Poor and Poorer: Regions with Low Budgets Prepare for Income Cuts

Yekaterina Maksimova

The TOP-10 constituent entities of the Russian Federation with a minimum budget traditionally include the Jewish Autonomous Region, the Nenets Autonomous Region, the Republics of Kalmykia, Altai, Ingushetia, Adygea, North Ossetia, the Karachay-Cherkess Republic, the Chukotka Autonomous Region, and the Magadan Region.

Most notably, the budget parameters for 2023 were rewritten by the Jewish Autonomous Region, the Republics of Adygea and North Ossetia.

Thus, the revenues of the JAO (excluding adjustments) are expected to decrease from 15.8 billion rubles to 14.6 billion rubles, and instead of a small surplus, a cash gap of 203 million rubles is planned. The revenue part of the Adyghe budget will be reduced from 31.6 billion to 29.8 billion, the deficit is projected at 1.5 billion against 925 million in 2022. The parameters of the budget of North Ossetia look like this: revenues of 38 billion rubles (against 41.7 billion in 2022), expenditures of 39.6 billion, the projected deficit will increase from 1.059 to 1.6 billion rubles.

In other regions, the revenue part for 2023, although slightly higher than the initial parameters for 2022, but taking into account the adjustments made this year, the subjects are still preparing for a reduction in revenue. For example, the Chukotka Autonomous Okrug, with projected revenues of 45.6 billion rubles, will miss more than 3 billion next year.

So far, these are only draft budgets that are now being considered and approved by regional deputies, but the general trend is already clear. Practically in all subjects with the status of the “poorest” the reduction in the revenue side is explained by the “reduction in the volume of gratuitous receipts from the federal budget”. It is also predicted that one of the key taxes, the income tax, will sag in 2023.

The course of the federal government to reduce subsidies, subsidies and subventions will not come as an unpleasant surprise for regional officials. The Ministry of Finance has already stated that in the next three years it intends to cut funding for subjects by 1.6 trillion rubles. And as the economist Natalya Zubarevich explained to NI earlier, this means that investment and travel expenses will be cut in the first place.

“They are {the government of the Russian Federation, - approx. ed.} understand that regional budgets will be in deficit in these years. This means, as usual, fewer roads, less modernization of the transport system, less money for scientific and technical developments, for transport construction - the constituent entities of the Russian Federation will repair intraregional and intracity roads less and more slowly. We will meet these years with the scale of patching. In the 90s, they lived, remember, about the same”, - Natalya Zubarevich reasoned.

Political scientists believe that in such a situation, the responsibility of the regionals to the population increases many times over.

“The quality of management and the level of responsibility of the elites are characterized by problems of varying degrees of intensity in Kalmykia, Ingushetia, and North Ossetia, the Chukotka Autonomous Okrug, and the Altai Republic. Naturally, this directly affects the state of the budget - the revenue side is reduced. However, the budgetary situation in all these regions, which are among the poorest, is traditionally unfavorable,” political analyst Dmitry Orlov noted.

Political scientist Konstantin Kolachev draws attention to the fact that in the regions of the top ten poorest socio-economic situation develops differently. For example, salaries in Chukotka can be the envy of Muscovites, but the peninsula is famous for its high prices. And the Jewish Autonomous Region is in such a socio-economic impasse that it may be time to annex it to the Khabarovsk Territory.

“And it is absolutely obvious that the regions have different problems. Some people have the problem of high prices and high salaries, while others have the problem that there are no jobs for people. Just none. And hence the low level of income”, - says Kalachev.

But in any case, Kalachev notes, the responsibility of governors in the crisis period increases. “There are objective and subjective factors. Be Goldstein {Governor of the EAO, - approx. ed.} at least seven spans in the forehead, but the region has a limit. And other regions have both opportunities and resources. And subjective factors will play a special role. From attracting investments to the region, developing the economy, creating jobs and improving the social well-being of the population to receiving preferences from Moscow and lobbying opportunities - can the governor attract money from Moscow in an objectively difficult situation or not. And this, by and large, is the first problem: regional authorities are often ineffective. In general, the problem is not only in the conditions that the heads of regions received initially, but also in their effectiveness, lobbying opportunities and the work of the entire governor's team,” Konstantin Kolachev summed up.