In all probability, the Cabinet of Ministers will scrap its plans to raise salaries for employees of budget-supported organizations on December 1. In a letter to oblast governors marked for restricted use, the Presidential Administration warned them to stop giving raises in an effort to avoid growing arrears. The budget can barely afford paying salaries at their present level, Presidential Administration experts insist, while higher pay will lead to new debts.
Recall that the government earlier promised to increase salaries of employees of the budget-supported organizations on a quarterly basis, with the latest 15% increase awarded on September 1. The letter signed by Presidential Administration Head Volodymyr Lytvyn says the government will raise teachers’ salaries without specifying the sources of funding. “Higher salaries for teachers will result in new debts, while additional pay expenditures not covered by the budget already amounts to UAH 480 million,” the letter continues.
Earlier, Finance Minister Ihor Mitiukov based his promise to up budget-funded salaries by means of improved tax collection. But according to the latest data released by the State Statistics Committee, as of September, the budget has developed a deficit, with a 3.5% revenue shortfall in the first nine months of 2001, against a 5.2% surplus last year, leading the finance minister to give up his former optimism, and with another UAH 1.5 billion revenue shortfall predicted by yearend.
The government last released figures on wage and salary arrears in September, then at UAH 60 million, and, judging by the statistics, no extra revenue has appeared to offset the arrears. Meanwhile, addressing a government social policy session in October, President Kuchma ordered the delayed wages be paid by the end of the year, sidestepping the government’s earlier pledge to raise pay in December. This obviously leaves budget-supported workers little cheer.
To settle wage and salary arrears, the Finance Ministry has come up with a project to redistribute budget expenditures, proposing cuts in funding for defense, international cooperation, road construction, and Pension Fund payments. “There are no guarantees that Verkhovna Rada will approve the proposed cuts,” the letter says. Yet, already on November 5 Finance Minister Mitiukov declared that the proposals on clarifying revenue and redistributing expenditure will be considered by the government at its next session scheduled for November 16. This time the government expects to balance the budget based on the appropriate decision by the prime minister, thus without getting the green light from lawmakers.
On the eve of this, the government, bent on paying pensions and stipends to students, probed the likely reaction of Verkhovna Rada to the proposed cuts in expenditures, with Premier Kinakh sending an open letter to lawmakers requesting them to officially amend the 2001 budget. It turned out, however, that consideration of this issue by Verkhovna Rada will be a rough ride for the government, with Verkhovna Rada’s Budget Committee Chairman Oleksandr Turchynov demanding the government’s progress report on implementing expenditure’s prior to taking any decisions on sequestering the budget. Of course, in the course of such a report the government will be heavily criticized by lawmakers, especially after Anatoly Kinakh had admitted in his letter, “There are no grounds to expect receiving any extra revenue in 2001.”
Still, the employees of budget-funded organizations need not lose heart, as the abortive pay increases will surely be compensated for in next year’s budget. Salaries will likely grow fastest on the eve of the parliamentary elections, propped up by ministers eager to become lawmakers and parliamentary caucuses on the lookout for more voter support. Given such a situation, the Presidential Administration has obviously assumed the role of a sober judge, warning in its letter that “pie-in-the-sky decisions could have bitter consequences.” It seems that this forecast is also doomed to come true.
