Restructuring Russian urban budgets: 1991–1995

Abstract

LOCAL GOVERNMENT BUDGETS contain information about economic and political priorities. Sufficient time has elapsed since the break-up of the former Soviet Union to allow us to examine budgetary records from 1991 to 1995 in order to uncover the imprint and significance of those priorities during a particular time in history-largescale social and economic restructuring. Do local conditions now drive budgetary policy in the post-centrally planned era? Has the former emphasis on the national economy given way to a new focus on local needs that shifts part of the influence over future population and economic patterns from the central government to urban governments? How has capitalisation of the Russian economy changed local expenditure patterns? The monetisation and capitalisation of the Russian economy certainly form one of the hallmarks of the post-Soviet period. While attention to the national level can highlight the institutional arrangements and structure for the future economy, focus on the local experience adds the essential element of understanding how fiscal decentralisation policies are implemented. The hierarchical nature of the Soviet politicaladministrative system severely limited local action and added strong predictability to analyses of economic geography.' If political status still limits the ability of local governments to act in the economy, then we shall see limited local access to capital and market institutions as a holdover of the Soviet system and a continued hindrance to local economic development. But, in a less centralised system, local conditions and political arrangements should influence local policy making. Has this indeed happened in Russia? A case study methodology is used to identify trends in local2 budgetary policy formation and local institutional interaction. The purpose is to highlight the economic role of local governments in the post-Soviet period and consequences of restructuring local fiscal policy. Findings suggest that in the first five years of restructuring continuity and change describe the local experience of restructuring the Soviet system. The initial restructuring period, from 1991 to September 1993, was characterised by great fluctuations in public expenditure and local experimentation signifying real changes to the fiscal system and the elevation of importance of local policy. A more recent period, from 1994 until 1996, is characterised by the stabilisation of patterns and recentralisation of fiscal authority that recall the Soviet system. During the entire period, however, the budgeting process and the budget itself lack transparency, resulting in the inability to determine clearly expenditure structure and the degree to which the local public sector subsidises the private sector. The lack of