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. Last Updated: 07/27/2016

City Budget to Boost Social Benefits

The Moscow city draft budget for 1999, which the City Duma is due to consider next week, sets social spending as its No. 1 priority.

Keeping pensioners happy and styling the city as a showcase for the rest of Russia is crucial for Moscow Mayor Yury Luzhkov's presidential ambitions.

But the budget cannot hide the fact that the city lacks the money to compensate for the reduction in living standards caused by high inflation since the August crisis.

Social payments such as pensions, child support and other benefits for the poor will be increased marginally as a share of the budget, rising by 28 percent compared to a rise of only 26 percent for spending as a whole.

But the budget predicts inflation of 50 percent next year so social spending will fall in real terms. "We are going to have an excruciatingly tough budget," said Valery Zharov, the first deputy head of the city's department of economic policy and development.

The draft budget is prepared by the city and must be approved by the Moscow City Duma, or local legislature, before it is signed into law by Luzhkov. Total spending in 1999 will be 58 billion rubles with 25.4 billion classified as social spending.

The city has promised some high profile spending increases in its campaign to sell its draft budget. Starting July 1, the city plans to raise the minimum pension from the current 450 rubles ($21 at Friday's official rate) a month to 500 rubles.

While pensions are usually paid by the Federal Pension Fund, the city of Moscow sets a minimum pension and makes up the difference for pensioners who fall below it.

The new minimum pension standard will increase the number of pensioners in the city eligible for the supplemental Moscow-paid pension by 600,000 and bring it to 1.5 million. The city will need almost 2 billion rubles ($93 million) to pay the additional pensions, twice the cost in 1998.

"What is an extra 50 rubles?" said Vladimir Vasiliyev, a deputy chairman of the City Duma social policy committee. "On the part of the mayor's office, it is a symbolic gesture to show those people that they are not forgotten."

The city also plans to increase its spending on school lunches, student stipends and the salaries of teachers, doctors, nurses and social workers. But spending will lag behind inflation.

For instance, the city will spend 1.9 billion rubles on medication provided to the elderly and disabled residents for free, an increase of about 35 percent over 1998. But prices on some medicines doubled and even quadrupled following Aug. 17.

The city plans to pay for increases in social spending by slashing expenditures for upkeep of the city infrastructure.

"We will save on pipes, we will save on school repairs," Zharov said. "Sadly, we will just have to cut back on some much-needed maintenance."

The city will also revamp and "streamline" its system of tax exemptions and benefits, a memo accompanying the budget said.

Both the city government and City Duma deputies are far from eager to discuss the specific numbers, increases and decreases in social spending for the year.

"Everything is far from being settled and decided on," said Zinaida Dragunkina, the chairwoman of the Duma's committee on social policy.

So far, deputies of the City Duma have read the budget and submitted their first round of amendments on Tuesday. The next round of discussions - and real budgetary battles - are expected to start at the end of January.

Duma deputies want to force the city to hike spending on poor World War II veterans, food stocks and Center TV, the city-owned television channel incorporated as a private company. But all the deputy's suggestions will have to go through a budget review process and could be vetoed by Luzhkov.

Indeed, the looming budget battle could mark a change in the compliant role of the City Duma which has up until now rubber stamped Luzhkov's decisions. Some deputies said they were keen to establish their independence from Luzhkov.

"We want to pick our battles carefully," said Oleg Muzyrya, the chairman of the City Duma's budget committee.

"Before, we used to just vote for what ever came down from the mayor's office," Dragunkina said. "Now, we would like to carefully look at some things, some dead funds, to see if we want to stand by them."