We are likely to spend more than one week watching numerous institutions
doing what we are familiar with as the "public control over the budget
process" debate with a hearty enthusiasm and even battle over the "terms"
and figures of the country's main financial instrument, regardless of who
the combatants are: Deputies, journalists, or foreign donors.
Meanwhile, they often do not comprehend (or pretend not to) what the
draft 1999 state budget program is all about in reality. In a way, the
document is like a confidence trick recently very popular in the CIS when
an unsuspecting victim buys dollars from a street moneychanger was handed
a bundle of paper carefully cut to the size of greenbacks with a genuine
banknote at the top and bottom of the bundle. Let me try to substantiate
this hypothesis.
ONE BUDGET, TWO WAYS OF LIFE
Why do we say that the proposed budget is a sham? Precisely because
this perfectly simple scheme has its replica, another budget for which,
supposedly, the entire government machine is working (I mean the so-called
off-budget funds - in other words, additional bank accounts held by government-run
institutions, to which a considerable part of payments for their services,
penalties, etc., is transferred). In fact, this other budget is like the
original one only in size, not according to its operating principles: the
legal budget is much less effective than illicit for the following reason.
First, a legal budget is an element of law, meaning that it is constantly
monitored by those supposed to defend the public interest. The quasi-budget
is subject to no laws (except for the legal formula that funds may be raised
to supply the needs of state structures, but that's all). Secondly, raising
these "funds" is based exclusively on the painstaking efforts and initiative
of such state institutions, while state budget income items depend on laws
that are anything but effective in Ukraine. The official budget is formed
using tax payments made on nonexistent production, it is "loss-oriented,"
so most budget revenues can never be collected (in fact, the state budget
annually loses 30% of its planned revenues, meaning on paper and in terms
of hard cash this loss reaches 50%). As for the off-budget funds, their
income items are formed using live (real) money: fixed payments, forced
contributions, and "automatic deductions" (more on this later). Thirdly,
state budget expenses are regulated by the law and are exposed to pressure
from the working masses picketing government buildings and staging protest
actions in city squares. Expenses out of non-budget funds are controlled
by bureaucrats acting at their own discretion and controlled by no one.
WHAT WAS AND WHAT WILL BE
Ukraine's adopted practice of collecting and spending budget money revealed
several tendencies which imperceptibly regulate the budget process. There
is a chronic shortage of budget income in terms of live money, so its expenditure
items are usually sequestered pro rata. This is a trick, but it
raises no objections since all the budget lobbies formally suffer equally.
In reality, they suffer unequally. Those without off-budget funds are the
worst off. Now isn't it strange that no state structure has ever suffered
because of budget income reductions? It is not because all or almost all
state institutions are sustained by off-budget funds.
Consider several of the most odious examples. Under the budget law,
the Ukrainian State Tax Administration was to collect some Hr 250 million
this year. Last year's results show that at least Hr 600 million was transferred
to the its accounts out of Hr 2 billion received as additionally accrued
tax payments - and 600 million is twice the size of that body's annual
budget.
One could also mention the Road and Innovation Funds. Viktor Suslov
told The Day that the previous Verkhovna Rada failed to shove the
off-budget funds into the state budget, and this means billions of hryvnias.
And when the reporter asked an anonymous recipient about the criteria used
in making loans from the Innovation Fund, he was told, "You pay 30% of
the loan up front, and you don't have to bother to pay back the rest."
Perhaps this was just one of those cases the Fund leadership refers to
as "high risk loans."
It is also true that attempts were made to put an end to this "off-budget"
anarchy. Late in 1997, the Counting House tried to take stock of these
funds. It had located 604 before it found itself in the Constitutional
Court which denied it the right of oversight and forbade it to inspect
budget incomes. In other words, the legislative auditors were put in their
place and told to stay away from budget matters.
NATIONALIZATION DRIVE
Judging from the official budget, Ukraine is a country of starving budget-sustained
institutions, enterprises, and organizations. A closer look, however, shows
that they handle public property as if it were their own. Moreover, they
appear to have "privatized" certain functions inherently the prerogative
of the state, ranging from customs control to combating organized crime
to protecting the environment to water supply. Representatives of this
group may well be considered real businessmen and their business boils
down to trading in power, which is the only possible and thriving business
under our conditions.
Now and then domestic and foreign periodicals launch propaganda campaigns
focused on the misery of coal miners, teachers, doctors, servicemen, or
Chornobyl victims. Speaking of the army, its proverbial poverty has been
discretely and effectively capitalized upon, turning into personal fortunes
for quite a few generals and other officers, emerging as officers' towns
and soldiers' barracks built with German money. Myths based on the suffering
of Chornobyl survivors have been translated into fortunes built by leaders
of numerous organizations claiming to represent the victims' interests.
In a word, the inner mechanism of this allegedly starving state remains
a big secret, with only potential wealth (expensive foreign cars and palatial
suburban cottages) or demonstrative misery in public view.
Finally, those who have dealt with the off-budget funds in practice
say that they constitute the main source of Ukrainian corruption, adding
that the powers that be could easily do away with this source, if they
wanted to, by enacting a law banning all off-budget funds.
COMMENTARY
Generally speaking, off-budget funds are a graphic example of not only
the well-known problem which is pathologically immune to any solutions
(the IMF has struggled with it for several years), but also - and primarily
- of the effective resistance our pseudo-polity offers when it comes to
its real vital interests. No one bothers to organize a campaign in the
press or debates in Parliament to defend off-budget funds (on the contrary,
their existence is kept out of the public eye), yet each and every attempt
to legalize government incomes and expenses is deftly nipped in the bud.
It should be noted that the struggle to preserve these off-budget funds
is effective precisely because it is organized or coordinated by no one.
It is a collective response, on the part of people who often do not know
one another, to a threat to their personal incomes. Such behavior is quite
typical of our state and is a separate topic rating a long and serious
discussion. There is, however, another aspect to the "off-budget problem."
The state can independently and uncontrollably "earn" and spend money.
Anything more unconstitutional would be hard to imagine. This situation
contradicts practically every Article of the Constitution's "General Provisions,"
yet is not formally at variance with any of them taken separately. In other
words, this situation contradicts the spirit but not the letter of our
Fundamental Law. Indeed, Western constitutions, whose provisions were diligently
copied in the Ukrainian one, do not provide for the state doing any business.
To them, this stage is history dating back to the time when parliamentary
government was first set up. The legal financing of the state is implied
by such notions as "democracy," "law-governed state," "popular sovereignty,"
etc. Since these notions are meaningless in our laws, they need to be constantly
specified and particularized. Hence, it would be best to overcome off-budget
funds (thus liquidating one of the main hotbeds of corruption) and restore
the constitutional order at the constitutional level. An amendment should
be adopted, reading something like "All incomes of the state received as
taxes and other lawful payments shall be transferred to the State Budget.
Other means of amassing revenues for state-run and state-instituted bodies
shall be prohibited. All expenses of state-run and state-instituted bodies
shall be implemented via the State Budget."
By Volodymyr ZOLOTARIOV, The Day







