Unintended Budgetary Consequences of Devolution and Decentralization: The Case of Cherepovetz Raion, Russia

Abstract

ABSTRACT This is a study of devolution of power and responsibility to local governments in Russia, the resulting pressures on local revenues and expenditures, and the challenges these pose to local public administrators currently and for the foreseeable future. It is developed from nearly 100 hours of face-to-face interviews of top local public administrators in Cherepovetz, Russia, and from a careful reading and discussion of the parameters are which set by budget obligations, charters, federal, state, and local laws which set the legal and financial constraints within which the local public administrator works. INTRODUCTIOn Many areas in Russia have moved so rapidly toward privatization and local self-government that, today, the formal transition is nearly complete and problems of adjustment to and the instability of the new political and economic order are of concern.1 As a result of the devolution of power, a substantial number of these problems fall on the local public sector and the capacity of its administrators to administer a constantly growing body of laws and policies in the context of a dynamic environment in which previous Soviet law is irrelevant, gives wrong signals or is nonexistent. Recognizing this situation, the U.S. Agency for International Development (AID) created the Russia Market Oriented Farm Support Authority (MOFSA) project to uncover these problems with the hope of helping local public officials design appropriate public policy strategies to deal with them. This case study draws from the author's work with Chemonics International and the National Academy of Public Administration (NAPA) in MOFSA in 1996 in Cherepovetz, Russia. It also benefits from the author's experiences with local public administrators in the United States, Estonia, and the Republic of Georgia. This study addresses the questions: (1) What is the nature of the decentralization and the devolution of powers and responsibilities to local governments in Russia? and (2) What are the resulting budgetary problems reported by local public administrators charged with implementing the newly acquired responsibilities in a democratic setting? Thus, unlike the burgeoning literature on privatization, this study focuses on devolution and its impact on local public administrators. This area of study has received relatively little attention except by such authors as Bird, Freund, and Wallich (1995), Alm and Sjoquist (1995), Mitchneck (1995), Bird, Ebel, and Wallich (1995), and Wallich and Nayyar (1993). Yet, it is the local public administrator who implements these ever-changing laws within an ever-changing political environment described by the articles in Lapidus and Walker (1995). Some characteristics of this residue are described in Lavigne (1995) and Aslund (1995) but largely from the economic perspective. This article focuses on the issues as they relate to local public administration. METHOD This study is based on nearly 100 hours of interviews with fifteen senior government officials of the Cherepovetz raion, including the head and deputy head of the local governments, all ministers and directors of departments including finance and agriculture, the chief legal counsel, the director of municipal properties who was also responsible for privatizing and who represents the state on certain private boards, the director of housing and utilities, two rural administrators, the director and chief accountant of the largest business enterprises in the area, the head of the largest consumer cooperative, the director of a school, and the members of the 17-member legislative assembly. Each was interviewed separately and each participated in three full days of interactive seminars in which the findings, reported here, on how devolution and decentralization have affected local budgets, were intensively reviews. The individual interviews were basically open-ended to encourage candor and to reduce interviewer influence. …