INTRODUCTION

The pandemic and the ensuing restrictive measures (lockdowns, institution closures, remote work formats, etc.) caused a slowdown of business activity and a decrease in household incomes, which in turn affected the volume and structure of aggregate demand. Since the pandemic affected commodity markets to varying degrees, the sectoral structure became one of the crucial factors in maintaining the stability of regional economies during this period, which manifested itself in the different patterns of change in the regions’ own tax and non-tax revenues going into the subfederal budgets. The fiscal support measures for businesses also reduced the regions’ own tax revenues and performed a compensatory rather than stimulating function.

The decrease in the regions’ own budget revenues was accompanied by an increase in expenditures on social services and healthcare and on the implementation of state investment and infrastructure projects. The growing imbalance between the revenues and expenditures in subfederal budgets was largely offset by an increase in transfers from the federal center. However, the increase in budget flows was accompanied by their substantial spatial redistribution and caused short-term and long-term effects in the regions’ budget sector. Together, these multidirectional trends determined the dynamics of subfederal budget revenues.

The aim of this study is to assess and analyze the behavior of revenues going into the consolidated budgets of the federal subjects of the Russian Federation during the pandemic (April 2020 to June 2021), including the contributions of various sources (tax, non-tax revenues, transfers), and to explain the structural shifts in subfederal budgets due to changes in the state fiscal policy institutions.

FISCAL EFFECTS OF THE PANDEMIC IN MODERN STUDIES

The fiscal and related effects of the 2020–2021 pandemic are discussed in many studies by Russian and foreign authors. First of all, we should note the studies focusing on macroeconomic, sectoral, and regional factors of the pandemic in terms of its impact on demand, supply, and income (Darougheh, 2021; Gunay and Kurtulmuş, 2021; Hoehn et al., 2021). Some authors examine the impact of the pandemic on changes in tax and budget systems revenues in various countries (Brada et al., 2021; Pietro et al., 2020).

Scholars who analyze the fiscal consequences of the pandemic in Russia also pay attention to changes in the breakdown of production and consumption during the crisis, which are associated with limited mobility, reduced business activity, temporary transformations in demand, and stimulating effects of fiscal and monetary policy (Zaitsev, 2020; Shirov, 2021; Kolomak, 2020). It is noted that the impact of the pandemic on the economies of Russian regions depends on their overall resistance to destabilizing factors (Kuznetsova, 2020; Mikheeva, 2021). In Russia, the pandemic caused the most damage to oil- and gas-producing regions, to regions specializing in the automotive industry, and to megacities with a large share of the service sector in the sectoral structure of the economy (Zubarevich, 2021a), which led to considerable losses in their own tax and non-tax revenues.

The substantial losses of the subfederal budgets during the pandemic were due to a tangible reduction in profit tax revenues. The uneven distribution of this tax across regions is due to the different sectoral structure of regional economies, the unequal financial conditions of their industries (resource-rich regions dominated by extractive industry typically have the largest share of profit tax) (Zubarevich, 2021b), and the different share of consolidated taxpayers in the regions (Lykova, 2020), which also explains the substantial spatial effects of the pandemic.

The studies place emphasis on the impact of fiscal shocks and fiscal incentives associated with the sharp change in the rules of economic policy during the pandemic. Thus, Zaitsev (2020) presents an overview of the monetary and fiscal measures employed by the Russian state in the first months of the pandemic. The fiscal measures included tax incentives, exemptions, and deferrals for some industries and types of activity; reduced payments to insurance funds; subsidies and state guarantees on loans for systemic companies, etc. The stimulating measures taken to support supply and demand also acted as internal shocks for the budget system.

Given the decline in the own tax and non-tax budget revenues of the regions, the considerable increase in federal transfers played an important role in supporting regional economies. The interbudgetary transfers from the federal budget were aimed mostly at compensating for the growing expenditures of the regions, mainly on healthcare and social services. When these transfers are considered separately from the expenditures, their increase creates an illusion of a growing wealth of the regions. In addition to social services and healthcare, the expenditures on the national economy also increased substantially in the regional budgets during the pandemic, but their spatial distribution was extremely uneven (Zubarevich, 2020). In general, the budget deficits increased in most regions because the federal support was not sufficient to offset the growing expenditures (Klimanov et al., 2020).

National projects played an important role in combating the fiscal consequences of the coronacrisis; these projects accounted for one-third of the federal interbudgetary support during the pandemic in the form of subventions, subsidies, and other interbudgetary transfers (Milchakov, 2021). The regions received the largest support through the Demography and Healthcare Projects. In this context, the fact that the regions of the North Caucasus and other lagging regions participate more actively in the national projects and receive greater per capita funding is suggestive of a certain policy pursued by the federal center (Milchakov, 2021). In general, the federal support policy turned out to be very selective and did not always reflect the real needs of the regions (Zubarevich, 2021b). Obviously, it also caused secondary effects (as well as primary ones) such as an increase in wages and taxes in the public sector of the corresponding federal subjects of Russia.

The period of the pandemic was also characterized by a transformation of interbudgetary relations, i.e., a change in the system of relations between the federal center and the regions. Based on evidence for an increase in the share of targeted federal support during the pandemic, an increase in the dependence of the regions on the federal center, and a decrease in the ability of the regions to maneuver in using the funds of regional budgets, Zubarevich (2021b) concluded that this period was characterized by the increased abandonment of the principles of fiscal federalism. Lykova (2020) came to similar conclusions. Yushkov and Alekseev (2021) demonstrated two trends: (a) on the one hand, the transfers allocated during the pandemic were related to the financial and epidemiological situation, and (b) on the other hand, the nontransparency and unpredictability of federal support only intensified during the crisis.

This work expands and refines the results of the above studies in several aspects. First, we build an econometric model that allows us to predict the revenues of subfederal budgets during the pandemic period for the case of no pandemic. Next, we calculate the deviations of the actual revenues from the forecast values and decompose them by source. In this manner we obtain a complete picture for all the regions and federal districts (FDs) and draw more subtle conclusions about the fiscal effects of the pandemic on subfederal budget revenues.

DATA AND METHODS

The study is based on the monthly data of the Federal Treasury of the Russian Federation on the revenues going into the consolidated budgets (excluding subfederal extrabudgetary funds) of 85 federal subjectsFootnote 1, and the city of Baikonur,Footnote 2 for the period from December 2015 to June 2021. The total revenues are broken down according to the budget classification into tax and non-tax revenues, transfers and their components. Note also that we use the assignment of regions to FDs as of the end of 2015, i.e., the Republic of Buryatia and Zabaykalsky krai are part of the Siberian FD in all the periods; Baikonur is referred in the article to the cities of the Central FD. Otherwise, the data on FDs could not be compared in time.

First, we calculated the increase in budget revenues for each region in each non-pandemic month. Since budget revenues are influenced by seasonality, by the timing of tax payments, by specific features of transfer allocation, and by other factors, it is complicated to use monthly data in modeling. It is still possible to do so, e.g., by building ARiMA (autoregressive integrated moving average) models (see, e.g., (Malkina, 2021a)). In this study, we use the approach previously proposed in (Malkina, 2021b). The essence of this approach is to calculate the moving annual budget revenues with a 1-month shift. Thus, each value of the resulting time series shows the total revenues for 12 adjacent months.

Based on the time series of the moving annual budget revenues (BR) from December 2015 to March 2020 (\(t = \overrightarrow {1,\;52} \)), we construct linear regressions for each region, which are estimated by the ordinary least squares method:

$$B{{R}_{t}} = \underbrace {{{\alpha }_{0}} + {{\alpha }_{1}} \cdot t}_{\mathop {BR{}_{t}}\limits^ \wedge } + {{e}_{t}},$$
(1)

where \({{\alpha }_{0}}\) and \({{\alpha }_{1}}\) are the estimates for the regression coefficients; \(\mathop {BR{}_{t}}\limits^ \wedge \) are the estimates for budget revenues; and et are the regression residuals.

The choice of linear regressions is explained by such an important property as additivity (reducibility by summation). In addition, these regressions describe well the trends for our time series although they do not take into account long-term cyclical fluctuations.

In a similar manner, we constructed the regressions for each kth source of budget revenues included in the analysis:

$$B{{R}_{{kt}}} = \underbrace {{{\alpha }_{{k0}}} + {{\alpha }_{{k1}}} \cdot t}_{\mathop {BR{}_{{kt}}}\limits^ \wedge } + {{e}_{{kt}}}.$$
(2)

Since \(B{{R}_{t}} = \sum\nolimits_{k = 1}^K {B{{R}_{{kt}}}} \), then it is also true that \(\mathop {B{{R}_{t}}}\limits^ \wedge = \sum\nolimits_{k = 1}^K {\mathop {B{{R}_{{kt}}}}\limits^ \wedge } \); \({{e}_{t}} = \sum\nolimits_{k = 1}^K {{{e}_{{kt}}}} \); \({{\alpha }_{0}} = \sum\nolimits_{k = 1}^K {{{\alpha }_{{k0}}}} \); \({{\alpha }_{1}} = \sum\nolimits_{k = 1}^K {{{\alpha }_{{k1}}}} \).

In other words, summing up the regressions for all the budget sources accurately gives us a regression for the total budget revenues, thus allowing a complete decomposition of the revenues by source.

The resulting regressions are used to calculate non-pandemic forecast values of annual budget revenues for each month of the pandemic period from April 2020 to June 2021 (\(t = \overrightarrow {53,\;67} \)).

The impact of the pandemic on budget revenues and their components in each region for 15 periods was calculated as the deviations of the actual revenues (BRt and BRkt) from their forecast values (\(\mathop {B{{R}_{t}}}\limits^ \wedge \) and \(\mathop {B{{R}_{{kt}}}}\limits^ \wedge \)). Correspondingly, the contribution of each kth budget source to the total losses (gains) of budget revenues in the regions during the pandemic was determined by the formula:

$$\Delta BR\% {{(k)}_{t}} = \frac{{B{{R}_{{kt}}} - \mathop {B{{R}_{{kt}}}}\limits^ \wedge }}{{\mathop {B{{R}_{t}}}\limits^ \wedge }}.$$
(3)

This technique helps to establish the degree of vulnerability of regional budgets to pandemic shock and to assess the scale and breakdown of budget losses (gains) during the pandemic.

RESULTS AND ANALYSIS

The Impact of the Pandemic on Subfederal Budget Revenues

Figure 1 shows the actual and forecast values of the subfederal budgets revenues and their three main components in Russia as a whole. The figure clearly demonstrates a substantial (beyond the usual scale for a crisis) decline in tax revenues during the pandemic, which manifested itself as early as in March 2020. We attribute this decline to both the decrease in production output and the slower growth in domestic producers’ prices during the first months of the pandemic.Footnote 3 Inflation reacted to the pandemic with a delay. Furthermore, since May 2020, there was a recovery of oil prices and a sharp increase in prices for nonferrous metals. The inflationary component and the recovery of production in 2021 contributed to the growing incomes and tax revenues going to the subfederal budgets. Meanwhile, the tax incentives and exemptions introduced by the federal and regional authorities reduced the tax revenues. Some recovery in tax revenues began in March 2021. However, even by mid-2021, the tax revenues did not reach the pre-pandemic level.

Fig. 1.
figure 1

The actual and forecast revenues of the consolidated budgets of the federal subjects in the pre-pandemic and pandemic periods, RUB bln.

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We also see a considerable increase in transfers, which manifested itself most conspicuously starting from May 2020 and reached its peak in April 2021, followed by a reverse, albeit weak, trend. The transfers are observed to noticeably exceed the trend line until the end of the period under consideration (June 2021). Non-tax revenues demonstrate a clear U-shaped pattern from June 2020 to June 2021. Finally, Fig. 1 shows that the total budget revenues exceeded the forecast values as early as December 2020 and then showed a noticeable rise, which is explained by both the continued high level of transfers and the partial recovery of tax and non-tax revenues.

Figure 2 shows the change in the revenues of the consolidated budgets of the federal subjects in 2020 compared to their non-pandemic forecast (according to our methodology). The impact of the pandemic on the budget revenues of the regions turned out to be very diverse. Thus, the spread of the deviations of the actual revenues from the non-pandemic forecasts ranged from –30.5% in Tyumen oblast and –24.7% in the Yamalo-Nenets Autonomous Okrug to +48.0% in the Republic of Ingushetia and +52.6% in the Jewish Autonomous Oblast. The greatest decrease in revenues was observed in oil-producing regions (e.g., 13.0% in the Nenets Autonomous Okrug) and in Kemerovo and Kaliningrad oblasts, which saw a 13.5 and 13.1% decline in budget revenues, respectively.

Fig. 2
figure 2

The change in the revenues of the consolidated budgets of the federal subjects in 2020 compared to the nonpandemic forecast, %. Compiled by the author. 1, Republic of Adygea; 2, Republic of Bashkortostan; 3, Republic of Buryatia; 4, Altai Republic; 5, Republic of Dagestan; 6, Republic of Ingushetia; 7, Kabardino-Balkarian Republic; 8, Republic of Kalmykia; 9, Karachay-Cherkess Republic; 10, Republic of Karelia; 11, Komi Republic; 12, Republic of Mari El; 13, Republic of Mordovia; 14, Republic of Sakha (Yakutia); 15, Republic of North Ossetia-Alania; 16, Republic of Tatarstan; 17, Tyva Republic; 18, Udmurt Republic; 19, Republic of Khakassia; 20, Chechen Republic; 21, Chuvash Republic; 22, Altai krai; 23, Krasnodar krai; 24, Krasnoyarsk krai; 25, Primorsky krai; 26, Stavropol krai; 27, Khabarovsk krai; 28, Amur oblast; 29, Arkhangelsk oblast; 30, Astrakhan oblast; 31, Belgorod oblast; 32, Bryansk oblast; 33, Vladimir oblast; 34, Volgograd oblast; 35, Vologda oblast; 36, Voronezh oblast; 37, Ivanovo oblast; 38, Irkutsk oblast; 39, Kaliningrad oblast; 40, Kaluga oblast; 41, Kamchatka krai; 42, Kemerovo oblast; 43, Kirov oblast; 44, Kostroma oblast; 45, Kurgan oblast; 46, Kursk oblast; 47, Leningrad oblast; 48, Lipetsk oblast; 49, Magadan oblast; 50, Moscow oblast; 51, Murmansk oblast; 52, Nizhny Novgorod oblast; 53, Novgorod oblast; 54, Novosibirsk oblast; 55, Omsk oblast; 56, Orenburg oblast; 57, Oryol oblast; 58, Penza oblast; 59, Perm krai; 60, Pskov oblast; 61, Rostov oblast; 62, Ryazan oblast; 63, Samara oblast; 64, Saratov oblast; 65, Sakhalin oblast; 66, Sverdlovsk oblast; 67, Smolensk oblast; 68, Tambov oblast; 69, Tver oblast; 70, Tomsk oblast; 71, Tula oblast; 72, Tyumen oblast; 73, Ulyanovsk oblast; 74, Chelyabinsk oblast; 75, Zabaykalsky krai; 76, Yaroslavl oblast; 77, Moscow; 78, St. Petersburg; 79, Jewish Autonomous Oblast; 80, Republic of Crimea; 81, Nenets Autonomous Okrug; 82, Khanty-Mansi Autonomous Okrug; 83, Chukotka Autonomous Okrug; 84, Yamalo-Nenets Autonomous Okrug; 85, Sevastopol.

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The greatest increase in revenues occurred in some underdeveloped regions (ethnic republics) in the south of Russia (an increase of more than 30% was observed in Chechnya, Kabardino-Balkaria, and Tyva; more than 20% in Dagestan, Buryatia, Adygea, Kalmykia, and North Ossetia–Alania), and in several regions of the Far Eastern FD (more than 20% in Amur oblast). As well, an increase in the budget revenues by more than 20% was observed in the underdeveloped Ivanovo oblast and the republics of Mari El and Mordovia.

As of the end of 2020, revenues were growing at a positive rate in 65 out of the 86 regions under consideration. In 29 regions, the excess of the actual revenues over the forecast values was within 10%; in another 19 regions it was 10–20%. It should be noted that the situation improved further by mid-2021, when 71 regions completed the fiscal semester with their revenues exceeding the non-pandemic trend.

During the pandemic, the situation in different regions of Russia was changing in different directions. As shown in Fig. 3, it was deteriorating rapidly in the Ural FD; however, since April 2021, when the budget losses reached their maximum in annual terms (–13.4%), some improvement was observed. The budget situation was improving during the entire period under review in the North Caucasian FD, where the revenues showed an increase above the forecast values in all the months. In the Far Eastern FD, too, revenues on average exceeded the forecast values during the entire period although the excess was not large and was decreasing over time. The rest of the FDs surpassed the negative threshold at different times, e.g., the Siberian FD as early as July 2020, and the Northwestern FD only in April 2021.

Fig. 3.
figure 3

Losses (–)/gains (+) in the revenues going into the consolidated subfederal budgets of the federal districts, annualized, %.

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The Change in Subfederal Budget Revenues and Its Decomposition

The sharp differences in the response of the budgets of different regions to the pandemic can be partly explained by the different sectoral structure of their economies. It is likely that serious changes in fiscal institutions are also behind this dynamics. To understand the impact of these changes, we now look at the results of decomposing the increase in the regional budget revenues by source. Figure 4 shows the gains (losses) of the regional budget systems in 2020, grouped by FDs.

Fig. 4.
figure 4

The decomposition of the gains (+)/losses (–) in the revenues going into the consolidated budgets of the federal subjects in 2020 in comparison with the non-pandemic forecast, %.

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We first consider the impact of the pandemic on the own (tax and non-tax) revenues of subfederal budgets. Figure 4 shows that almost all the FDs, except for the Far Eastern FD, experienced a substantial decline in tax revenues in the first year of the pandemic. Moreover, the largest decline was observed in the federal subjects of the Ural FD (primarily in Tyumen oblast and the Yamalo-Nenets Autonomous Okrug). As well, a substantial decline in tax revenues was reported for the Volga FD (especially in the republics of Tatarstan and Bashkortostan and Perm krai) and Siberian FD (especially in Kemerovo and Irkutsk oblasts and the Republic of Khakassia).

Figure 5 shows the contributions of revenues from different taxes to the change in the subfederal budget revenues. The greatest contribution to the tax revenue reduction in 2020 came from profit tax. A substantial decline in this tax can be explained by the evident decrease in business activity amid the pandemic given a slowdown in price growth or even a price fall in some industries. The leaders in the decrease of revenues from profit tax are mostly the same regions as in the reduction of the total tax revenues. This means that the behavior of the profit tax in fact determined to a great extent the change in the total tax revenues of the regions during the pandemic.

Fig. 5.
figure 5

The contribution of different taxes to the change in the budget revenues of the federal subjects in 2020 in comparison with the nonpandemic forecast, %.

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The worst situation with profit tax was observed in the Ural FD, where this tax accounted for 16.7% of the losses of its budget system in annual terms as early as in April 2021 (with a total budget loss of 13.4%). By June 2021, the situation in the Ural FD had improved slightly, but still remained extremely tense. The Khanty-Mansi Autonomous Okrug stands out among the regions of this FD. Here, the situation with profit tax was only worsening over time, and by mid-2021 this tax accounted for 14.5% out of the 16.6% losses of the regional budget. Large losses of profit tax were also observed in other resource-producing regions: the Komi Republic and Astrakhan and Orenburg oblasts.

The Far Eastern FD was the only one with a reported increase in profit tax. This result was achieved mainly through the considerable increase in levying this tax in Sakhalin oblast (where the contribution of profit tax to the increase in budget revenues was 20.9%) and the Chukotka Autonomous Okrug (+18.9%). However, by mid-2021 this advantage in the Far Eastern FD had been partially lost, and profit tax accounted for only 2.1% of additional revenues of subfederal budgets. It should also be noted that in none of the FDs, except for the Far Eastern FD, the change in profit tax reached a positive level by mid-2021, but the number of regions with a positive increase in this tax relative nonpandemic forecast for six months increased from 11 to 27.

Personal income tax showed a weak growth on the national scale as early as at the end of 2020, although it did not reach the nonpandemic forecast value in four of the nine FDs. However, by mid-2021, the contribution of personal income tax to the growth in subfederal budgets revenues increased from 0.2 to 1.3% in Russia as a whole, with the Southern FD being the only one with losses of this tax. By June 2021, only 16 regions reported a negative, albeit small, contribution of personal income tax to the changes in the budget revenues (with the exception of the Republic of Khakassia, Krasnodar krai, and Kemerovo oblast, where the negative impact of this tax was more evident).

The largest increase in personal income tax was observed in the Central and North Caucasian FDs, where by mid-2021, this tax accounted for 2.6 and 2.0% of additional budget revenues, respectively. Among the leaders in terms of personal income tax growth, we should note Moscow (where its contribution was 4.2% of the 5.5% additional increase in budget revenues in June 2021), Moscow oblast (with a contribution of 3.3%), Tambov oblast (4.3%), and the Republic of Dagestan (5.4%). Moreover, nine federal subjects were reported to have positive growth rates of personal income tax in all the 15 months of the pandemic. The positive contribution of personal income tax to the growth of budget revenues in the vast majority of regions (in December 2020, their number reached 50%) can be explained by the increase in wages in the public sector due to state support during the pandemic.

The situation with taxes on goods and services going into subfederal budgets (which include excise taxes and a small part of VAT going to the budget of the city of Baikonur) turned out to differ greatly in different regions. First, it concerns the diverging trends for the contributions from this group of taxes, which were, nevertheless, positive in a majority of federal subjects. By June 2021, almost all FDs (except for the North Caucasian FD) achieved positive growth rates in tax revenues from taxes on goods and services. Second, no spatial regularity was observed in the distribution of the increases in revenues from this group of taxes. The behavior of commodity taxes is associated both with the increase in excise taxes on fuel, increase in the deductions of certain excise taxes to subfederal budgets, and with the outbreaks of “buying fever” in some months of the pandemic.

In contrast to commodity taxes, gross income taxes show very uniform behavior across regions. Considering that they cover special regimes for small businesses, it is not surprising that by the end of 2020, all the FDs and the vast majority of regions (except nine) showed a negative trend in gross income taxes. For most regions, this group of taxes entered the green zone of revenues only in April 2021. By June 2021, 70 regions had received additional, albeit small, increase in revenues from these taxes.

The drop in revenues from property taxes, especially corporate property tax (or the tax on the assets of organizations), deserves separate mention. As of the end of 2020, losses in the corresponding tax revenues were reported in all the FDs, except for the Far Eastern FD, which reached a positive level as early as July 2020. However, even in mid-2021, corporate property tax generated less revenue than forecasted in 69 out of the 86 regions under consideration. The tax losses are believed to be due to the introduction of the corresponding benefits and exemptions for several industries that were officially recognized as most affected by the pandemic.

Finally, the contribution of natural resources taxes to the growth of the budget revenues of regions and FDs turned out to be insignificant. The exceptions are Amur and Magadan oblasts and the Chukotka Autonomous Okrug, where these tax revenues were growing at a positive rate throughout the pandemic and accounted, respectively, for 2.7, 5.4, and 3.7% of the increase in the total budget revenues at the end of the first half of 2021. Astrakhan, Kemerovo, and Sakhalin oblasts, on the contrary, showed a substantial decline in the revenues from natural resources taxes.

An analysis of the change in non-tax revenues reveals a negative trend similar to the one described above for the tax revenues in all the FDs, but by mid-2021 this trend gave way to a weak positive change in the North Caucasian and Siberian FDs. The worst situation with these subfederal budget revenues was observed in the Far Eastern FD, where they accounted for 5.2% of the budget losses as of June 2021. The most pronounced negative trend was reported for non-tax revenues in Sakhalin oblast (14.3% of the budget losses as early as in mid-2021), the Republic of Sakha (Yakutia) (–10.4%), and the Nenets Autonomous Okrug (–21.1%). In Yakutia, the main contribution to the decline in budget revenues was attributed to proceeds from the use of state property, and in Sakhalin oblast and the Nenets Autonomous Okrug, the main factor was the shortfall in proceeds from the sale of tangible and intangible assets.

The Increase in Transfers to Subfederal Budgets and Its Decomposition

Amid the substantial decline in the own budget revenues generated within the federal subjects and the growing deficit of subfederal budgets, the main compensating function was performed by interbudgetary transfers from the federal center to the regions, as evidenced by Fig. 6. The volume of transfers to the regions in 2020 alone increased by 59% compared to 2019, including interbudgetary transfers, which increased by 53.9%.

Fig. 6.
figure 6

The correlation between the changes in the own budget revenues and interbudgetary transfers to the federal subjects, 2020 to 2019 level, %.

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In 2020, the greatest gain from federal support was obtained by the North Caucasian FD (Fig. 4), which received it in amounts that clearly mismatched the losses in this FD. At the same time, the Ural FD, which turned out to be the most vulnerable to the pandemic, received virtually the least amount of federal support. By mid-2021, the situation with transfers did not change much; they varied from 4.6% (in Northwestern and Far Eastern FDs) to 23.8% (in North Caucasian FD) of the increase in subfederal budget revenues. In addition, a large amount of federal support went, as in 2020, to the Volga FD (+15.4% of additional income) and below average to the Ural FD (+5.2%).

The main beneficiaries of federal support were the Republic of Dagestan (in this region, by the end of the period, the contribution of transfers to the over-forecast growth of budget revenues amounted to 53.6%), Chechnya (+36.7%), Kabardino-Balkaria (+33.7%), Tyva (+33.2%), Mari El (+32.3%), and the Jewish Autonomous oblast (+49.7%). The regions with a decrease in federal support were the Chukotka Autonomous Okrug (as of June 2021, the contribution of interbudgetary transfers to the change in budget revenues relative to the forecast was –23.3%), Sakhalin oblast (–9.2%), Kaliningrad oblast (–16.5%), the city of Baikonur (–15.9%), and the Republic of Crimea (–6.3%).

The distribution of transfers during the pandemic creates an impression of emergency decision making with a lack of information and uniform rules, as if the federal center was granting support to those regions that were most insistent in asking for it. Hence, the paradoxical and hard-to-explain consequences, e.g., Sakhalin oblast with its large losses in own revenues (–8.5% at the end of the first half of 2021 in annual terms relative to the non-pandemic forecast) experienced a negative trend in transfers (their contribution to the changes in the budget revenues calculated by our technique was –9.1%). At the same time, Amur oblast (also in the Far Eastern FD), a region with a large increase in own revenues (which accounted for 10.9% of additional budget revenues by June 2021) received substantial federal support (resulting in an overall increase in revenues by 22.5%). Here, it should be noted that the assessment of the spillover effects from interbudgetary transfers in the form of increased tax revenues from the financed activities requires a separate study using more delicate methods.

It makes sense to separately discuss the components of transfers processed during the pandemic. As shown in Fig. 7, the largest part of the additional federal support was provided in the form of subsidies, as a rule, on the condition of cofinancing investment projects by the region. Thus, in the North Caucasus FD, subsidies accounted for 13.8% of excess budget revenues by the end of 2020 and 17.7% by the end of the first half of 2021, and their share in the transfers was 55.5 and 74.3%, respectively. Extensive subsidies were also received by the Volga and Siberian FDs; in the Far Eastern FD, by the end of the period, the contribution of subsidies to the growth of budget revenues exceeded the total negative contribution from all other transfers. The main beneficiaries of subsidies (based on the relative rather than absolute contribution to the subfederal budget revenues) were the republics of Ingushetia (+43.2% by mid-2021), Chechnya (+26.9%), Kabardino-Balkaria (+22.0%), and Mari El (+20.0%). Meanwhile, there was a noticeable reduction in this type of support in the Republic of Crimea (with a contribution of –20.9% to the increase in budget revenues). In general, the observed trend suggests that the federal center encouraged vigorous investment in the regions during the pandemic.

Fig. 7.
figure 7

The contribution of transfers to the change in the budget revenues of the federal subjects in 2020 in comparison with the non-pandemic forecast, %.

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The contribution of other types of support to the growth of subfederal budget revenues turned out to be less significant, except for the so-called other interbudgetary transfers, which accounted for a substantial increase in revenues in the Southern, Volga, and Siberian FDs. According to the Budget Code of the Russian Federation, these transfers are allocated on the basis of cofinancing (including full financing) when fulfilling obligations that are not regulated by the laws of the Russian Federation and federal subjects and in the case of appropriations from the reserve funds of the President and the Government of the Russian Federation. It follows from the definition that this is the least formalized and most flexible (mobile) type of support, which implies so-called manual control.

The slight increase in subventions, which are provided on a targeted basis to fulfill social obligations arising from the resolutions and orders of the President and the Government of the Russian Federation, is also noteworthy. The distribution of subventions follows the procedures approved by the Government of the Russian Federation. The allotment of subventions is less tied to the level of revenues in the regions, which contributes to a greater increase in the welfare of less wealthy regions and to the reduction of regional disparities. In fact, during the pandemic, we saw a substantial contribution of the subventions to the budget revenues of the lagging North Caucasian FD (especially Chechnya, Kabardino-Balkaria, and Dagestan) and their smallest contribution to the revenues of the more developed Central, Northwestern, Ural, and Far Eastern FDs.

A completely different situation was observed for grants. In 2020, they accounted for a small increase in subfederal budgets revenues in all the FDs (Fig. 6). However, by mid-2021, their contribution to subfederal budget revenues was slightly positive only in the Volga FD (+0.9%) and zero in the Far Eastern FD; in all other FDs, the contributions of grants became negative. It should be noted that within this group of transfers the largest share belongs to grants aimed at equalizing the budgetary provision of regions and these grants are distributed by the approved methodology. By mid-2021 the contribution of this type of grants to the growth of budget revenues (above the non-pandemic trend) turned out to be negative in all the FDs and in 66 out of the 86 regions under consideration. On the national scale, equalization grants accounted for a 0.2% loss in subfederal budget revenues by the end of 2020 and 0.8% by mid-2021. The only regions with a noticeable positive contribution of equalization grants to the growth of subfederal budget revenues (more than 1%) are the republics of Crimea and Tyva and the Jewish Autonomous oblast. The substantial decline in the share of equalization grants in transfers signifies an alarming trend towards a reduction in non-targeted transfers. These transfers, on the one hand, are allocated by uniform rules and, on the other hand, give regions some room for maneuver in managing their budget expenditures (based on regional preferences).

The share of grants, aimed at supporting measures to balance subfederal budgets, in the total federal aid was small, and they were distributed extremely unevenly across regions. In 2020 alone, they increased nearly by a factor of six. During the pandemic, there was also an increase in the number of individualised balancing grants allocated out of schedule to certain federal subjects (Chechnya, Saratov oblast, Krasnoyarsk krai, Republic of Crimea, Sevastopol).

In addition, it is worth mentioning the appearance in 2020 of four targeted grants allocated to the regions from the federal budget in the amount of 93 RUB bln, which were related to the special conditions due to the coronavirus infection: for balancing the budgets, financing additional medical expenses, supporting employment, and maintaining wage levels. In the same year, two targeted grants were also introduced in the amount of 14 RUB bln to ensure safety and provide additional payments to members of election commissions during the voting period on amendments to the Constitution of the Russian Federation. However, the share of these six targeted grants in total interbudgetary support was only 2.8%.

Thus, our analysis revealed substantial changes in the breakdown and spatial distribution of subfederal budget revenues. Only time will tell whether the new trends are sustainable. Their long-term effects (particularly those associated with significant increase in intergovernmental support) could be subject to a future research.

CONCLUSIONS

This paper presents an analysis of the changes in the budget revenues of Russian regions during the pandemic. Based on retrospective data for 86 regions, we constructed nonpandemic forecasts for subfederal budget revenues and their components from April 2020 to June 2021. By calculating the relative deviations of the actual revenues from the forecast values, we assessed the contribution of the pandemic to the changes in subfederal budget revenues and carried out a full decomposition of this contribution by source. The study showed a significant impact of both the sectoral structure of the economy and the changes in fiscal institutions on the spatial effects of the pandemic.

First, the pandemic affected the tax revenues of Russian regions in different ways. The ones that suffered the most were the oil- and gas-producing regions and the regions whose tax revenues contained a large share of profit tax. As a result of the introduction of property tax exemptions, a loss in the corresponding tax revenues was observed in the regions with capital-intensive industries where these exemptions were applied. Meanwhile, the increase in federal support to the regions and the increase in supportive spending amid the coronavirus infection caused spillover effects, which manifested themselves primarily in the wage growth in the public sector and in the growth of personal income tax receipts. Thus, at the level of federal subjects, personal income tax played a compensatory role during the pandemic.

Second, non-tax revenues during the pandemic behaved similarly to tax revenues; substantial losses occurred in proceeds from the use of state property and from the sale of tangible and intangible assets. Similar to the tax revenues, the effects varied widely across regions.

Third, given the substantial decrease in the regions’ own revenues (i.e., generated within the regions), the federal center markedly increased interbudgetary support in order to compensate for the shortfalls in tax revenues and to finance the growing social expenditures. An unprecedented increase in interbudgetary transfers was recorded during the pandemic. A part of the federal support was distributed on the basis of uniform per capita payments, which contributed to regional equalization. As a result, the greatest support went into the least developed regions of the south, while the more developed regions, including the oil-producing ones, which were hit the hardest by the crisis, received the least amounts of support from the center. This support did not reflect the actual state of affairs in the regions; nevertheless, it helped to reduce regional disparities and was justified by the fact that rich regions have a safety margin while poor ones are usually more vulnerable to economic crises.

Fourth, the growth of interbudgetary support was extremely uneven by type. First of all, there was a noticeable increase in subsidies for investment projects provided on the condition of cofinancing by the region, and a growth of other interbudgetary transfers, which also include substantial investment subsidies with less stringent conditions (even with zero cofinancing by the region). This is evidence that the state markedly increased its investments into public goods amid the pandemic, which is suggestive of the Keynesian model of economic policy.

Fifth, the diminished share of grants for equalizing the regional budgets, which are distributed by strict and uniform rules, also indicates a contraction of formal relations between the regions and the center, a step back from the principles of budget federalism, and an increase in the “manual control” over the regions by the center.

Finally, the logic underlying the distribution of federal support fits not only into certain ideas about the impact of crises on rich and poor regions but also into the new ideology of fighting poverty and the political preferences of the Russian authorities.

The results obtained and the conclusions drawn from these results can be applied for both assessing the resilience of regional economies to shocks and managing interbudgetary relations during crises. The further research can develop and implement approaches for assessing the efficiency of federal support to the regions during the pandemic, distinguishing between the primary and secondary effects of interbudgetary transfers, and finding correlations between subfederal budget revenues and expenditures during the pandemic, and the impact of fiscal policy on the budget imbalances of Russian regions.