The federal government is trying to clarify its relationship with the public. In reality, this attempt looks like a way to dump responsibility for social programs onto the regional level.

Oleg Khrabry

The Duma recently passed a bill with the mundane title of “On Making Some Amendments  to the Legislative Acts of the Russian Federation” and with revolutionary content, obviously without much debate on its first reading. Crafted in the depths of the Ministry of Finance by a group under the direction of Deputy Finance Minister Tatiana Golikova with the cooperation of the Ministries of Labor and Social Development and dozens of other Russian ministries and agencies, the bill makes amendments to 155 federal laws and suspends 41 legislative acts. “At the moment, all legislation connected to citizens’ rights and social benefits is being dismantled. But this is more than just legislation; it is an attempt to change the psychology of millions of people. The entire system of social services is being revised and the concept of what a person can depend on from the government and the principle of what government is are being profoundly altered,” Mikhail Zadornov, former minister of finance and independent Duma representative, told Expert in an interview.

The dependency complex

This bill is the continuation of what has been called Kozak’s Reforms. Two other laws were passed last year as part of these reforms. They defined the structure and jurisdiction of various governmental agencies at the federation subject level and of self-governing agencies at the local level, as well as how these agencies should be funded. Because the documents only established principles, there are still Russian regions that have yet to hear of the reforms. Many regional leaders consider the dividing up of jurisdictions between federal government and federation subject merely a façade thrown up in front of what amounts to business as usual. The entire history of informal dealings with the Kremlin has convinced them of this. Yet for the first time officials are currently trying to provide this complicated system with a legal framework.
Thus, the federal government for the first time is giving up its right (and putting it in law) to force a region (or any commercial entity in a region) to honor financial obligations before the public if the government does not give money from the federal budget for the purpose. The logical consequence of these basic principles is the idea of putting the in-kind benefits of certain groups of people in monetary form, as a very reasonable mechanism for “dividing up jurisdictions.” It is practically impossible to establish in any real fashion the extent of each party’s responsibility in virtual social welfare relations. Turning numerous benefits into cash has made the problem of Russian federalism more tangible and more real. Moreover, the reforms have finally forced the authorities to admit that the “social welfare government” stipulated in the constitution only exists virtually. According to data from the Ministry of Finance, made public by Putin on several occasions, starting in the early 1990s legislators passed a total of 6.5 trillion rubles in annual social welfare obligations. The current total budget for Russia as a whole is only 4.5 trillion rubles. At the federal level alone, there are around 120 types of benefits for more than 200 categories of recipients. In all, according to analysis by the FBK Company, over 103 million people, or 71.5% of the population, benefit in one way or another from government programs.  The overwhelming majority of these populist laws which are clearly impossible to carry out were passed when the Russian economy was at its worst and the domestic political situation at its tensest. For example, between 1991 and 1996, customs and tax inspectors, judges, and medical personnel all became welfare beneficiaries. In 1995, the basic law on the disabled was passed and it soon became clear that among those receiving these benefits, less than half were actually disabled. The rest had purchased shady medical documentation of their supposed disability.
The review of social welfare obligations is inevitable, because as cynical as this might sound, they do little to help those in need and do much to encourage a unique culture of social dependency. According to “The Human Consequences of the Chernobyl Nuclear Accident,” a report published by the UN Development Program and UNICEF, the health consequences of Chernobyl radiation were significantly fewer than previously believed. The key conclusion that UN experts came to was that victims’ stress and hypochondria did the most damage to their health, as did unsuccessful attempts to help them: “The generous benefits and medical and food assistance for those recognized as victims of led millions of people to feel that they are victims of fate and to develop a dependency complex.” The entire country has fallen into this same trap of social expectations. Everyone among the tens of millions insisting that benefits be maintained in full and in kind has had their own personal social catastrophe since the fall of the Soviet Union and has developed their very own dependency complex.

The view from the left

According to Oleg Sheyin, member of the Rodina faction in the Duma, exchanging benefits for cash involves only a small group of people. Left-wing politicians believe that the bill really means getting rid of the majority of categories of benefits, as the new Housing Code passed along with the jurisdiction bill (which killed the hopes of limited income families to get free municipal housing). In addition, the Single Social Tax decreased (from 3.6% to 2.8%, and the federal budget will receive 28.6% when it once got 5.9%) and changes were made to the Labor Code (the entire institution of the minimum wage will be done away with). The fact that the federal government can no longer force regions to pay for, say, a 50% discount on utilities for veterans of labor could mean that these benefits will disappear. This also involves subsidies to the regional government enterprises of the Far North and the 25% subsidy to village teachers. Each region will define the extent of its obligations on its own.
At the same time, the federal government’s jurisdiction will undergo a strict revision. This spells the end of the unified wage schedule, and regions will have the right to set the salaries for state employees. “This means that in a year or two teachers teaching the same subject for the same amount of hours will receive different salaries in different Russian regions,” Oleg Sheyin argues.
The reaction of regional leaders will also differ. They finally have their hands on 100% genuine power, but have yet to spot the back-breaking welfare obligations that come with it, obligations that the federal government has shifted from its own sore back to an even sorer one. Absolute and undisputed loyalty to the federal government will only make regional leaders lose local support. Once they understand this, they will start talking back to the federal center. The most unexpected reaction came from Valentina Matvienko, Governor of St. Petersburg, who plainly stated that “should benefits be changed to cash compensation, the annual burden on the city budget will be six or seven million rubles. Many federation subjects, including the city of St. Petersburg, are not able to take on such a burden.”
By dividing up jurisdictions, the federal government will set the social standards for the regions and at the same time unintentionally stimulate social inequality between one and the same groups of the population. The left grassroots opposition is threatening to hold large-scale protests in many cities around Russia and is appealing to those virtual standards that today exist only on paper but that should, they believe, be upheld.

Stealing their thunder

The leftists are trying to mobilize various social groups (independent labor unions, organizations for the disabled, environmental organizations, Sergei Glazyev’s Movement for a Decent Life, the Unified Socialist Party of Russia, People’s Will, and Solidarity) and to earn extra brownie points for demanding the “social welfare state” be preserved. They are inspired by the success of various group initiatives in Russia’s regions, groups that are gradually starting to consolidate their protest.
These interest groups will likely see even the government’s willingness to adjust payment amounts in response to public pressure as lame. Social expectations in this case will soar to high heaven. The Kremlin has already come up with an excellent antidote to the decline in presidential approval ratings during painful social reforms. Domestic discontent will erupt in limited areas in the regions and will as a rule be directed against regional leaders who will be the ones making most of the unpopular decisions. Taking into account that pro-communist leaders happen to be in power in some of the most problematic federation subjects, the new rules of the federal game could lead to the demise of several gubernatorial administrations disliked by the Kremlin, and their regions will end up absolutely financially dependent on the federal government. Redefining the jurisdiction among the regions with major natural gas and oil reserves will not allow any extremely powerful regional figures to emerge, as the federal government has taken over the lion’s share of taxes and left regions little room to maneuver. At the base of this federal pyramid, the Kremlin sits like an inscrutable sphinx. “The left wing’s ability to scare up a powerful leftist movement on the basis of problems arising in the process of welfare reforms is illusory. The people these decisions will affect are very conservative. They are WWII veterans, the disabled, people who would never follow the lead of some youth organization. They won’t go over to the opposition, but will write letters to the president or stand in picket line in front of government offices,” Andrei Isaev, chair of the Duma Committee on Labor and Social Policy, told Expert.

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