Some Observations Regarding the Law on the Federal Budget for 2015

On 3 December, the text of Federal Law, of 1 December 2014, No 384-FZ 'On the Federal Budget for 2015 and the Planning Period 2016-2017' was published on the Official Government Internet-Portal of Legal Information and on the website of the RF Ministry of Finance. Two days later, on 5 December, an annex to that law, titled 'The Citizen's Guide to the Federal Budget' , was published on the website of the RF Ministry of Finance.

As far as these documents are concerned, the following observations are to hand. It is evident that absolutely no changes were made to the main budgetary indicators, including total revenue, expenditure and the size of the budget deficit, during the two-month-long revision of the original version of the budget submitted by the Government. The macroeconomic parameters forming the foundation of the budget also remained unchanged.

However, a number of considerable changes were made to the non-classified section of the institutional structure of the federal budget. Thus, over the aforesaid two months, the 2015 budgets of the RF Ministry of Education and Science, the RF Ministry of Agriculture, the Federal Road Agency, the RF Ministry of Labor, the RF Ministry of Defense, the Federal Migration Service, the Presidential Executive Office, and the RF Ministry for North Caucasus Affairs were increased by Rb 13.8bn, Rb 20.2bn, Rb 14.6bn, Rb 5.2bn, Rb 80bn, Rb 2.8bn, Rb 2.2bn, and Rb 5.0bn respectively. It should be noted that a year ago, the initially suggested budgets of the RF Ministry of Education and Science, the RF Ministry of Defense and the Presidential Executive Office had also been eventually increased. The only agency whose budget was significantly cut was the RF Ministry of Finance. Also, the institutional structure of budget expenditure was extended to include allocations to the two agencies earmarked for closure - the Federal Service for Defense Contracts and the Federal Agency for the Procurement of Armaments, Military and Special Equipment and Materiel.

As far as the non-classified section of expenditure is concerned, the most significant changes were made to the funding of the following state programs: No 2, 'Development of Education' (+ Rb 17.2bn); No 4, 'Available Environment' (+ Rb 5.2bn); No 5, 'Provision of Citizens of the Russian Federation with Affordable and Comfortable Housing and Communal Services' (+ Rb 2.0bn); No 7, 'The Program of Employment Assistance to the Population' (+ Rb 2.9bn); No 11, 'Development of Culture and Tourism' (+ Rb 2.4bn); and No 36, 'Development of Federal Relations and Creation of Conditions for Effective and Responsible Management of Regional and Municipal Finances' (+ Rb 11.7bn). As it had already happened one year ago, financing for State Program No 34, 'The Socio-economic Development of the Far East and the Baikal Region' was drastically cut (this time, by one-third, or Rb 21.5bn). State Program No 33,'Regional Policy and Federal Relations', which should have received a Rb 15.0bn allocation in 2015 in accordance with the initial version of the federal budget, vanished from the final version of the federal budget signed by the RF President on 1 December 2014.

Unlike in the six previous years, now both experts and laymen alike have an opportunity, provided by the publication of 'The Citizen's Guide to the Federal Budget', to also assess any changes made at the section level of the functional classification of federal budget expenditures. Thus, during the passage of the draft law on the federal budget for 2015 through the RF Federal Assembly, spending cuts were applied to the following budget sections: 'Nationwide Issues' (- Rb 0.9bn); 'National Defense' (- Rb 12.8bn); 'National Security and Law-enforcement Activity' (- Rb 1.7bn); 'National Economy' (- Rb 25.8bn); 'Health Care' (- Rb 0.2bn); and 'Physical Culture and Sports' (- Rb 1.5bn). The following budget sections saw an increase in spending: 'The Housing and Utilities Sector' (+ Rb 14.7bn); 'Education' (+ Rb 14.1bn); 'Culture and Cinematography' (+ Rb 0.6bn); 'Social Policy' (+ Rb 8.2bn); 'Mass Media' (+ Rb 1.9bn); and 'General-nature Interbudgetary Transfers to the Budgets of Subjects of the Russian Federation and to the Budgets of Municipal Formations' (+ Rb 3.4bn).

During the passage of the draft law on the federal budget through the RF Federal Assembly, the transparency of the federal budget for 2015 and 2016 significantly increased due to the reduction of the classified section of expenditure by Rb 80.8bn and Rb 5.2bn respectively. The classified section of expenditure in the federal budget for 2017 grew by Rb 3.2bn. As a result, the share of the classified section of expenditure will amount to 20.5% in 2015, to 21.8% in 2016, and to 24.7% in 2017.

The Law on the Federal Budget envisages that, in the year 2015, Rb 3,274.0bn (or 4.2% of GDP) should be allocated to the budget section 'National Defense'. Thus, Russia's defense budget for 2015 will be 32.5% larger than her defense budget for 2014, which was set out in accordance with Federal Law, of 28 July 2014, No 201 'On the Introduction of Alterations to the Federal Law 'On the Federal Budget for 2014 and the Planning Period 2015-2016''. In the List of Instructions on Implementing the Presidential Address to the Federal Assembly of 5 December 2014, expenditures on national defense and national security are excluded from the range of expenditures that the RF Government should be obliged to cut in 2015-2017. At the same time, Federal Law, of 1 December 2014, No 397-FZ has suspended for one year all annual increases to the pensions of retired military servicemen and persons equated to them.

Vasily Zatsepin — Candidate of Military Sciences, Head of the Economics of the Military-Industrial Sector Department