federation in 2003 – 2009

Indicators 2003 2004 2005 2006 2007 2008 2009

Volume of GDP, trln. rub. 13243 17048 21625 26903 33111 41668 40420 Volume of expenditures of Russia’s federal budget, bln. rub., total 2358.5 2648.9 3514.3 4284.8 5983.0 7570.9 9931.4 in % from GDP 17.9 15.8 16.2 15.9 17.1 18.1 20.4 Higher education expenditures of Russia’s federal budget, bln. rub., total in % from GDP 56.8 71.8 119.2 161.6 228.3 280.0 328.6 in % from the total volume of Russia’s federal budget expendi- 0.4 0.4 0.5 0.6 0.7 0.7 0.8 tures 2.4 2.6 3.4 3.8 3.8 3.7 3.3 Source: Kalashnikova O.V. Financing of higher education in the transition to an innovative economy. Author’s abstract. Ivanovo, 2011. 26 p.

Institutions” dated November 3, 2006 No. 174- the Federal Security Service and the Ministry FL was adopted under the pretext of improving of the Interior are automatically awarded the the legal status of public institutions; it allowed status a status of government agencies. These the privatization of public institutions, includ- universities should be financed in accordance ing state universities, and thus provided for the with the budget estimates (estimated form of full gradual replacement of free higher educa- financing), and the funds obtained due to other tion by paid one. However, the complexity of profitable activity are liable to be included into the process of creating autonomous institutions the appropriate budget. The rest of state uni- (the Resolution of the Government should versities are awarded the status of institutions have been taken to each of them) did not allow with an extended range of rights or autonomous a massive transition of public institutions, institutions that defines the differences in the including state universities, into the status of financial aspects of their activity. For example, autonomous organizations, and they did not institutions with an extended range of rights or guarantee the improvement of their financial autonomous institutions can be provided with standing because the decline in budget funding the funds in the form of subsidies and budgetary required to attract extra-budgetary sources. investment according to the assignment of the The Federal Law on May 8, 2010 No. 83-FL founder, and their revenues should be at their “On amendments to certain Legislative Acts of self-sufficient disposal. In fact, without invest- the Russian Federation in connection with the ment, the overall trend is becoming clear that improvement of the legal status of state the budgetary financing of these universities’ (municipal) institutions” enacted on July 1, expenditures is reduced. 2012 has become the logical extension of the The amendment to the Budget Code of the policy aimed at strengthening the commer- Russian Federation made according to the cialization of public institutions, including Federal Law No. 83-FL eliminated the provi- state universities. This law allows the state sion that state-financed organization should universities to achieve a status of so-called perform non-commercial functions and their institutions with an extended range of rights, or activity should be financed at the expense of autonomous institutions, or government agen- the national budget or state non-budgetary cies. According to this law, a number of federal fund. According to the new amendment of state-funded educational institutions of higher the Budget Code of the Russian Federation, education which are under the jurisdiction of those state universities that have awarded the

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status of state-financed public organizations The table shows that the total number of perform commercial functions, and they are graduates from the Economics Department of financed in full due to the budget on the basis the Vologda State Technical University has of the budget estimates (BC Code of RF; article increased 2.2-fold over the period from 2003 161). And most state universities that have not to 2006, including 1.7-fold increase in the been awarded this status perform commercial number of graduates who got state-subsidized functions, and they are financed mainly by the education and 4.2-fold increase in the number revenues from their paid activity, in particular, of fee-paying graduates, i.e. the growth rates from providing paid educational services. of the fee-paying groups have exceeded the Finally, Russia has found a global factor to growth rates of the state-subsidized groups. transfer the activity of social institutions (in the Moreover, the share of state-subsidized hon- sphere of education, public health, etc.) onto ours graduates in the total number of graduates commercial basis: the country became a full from the Economics Department accounted for member of the World Trade Organization 13.7% in 2006, and the share of graduates who (WTO) and a participant of the General Agree- got state-subsidized education and received ment on Trade in Services (GATS) at the end of excellent and good final marks was 56.2%. The August, 2012. According to the WTO – GATS share of honours fee-paying graduates was only rules, the citizens of Russia, unfortunately, are 1.8%, and the share of fee-paying graduates deprived of their constitutional rights to free who received excellent and good final marks education, as these social rights become expen- accounted for 28.2%.It is increasingly possible sive and inaccessible for most people services to meet such graduates from the economic that are similar in their nature to the sale of faculties who have no ideas about economic goods in retail trade system. categories and economic laws, say nothing of Strengthening the commercialization of the current problems of economic transition of state universities, which means, first of all, the the country to innovative development. replacement of free education by fee paid edu- There is a tendency to reduce the number cation is one of the reasons for the sharp decline of state-subsidized students in the state univer- in the quality of graduates from the universities. sities of the country. So, share of these students Table 2 proves this. reduced by 4% in 2006 and by 10% in 2007.

Table 2. The number of full-time graduates from the Economics Department of the Vologda State Technical University their quality classification in 2003 – 2006

Indicators 2003 2004 2005 2006 The number of full-time graduates from the Economics Department, total 152 166 189 336 Including: – graduates who got state-subsidized education 121 146 176 204 – graduates who paid for their education 31 20 13 132 Graduates quality: – the number of honours graduates who got state-subsidized education 40 49 44 46 – the number of graduates who got state-subsidized education and received 79 90 104 179 excellent and good final marks – the number of honours fee-paying graduates 1 – 5 6 – the number of fee-paying graduates who received excellent and good final 17 15 7 55 marks Source: Avetisyan I.A. Higher education expenditure financing in the Russian Federation and the directions of its improvement. Economic and social changes: facts, trends, forecast. Vologda: VSCC CEMI RAS, 2007. No. 39. P. 12-27.

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The number of state-subsidized students in institutions, which are the main source of con- Russia amounted to 179 persons per 1000 people tingent for both public and non-government at the end of 2006; according to this indicator for-profit universities in the country. If earlier it was overtaken by Canada (299), Austria (227), (in Soviet times), as a rule, only the pupils with Belgium (224), Finland (220), Spain (187), a predominant excellent and good marks entered number of Latin America countries8. the universities and became students, then The new Minister of Education and Science today mediocre pupils enter the state universi- of the Russian Federation Dmitry Livanov has ties paying money. Our teaching experience called for a further reduction of state-subsidized shows that if the students in state universities student spaces in the state universities and prin- receive objective grades then about 2/3 of fee- cipled rejection of free higher education. He paying students will be immediately expelled has described his position as follows: “As soon for academic failure after the first session of as we get away from the free higher education the academic year. But this means that that for everyone, we will have got the mechanism state university will lose a teacher’s wage rate to engage valued staff. For example, educa- and has to dismiss one lecturer. If it is repeated tion loan. If good education is expensive and every term, the university will have to liquidate a person has to pay for it, he or she will be the whole department and a lot of lectures will able to take out a loan, and an employer to be be unemployed. With such a system of the orga- will repay it in exchange for commitments”9. nization of higher education, when functioning In our view, such an approach of the minister of state universities and salaries of their lectures to higher education reform in today’s Russia, do not depend on the state budget funding, but where a third of the population lives below the mainly on the money paid for the education poverty line, and according to official statistics, by students and their parents, the objective the ratio of the average income of the richest assessment of the knowledge of fee-paying 10% to the poorest 10% (the Gini coefficient) students is eliminated and, therefore, there is is higher than 15-fold, but in fact it is 35-fold no stimulating basis to improve the quality of or more10, puts an end to the availability of free higher education. Is it a reason to explain the higher education for many talented and gifted fact that in Russia fee-paying students do not children from poor families. It is also impos- have the desire to study, and they study badly, sible to agree with the minister’s opinion that an considering that getting “a wallpaper degree” (i.e. diploma of higher education) is guaran- educational loan can be used as a tool to replace teed by the fact of paying for education. This state-subsidized higher education by fee paid situation is one of the causes of corruption and education because it is almost impossible to use bribery in the system of higher education in such a loan due to the great social inequalities our country. in the country. Moreover, educational loans Former RF Minister of Education and for students become risky and unprofitable for Science Andrey Fursenko, known for his liberal banks and employers due to the second wave and market views on the reforms in Russia’s of economic and financial crisis higher education system, said, “The main It is well known that providing high-quality defect of the Soviet educational system was higher education, first of all, depends on the an attempt to form a human-creator, and standard of knowledge of graduates from sec- now our task is to cultivate a skilled consumer ondary schools and vocational educational who is able to use ably the results of others’ 11 8 Soviet Russia. 2007. January 16. P. 5. creativity” . 9 Soviet Russia. 2012. July 5. P. 1. 10 Zavtra. 2012. Aug. No. 31. P. 3. 11 Soviet Russia. 2012. June 19. P. 4.

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Ex-minister’s ignorance strike us when he introduced across Russia in 2003 and the oral tries to fling mud at the Soviet system of educa- and written exams for prospective university tion, turn everything upside down and find students were replaced by testing. At the same faults in everything, even in the creative and time, the final school exams in the form of constructive nature of Soviet educational sys- testing became the entrance university exami- tem recognized in due course as the best one nations. In other words, if a pupil obtained the in the world. According to ex-minister, form- required score (maximum 100 points) accord- ing of a human-creator through the system of ing to the results of testing and sent a certificate education is not a virtue but a defect. But it is in the university that he or she liked, he or well known that forming of a human-creator she could consider himself/herself a student. is a fundamental factor to characterize the Meanwhile, testing is a formal way of exami- quality of training. Instead of this, it is pro- nation because school leavers, i.e. potential posed to bring up the consumers who are able university students, learn and mechanically to use the results of others’ activity (creativity, reproduce information without analyzing it creation). What will such an approach lead to? and almost without studying the subjects, they Firstly, if the higher education system does not cease to understand the nature of the question prepare creators, it turns out that the objects and think by themselves. In our opinion, EGE of consumption (advanced technologies and is a means of mental debilitation, cultural and other objects of creativity) that are not made psychological primitivism of the younger gen- in the Russian Federation but abroad, will be eration, and, finally, it has a negative impact on used by Russia’s qualified consumers from the the quality of both general and higher education place where they are made, i.e. from abroad. in the country. Secondly, this approach to higher education The test method used in EGE is not par- in the context of world globalization will strike ticularly appropriate for testing and objective out Russia from the list of potential competi- assessment of knowledge of social disciplines tors in the world market. Thirdly, it is the most and humanities (history, literature, social important thing, this is a clear failure of plans studies, etc.), as they are not formalized due to modernize the society and transfer the to their specific nature. It is impossible to national economy to innovative development assess objectively university entrants’ knowl- announced by the current Russia’s government edge of the subjects mentioned above without because the implementation of these plans direct speaking to them and without an oral requires the creative impulse and only the exam. The authorities seem to recognize the creators but not consumers are able to imple- shortcomings of EGE; however, they suggest ment them. to improve this exam but not to cancel it. It Introduction of Unified State Exam (EGE is impossible to agree with this, because the in Russian) in schools is one of the reasons for negative effects of EGE emerge from its faulty the academic decline in schools and, naturally, nature. By the way, the developers of the law the deterioration in quality of higher educa- on EGE in Russia borrowed it from the former tion training in the Russian Federation. Since practice of the American educational system, 2001, EGE has been cultivated in Russia as which was abolished later in most European an experiment, which is opposed by many countries, including the USA. EGE support- professionals, school and academic teachers. ers believe that it is intended to provide all the However, despite the views of experts and the school leavers with the equal opportunities for general public protest, a special federal law entering the universities and reduce corruption was adopted, and according to it, EGE was and bribery in the education sector.

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However, this is not borne out in practice: formal requirements of bachelor’s programme, EGE results show that corruption and bribery i.e. there are things that are not related to the have risen to a new level. content of education here. In such a situation, Doubtful innovation in higher education is low-skilled teachers are ready to cling to the the transition to the educational process in state formal aspect of training. universities according the Bologna system (BS). The financing problems of higher education Russia’s state universities have adopted a two- are closely related to the financial support for stage educational system “bachelor plus mas- universities’ scientific activity, as they are not ter”. This innovation is aimed at the unification only educational, but also research centres. of higher education and acceptance of Russia’s The most part of country’s scientific potential diplomas in Europe. While there are state- is concentrated in the universities. The system subsidized, i.e. free, student spaces in the state of higher education and the realm of science universities only for the Bachelor’s programme are inseparable, because a today’s student is as a lower stage of higher education, then stu- a potential tomorrow’s researcher. Academic dents should pay for their MA courses at the scientists and researchers, especially in the state highest stage of higher education. The maximal universities, do not only impart their profes- term of Bachelor’s programme is four years, sional and scientific knowledge to students, and the term of MA course is two years. And but they “produce” the knowledge conducting the transition took place when there were no fundamental and applied scientific and techni- serious reasons to adopt BS in Russia because cal projects, as well as preparing and publishing our schoolchildren always ranked first in the their textbooks, manuals, scientific articles Physics and Mathematics Olympiads, and the etc. In the modern era of high technologies, graduates from Russia’s universities such as when the world really strives for a “knowledge engineers and physicists were appreciated and economy”, the new institutional forms of employed abroad despite the inconvertibility between education, science and industry such of their degrees. as “academic university”, “research institute”, We share the opinion of Andrey Fursov that “research and education centre” and others are “the introduction of a four-year bachelor’s in demand. programme instead of five-year traditional high The budgetary financing of higher educa- education turns our high school into a kind of tion has been reduced manyfold in recent years vocational school; it brings the higher educa- due to the transition of state universities to tion down to earth; and if such a policy is very market relations. Despite this, many leading bad for an institute, then it is catastrophic for an state universities continue the tradition of tire- university, because an university is eliminated less scientific research which involves leading as a social and civilized phenomenon”12. In scientists who generate new ideas and research the United States, bachelors are trained in col- directions. At the same time, the spectrum for leges that are similar to our technical schools. research activities is expanded, and it covers Training of bachelors according to BS rules many fields of knowledge – from the theoreti- dramatically increases the bureaucratization cal and fundamental to specific and applied sci- of the educational sphere. The case is that ences. Students continue their research activity bachelor’s programme requires a lot of time that are resulted in publishing the collections of lectures to bring their usual scientific and of their research works. Finally, the top state educational activities in accordance with the universities rank first in training of academic, scientific and research staff through postgradu- 12 Zavtra. 2011. December. No. 50. P. 5. ate and doctoral courses.

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The transition of the country’s economy to • increase in the share of employed people an innovative way of development requires a aged from 25 to 65 who improved their new qualitative level of the development of qualification and (or) were retrained up to 37% university’s science and new methods of its by 2015; financing. Therefore, in our opinion, when • increase in the share of universities and addressing the issue of funding support for secondary vocational institutions, the buildings university’s science according to theoretical of which were adapted for disabled people from and fundamental areas, including social and 3 to 25% by 2020. humanitarian researches, it is impossible to The need for these and other measures was set hopes upon attracting the investment of dictated primarily by the fact that a lack of businesses because they are not interested in governmental regulation of the labour market this. Budgetary financing should predominate for the specialists with higher education was here due to the developed long-term concept of resulted in a number of non-governmental com- the state policy in the field of higher education mercial universities in Russia. As a result, the and science. As for financing of concrete applied total number of universities and the number of research projects that are developed by major diplomas received in the country became much more than before 1990. For example, there were universities and research and education centres, more than 500 universities (only in the form then it is possible to involve the investments of of state universities) in the RSFSR before the the business community to implement them or collapse which involved about 2.8 use public-private partnership, as well as they million students, i.e. there were 6000 students can involve foreign leading experts and scholars on average per one university. Today, there following the principles of arranging the work are 2650 universities in Russia (according to of the Skolkovo Innovation. Centre incomplete data), including non-governmental Of course, world globalization, high business commercial universities that involve seven competition, technological and scientific million students, i.e. the average number of discoveries, which change the way of life, students per one university is 2.64 thousand require the changes in standards of higher people, which indicates the diminishment education that should be brought in accor- of Russia’s universities13. On the other hand, dance with the requirements of the day. The 20.6% of the population in Russia had higher Presidential Decree “On the measures to education at the end of 2005, which was lower implement the state policy in the field of than in the developed countries. For example, education and science” dated on May 7, 2012 this indicator amounted to 30% for the same No. 599 is aimed at solving these tasks. The period in the USA14. Furthermore, state- decree provides for the activities related to: subsidized (free) student spaces are allocated • monitoring the activities of universities to state universities without clear and theoreti- to assess the effectiveness of their work in order cally substantiated calculation of the need for to restructure inefficient universities; specialists. Both state and non-governmental • increase in scholarships to needy first- commercial universities have been training the and second-year students who are studying specialists in humanities for the recent 20 years on an internal basis on bachelors’ and (lawyers, economists, managers) who are not specialists’ programmes (state-subsidized on demand in the labour market. At the same groups) and have excellent and good marks time, there is an acute shortage of highly skilled by the end of 2012; engineers and technicians. • transition to normative per capita 13 Soviet Russia. 2012. June 21. P. 5. financing of universities by June 2013; 14 Zavtra. 2006. No. 49. December. P. 4.

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Due to unregulated labour market of spe- benefits in the form of goods are not directly cialists who have higher education and a lack produced. However, the social importance of the distribution system for the graduates from of this field for society is very high, since, as the state universities, a lot of graduates are not noted, the effective economic development of in demand for practical work, so they join the any country depends on the education of its army of unemployed people or do not work in citizens. That is why free secondary education their specialty. According to the 2004 World and free higher education on a competitive Bank analysis, only 20% of graduates from the basis is a constitutional right of citizens in Russian universities worked in their specialty15. Russia (Article 43 of the Constitution) and According to the RF President’s Decree one of the social functions of the Russian state No. 599, the precondition for the implementa- because the Russian Federation is a social state tion of state policy in higher education is ensur- (Article 7 of the Constitution). But nowadays ing the sufficient financing for the expenses on education in Russia is increasingly derived the development of state universities, as well as from the social functions of the state, higher using new forms and methods of its implemen- education services become a commodity, and tation. Moreover, the main item of expenditure the universities turn into trade organizations. for the current functioning of state universities In our opinion, the whole education system, is the wages of their employees, especially aca- including higher education, can’t be considered demic teaching staff and students’ scholarships. a service sector. This is a sphere of intellectual Since the main persons involved in ensuring the and spiritual activities of the society, which quality of higher education are teachers and allows us to acquire knowledge, educates scientists who work in state universities, it is and forms a human person who has not only necessary to set their wages in such a way that higher education, but also spiritual, moral and they would work and live worthily and have a ethical qualities. World experience shows that high social status. there are benefits (public goods) at the level of Unfortunately, rates and official sala- society, which are not rational and sometimes ries of university teachers to the exclusion of impossible to be acquired individually. Of degree and academic rank allowances have not course, these public goods include educational increased over the years of market reforms, and services. But this does not mean that educational they still remain low while increasing the edu- state-financed institutions, particularly state cational and instructional load. Often a lecture universities, cannot receive extra-budgetary has to teach 3 – 5 disciplines for the sake of funds from the additional educational activities more or less adequate salary. Of course, such a through their preparatory departments, training lecture regardless of his/her qualification can’t and retraining centres, experimental farms, as efficiently teach all the disciplines. Ultimately, well as through contractual researches and their this will have a negative impact on the quality implementation, rental property, etc. of training. In addition, many students have to Today, all the spheres of social life, including work at the expense of the quality of training higher education, have a pressing issue of because of the extremely low scholarships. strengthening the public financial control over It is known that education in general, budgetary expenditures. It is a known fact including higher education, as one of the that low budget discipline, embezzlements, leading sectors of the social sphere belongs to thefts, improper use of budget resources, a non-production sector, where material corruption, bribery, etc. take place in some state universities due to weak, ineffective and 15 Premier. 2007. March 27 – April 2. P. 16. sometimes formal state internal and external

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financial control at the level of the Ministry grammed target principle of funding provides of Education and Science, therefore, it is a stronger link between budgetary financing of necessary to focus on some issues relating to the state universities’ expenditures and achieving use of new techniques, forms and mechanisms the objectives, thereby improving the utilization of financing for higher education. of budgetary funds. Until recently, the current expenditures on The analysis of the problems investigated in the wages of state university employees in a this article allows us to formulate the main public sector, including higher education, were conclusions and suggestions. financed through a unified tariff net (UTN), 1. In our opinion, education in whole, which was abolished later and replaced by a including higher education, can’t be considered new one, so-called sectoral system of financ- a service sector, educational services as goods, ing the public sector expenditures. That is, the and universities should not be considered individual methods of planning and financing as commercial organizations. The specifics of budget expenditures began to be used in of education, including higher education, is every sector of the public sphere (education, the fact that it is a sphere of intellectual and health, culture, etc.). In order to implement spiritual activities of the society, which allows us to acquire knowledge, educates and forms a new phase of higher education reform, there a human person who has not only higher edu- is a need for the development of a new model cation, but also spiritual, moral and ethical to finance its expenditures that is adequate to qualities. today’s challenges. SIFO system (State indi- 2. The reform of higher education and the vidual financial commitments), which is used educational system in whole implemented in planning and financing the expenditures of under the guise of modernization in Russia in state universities and which is a part of a new recent years that is based on educational model of financing the higher education expen- standards (models) of Western countries ditures, is worth noticing. This system is called with the use of the Unified State Exam and “a transition to a normative per capita financing the Bologna education system has a negative of universities”. It will be used since June 2013. impact on the quality of general and higher If budgeted form of financing predominated education in the country, which brings into a earlier in the planning and financing of state question the feasibility of the strategic objec- universities’ expenditures, i.e. the amount of tives of society modernization and the transi- funding was formed not on the base of the tion of economy to innovative development. actual and expected results of budget expendi- We oppose the mechanical copying of the tures, but by indexing and adjusting the amount Western educational standards and propose of funds allocated in the previous year, then the to develop the National Doctrine for the amount of financing for each state university development of education, including higher is formed by programmed target principle in education of the Russian Federation, as well the new format. These budget expenditures on as to have our own model of its long term financing of each university are argued by the modernization – the model based on the best purpose of spending which is permitted by the traditions of Russian and Soviet education. In government. In this case, the purpose is deter- our opinion, the compliance with the national mined in accordance with the task determined roots and traditions does not mean that the by the government. For example, funding for country refuses to make progress and we doom university teachers’ salaries expenses in the part ourselves to mark time. On the contrary, it of training state-paid students directly depends means that the reform of higher education in on the number of the latter. The use of pro- our country should be oriented to the world’s

104 1 (25) 2013 Economic and social changes: facts, trends, forecast BRANCH-WISE ECONOMY I.A. Avetisyan

achievements in this field, it should create We also propose to restore the provision of the necessary prerequisites for the improve- an article 54 of § 3 of the 1996 RF Law “On ment of higher education system in Russia. Education”, which states that the average wage 3. The unregulated labour market of spe- rates and official salaries ... for the academic cialists who have higher education was resulted teaching staff of state universities are set at the in a number of non-governmental commercial level that is two times higher than the average universities in Russia. As a result, the total wages of industrial workers in Russia. And it number of universities and the number of diplo- is necessary to achieve the implementation mas received in the country became much more of this provision at the expense of the budget than before 1990. However, universities train funds, which will become available due to the the specialists in humanities, while there is an reorganization and reduction of the number of acute shortage of highly skilled engineers and inefficient institutions. technicians in the country. This is a result of the fact that state-subsidized (free) student spaces 5. High competition, technological and are allocated to state universities spontaneously, scientific breakthroughs that change the way i.e. without a clear and scientifically calculat- of people’s life in a few years require to change ing the need for them. There is no distribution the standards of higher education in the coun- system for the state-subsidized graduates from try so as to bring these changes into line with the state universities, so a lot of graduates are modern requirements. Therefore, the reform not in demand for practical work, so they join of higher education that is characterized by the army of unemployed people or they work continuous and dynamic nature must be closely not in their specialty, and talented specialists related to the development and implementation go abroad. Based on this, we propose to recover of a new model of financing the educational the practice of planning the number of state- expenditures. It is impossible to improve the subsidized spaces in the state universities for quality of higher education by the only increase the certain types of specialties based on clear in funding the educational expenditures. Today, and scientifically grounded calculation, as well more than ever, it is important to increase state as to put into practice the distribution system financial control over the spending of budget for the state-subsidized graduates aimed at the funds allocated to finance the expenditures on compliance of their training with real needs. higher education. 4. Since ensuring the quality of higher In terms of the implementation of a new education is largely determined by the aca- demic teaching staff of state universities, today phase of the reform (modernization) of higher an important task of the state is to increase their education in Russia, a significant result can be wages in such a way that they would work and achieved by a funding model, a part of which live worthily and have a high social status, as it is is the system of State individual financial com- done in the developed countries. The labour of mitments. According to it, since June 2013 a university teacher and an academic scientist is the expenditures on higher education will be a highly skilled labour required for the current financed on the base of a programmed target and further development. principle.

References 1. Avetisyan I.A. Higher education expenditure financing in the Russian Federation and the directions of its improvement. Economic and social changes in the rigion: facts, trends, forecast. Vologda: VSCC CEMI RAS, 2007. Iss. 39. P. 12-27.

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2. Avetisyan I.A. Issues of improving salaries of public sector employees. In: Problems of the strategy and tactics of regional development. Proceedings of IV Russian scientific and practical conference (Vologda, April 2 – 5, 2003). Vologda: VSCC CEMI RAS, 2003. P. 156-162. 3. Avetisyan I.A. On the effectiveness of the state budget and budgetary expenditure. Economic and social changes in the region: facts, trends, forecast. Vologda: VSCC CEMI RAS, 2005. Iss. 29. P. 9-19. 4. Avetisyan I.A. On the public financing of control in today’s Russia. Economic and social changes in the region: facts, trends, forecast. Vologda: VSCC CEMI RAS, 2006. Iss. 34. P. 19-31. 5. Avetisyan I.A. Issues of the state regulation of the processes of income distribution and use in today’s Russia. Economic and social changes in the region: facts, trends, forecast. Vologda: VSCC CEMI RAS, 2009. Iss. 1 (5). P. 107-121. 6. Constitution of the Russian Federation. Moscow: RF MIA Joint Editorial Board, 1998. 7. Budget Code of the Russian Federation (as of April 25, 2012). Moscow: Omega-L, 2012. 8. The concept of reforming the budget process in the Russian Federation in the period from 2004 to 2006. Approved by the RF Government Decree dated May 22, 2004 No. 249. Available at: Consultant Plus. 9. Gurov V.А., Sigova S.V. On financing of education. Finances. 2006. No. 8. P. 49-52. 10. Kalashnikova О.V. Financing of higher education in the transition to an innovative economy. Author’s abstract. Ivanovo, 2011. 11. Kovaleva T.M., Barunin S.V. Budget and in the Russian Federation. Moscow, 2005. 12. Parygina V.A., Tadeyev A.A. Budget law and procedure. Moscow, 2005. 13. Svischeva V.A. State and municipal finances. Moscow, 2008. 14. Godin A.M., Goreglyad V.P., Podperin I.V. Budget system of the Russian Federation. Moscow, 2009.

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