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by Vladimir Kovalyev

St. Pete Set to Battle Over City Budget

The Moscow Times,Monday, Oct. 8, 2001

ST. PETERSBURG -- City Hall kicked off the budget-debate season last week by submitting a 31-volume draft for 2002 to the St. Petersburg legislative assembly that included increases in spending on education and health services by 56 percent and 32 percent, respectively.

The city administration's proposal anticipates a surplus of 1.1 billion rubles ($37.3 million), but lawmakers and analysts say this figure will likely change in the process of give and take with the legislative assembly.

The proposed surplus is based on forecasted revenues of 53.8 billion rubles and expenditures of 52.7 billion rubles.

City Hall is forecasting a year-end exchange rate of 31.4 rubles to the dollar and an inflation rate of 22 percent. By comparison, the federal budget submitted to the State Duma last week foresees inflation of about 13 percent and an average exchange rate of 31.5 rubles.

The most significant jump in spending is in education, where the city is proposing expenditures for 2002 of 10.6 billion rubles, compared with 6.8 billion rubles in 2001. The largest part of the increase is in teachers' salaries, which will total 6.7 billion rubles, a jump of 87 percent over this year.

"Teachers are one of the most unfortunate groups in our society," said Alexander Afanasyev, spokesperson for Governor Vladimir Yakovlev, in an interview last week. "Even though teachers here are paid more than in any other part of Russia, their salaries mean they are basically surviving day to day."

Medical salaries paid under the City Hall plan will jump by 63 percent from 2001 as total health care spending will rise to 6 billion rubles from 4.6 billion rubles. In total, social- and health-policy expenditures, not counting education, will be 13 billion rubles, or 25 percent of the 2002 draft budget.

Natalia Yevdokimova, a Yabloko faction deputy in the legislative assembly, said the rise in the social spending in the draft is misleading. "Part of this jump is simply the result of inflation," she said. "Another problem is deciding which numbers to use in comparing.

"For example, this year monies for subsidies to public transportation organizations for senior citizens, the handicapped, etc., were included in the transportation portion of the budget," she said. "Next year, this funding will be included in the social spending section. This is only one example."

The budget's revenue side shows a figure of about 10 billion rubles -- an increase of $300 million once the change in the Central Bank rate is taken into account.

"Most of this growth is inflation-related, but considerations like the growth in regional GDP, the improvement in the collection of rents owed to the city and federal economic policies ... are all playing a part," said Sergei Dyomin, deputy chief of the City Hall Finance Committee, last week.

Some of the money being made available in these spheres may derive from a drop in the percentage of total expenditures earmarked for servicing the city's debt. The 2002 plan sets this figure at 3.7 percent, down from 6 percent in 2001 and 8.5 percent in 2000.

Dyomin said thatthe 1.1 billion ruble surplus would probably go to paying off more of the city's debts, which will have been paid down to 10.7 billion rubles by the end of 2001 from 15.7 billion rubles at the start of the year.

The budget includes a $118 million payment scheduled to be made June 18 on Eurobonds issued by City Hall in 1997. The original total of bonds was $300 million, with $182 million to have been paid off by City Hall at the end of this year. Next year, City Hall plans to take out $40 million in additional loans.

Original at

The Moscow Times,Monday, Oct. 8, 2001

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