Federalism and Local Politics in Russia

14 Vladimir Gel'manamendments, known as Federal Law No. 122, that brought in its wake themonetization of social guarantees to many categories of Russian citizens(veterans, disabled and others). As a result of mistaken estimates about theamount of compensation necessary and inefficient methods of payment, theLaw’s entry into force in early 2005 was greeted by massive social protest,which only subsided after the Centre had transferred substantial extra fundsto the regions. Without going further into the details of this policy, it isworth noting that shortcomings in the way the Law allocated competences tothe federal and regional levels contributed to the failure of the monetizationpolicy, and this was to put a brake on further major developments in thereform of the delimitation of competences between the Centre and regions,until the end of the electoral cycle in 2008.Fourth, the Kozak Commission prepared a new Law on GeneralPrinciples of Local Self-Government in the Russian Federation, adopted bythe State Duma in October, 2003, in the face of objections from selfgovernmentalistsand the ‘Left’ faction, 60 who saw the law as bringing aboutthe étatization of local government in the spirit of the zemstvo counterreformof 1890-2. The Law not only changed the structure and boundaries oflocal government, introducing multiple tiers, but substantially increased thenumbers of municipalities. It changed the financing of local government inthe direction of the ‘fan’ model referred to above, as well as introducingcompulsory horizontal equalization between municipalities (distributingfunds extracted from the better-off municipalities) and envisaging the possibilityof de facto bankruptcy of municipalities, which could now be placedunder external administration. The Law was criticized for placing moreemphasis on making municipalities responsible for local questions ratherthan creating the conditions in which they could actually resolve these. 61There were, however, more fundamental problems to be overcome before theLaw was implemented – notably the establishment of new municipalities,boundary changes and the reform of local finance and the associated problemsof inter-budgetary finance that had not been resolved by the Ministryof Finance or the regions. The entry into force of the new law was firstpostponed until the beginning of 2006 and at that stage neither the managerialistsnor the regional leaders nor, in the end, the State Duma had anydirect interest in the law’s application. Thus, it was decided to let the regionsdecide their own timetable of implementation of the law over the period2006-9 62 (see Chapters 10–12).Overall, the second stage of the reform was less successful than the first:the Centre’s policy was only partially implemented, and then not in the correctsequence. 63 It was at this point that the coalition that had been formedin 2000 in favour of recentralization fell apart. Insofar as the Centre hadbeen able to fulfil successfully most of the objectives of the first stage offederal reforms, the perceived need for the recentralization seemed to havebeen exhausted, and some of the local self-governmentalists began to see init a threat to the democratic gains of the 1990s. The regional dimension of