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700 the IMPACT of INTERGOVERNMENTAL TRANSFERS on the FINANCIAL SECURITY of the CONSTITUENT ENTITIES of the RUSSIAN FEDERATION Roman M

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700 the IMPACT of INTERGOVERNMENTAL TRANSFERS on the FINANCIAL SECURITY of the CONSTITUENT ENTITIES of the RUSSIAN FEDERATION Roman M V. 01 - Nº 01 - Ano 2020 – Special Edition 700 THE IMPACT OF INTERGOVERNMENTAL TRANSFERS ON THE FINANCIAL SECURITY OF THE CONSTITUENT ENTITIES OF THE RUSSIAN FEDERATION Roman M. Kotov1 Nuriya M. Chernysheva2 Abstract: The research focuses on the of inter-budget transfers, the directions mechanism of inter-budget transfers in for reforming this mechanism are stated, the budget system of the Kemerovo and sources of increasing the revenue Oblast. The evolution of inter-budgetary side of budgets are identified to reduce relations of the RF is discussed, models the dependence of the regional budget on of separating the powers are given, the federal one. implementation of the regional budget and that of municipalities are analyzed, Keywords: intergovernmental transfers, and the role of inter-budget transfers in budget security, budget, subsidies leveling budgetary provision is revealed. The research aims to identify promising 1. Introduction areas for strengthening regional and Uniform development of all local budgets in the Kemerovo Oblast. entities is a fundamental issue of the The crucial method is to analyze the government; this issue can be solved structure and dynamics of the budgets of through a system of effective the Kemerovo Oblast and its intergovernmental regulation, a system municipalities, as well as to look into which takes into account the national inter-budget transfers. The dynamics and characteristics of the state. structure of intergovernmental transfers Inter-budget transfers are an are investigated using economic and important feature of the economic policy statistical analysis. Based on the results, of any federation. The most important an assessment is made of the existing business case for intergovernmental model for implementing the mechanism transfers is achieving horizontal 1 Kemerovo State University, 6 Krasnaya Str., Kemerovo, Russia, 650000 2 Kemerovo State University, 6 Krasnaya Str., Kemerovo, Russia, 65000 V. 01 - Nº 01 - Ano 2020 – Special Edition 701 equality. agriculture, is necessary. This area The principle of horizontal should be on the list of priority tasks to equality is due to the argument that an ensure Russia's food security in the equitable distribution of resources will context of economic sanctions. The eliminate the scarcity of resources that amount of subsidies to rural areas often arises in subnational units. In the absence depends on external phenomena such as of a horizontal redistribution of weather that are not controlled by local resources, resource-deficient regions entities and can affect decentralization will struggle to eliminate inter-regional de facto, affecting the financial differences in economic growth and capacities of local authorities. The economic development. consequences of climatic cataclysms Both in Russia and worldwide, cause fluctuations in income from the fundamental organizational goal of agriculture, affect the collection of such regulation is to equalize the level of revenues of local authorities and, in turn, socio-economic development of the stimulate further income received by country's subjects. In Russia the main local authorities through transfers from method that evens out budget financing the central government [26] is the distribution of federal transfers These are factors impeding the among the regions. development of the financial system of At the present stage of Russia; therefore, the problems of inter- development of Russia, the problem of budgetary relations in the Russian optimal formation and distribution of Federation are increasingly relevant. budget funds is urgent. The budgets of The present research aims to local governments are increasingly briefly review the latest achievements in dependent on the federal budget; the the state policy of financing the regions, state cannot fully satisfy the interests of and to provide details and an assessment all the entities in the field of financial of the financing of the Kemerovo Oblast. support for national and regional projects. 2. Materials and Methods With the current political and Currently, the economic economic development of the country, development of Russia is characterized subsidizing vital sectors, such as by dynamic organizational and structural V. 01 - Nº 01 - Ano 2020 – Special Edition 702 changes in public finance. Improving monetary’ execution of budgets. The intergovernmental relations in the budgetary provision of the regions is framework of the budget system reform formed on the assessment of tax are an important part of state policy in revenues and expenditure items of the terms of financial relations. Balancing budget [10, 12]; budgets at all levels is the basis of the 3) The third stage (1998-2000) ongoing economic development. To was characterized by new improvements achieve balance, it is necessary to level of organizational and legal support of the ‘lower’ budgets with the help of intergovernmental relations. In inter- inter-budget transfers. Transfers budgetary interaction, there was a provision is regulated by Chapter 16 of tendency towards centralization. The the Budget Code of the RF. financial security of state entities was The evolutionary development of determined through an assessment of the intergovernmental relations has five budget expenditures index and the tax stages: potential index [10]; 1) At the first stage (1991-1993), 4) The fourth stage (2001-2005) the basic tenets of federalism in the was characterized by strengthening Russian Federation were formed. The centralization. A system of borrowing distinguishing feature of inter-budgetary functioned at the regional level. relations was the strengthening of Authorities of the constituent entities of centrifugal trends. Taxes assigned to the the RF, especially local self-government, corresponding levels of the budget were vested with limited formal powers system of Russia were the sources of to form their own income and expenses budget revenues. By Decree No. 2268 of [10, 5]; the President of the Russian Federation 5) At the fifth stage (2005- of December 22, 1993, the Federal Fund present), the local level of the budget for the Financial Support of Regions was system in intergovernmental relations is established to implement the inter- of most interest [10]. budgetary alignment [10]; Russian and foreign authors 2) The second stage (1994-1998) consider various models of was legitimate decentralization. A intergovernmental relations. feature of the period is the ‘non- V. 01 - Nº 01 - Ano 2020 – Special Edition 703 Richard M. Bird and Michael management by the government, as well Smart, in their article ‘Inter-Budget as limited independence of regional Transfers: International Lessons for authorities. An important role in this Developing Countries,’ addressing the model is represented by transfers which main problems of developing include various forms of government transfers, conclude that no intergovernmental regulation [12]. simple, uniform transfer scheme is Inter-budget transfers can be universally acceptable, yet the world’s classified by their types: equalizing experience clearly shows that to ensure (unconditional) and target (conditional). the effective provision of services, the In the Russian Federation, transfer of federal funds should be subsidies can be classified as designed in such way that the entities unconditional intergovernmental receiving them have a clear mandate, transfers, and subsidies and subventions adequate resources, sufficient flexibility as conditional. for decision-making and responsibility An essential aspect in forming for results [27]. intergovernmental relations is the The differentiation of separation of powers: revenue and interbudgetary relations is directly expenditure. In world economic practice, influenced by the specific feature of the there are several basic models of construction of budget systems in each separation of powers: individual state, and, in addition, the 1) In the first model, the federal form of movement of cash flows authorities have a clear-cut range of between budget levels. Thus, the models exclusive powers, and the remaining are divided into decentralized and powers are distributed between cooperative [12]. territories (states); The cooperative model is most 2) In the second model, there are widespread in world practice, including two different groups of powers – Russia. Its distinguishing features are: respectively, only federal or sub-federal; close cooperation in inter-budgetary 3) The third model is relations at the central and regional characterized by the following powers: levels of government; high degree of state, federal subjects and series of centralization of regional financial combined powers; V. 01 - Nº 01 - Ano 2020 – Special Edition 704 4) In the fourth model, an The mechanism of inter-budget exhaustive list of powers is assigned to transfers, firstly, corrects vertical the federation and a joint list is the imbalances, i.e. eliminates the responsibility of the state and its subjects discrepancy between the expenditure [12]. side of regional and local budgets and The decree No. 204 of May 7, the share of their financing (limited 2018of the President of the Russian budgetary liability) which is assigned to Federation stipulates that "in the field of this budget; second, it is meant to inter-budget relations, it is necessary to equalize the level of using public reorient targeted inter-budget transfers services in different regions. and to review the level of co-financing Do intergovernmental transfers from the federal budget"
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