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Bills Carve Up Towns, Villages

On Friday 28 February, the Russian State legislature the Duma is to consider legislation overhauling the country's system of local government.  If passed, it would more than double the existing number of municipalities, carve up their property, swell the ranks of local bureaucrats and require changes to some 240 other statutes.

The controversial Kremlin-penned bills, which are expected to squeak through a first reading, are part of President Vladimir Putin's effort to strengthen the so-called “vertical structure of power.”   The Kremlin says it wants to boost the Government's accountability to the public by clarifying the responsibilities of government at different levels and allocating enough money to cover all the State's obligations.

·        "It is necessary to delineate powers and stop deceiving the public," Putin told a meeting of regional lawmakers this week. "[It is necessary] to say who is responsible for what, and where the funds are to come from, to fulfill these responsibilities.  And if there are commitments  we cannot meetl, we must openly and honestly say so. ... There is only one thing people cannot forgive – and that’s lying."

Barely restraining his anger, Putin said the Government's domestic obligations, under existing laws, equal some 6.5 trillion roubles (=$205.8 billion) – that is, nearly double its National Budget.  In an attempt to untangle this fiscal knot, the Kremlin's reform introduces strictly ring-fenced funding for any financial obligation devolved to local government from the federal or regional level -- including programmes like education, health-care and housing subsidies.

·        "We used to promise a great deal, make decisions and then send them to the local level with orders to implement -  but we did not provide the necessary funding. This is absolutely wrong," Putin said of the two Bills last October.

The reform also introduces a two-tier system of local government:

·        The lower level, called a settlement (poseleniye), would be based in a village or town; the settlements, in turn, would be grouped into municipalities or municipal regions, that would act as a buffer between a town or village and the Region;

·        The upper level is the Region (or Province) where each municipality is located.  Large cities would more or less retain the power to govern themselves, as “Regions” in their own right.

The new system, due to be up and running in 2005, would place great responsibility on the shoulders of Regional officials, and reduce the powers of the settlements -- leaving them in charge of building maintenance and public areas such as sidewalks, lawns and playgrounds.

It would also require the Regions to redraw internal borders, which would increase the number of municipalities from the existing 11,500 to more than 28,000, according to the Economic Development and Trade Ministry.  Financial conflicts between municipalities and Regional authorities have been disturbingly common in post-Soviet Russia.

Critics of the new legislation doubt whether it will help settle existing problems, indeed they say it is likely to breed new ones.

·        "The old law is not obeyed. What makes us think the new one will be?", said Union of Right Forces Deputy Vadim Bondar, a staunch opponent of the proposed legislation, speaking last Thursday.

One of the main concerns has been the redistribution of power and property, whose consequences Bondar likened to the Time of Troubles -- the chaotic 17th-century interregnum that preceded the rise of the Romanov dynasty.  Bondar warned that the costly transition phase -- which is not budgeted into the legislation -- would lead to property disputes, unpaid bills, wage arrears and a great deal of passing the buck.  Earlier this month, Standard & Poor's blasted the plan as a whole.  The international credit agency said the legislation could damage the investor-friendliness of municipalities "due to a high likelihood of conflicts over property rights." 

While the reform's stated aim is to strengthen municipal government, opponents have criticized its top-down approach.  "The State is trying to discharge its obligations at the expense of local self-government," said Nadezhda Kosareva, President of the Moscow-based Institute for Urban Economics. "In no way does the reform foster local self-government as an institution."

One oft-criticized provision allows regional authorities, in certain emergency situations, to take over a municipal authority. Such cases include natural disasters, long-term insolvency or local decisions that "threaten to lead to widespread violations of human and civil rights, endanger the life or health of citizens or otherwise jeopardize their safety."

Kosareva praised the Government's plan to put its money where its mouth is by giving  the municipalities subsidies to cover spending which has been mandated from above, but she warned that the Bills'  fine print could nullify those benefits.   She also criticized the legislation for allowing the Regional authorities to use money from wealthier areas to cover the needs of poorer ones, thereby undermining the municipalities' incentive to generate income locally.

Even supporters of the reforms have pointed to flaws.  Federation Council Senator Leonid Roketsky, previously Governor of the oil-rich Tyumen Region, said last Thursday that he backed the Bills, and called on the Legislature to pass them.

·        "I've seen what happens to people when they realize what self-government is," Roketsky told a round table of legislators and scholars. "When an old man understands that 13 percent of his 100 roubles goes to the school that teaches his grandson, he understands that that's power!"

At the same time, Roketsky criticized the Bills for giving local government too little fiscal autonomy and not assigning any specific tax-revenues to the municipalities.  This issue has been raised repeatedly.  The new legislation will not come into effect until changes are made to the Tax Code and the Federal Budget.

Kosareva agreed that the municipalities’ tax base was too small, but also called on the Government to think bigger.

·        "Our Soviet legacy has left us a completely artificial system of settlement," Kosareva said, adding that, in a free market, many towns and villages would never have any profit-making enterprises at all.  “And supporting an artificial system of that kind would cost huge amounts of money," she said. "Perhaps it would be wiser to spend that money on increasing people's mobility and making it easier for them to relocate to places with some economic potential."