The revival of local self-government in the Russian Federation contributed to the increase in
territories’ responsibilities for the solution of socio-economic issues. However, during the whole
period of this institution formation the authorities failed to realize its potential due to a lack
of municipalities’ economic independence, which to a certain extent depends on the policy
implemented by federal and regional government bodies in relation to local territories. The idea
is that the principles of Russian federalism and fiscal legislation ensure resource centralization
at the level of federation and its subjects. As a result, local budgets are characterized by subsidies
and a lack of own funds to finance local activities. This policy results in the gap between formal
functions of local governments and possibilities of their implementation, indicating the need for
significant amendments of the regional policy in relation to local territories. This particularly
concerns the improvement of fiscal policy in terms of formation of the municipalities’ fiscal
base and inter-budgetary relations; the encouragement of local governments to increase their
revenues, improve cost efficiency, strengthen economy and build institutions of local development;
the enhancement of the efficiency of used potential of local self-government. The state of local
budgets, the sustainable development of local areas and the reduction in intraregional socioeconomic
differentiation can be considered as indicators of effective regional socio-economic
policy
Keywords
regional policy, local self-government, fiscal policy, socio-economic development, local budgets, local area