Efficiency of Inter-budgetary Regulation of Heavily Subsidized Budgets at the Subnational Level

Abstract

The subject of this article is the set of economic and financial relations that develop in the process of inter-budgetary regulation and equalization of budgetary provision and balance of heavily subsidized budgets at the subnational level. The purpose of the study is to identify the degree of influence and effectiveness of the existing system of inter-budgetary regulation and fiscal decentralization in Russia in relation to heavily subsidized budgets at the subnational level in the context of their socio-economic, budgetary and financial condition and development. The methodological basis of the study is based on the Russian budgetary legislation, as well as domestic and foreign scientific studies devoted to the theory of fiscal decentralization (federalism), mechanisms for equalizing budgetary provision at the subnational level, approaches to assessing the degree of influence of fiscal decentralization on stimulating economic growth in regions and states. In the course of the study, the author applies a systematic approach, as well as general scientific and special methods: coefficient method, comparative, structural dynamic retrospective analysis. The analysis of the relationship and dispersion of the financial parameters of subnational budgets using the Pearson pair correlation coefficient, as well as the coefficients of variation and oscillation. The study reveals the problematic aspects of the effectiveness of the existing system of inter-budgetary regulation and the convergence of the socio-economic state of heavily subsidized regions in recent years. This result contradicts most budgetary practices and the theory of fiscal decentralization, which justifies the need for a qualitative change in the existing system of inter-budgetary regulation. The main conclusion of the study is that the existing mechanism of inter-budgetary regulation and the existing instruments for equalizing budgetary provision do not contribute to a significant change in the fiscal and socio-economic parameters of the development of heavily subsidized budgets at the subnational level. The nature of the use of the gratuitous aid received for this category of subjects of the country is reduced to short-term coverage of the gap in financing expenditure obligations but does not change the model of either the organization of budget regulation or the regional economy. Soft budget constraints create weak incentives and lead to financial and economic problems — increased dependency and subsidies.