Will there be budget sequestration in Tatarstan?
Successful administration of Tatarstan budget in 2015 inspires optimism in 2016 as well.
Our correspondent Albert Bikbov forecasts the extremely low probability of sequestration of Republican budget in 2016.
The myth of budget planning
There is one persistent myth: Republican budget depends on so-called scenario conditions (oil prices, dollar rate, inflation rate). In case of federal budget, these scenario conditions are very important, but as for the Republican budget, it is different situation. Judge for yourself, by October 2015, when adopting the budget for 2016, scenario conditions were:
- oil price = $60 per barrel;
- dollar rate = 56.8 rubles;
- inflation = 7.0%.
At the same time, for some reason scenario conditions of federal budget-2016 are different from Tatarstan's:
- oil price = $50 per barrel;
- dollar rate = 63.3 rubles;
- inflation = 6.4%.
What is the most important, both forecasts are far from the current economic situation:
- oil price = $33 per barrel;
- dollar rate = 77 rubles;
- inflation (official) = 12.9%.
It is clear that talks in federal government about no fewer than 10% sequestration are inevitable. As for our Republic, the situation is not so fatal.
Let's look at the administration of consolidated budget of Tatartstan in 2015 and official scenario conditions, which have not been revised throughout the whole fiscal year. Taking into account recent events, they are surprising:
- oil price – decreased to $100 per barrel;
- dollar rate – increased to 38.8 rubles in 2017;
- inflation (official) = 5.0%.
It would seem that Republican budget under such absurd calculations should crumble to dust, but no: it was run even with surplus income and relatively small deficit. It is sufficient in order to doubt the impact of scenario conditions on the implementation of our Republican budget.
In order to understand this better, let's consider some of the features of budget planning in the Republic of Tatarstan.
Budget planning in Tatarstan
It is known that only three types of taxes account for 80% of all own revenues of the consolidated budget of the Republic:
- income tax;
- individual income tax;
- property tax.
If there are no questions about income tax, but individual income tax and property tax do not depend on the dollar rate or oil prices and they are counted easily.
When calculating the income tax, the data from business-projects of large and medium organizations of the Republic is used. At meetings with the participation of the Ministry of Economy, the Tax Service, sectoral ministries they consider about 160 businesses that pay more than 65% of income tax. PJSC Tatneft provides about 30% of the total income tax of the Republic.
It is the specificity of the long-established manner of budgetary federalism: oil prices have a little impact on allocations of Tatneft and small oil companies to the Republic budget, but affect the Federal budget. Despite the fact that 64% of revenues of Tatneft (based on data for 9 months of 2015) — these are exports, a part of profits, that depends on oil prices and currency rates, is 'cut' and goes straight to the Federal budget through the mechanism of levying export duties.
Profit will be affected by many other factors, and services of companies, that prepare business plans, are better informed, and their forecasts are more precise in this respect.
Major items of the consolidated budget of Tatarstan (billion rubles)
items | 2015 fact | 2016 plan | abs. var. | rel. var. |
1. Budget revenues | 242,5 | 194,3 | -48,2 | -19,8% |
1.1. Income tax | 72,3 | 57,3 | -15 | -20,7% |
1.2. Individual income tax | 57,9 | 59,3 | +2 | 4,8% |
1.3. Excise taxes | 20,7 | 18,9 | -1,8 | -8,7% |
What do we see? First, revenues of the total budget of Tatarstan according to the plan in 2016 are understated in compare with the actual implementation in 2015. Here is the 20% reserve. It is very reliable buffer against possible troubles. Second, income tax and excise tax also have significant odds. The only growth is the growth from individual income tax. Here is the necessity to continue the implementation of 'May decrees' in 2016.
No reasons for cuts
Consolidated budget expenditures in 2016 are planned at the amount of 200.1 billion rubles. However, the actual implementation in 2015 amounted to 248.9 billion rubles. Here is just the opposite result: the actual implementation of expenditures in 2015 turned out to be by 24.3% more than was planned for 2016. The main technical difficulty is to keep expenditures in 2016 at the level that was planned. But again, that unscheduled expenses would be covered from excess revenues, the likelihood of which is very, very high.
When designing the amount figures of spending for 2016, the following was taken into account:
- wage increases to certain categories of public sector employees in the framework of implementation of decrees of the President of the Russian Federation dated 7 may 2012 in accordance with the technology roadmapping;
- increase in wages of certain categories of public sector workers, who are not included in the category of employees, salary increases of which are determined by decrees of the President of the Russian Federation dated 7 may 2012, the civil servants of the Republic of Tatarstan and other workers of state bodies of the Republic of Tatarstan by 7.0% from 1 October 2016;
- public obligations, food expenses and the medicines are indexed by 7.0% from 1 January 2016;
- scholarships are to increase from 1 September 2016 by 7.0%;
- utilities are adjusted for the growth of 7.5% from 1 July 2016.
All of these increases are already taken into account in the modest fiscal planning for 2016, so there is no doubt in their implementation.
In general, the tendency is that priority and socially important expenditures are growing. In the planned budget for 2016 they will increase by 5% and will amount 74.7 % of the total expenditures. Such expenditures are cut only at the end of the line, only after investment expenses. So we can be assured for 3/4 of our budget.
The only moment, when we can expect the trick, is the reduction in revenue from the federal government. Last year, 33.9 billion rubles were received.
The federal budget is under revision now with sequestration by 10%, that will probably reduce the possibility of the federal transfers to Tatarstan (grants, subventions and subsidies), which were provided earlier. However, it is not obligatory, because many of the transfers are also related to protected items and are not adjusted. So, losses will be minimal and can easily be covered with surplus revenues of budget in 2016. Besides, it is unlikely that in the case of Tatarstan the federal center will insist rigidly on 'sequestration for sequestration', because, like it or not, we are still a donor region. And it means that we can expect special treatment…