#12
RFE/RL Russian Political Weekly
Vol. 2, No. 22, 10 July 2002
NEW HOPE FOR LOCAL SELF-GOVERNMENT UNDER PUTIN?
By Matthew Hyde
Matthew Hyde is on staff at the School of Public Policy, University of Birmingham, U.K.

Local self-government, the third level of government below the federal and regional levels, is the forgotten institution of the Russian transition. Policymakers have tended not to see it as a priority, and there has never been a coherent federal policy on local government. In turn, Western academics studying subnational politics in Russia have focussed on the dramatic power struggles between the center and the regions, rather than on the more mundane problems facing Russia's cities and villages.

Local government, however, is important. It is responsible for delivering a range of public services to millions of Russians. It is the level of government closest to the people, and provides the link between state and society that is so vital in Russia. Building effective local government with the capacity to fulfil its core responsibilities is an urgent task. But as a new and developing institution, local government cannot achieve this task on its own. It is essential that the federal level create an environment that is supportive of local government and protects it from the interests which seek to limit its autonomy and its share of resources.

Local self-government under Yeltsin

The history of local government under Yeltsin is a mixed one. While events in the early and mid-90s led some to talk of a "municipal revolution," the center has also pursued contradictory policies which have stifled the development of local government.

A major problem has been defining exactly what local government is in the post-Soviet context. Indeed the very concept of "self- government" contains an inherent tension that has been played out in the realities of Russia's reforms. On the one hand, the "self" element of self-government stresses the importance of representation. The extreme interpretation of this view requires that the smallest of villages and settlements have their own local government organs (the "settlement principle"). Whatever its romantic appeal, this model is not realistic, as these small units do not have the capacity to deliver services. Indeed the settlement principle is sometimes put forward by enemies of local government as a pretext for transferring its responsibilities to the regional level. Similarly, the definition of local government as legally separate from the state has led some to argue that it is better seen as a type of "social organization," which should be entrusted only with minor functions.

The other extreme definition of local government sees it as the lowest level in a vertically organized system of state power (as it was in the Soviet period). While too much autonomy is not necessarily a good thing, real local government needs to be responsive to the wishes of local populations, and excessive hierarchical subordination is not conducive to this. Moreover, the tendency to think in vertical terms has hindered the recognition of the problems of building horizontal relations with other organizations at the local level.

The search for models, sometimes looking to Russia's prerevolutionary past, sometimes to the West, is reflected in the federal legislation. The 1995 federal law, On the Basic Principles of Local Self-Government in the Russian Federation, represented a compromise between a wide range of ideas and interests. A great deal was left unsaid, and very little thought given to how the law would actually be implemented.

Much of the responsibility for the further development of local government was handed to the regional level, which tended to deprive it of the resources and autonomy it needs. Frequently, the regions violate federal legislation on local government, and in many parts of Russia local government as such does not exist, its functions carried out by regional state administration.

Where local government does exist, the tendency has been to dump responsibilities for providing services on to it without providing the necessary resources. This phenomenon is referred to as unfunded mandates. Local government becomes a scapegoat for the failures of federal policies. Where the federal level did show some support for local government, it was to use alliances with mayors in its struggle against regional leaders.

Local government's inability to carry out its core tasks has led to popular disillusionment with the institution, so much so that in some cases local residents request the transfer of its responsibilities to regional government. Although lack of "demand" for local self-government is clearly a problem in Russia, the federal level must bear the responsibility for failing to supply an institution with the means to fulfil the expectations placed on it.

Developments under Putin

In the early days of his presidency, Putin unleashed a package of reforms intended to seriously alter the balance of power between the center and the regions. Central to Putin's federal reforms, the concept of the "vertikal" -- the vertical chain of executive authority emanating from the president and extending to the lowest levels of government -- is perhaps not compatible with genuine local government.

Indeed, initial elements of the reform package contained measures which attacked the autonomy of local government, such as the proposal to introduce regional appointment of mayors in cities with a population over 50,000, and the liquidation of raion-level local government, which would mean that local government would be exercised only at the lowest settlement level. It seemed that the problem of the mismatch between resources and responsibilities would be solved by removing responsibilities rather than increasing resources. In the end, however, the only proposal relating to local government which made it into law was the right for regional leaders to remove local heads for violation of federal and regional legislation, seen as compensation for regional leader's loss of their Federation Council seats.

Throughout 2001 and into 2002, however, Putin began to make announcements which suggested that the policy of neglect may be coming to an end. In what was seen as something of a turning point, his February 2001 speech at the presidium of the State Council voiced support for increasing local finances through redistribution of tax revenues. At the end of 2001, Putin stated that he would "focus his attention" on the question of local government in 2002. In his address to the Federal Assembly in April 2002, Putin admitted that the federal level had not given enough attention to local government in recent years. According to Putin, the problems would be addressed in a new version of the 1995 law on local government.

Obviously this kind of lip service has been paid before, and is insufficient in itself. But there have been signs that real changes are afoot. First, the government program on the development of fiscal federalism in the Russian Federation by 2005 under Finance Minister Viktor Khristenko has been examining the financial relations between regional and municipal levels. It aims to introduce measures to improve local finances, recognizing the need to end unfunded mandates, and limit the power of the regions to pass on responsibilities to the local level. It aims also to establish a stable unalienable tax base, proposing the transfer of a number of taxes to the local level.

Currently only parts of the program which are favorable to the federal government are being implemented (such as transfer of VAT to the federal level). Other federal policies, such as the reform of the budget and tax codes, have in fact reduced local revenues. The increased centralization of the 2002 budget means that local government receive only 5-6 percent of its income from its own sources, and is increasingly reliant on subsidies.

However, another important initiative promises more positive changes. The Presidential Commission for the Demarcation of Powers Between the Federal, Regional and Municipal Levels of Government was set up in June 2001, under the chairmanship of deputy head of the presidential administration Dmitrii Kozak. It has focussed considerable attention on the problems of local government.

One of the most significant proposals to come out of the Kozak commission's work involves a structural reorganization, establishing two tiers of local government. The lowest level, termed "municipality," would be organized according to the settlement principle and would be directly elected. The municipalities would be responsible for communal services, and would derive their incomes from local taxes, subventions and grants, and service charges. Echoing the creation of the seven federal districts in May 2000, municipal districts (okrugs) would be established which would consist of at least three municipalities, and be indirectly elected by municipal legislatures. Existing raions and regional capital cities would be classified as okrugs. The okrugs would deal with services such as education, health, and delegated state functions and would be financed by the municipalities and regional government.

The aim is to make sure that local governments have responsibilities which are commensurate with their size and capacities, while at the same time allowing for small units which offer effective representation. Obviously, however, structural reorganization is meaningless if local government continues to lack the financial resources it needs. Proposals have been put forward to enhance the tax base of local government by giving it a share of income tax, and to end unfunded mandates. This, and a clearer definition of local responsibilities, would make local government less vulnerable to regional control.

The regions would be further sidelined by establishing closer direct links between the federal and local levels, possibly through the creation of a federal ministry for local government and transfer of some federal finances directly to local government. Some have criticized the proposals as an attempt to extend the presidential vertikal to the lowest levels, although it is doubtful whether this is feasible in any meaningful sense.

Conclusion

The support for local government voiced by the president and other federal actors is unprecedented, and sensible proposals, focussing on effectiveness, have been made. Legislative initiatives are expected by the end of this year which promise to be wide-ranging. The Federation Council in its current form is not likely to block these initiatives.

However, before too much optimism is voiced, it must be remembered that in order to be effective, any new legislation on local government needs to be accompanied by detailed measures for its implementation, and that the cooperation of the regions is also essential.

Moreover, federal policy on local government still contains many contradictions, and the tendency to give with one hand and take with the other persists. It is unlikely that local government will remain a priority for long, and the current spurt of enthusiasm may result only in half measures. A great deal more is needed to create an institution that is sufficiently effective to earn the trust of the local population in the way that local self-government must.