Specific Features of Regional Budget Policy Using the Example of Novosibirsk Oblast T

ISSN 1075-7007, Studies on Russian Economic Development, 2009, Vol. 20, No. 4, pp. 374–382. © Pleiades Publishing, Ltd., 2009. Original Russian Text © T.V. Sumskaya, 2009. RUBRIKA RUBRIKA Specific Features of Regional Budget Policy Using the Example of Novosibirsk Oblast T. V. Sumskaya Abstract—The paper elicits the conditions for developing the financial base of local self-government and examines the breakdown of local budgets in Novosibirsk oblast. The author has analyzed the inhomogeneity characteristics of budget indicators before and after the municipalities were granted financial resources from the oblast budget and assessed cross-territorial differentiation in the fiscal capacity of Novosibirsk oblast municipalities. The paper analyzes the connection between grants, municipality taxes, and nontax revenues and assesses the marginal effect of an increase in taxes going to the local budgets. DOI: 10.1134/S1075700709040042 Territorial budget as a tool for regional economic The decrease in the share of local budget revenues in management. Fiscal policy is not only the most impor- the consolidated budget of the Russian Federation, tant form of direct intervention in processes at all man- given the growth of the proportion of their expendi- agement levels, but also a condition for creating a com- tures, will lead to an excessive reduction in capital costs mon economic space and overcoming excessive differ- compared to the operating costs and, hence, the under- ences in the socioeconomic development of regions and financing of investment expenditures. These problems municipalities. At the regional level, the budget is rele- cannot be solved without consolidating the municipal vant to the extent that it can finance the development of budget’s local revenue base. the social sector and territorial infrastructure, stimulate Russian municipalities differ noticeably in both the production, and ensure the relative autonomy of the actual tax revenues and tax potential. In this respect, we regional economic system. The territorial budget is a can single out a group of municipal entities, e.g., the major source of financing the operating costs of the capital cities of oblasts and republics, i.e., centers of 3 regional economy and social sector; it plays a primary constituent entities whose financial statuses differ role in financing economic and social target-oriented greatly from those of other Russian municipalities. The programs and investment projects. An important func- local self-government bodies of the constituent entities tion of the territorial budget is contracting regional administrative centers, as a rule, have budgets compa- enterprises to provide for the region’s needs, as well as rable to those of the constituent entity itself (excluding providing targeted subsidies to individual enterprises. the municipal budgets) and do not receive grants from The budget serves as a multiplier for other incoming regional funds for the financial support of municipal (nonbudgetary) resources, i.e., shared funding and entities. We have selected Novosibirsk oblast as a investments in the territorial infrastructure entail an research target, as it can be classified among the above- increase in the inflow of financial resources to the terri- * tory. Fiscal policy in a federative state is based on a mentioned group of Russian constituent entities smoothly running system of fiscal relations between the Novosibirsk oblast was chosen as research target also governments. because in 2003 it was one of the first regions to make a transition to new principles of intergovernmental fis- In Russia, intergovernmental fiscal relations have cal relations. According to these principles, the lower- recently been developing towards the increased formal- level elements of the budget system are budgets of ization of federal financial aid distribution and the elim- small urban or rural settlements (there are 460 of these ination of asymmetry in the budget status of the govern- settlements in the oblast). At the same time, the concept ments at different levels. So far, neither the necessary of a municipal district budget within the oblast budget rigidity of budget constraints for the constituent entity was preserved as the sum of expenditures of a specific authorities nor established control over the effective- ness of resource use by regions have been achieved. * An analysis was conducted based on the data on the municipal Intergovernmental fiscal relations have not been made districts (administrative territorial units comprising several small sufficiently formalized either [1–5]. settlements) and towns subordinate to the authorities of Novosi- birsk oblast. The number of districts (30) was the same over the 1 At present, fiscal regulation in Russia is overcentral- whole period under study. In 1996–2004, there were seven towns/cities subordinate to the oblast (Barabinsk, Berdsk, ized; therefore, many municipalities cannot function Iskitim, Kuibyshev, Novosibirsk, Ob’, and Tatarsk), which, since 2 autonomously and sustainably, as local taxes and other 2005, has decreased to only five (Berdsk, Iskitim, Ob’, Novosi- local revenues make up less than 20% of their budgets. birsk, and the science town of Koltsovo). 374 SPECIFIC FEATURES OF REGIONAL BUDGET POLICY 375 Table 1. Distribution of the municipalities of Novosibirsk oblast by the share of collected revenues* Share of collected (tax Number of municipalities in the group and nontax) revenues, % 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 0–20 2 2 64561422529 20–30 14 12 3 11 15 11 12 7 10 6 2 30–40 98797566922 40–50 5 7 13459416 50–60 12311 323 1 60–70 3 2 3 232322 70–80 24311322 1 80–90 2121 1 2 90 or more112222121 * The empty cell in this and the following tables means that none of the municipalities under study fell in the given group. district and cost statements of district administrations. As It is noteworthy that, over the period under study, in the a result, continuity was guaranteed, as was the participa- majority of municipalities of the Novosibirsk oblast, the tion of the district councils in the budgeting process at the proportion of collected revenues was less than 50%. This oblast level from the standpoint of each district, including is explained by the fact that most of the territories in control over the oblast budget execution with respect to the Novosibirsk oblast (except for a number of urban settle- districts. Since 2005, Novosibirsk oblast has been a pilot ments subordinate to the oblast) have rural specialization. region for implementing the new federal law on local self- In 2005–2006, the share of collected revenues was only government [6]; i.e., in this oblast, the law came into effect greater than 50% in two municipalities, i.e., the town of earlier than in other Russian regions. Ob’ and the city of Novosibirsk, and, in 31 municipalities, this indicator did not exceed 30%. Specific features of revenue generation in the budgets of municipalities of Novosibirsk oblast. The revenues of On this basis, it is interesting to construct a distribution local budgets include tax and nontax revenues, and grants of municipalities by the share of grants in the total reve- from regional and federal budgets. Besides, it is only the tax nues of municipalities of Novosibirsk oblast (Table 2). revenues connected with economic potential of the given It follows from Table 2 that, in the majority of munici- territory that can be regarded as a stable revenue base for the palities of Novosibirsk oblast, grants make up more than budgets of local self-government bodies. The nontax reve- half of the budget revenues. Note that, in 1996–1998, the nues are to a large extent either temporary, or instable. In share of grants, including subsidies and money transferred Russia on average, nontax revenue make up about 5-8% of by contrasettlements, fell in the district of the Novosibirsk all the local budget revenues [7]. The share of nontax reve- oblast from 68 to 54%; however, in 1999–2002, this figure nues in the budget of Novosibirsk oblast (excluding Novosi- rose again to 67–69%. In 2003, the proportion of grants birsk) was 2–4% in 1996–2006. In 2003–2006, apart from was 74%; in 2004, it was 62%; and, in 2005 and 2006, it tax, nontax revenues, and grants, the local budget revenue increased to 78 and 82%, respectively. In urban settle- pattern included revenues from entrepreneurial activity. ments (excluding Novosibirsk) subordinate to the oblast, Their share in the aggregate revenues of all the oblast the proportion of grants from the oblast budget decreased municipalities was, on average, 2–3%. from 37 to 29% in 1996–1998, while, in 1999–2002, it To estimate the level of autonomy of local budgets, we increased to 39–42%. In 2003, the percentage of grants have analyzed the distribution of the municipalities based was 25%; in 2004, it was 30%; and, in 2005–2006, already on the share of collected (tax and nontax) revenues in the exceeded 60%. In Novosibirsk, the unit weight of grants aggregate revenues of the local budgets in 1996–2006. The was about 8–9% in 1996–1998; however, by 2000, it calculations results are presented in Table 1. decreased to 3%. The proportion of grants in Novosibirsk in 2001 was 10%; in 2002, it was 19%; in 2003–2004, it In 1996–1997 and 1999–2004, the proportion of col- was 16%; in 2005, it was 30%; and, in 2006, it was 25%. lected revenues for the majority of municipalities of the Moreover, by 2003–2004, the unit weight of nonrepayable 4 Novosibirsk oblast was within the limits of 20–40%, grants had risen considerably; however, in 2005, this indi- whereas, in 1998, this proportion was 30–50% and, in cator was down again to 7% and, in 2006, it had decreased 2005–2006, was no more than 20%. Moreover, in 2003, the further to 3%.

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