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Date of publication: 2017-11-14 09:00:29
Дата модификации: 2017-11-14 09:00:29
Views: 2034
The article is timed to the date: 1996-01-01
Other articles related to: Date1996-01-01 Articles for: Year1996


Sergei V. Shishkin & Irina A. Rozhdestvenskaya 




1. Social services main characteristics

2. Special interest groups in health care, education, and culture

3. Introduction of medical insurance

4. Changes in financing of education

5. Reforms in the sphere of culture

6. Changes of economic models for social services organizations

7. Changes in the ownership structure

8. Problems which need solution

9. Directions for the necessary actions





Reforms in health care, education, and culture (social services) represent an important part of social and economic policy during the transition. The problems of reforming social services attracted the interest of many researchers. This analysis is devoted to the models of health care, education, culture, and recreation organization in new conditions. Introduction of certain models will bring success or cause failure to the undergoing transformations and certain ideas. Interaction between different interest groups remains out of the framework of the analysis. Meanwhile, research of the social services performance is directed at the role of special interest groups in carrying out or blocking organizational or economic innovations. When analyzing transformations that are taking place in social services in the countries with the economy in transition, the question about which social forces stand behind the process of promoting or hindering the reforms, their interests, and how their positions change are left beyond investigation.

The purpose of this research includes analysis of the role of special interest groups in carrying out the reforms in health care, education, and culture (social services) in Russia. This text offers a description of the structure of interests existing in the Russian society with respect to reforms in social services; analysis of the most important changes that have taken place in financial, economic, managerial mechanisms, and in the relations between different kinds of property. The key organizational and economic problems existing in social services at present are being identified, and measures to their solution are being offered.


The concept of social and cultural sphere (social services) that is accepted in the Russian economic literature dealing with health care, education and culture is included. Simultaneously, in order to define these branches the notion of social services' branches is also applied. In this report both these concepts are used as synonyms.

Social services represent a rather wide sector of the Russian economy. In the Soviet society official ideology underlined the achievements in developing precisely social services, when they compared the situation in the USSR with that in the foreign countries. For example, according to the calculations carried out by the WHO, in order to have a satisfactory medical care there should be 28 doctors per 10,000 people. In 1985 this index in Russia was equal to 45. On the number of hospital beds per 10,000 people we outstripped all other countries: in Russia--135, in USA--53, in Germany--109, in Japan--124, in Great Britain--74 (Goskomstat data).

According to such indices as the GDP expenditure on social services, Russia by the end of the socialist era was behind the countries with the developed market economy. In 1989 combined expenditure on health care, education, culture, and recreation represented in Russia 11 per cent of the GDP, in the US--22 per cent, in Sweden--19 per cent, in Germany--19 per cent, in Japan--17 per cent, in Great Britain--16 per cent. Calculations were made using the data from Statistical Yearbook. United Nations. NY, 1993; OECD Economic Surveys; Narodnoye hozyaistvo RSFSR v 1989. (National economy of the Russian Federation in 1989). Ìoscow, 1990. The biggest gap was in the spending level on health care: in Russia--3.5 per cent of the GDP, in Germany--8.5 per cent, in Japan--6.5 per cent, in Great Britain--6.0 per cent. In our country expenditure on health care was 1.7 times less than the necessary GDP percentage level according to the WHO needed to satisfy requirements in medical service.

In 1993 the share of employed in social services in Russia equaled 17 per cent of the total number of employed in the national economy. At the same time, the share of those employed in education in Russia was higher than in the US: in 1993 in Russia it was 9.4 per cent of the total number of employed, and in the US--8.0 per cent. In health care the correlation was the opposite: in Russia--5.9 per cent, in the US--8.9 per cent of the total number of employed (according to the data of the Center for the Macroeconomics Analysis with the Russian Government and the US Bureau of labor statistics).

In this country population used to get the main part of social services free of charge or in a form of allowances. Thus, in 1989, the state budget covered 98 per cent of health care expenditure, 97 per cent of expenditure for education and 81 per cent of expenditure for culture and arts.

Market reforms that are being carried out in Russia at present considerably influenced dynamics and scale of social services development, quality and availability of rendered services, effectiveness of the existing material and technical base of their institutions.


Health Care

The scale of health care development in Russia is characterized by the following indices: according to the data available for the beginning of 1994, the number of hospital beds was at the level of 124.9 per 10,000 people, and the number of visits to the out-patient clinics and clinics per shift equaled 228.7 per 10,000 people. Development of medical institutions is given in the Table 1.

Table 1


Development indices of the medical institutions
  1985 1990 1992 1994
Number of hospitals, th. 12.5 12.8 12.6 12.5
total number of beds, th. 1938 2038 1940 1904
per 10,000 people 135.0 137.7 130.8 129.7
Number of out-clinics and clinics, th. 19.4 21.5 20.7 20.5
total number of visits per shift, th. 2898 3222 3321 3355
per 10,000 people 201.9 217.4 223.9 226.7
Total number of day hospitals,th. - 1085 1515 1552
Number of beds, th. - 18.6 26.9 30.3

Source: Goskomstat of the RF

A reduction in the number of day hospitals was accompanied, as may be seen from the data, by rendering more of the out-clinic services. By the end of 1993, the number of beds in such out-clinics increased by 2.6 times by comparison with 1989. At the same time, the average number of visits to doctors per person declined from 11.1 in 1985 to 9.2 in 1993.

Because of the different dynamics in hospitals, out-clinics, and clinics development the total number of people employed have changed (Table 2).

Table 2


Number of people employed by medical institutions
  1985 1990 1992 1993
Total number of doctors of all specialties, th.



per 10,000 people 45.1 46.3 44.7 45.0
Total number of paramedical personal, th.



per 10,000 people 120.6 122.61 113.6 111.7

Source: Goskomstat of the RF

Reduction in the number of paramedical staff represents an indirect feature of the quality decline in health care, because precisely the paramedical staff considerably guarantees doctor's efficiency, and patients' comfort at hospitals. There was a low correlation between the number of paramedical staff and the number of doctors. In 1993 it represented 2.5 paramedical staff members per doctor, which meant that a considerable amount of work which did not need special training, but which was necessary to guarantee the quality of treatment, either was done by doctors or was not done at all.

The most important aspect of transformations, that are taking place in material and technical basis of health care in Russia, lies in the out-clinics and clinics structural changes. It shows itself in the reduction of number of beds owing to an increase in their use efficiency, outstripping development of out-clinics and clinics, consulting, diagnosis and special kinds of medical assistance.



Indices that characterize the level and dynamic development of the educational institutions in Russia are represented in Table 3. Despite an extremely insufficient level of state support during transition, the system of education managed to preserve its resources potential. The whole educational system is undergoing a gradual reform. Changes which are taking place, first of all, are connected with the development of new types of educational institutions. They are also linked with the introduction and spreading of the innovative educational programs while preserving accumulated educational potential accumulated over previous years.

Table 3


Educational institutions development indices
  1985 1990 1992 1994
Total number of day-time schools, th. 67.1 67.7 68.3 68.2
number of pupils, mn 18.6 20.3 20.5 21.1
Total number of pre-school institutions, th.



number of children, mn 8.1 9.0 7.2 6.1
Total number of secondary specialized educational institutions, th.



number of schoolchildren, mn 2.5 2.3 2.2 2.0
Total number of higher educational institutions



number of students, mn 3.0 2.8 2.8 2.5

Source: Goskomstat of the RF.

Reduction in investment in construction and major repairs of educational institutions led to the growth of number of pupils who go to school in the second and third shifts. In 1985 the number of such pupils represented 19.3 per cent of the total number of pupils and in 1994--25 per cent already. This, undoubtedly, could not tell on the quality of school education.

The state of the material and technical base of educational institutions, as a rule, does not correspond to the existing norms and standards. The number of schools that needed major repairs reached 34 per cent of their total number the same year. In 1991 37.5 per cent of schools in Russia did not have running water, 21 per cent--central heating, 48.5 per cent--sewerage. This situation unfortunately has not improved lately.

Report sent by the General Procurator's office to the Prime Minister of the Russian Federation entitled "About the destruction of the educational system for minors", said that more than 60 per cent of schools lacked any sanitary facilities. Out of 2500 items of equipment and instruments that guarantee educational process half was outdated and needed to be replaced. On average, for a pupil in Russia falls less than 3 square meters of school space floor, which is 1.5 times less than the permissible minimum. As a result, in the majority of Russian schools the number of pupils per class is now twice bigger than in the developed countries.

The number of school teachers providing general education is growing. In 1985 it was equal 1,023 thousand teachers, in 1990--1,442 thousand teachers, in 1994--1,668 thousand teachers. There are only 15.3 per cent of men in the total number of teacher; 8.9 per cent are retirees who continue working (Ministry of education of the RF data). According to the estimations available at the Ministry of education, the schools are short of 15,000 teachers, including 6,000 teachers of foreign languages.

In recent years, there appear new forms of educational institutions: gymnasia, Lyceum, non-state schools, which represent an alternative to traditional public schools. Only in 1994 the number of gymnasia increased by 11 per cent (from 743 to 822), Lyceums--by 13 per cent (from 447 to 505), non-state schools--by 21 per cent (from 368 to 447). Technical maintenance of the educational process and conditions in these schools, as a rule, are much higher by comparison with the majority of public schools.

The number of higher education institutions in Russia is constantly growing (Table 3). The number of students per 10,000 people decreased between 1990-1994 by 10 per cent and represented 171. This reduction was due to the fall in students' number in the evening and correspondent departments. In last years this fall was due to a reduction of certain specialities that were overgrown because of the requirements represented by the ideological sphere and the military industrial complex in the past.

During last three years non-state higher educational institutions were growing most intensively. In 1994 their number reached 157 or 28 per cent of the number of public higher educational institutions. They were providing education to 4 per cent of the total number of students.



The dynamic development of culture facilities is given in Table 4. The number of theaters and museums is constantly growing while the number of libraries, clubs and cinemas is falling during last years. Attendance of all types of cultural institutions is falling.

Table 4


Development of culture indices
  1985 1990 1992 1993
Theaters, total 364 382 413 427
Attendance, per 1,000 people 509 375 296 279
Museums, total 964 1315 1379 1478
Attendance, per 1,000 people 724 971 389 438
Libraries, th. 62.7 62.6 57.2 57.0
Number of readers per 1,000 people 572 487 418 417
Clubs, th. 76.3 73.2 65.8 63.7

Source: Goskomstat of the RF

Material and technical state of cultural facilities in Russia are sharply behind similar facilities in countries with developed market economy. According to the Ministry of culture data, in 1992 nearly 40 per cent of public libraries occupied space floor that was less than 50 square meters. Ten per cent of libraries, eighteen per cent of clubs and thirty-seven per cent of theaters demanded major repairs. The space floor shortage in museums forces them to exhibit only 6-7 per cent of their funds.

Limited budgetary possibility during the transition period explains a reduction in construction of new social and cultural facilities and deterioration of the available facilities' condition. Gradual formation of the private sector in social services, as a rule, was not accompanied by an adequate development of its material base. Private schools, kindergartens, hospitals, theaters, etc., are housed in already available buildings and not in a newly constructed one.





Social and economic reforms always come as a result of compromises among different interest groups. Identification and study of such interest groups will ensure a true understanding of the actual dynamics and real substance of the reform processes in social services. At the same time, it represents a necessary condition for elaborating and putting into practice a realistic and effective socio-economic policy. Therefore, we think that any analysis of processes of reforming these or other aspects of social activity should be started with a careful description of various special interest groups concerned with these aspects.

Under special interests we understand respective operational positions of social subjects, that is, their attitude towards certain activities that provide for the fulfillment of their requirements. Considering the interests, we will try to explain at least three different aspects, or angles of approach:

a) Substantial--interests revealed towards substance, qualitative characteristics of rendering social services.

b) Economic--interests revealed towards economic characteristics of rendering social services, costs and results.

c) Political and economic--interests revealed towards retaining or replacing the norms which regulate the participation and interaction of different participants in this activity, that is the interests revealed towards the organization of management, financing, taxation, etc.

While doing research on medical, educational, cultural, and recreational services being rendered at the most general approximation, we should single out three large interest groups.

1) The interests of the population which are served by these services;

2) The interests of those officials who directly render these services (social and cultural institutions and their employees);

3) The interests of managing bodies regulating the process of rendering respective services, e.g., Ministry of Health, Ministry of Education, Regional Departments of Health, etc.



The social services consumers' interests, of course, are heterogeneous and differ among groups with different income level, education; among urban and rural population, households of different sizes, etc. However, recently, before the beginning of reforms, there was a common aspect in the interests of all these groups. Namely, it was dissatisfaction with the quality of rendered social services and with the chronic deficit of certain services. In the first place, dissatisfaction was caused by the difficulties in getting free medical assistance guaranteed by the state. Long hours spent in doctors office, difficulties in getting specialized medical assistance, shortages of medicines, deficit of hospital staff, its rudeness and corruption, etc., added to it. Irritation was also caused by scarce availability of cultural and recreative services, deficit of audio, cinema and video products directed to meet mass demand, uninteresting television programs and movies, etc. Many parents, comparing secondary school education offered to their children with recollections of their own school years, felt that the quality of state education was declining in the eighties.

Typically, this situation, first of all, was true of consumers who wanted to get social services from the institutions with a free public access. At the same time, there existed a rather extensive network of social and cultural institutions with restricted public access (so called special hospitals and clinics, holiday centers, etc.). Access to these institutions was given depending on citizen's position in this or that administrative body, large enterprise, department, as well as on personal acquaintances, relations with officials of these social and cultural institutions or people within the system of the state and party nomenclature. The network of these institutions has become known as special: special medical assistance, special pre-school institutions, special cultural institutions, that belonged to certain public organizations, or ministries, etc.

The level and quality of services rendered by these social and cultural institutions to the population were much higher than those rendered within the network available for the people at large. Accordingly, the level of expenditure required to maintain these institutions was also higher. At the same time, the services of special institutions, as compared with those of similar state social and cultural institutions, were rendered either free or at approximately the same and, sometimes, even at lower prices. As a result, the higher services level in special institutions was paid at the expense of unequal, not beneficial for the general population, distribution of public resources allocated to meet social services needs.

Thus, for instance, by the end of the eighties, in Moscow in the sphere of medical services the difference in the number of patients per a district doctor working at a general out-patients' clinic and per a special clinic doctor reached 4.7 times, and in the number of visits--10-15 times. It is obvious, that such difference in the amount of work among doctors considerably influenced their services quality. Thus, in life the social services consumers were informally divided according to their access to special institutions: some of them had this access and others were denied it. The latter had to turn only to the network available for the general public and receive services of lower quality.

People's interests are common in wanting higher quality of social services. A certain part of the population (groups with average and high incomes) is ready and able to pay for such better quality services. Groups with higher income are ready even to pay for all medical, educational, cultural and recreational services had they been of quite a different quality. Groups with average income are ready to pay for better quality services, but only for additional services to the free set of services offered by the state. Groups with average and lower income, i.e., the overwhelming majority of the population, are interested in preserving the old system of free distribution of social services. They want to enjoy improvement quality conditions mainly at the state expense. Forty-six per cent of Russian citizens think that health care should basically be free, three per cent of Russian citizens think that it should require payment, and forty-nine per cent of Russian citizens think that both approaches should be applied. For the Moscovites, whose per capita income is the highest in the country, the spread of opinion on this subject was in October 1993 the following: 44 per cent--for free health care, 16 per cent--for requiring payment, and 39 per cent--for both.

The Russian population has the same attitude towards the state of social services as existed in the Soviet society, and which could be characterized as passive discontent. The population was not organized to express and defend its interests with respect to transformation of public health or education, culture and recreational services.

After the start of sweeping economic reforms, the importance of health care, education, and culture turned out to be much less than obtaining cash income. According to surveys conducted by VTSIOM in February 1994 (Ekonomicheskie i sotsialnie peremeny: monitoring obshestvennogo mneniya. Informatsionnyi bulleten #1, 1995. Moscow, VTSIOM, 1995, p.35. Economic and Social changes: public opinion monitoring. Information bulletin.) among the problems which mostly hampered every day life in Russia 65 per cent of the city-dwellers named low income; 28 per cent--poor health and quality of medical assistance; 24 per cent--fear the job; 23 per cent--hopelessness and lack of perspectives; 22 per cent--every day life difficulties; 16 per cent--fatigue and overexaustion; 15 per cent--poor housing conditions; 9 per cent--lack of free time; 7 per cent--alcoholism of a family member, and 6 per cent each--difficulties experienced in children's education and relations in the family. Similar priorities were revealed in a survey, conducted among Moscovites (October 1994), which dealt with general problems: 56 per cent of respondents named environment a priority, 49 per cent--work of law enforcement, 28 per cent--social safety net for the poor, 26 per cent--, 23 per cent--performance of medical institutions, 22 per cent--public transport performance, 20 per cent--employment, 15 per cent--food availability, 8 per cent--performance of schools, 4 per cent--cultural institutions performance, 2 per cent--pre-school institutions performance (Ibid., p.34).


Social and cultural institutions staff and professional associations

The system of funding social and cultural institutions which existed till the end of the eighties together with the salary system have not provided any meaningful link between the amount of revenues received by these institutions or their employees' salaries and the quality of their performance. Accordingly, this have not given any stimulus to seek improvement in the services quality rendered to the public or to look for a more rational expenditure system. Salaries and wages increase of those employed in the social services lagged behind the salaries and wages increase in other branches of the national economy.


Table 5


Average Wages Rate in the National Economy (per cent)
  1970 1975 1980 1985 1990 1992 1994
National economy, total 100 100 100 100 100 100 100
Health care 75 70 75 70 68 65 78
Education 86 84 78 77 68 62 73
Culture 74 66 73 69 63 54 63

Source: State Statistics Committee of the RF (Goskomstat)

Medical staff, teachers, lecturers in the institutions of higher education had practically no opportunities to legally increase their incomes by improving quality of their work. As a matter of fact, there existed in the country a system according to which one needed an official permission for a part-time job as an addition to his/her main one, allowing a person to have legally not more than one part-time job. The salary rate difference was rather small (2-2.5 times). Employee's career depended on a number of formalities (working record, diploma, the CPSU membership, etc.) and not on the real level of training and quality of work.

In this situation the shadow system of "additional payment for services" (according to legislation then in force, it was qualified as a bribe) in fact represented payment made by the consumer for higher quality services.

Professional associations which existed in the social services were interested in overcoming the prevailing trend, according to which economic situation of their members was declining by comparison with that of those employed in the industrial sector. That is why, they were interested in economic reforms which, as they thought, would link the amount of funds allocated for the social services and the amount of wages and salaries of their employees with the actual volume and quality of their work, as compared with work of those employed in other sectors of the economy.

Since 1992, after economic liberalization, in the prevailing conditions of constant economic decline and limited possibilities for greater state budget financing, the living standards of employees in public health, education, and culture have sharply declined both in absolute and relative terms by comparison with other social groups. A decline of their profession prestige continued.

A survey conducted in Russia among secondary school leavers in 1966, showed that professions with respect to their prestige ranged as following: philologist, physicist, electrical engineer, artist, mechanical engineer, construction engineer, economist, doctor, driver, field-crop cultivation specialist, primary school teacher, agronomist, sales person, accountant, (Titma M.Kh. Vybor Professii kak Sotsialnaya Problema, (Choice of Occupation as Social Problem, Moscow, "Mysl", 1975. P.128). In 1994 a survey conducted among the school leavers revealed the following gradation of prestigious professions: lawyer, businessman, artist, translator/interpreter, accountant, housewife, mathematician, doctor, sportsman, engineer, writer, journalist, secretary, teacher, military officer, scholar, scientist in the field of natural sciences, pilot, farmer, worker, politician (Pulse No. 7, Department on Press and Information Affairs of the Moscow Government, 1994, p. 11). It is easy to note that the rating of professions of social services, except arts, was low in the past and remains the same at present. In 1966 a doctor occupied the 8th place, a teacher--9th place. In 1994 a doctor--8th place, a teacher--14th place.

Social and cultural institutions' employees concentrated on looking for additional means which they needed for their survival. They were forced to look for a second job, for any opportunities for receiving additional incomes. The most convenient for them becomes appropriation of revenues derived from the use of state property and municipal social and cultural institutions.

There appeared such forms of use of public medical facilities as: out of turn hospitalization, unregistered patients treatment for a fee using public medical equipment; preparation of candidates for the entrance exams to higher educational institutions by lecturers using facilities without paying rent; commercial use of computer equipment which belongs to educational institutions; private use of musical instruments and equipment belonging to clubs. Generally the property owner doesn't receive payment for its use and income is not taxable which guarantees high economic reward for this activity. Hence their interest in receiving, maintaining, and extending opportunities to privately use public and municipal property.


Managing bodies

State administration in Russia at present is decentralized to a considerable extent. Federal bodies of power (President, Parliament, Government, ministries and committees) and regional and local bodies of power (governments and parliaments of republics forming part of the Russian Federation, governors administrations, parliaments of territories and regions, city and district administrations) conduct their own social services policy.

Not long ago executive power bodies formed a single system. For example, city and district health care, education, and culture departments were under dual administrative control: under local executive administration and under corresponding regional health care, education a culture departments. The latter, in their turn, were submitted to regional executive power control and correspondingly to the control of the ministries of public health, education, and culture. At present, social services administrative bodies social services are not subjected to dual administrative control. For instance, regional culture committee is not administratively subjected to the Federal ministry of culture.

Federal executive power bodies carry out certain controlling functions at present which establish federal requirements to educational programs, establish requirements, licensing and attestation procedure, state licensing of corresponding types of institutions, etc. Federal executive bodies directly administer only those social and cultural institutions which are in federal property; regional (republican, territorial, and regional) executive bodies administer social and cultural institutions which are under their property rights; local executive bodies administer municipal social and cultural establishments. Lower executive bodies dependency on the higher ones remains only where the latter possess the means which they can distribute, and the former are forced to apply for them.

Central and local administrative bodies have similar interests. They are not striving for changes in activity which is regulated by them. In other words, their interests are sufficiently conservative and are directed at preserving the present structure and character of activity in each sector.

Social services administrators' economic interests have been directed and still are directed at providing stable state budget financing for their respective sectors. Speaking about their political and economic interests, administrative bodies are interested, on one side, in conducting such reforms, which would regulate appropriation of budget funds for their respective sectors, increase stability of financial flows and sector's financial position as a whole. They are interested in transformations and arrangements which would provide more guarantees and stability in receiving budgetary funds or funds from other sources. On the other hand, officials are interested to preserve and expand their rights and opportunities to handle state funds.

Experience resulting from the implementation of certain reforms shows that social services administrative bodies supported and tried to implement exactly (and only) those transformations which included both these components: 1) real arrangements directed at securing guarantees for receiving funds; 2) imaginary arrangement directed at establishing relations among administrative bodies and organizations, controlled by them, preserving and expanding zones of legal uncertainty with respect to allocation of funds for social services.


Supreme executive bodies

In the years of perestroika political leadership of the country considered implementation of democratic reforms in culture and education as a comparatively cheap measure. Gorbachev and his colleagues reduced ideological pressure on mass media, reduced administrative control over cultural and educational institutions' activities. Authorizations of substantial changes in culture and education and their support were also stimulated by the need to find a new ideology, or more precisely, a new socialist image--socialism with a human face. A growing attention of the authorities to the development of culture and education, and to the improvement in health care situation was due to a new turning point in the government socio-economic policy which was directed to satisfy the needs of the people, and to solve social problems.

In 1985-1986, proclaiming a course aimed at speeding up socio-economic development, the new USSR leadership promised to renounce the principle of residual financing of social services and to increase funding of their material and technical base. Indeed, the share of state budget expenditure on health care, education, and culture began to increase in the national income, reaching in 1989 12.6 per cent by comparison with 10.2 per cent in 1985. However, the share of expenditure for these purposes in the state budget practically had not changed, amounting to 22.4 per cent in 1985 and 22.6 per cent in 1989.

In 1989-1991, as economic and political crisis intensified in the country, the interest of the top leadership in social services began to subside. Decree No. 1 of the Russian President (June 1991) on development of educational system may be considered as the last manifestation of this interest. The decree mentioned the priority of educational financing and, in particular, that average teacher's salary should be maintained at the average industrial wage level. However, all this have remained in declarations. Since the end of 1991 the Russian federal authorities have not shown any interest in health care, education, and culture. This was a part of a general process of erosion of the government and state responsibility as a whole for the provision of social services. Only at periods preceding the referendum and elections, politicians paid attention to positions of professional associations, and they made certain gestures or rather gave tips in order to win over their members votes.

From 1992 the federal government has considered expenditure social services expenditure exclusively as an extra load on the federal budget and has striven minimize this burden. The attitude to the social services problems was a secondary one. It depended on the current economic policy requirements and turns in the political struggle. The government therefore wanted to implement reforms which would replace the social services sources of funding and was ready to allow the social services reduction, but not till the point when serious political consequences may appear. That is why, government documents of this period constantly mentioned the need for serious transformations. They also mentioned restructuring the health care, education, and culture economy on a new market basis aimed at cutting the state share in their funding and, consequently, increasing the share of the population and entrepreneurs expenditure on social services.



Neither the USSR Supreme Soviet, nor the Supreme Soviet of the Russian Federation, nor the State Duma had any definitely formulated positions with respect to health care, education, and culture which would be supported by the majority of deputies or, at least, were the subject of discussions in the Parliament. Respective Parliament committees showed some activity "in line of duty". The social services administrative bodies and their professional associations tried to use these committees as instruments for implementing their interests.

At the same time, Parliament committees had their own special interests. (the Committee on Education and Science, the Committee on Culture, the Committee on Cultural and Natural Heritage, etc.), It was extremely important for these committees to secure approval of at least one draft law (of course, the more the better) in their respective fields in order to be able to show themselves in a favorable light: to demonstrate their activity and efficiency. Such attitude negatively affected the contents both of the draft laws and those which had been adopted. Thus, the texts of the laws dealing with education and culture, adopted at that time (1992) were more declarations than documents providing real guarantees and regulating procedure for educational and cultural activities. Their contents were often in contradiction with other legislation.

Before the December parliamentary elections of 1993 and immediately after them, when the problem of the government composition had to be settled, many political groups spoke about reorientation in social policy, including a change of attitude to health care, education, and culture. But very soon everybody forgot it, the settlement of other political problems drew their attention. This demonstrated once again that political groups had no real interest in addressing and resolving the social services problems.

By contrast with democratic countries, in Russia development of education, support for national culture, quality and efficiency improvement of health care are not the elements of public consensus. They are not part of the national values system. Politicians who want to obtain public votes and those who are in office do not have to reckon with it. At the moment there is no common system of values or widely shared ideology in this country. Hence come politicians' indifference to the social services problems.


Health care

It is obvious that discussion of the population's interests, as a whole, with respect to health care is an oversimplification of the matter. People are very different when they deal with health care services system. Various population groups significantly differ in their behavior. It is determined by the following characteristics: 1) age (children, adults, old); 2) income (those with low, average and high incomes); 3) health condition at certain life periods (a person is healthy or ill), it is important to divide patients into groups: chronic invalids and temporarily sick people; 4) place of residence (urban population, including population of small and medium-size towns and big cities and rural population). The last characteristic is especially important due to Russia's large geographical dimensions and extremely heterogeneous territorial distribution of medical services with respect both to their volume and especially quality.

For correctly assessing the results and prospects of reforms, it is important to consider changes in the situation and interests of the following population groups:

A) All categories of the low-income people especially including low income patients who live in rural areas and small towns. They have no access to the high quality medical services that explains the specific character of their interests. At the same time, their possibilities to influence changes in the existing organizational and economic situation are extremely limited.

B) Practically all families with many children now can be included in the low-income category of the population. They have no opportunity to provide an adequate level of health care for their children which can negatively affect the reproduction of the population.

By the end of 1993, families with three and more children represented 72 per cent of the total number of the families who lived under the poverty line. Real income of families with children have dropped by 30-40 per cent by comparison with the income level at the end of 1991 (Semya v Rossii (Family in Russia) 1994, No. 1. P.84-85). In this connection their wish to preserve the old health care system, especially taking into account the underdevelopment of medical insurance system and uncontrolled replacement of formerly free services with paid ones, seems to be quite understandable.

C) Low income old people who are chronically ill, exert extra "pressure" upon hospitals. They consider their stay in hospiyals as a peculiar way of saving on food, communal services, and rent. According to the survey results conducted in Russia in 1994, more than 45 per cent of the retirees considered their health to be poor and very poor (Demographicheskoye Razvitie Rossii i Yego Sotsialno-Ekonomicheskie Posledstviya (Demographic Development of Russia and Its Socio-economic Consequences). Summary of an international scientific conference. M., 1994, P.74).

It is worthy of note that at the moment cost of food for low income population groups represented a larger part of family budget expenditure.

It seems important to divide medical personnel into the following categories:

1) qualification level. State qualification boards grant qualification level in the form of: highly qualified or low qualified personnel;

2) administrative body which supervise medical institutions. They supervise medical institution open for the general public or medical institution with a restricted public access. The restrictions can be both of economic character (high price for medical services) and of administrative character (when medical institution belongs to a certain organization or a certain administrative body);

3) professional status. There is medical staff, on the one hand, and there are representatives of informal medicine, on the other hand--the so called "folk healers". The latter usually have no official medical education and diploma, but possess real or imaginary unique individual healing abilities.

Various groups of medical personnel have different interests. In the first place, it is connected with the fact that their income level directly depends on the form of medical institution's ownership (those employed in the private sector receive maximum income, those employed in the publicly owned medical institutions receive minimum income). That forces highly qualified medical personnel to move from the publicly owned medical institutions open for general public to the medical institutions with restricted public access (privately owned or that belong to various organizations).

At the same time, publicly owned medical institutions are gradually developing commercial activities. Medical services which traditionally were free for the public, are becoming paid ones. They are no more in the standard list of free medical services (for instance, X-ray and ultrasonic examinations). In a situation, when the level of budget expenditure on health care has dramatically fallen, this process is in the interests of paramedical staff that has no high qualification and thus can not obtain highly paid jobs at privately owned and special medical institutions. It is worthy of note that the above mentioned commercialization process is not something basically new for health care in Russia. It only continues in a legal framework the unofficial payments for medical services which existed in the former USSR.

With regard to this, the position of "folk healers" may be characterized as an ambiguous one. Those of them who really possess individual healing abilities want to formalize their status. They want to be integrated into the network of private medical institutions operating with state approval. Those who in reality are charlatans actively oppose to any form of state control in the health care. With good reason, they fear to lose their income. In this respect, the acceptance or rejection of reforms by "folk healers", in general, is absolutely similar to the attitude of both highly qualified and low-skilled groups of medical personnel in the publicly owned medical institutions to the reforms.

Special interests of administrators are determined by the level of their position and by the place of work in the health care administrative system. Among the administrators of medical institutions, the interests of top administrators, on the one hand, and the interests of technical staff, on the other hand, typically do not coincide. The former have an opportunity to use medical institutions facilities (to let the floor space, to draw and independently use funds from various sources, etc.) and thus obtain personal profits. The latter do not have a legal opportunity to obtain profits by using the property which belongs to medical institution.

Managers of these medical institutions are really interested in the health care reform in Russia. It is due to the fact that they are provided with modern equipment and employ highly qualified staff. At the same time, managers of special medical institutions, as a rule, are not among supporter of quick implementation of health care reforms. Their work is not so intensive by comparison with the intensive work of municipal medical institutions. Special medical institutions, as a rule, have a more developed material basis, and their financial situation is less difficult. They receive funds not only from organizations they belong to, but often also from local budgets. Therefore, their interest in preserving the existing health care system appears to be only too natural.

It is in the interests of the regional health care administrators to preserve these very structures while reforming the health care system. As long as they preserve the distributive functions of budgetary resources, they will continue to derive rent being distributors of restricted resource (rent-seeking behavior). At the same time, it is a poor criterion to assess regional administrators work by meeting demands from the public medical institutions. At the moment, there are no methods or procedure to reveal the interests of the population and medical staff in the country and, consequently, to exert influence on regional decision-takers.

On the federal level, different interests among various groups of administrators are similar to those which can be observed at the regional level. The difference is, on the one hand, that they larger distribute more resources, and, on the other hand, they depend more on control from representative branch of the authority, mass media, etc. At the same time health care top administrators has its own powerful levers needed to exert influence on the above mentioned "controlling" organizations.



While examining special interest groups, it is important to single out the following groups among population: first, the students themselves, second, their family members.

The students are naturally divided into groups by such characteristics as age, place of residence (country, city), type of education, wish or no wish to study, capability, etc.

Members of the students' families are naturally divided into the following groups: a) parents, it is important for the following analysis of students' behavior; b) husbands and wives of students--for adult consumers of educational services. It is important to divide students' families by level of education, income level, and occupation, etc.

It is obvious, that it is important to single out students as an independent social group with their own clear interests and capable of defending them by an organized action together with teenagers, that is, schoolchildren from senior classes of shortened secondary school (7-8 class). Parents express the interests of younger students. However, it is apparent, that the accuracy of their interests substantially depends on the level of their education, occupation and income level.

The interests of teenage students and their attitude towards reforms are determined, first of all, by the presence of a wish, material base and abilities to continue studies in a secondary school and later in universities or colleges. Students who want to continue studies also want a stabile educational system. Reforms in education will bring for them certain difficulties during the entrance exams to universities or colleges. They mainly have a negative attitude towards organizational and pedagogical innovations.

In their turn, students who plan to work, on the contrary, are interested in transforming the existing educational system. Creation of new educational institutions that will let them in the future, as their requirements grow, to combine their work with studies at the evening and by correspondence departments, improve their professional training, etc.

At the same time, it is obvious that the interests of the above mentioned groups do not necessarily correspond to the interests of their family members who belong to the elder generation, because various age groups have a different approach to the value of education.

Now we shall discuss the interests of parents with respect to the forms and types of education. A certain number of families, mostly with a high income level, want to give a higher level of education for their children, which in their opinion could help their children to reach a certain social status often irrespective of their real abilities. These families increase a demand for various types of "elite" schools (private schools) that are characterized by charging a fee for education. The education fee is prohibitively high for the people with medium and low incomes.

Since teachers' salaries paid at state secondary schools are still small, we may expect the most qualified teachers to move to the private schools. However, it does not always happen. The majority of highly qualified teachers work at the "unique teaching methods" schools, that have a reputation for their innovations.

Private schools do not always provide high level of education. In many cases they do not provide good education, but charge large fees for their illusory creative potential. The only real advantage of private schools over the state ones consists in providing comfortable conditions for the pupils.

"Unique teaching methods" schools which even in the pre-reform period attracted talented children, in the new situation continue to carry out their work with the support given to them by the administrative bodies of state education. Now the majority of the former Soviet intelligentsia receives low or average income, that is why it is more interested in the "unique teaching methods" schools and other specialized schools with a deep study of certain subjects.

Parents with different income level and education find themselves in the same situation with respect to the system of pre-school institutions and to the system of higher education. At the same time, it is worthy of note that families with average or low income and low level of education of the parents do not have a problem of choosing educational institution for their children, and they have not got any special interests with respect to the system of education.

On the basis of the above mentioned facts, it is possible to say that in the near future we can not expect a sharp increase in the number of private schools (with full cover of education costs) in Russia: families with high income level will stop being interested in private educational institutions unless they provide high level of education. The majority of the population will not accept private education because of their low income level. The natural selection will result in a small number of "elite" private schools which provide high quality of education, and larger, than at the moment, number of "unique teaching methods" and specialized state schools. Traditional state (municipal) secondary schools will represent the majority of general educational institutions. That is, schools will correspond to the interests of parents according to their level of education and income. In a situation described above, the interests of teaching staff will also be taken into consideration. The majority of highly qualified teachers will work in schools that belong to the first two groups. At the same time, the present situation will remain in the main part of schools, that is, shortage of teachers, large number of teachers moving, attempts at commercializing activity, etc.

Executive authorities. Regional executive authorities (regional, municipal, district) are interested in the reform process mainly to: a) avoid sharp social protests from lecturers and teachers of higher and secondary educational institutions. That means that they ought to meet certain requirements; b) prevent social protests from the population that may result from insufficient level of budget financing of secondary (general) and pre-school education.



Groups of artists in movie industry, theater, music (actors, directors, musicians, etc.) manifest a specific character of cultural interests. Artists are interested in securing freedom of their intellectual activities, freedom of expression, liquidation of state censorship and ideological control over their intellectual activities. In organizational and economic aspects their interests concentrate on providing state guarantees for financing of their work and apart from these guarantees, they want have the right to earn and to spend their income independently. It is characteristic of the interests of independent artists and of their organizations, in the framework of which they engage in their professional activities (film studios, theaters, philharmonic societies).

In a totalitarian system cinema and theater actors, musicians and literary figures were united in the so-called artists associations according to their activity (the USSR Union of cinematographists, the All-Russia Theater society, the All-Russia music society, the USSR Union of composers, the USSR Union of writers). It was the idea of the authorities to create artists associations. They helped the Communist party to control artistic communities.

Artists associations to a certain extent were performing distributive functions. Members of artists associations had a bigger access to various goods and services which were in short supply for the majority of the population. They had access to high quality medical and recreational services (artists associations had their own clinics, sanatoria, holiday centers, and rest homes), a possibility to get goods which were in short supply. Let us underline once more, that the party apparatus rigidly controlled artists associations. These associations could lobby for the interests of corresponding professional communities. These unions were distributors of things which the authorities voluntarily were giving them in exchange for serving the regime. To give intelligentsia privileges was part of the Communist party ideological work.

With the beginning of perestroika ideological pressure on figures in arts and entertainment began to ease. Authorities used artists associations as channels to promote their interests among members of artistic professional communities. At present, professional communities use artists associations to exert pressure on the authorities, to lobby for their professional interests. Associations' political activity changed to the contrary.

Employees of the cultural and educational institutions (museums, libraries, clubs, etc.) are more conservative in their interests and are far less organized. By contrast to the artists, their majority not favor serious substantial changes in their activities. They are interested in receiving more state allocations on the development of museums and libraries, and on the organization of recreational services. Their position remains that of dependence.

The conservatism of this category of the social services employees was highlighted in 1991, when the draft law on museums and their organization was prepared. Legislation drafted by the government envisaged to introduce serious changes in museums organization, brake up of state monopoly, introduce elements of market and competition to expositions held in museums. The administration of the largest museums of the country gave a hostile reception to this legislation. They managed to join their efforts forcing the government to suspend work on this legislation by replacing members the ad hock group and by changing the whole concept of the law. We will not examine criticism of the legislation in details. The ideas about the museum reforms aimed at their modernization were buried. New legislation was drafted only three years later, in autumn of 1994. It did not envisage serious organizational and economic innovations.

Among employees of cultural and recreational institutions there were individuals who were ready to promote innovations and develop commercial activities. It is true, they were few and had little chance to influence the preparation and implementation of economic and organizational reforms in culture.



From the very beginning of perestroika the central administrative bodies undertook attempts to introduce soft reforms in the existing system of social services provision. In health care since 1988 experimental testing of the new procedure in financing state medical institutions has already been carried out three regions (the Leningrad, Kemerovo, and Kuibyshev regions). Main changes were directed at setting of the stable standards of funding health care institutions from regional budgets. Standards were set per capita. A system of internal mutual payments between clinics and hospitals for diagnoses and treatment received by patients has been introduced, as well as a new system of payment for the work done by medical staff.

Executive bodies and medical staff positively received these experiments. Since 1990 the new economic mechanism approved during the experimental period has been extended to twelve more regions. The problem was that the new system of budget financing based on stable standards to a considerable extent remained on paper. Financial institutions were slow in establishing and adopting of such standards, or did not adhere to them, referring to the increasing budget deficit. Limited budget resources, permanent budget deficit, lack of active state social policy and the deficit of serious attention on the part of the authorities to the social services development predetermined a failure of the declared changes in the system of budget financing.

By the beginning of the 1990s economic growth stopped. Economic crisis began to aggravate, and state budgetary possibilities began to shrink. Health care, education, and culture administration and their professional associations were the weakest in the intensified struggle for the distribution of more and more meager budget pie. In order to protect their interests they began to support changes in the financing mechanisms. Representatives of health care administrative system decided to pass over to medical insurance.


Starting idea

The new model of health care organization was prepared by joined efforts of the central pubic health administrators and of a number of regional health care officials. The main idea of the proposed system included the following. Both compulsory and voluntary payments should cover health care financing. Enterprises contributions were to carry compulsory insurance of the employees, and budget allocations were to carry insurance of unemployed and those working in the budgetary sphere. Enterprises and the state, being insurers, were to make agreements with the insurance companies and pay for medical and prophylactic assistance.

It is worthy of note once more that by proposing and defending this model, the central and local health care administrators as well as the leaders of professional associations considered this model to be an instrument needed to stabilize and increase financial resources to health care.

The sectoral administrators have found in the transition a possibility to guarantee health care another important advantage. The new model envisaged creation of financial institutions in health care which would accumulate budget and non-budget funds and which would have legal rights to carry out commercial operations with these funds. For officials, determining the conditions of transfer of the budget funds to the medical insurance companies, licensing them, fixing the prices for medical services, determining the order of payments to medical institutions, etc., there appeared various new opportunities of deriving revenue out of their positions. It appears that realization of such opportunities became the substantial additional factor which determined very active reform activities of central and local health care management, supported by the leadership of certain regional administrations.

As an argument in favor of the new model, designated to convince the government and legislators, it was asserted that introduction of medical insurance would allow to achieve the following targets:

- to create a system of economic relations adequate to the principles of market economy in the health care;

- to provide guarantees of maintaining the achieved level of financing of the health care and even to increase it;

- to provide conditions for appearance of economic incentives for medical institutions and their employees which would make them to strive for better quality of medical treatment and efficiency of their activities;

- to grant the right to choose medical institutions and doctors in charge of the case for the populace;

- to provide effective control over quality of medical services and protection of interests of the populace.

In June 1991 using the desire for radical economic reforms in Russia and a wish of Russian peoples' deputies to contrast their radicalism with the conservatism and indecision of the union authorities, health care administrators and the leaders of professional associations, declaring the necessity to reconstruct the health care economy on a market basis, managed to secure adoption of legislation on medical insurance. It stipulated to carry out the transition to the medical insurance in 1992 - 1993. Later the term of introduction of the system of compulsory medical insurance (CMI) for all regions has been postponed until 1994.

But, what has eventually been implemented on practice, differed very much from the first declared reform principles in health care.

In 1993 the model which should have been introduced, was corrected. At first, it was supposed that non-state insurance companies would carry out the intermediary functions between insurers and medical institutions both for voluntary insurance and for implementation of the CMI program. But later state territorial funds for compulsory medical insurance and their branches have been allowed to play the part of insurers. In contrast to insurance companies they were granted some tax privileges: federal and territorial funds were exempt from paying taxes on their principal activities.

With the introduction of the medical insurance considerable expectations were connected of the whole sphere of health care and, first of all, of raising the quality of medical services. For example, this is supported by the data collected during a survey conducted in Moscow in 1993 (Pulse. 1993, N 25, Moscow. Moscow government's department on press and information. p. 24-30). It covered administrators of the federal and regional CMI (compulsory medical insurance) funds, insurance companies associations, municipal health care departments, staff of the principal health care department of the Moscow government, chief doctors, the mayor's office and legislative power representatives.

On the question of their attitude towards the introduction in Russia CMI 73 per cent of the respondents said that "this measure was absolutely necessary and timely", 19 per cent of the respondents said that "this measure was necessary, but yet not timely", and only 3 per cent of the respondents said that "this measure in many aspects does not suite Russia, and because of this is not timely". From the introduction of CMI in Russia according to the opinion of 44 per cent of the respondents mostly will gain the citizens, 11 per cent--insurers, 28 per cent--medical staff, 30 per cent--everybody equally. The respondents thought that psychological unprepeardness in new conditions will mostly hamper the medical staff to accept successfully the CMI system (62 per cent of the respondents), insufficiently high level of professional training (19 per cent of the respondents), and insufficient knowledge of the CMI system (19 per cent of the respondents). To the question "whether the introduction of CMI will lead to the complication of relations between the staff of different medical institutions?" 44 per cent of the respondents said "no", 36 per cent--"to a certain degree", and only 8 per cent--said "yes". To the question "whether the introduction of the CMI will lead to the migration of the qualified staff into the private sector?" 50 per cent said "no", 25 per cent--"to a certain degree", and only 17 per cent--"yes".

At the same time, before the start of the large-scale introduction of compulsory medical insurance doctors and managers of medical institutions, who were low-qualified, and were psychologically unprepared to work according to new rules and therefore did not want to risk their positions and although small, by comparison with other sectors of economy, but stable salaries, as well as opportunities to receive shadow incomes, took negative attitude towards it. Sixty two per cent of medical experts mentioned the last factor as the main reason for of medical staff' hostility to medical insurance.


What has really changed?

From the second half of 1993 all organizations had to transfer 3.6 per cent of their payroll fund to medical insurance of their employees. Thus, now a part of health care resources include targeted tax payments. Health care dependence on turns of fortune in the struggle for distribution of the budget pie somewhat diminished.

When the system of contributions to the CMI had been approved, the ministry of public health and medical equipment industry have considerably weakened their efforts directed at the development of the CMI legislative base. Reform realization was left alone and began to be carried out in a decentralized manner. As a result, considerable regional differences were revealed in the speed and depth of transformations. Compulsory medical insurance was introduced with big deviations from the law on medical insurance.

According to the Goskomstat data, by the beginning of 1994 there were 82 territorial CMI funds and more than 900 of their branches, where the means transferred for CMI were to be accumulated. By the end of that year the number of funds reached 86 and the number of branches--1058. The CMI system included 294 insurance companies. According to the Federal CMI fund's data, particularly insurance companies carried out medical insurance only in 23 regions. In 34 regions the territorial CMI fund branches and insurance companies take out medical insurance. In 30 regions territorial CMI funds and their branches take out medical insurance.

According to the Goskomstat data, by the end of 1994, only 22 per cent of the population were provided with insurance policies.

According to the legislation currently in force, territorial CMI funds will accumulate resources received from juridical persons and from the budget. However, only in 40 regions local budgets sent contributions to the CMI funds for non-working population. Furthermore, these contributions were less than the amounts that were due to the funds. According to the calculation made on the basis of the Goskomstat data, in 1994 contributions for non-working population insurance actually transferred to the CMI funds made 31 per cent of the insurance payments of enterprises. Meanwhile, the number of non-working people represents 108 per cent of the employed total number.

Local administrations wanted to use the newly created CMI funds only as instruments which would accumulate extra financial resources for local budgets, at the same time not having the right to dispose of them independently.

In most regions all budgetary means or their part remained at the disposal of territorial health care administrative bodies. Accordingly, they covered current expenditure of medical institutions.

According to the Ministry of public health data, in 18 per cent of the regions the CMI funds used their resources to finance only hospital services, and in a number of other territories, to the contrary, only out-patient clinic services.

The quality of medical care has not improved. It could not get better because of a cut in financing of our health care system which never was well equipped. In a situation characterized by a highly monopolized supply system of medical services, only inhabitants of large cities have a chance to choose hospitals, clinics, and doctors. Introduction of medical insurance in itself will not create competition which contributes to an increase in quality of medical services. In fact, competition exists only on the medical services market that covers voluntary medical insurance. However, this market embraces only thin layers of people with high incomes.

Everywhere in the country the CMI funds faced difficulties in receiving compulsory insurance contributions. Enterprises aimed at hiding their real financial situation They did not transfer due amounts explaining it by a shortage of money needed even to pay salaries, etc. Different levels of financial situation in the regions considerably affected the results obtained from the introduction of medical insurance. The territorial CMI funds in Moscow, St.Petersburg and other regions, being major sources of revenues for the federal budget, accumulated considerable resources. At the same time, in a number of regions in Russia which were in extremely difficult economic situation there was considerably less amount of contributions to CMI than it had been envisaged. Moreover, financially strong regions supported the financial activities of the CMI system, while depressive regions wanted to use the CMI funds resources for other purposes.


Problems on the agenda

Deficiencies in the normative and legal base of the CMI program appeared during its large-scale introduction. Main components of the new mechanism of interrelations among population, enterprises, government agencies, insurance companies, medical institutions were not perfect.

The CMI framework did not include a developed system of justified and detailed normative costs of medical services, such as: medical standards for clinic-statistical groups of diseases which should include requirements to the volume and quality of medical assistance, and serve as a basis for the price system and quality control. This led to conflicts connected with payment for the rendered services.

In the CMI framework a system of interregional payments for the rendered services was not developed on time. People began to have problems with getting free medical care outside their native regions. Only at the beginning of 1995, Federal CMI fund introduced a system of payments between regional CMI funds. But the Ministry of public health has not adopted it.

The regional CMI programs should establish the way they spend resources from the CMI funds. But, as a rule, these programs contain many general regulations, but do not rigidly regulate the money spending procedure accumulated by the funds. When normative documents do not clearly establish the funds rights and obligations, when there is no competition between the insurance companies for clients, and medical institutions do not compete for the insurance companies, the CMI funds become distributors of the accumulated resources according to their criteria, and not a source of finance for medical services. As a result, the activity of funds that pursue their own economic interests contradicted medical staff ideas on the expedient use of the CMI funds resources. For example, the funds were spending considerable sums of cash on computer equipment and cars, etc.

The rights and responsibilities of the health care administrative bodies and those of the territorial CMI funds have not been properly delimited. Sharp replacement of the old budgetary mechanism used for accumulation and redistribution of resources in health care with a medical insurance mechanism that was not perfect enough in some regions led to a partial loss of control in health care.

Poor organizational and financial cooperation mechanism, used by regional executive bodies and new medical insurance companies, is becoming a reason for low quality services in health care.

Reform of methods and forms of financing of a complicated, bulky and socially important sphere, so far has not led to a corresponding growth of medical service for the Russian population. Speedy transition from budgetary financed health care to medical insurance did not take into full account the limited personnel and organizational-economic potential in this sphere. Exaggerated expectations of rapid positive changes in health care for the population linked with the transition to medical insurance have not been justified.


Positional changes of Special Interest Groups


in Health Care

The health care reforms have brought structural changes in special interest groups. There have appeared two new special interest groups--the CMI funds and private medical insurance companies. Position of health care administrative bodies has changed. New subjects, on the one hand, and local administrations and health care administrators, on the other hand, had different conflicting interests.


Insurance companies

Non-state companies which engage in medical insurance in Russia are commercial organizations. They are interested in preserving stable and guaranteed financing from the compulsory medical insurance funds, in minimization of their payments to medical institutions, in executing economic control over the latter activities.

Like any other commercial organization, the existing insurance companies are by no means interested in increasing the number of insurers, that is, creating competition environment in this business. It is obvious, that such aspirations most of all infringe upon the people's interests, depriving them of the right to choose an insurance company which would defend their interests in medical institutions. In other words, specific interests of the medical insurance companies are directed at creating regional compulsory medical insurance funds which serve as financial resources, the access to which requires extremely insignificant transaction costs. At the same time, insurers have only limited interest in higher quality of medical services. Their natural wish to be monopolists prevents them from fully expressing people's interests.

There is, however, a serious factor which stimulates insurers to actively control medical services quality, rendered to the population. This factor is also of economic nature and is connected with the insurance companies wish to expand their activities through developing voluntary medical insurance system. Effective protection of the people's interests in medical institutions serves insurance companies as good propaganda and is a condition needed to attract new customers.


Territorial CMI funds and their branches

In those regions, where these funds have begun to pay bills presented by insurance companies or presented directly by medical institutions, they tried to control the real amount of services rendered to the population and influence the work of medical institutions by economic methods. The logic of economic relations forces territorial funds of compulsory medical insurance to control and moreover--to help developing normative and legislative basis for medical insurance. It forces them to became reformers. For instance, Moscow and St.Petersburg both municipal and regional funds are customers of medical-economic standards.

The CMI funds received an independent from the budget source of financial means--compulsory payments from juridical persons in the form of the payroll tax. Being independent financial institutions, they are interested in having a surplus which would be a reserve, and which could be put on a deposit in order to get interest, and thus to increase their assets.

According to the Federal CMI fund's data, the level of utilization of means accumulated by the CMI funds made on average 70 per cent, and 30 per cent were on deposit accounts and in disposable surplus. In the second half of 1994 this share considerably decreased. Deposits and disposable surpluses reached by the end of 1994 15 per cent of the revenues for the whole year.

Practically everywhere the local authorities tried to use the means, accumulated on accounts of the territorial funds for compulsory medical insurance as credit resources in order to cover the budget expenditure, including the expenditures having no relation to the programs of the compulsory medical insurance. It shall be mentioned that this directly contradicted the legislation on medical insurance. The revenue base for the local budgets is diminishing in conditions of economic crisis, irregularity of incomings, late allocation of subventions from the federal budget--all this explains why local administrations behaved in such a way.

As a rule, territorial funds had to give way to such demands. However, there were other precedents. For instance, in Tomsk municipal territorial fund has put the matter before the arbitration court which defended the fund's legal rights to use the accumulated means for direct purposes.

In July of 1994, when the federal budget was being approved, this legislation was amended. The available surpluses of the federal funds for compulsory medical insurance at the end of each quarter have been used as a source for covering the budget expenditure, although exclusively the health care expenditure.


Health care territorial administrators

The transition to medical insurance has changed their position. Those of them who have initially supported the reform hoped that insurance payments from juridical persons would constitute an additional source of revenues in addition to the direct budgetary allocations. However, they have been disappointed. On practice, the local authorities have immediately started to reduce allocations to the health care from local budgets, referring exactly to the fact that now there appeared a new source of financing. In 1993 the share of the above mentioned allocations made 17.5 per cent of the total amount of allocations from local budgets and in 1994--15.7 per cent. The corresponding share of allocations from the federal budget diminished from 1.7 per cent to 1.6 per cent. In total, the volume of allocations to the health care from the federal budget in comparable terms diminished by 19.9 per cent in 1994. The share of this expenditure, calculated as percentage of the GDP, diminished from 3.3 per cent to 3.1 per cent. At the same time compulsory insurance payments of enterprises made 0.7 per cent of the GDP, or 22.1 per cent of the amount of budgetary allocations.

Table 6

Health Care expenditure in the State Budget of Russia

1989 1991 1992 1993 1994
Expenditure in comparable terms,
mn. Rubles 12629 14433 10518 11819 9653
Share of the GDP(%) 2.2 2.9 2.6 3.3 3.1
Share in the Sate Budget
Expenditure (%) 9.5 9.9 7.8 9.4 8.4


Source: authors' calculations based on the Goskomstat data

So, the special interest group has tried to secure a redistribution of public resources for its own benefit, carrying out the reform in financing of the health care, i.e., altering the rules of distribution of these resources. According to our calculations based on the Goskomstat data, as a result of the transformations which had actually been carried out, the volume of the health care financing at the expense of the budget and at the expense of the payroll tax in comparable terms fell only by 2 per cent, at the same time, the GDP fell by 15 per cent. However, the fact that the amounts of allocations being in direct disposal of bureaucrats in the health care sphere has also diminished was of principal importance. A part of financial flows now went out of their reach: through the CMI funds and insurance companies. The means accumulated by the territorial CMI funds made 35 per cent of the total amount of expenditure for the health care from local budgets.

The bureaucrats already could not control the activities of new subjects as they were used to in case of the state organizations that were directly subordinate to them. The fact that new financial institutions appeared in this sphere opened for the officials new non-traditional of getting profit from their position. But, apparently, the majority of the heads of territorial public health administrative bodies could not profit from it.

The loss of traditional levers in administrating health care in the framework of state structures, the failed hopes that the transition to medical insurance would increase the flow of resources into this sphere, the lack of normative and legal basis and elaborated procedures for rational and flexible utilization of financial resources through the system of territorial CMI funds--all this caused a serious conflict of interests between territorial administrative bodies and the CMI funds.

The essence of medical bureaucrats' claims comes to the following:

- state administrative bodies are still responsible for health care in regions, but have not got enough authority to control the expenditure of the means accumulated by the CMI funds;

- unjustified and unreasonable expenditure of the funds' means from the regional interests point of view;

- lack of operativeness in carrying out financial payments to medical institutions;

- overspending on the upkeep of the territorial CMI funds staff;

- availability of reserves and surpluses which the funds and private insurance companies have received from the state and have the opportunity to use for commercial operations in their interests.

In some regions administrations have not changed their positive attitude towards the reform. It is interesting to note that those regions are continuing to support the reform whose economic situation is better than in other regions, and that is why the amounts of public health financing from the budget has not fallen. For example, in the Samara region public health reform is more profound, the volume of budgetary allocations for public health in comparable terms was in 1994 not less than in 1991. 20 per cent more was added to that sum in the form of transfers done by juridical persons to CMI, and 10 per cent was received by rendering medical services for a fee.


Employees of medical institutions

Many of them have a negative attitude towards reforms. For the majority of them the reform has brought no additional incomes, but only troubles: doctors had to fill even more forms, administrators had to adjust their activities to new procedures and conditions of obtaining financial resources.

A survey conducted in several Moscow district clinic in spring 1995 by the Moscow State University department on social services economics gives some idea about the attitude of medical personnel. Thirty per cent of the chief doctors think that there are positive results in the work of medical institutions; 10 per cent think that these changes are possible, but say that the introduction of the CMI system is not perfect; 60 per cent do not see positive results. Answering the question "whether the salary of the medical staff began to increase with the introduction of CMI?"--14 per cent said "yes, but insufficiently enough", and 86 per cent said "no". Answering the question "whether the quality of public health increased with the introduction of CMI", 40 per cent of the respondents answered positively on the whole, and 60 per cent gave a negative answer. Answering the question about medical service quality control under the CMI system, 75 per cent of the respondents gave a positive answer, and 20 per cent gave a negative one. And, finally, 5 per cent of the medical staff support the CMI system, 45 per cent of the medical staff support, but with considerable reservation, and 40 per cent of the respondents do not support it.

Patients of the Moscow district clinics were also among respondents of the survey. Twelve per cent of the respondents said that medical service became better with the introduction of CMI, 8 per cent of the respondents said that it became better, but insignificantly, 57 per cent--said that it remained at the previous level, 17 per cent--said that it became worse, 88 per cent of the respondents said that they paid the same, 2 per cent--that they began to pay less, and 4 per cent--that they began to pay more. Forty eight per cent of the respondents think that to get to a doctor is as difficult as it was before the introduction of CMI.

Hopes connected with the introduction of the CMI system and evaluations of the first results differ strikingly. It is connected not only with the problems created by the introduction of the chosen CMI model. Introduction of medical insurance represents only a part of the urgent public health reform. Meanwhile, introduction of CMI and public health reform go together in public consciousness. The lack of positive changes as a result of the introduction of CMI is taken by the population and medical staff as a failure of the public health reform as a whole.

Regional public health administrative bodies, supported by personnel of medical institutions, have started to claim the transfer of control over expenditure of the CMI funds' revenues. In some regions they have managed to succeed in this, making regional authorities to officially adopt the relevant decisions. It was done, in particular, in the Bryansk and Kemerovo regions in the beginning of 1995.

The negative stand with respect to the implemented reforms took also the top administrative body of public health. Two years ago the Ministry of Public Health has been transformed into the Ministry of Public Health and Medical Equipment Industry. New people taking over the Ministry have concentrated their attention on problems of the medical equipment industry and on provision of the population with medicines. Public health reform was not their concern. Moreover, the idea of the implemented reform in itself was seemingly alien to experience and views of the new ministerial authorities, who originally came out of the military medicine.

At the beginning of 1995, the Ministry Board and heads of the majority of the public health regional administrative bodies supported the transfer of control over expenditure of the resources accumulated by the territorial funds for compulsory medical insurance to the health care institutions.


Prospects for Continuation of the Public Health Reform

Continuation of the reform now suits the interests of CMI funds and medical insurance companies.

In March 1995 a meeting took place where representatives of the Federal and territorial CMI funds, the Russian association of medical insurance organizations, the All-Russia union of insurers, The Insurance union of Russia took part. The need to continue transition to medical insurance, strict observance of the adopted legislation on medical insurance was confirmed. At the meeting the need to adopt additional normative document was specially emphasized. This document would have established a definite and single procedure of money transfer from the local budgets into the CMI funds for the non-working population. This document also would establish the responsibility of the executive administrative bodies and introduce corresponding sanctions for violating the legislation. They recommended the Federal CMI fund together with the Ministry of public health and medical equipment industry of the Russian Federation to work out and adopt a procedure according to which medical and economic expert analysis of the health care quality will be carried out taking into account standards and licenses of medical services, legal protection and economic responsibility of medical personnel, medical institutions, and insurance companies.

Both central and local health care administrators are favoring the curtailment of the reform, in which they are also backed by the majority of the personnel working in medical institutions.

To preserve a new source of financing the medicine--compulsory insurance contributions by juridical persons is in the interests of these groups. And, that is why, even for the opponents of medical insurance, liquidation of the CMI funds as juridical persons and their transformation into subaccounts or symbolic definitions of a certain part of public administration bodies' budget is not suitable. For example, there exist on paper Republican and regional funds for development of culture and arts. In reality, this is only a separate item in budgetary expenditure on culture. If this way is taken, then some time later, most likely, a decision will be taken according to which compulsory contributions to the medical insurance must be sent not into the CMI funds, but to the budget, out of which they will be transferred to the public health administrative bodies. This will mean the restoration of the old system of financing public health and reproduction of the old problems. That it why, it suits the interests of medical bureaucrats to turn the CMI funds into administratively dependent structures.

In spring 1995 there appeared in the State Duma two alternative drafts with amendments to the law "On medical insurance of the citizens of the Russian Federation". One of them that was developed by the State Duma committee on health care, is aimed at continuing the reforms on the basis of the available CMI model.

The other draft law reflects the position of the administration of public health. The Federal and territorial CMI funds are being transformed into organizations whose founders are Ministry of Public Health and medical equipment industry of the RF and the territorial bodies of public health correspondingly. In the framework of CMI the role of insurers is passed on to the public health bodies. Non-state insurance companies are allowed to deal with the voluntary medical insurance only.

Adoption of such draft law will mean a return to previously existed system of administrative management of public health. Only now the activity of the public health bodies will get a new name: "guarantee of compulsory medical insurance". Such system does not envisage a solution of the quality control problems in public health and protection of the population's interests, of the problems of creating real incentives for the increase of social and economic effectiveness of public health.

It is not clear whether the opponents of the reform will manage to revise the available CMI model. It is highly unlikely that they will manage to win and place under control the CMI funds in all the regions. For example, a number of the territorial CMI funds and insurance companies--Moscow and St.Petersburg--possess sufficient influence needed to protect their interests in the parliament. In case the counterreform amendments to the law on medical insurance are adopted, they will impose their wording of the document which will give them free hand in their regions.

If medical officials do not manage to introduce desired changed into the Federal law on medical insurance, then one should expect that the revision of the available CMI model will be carried out in a decentralized manner, by way of corresponding decision taken by the regional administrations.

The CMI funds and insurance companies may try to change the attitude towards them on the part of territorial public health administrators by way of sharing their revenue with them. One may suppose that this process is already taking place. The fact that after the open discussions of the reform in winter and spring 1995, in summer the number of critical articles in mass media sharply fell.

It is possible that the supporters of medical insurance will manage not to allow a revision of the CMI basic model and restoration of the state system of public health. But they will not manage to continue the reform and introduce the CMI system fully in all regions.

Even assuming that the position of the Ministry of Public Health would change (for instance, in case the supporters of introduction of the medical insurance will be appointed as its administrative personnel), or in case the Parliament will prohibit to change the status of the CMI funds and will require to comply with the legislation on medical insurance, there is little chance that a large-scale reform will be continued. It is impossible to impose a reform on those who are not interested in it. It is not likely that the federal authorities will and are able to withstand the pressure from the local bureaucracy and the majority of medical personnel. And a change in their attitude to the medical insurance will be possible only when there will be more financing of the health care. It is possible to count on that only after the country overcomes the present economic crisis.



Teachers tried to make the state to set a guaranteed minimal level of expenditure on education in order to protect their interests during the transitional period. They have succeed in this. In July of 1992 the Supreme Soviet of the Russian Federation passed the "Law on Education". In this document, in the article on the state guarantees for education it was stated that "the state guarantees annual allocation of financial means on educational needs in the amount not less than 10 per cent of the national income, as well as securing relevant expenditure articles of the budgets on all levels." However, in the resolution on the order of carrying this law into effect there was made the reservation that the above mentioned provision should come into force only after the Federal Program on Development of Education would be adopted.

In 1992 the share of expenditure on education allocated from the state budget made 5.2 per cent of the national income. The implementation of the above mentioned guarantees would mean a substantial redistribution of the public resources in favor of education. However, the respective special interest groups failed to secure that these guarantees are implemented on practice. In 1993 from the state budget was allocated for the education in fact not 10 per cent of the national income, as was required by the "Law on Education", but only 4.5 per cent. However, there is no formal infringement of the law, as the Federal program on development of education has not been adopted until this time. In 1993 the government tried to redistribute the load of financing of the education between the federal and local budgets. It was carried out in the framework of the general policy aimed at diminishing of the burden on the federal budget. In 1992 for the needs of education was allocated 5.8 per cent of the budget funds, then in 1993 only 4.0 per cent and in 1994 - 3.7 per cent. The share of local budgets in the total volume of financing of the education in 1992 was 66.2 per cent, increasing in 1993 to 80.5 per cent and remaining about the same level in 1994--80.0 per cent. The share of allocations for the education in the local budgets' expenditure in 1992 made 19.1 per cent, in 1993 - 20.3 per cent and in 1994 - 19.8 per cent.

Table 7


Expenditure for Education in the State Budget of Russia
1989 1991 1992 1993 1994
Expenditure in comparable terms,
mn. Rubles 18313 21260 15728 15224 13152
Share of the GDP (%) 3.2 4.3 3.9 4.3 4.4
Share in the Sate Budget
Expenditure (%) 13.7 14.6 11.4 12.1 11.7

Source: authors' calculations using the Goskomstat data

The most vivid example of the government's policy is the situation with textbooks during last two years. Promised by the Federal government financial allocations for this purpose while not being a protected item of the federal budget, are regularly sequestered and held up. As a result, for the second year running a provision of free federal set of textbooks for the secondary schools' pupils is on the brink of disruption.

When there is a shortage of cash, it is spend inefficiently. The situation with the federal set of textbooks serves as a perfect example. Today, the distribution of money between editorial offices possessing copyright for corresponding textbooks is in the hands of the officials of the Ministry of education, while the public role is purely consultative and is represented by the Federal council for school education. Editorial offices, first of all the biggest one--Prosveshenie--a monopolist of copyright for textbooks, does printing in a limited number of printing offices situated in the European part of Russia. Meanwhile, considerable printing capacities in Siberia are left underloaded. As a result, publication cost of the Federal set of textbooks turn out to be overincreased. A number of experts think that this excessive increase reaches 50 per cent. This cost represents a direct result of monopolism in decision taking.

The policy aimed at cutting the burden on the federal budget encounters an active opposition from special interest groups. For example, the state education and science workers labor union are pulling together their efforts with deputies of the Parliament, and the Ministry of education officials in trying to achieve from the Government to give up plans to transfer to the regional level financing of the higher educational institutions. In March 1995 on the initiative of the public education and science workers labor union the all-Russia socio-political movement of teachers "Education and the future of Russia" was formed in order to guarantee professional lobbying state education and science workers' interests in the Government of the Russian Federation.

During last years the number of regions getting subsidies from the federal budget was growing. In 1994 their number reached 77 out of 89 subjects of the Federation. Combining this process with the policy according to which financing and administration are transferred to the regional level result in a bigger number of responsibilities for the regional administrations which are not supported by the expenditure items in regional budgets. The same processes are taking place in a number of subjects of the Federation, but at the local level. Increasing power for the local self-administrations in education is not accompanied by an adequate increase in the amount of subventions from the subjects of the Federation.

Consequently, this process does not express decentralization of financing, but a decrease in priority support of education. As a result, many teachers' strikes are taking place, in which they protest against the permanent failure to carry out the Federal law "On Education", and Decree No. 1 of the Russian President.

The special interest groups in the sphere of education were not strong enough to fight for distribution of the public resources at the federal level. Their efforts were more successful at the level of regional and local authorities which were closer to direct consumers of educational services. At the same time, the specter of reactions to the existing situation varied considerably. In a number of regions the local authorities making use of the right to independently determine lists and rates of local taxes, granted to them in 1994, introduced special taxes to provide means for education. For instance, in Moscow this tax's rate made 1 per cent of enterprises' payroll bill. In other regions, for instance, in the Samara region, authority responded to the proposal of the State Committee for Higher Education to consolidate local higher educational institutions into unified "regional" Universities, that supposedly leading to considerable cut in administrative costs. At the level of city and district administrations the attempts to revive the practices, when economically strong enterprises took educational institutions under their "patronage", became typical. That is, local authorities impelled enterprises to make donations of various material resources to educational institutions.

Institutions of higher education expanded admission of tuition fee students. Thus, in 1994, as the number of students admitted to the Russian higher educational institutions on fully funded basis totaled 480 thousand, 46 thousand students (or 10 per cent) were admitted on condition of tuition fee.

It shall be mentioned that until 1994 only juridical persons could pay for education in the Russian institutions of higher education, that resulting in emergence of additional shadow economic relations during the entrance exams. Since 1994 the institutions of higher education have enjoyed the right to charge school fees not only from juridical persons, but from the students as well. A certain category of citizens has been relieved of necessity to bribe juridical persons for their intermediary services when entering the institutions of higher education.

However, the introduction of elements of school fees to higher educational institutions have not been followed by creation of an adequate system of the state regulation in this process (introduction of repayable subsidies for education, set funds sponsoring the most talented students, etc.). Some local higher educational institutions tried to solve this problem by engaging various commercial structures. For instance, the Altai State University and a local commercial bank introduced a system of educational loans, enabling an entrant to be admitted to additional places at the University in case the entrant owns a certain number of bonds.

As to the different groups of the population, their reactions to reduction of funds allocated by the state for financing education, have been different. The groups with higher incomes aimed, first of all, at getting education in private (including foreign) educational institutions, thus enabling them to gain additional profits and to attract a considerable part of talented teachers. This resulted in lowering the average qualification level of teachers in fully funded educational institutions. The groups with low incomes were neutral with respect to the deterioration of quality of educational services rendered to their children, since this strata of population has an understated notion of educational values. The reduction of the budgetary allocations had its strongest impact on representatives of the middle class. Their interests with respect to the level of education of their children could be realized in full neither in the framework of fully funded educational institutions (due to low quality of education provided by them), nor in the framework of paid ones (because of the high fees for the education).

The law on education, passed in 1992, is remarkable not only because of its failed attempt to introduce guarantees of the state financing on the whole. It allowed the creation of non-state educational institutions, set the order of their licensing and obtaining a state accreditation. The non-state educational institution on obtaining the state accreditation gain the right to become recipients of budgetary financing. The amount of this financing is set on the normatives, determined on per capita basis. That is, the amount of financing shall be proportional to the actual number of students at an educational institution, notwithstanding its status. In 1994 160 out of 447 existing non-state schools were receiving funds from the budget.



Reforms in the sphere of culture were the first to begin after the start of perestroika in 1985. Their main supporters were the Union of cinematographists and the Union of theater figures.

One of the main events in the era of perestroika was the Fifth congress of cinematographists of the USSR which took place in May 1986. For the first time creative community publicly sharply criticized the state administration of culture, interference in the creative process, control over conformity of form and contents of art work to the ideological tenets of the party apparatus. The congress completely changes the leadership of Union of cinematographists and unequivocally spoke out in favor of a sweeping reform in cinematography.

One may evaluate the importance of this congress differently. Usually then and now they emphasize the influence which it exerted on the development of democracy. As a result of the congress, the practice of scripts' approval by the USSR State committee of cinematography and issuing permits on launching movies was abolished. Cinemagoers received a chance to watch many movies shot in previous years, but not released by the officials.

Events which took place during the congress were considered as a change ruling groupings in the Union of cinematographists. But we want to draw attention to a different aspect. From the point of view of special interest groups, that congress meant a transformation of a creative community into an organization which represents the collective interests of a professional creative community. The Union of cinematographists began to work out a new organizational model for cinematography which presupposed cancellation of state administration over movie production and film distributors, and its replacement with market regulation.

The Union was not satisfied with draft reforms only. The Union of cinematographists got an adoption by the Government of corresponding decisions. But the results of the reform turned out to be those which the creative community were not expecting. Film studios began to decide themselves which films to shoot. began to decide which films to buy and release. An unexpected result for the cinematographists was ousting of Russian films from the screen. To buy second rate foreign films turned out to be more profitable, and by contrast with the national ones, they need less investment in advertisement in order to attract attendance.

After the brake up of the USSR the structure of the Russian government did not envisage an independent federal body dealing with cinematography. Previously existing the Union and Russian committees on cinematography were included in the Ministry of culture. And later, one of the most interesting aspects in the reform process in the sphere of culture took place. The Union of cinematographists began to lobby the restoration of an independent state body to administer cinematography. Why?

Without the state support the national cinematography is doomed to disappear. As the experience show, to get more money for cinematography is easier not through the Ministry of culture, but acting independently, having its own state body which business is to get money from the Government. Coalition of special interest groups acting in similar, but professionally different spheres failed. Cinematographists preferred to obtain money from the budget acting independently.

In 1992 again the Committee on cinematography was created. In the social sphere it is the first and so far the only example when the special interests group, professional community of cinematographists, managed to restore a special state body for defense of their interests.

It is interesting to note that the Committee on cinematography, the only one among the Federal bodies from the "social block", successfully managed to introduce a competitive principle of money distribution. The list of movies which are being produced for money out of the Federal budget is compiled on a competitive basis. Selection of the movies is done by a special panel (there are two panels--one is for feature movies and the other for documentaries). The panel on feature cinematography is headed by the Chairman of the Committee of cinematography, but other members of the committee are not employees of the committee, and the decision (which are not advisable, but compulsory) are taken collectively.

The situation in the Ministry of culture is different. Two-three years ago new leadership of the ministry, wanting to show its democratic stance, tried to carry out open discussions of the ministry's budget at least for its employees. Attempts were made at changing the decision-taking procedure while selecting projects. Create a system of expert councils at whose open meetings a discussion of presented projects and criteria of their selection would have taken place. But all these innovations quickly disappeared.

Why the innovations proposed by the Committee on cinematography turned out to be more viable? The present Committee on cinematography was created on the initiative of the professional community itself in order to defend its interests in the struggle for state support. Seemingly, the expert councils continue to play an important role in the activity of the committee because this is the institutional form of control on the part of the elite of the professional community over the process of budget money distribution.

The policy conducted by the committee shows that it suits the interests of the feature films producers first of all. While allocating the budget money in support of cinematography, the priority is given to financing movie production (approximately two-thirds of the means is being spent for these purposes), and to cinematography education and training. From 5 to 10 per cent of the total sum of the available means is directed in support of film distributors, or 8-14 per cent of the total sum of allocations for the movie production. The share spent on feature film production is growing in the budgetary expenditure directed to the feature film production, non-feature film production, documentaries, animated films. In 1992 this amount reached 45 per cent, in 1993--60 per cent. The number of full-length feature movies, which production is funded by the state, is growing: in 1992--19 (including 19 fully funded by the state), in 1993--26 (including 13 fully funded by the state), in 1994--28 (including 8 fully funded by the state).

The Union of theater figures played an active role in conducting transformations which were taking place in the sphere of culture. It achieved for the public theaters adoption of a convenient economic model. This model was based on the following principle: the state assumed responsibilities to finance theaters, the theaters assumed no responsibilities, but got complete artistic and economic freedom. Theaters, formally remaining non-profitable organizations and using tax exemptions, got a possibility for business activity and distribute revenues among their employees.

The influence of the Union of theater figures showed itself when minister of culture was appointed. One of the slogans of perestroika was to replace the party bureaucrats with the people who understand something in culture. As a result, in place of the former party bureaucrats actors became ministers of culture of the USSR and the Russian Federation, who represented the interests of the creative community. The present minister of culture of Russia also was appointed with the active support from the artists associations. When after the 1993 elections, behind-the-scene discussion were in progress about his replacement with a representative of one of the influential factions of the State Duma, but who was an alien for the artists associations, the latter managed to save their minister.

In the transition period the artists associations exert the decisive influence on the formation of the administrators of state bodies which deal with culture, and on the formation of these bodies themselves. Democratization, removal of the totalitarian system were used by the artists associations with the purpose of putting the administrative bodies under control.

It is worth asking why precisely the Union of cinematographists and the Union of theater figures turned out to be the most active and effective in promoting their interests. In other artists associations serious internal strives took place which prevented them from organizing the effective collective actions. The state continues to finance theaters and finances film production and film distribution. But the Writers' Union and the Artists' Union do not get any more money from the state.

Of course, one of the obvious reasons is the wide popularity of the grandees of cinematography and theater. But this is not the only reason. The best Russian writers are no less popular than popular actors. There is an opinion that there are many writers and painters without talent whose works are not needed by anyone. In 1988 in the former USSR there were 20.6 thousand members of the Artists' Union, 9.7 thousand members of the Writers' Union, 2.6 thousand members of the Composers' Union. But there were 7.0 thousand members of the Union of cinematographists. And now their films are not shown in cinemas. So the reason is not in the size of the demand.

The cinematographists managed to achieve a lot from the state thanks to the fact that they have an experience of forming teams and organizing collective actions, and each time from scratch, each time forming a new team for shooting a new film. That is why, it was easier for them to get together and act collectively in lobbying transformations. Theater directors, and precisely they are heading the Union of theater figures, also must organize people for collective artistic actions. But the artistic activity of painters and writers is highly individualistic. It is more difficult for them to organize collective actions, they are accustomed to it.

During the transition period the special interest groups in the sphere of culture, as well as the teaching personnel, were striving to achieve that the principle of the guaranteed minimum level of the state expenditure on culture would be reflected in legislation. In 1992 they succeeded in passing through the Parliament the "Principles of Legislation on Culture" which proclaimed that financing of culture should amount to no less than 2 per cent of the federal budget and to no less than 6 per cent of local budgets. Sectoral lobbies in education and culture were not strong enough to provide the passing of such laws in the Parliament. Besides, in the situation of sharp conflict between executive and legislative branches of authority the Supreme Soviet of Russia easily passed the laws, laying extra responsibilities on the government which in its turn equally easily ignored many decisions, taken at that time.

In 1993 the share of expenditure for culture in the aggregate expenditures of the federal budget not only was less than 2 per cent stipulated by the law, but was considerably diminished in comparison to the previous year: form 1.5 per cent to 1 per cent. The professional associations and the sectoral managing bodies lacked the strength to enforce the already adopted law. In 1993 the rate of reduction of the federal budgetary expenditure for culture was even faster than decline of the GDP. The expenditure for culture dropped by 44 per cent and decline of the GDP made 12 per cent in comparable terms.

However, a reduction of the state budgetary allocations had been compensated by increased expenditure of local budgets. In 1993 this expenditure increased by 22 per cent in regard to the previous year in comparable estimation. In relative terms the share of expenditure for culture in the local budgets' expenditure increased from 2.4 per cent in 1992 to 2.9 per cent in 1993. Thus, in 1993 there took place a substantial redistribution of the load to finance the sphere of culture between the federal and local budgets. In 1992 the proportion between the federal and local budgets in financing of the sphere of culture was 51 to 49, in 1993 it was 33 to 67.

Parliamentary elections held in December of 1993 drew some attention of political forces to the state of the national culture. The words on necessity to preserve the national cultural heritage, to revive the culture were included into programs of virtually all political parties. Taking the advantage of the situation, the special interest groups in the sphere of culture managed to increase their pressure on the government and the Parliament.

At the end of 1993 a Presidential decree granted a number of additional tax exemptions and customs privileges to the state cultural institutions, as well as artistic associations and their members.

In 1994 the federal budgetary expenditure for culture increased, as calculated in comparable terms, from 1 per cent to 1.1 per cent. The balance of expenditure for culture slightly changed to the advantage of the federal budget: 36:64.

Table 8.


Expenditure on Culture in the Russian State Budget
1989 1991 1992 1993 1994
Expenditure in comparable terms,
mn. of Rubles 1379 3199 2606 2293 2267
Share of the GDP (%) 0.2 0.6 0.6 0.6 0.7
Share in the Sate Budget
Expenditure (%) 1.0 2.2 1.9 1.8 2.0

Source: authors calculations done the Goskomstat data



In the second half of the eighties, under the influence of introduction of new economic models in material production sectors which extended the independence of enterprises and under pressure from professional associations, striving for the independence from the strangling press of administrative management, in the sectors of the sociocultural complex there were started organizational and economic experiments. In 1987-1988 a "complex experiment aimed at improving the management and increasing the efficiency of performance of theaters" and an experiment on transformation of economic mechanism in health care were carried out.

The basis for both experiments constituted the idea of introduction of principles of self-support into operation of social and cultural institutions. Recently this term has been actively used in this country to describe the type of economy in which funds of economic entities are formed as revenues, received for concrete results of their operations and organizations have the right to dispose of them independently, covering their costs out of the revenues. The budget allocations were also considered as revenues.

Thus, public health institutions were allowed to make agreements with organizations on rendering medical services to their employees, rendering extra medical services to the populace, using part of funds being at their disposal (both budget and non-budget) as material incentives for their workers, set salaries according to result indicators of performance of the institution, volume and complicity of rendered medical aid.

The most striking example of "genuine" realization of this idea became the Svyatoslav Fedorov's eye clinic (MNTK "Eye microsurgery") which received budget allocations from the state as payments for actual number of performed operations, calculated upon the basis of fixed tariffs, and then independently spent these funds. This economic model was called budget self-accounting.

The experimental testing of self-support models as a whole received appreciation, and at the end of 1988 the Commission on Improvement of Economic Mechanism under the Council of Ministers of the USSR approved "Main Principles of the New Economic Mechanism in Sectors of the Non-Production Sphere", after this there was adopted a number of respective sectoral regulations. Since 1989 there has begun the process of transferring the social and cultural institutions, financed from the budget, to the new economic model which was practically the same for every one of them. Under this model the institutions were granted the status of juridical person, opportunity to plan their work independently, receive funds from any sources, place both budget and non-budget appropriations to the same bank accounts, use the amount of excess of aggregated revenues over expenditure to form the production development and economic incentive funds, determine terms and amounts of incentive payments to employees. The forms and order of distribution of funds corresponded to the regulations being then in force at the state enterprises in material production sectors.

It was also supposed to transform the system of budget financing of social and cultural institutions and to change essentially expenditure-oriented order of financing, when the funds to maintain the institutions were allocated by separate articles of expenditure, to allocations calculated on the basis of stable norms, linked to result indicators of their work. Such norms were worked out for educational and cultural institutions, but in practice they were not observed by financial institutions. And since 1992 the funds in practice have again begun to be distributed by concrete articles of expenditure, mainly to salaries and payments for communal utilities. For the institutions of higher education, for instance, they amounted to 30 - 40 per cent of normative expenses.

The new economic model equalized social and cultural organizations functioning on the basis of both commercial and pure non-commercial principles of organization of their main activities. The new model, on the one hand, considerably increased economic independence of social and cultural institutions and on the other hand created direct material incentives for working collectives to change the structure of operations of their institutions according to criteria of current economic gains. Insufficient increase of budget allocations in comparison to real inflation rates made such orientation vitally important. The corresponding changes did not favor the profile, socially important kinds of operations.

In search for sources of additional resources, the social and cultural institutions had to engage themselves into business operations, lease a part of their space floor to commercial structures which used it as offices, warehouses, shops, restaurants, etc. The expectations that decrease of budget allocations would be compensated by revenues from other sources proved to be groundless. Although the revenues from paid services are increasing, they still play only secondary role in covering expenses of the main bulk of educational, cultural and health care organizations. According to calculations done on the Goskomstat data basis, the volume of paid medical services rendered to the populace (not including the services provided by sanatoria and health resorts, recreational institutions) made 1.2 per cent of the amount of the budgetary allocations to the health care in 1992, 1.3 per cent in 1993, 2.1 per cent in 1994. The respective indicators for the sphere of culture were 6.7 per cent in 1992, 7.7 per cent in 1993, 7.8 per cent in 1994.



In 1992-1994 the network of budget-financed educational, cultural, and public health institutions was on the whole preserved, with the exception of pre-school institutions, the network of the latter diminished in 1992 by 6 per cent and in 1993 by 4.5 per cent.

At the same time, serious problems have arisen in preserving objects of the social infrastructure, belonging to industrial and agricultural enterprises. Under planned economy a considerable part of institutions of culture and recreation, of health care, of pre-school institutions were included in balances of enterprises. The expenditure for their maintenance was covered from enterprises' revenues and their status differed from that of the state institutions. In the situation of economic crisis the maintenance of such objects became for enterprises a heavy burden they would gladly get rid of. In many cases these object were closed down and the space they had occupied was leased or sold to commercial structures which curtailed their former operations and used them for other purposes. Thus, in 1990 - 1992 less than 50 per cent of all pre-school institutions closed down in Moscow were transferred to the balances of municipal administrative bodies, and the majority of them were restructured in accordance with commercial interests of the enterprises.

In 1994 the government approved the transfer of the social and cultural objects from the state and privatized enterprises' balances into municipal ownership. It was planned to cover the corresponding increase of expenditure of local budgets for running municipal facilities at the expense of dividends on the state-owned shares in privatized enterprises and of adjustment of relations between budgets of different levels. But this decision was never implemented and local budgets have not received any additional funds. Therefore, local authorities hamper in every possible way the transfer of objects of the social sphere which were owned by enterprises, to their ownership.

In privatization programs of state and municipal enterprises, approved in 1992 and in 1993, it was planned that they would be turned into joint stock companies or become private property, while it was prohibited to privatize state and municipal public health, educational, and cultural institutions in this way. Since there was no legislation determining the legal status of non-profitable organizations except for the public associations, such possible form of privatization as turning state non-profit organizations into non-state non-profitable organizations had not even been considered.

Nevertheless, in 1992-1993 privatization of objects of social infrastructure belonging to public industrial and agricultural enterprises was taking place, though on a very limited scale. It has already been mentioned, that in fact such privatization came to transfer of the space being in use of non-profit organizations into commercial sector, usually with the consequent cessation of their basic operations.

In privatization program of public and municipal enterprises approved in 1994, a ban on privatization of social and cultural institutions was lifted. It shall be mentioned that the majority of workers and of management of the state and municipal institutions of culture and education opposed privatization of these institutions. In March of 1994, the Federal Council on Culture and Arts (composed of members of regional managing bodies in the sphere of culture) protested against privatization of institutions of culture and arts, while the Ministry of Education and the State Committee on Higher Education officially spoke out for postponing the discussion on the question of privatization of educational institutions until 1996.

This attitude towards privatization may be explained by two main reasons. First, if was the disappointing experience of privatization of objects of the social infrastructure, belonging to the state industrial and agricultural enterprises which had been discussed above. The preservation of the former structure of operations of privatized social and cultural organizations seems to be problematic after they are be turned into commercial enterprises.

Second, there exists well grounded apprehension, that after privatization of social and cultural institutions the federal and local authorities would reduce financing of education and culture. In the situation of continuous economic decline and increasing difficulties in forming revenue part of the federal and local budgets there is a high probability that in a number of regions would arise the situation, when to lessen the burden on budget the decision on mass privatization of social and cultural objects would be taken. On practice it will mean their transfer to commercial sector, as well as restructuring of their operations in most cases.

The personnel of educational institutions was the most active in the struggle against privatization. The deputies, representing this group in the State Duma secured the adoption of the law "On Preservation of the State and Municipal Educational Institutions Status and Moratorium on Their Privatization" at the beginning of 1995. This law stipulates that there shall be introduced a 3-year moratorium on privatization of all types of educational institutions, including the objects of their industrial and social infrastructure (hostels, sports centers, medical institutions, cultural objects).

To overcome the critical situation in financing of educational institutions might serve a change in composition of their founding members, inclusion in their number of non-state organizations ready to finance corresponding institutions of higher education. However, these proposals have not been supported by the management of institutions of higher education. Their negative attitude to proposed changes, the striving to hold their present positions has been adequately reflected in the law mentioned above.

In spite of a ban on privatization of social and cultural institutions, some changes in the ownership structure in this sphere have already been underway. There have emerged non-state educational institutions and cultural organizations. In 1994 in Russia there operated 157 non-state higher educational institutions (22 per cent of the total number of higher educational institutions in the country) where studied 110 thousand students (4 per cent of the number of students nationwide). The number of non-state schools was 447 and there studied 40 thousand pupils. However, the share of non-state schools in the total number of schools in Russia made only 0.6 per cent and the share of their pupils - 0.18 per cent of the total number of schoolchildren. 417 out of 1091 theaters are private, 51 out of 145 circuses are non-state organizations; the number of private art galleries exceeds the number of the state-owned ones threefold (1215 and 399 respectively), etc.

The development of an alternative educational system, in particular school educational system, provoked an opposition among part of the state educational institutions' staff. They are defending tougher requirements with respect to private schools and depriving them of the right to be recipients of the budgetary financing. To justify these measures the necessity to defend children's rights on quality education as well as the argument that private schools are schools for the elite and the rich, that making their reception of financing from the budget as any other ordinary school socially unfair, are mentioned.

This position was supported by authorities in quite a number of regions. This support manifested itself through a legislative initiative of the Federation Council--the upper chamber of the Federal Assembly in which are represented mostly leaders of regional executive and legislative authority bodies. In 1994 the Federation Council sent to the State Duma legislation "On Introduction of Amendments and Supplements to the Law On Education". This legislation stipulates exclusion of the provision on budgetary compensations for private schools' educational costs; makes issue of the license to a private educational institution dependable on the fact, if this institution has its own material base; limits the number of teachers working in private schools part-time to 30 per cent of the total number of teachers in this school; deprives the populace of the right to receive personal state credit on education. Adoption of such a law will sharply deteriorate the situation for non-state educational institutions and deprive the families with middle income of the opportunity to send their children to non-state schools.

Development of the network of non-state educational institutions in Russia is confronted, on the one hand, with the interests of the conservative part of teaching staff which feel the threat to their positions coming from the new educational institutions which as a rule use modern pedagogical technologies and attract the most talented students and teachers. On the other hand, economic interests of the bureaucracy and real financial possibilities of territorial managing bodies in the sphere of education conflict with the necessity to finance non-state educational institutions which manage to obtain the state accreditation.

This conflict is reflected in the position of the deputies of the Federal Council. However, there are reasons to believe that the real motives of their activity, directed against the development of alternative educational institutions, lay much deeper. It is the general negative attitude to the democratic reforms in the country. It is the unwillingness to allow ideological pluralism and first of all the freedom of choice of ideological values and priorities by students. This is clearly confirmed by party membership of the authors and backers of the legislative initiative mentioned above which is directed to slow down the reforms in the sphere of education.

Analysis of the first results of implementation of large-scale program of the state property privatization in the Russian Federation makes it possible to conclude that formation of the special, differentiated and clearly defined from the point of view of probable variants of social after-effects, approach to denationalization and privatization of institutions of the social services is necessary. As practice shows, the lack of clearly defined principles and limits of transformation of ownership forms in the social sphere lead to their mass restructuring, commercialization, reorientation of their activities exceptionally to the strata of the populace with high incomes, or the total prohibition of any institutional transformations of the state system of public services provision.

The other knot of problems, connected with changes in relations of ownership, concerns the spontaneous privatization of the rights to use and dispose of the state property in social and cultural institutions. These phenomena are especially apparent in medicine. The present situation in the financial sphere and conditions for investment activities objectively hinder the establishment of new private medical institutions. Only few of the most powerful non-state structures, firms are able to carry out such projects. In connection to this, the non-state sector is practically functioning on the material and technical, as well as personnel base of the former state system of health care, attracting the best specialists and medical technologies due to better salaries.

On various levels of the managerial system of health care, spontaneous privatization manifests itself both through mishandling of budget funds (placement of these funds to banks, as deposits, to insurance companies, etc. in order to gain personal profits) originally allocated to meet health care requirements and striving to derive "rent" out of the position of distributor of budget funds. The mass transition to the system of medical insurance which is presently taking place, in fact does not change the above mentioned situation, since newly founded financial institutions demonstrate the same forms and motivations of behavior.

The reason to this is, on the one hand, the lack of legal requirements for transparency (openness) of the all financial activities of health care institutions and, on the other hand, lack of effective forms of self-organization of consumers of medical services, able to directly influence the behavior of managerial personnel.



In the previous chapters of the present work a description of urgent economic problems of public health, education and culture has already been given. In this chapter we want to summarize these descriptions. Main problems of the social services of which solution its further evolution depends, are the following:

1) Insufficient allocations of budget funds for normal performance of social and cultural institutions, aggravated by instability of public finance.

The decline of share of the federal budget expenditure allocated for the social services was accompanied by arrears of payments and, finally, failure to fulfill the adopted decisions on the volume of financing. Printing of the textbooks does not get enough funding. Delays in allocating funds needs to increase teachers' salaries provoke teachers' strikes.

As before, the public health high dependence on budget allocations remains. As a consequence, in regions under very grave financial conditions have already arisen and can arose in the future critical situations in rendering medical services to the population.

There remains a considerable lag in wages between workers of the social sphere and those employed in other branches of the economy. Connected with this is the process of outflow of highly qualified specialists out of traditionally free for general consumers education, health care and partly culture institutions to commercial sector which sharply limited access of general public to high quality services of social and cultural institutions. Neither state measures of financial support of these sectors, nor efforts of numerous funds and associations, including foreign ones, do not allow to rise the level of average salary in the social services to the level of wages in Russian industry.

2) Erosion of responsibility of the state authorities for the situation in social services.

In Russia there took place a considerable administrative decentralization in the social services. But because 77 out of 89 subjects of the Russian Federation receive budgetary subventions, then the volume of financing of the social services in the regions considerably depend on decisions taken by the Finance Ministry. At the same time, not the Finance Ministry, nor the Government are responsible for the changes in volume and quality of social services rendered to the population. In its turn, local authorities take off responsibility for the worse situation in the social sphere, saying that the major part of taxes is sent to the federal budget, and the amount of subventions from the federal budget is getting smaller. The same situation is reproducing itself in relations between the regional, on one side, and municipal, and district administrations, on the other.

In reality, the financing of the social services still remains considerably centralized, but responsibility for allocation of these funds and their utilization is not strictly defined. The question is the distribution of authority and responsibilities, corresponding to actual flow of funds, i.e. the responsibility of the Finance Ministry and sectoral federal managing bodies to the government and parliament, the responsibility of regional authorities to the federal bodies.

The undefined division of power between various state managing bodies results in erosion of responsibility of the state as a whole for provision of public goods to the population.

There are no funds for the adequate functioning of the available system of rendering social and cultural services to the population. With the available funds this system is only degrading. But nobody is ready to assume responsibility to officially revise the conditions and scale of rendering social and cultural services and goods to the population for free or on a preference basis.

3) The impractical utilization of funds allocated for social services.

Public finance instability and inability of higher authorities to assume responsibility for change of the situation and to guarantee the provision of public services by the state maintains illusory hopes of the sectoral and territorial managing bodies for increase of budget financing and prevents realization of the fact, that former strategies of financing and management should be revised. They are acting on the principle "to spread porridge in thinner layer", trying without success to preserve the maximum of achievements in organization of social services won at the end of the eighties.

Ineffective, disagreeable with present socio-economic reality, use of the public funds also continues due to the absence of effective control over the budget allocations spending.

4) Inconsistency and fragmentary introduction of the compulsory medical insurance.

This led no to improvement in the situation in the public health sphere, but to the creation of new problems. While introducing the compulsory medical insurance, there were many collisions between medical institutions, insurance funds and companies, and administrative bodies. But they were caused not by the incompetence of the introduced medical insurance model, but by the fragmentary way of its introduction and by insufficient study of its normative basis.

5) Uncontrolled process of erosion of free social and cultural services is taking place.

The quality of social and cultural services rendered to the majority of the population is getting worse; replacement of free services with paid ones is taking place; possibilities in getting this kind of services are diminishing for the poor groups of the population, and their influence on those who render these services is also falling.

Under the former system, groups of potential outsiders as to their access to quality services of the health care among the populace (because of their low income or place of residence) could nevertheless get the access to required services by turning to the Party and Soviet authorities. At present the citizens' appeals to Party authorities are, naturally, impossible, while appeals to elective authorities bring no results.

As a consequence those strata of the population which on the one hand need medical services and on the other hand have the least economic opportunities to use them, were deprived of effective institutional means to advance the favorable for them changes in the situation in health care. Their interests are not represented in the mechanism regulating provision of medical services to the population, and the character of these groups makes very doubtful the possibility of their self-organization, i.e. spontaneous creation of organizational forms of behavior in power structures by the indigent people themselves.

It is worth mentioning, that on regional level there exist individual phenomena of the above mentioned self-organization (associations of families with many children, etc.). However, the experience of their operations shows lack of efficiency in organization of respective interests.

6) There appeared a tendency to polarization of sectors, working for general public, on one side, and those, working for elite consumers with high incomes, on the other.

Meanwhile, the economic situation of the organizations oriented towards the high income groups if sufficiently favorable, the vast majority of social and cultural institutions as before is solving problems of survival, and their situation is critically unstable. In conditions of insufficient budget funding and low solvency of the population, this sector is slowly degrading.

7) The institutional conditions and tax policy do not stimulate increase of the share of non-state funding of the social services.

The task to stimulate social and cultural institutions in search for new sources of financing and encourage the development of non-state sector, invariably declared in the program documents of the government, has not been supported with according taxation policies. Under the legislation in force the amount of funds transferred by enterprises and banks for charitable purposes, to social and cultural institutions, etc. shall be subtracted from the taxable profit, but this amount is limited to 3 per cent of the profits. To be fair, it shall be mentioned that this limit was increased in 1993 (in 1992 it was 2 per cent), but as international experience shows, the allowances shall reach 5 - 10 per cent to provide for effective stimulation of philanthropy.

The tax policy with respect to the social services differ depending on the fact if an organization belongs to the state or not. Since 1994 the share of profit not subjected to taxation in case it is donated to cultural institutions has been increased to 5 per cent, but only if recipient is a state institution!

Certain tax exemptions are granted to the social and cultural institutions themselves (institutions of education and culture are exempted of value added tax, etc.), but budget organizations still enjoy more preference. Only state and municipal organizations are exempted of the tax on profit, derived from principal activities. Financial allowances for rent of space are not granted to non-state educational institutions.

At the same time, the taxation policies in regard to organizations differing by purposes of their operations and economic types, i.e. commercial and non-commercial organizations is the same, contrary to the common practice in countries with market economies.

8) Commercial and non-profit sectors in Russian economy continue to exist institutionally undivided.

9) The future of the social institutions which belong to industrial and agricultural enterprises remains unclear.



1. Stabilization of public funding

The state support for the social services, including allocations out of the federal budget, shall continue. In present situation the main thing is to provide stable funding for the social services.

1) Set minimum federal and local budgets' expenditure, allocated for public health, education, and culture;

2) Introduce targeted taxes in order to fund public health, education, and culture; or in the framework of the available taxes and tax rates set those incomings which will be targeted on funding public health, education, and culture;

3) Set norms for the minimum public expenditure on public health, education and culture calculated either in cash per capita, or as a share of GDP, as a hole on social services;

4) To widen the list of those expenses on public health, education, and culture which go under protected budgetary categories--expenditure categories which are being financed in the first instance; to them now relate expenses on wages and salaries, deductions to the social security funds, which are calculated in percentage points to payroll fund, and expenses on food for the patients in hospitals.

The first variant has the best chances to be carried out. Attempts were already made. In the "Bases on legislature on culture" (1992) the minimum expenditure out of federal and local budgets on culture were set. In reality these requirements are not maintained.

The second variant is more realistic. In various regions local taxes have been introduced in order to support the upkeep of social services' institutions. Introduction of special taxes or allocation of targeted tax incomings on public health, education and culture would have been the best guarantee for the stable financing of social services. But special interest groups and Finance ministry will speak against this procedure.

Under the existing high taxation level it is difficult to introduce additional taxes. Targeted taxes in order to finance public health, education and culture is possible to introduce only on condition of corresponding cut in other tax rates. Precisely this way in 1993 compulsory employers' contributions for employees' medical insurance was introduced. These contributions in the amount of 3.6 per cent of the payroll fund were set at the expense of a cut for the same amount of the compulsory contributions into the pension fund. At the same time, the amount of compulsory employers' contributions into the social security funds did not change.

But to introduce federal targeted taxes in order to finance education and culture will be much more difficult. The existing distribution of forces is obviously not in favor of this decision. In this regard, one must note that the decision to introduce compulsory contributions for the medical insurance was in the interests of not only social services lobby, but some other groups. While this decision was taken the pension fund was under the control of the Supreme Soviet. A cut in the financial basis of the pension fund was in the interests of the President and the government in their struggle with parliament.

Another possible way of stabilizing financing of the social services--introduction of public expenditure minimum on public health, education and culture--is now being drafted in the government. In the 1995 President's message to the Federal Council it was said that "in the future while forming a budget obligatory should be consideration for the public minimum standards--on basic indices of living standard, expenditure on science, culture, education, health care, and ecology". In the Russian government's program for 1995-1997 among measures on improvement of the mechanism using which federal aid was granted to the regions in 1996-1997 was mentioned "introduction in the procedure of evaluating volumes of federal aid to the regions more objective estimates of territories' needs in budgetary resources using differences in social and budgetary norms according to territory."

State norms (standards) which define the guaranteed minimum of expenditure on public health, education, and culture may be defined according to two different bases:

1) As public expenses on rendering a certain set of medical, educational, cultural, and recreational services per capita: at the same time, a list of services, qualitative and quantitative characteristics of the services must be defined; in other words, the minimum social consumption norm of social services should be fixed;

2) As expenses on the upkeep of the existing social services' institutions; at the same time, expenses on separate categories of expenditure of the social institutions should be standardized (expenses on paying wages and salaries, on buying medicines, materials, equipment, covering communal services, etc.).

One must note, that these two approaches are not alternatives, but allow combining and uniting.

While defining norms in the first base, that is while standardizing services per capita, there appear difficulties because of considerable differences between the regions in availability, quantity, quality of health care, educational, cultural, and recreational services rendered to the population. Indices of supply of social and cultural institutions the rate of their use and correspondingly the amounts of spending on public health, education and culture per capita differ considerably in the regions. These differences reflect, on the one hand, a different level of regional urbanization, peculiarities of accommodation and climate, etc., and on the other hand, specific nature of the economic development of the regions, different volumes of investment made in the social services in the past.

If one parts from a premise that the public norms which define the guaranteed minimum of expenditure on public health, education, and culture per capita must provide for all citizens equal rights in obtaining certain (minimum or basic, etc.) set of health care, educational, and cultural services, then the indices of these norms must be the same for all the citizens of different regions; permissible are differences conditioned by the climatic factors. But then a problem of covering the difference between the real and normative expenditure arises in many regions. Those regions where real expenses turn out to be below the norm have to increase budgetary expenditure and, consequently, subventions from the Federal budget. And those regions where real expenses turn out to be above the norm introduction of such norms will help little.

If standardization of expenditure is taken as a basis for the norms directed to the upkeep of the existing social and cultural institutions, then a problem of scissors between the real volumes of budgetary funding of social services and those volumes of expenditure which will be needed to cover substantiated norms.

Judging by the remarks which are made by the employees of social and cultural institutions in mass media, the volumes of budgetary finance are not enough to keep the majority of these institutions running normally. There are not enough means needed to acquire sufficient amount of medicines, materials, and equipment, to carry out current redecoration. If to standardize expenditure directed on the upkeep of different types of social and cultural institutions, then it will be necessary to set various minimum for expenses according to each of the existing expenditure items. And then, whatever you do, it will turn out that the necessary amounts of funds calculated according to the norms will exceed, and obviously considerably exceed, the amounts of real allocations.

It is possible to solve this problem in two ways: either by considerably increasing funds for public health, education, and culture or by cutting the number of public and municipal social and cultural institutions which are publicly funded.

Neither the government, nor the parliament will want to admit that the state has no funds need to support the existing number of social and cultural institutions and to support familiar for the population number and volume of free medical and educational services. Before the parliamentary and presidential elections nobody will take responsibility for the official reconsideration of the conditions according to which the population is receiving medial, educational, cultural, and recreational services--in a way of lowering those conditions.

On the threshold of parliamentary and specially presidential elections it is possible that budgetary expenditure on social and cultural sphere will increase. But will it be sufficiently enough to guarantee normal functioning of its institutions?

Obviously, the military-industrial and agricultural lobbies will not allow considerable increase in financing of social services at the expense of a cut in allocations in support of the military-industrial complex and agriculture, etc. To count on a serious increase of budgetary allocations in social services is real on condition that budget revenue will grow. Consequently, standardization of expenses on the upkeep of the social services' institutions has the biggest chances to be realized only when the country overcomes the economic crisis. Moreover, it is justifiable in relation to the standardization of expenses which cover rendering of a certain set of social and cultural services per capita.

As the government's decision on the development of expenditure norms directed on health care, education, and culture exists, and if such a decision is fulfilled, then most likely those norms will be set which define for each region only guaranteed general volumes of funds directed to public health, education, and culture, and which are not desegregated at that. Of course, such indices one may call norms on condition. Nevertheless, even such decision will contribute to the stabilization of funding for social and cultural sphere if setting norms means that the Federal administration assumes responsibility grant subventions to the regions enough to cover normative expenditure.

One must realize that in the near future it will be difficult to get the government to approve the norms which define a guaranteed set of services rendered to citizens, and the norms which define the guaranteed minimum of expenses directed on the upkeep of the social and cultural institutions. Nevertheless, the social services administrative bodies should elaborate such maximum desegregated norms and try that they are adopted at least as recommended ones. They may be used in order to substantiate suggestions on the necessary amounts of funds for social services from the Federal and local budgets.

In order to stabilize social services funding one may include their expenditure to the protected budgetary items. Of course, it is unrealistic to try to achieve that all the expenses on social services become protected items. But it is quite realistic to try to achieve some widening of those kinds of expenses on public health, education, and culture which are included in the protected budgetary items. It is necessary to include in this list expenses on medicines for the hospital patients (at least certain kinds of medicines and for certain categories of patients), on replacement of the old medical equipment, at least certain types of this equipment, on printing textbooks, etc.

At present, interest groups which have a direct relation towards production and consumption of the corresponding types of services are interested in guaranteeing stable public funding of education and culture. But all other lobbies will oppose it (agrarian, military-industrial, fuel and energy, etc.), those lobbies which verbally acknowledge the importance of social services for Russia, but in reality are worried only about short term interests of those state and formally privatized enterprises which they represent.

Realization of the above examined measures on stabilization of social service financing is directly depended on a relative strength of social groups in the corresponding administrative bodies (parliamentary commissions and committees on social questions, ministers of the federal and regional governments who are responsible for the social services). They do not have much force. But it is important to use to advantage the forthcoming elections period for achieving not only an increase in financing of the social services during the election campaign, but approval of decisions which guarantee stable financing in the future. Considerable contribution in lobbying of the above mentioned measures could be made on the part of labor unions and social movements.


2. Division of responsibilities and powers between the bodies of power of different levels

Decentralization of the system of state management, delegation of huge amounts of power and responsibility to the regional level in the social sphere require, on the one hand, the definite distribution of functional duties in the social sphere between different regional levels of authority, on the other hand, the establishment of real correspondence between responsibilities, entrusted to this or that managing body and those material and financial resources, organizational and managerial instruments allowing to influence dynamics of these resources it disposes of.

Regional authorities who are constantly demanding an increase in tax share which remains in the regions are interested in it. But the president and the government are not interested in it. In their interests remains to preserve dependency of the regions on federal subventions amounts and conditions of granting which are decided as a result of administrative deals.


3. Stricter control over budget expenditure

It is necessary to provide for more transparency of financing and management of the system of public services provision. Now when the budget is being approved by the parliament the social services' expenses are given in details which take a few lines, and substantiation which are being presented by the ministries and committees take only a few pages. But contrast, in Sweden the social services expenses are being substantiated by a whole volume presented to the parliament which contains a description of certain programs and projects.

The part the respective committees of the State Duma and regional dumas take in organization of control over utilization of the budget funds allocated to meet the requirements of health care, education and culture shall be enhanced. We clearly understand that the measure of impracticability, dishonest actions in utilization of the state allocations in the social services is insignificant as compared with impracticability of policies and enrichment of officials at the state expense in other spheres. However, an effective system of Parliament control over expenditure of the state funds shall be established. This is a necessary condition to develop democracy and market economy in this country. It is easier to accomplish this in the social and cultural sphere because of two reasons. First, here the groups not interested in such control are considerably weaker than in other spheres, and their resistance can be overcome more easily. Second, for such sectors as health care, education, culture, the outsiders in distribution of the budget pie, the increase of transparency will mean that respective articles of the budget expenditure are more justified and, consequently, certain reinforcement of positions of these sectors in the struggle for budget allocations.

In case an effectively working system of parliamentary control over expenditure of funds could be created if only in the social services, afterwards it were much easier to create such systems in other spheres.

Social services' administrative bodies and the Finance Ministry will be against an increased transparency of budgetary expenditure. For example, quite recently the finance minister declared in one of his TV appearances literally the following. It is unnecessary to analyze and approve the budget in the State Duma in very detailed form. If certain resources are being allocated for culture, then the minister of culture himself decides how to spend it. He is responsible for culture, and let him decide what will he do with the allocated money. This position is convenient for the finance and culture ministers.

Not only employees of the ministries who distribute resources, but many beneficiaries of these resources--social and cultural institutions, pharmaceutical enterprises, editorials publishing textbooks, etc., will be opposing improvement in decision-taking procedure and introduction of public control. Very many are interested informal hidden from the public mechanism of receiving and disbursing public money.

Among the advocates favoring stricter control over the public money disbursement in the social services may become those political parties which in order to win the following election will proclaim slogans of introducing order in the state administration and a radical change in attitude towards social services, and which not only in words, but in deeds will try to carry out these slogans, or, at least, demonstrate the beginning of their realization. To overcome the officials' resistance and to secure an increased transparency in financing and administration will be easier with the weak social services then with the military-industrial and agrarian lobbies. On their example it will be possible to show dedication to the election slogans.


4. Rational use of public finance

While maintaining the role of the state in support of health care, education, culture, it is necessary to revise the strategy of the state financing of these sectors.

It is necessary to stop spreading the allocated means and in practice to start financing public health, education, and culture on the basis of targeted programs.

At present only the federal program of preservation and development of culture has been adopted. The given program and a draft of the federal program of development of education are built on the subject basis: their components (chapters, subprograms) correspond certain social services' sectors. For example, in the program of preservation and development of culture those chapters are marked which correspond to sectors controlled by the ministry of culture, state committee on cinematography, federal archives service, etc. In its turn, the main component of the chapter dedicated to the ministry of culture includes financing of the culture institutions' activities which are in federal property (for these purposes are directed 80 per cent of the means allocated for the ministry of culture). Among other chapters subject ones also prevail: restoration of historical and cultural monuments, development of artisans, preservation of museums' funds, etc. Priorities of realization of these or that directions in the program and its separate chapters are not been defined. All this leads to the fact that the allocated public money is spread over sectors and institutions and is spent inefficiently.

A transition to functional and targeted principle of developing federal and local social programs is needed. Their subprograms must correspond to the state activities in the appropriate spheres and reflect the priorities for the solution of these tasks.

To our mind, among these tasks first in priority in the crisis period are:

1) preservation of the system's components of the social services, i.e. those elements, the loss of which will be irreversible or need too much time and resources for restoration. It is necessary to clearly define and in strict terms the list of objects and organizations which shall be preserved at the state expense in any case, for instance, museum funds, archives, main library collections, the most valuable historical and cultural objects, creative-pedagogical schools, etc. The best solution for this will be the legal protection of respective standards, and lists, etc.

One should note, that at present there is a list of the so called especially valuable objects of culture. To this list belong The Bolshoi Theater, The Tretyakov Gallery, architectural and museum complex of the Moscow Kremlin, The Solovetsk Monastery, Kizhi, etc. But it is all in all 35 objects which usually have a world-wide fame. We suggest something else. Out of the general number of culture institutions select in each region those ones, which normal functioning is absolutely necessary for the preservation of the regional cultural potential. They should be financed in the amounts which guarantee there normal work. That is, not only the payroll funds, but other types of expenditure for the institutions belonging to this list should be protected budgetary item. Financing of the rest of the culture institutions will be realized as before, that is, as the budget permits.

2) The provision of minimal social standard of consumption of social and cultural services by the population. It is necessary to find out and strictly fix that minimal list of social and cultural services, for which the state support shall be rendered in new economic situation. The guarantees, that any Russian citizen shall enjoy such list of services, are to be protected by the law.

In principle, the basic federal compulsory medical insurance program and also regional compulsory medical insurance programs are called to solve precisely this problem. But the federal program was not approved by the government neither in 1994 nor in 1995. Regional programs suffer from lack of precision, and their funding does not correspond their goals.

3) The preservation of the social services development potential in the future, when there appear funds and opportunities for this. Therefore, at present, support is required for the pedagogical innovations, new forms of organization of cultural life, working out of new medical technologies, etc.

If the federal and regional social programs are in the form of functional subprograms placed according to their priority, then there appear a possibility for more rational and efficient use of the allocated budgetary funds. These funds should be directed to the priority subprograms, and the rest of them to finance as far as possible, or put them off. In accordance with the list of programs certain items of targeted expenses should be selected (for instance, for compulsory medical insurance of non-working citizens, for financing textbooks printing, etc.).

Public financing of the social services may become a reality if measures are taken for the stricter control of budget expenditure. Accordingly, those political forces whose interests more transparent social services funding will serve, will initiate the revision of the principles and priorities of funding. Such revision may be done when the federal programs on public health, education, and culture are discussed in the State Duma.

Certain interest groups will be interested in realization of the suggested innovations. Obviously, the inclusion into the federal and regional programs of a list of the most important social and cultural institutions will most of all correspond the interests of those organizations that are counting on being included in the list. Accordingly, those organizations and their employees who before hand cannot count on being included in the list will be against this measure.

The most interested in defining the federal health care and education standards are those groups of population who as a result of the economic reforms considerably lost in their living standard and quality of life the new poor. For them federal heal care and education standards will mean additional state guarantees for free health care and education (for themselves and for their children).

Administrative officials and staff of the social and cultural institutions are interested in federal standards for the funding of these institutions, and are also interested in the standards which define the volume of rendered services. But they are not interested in establishing any quality requirements for these services. Actively against the introduction of the standards will be that part of the medical workers and teachers who will have to bring their professional level to the standard's level.

Among those who will be opposing the introduction of the standards are the agrarian, military-industrial and other lobbies.

In state support of innovations in education are interested, firstly, capable and gifted pupils and their parents, secondly, those teachers and administrative officials whose mentality corresponds the ideas expressed in the innovations.

Against this measure, from our point of view, will also be conservative teachers and administrative officials who only accept traditional methods of education which were used during the communist rule.

Organizations expressing the interests of the groups which will benefit from this measure are the associations, unions, associations of "unique teaching methods" school teachers, teachers of the non-state higher educational institutions (Association of innovative schools and centers, Association of non-state higher educational institutions of Russia). Precisely they are the promoters of these educational innovations.

It will be in the interests of the young artists to give priority to the innovations in the state cultural policy. Professional associations and their administration will speak out against this. It became obvious when the federal program directed at preserving and developing culture and arts was designed. One of the program's goals is support of the innovations that guarantee the growth of the society's cultural potential. In the first grafts of the federal program special targeted subprogram directed at supporting cultural innovations was envisaged. But this subprogram was not approved by any of the Ministry of culture officials, and later was dropped.

In principle, the private funds are more likely to give support to the new organizational forms of cultural life and artistic innovations than the state. The state may help by granting tax relief that will stimulate private support of culture.


5. Continuation of health care reform

It is necessary to elaborate on some aspects of the basic model of the compulsory medical insurance, that has been set by the active legislation:

a) To introduce into the federal law such guarantees which prevent CMI funds from subordination to the public health administrative bodies;

b) To prohibit to the CMI funds and their branches to become insurers,

to select corresponding institutions in order to turn them into the independent state insurance companies;

c) To widen the controlling powers of funds' boards for the activity of executive directors;

d) To permit activity in the compulsory medical insurance only to the non-profit insurance medical organizations;

e) In the regions where the compulsory medical insurance for the non-working citizens has been introduced partially, to permit not to allocate temporarily, up to three years, budgetary funds for the CMI funds, and restrict the activity of the latter by funding health care for the working population;

f) The public health administrative bodies can be permitted temporarily, up to three years, to become insurers in the regions, where the introduction of CMI has been limited by the creation of CMI funds.

We may bring the following arguments in support of the given suggestions:

a) The State Duma is capable of preventing the restoration of the administrative system of the public health administration. The question about the status of the compulsory medical insurance funds is very important for the future of the public health reform. It is important not to allow the public health administrative bodies to place them under administrative control. At present the status of the funds and their administration are not clearly defined in the regulation approved by the government. Strictly speaking, such regulation has recomendatory character for the regional authorities. It is necessary to clearly define in the federal law the status and power of the CMI funds as independent subjects in the public health system; it is necessary to prohibit the use of funds that are accumulated in those funds by the public health administrative bodies.

Obviously, the CMI funds, as well as the medical insurance companies, that are interested in preserving the available CMI model, support such changes in the law.

b) The major part of the CMI funds combine, on the one hand, activities of accumulating and growth of funds, and on the other, activities of insurers, paying for medical services and controlling their quality. These are different functions that contradict each other. They must be organizationally separated. The subdivisions of the CMI funds that are dealing with insurance should be separated into independent public medical insurance companies.

c) Accumulated funds may be used not only for the health care purposes, but at a profit for the funds' and insurance companies' employees. The purpose of improving the medical insurance legislation includes preventing such cases. The juridical and financial independence of the regional CMI funds does not mean that the regional administrations and local community have no control over their activity.

The regional funds' working record shows that it is necessary to establish a more rigid and effective control by the boards over their executive directors. In particular, it makes sense to give the boards the right to approve quarterly and even monthly plans for the funds' financial activity. Basic administrative principles should be defined in the federal law.

At the same time, it makes sense to demand from the CMI funds a publication of detailed reports. It is worth including requirements to the reports' content in the federal law. Precisely that was done when the law on charity and charity organizations was adopted in summer 1995.

d) The present legislation permits the medical insurance organizations to become commercial ones. The economic interests of the commercial insurance organizations may contradict the interests of the population and the state while realizing programs on compulsory medical insurance. Meanwhile, in the countries with public health based on insurance, organizations that deal with compulsory medical insurance are, as a rule, non-profit organizations, i.e. they are getting no profit as a result of their activity, and they do not divide profit among their founders and employees. That is why, it makes sense to include in the law on medical insurance a clause that only non-profit medical insurance organizations have the right to deal with medical insurance.

e) Legislation on medical insurance that envisages a single CMI model should be brought in accordance with the real CMI practice, and with the real differentiation in the CMI models. In our country with big regional differences, the use of transition models for the organization of public health is justified.

The budgetary funds are not transferred to the CMI funds in many regions. The latter only accumulate compulsory contributions from organizations and deal with funding health care only for the working population. It makes sense legislatively to prohibit this practice. But only for a certain period. It may be permitted only in those regions where compulsory medical insurance for the non-working citizens has been introduced partially. In those regions where the basic CMI model has been fully introduced, a return to a transitional model is already impermissible.

f) They have not practically introduced CMI in some regions. They have only created the CMI funds which are accumulating contributions from enterprises. It seems possible to allow the public health administrative bodies to become insurers in such regions. Permission may be granted only for a limited period of time.

Incorporation of the above mentioned changes into legislation will allow to form and use transitional CMI models. Different degrees of transformation of the health care system in various regions is the reality of the transition period which will continue during the next few years. In those regions, where they have introduced CMI fully, it is important to continue the work on development and improvement of the normative and legal basis of interrelations between all subjects of the medical insurance system, including efficient distribution of rights and responsibilities between local executive bodies and territorial funds for compulsory medical insurance. In future when the economic situation becomes more favorable, it will be possible to continue a widescale public health reform more successfully, and to introduce the basic CMI model everywhere and fully.


6.Innovations into the financing mechanisms of


education and culture 

In education and culture it is important to introduce procedures of competitive allocation of state orders (including, in higher education), of competitive support of projects and programs, etc. They should start experimental approbation of the voucher system for funding social services.

Potential supporters of rational use of the budgetary funds and stricter control over the budgetary funds expenditure will promote these measures. About them we have spoken above.

Employees of the administrative bodies will be against the introduction and improvement of the competition procedure for the support of programs and projects. Officials and ministry employees are extremely uninterested to explain socially acceptable terms why these or those organizations or projects are getting support and give explanation about the volume of this support. Each ministry employee has its small field of work (organizations with which he works and has a possibility to influence the volume of allocated funds, etc.), which he cultivates with a profit for himself. He has no interest in explaining the reasons of his decisions. There is one more reason why they badly accept competition system of public funds distribution, especially in performing arts. Professional associations lobby for the system of feudal privileges for themselves, which is incompatible with openness and competitiveness in orders and grants' distribution, etc.

The main force opposing introduction of the educational vouchers is represented by conservative employees of the ministry of education, officials of all levels for whom the voucher system seems to be too progressive and brakes their understanding of the educational system economics. Besides, non-competitive teachers' collectives are obviously not interested in the voucher system, because this system will mean for them abrupt aggravations of problems connected with professional status and economic well-being, etc.

It is worthy of note that a considerable part of the pupils' family members will occupy a neutral position. The low importance of education among a considerable part of pupils' parents explains it. This will undoubtedly diminish regulatory effect of the voucher system in guaranteeing economic advantages that it may bring for the competitive teachers' collectives.

Because of its radical character the voucher concept in the foreseeable future undoubtedly will not be accepted everywhere. At the same, the most advanced regions (Nizhny Novgorod, the city of Moscow, etc.) will accept it.

In order to attract funds necessary to meet the health care, education and culture requirements, it is expedient to try using such forms of financing as targeted loans, distributed among the populace and enterprises. In this way the problem of funds' deficit which are necessary, for instance, for centralized printing of textbooks can be solved.

The poor people and passive administrators at all levels will be among those who are against this measure. It is absolutely unrealistic for the former to receive this loan. For the latter it will mean additional work.

Progressive administrators and teachers collectives will support this measure. Indirectly all pupils will benefit from the introduction of this measure, but it is unlikely that they will directly participate in targeted loans.

We think that this aspect of the educational reform may be carried out in separate "advanced" regions, meanwhile it is highly unlikely its widespread emission.


7. Widening and differentiation in tax relief

It is necessary to develop a system of the indirect social services funding at the expense of a greater differentiation in fiscal policy, in particular by way of extension of tax relief for the non-commercial organizations and individuals, making donations to them. Both public and non-state organizations will operate under equal conditions. The system of granting allowances due to participation in targeted state programs in health care, education, and culture shall be tested.

Realization of this measure depends first of all on the correlation of forces between the social services' lobby and "social" commissions and committees in the parliament. Working collectives of the social and cultural institutions and social services' consumers will benefit from this sort of transformations. The efficiency of this measure will considerably depend on whether public control will become stricter over public funds spending on education.


8. Law "On non-profit organizations"

Institutional misunderstanding of the non-commercial sector in the economy must be overcome. In order to do this, it is necessary to pass legislation regulating operations of state and non-state non-profit organizations, as soon as possible.

There are fewer and fewer of those who are interested in this law. Not a single special interests' group is lobbying this law at present. This law's objective is to regulate the procedure of economic activity of the non-profit organizations, their management, granting tax relieves, exercising public control over their activity. The fact that commercial and non-profit activities are mixed in the life of educational and cultural organizations is in the interests of many.


9. Non-profit privatization

While it is necessary to encourage development of the non-state sector, the forcible acceleration of the privatization process of public and municipal social services' institutions is inadmissible. At the same time, it is inexpedient to freeze the process of institutional transformation of these organizations.

The experience accumulated during the first stage of privatization in Russia showed that application to the social services' institutions of the same models which were applied during privatization of industrial enterprises led to the former commercialization and the fact that they lost their professional identity. This explains why legislators prohibited privatization of the educational institutions till 1997.

After the adoption of the new Civil Code, it becomes legally possible to privatize social and cultural institutions, but not as joint-stock companies, but turning them into non-state or quasi-public non-profit organizations (non-profit privatization). The state authority or (and) local government bodies, as well as citizens and (or) juridical persons might act as cofounders of such organizations.

"Non-profit privatization" (organizations which were privatized into non-profit institutions) represents a prospective direction in the institutional transformations of social services. It is a promising way to find new sources of financing for education, culture, and health care. The way which provides real institutional guarantees of preserving main activities of social services' institutions and of the use of their property for its' direct purpose - to provide for public services.

The model of non-profit privatization may be considered as a prospective solution of the problem of running the social services institutions, belonging to enterprises. Instead of total municipalization, as the state at present is short of funds to accomplish this, or auctioning them off, that being unreasonable from social and economic points of view, as it will mean their liquidation and restructuring, it makes sense to transform them into non-profit organizations. The municipal authorities and the enterprises, formerly owning them, being cofounders of such organizations. In this case, the local budget and enterprises will share the burden of running the respective institutions, thus lessening it for each of them.

The competitive working collectives of the social and cultural institutions and consumers of their services are interested in their non-profit privatization. Federal and local administrative social services' staff will oppose the non-profit privatization, because it will narrow the sphere of their influence.



Special interests' groups were and remain the main driving forces in social services economic transformations. They are not strong enough to change radically the critical situation which exists in health care, education, and culture. If strong political groups do not support the effective social services' policy then the situation there will be changing very slowly as a result of positive transformations in the economy.

Parliamentary and presidential elections may turn social services into an object of the instrumental interest for the competing political parties. If it comes trues, the chances will appear for the social services to stop degrading.

In order to secure normal functioning and development of the social services, it is necessary to radically change the people's attitude towards the problems of health care, education, and culture. This change is possible when the social and economic situation of the main part of the population has stabilized and there has appeared a trend towards the real incomes growth. Then it will be possible to turn people's conscience towards the social problems. It may be necessary to carry out special propaganda activities in a persuasive form that will attract people's attention towards the situation in health care, education, and culture in Russia by comparison with other countries.



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Article description: Reforms in health care, education, and culture (social services) represent an important part of social and economic policy during the transition. The problems of reforming social services attracted the interest of many researchers. This analysis is devoted to the models of health care, education, culture, and recreation organization in new conditions.

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