THE SOVIET STATE BUDGET SINCE 1965

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• Document Creation Date: December 20, 2016
• Document Release Date: January 23, 2006
• Sequence Number: 1
• Publication Date: December 1, 1977
• Content Type: REPORT

National '
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Assessment
Center
The Soviet State Budget
Since 1965
A Research Paper
ER 77-10529
December 1977
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CONTENTS
Page
Preface iii
Recent Developments 1
Revised Spending Priorities 1
Economic Reform 1
Scope of the Budget 3
Central Role 3
The Budget as an Economic Indicator 3
Expenditures 4
Financing the National Economy 6
Industry and Construction 7
Agriculture 8
Other Sectors 9
The Sectoral Residual Under Financing the National Economy 11
FNE, by End Use 12
Social-Cultural Measures 13
Science 14
Defense 15
Administration and Loan Service 17
Reserve Funds of the Councils of Ministers 18
The Budgetary Expenditures Residual 18
Revenues 19
Turnover Tax Receipts 19
Payments From Profits 20
Other Social Sector Revenues 21
Revenues from the Private Sector 23
The Budget Surplus 24
The Budgets of the Union-Republics of the USSR 25
CHARTS
Page
1. USSR: Distribution of State Budget Expenditures 5
2. USSR: Major Sources of Budget Revenue 19
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TABLES
Page
1. USSR: Expenditures of the State Budget, Selected Years 4
2, USSR: Planned Expenditures for Financing the National Economy
(All-Source Financing), Selected Years 7
3. USSR: Planned State Centralized Investment, by Source of Funds 8
4. USSR: Explicit Budget Outlays for Agriculture, by End Use 9
5. USSR: Budget Redistribution of Funds, by Major Branch of the
Economy, Selected Years 10
6. USSR: Budget Financing of the National Economy, by End Use 12
7. USSR: Expenditures for Social-Cultural Measures in the State
Budget, Selected Years 13
8. USSR: Expenditures for Science 15
9. USSR: Explicit Defense Expenditures 16
10. USSR: Budget Funds -Available- for Defense, 1970 17
11. USSR: Revenues of the State Budget, Selected Years 19
12. USSR: State Social Insurance Receipts and Expenditures 22
13, USSR: State Budget 24
14. USSR: Major Budget Expenditures of the Union-Republics 25
A-1. USSR: Expenditures of the State Budget 26
A-2. USSR: Planned Expenditures for Financing the National Economy
(All-Source Financing) 28
A-3. USSR: Budget Redistribution of Funds, by Major Branch
of the Economy 30
A-4. USSR: Expenditures for Social-Cultural Measures in the
State Budget 32
A-5. USSR: Revenues of the State Budget 34
11
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Preface
This paper surveys the major revenue and expenditure patterns of the
USSR state budget from 1965 to 1977. It relates budgetary appropriations and
receipts to changing Soviet economic priorities, and explains how the budget's
role in the state financial system has evolved since the economic reforms of the
mid-1960s.
The research for this paper relied primarily on Soviet sources, particu-
larly monographs by Soviet economic and financial experts, the budget
speeches at the annual meetings of the Supreme Soviet, and the monthly
journals of the Ministry of Finance (Finansy SSSR) and the State Bank (Dengi'
i kredit). The statistical data base was developed from Narodnogo khozyaistvo
SSSR, annual editions, and Gosudarstvennyi byudzhet SSSR i byudzheti
soyuznikh respublik 1966-1970 and 1971-75. These sources were supple-
mented as appropriate by the small but specialized Western literature on the
Soviet budgetary system. This paper reflects information received as of 1
December 1977.
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The Soviet State Budget Since 1965
Central Intelligence Agency
National Foreign Assessment Center
December 1977
Recent Developments
When Leonid Brezhnev and Aleksey Kosygin
assumed power in 1964, they inherited economic
problems that continue to plague the Soviet
Union even today. These problems included a
slowdown in the rate of economic growth, a
severe disproportion between resources allocated
to investment and defense and those allocated to
consumption, and low productivity in both indus-
try and agriculture. In response, the new leader-
ship launched a four-pronged strategy:
? Upgraded substantially the priority given to
consumer welfare, in goods, services, and
real incomes.
? Revised national spending priorities, giving
added emphasis to agriculture?a key ele-
ment in consumer welfare.
? Instituted general price revisions that raised
industrial and agricultural prices but held
the line on retail prices for most consumer
necessities.
? Introduced economic reforms that affected
the ways in which producing enterprises
were managed and financed.
The Soviet state budget, as the principal
mechanism for distributing national financial re-
sources, has been the key instrument through
which the leadership has implemented this strat-
egy. The results are reflected in significant
changes in the distribution of budget incomes and
expenditures and their trends.
Revised Spending Priorities
The relatively higher priority accorded con-
sumption over the past dozen years is reflected in
state budget outlays in a number of ways. Since
1965, net budget allocations to consumer-on-
'Total allocations from the budget, less payments to the budget
from profits.
ented sectors?particularly agriculture?have
more than tripled, while net allocations to indus-
try and construction?the key producers of in-
vestment and defense goods?have remained rel-
atively stable. Agriculture was scheduled to be a
net recipient of 17.2 billion rubles in 1977,
compared with 5.2 billion rubles in 1965. In
addition to large investments, the government has
sought to boost food production by substantially
raising procurement prices paid to farmers, while
maintaining stable retail prices for consumers. As
a consequence, the state budget has financed
rapidly growing subsidies to the food processing
industries, particularly in respect to meat and
dairy products. These subsidies rose from 5.5
billion rubles in 1965 to over 19 billion rubles in
1976 and now constitute over 8 percent of total
budget outlays.
In addition to these consumption-reflected out-
lays, the budget has financed rapidly growing
expenditures on a variety of social welfare meas-
ures. Since 1965, outlays for education, health,
and cultural activities nearly doubled, reflecting
in part the substantial wage increases granted to
workers in these sectors. Budget expenditures on
social insurance and related welfare programs
rose two and a half times, reflecting substantial
increases in pensions and the introduction of a
new program of family allowances introduced in
1974. In addition, the state budget now finances a
part of the cost of new pension and welfare
programs for collective farmers, which were
introduced in 1964 and expanded in 1970. Allo-
cations to these programs rose from 0.4 billion
rubles in 1965 to 2.8 billion rubles in 1976.
Economic Reform
The general economic reforms launched in
1965, along with subsequent modifications, made
a number of changes in the system of organizing,
managing, and financing the producing enter-
prises. The purpose of the reforms was to raise
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the efficiency of resource use, particularly in the
industrial sector. To this end, (1) enterprises were
given greater financial autonomy and decision-
making authority; (2) profits and the profit rate
were made important criteria in the system of
incentives; (3) a charge was imposed for the use
of enterprise capital?formerly largely an in-
terest-free grant?and enterprises were to finance
most of their investment out of retained profits;
(4) prices were increased so as to raise the profit
rate and facilitate self-finance; and (5) enterprises
were to be organized into various types of associ-
ations, which were expected to finance their
activities from internal profits, a principle ulti-
mately to be extended to the industrial ministries.
These general economic reforms had an impact
on both budget revenues and budget expendi-
tures, with the most pronounced impact occur-
ring during 1966-70. With respect to revenues,
payments from profits of state enterprises re-
placed the turnover tax as the most important
source of budget income. This result stemmed
from the increased profit allowances included in
prices in the 1967 price reform, while the share
of turnover tax in retail prices was reduced as a
consequence of the government's policy of hold-
ing the line on most retail prices for consumer
goods. Also, profits now flow into the budget
through three channels rather than one?pay-
ment of the capital charge, fixed (rent) payments
primarily from the extractive industries, and the
so-called -free remainder- of profits remaining
above those that enterprises are explicitly per-
mitted to retain for self-finance and similar
purposes.
With respect to expenditures, the reforms
sharply reduced the share of investment financed
from the budget; in respect to total centralized
state capital investment it fell from 61 percent in
1965 to 47 percent in 1970, after which it
fluctuated between 47 and 49 percent. Besides
investment, the reforms required enterprises to
finance most of their own working capital and
some other outlays that formerly would have
required budget grants. Reflecting the increasing
financial independence of enterprises, the budg-
et's share in the total financial resources of
enterprises in industry and construction fell from
51 percent in 1965 to 37 percent in 1969; since
then it has fluctuated between 37 and 40 percent.
The main reasons for the stability of the budget's
role in enterprise finance, after its initial diminu-
tion, are probably to be found in (1) rapidly rising
costs, which have led to falling profit rates in the
raw materials and extractive industries, necessi-
tating budget aid, and (2) substantial decreases in
machinery prices in 1970-73, which reduced the
potential for increased financial independence in
that sector.
Aside from the enterprise level, the reform's
intent to extend the principle of self-finance has
been slow to be implemented. With the impetus
of a Party-Government Decree in March 1973,
however, the move to group enterprises into
production associations and to group associations
and enterprises into larger, financially autono-
mous "industrial associations- has picked up
speed. As of 1 April 1977, there were 3,450 such
associations, which accounted for 45 percent of
total industrial output.2
While the production associations are finan-
cially autonomous, few of the industrial associ-
ations, apparently, have achieved that status as
yet. Extension of full financing to the ministry
level is still in an embryonic stage. Under this
approach, the ministry finances all of its activites,
including investment and its own administrative
outlays, from the profits of subordinate enter-
prises, paying into the budget only a fixed share
of these profits. Only one all-union ministry?the
Ministry of Instrument Making, Automation
Equipment, and Control Systems?and several
republic-level units have been functioning under
this system. Recently a decision was made to add
three all-union machinery ministries to this list,
and preparations are under way to add others.3
The extension of self-financing to all industrial
ministries would substantially diminish the bud-
get's role as a distributor of financial resources for
this sector. However, adoption of self-finance will
probably be slow in implementation, because of
bureaucratic opposition and because profit levels
in many ministries are inadequate. In this area, as
in others, the role of the budget will be affected
to an important extent by the nature and timing
-Povoishat deistvennost khozraseheta," Plariovoye Khozyaistvo,
No. 8, 1977, p. 24.
Ibid., p. 26.
2
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of future price reforms, which currently are
under discussion.
Scope of the Budget
Central Role
The Soviet state budget is compiled by the
Ministry of Finance. It is a consolidated budget
that includes the all-union as well as the republic
and local government budgets. It distributes a
major portion of the national product within
investment, defense, and consumption. The
budget provides funds for capital investment,
higher education, health, recreation, pensions,
and many other activities that are usually
financed largely from the private sector in West-
ern economies.
The budget, the central component of the
overall state financial plan, reflects in value terms
the physical priorities of the annual economic
plan. Both the plan and the budget are presented
and approved at the end-of-year meeting of the
Supreme Soviet. The financial resources are then
allocated to the subordinate agencies, and the
expenditures are monitored by the Ministry of
Finance and the State Bank.'
The Budget as an Economic Indicator
While general economic policies are corrobo-
rated by published budget data, budget data
alone shed little advance light on new directions
in the economy. The kinds of budget statistics
that might signal key economic policy shifts are
not announced?for example, outlays for the
light, food, and other consumer goods industries;
investment in defense industries; and the func-
tional distribution of science funds.
In addition, there are serious deficiencies in the
reliability of the published budget data. The
explicit defense budget in particular is virtually
useless as an analytical tool; actual defense out-
lays are estimated to be perhaps three times
greater than announced. The decline in the
'An excellent detailed analysis of the state budget and its role in
the state financial system is found in Daniel Gallik, et al., The Soviet
Fintncial System: Structure, Operation and Statistics, US Depart-
ment of Commerce, International Population Statistics Reports,
series p-90, No. 23, 1968.
3
announced defense budget during the 1970s,
moreover, is inconsistent with the observed
expansion of Soviet strategic, theater, and naval
strength. (See the section on -Defense,- below).
In contrast to defense expenditures, the Soviets
provide considerably more detail on the financ-
ing of social and cultural programs?although a
minuscule amount by Western standards. Finan-
cial policy in these less sensitive areas of national
policy is more fully reflected in the published
budget. Here as elsewhere, however, the analyt-
ical utility of the budget data is constrained by
several factors:
Aggregation. The annual budget speeches and
statistical handbooks provide little detailed infor-
mation on the planned and actual budgets. The
handbooks, for example, include only three to
five pages of highly aggregated budget informa-
tion. In comparison, other Communist states?
Poland, for example?publish considerably more
data, especially on such critical policy areas as
investments, defense, subsidies, foreign trade, and
science.
Unidentified Categories. Large sums are in-
cluded in the budget as unspecified expenditure
and revenue residuals. The scope of these rapidly
growing categories can only be suggested.
Ambiguity and Changes. Budget methodology
changes have never been thoroughly explained
and are rarely announced. For example, at least
three different science budget series have been
published since the early 1960s, with little or no
explanation.
Incompleteness. Although it comprises more
than 50,000 local and republic budgets as well as
the all-union outlays, the state budget is only one
part of the state's consolidated financial plan,
albeit the largest. 5 In several important areas,
notably investment and science, the budget's
expenditure role has been sharply reduced, fur-
ther limiting its analytical usefulness.
The consolidated financial plan is compiled by the Financial
Department of the State Planning Committee (Gosplan), probably
with the assistance of the Ministry of Finance. The plan reflects the
resources of the state budget, the financial accumulations of state
enterprises and organizations, and other centralized funds. Almost
no details have been made available on the plan.
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Expenditures
From 1965 to 1976, total expenditures from the
state budget more than doubled, and grew at an
average annual rate of 7.6 percent (see table 1).
Like most developed Western nations, the USSR's
actual budgetary expenditures have generally
exceeded planned outlays. The Soviet deviation
from plan, however, has been small, averaging
only 3 percent a year, and only once-1970-did
it exceed 5 percent. Apparently, above-plan rev-
enues have prompted upward revisions in the
budget expenditures. Above-plan outlays may
also mean that budget financing has not been
supplanted by the intended fuller use of bank
credits and enterprise self-financing (as called for
in the 1965 economic reforms). In any case,
Soviet adherence to planned budget expenditures
is remarkable by Western standards and results
from the enormous amount of centralized con-
trol. Rigid control by state financial organs over
prices, wages, and financial allocations has en-
abled planners to avoid deficit budget financing,
serious inflation, and other problems faced by
market economies.
Economic organizations in the USSR are not
equally dependent on the state budget. Some
budget appropriations support institutions almost
completely dependent on the budget for funds-
for example, schools and hospitals, military instal-
lations, and state agencies. These institutions are
financed through the categories Social-Cultural
Measures (SCM), Defense, and Administration,
Table 1
USSR: Expenditures of the State Budget '
Selected Years
Billion Current Rubles
1965
Actual
1970
Actual
1975
Actual
1976
Actual
1977
Plan
Total
101.62
154.60
214.52
226.7
238.73
Financing the national economy
44.92
74.55
110.70
118.5
123.39
Industry and construction
20.99
3053
47.01
NA
49.1
Agriculture and procurement
6.77
12.37
19.08
NA
19.4
Trade
2.27
6.26
4.43
NA
4.4
Transportation and communications
2.83
3.11
4.96
NA
5.3
Municipal economy and housing
4.23
6.46
8.80
NA
9.2
Residual
7.82
15.82
26.42
NA
36.0
Social-cultural measures
38.16
55.94
77.04
80.7
83.85
Education, science, and culture
17.51
24.77
32.79
33.8
34.8
Health and physical culture
6.67
9.28
11.47
11.8
12.0
Social welfare measures
13.98
21.89
32.78
35.1
37.1
Defense '
12.78
17.85
17.43
17.4
17.23
Administration
1.28
1.66
2.01
2.1
2.03
Loan service
0.10
0.10
1.10
1.3
1.30
Budgetary expenditures residual and reserve funds
of the Councils of Ministers ?
4.38
4.50
6.24
6.7
10.93
I For complete data for 1965-77, actual and plan, see table A-1 in the appendix. Because of rounding,
components may not add to the totals shown.
Not available.
Estimated.
Probably excluding outlays for most of military research and development (R&D), space, internal
security forces, procurement of major weapons systems, and possibly other defense related items.
Including financing for all local and central government agencies, such as planning and financial bodies,
ministries, government departments, and the courts and judicial organs.
? The budget plan measure includes Reserve Funds of the Councils of Ministers. Presumably, these are
normally reclassified under the functional budget categories in the actual budget; that is, the plan measure
includes both the Reserve Funds and the expenditures residual. The actual measure includes only the
expenditures residual.
4
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respectively. In contrast, the category Financing
the National Economy (FNE) deals basically with
state industrial, construction, agricultural, trade,
and other enterprises that are independent ac-
counting units operating on the principle of
economic accountability (khozraschet).
The distinction between khozraschet and bud-
get-dependent institutions and organizations is
not always clear-cut. Although theoretically self-
supporting, with their own settlement accounts in
the State Bank (Gosbank) and independent bal-
ance sheets, khozraschet enterprises can still re-
ceive support from the budget for investment,
working capital, subsidies, and other purposes?
even when they make a profit.
Under Brezhnev, there have been several nota-
ble trends in the distribution of major budget
outlays (see figure 1):
? Expenditures under FNE constitute the
largest single block of budget outlays, rising
from 44 percent of budget expenditures in
1965 to 52 percent in 1976. Moreover, non-
budgetary sources of financing FNE have
also grown, and have represented a majority
of the planned sources of financing FNE
since 1969. These trends indicate that FNE
is receiving a steadily growing share of all
state financial resources.
? The share of the budget allocated for
Social-Cultural Measures (SCM) has declined
USSR: Distribution of State Budget Expenditures
Percent
100 ?
mmaa,?????????????'"'
Other
Explicit Defense
Social-Cultural Measures
Figure 1
ti?re?Natio/11:11to
67 68 69 70 71
72 73 74 75 76
57491412-77
5
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slightly, from 38 percent to 35 percent dur-
ing 1965-76. Nonbudget resources of enter-
prises and organizations, trade unions, and
collective farms have recently played a
greater role in financing educational, scienti-
fic, cultural, and other activities. However,
the state budget still provides over three-
fourths of the total all-source funding for
SCM expenditures.
? Explicit defense outlays have dropped
from 12.6 percent of budget expenditures in
1965 to 7.7 percent in 1976. However, the
announced defense budget could not cover
all Soviet defense programs. For example,
CIA estimates that Soviet defense spending
for 1976?defined to include roughly the
same range of activities encompassed in the
US defense budget?totaled 52 billion to 57
billion rubles (when measured in constant
1970 prices), compared with the announced
defense budget of only 17.4 billion rubles (in
current prices).6 The difference was fi-
nanced presumably from other nondefense
budget categories (primarily FNE and sci-
ence) and possibly from nonbudget resources
as well (for example, a portion of military-
related science). (See the section on "Sci-
ence,- below).
? Major unidentified budget categories?the
FNE and Budgetary Expenditures Residu-
als?have risen under Brezhnev and could
reach 20 percent of total budget spending in
1977. The residuals appear because the re-
gime wishes to conceal certain types of
expenditures (defense-related outlays, for ex-
ample) or because it feels that publication of
the residual outlays would serve no useful
purpose. In any event, while some of the
components of the residuals can be tenta-
tively established, the size of most of the
individual items cannot be estimated with
confidence.
Financing the National Economy
FNE now accounts for more than one-half of
total budget expenditures compared with 44 per-
'US Congress, Joint Economic Committee, Allocation of Re-
sources in the Soviet Union and China-1977, Washington: US
Government Printing Office, 1977, p.7.
6
cent in 1965. Among the expenditures under
FNE, financed partly or in full by the budget, are
the following:
? Capital investment.
? The expansion and covering shortages of
working capital.
? Capital repair.
? Certain operational expenses not covered
completely in the cost of production, such as
geological survey, product designing prepara-
tion of test models (prototypes), and the intro-
duction of new techniques.
? Subsidies for the sale of agricultural ?and
other products and for enterprises with
planned losses.
? Formation of "state material reserves,"
which consist of (1) stockpiles of goods kept for
use in case of national emergency and (2)
stockpiles of materials used to supplement or
replenish stocks of working capital (inven-
tories) at production units.
In keeping with the 1965 economic reform's
encouragement of enterprise self-financing, bud-
get funds fell as a percent of planned all-source
FNE?from 56 percent in 1965 to 49 percent in
1970 (see table 2). Since 1970 it has remained at
about this level. In general, budget financing of
investment and working capital is supposed to be
reserved for newly created enterprises.
The shift from budget to nonbudgetary financ-
ing was especially pronounced in industry and
construction, where the share of planned financ-
ing from budget funds fell from 51 percent in
1965 to 37 percent in 1969 before leveling off.
The budget's share of planned FNE funding for
agriculture has been far more volatile, ranging
from a high of 56 percent in 1965 to a low of 44
percent in 1972.
Capital investment is the largest individual
outlay of FNE?about one-third of the total?but
it has declined in importance since 1965. Enter-
prises are supposed to finance increasingly their
new construction from their own retained profits,
from bank loans, and from amortization al-
lowances (see table 3). During 1969-76, for exam-
ple, the budget plan provided 47 to 49 percent of
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Table 2
USSR: Planned Expenditures for Financing the National
Economy (All-Source Financing)'
Selected Years
Percent
1965
1970
1975
1976
1977
Total
100
100
100
100
100
From the budget
56
49
49
50
49
From other sources
44
51
51
50
51
Industry and construction
From the budget
51
37
38
40
38
From other sources
49
63
62
60
62
Agriculture and procure-
ment
From the budget
56
49
47
49
47
From other sources
44
51
53
51
53
Trade
From the budget
69
82
NA
NA
62
From other sources
31
18
NA
NA
38
Transportation and
communications
From the budget
35
23
24
25
26
From other sources
65
77
76
75
74
Municipal economy and
housing
From the budget
88
NA
NA
83
NA
From other sources
12
NA
NA
17
NA
Residual
From the budget
78
NA
NA
NA
NA
From other sources
22
NA
NA
NA
NA
For complete data, including values in rubles, for 1965-77, see
table A-2 in the appendix.
Excluding collective farms.
centrally planned state investment, compared
with 61 percent in 1965. To make greater self-
financing possible, product prices were raised in
the 1967 reform and amortization rates were
raised sharply in 1975.
In an effort to tighten control over investment
resources, beginning in 1977 the state plan for
capital investment will include investment
funded from noncentralized sources such as en-
terprise funds for development of production.7
Under this broader concept, the share of total
investment financing provided by the state bud-
get will fall to about 41 percent in 1977.
In the past decade, budget grants to enterprises
for financing working capital have also been
'V. F. Garbuzov, "Byudzhet vtorogo goda pyatiletki," Finansy
SSSR, No. 12, 1976, p. 13.
7
reduced in importance.8 Enterprises have been
instructed to rely more on nonbudget sources of
working capital, such as short-term bank credits.
-Own and equivalent" working capital?which
includes budget grants, funds received from su-
perior organizations, receipts from the sale of
fixed assests, and other sources?has declined for
the economy as a whole from 38 percent of the
sources of working capital in 1965 to 27 percent
in 1976.
Industry and Construction
Industry and construction, the largest category
under FNE, accounts for about 40 percent of the
total and roughly one-fifth of all budget expendi-
tures. It grew at an annual average rate of 8.4
percent between 1965 and 1975 and then at a
planned rate of 7.7 percent through 1977.
The largest single allocation is believed to be
for centralized capital investment by the indus-
trial ministries?about 10 billion to 12 billion
rubles in 1975.9 Other allocations are made for
capital repair, for the expansion and covering of
shortages of working capital, for operational ex-
penditures not covered by the cost of production
(for example, prototype development and test-
ing), and for other outlays of both civilian and
military nature.
A portion of the price subsidies for production
and sale of meat, processed dairy products, and
other food products probably is included in the
all-union budget appropriation to the food proc-
essing industries. The remainder evidently is
concealed in the union-republics' portion of the
calculated residual under FNE." The total of
'An excellent discussion of the sources and accounting of
working capital is contained in Structure and Accounting of
Working Capital in the USSR, US Department of Commerce,
International Population Statistics Reports, series P-95, No. 70, 1972.
Calculated on the basis of data in V. L. Perlamutrov and L. V.
Braginsky, "Kreditno-finansoviye richagi khozrascheta,- Ekono-
rnika i organizatsia promyshlennovo proizvodstva, No. 1, 1975, p.
62.
'The handling of the many kinds of subsidies in the state budget
is a complex and poorly understood issue. The available information,
moreover, often is subject to conflicting interpretations.
The above discussion of the handling of agricultural price
subsidies is based in part on information from V. N. Maslennikov
and V. M. Afremov, Ekonomicheskiye metodi opredeleniya renta-
belnost v promyshlennosti, Moscow, 1975, pp. 115-164, and V. N.
Semenov, Rol' finansov I kredita v razvitii selskogo khozyaistvo,
Moscow, 1973, pp. 248-264.
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Table 3
USSR: Planned State Centralized Investment, by Source of Funds '
1965
1966
1967
1968
1969 1970 1971 1972
Billion Current Rubles
1973
1974
1975
1976
Centralized in-
vestment
from
38.7
40.6
41.3
43.6
52.5
54.4
64.0
67.0
70.5
78.0
85.4
88.3
Budget
23.5
22.8
22.2
23.1
25.5
25.8
30.3
31.5
33.7
37.2
40,5
43.6
Profit 4.4
3.8
NA
6.4
12.4
12.0
12.7
13.0
11.3
13.1
13.8
13.2
Amortization
9.2
10.4
NA
11.6
11.5
12.1
12.9
14.4
16.1
17.0
22.7
24.4
Other 2
1.6
3.6
NA
2.5
3.1
4.5
8.1
8.1
9.4
10.7
8.4
7.1
Percent
Share of centralized
investment fi-
nanced by the
budget
61
56
54
53
49
47 47
47
48
48
47
49
I Including (I) additions to working capital of construction organizations and (2) outlays for project
planning.
For example, long-term credits and mobilization of internal reserves in construction.
these agricultural price subsidies increased from
an estimated 5.5 billion rubles in 1965 to about 19
billion rubles in 1976." This growth resulted
from the leadership's policy of keeping the retail
prices of staple foods unchanged while sharply
increasing prices paid to farms for agricultural
products. The difference between the state pur-
chase price and the accounting price at which the
food processing industry enters the product in its
production costs is financed from the state
budget. 12
The changes since 1965 in the financing of
industry and construction have reflected the lead-
ership's attempt to maintain overall control of
investment flows while permitting enterprises
greater freedom in financing their operations. On
the one hand, more than three-fourths of the state
budget allocation to these sectors currently flows
" According to N. Glushkov, chairman of the USSR Council of
Ministers' State Prices Committee, budget subsidies for meat and
milk products in 1975 totaled "almost 19 billion rubles." Pravda,
8 February 1977, p. 2. These subsidies are scheduled to total 100
billion rubles during the 1976-80 plan period. See V. Garbuzov,
"Finansovaya politika KPSS," Planovoye Khozyaistvo, No. 7, 1977,
p. 17.
IS V. N. Semenov, "Finansirovaniye selskogo khozyaistvo," Fin-
ansy SSSR, No. 5, 1974, p. 45; also, V. I. Vesbland, "Ob ekonomi-
cheskoi prirode byudzhetnogo regulirovaniya raznits v tsenakh,"
lzvestiya Akademii Nauk SSSR: seriya ekonomicheskaya, No. 5,
1975, pp. 66-67.
8
from the all-union budget, compared with 38
percent in 1965. This development was a conse-
quence of the recentralization of control over
heavy industry and other important activities-
located primarily in the RSFSR-that occurred
soon after Brezhnev gained power. On the other
hand, reliance on nonbudgetary sources of fi-
nancing steadily grew from 49 percent of
planned all-source financing in 1965 to 63 per-
cent in 1969 and has stabilized subsequently at 60
to 64 percent. This pattern suggests that, while
nonbudgetary sources for investments, such as
enterprise profits and amortization deductions,
have continued to grow, it has also been necessary
?
in the 1970s to increase-in the sectors industry
and construction-budgetary outlays for invest-
ments, price subsidies, and other activities pri-
marily of an all-union significance (including
some military-related activities).
Agriculture
The increased priority given agriculture under
Brezhnev is reflected in budget allocations for the
sector which increased from 7 billion rubles in
1965 to 19.4 billion rubles in 1977 (plan). Never-
theless, budget outlays have declined as a share of
the total planned financing of this sector, from 56
percent to 47 percent during the same period.
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Table 4
USSR: Explicit Budget Outlays for Agriculture, by End Use '
1966-70
(Billion Rubles)
Percent
1971-75
(Billion Rubles)
Percent
1976-80 Plan
(Billion Rubles)
Percent
Total
45.90
100
75.60 2
100
107.00
100
Capital invest-
ment 8
23.41
51
42.36
56
62.06
58
Development of
the basic herd
0.46
1
1.51
2
2.14
2
Increase in work-
ing capital
2.75
6
2.27
3
1.07
Operational ex-
penses
6.89
15
11.34
15
14.98
14
Other '
12.39
27
18.14
24
26.75
25
V. Semenov, Ekonomicheskiye nauki, No. 8, 1976, p. 46, and V. Semenov, "Finansy selskogo khozyaistvo v desyatoy
pyatiletkye," Finansy SSSR, No. 6, 1977, pp. 21, 23.
This figure presumably represented a preliminary estimate by Semenov of actual budget allocations to agriculture.
According to more recent information, budget outlays during 1971-75 totaled 78.4 billion rubles.
Including capital investment on state farms, land reclamation work at both state and collective farms, and other
investment outlays.
' Including funds to help liquidate bank loans, allocations to cover losses from the sale of products and losses in housing
and communal services, and numerous other end uses.
The rapid inflow of budget resources is largely
the result of the continuing effort to stimulate
f arm output by increasing the financial health of
agriculture in general and the state farms in
particular. Higher procurement prices on major
grains and dairy products and bonuses for above-
plan sales to the state also reduced the need for
direct budget subsidies to state farms.
The budget entry for agriculture includes
funds for the Ministry of Agriculture, the Minis-
try of Procurement, and numerous other state
agencies.'3 Funds are also included for the All-
Union Farm Machinery Association (Soyuzsel-
khoztekhnika) which supplies state and collective
farms with machinery, spare parts, fertilizer, and
other production essentials. The prices paid by
the farms for many of these products are subsi-
dized indirectly through an appropriation to
Soyuzselkhoztekhnika. The 1976 planned budget,
for example, included 2.1 billion rubles in price
subsidies for mineral fertilizers, tractors, com-
bines, and other agricultural equipment sold to
state and collective farms."
" For example, the Ministries of Land Amelioration, Water
Economy, and Forestry. V. V. Lavrov and K. N. Plotnikov, Gosu-
darstvennyi byudzhet SSSR, Moscow, 1975, p. 197.
" V. Semenov, "Voprosii finansirovaniya i kreditovaniya selskogo
khozyaistvo," Ekonomicheskiye naukt, No. 8, 1976, pp. 53-54.
9
Like the other sectoral allocations under FNE,
the largest portion of budget funds for agricul-
ture goes to finance capital investment. Other
end uses include the expansion of working capi-
tal, formation of livestock herds, land improve-
ment, and other activities of the state farms (see
table 4). In addition, both state and collective
farms are assisted through budget financing of
land reclamation work, research in the control of
plant and animal diseases, and general overhead
investment by the state.
Brezhnev's commitment in 1965 to raise the
priority of the agricultural sector and thereby
improve the consumers' diet is further evidenced
by the sector's position as a net recipient of
budget funds (see table 5). The 1965 budget
allocation to agriculture was 5.2 billion rubles
more than that sector's payments into the budget
from profits. By 1975, however, this net position
had jumped to 16.6 billion rubles, the result of
the steady inflow of budget resources for invest-
ment as well as the leadership's policy of leaving
greater profits at the disposal of the state farms
operating on khozraschet.
Other Sectors
The other sectors announced under FNE
(trade, transportation and communications, and
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Table 5
USSR: Budget Redistribution of Funds
by Major Branch of the Economy '
Selected Years
Billion Current Rubles
Industry and construction
1965
Actual
1970
Actual
1975
Actual
1976
Plan
1977
Plan
Budget allocation
21.0
30.5
47.0
48.0
49.1
Payments from profits .
19.0
37.5
46.3
44.3
50.3
Net contribution to the budget
-2.0
7.0
-0.7
-3.7
1.2
Agriculture and procurement
Budget allocation
6.8
12.4
19.1
18.3
19.4
Payments from profits
1.6
2.3
2.5
1.9
2.2
Net contribution to the budget
-5.2
-10.1
-16.6
-16.4
-17.2
Trade
Budget allocation
2.3
6.3
4.4
442
4.4
Payments from profits
0.7
1.3
1.9
NA
1.7
Net contribution to the budget
-1.6
-5.0
-2.5
NA
-2.7
Transportation and
communications
Budget allocation
2.8
3.1
5.0
4.9
5.3
Payments from profits
5.3
7.6
10.5
10.1
11.7
Net contribution to the budget
2.5
4.5
5.5
5.2
6.4
Municipal economy and housing
Budget allocation
4.2
6.5
8.8
8.2
9.2
Payments from profits
0.9
1.6
2.5
1.6
1.8
Net contribution to the budget
-3.3
-4.9
-6.3
-6.6
742
For complete data for 1965-77, actual and plan, see table A-3 in the appendix. Because of rounding,
components may not add to the totals shown.
'Estimated.
municipal economy and housing) typically ac-
count for less than 10 percent of budget
expenditures.
Budget financing for trade rose from 2.3 bil-
lion rubles in 1965 to 6.8 billion rubles in 1973,
subsequently declining to 4 billion rubles annual-
ly through 1977 (plan). Prior to 1974, the trade
appropriation presumably covered both foreign
and domestic trade operations and possibly mate-
rial-technical supply as well.' 5 The sharp drop in
budget funds since 1973 suggests that the scope of
this budget category has been redrawn. No infor-
" The State Committee for Material-Technical Supply (Gossnab)
was created in 1965 to plan, allocate, and distribute materials and
equipment to producer enterprises.
10
mation on this change has been announced.
Several activities that had been financed pre-
viously through the sectoral allocation to trade
may now be included in the unexplained FNE
residual, which rose in 1974 by roughly the
amount of the 1974 reduction in trade.
Among the important end uses of budget funds
for trade are working capital, investment, -the
carrying out of foreign trade operations for ex-
ports and imports of goods,"" and subsidies. For
example, a budget allocation covers a share of the
losses from the sale of outmoded and irregular
16 V. A. Yevdokimov, Kontro/ za ispolneniyem gosudarstvennogo
byudzheta SSSR, Moscow, 1974, p. 160. Unfortunately, the Soviets
have released little data on the definition and amounts of the
budgetary appropriations for foreign trade.
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goods at discount (1.9 billion rubles during 1971-
75).17
Budget outlays for transportation and commu-
nications have risen gradually from 2.8 billion
rubles in 1965 to a planned 5.3 billion rubles in
1977. Approximately 90 percent of these funds
finance investment and other activities in the
transportation sector. As a whole, the budget now
provides only one-fourth of the total financing of
transportation and communications (compared
with more than one-third in 1965), illustrating
the greater reliance on enterprise-retained profits
and other nonbudgetary resources for investment
financing and for working capital.
Budget outlays for housing (owned by local
Soviets) and the municipal economy are con-
tained entirely in the union-republican budgets.
These appropriations have more than doubled
since 1965, to an estimated 9.2 billion rubles in
the 1977 plan. The municipal economy compo-
nent covers city services (sanitation facilities,
water, and sewer systems), maintenance on roads
and bridges, street lighting, and other urban
services." The housing portion finances capital
investment, capital repair and other activities in
apartment complexes, warehouses, and supply
organizations and supports warehouses and of-
fices that are leased to other organizations. The
housing appropriation also contains a state oper-
ating subsidy for current repair in housing and
other purposes." Budget funds for housing are
supplemented by the resources of enterprises and
collective farms which finance housing activities
from profits.2?
'7 Ye. N. Fonarev, "0 sovershenstvovanii poryadka formirovaniya
i raskhodovaniya finansovykh resursov na utsenku tovarov," Fin-
ansy SSSR, No. 7, 1976, p. 41.
18 In 1975, responsibility for urban subway systems was trans-
ferred from the city Soviets to the Ministry of Railroads. Presum-
ably, budget funds for subways were also shifted from the Commu-
nal Economy line to the Transportation appropriation. See
/zvestiya, 5 June 1975, p. 3.
'2 Z. Kh. Rusin and L. L. Aydinov, Gosudarstvennyi byudzhet
SSSR, Moscow, 1969, p. 212, and Lavrov and Plotnikov, pp. 222,
226.
20 In 1972, for example, 1.6 billion rubles from the profits of all
enterprises and organizations was directed toward covering the
losses of the housing and communal economies. See V. Garbuzov,
"Gosudarstvennyi byudzhet 1972 goda i zadachi finorganov," Fin-
ansy SSSR, No. 1, 1972, p. 7.
11
The Sectoral Residual Under Financing the
National Economy
An ENE residual is calculated as the amount
remaining after the several announced appropri-
ations have been accounted for under FNE. The
residual probably covers a specific but unpub-
lished group of budget expenditures; it is neither
a reserve (or balancing) account nor a budget
entry whose components vary considerably from
year to year. The residual is believed to include
expenditures for:
? Additions to state material reserves (of both
civilian and military-related goods) 21
? Special accounts for price regulation (to
cover enterprise losses due to unforeseen price
changes).
? Any economic sectors, ministries, and agen-
cies not included in the announced allocations
under FNE (for example, Inturist). In addition,
any budget subsidies on agricultural products
that were not treated as subsidies to the food
processing industry would probably be includ-
ed in this residual.
The FNE residual is one of the fastest growing
categories of the state budget, rising from 7.8
billion rubles in 1965 to 36 billion rubles in the
1977 plan. The residual now comprises about 15
percent of all budget expenditures.22
Western observers have long believed that
defense-related outlays are concealed in the FNE
residual.23 This suspicion initially was kindled by
the scarcity of information on the composition of
the residual and more recently by the inconsisten-
cy between a declining announced defense bud-
get and the expanding defense programs. (See the
section on -Defense,- below).
There are numerous hypotheses on the meth-
ods by which sizable defense-related activities
could be concealed in the residual. For example,
2` Before World War II, these funds were included in the
allocation to the Administration of State Reserves under the Council
of Peoples Commissars?today, the Main Administration of State
Material Reserves under the Council of Ministers. There are no
indications that these outlays have ever been part of the announced
sectoral appropriations.
" In contrast, the FNE residual in the period before World War II
and through the mid-1960s typically comprised only 5 percent to 6
percent of budget expenditures.
" CIA/ER 60-37, The 1960 Soviet Budget, Nov. 1960, p. 13.
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if Soviet budget accounting considers military
production as an investment-type good, some
procurement of weapons and other materials
could be financed logically from an FNE appro-
priation. These funds could be hidden in the
residual by charging military production to state
reserves.' 4
FNE, by End Use
Soviet budget statistics can give only a partial
picture of the distribution of national output by
end use, mainly because expenditures are fi-
" Writing in a journal of the Ministry of Defense, one Soviet
writer has suggested that this kind of financial arrangement was in
effect for the procurement of tanks prior to World War IL See G.
Solyus, "Finansovaya sluzhba v velikoy otechestvennoy voinne,"
Voyenno-istoricheskii zhurna/, No. 5, 1969, pp. 104-105.
nanced increasingly by nonbudgetary sources. It
is possible, however, to make estimates of some of
the major end uses of budget FNE appropri-
ations, including investment, working capital,
capital repair, subsidies, operational outlays, and
"other expenditures.- Because official Soviet sta-
tistics are not published in this form, the esti-
mates in table 6 represent general orders of
magnitude rather than precise sums.
The table shows that fully one-fourth of annual
budget FNE during 1970-75 is unaccountable on
a functional basis. Available data do not permit
this exercise to be done for the immediate postre-
form years, but CIA estimates for earlier years
indicate that between one-fourth and one-third of
Table 6
USSR: Budget Financing of the National Economy, by End-Use '
1970
1971
1972 1973
Billion Current Rubles
1974
1975
Total, of which: ......
75
80
85
91
100
111
Investment
25-27
28-30
29-31
33-34
34-36
37-39
Working capital
3-4
2-3
3-4
3-4
3-4
3-4
Capital repair
2-3
3-4
3-4
3-4
4-5
4-5
Subsidies
17-18
18-19
19-20
20-21
21-22
22-23
Operational outlays '
4-5
7-8
8-9
8-9
9-10
11-12
Other expenditures
18-24
16-22
17-23
19-24
23-29
28-34
Midpoint of "other
expenditures"
21
19
20
22
26
31
Percent
Midpoint of "other
expenditures" as a
share of financing
the national econ-
omy
28
24
24
24
26
28
Estimated. This table is based largely on V. A. Yevdokimov's unprecedented distribution of
budget FNE funds to khozraschet enterprises and organizations. (Yevdokimov, p. 141). These
data were supplemented as appropriate with information from other Soviet sources. Yevdoki-
mov is the chief editor of Finansy SSSR, the monthly journal of the Ministry of Finance.
Including centralized and decentralized capital investments.
Including subsidies to retail trade system to cover losses, price subsidies to Soyuzselkhoztekh-
nika, and subsidies to the light and food processing industries for state purchase and sale of
agricultural products.
' Budget funds for operational expenditures cover certain activities whose costs are not
entirely included in the cost of production; for example, maintenance of waterways and
hydrotechnical installations, geological survey work, prototype fabrication, test and evaluation,
and sundry other expenditures.
Including some civilian and military-related additions to state material reserves, subsidies to
planned-loss enterprises, subsidies for foreign trade operations, compensation for wage reform
expenditures in sectors of the national economy, and other measures.
12
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FNE is unidentified when FNE is residualized by
end use.25
Among the items in "other expenditures- are
the maintenance and expansion of state material
reserves, outlays for foreign trade operations
(both import and export), expenditures for wage
reform in certain sectors of the economy, gold
purchases, starting outlays of various types for
new enterprises, subsidies for planned loss enter-
prises, bonuses, and other outlays."
The largest single item in the end use residual
may be additions to state reserves (financed
under an allocation to the Main Administration of
State Material Reserves). These goods "include
industrial, agricultural, transport, food and de-
fense, and other types of reserves.- " The de-
fense-related reserves may include food and non-
food items such as fuel and clothing. But, in
addition, it is likely that "reserves of the means of
defense which have a special character- " are
financed under FNE and could include weapons.
A plausible but unproved hypothesis is that pro-
curement of some weapons is financed through
the state reserves system.
Social-Cultural Measures
Budget expenditures on SCM rose from 38.2
billion rubles in 1965 to 80.7 billion rubles in
1976, an average annual rate of 7.0 percent (see
table 7). SCM covers a broad range of public
services and activities: pensions, welfare pay-
ments, sick and maternity pay, education and
medical services, recreation and cultural activi-
ties, and science.
Despite the steady growth of SCM funding
from the state budget, its share in total budget
expenditures has declined under Brezhnev, from
38 percent in 1965 to 35 percent in the 1977
planned budget. This development is explained
by (a) the demands of the national economy as
well as military programs, (b) the greater role of
" CIA/ER 60-37, p. 20. William T. Lee has examined recently
this question of the FNE end use residual in his "Soviet Defense
Expenditures," Osteuropa Wirtschaft, June 1976, pp. 118-122.
26 Yevdokimov, pp. 141, 160; also Franklyn D. Holzman, Finan-
cial Checks on Soviet Defense Expenditures, Lexington, Mass.:
D.C. Heath and Company, 1975, p. 90.
27 A. V. Bachurin, Finansy I krectit SSSR, Moscow, 1958, p. 148.
2' M. Z. Bor, Balans narodnogo khozyaistvo SSSR, Moscow, 1956,
p. 97.
13
Table 7
USSR: Expenditures for Social-Cultural Measures in the
State Budget '
Selected Years
Billion Current Rubles
1965
1970
1975
1976
Total ..... ....... ......
38.16
55.94
77.04
80.74
Education, science, and
culture,' of which:
17.51
24.77
32.79
33.79
General education
8.31
10.75
13.85
14.28
Cultural-enlightenment
work
0.42
0.70
0.98
1.04
Training of cadres
3.25
4.85
7.02
7.39
Science
4.13
6.43
7.89
7.90
Publishing
0.08
0.12
0.14
0.15
Art and broadcasting
0.30
0.63
1.12
1.18
Health and physical cul-
ture,' of which: ......
6.67
9.28
11.47
11.85
Health
6.39
8.74
10.49
10.85
Physical culture
0.04
0.05
0.07
0.07
Social welfare measures
13.98
21.89
32.78
35.10
Social security, of which:
9.05
12.74
18.17
19.21
From state social in-
surance
6.50
9.77
14.34
15.24
State social insurance
4.04
7.33
11.85
12.75
Aid to mothers ......
0.46
0.44
0.39
0.37
For collective farmers'
welfare fund ......
0.44
1.38
2.38
2.77
For complete data for 1965-76, actual and plan, see table A-4 in
the appendix.
Components exclude capital investment.
nonbudgetary resources in financing SCM, and
(c) the slower relative growth of SCM outlays.
Since 1965, SCM activities have been financed
increasingly from the resources of state, coopera-
tive, trade union, and similar organizations, as
well as collective farms. The state budget pro-
vided 79 percent of the all-source funding of
SCM in 1976, down from 84 percent in 1965.
The growth in SCM outlays over the past
decade reflects measures taken to raise real in-
comes, particularly by means of the social insur-
ance and social security programs. These latter
expenditures more than doubled during 1966-76,
largely owing to:
? Rising pension and welfare grants, which are
tied to workers' earnings.29 About 46 million
25 The average monthly wage for all workers rose from 96.5 rubles
in 1965 to 151.4 rubles in 1976. Also, the minimum pension for
industrial workers was raised in 1971 from 30 rubles to 45 rubles per
month.
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people, or almost 18 percent of the population,
are receiving pensions in 1977?compared
with 26 million pensioners, or 11 percent of the
population in 1965.
? Wider coverage of existing benefits such as
the extension of pension privileges to collective
farm workers in 1965. The state budget pro-
vided almost 2.4 billion rubles to this pension
fund in 1975, underwriting about two-thirds of
the program's cost, with collective farms con-
tributing the remaining portion. Almost 12
million collective farmers received pensions in
1976-4 million more than in 1966, the first
full year of the farmers' pension program.
? The introduction of new programs, such as
the 1974 announced program of children's
allowances to low-income families. The cost of
this program may be about 1.8 billion rubles."
The second largest boost in SCM outlays was a
93-percent increase between 1965 and 1976 in
education, science, and culture. With the excep-
tion of -science- (described in the following
section), these funds are contained largely in the
republican and local budgets; for example, 85
percent of the budget allocation for education
and culture, including the financing of schools,
agitation-propaganda work, art and broadcasting,
is channeled through republican and local
budgets.
The budget appropriation for health and phys-
ical culture rose 78 percent during 1966-76. The
appropriation for physical culture is quite
small?only 70 million rubles in 1976. Budget
spending for health care, 10 billion to 11 billion
rubles in recent years, provides three-quarters of
the all-source funding for this activity. Like
education and cultural activities, health services
are planned and financed primarily at the local
governmental levels. In 1975, for example, 88
percent of budget outlays for health were con-
tained in the local budgets, 7 percent in the
republican budgets, and only 5 percent in the all-
union budget.'
" A. Skachko, Profaktivu o gosudarstvennom byudzhete, Mos-
cow, 1976, P. 65.
"It is suspected that the small all-union allocations for health
services, education, and culture contain military-related funds.
14
Science 32
The state science budget warrants special at-.
tention: it is the primary source of financing basic
research, and it is believed to finance a large
portion of military and civilian research, develop-
ment, testing, and evaluation (RDT &E) and
space programs.
Some military-related science outlays are be-
lieved to be financed from the all-union science
budget?which comprises more than 90 percent
of the total budget allocation?although precise
knowledge of the amounts involved and their
coverage is not available.
Science-related funds for both military and
civilian purposes also are included in other sec-
tions of the state budget: some capital investment,
prototype development, and a share of the costs
of introducing new technology (both civilian and
military) are believed included under FNE; the
costs of military personnel engaged in defense-
related R&D are probably included with all
military personnel costs; and university budgets
(VUZes) contain important sums for scientific
activities (at least 150 million to 200 million
rubles annually)."
Allocations from the state science budget rose
by 88 percent from 1965 to 1975, growing at the.
average annual rate of 6.5 percent (see table 8).
At the same time, reported all-source science
spending more than doubled and grew at the
annual rate of 9.7 percent.' As a result, the
explicit science budget declined steadily as a
share of total science funding, from 62 percent in
1965 to less than 50 percent since 1972. Several
factors explain this development:
? The conversion of most scientific research
institutes (Nils) from budgetary status to khoz-
raschet status?although there are many khoz-
raschet scientific research organizations that
" For a comprehensive treatment of the expenditures and sources
of financing Soviet science, see Louvan E. Nol'ting, Sources of
Financing the Stages of the Research, Development and Innova-
tion Cycle in the USSR, US Department of Commerce, Foreign
Economic Reports, No. 3, September 1973.
" S. M. Aleshin, "Nekotoriye voprosy planirovaniya i uchete
zatrat na nauku," Finansy SSSR, No. 10, 1976, p. 43.
" It is not known whether the total reported science expenditures
include all the science-related funds that are included in the
nonscience appropriations of the state budget.
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Table 8
USSR: Expenditures for Science
1965
1966
1967
1968
1969
1970 1971 1972 1973
Billion Current Rubles
1974
1975
1976
1977
Plan
Total reported
science expenditures 6.90
7.50
8.20
9.00
10.00
11.70
13.00 14.40
15.70
16.45
17.40
17.7
18.2
Science budget
category' 4.27
4.61
5.05
5.52
5.88
6.54
7.02 7.30
7.64
8.04
8.03
NA
NA
Other budget
categories
and nonbudget
financing 2.63
2.89
3.15
3.48
4.12
5.16
5.98 7.10
8.06
8.41
9.37
NA
NA
Percent
Budgetary allocation
for science as a share
of total reported
science expenditures 62
61
62
61
59
56
54 51
49
49
46
NA
NA
'Including some capital investment.
2 The USSR publishes several different science series. Although the 1976 science budget "with capital investment- is not
known, it is probably almost identical to the 1975 figure of 8.03 billion rubles. The 1976 science budget -without capital
investment" was reported as 7.897 billion rubles, only 0.004 billion rubles more than in 1975.
Calculated as a residual.
are financed largely from budget appro-
priations.
? Increased financing of science from such
nonbudget sources as contract funding, charges
to cost of production, operational expenditures,
and other -own resources."
? Since 1969, several industrial ministries have
adopted a unified fund for the development of
science and technology. This single source of
financing R&D is created from enterprise prof-
its and has nearly completely replaced the state
budget as a source of science financing for
these ministries.
Defense
The only information released by the USSR on
its annual defense expenditures is a one-line item
in the published state budget. The size of this
number, however, is clearly too small to cover the
full range of observed Soviet military activities.
In fact, actual defense outlays are estimated to be
about three times larger than the budget item
labeled -defense.- For example, CIA has esti-
mated that Soviet 1975 defense expenditures
(defined to accord with US budgetary accounts)
15
were 50 billion to 55 billion rubles when meas-
ured in constant 1970 prices.35 The announced
1975 defense number is 17.4 billion rubles in
current prices.
Explicit budget expenditures for defense rose
from 12.8 billion rubles in 1965 to 17.9 billion
rubles in 1972 and thereafter declined gradually
to a plan figure of 17.2 billion rubles in 1977 (see
table 9). While total state budget expenditures
continued to grow, the defense portion of the
budget steadily shrank-from 12.6 percent in
1965 to 7.2 percent in the 1977 plan.
It is known that all defense expenditures fund-
ed by the Ministry of Defense (MOD) are
planned on the basis of the MOD Smeta, or
-estimate.- Soviet writers describe the activities
covered by the Smeta as including military pay
and subsistence, outlays for operations and main-
tenance, military procurement, and military con-
5truction.36 However, there are major obstacles in
trying to relate the MOD Smeta to the an-
nounced defense budget:
35 CIA, SR 76-10121U, Estimated Soviet Defense Spending in
Rubles, 1970-75, May 1976, p. 9.
" See, for example, A. M. Aleksandrov, ed,. Gosudarstvennyi
byudzhet SSSR, Moscow, 1965, pp. 382-383, and D. K. Allakhver-
dyan, et al., Finansy SSSR, Moscow, 1962, p. 310.
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Table 9
USSR: Explicit Defense Expenditures
1965
1966
1967
1968
1969 1970 1971 1972
Billion Current Rubles
1973
1974
1975
1976
1977 1
Explicit budget alloca-
tion for defense 12.78
13.40
14.50
16.70
17.70 17.85 17.85 17.90
Percent
17.85
17.65
17.43
17.4
17.23
Defense as a share of
total state budget 12.58
12.69
12.58
12.99
12.78 11.55 10.87 10.33
9.70
8.94
8.13
7.68
7.22
Plan.
? Nowhere in the Soviet literature is there any
quantification of the Smeta or any of its
components.
? No Soviet source has ever unequivocally
linked the Smeta to the announced defense
appropriation.87
Even if the coverage of the Smeta and the
announced defense budget were identical, total
Soviet defense spending would still exceed the
announced budget by the cost of the defense-
related activities that are not included in the
Smeta; for example, RDT&E, civil defense, for-
eign military aid, military stockpiling, and space.
It is suspected, but cannot be proved, that the
announced defense budget is largely a current
expenditures budget of the Soviet military estab-
lishment. As such, it would probably include pay
and allowances of military personnel, wages of
civilian MOD employees, current repair of facili-
ties, pensions, food and nonfood quartermasters
supplies, utilities, and the like. Even if this is true,
however, the decline in the defense budget in
recent years?at a time when we believe Soviet
operating and maintenance costs have increased
considerably?suggests that the announced bud-
get is manipulated for political purposes. To
signal Soviet attitudes about detente, for example,
some operating expenditures could have been
shifted from the defense budget to other budget
" William T. Lee discusses this and other aspects of the MOD
Smeta in The Estimation of Soviet Defense Expenditures, 1955-75:
An Unconventional Approach, New York: Praeger, 1977. pp. 320-
323. See also Robert E. Leggett and Sheldon T. Rabin, "A Note on
the Meaning of the Soviet Defense Budget," Soviet Studies,
forthcoming.
16
lines in the 1970s, resulting in a showing of
apparently reduced defense spending.
The uncertainty surrounding the true coverage
of the announced defense budget has rendered it
virtually useless as a barometer of either the level
or the trends in total Soviet defense expenditures.
As a result, Western analysts have had to devise
various methodologies to estimate Soviet defense
spending. CIA, for example, estimates Soviet
defense spending by a building-block approach.
This method consists of identifying the forces and
activities that constitute the Soviet military effort
and then estimating the annual cost of these
components and summing these costs to yield
estimates of total spending. Other aproaches used
by Western observers rely heavily on reported
Soviet economic statistics.
Another approach to the defense expenditures
issue is to construct a measure of budget funds
that might be -available- for financing defense
activities. Besides the announced defense budget,
these funds would include the portion of the FNE
residual that is unidentified by functional end
use, a share of the science budget, and several
smaller outlays. Given the uncertainties surround-
ing the meaning of all Soviet budget data, howev-
er, the results obtained using this methodology
must be regarded as general orders of magnitude
rather than point estimates. 38 Nonetheless, the
concept of -available- funds can serve as a useful
check on the reasonableness of Western estimates
of Soviet military outlays.
88 Franklyn D. Holzman has examined the uncertainties in the
definition and coverage of Soviet budgetary data in Financial
Checks on Soviet Defense Expenditures, Lexington, Mass.: D.C.
Heath and Company, 1975.
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A tentative calculation of budget funds -avail-
able- for defense in 1970 is presented in table 10.
This exercise indicates that between 44 billion
and 50 billion rubles, or between 28 and 32
percent of the entire state budget might have
been spent for defense. This suggests that there is
Table 10
USSR: Budget Funds "Available" for Defense, 1970
Billion Current Rubles
Total
FNE residual unidentified, by end use
Science budget
Budgetary expenditures residual (33 per-
cent) 1.5'
Announced defense budget 17.9
43.8-49.8
18.0-24.0
6.4
'Defense outlays financed from the budgets for education,
health, and administration are not estimated. Also not estimated and
not included in this estimate of "available" funds are any nonbudget
funds that might be used for defense-related activities, such as
military RDT&E financed from enterprise "own" resources.
2 Representing a ranged FNE residual, as calculated in table 6.
FNE funds probably finance most military procurement and other
investment-type defense costs such as development of weapons
prototypes.
This figure is the explicit science budget for 1970. No one
outside of a small group of Soviet officials knows how much of this
appropriation is military related. For a discussion of several Western
estimates of Soviet military science costs see The International
Institute for Strategic Studies, The Military Balance, /973-74,
London: 1973, pp. 8-9.
' The KGB and possibly other defense and security-related outlays
are financed from this residual. Here, one-third of this residual (see
tables 1 and A-1) is assumed to be military related.
room in the state budget as published to accom-
modate most official and nonofficial Western
estimates of Soviet defense expenditures. For
example, total -available- budget funds for 1970
could cover the 45 billion to 50 billion rubles
estimated by CIA (using a broad definition of
defense such as the Soviets might use). 39
The coincidence between the above calculation
of -available- budget funds and Western esti-
'? CIA, May 1976, p. 9; a semiofficial French source has recently
estimated Soviet 1970 defense spending at about 34 billion rubles.
See X.X.X., "Combien de roubles pour la defense?" Defense
Nationale, November 1976, p. 54. Other estimates place the Soviet
defense bill at higher levels. For example, William T. Lee suggests
that 1970 Soviet defense outlays were on the order of 42 billion to 49
billion rubles. See his The Estimation of Soviet Defense Expendi-
tures, 1955-75: An Unconventional Approach, p. 141. It is interest-
ing to note that the Chinese Communists?never ones to downgrade
the nature of the Soviet threat?have estimated the 1970 USSR
defense bill at 49 billion to 51 billion rubles. See Peking Review, 7
November 1975, p. 20, and 28 November 1975, p. 9.
17
mates does not mean necessarily that defense
outlays were made in the amount or in the
manner outlined in the table:
? It is doubtful that all of the "available"
fundscould have been allocated to defense
activities. This methodology is in many ways
an expression of Western ignorance of the
possible nondefense uses for these budget re-
sources. Alternatively, some defense spending
could easily be concealed in the ostensibly
civilian end uses under the appropriations to
FNE, such as for capital investment and oper-
ational outlays. 4?
? A presumably small but unknown amount of
defense-related expenditures probably is fund-
ed on the basis of nonbudgetary funds, such as
the resources of the khozraschet industrial,
construction, and trade enterprises of MOD. "
Administration and Loan Service
Expenditures for administration and loan serv-
ice typically account for about 1 percent of total
budget outlays. The announced budget appropri-
ation for administration covers the costs of gov-
ernment operations?wages, social security con-
tributions, office expenses, and other
administrative costs?for the judicial system, cen-
tral and local legislative bodies and ministries
(including, possibly, the central office costs of the
MOD), the planning and financial apparatus, and
embassies and consulates abroad.
The budget allocation for administration has
increased gradually from 1.3 billion rubles in
1965 to 2.1 billion rubles in 1976. However, the
announced budget appropriation is believed to
cover only a portion of the total expenses in-
curred by the government -apparat--perhaps as
low as one-sixth, depending on the definition
used. 42 A share of the administrative expenses for
" For example, capital expenditures under FNE which have both
military and civilian applications, such as airfields, naval bases, and
roads, could be concealed in this manner. This practice is implied by
M. L. Tamarchenko, Sovetskiye finansy v period velikoy otechest-
vennoy voini, Moscow, 1967, pp. 98-100.
" For an excellent discussion of the numerous possible schemes
for concealing defense expenditures see Holzman, pp. 13-46.
"In one of the few Western treatments of this subject, Gertrude
Schroeder concluded that official Soviet statistics grossly understate
both the cost of government administration and the level of
employment in the "apparat." See "A Critique of Official Statistics
on Public Administration in the USSR," ACES Bulletin, spring
1976, pp. 23-44.
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the economic ministries may be financed par-
tially under the appropriate branch in the budget
FNE. Other outlays are financed from nonbudg-
etary sources, for example, from the cost of
production in the industrial sector and from the
cost of distribution in the trade sector.
Loan service to the population consists of pay-
ments of interest and principal on the public
debt. This amount has generally been a very
minor budget entry since 1957, when the state
stopped mandatory subscription bond sales and
announced a 20-year moratorium on repayments.
The government continued a 3-percent lottery
loan, however, in which income from the loan is
paid out in the form of prize winnings equivalent
to 3-percent interest. Loan service on this latter
account has fluctuated between an estimated 80
million and 200 million rubles annually.43
In 1973 the Council of Ministers ordered the
redemption of the 25.8 billion rubles in outstand-
ing subscription loans, beginning in December
1974. This program should realize Brezhnev's
1971 pledge to redeem the bonds several years
ahead of schedule. The debt was retired by 1.0
billion rubles annually in 1974-75. The state plans
on redeeming the bonds by 1.2 billion rubles in
each year of 1976-80; 1.5 billion, 1981-85; 2.0
billio 1, 1986-89; and a final payment of 2.3
billion in 1990.
Reserve Funds of the Councils of Ministers
The plan budgets include a contribution to the
finanCial reserves of the union and republican
Councils of Ministers. Although this allocation is
not announced, the calculated residual in the
planned budget is believed to include the reserve
funds as well as several items that constitute the
budg6tary expenditures residual (see following
section). In the actual budget, however, the re-
serve funds are assumed to be classified under the
categories for which they were expended during
the year. If so, their size can be approximated by
comparing the plan and actual residuals: using
this method, the reserve funds appear to have
averaged 2.3 billion rubles annually during
1965-76.
" Sitee 1971, budget reporting has carried no item on loan
service
18
While the uses of this financial reserve are not
generally announced, they are believed to
include:
? Emergency and disaster relief. From time to
time the government publicizes outlays from
the reserve funds, such as the financing of
disaster relief in flood stricken republics. The
amounts involved, however, probably comprise
a very small portion of the total reserve funds
expended in any given year.
? Expenses occasioned by unforeseen develop-
ments in the international arena. All-union
reserve funds were possibly used in 1968 to
help finance the resupply of the Arab armies
after the 1967 Six-Day War as well as the
August invasion of Czechoslovakia. These out-
lays would explain in part why reserve funds
jumped from 1.25 billion rubles in 1967 to 4.
record 6.17 billion rubles in 1968.
? Supplemental financing for the national
economy, social-cultural measures, and other
measures not envisioned at the beginning of
the year.
The Budgetary Expenditures Residual
The budgetary expenditures residual is the
amount remaining after outlays for the primary
categories have been accounted for in the actual
budget. The residual averaged 5.3 billion rubles
between 1965 and 1976, or 3 percent of total
budget expenditures.
Little information is available on this calcu-
lated residual. It is believed to finance the Corn-
mitte for State Security (KGB) and other internal
security operations.44 It also includes allocations
to the state banks for the expansion of long-term
credit facilities and miscellaneous rebates and
small payments to enterprises and organizations.
The residual may also contain funds for foreign
aid and for repayment to the savings banks of any
sums used as budget income during the year.
" The financing of the state security services is rarely addressed in
recent Soviet literature, although it is known that these activities are
funded through a separate line item in the state budget. (S. M.
Gerrud and A. F. Yakovleva, Albom naglyadnykh posobiy po kursu
gosudarstvennyi byudzhet,- Moscow, 1963, p. 17.)
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Table 11
USSR: Revenues of the State Budget '
Selected Years
Billion
Current Rubles
1965 1970 1975 1976
Actual Actual Actual Actual
1977
Plan
Total
102.32
156.70
218.77
232.2
238.94
Social sector ..........
93.89
142.86
199.09
211.3
216.7
Turnover tax receipts
38.66
49.38
66.61
70.7
73.3
Payments from profits
30.87
54.16
69.71
70.6
78.4
Income tax on organiza-
tions
1.54
1.23
1.46
1.5
1.5
Social insurance receipts
5.56
8.20
11.06
12.2
13.0
Residual
17.26
29.89
50.25
56.3
50.5
Private sector ........
8.43
13.84
19.68
20.9
22.2
State taxes on the
population
7.70
12.74
18.36
19.6
20.9
State loans
0.18
0.47
0.56
0.6
Local taxes and
1.3
lotteries
0.55
0.63
0.76
0.7
Budget surplus .
0.70
2.10
4.25
5.5
0.21
' For complete data for 1965-77, actual and plan, see table A-5 in
the appendix. Because of rounding, components may not add to the
totals shown.
Revenues
Budget revenues between 1965 and 1976 grew
at an average annual rate of 7.7 percent, slightly
faster than the growth of expenditures (see table
11). The USSR relies primarily on indirect tax-
USSR: Major Sources of Budget Revenue
Percent
1965
Private Sector
Revenues
8
574915 12-77
ation for its budget income. Revenues are derived
from both the social sector (economic organiza-
tions and enterprises) and the private sector
(individuals). The former is by far the more
important source, consistently providing more
than nine-tenths of total revenues (see figure 2).
Income from the social sector consists of turn-
over tax receipts, payments from profits of enter-
prises, income taxes on collective farms and
economic organizations, social insurance receipts,
and a large residual of numerous itemized and
nonitemized entries. Turnover tax receipts and
payments from profits are the two major sources
of revenue and generally account for roughly
two-thirds of total budget receipts.
Income from the private sector increased
slightly as a portion of total revenue, from 8
percent in 1965 to 9 percent in 1976. The largest
component, state taxes on the population, traced
a comparable rise, from 7.5 percent in 1965 to 8.4
percent of total revenues in 1976. This occurred
because of rising wage levels which made a
sizable share of the workers' wages subject to the
maximum income tax rate of 13 percent.
Turnover Tax Receipts
The turnover tax is essentially an excise tax
levied on consumer goods-about three-fourths
of the total amount appears to be collected from
1970
19
Figure 2
1977 (Plan)
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the light and food industries." The tax varies on
each item and is included in the retail price.
Some producer goods are also taxed, such as
electric power, oil, and gas. Consumer durables,
produced in machinery plants, carry high turn-
over taxes. Military hardware items are treated
like most producer goods and are not subject to
the turnover tax, as are goods allocated to state
reserves and exports.
Since its introduction in 1930, the turnover tax
has served a number of purposes:
? As a principal source of state revenue, with
varying amounts also allocated annually to the
individual union-republics. (The latter distri-
bution serves as a budget-balancing mechanism
throughout the budget system.)
? As a tool to maintain a desired balance
between overall public purchasing power and
the volume of available consumer goods and
services.
? As a lever for regulating enterprise profits.
Turnover tax receipts have not risen as rapidly
as have total budget revenues in the past dec-
ade." From 1965 to 1976 turnover tax receipts
increased by only 83 percent, rising at an average
annual rate of 5.6 percent. The net result was a
smaller role for this tax in the total revenue
picture; its 38-percent share of revenue in 1965
dwindled to 30 percent in 1976.
This slowdown in the growth of turnover tax
receipts has resulted from several developments:
? The increased procurement prices on agri-
cultural raw materials and higher wholesale
" V. N. Semenov, Rol' finansov I kredita v razvaii selskogo
Ichozyaistvo, Moscow, 1973, P. 267. Alcoholic beverages provide the
largest single share of tax proceeds. In 1973, for example, about one-
third of turnover tax, or 20 billion rubles, came from products of the
alcoholic beverage, beer, and wine industries. (Calculated on the
basis of data in Yevdokimov, p. 44.)
" Budget receipts of turnover taxes are published net of "pay-
ments charged against turnover tax," such as rebates to trade
enterprises and clothing producers for certain types of expenditures
and for the transport of goods to outlying regions. The turnover tax
number published in annual statistical handbooks is about 92
percent of the gross turnover tax payments. This question of net
versus gross turnover tax is discussed by V. I. Vesbland in lzvestiya
Akademii Nauk SSSR: seriya ekonomtcheskaya, No. 5, 1975, pp. 63-
74.
20
prices on many other items?the result of price
reforms?were not passed on to the retail level.
This practice squeezed turnover tax receipts.
? Many turnover tax rates since 1965 were
reduced (especially on food products) or elimi-
nated (such as the rural surcharge, which was a
higher rate on consumer goods sold in rural
areas). The unusually slow growth of turnover
taxes in 1972, for example?just over 1 billion
rubles?was due in large part to the sharp
reductions in the turnover tax on grain prod-
ucts.47 The decline in tax revenues as a percent-
age of retail sales, from 37 percent in 1965 to
32 percent in 1976, may be a general reflection
of these numerous reductions in the overall tax
rate.
Payments From Profits
Payments from enterprise profits into the state
budget rose from 30.9 billion rubles in 1965 to
70.6 billion rubles in 1976, at an average annual
rate of 7.8 percent." Most payments from profits
are made by industrial enterprises (about 60
percent in recent years); one of the smallest
shares-4 to 5 percent?comes from agriculture
and procurement.
As a result of the 1965 economic reforms and
the 1967 industrial wholesale price increases, the
share of budget revenue from profits payments
rose from 30.2 percent in 1965 to 36.7 percent in
1968. This share has since declined to under one-
third primarily because the total profits of the
industrial enterprises, which rose by over 33
billion rubles during 1965-70, increased by only 9
billion rubles during 1970-76. Among the reasons
for the recent slowed growth of profits are the
major price reductions on machinery products (in
1971 and 1973) and the rising costs in some
economic sectors (such as the extractive indus-
tries) without compensating price increases for
their output.
The method of distributing profits has changed
since 1965 as a result of the implementation of
" V. N. Semenov, Rol' finansov. . p. 251.
" Published statistics on payments from profits are on a year-paid
basis and include taxes from the current year's earnings as well as
any taxes recalculated from the previous year's earnings.
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the economic reforms." Previously, enterprises
made a single "deduction from profits- into the
state budget. Now, most enterprises make "pay-
ments from profits- that are composed of several
parts:
? Capital charge. One of the most important
innovations of the reforms, this charge is usu-
ally 6 percent of fixed and working capital. By
charging enterprises for budget-financed capi-
tal, it was hoped that enterprises would have
an incentive to more efficiently use their exist-
ing capital.
? Fixed payments, paid by enterprises for
especially favorable natural, transportation, or
other conditions. Enterprises in the extractive
industries provide more than 60 percent of the
fixed charges.
? "Free- profit remainder, formed after pay-
ment of the above charges plus interest on
repayment of bank loans and stipulated deduc-
tions into the various enterprise funds (for
material incentives, social-cultural measures,
and housing and for the development of pro-
duction) and several other allowable deduc-
tions. The free profit remainder is the largest
of the profit payments, accounting for 47
percent of all payments from profits in 1976.
? "Deductions from profits- and other pay-
ments, including deductions from enterprises
not yet transferred to the new system of profit
accounting as well as several other payments
from enterprise profits, such as deductions for
geological work and the removal of excess
amortization funds and working capital. (In
1975, these latter payments were planned at
3.2 billion rubles, or about 5 percent of total
planned payments from profits.) 50
Despite the rapid growth in payments from
profits, these funds form a declining share of total
enterprise profits, falling from 69 percent in 1965
*9 An excellent discussion of the reform's impact on the financial
relationships of the producing enterprises with the state budget and
the banking system is found in Gertrude E. Schroeder, "Post-
Khrushchev Reforms and Soviet Public Financial Goals," in
Zbigniew M. Fallenbuchl (ed.), Economic Development in the
Soviet Union and Eastern Europe, Volume 2, New York: Praeger,
1976, pp. 348-367.
" V. F. Garbuzov, "Byudzhet zavershayushchego goda pyati-
letki," Finansy SSSR, No. 1, 1975, p. 8.
21
to 57 percent in 1976. This reflects the leader-
ship's attempts to increase the role of enterprise-
retained profits in the financing of capital invest-
ment, working capital, and capital repair and in
supplementing incentive funds. For example, en-
terprise profits financed only 12 percent of capi-
tal investment in industry, transportation, and
communications in 1965, 24 percent in 1969, and
aboui 22 percent subsequently."
Other Social Sector Revenues
Other payments from the social sector into the
budget include social insurance receipts, income
taxes on organizations (for example, collective
farms and nonstate economic organizations such
as consumers' cooperatives), and a number of
unrelated revenues that form a large and rapidly
growing revenue residual.
Social insurance receipts provide about 5 per-
cent of total budget revenues. These payments
are made by state enterprises as a fixed percent-
age of their wage bill, ranging from 9 percent in
the coal industry to 4.4 percent in agriculture."
The funds are used for pensions, disability bene-
fits, sanatoriums, and child care facilities (see
table 12). While the Social Insurance Budget
is an independent unit administered by the trade
unions, its income and expenditures are consoli-
dated into the state budget. Receipts are not
sufficient to cover outlays, and so general budget
funds are made available. In recent years, re-
ceipts have supplied a diminishing portion of the
program's expenditures, falling from 53 percent
in 1965 to 44 percent in 1976.
Income taxes on the khozraschet enterprises of
public organizations and on collective farms and
cooperatives have fluctuated between 1 billion
and 1.5 billion rubles since 1965 and provide less
than 1 percent of total budget revenue. The tax
rates for collective farms depend on net income
levels, while consumer cooperatives typically pay
an income tax at the rate of 35 percent of net
income and other organizations pay a rate of 25
P. N. Zhevtyak and V. I. Kolesnikov, Pribil v sotsialisticheskom
raschirennom vosproizvodstve, Moscow, 1976, p. 153.
" 0. G. Shapovalenko, Kontra za raskhodami na upravleniye,
Moscow, 1976, pp. 8-9. This source also reveals that the social
insurance payment by the aviation and defense industries is 7.3
percent of the wage bill.
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Table 12
USSR: State Social Insurance Receipts and Expenditures
1965
1966
1967
1968
Expenditures
10.54
11.47
12.46
13.85
Benefits 2.59
2.68
2.95
3.54
Temporary
disability
1.96
2.02
2.28
2.81
Pregnancy
and child-
birth
0.62
0.65
0.66
0.72
Pensions
7.41
8.17
8.84
9.58
Sanitarium and
health resort
care
0.36
0.41
0.44
0.49
Child care
0.14
0.15
0.16
0.17
Other
0.05
0.06
0.08
0.07
Receipts
5.56
6.00
6.39
7.12
Receipts as a
share of total
expenditures
53
52
51
51
1969 1970 1971 1972 1973 1974 1975 1976
Billion Current Rubles
15.34
4.13
3.34 3.73 3.69 3.86 4.26 4.44 5.08 5.56
17.11 18.35 19.65 21.06 22.62 26.19 27.99
4.61 4.64 4.85 5.32 5.67 7.21 7.82
0.79 0.87
10.43 11.65
0.52 0.55
0.18 0.19
0.08 0.10
7.78 8.20
0.94 0.99 1.04 1.19 1.26 1.34
12.80 13.84 14.73 15.82 17.76 18.90
0.62
0.20
0.10
8.71
Percent
0.64
0.21
0.10
9.14
0.69
0.22
0.10
9.75
0.75
0.25
0.13
10.41
0.79
0.26
0.16
11.06
0.86
0.27
0.16
12.20
51
48 47 47 46 46 42 44
' Pioneer camps, for example.
percent. Numerous organizations are exempt
from paying the income tax-for example, eco-
nomic enterprises of Party and Komsomol
organizations."
The social sector revenue residual has grown at
a higher rate since 1965 than any other budget
revenue category. In 1966-76 the residual rose at
an average annual rate of 11.3 percent. Its share
of total budget revenues increased from 17 per-
cent in 1965 to about 24 percent in 1976. Al-
though the size of several minor revenues in this
grouping is reported annually, the largest por-
tion-probably more than 90 percent-is not.
The revenues that can be estimated or for
which data are usually available include the
following: fees from forestry operations and
radio-television subscriptions (each about 500
million to 600 million rubles annually), 54 funds
created by the annual mandatory reduction in
administrative-management expenditures by en-
terprises (averaging 1 billion rubles annually
" Yevdokimov, p. 90.
" The radio industry pays the subscription fee directly to the
budget. Until 1962, owners of radios and television sets paid their
subscription fees when they made their utilities payments at the
savings banks.
22
since 1965), and a percentage deduction from a
group of insurance payments."
Among the revenues that are not announced
annually are customs duties, receipts from budg-
etary institutions, accounting profits from foreign
trade (and possibly gold sales in Western markets)
arising from the differences between domestic
and foreign prices, various types of state fees (for
example, for automobile inspections), the return
to the budget of enterprise-received but unex-
pended funds from the previous year, income
from the sale or rental of state property and
confiscated property, savings in the reduction in
the cost of capital repair, and numerous very
small revenues.
No single known revenue or group of revenues
can explain the residual in any given year; nor
can the known revenues explain the tremendous
jump in the residual from 17 billion rubles in
1965 to 56 billion rubles in 1976. In recent years,
" In the Belorussian SSR in 1975, for example, local budgets
received 50 percent of the payments by cooperatives for voluntary
property insurance and by the population for certain types of
obligatory and voluntary insurance. M. I. Khodorovich, "Dokhodi
mestnikh byudzhetov ot strakhovikh platezhei," Finansy SSSR, No.
8, 1975, p. 62.
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therefore, strong suspicion has developed among
Western observers that a sizable share of this
residual consists of sensitive financial flows that
the state, for various reasons, does not wish to
disclose. Several tentative but untested hypoth-
eses can be put forth which might point the way
toward an explanation of this revenue residual:
? Repayment for foreign aid extended by the
USSR. It is known that the state budget in-
cludes various expenditures for "financial aid
to Socialist states as well as developing coun-
tries.- 56 To the extent that this aid is repaid, it
would probably be treated as budgetary rev-
enue. Receipts from the rapidly growing sales
abroad of weapons might also be handled in
this manner. The sensitive nature of these
financial flows would be the likely reason for
including them in an unidentified revenue
residual.
? Proceeds from the expansion of the money
supply. Gosbank issues bank notes (currency)
on the basis of 25-percent backing by precious
metals (including gold) and foreign hard cur-
rency, and 75-percent by other assets of the
bank. 57 It is possible that a certain portion of
the new currency is treated as an unreported
income to the state budget, in either the form
of loans or credits to the budget's accounts.
Such a practice would not be unprecedented in
Soviet annals as the issuance of new currency
was used to cover budgetary deficits in the
early 1920s as well as during the first three
years of World War II. In discussing this latter
episode, one Soviet economist alluded to the
mechanism for such a practice when he noted
that "the issuing of additional currency . . .
was effected partly in the form of covering
state budget expenditures from its account in
Gosbank. Formally it was effected through
credit, although it was essentially of a budget
character. "58
? Budget "borrowing- from the population's
savings deposits. Until 1963 the annual increase
in the population's savings deposits was placed
" I. D. Zlobin, ed., Finansy SSSR, Moscow, 1971, P. 331.
" N. A. Tsagolov, Kurs politicheskoy ekonomii, Volume II,
Moscow, 1970, pp. 287-288.
" V. Batyrev, Denezhnoye obrashchenoye v SSSR, Moscow, 1959,
p. 209.
23
by the savings banks in a loan to the budget.
This practice was officially stopped on 1 Janu-
ary 1963, when the savings banks were trans-
ferred from the Ministry of Finance to Gos-
bank. After that date, the increase in savings
deposits was to be used to expand Gosbank's
lending capabilities. Some of this increase,
however, may still be treated as a revenue,
perhaps in the form of unreported loans to the
budget's account. Soviet sources since 1963
provide little specific information in this area,
although they frequently imply that the popu-
lation's savings deposits still constitute "budget
available" funds.59
Additional research on this contention is clearly
required, especially since, along with the preced-
ing hypothesis on the expansion of the money
supply, it suggests the possibility of some form of
deficit budget financing.6?
Revenues from the Private Sector
Annual revenues from the private sector more
than doubled in size during 1966-76, growing at
the average annual rate of 8.6 percent. In recent
years the state budget has increased slightly its
dependence on private sector revenues, from 8.2
percent of total revenues in 1965 to 9 percent in
1976?this despite repeated promises from the
leadership to reduce or abolish the many taxes on
the private sector."
State taxes on the population account for more
than 90 percent of private sector revenues. These
taxes grew from 7.7 billion rubles in 1965 to 19.6
billion rubles in 1976. In 1975, for example, these
taxes included the following:
" For example, Tsagolov, pp. 522-523, and D. K. Allakhverdyan,
Soviet Financial System, 1966, pp. 274, 278.
" Some useful information on the revenue residual might be
found through research on the financial systems of the East
European Communist states, whose budgets are patterned on the
Soviet model. In both Hungary and Poland, for example, foreign
loans and net savings bank deposits are mentioned as budgetary
revenues. See the Columbia University Research Project on National
Income in East Central Europe, published in 1968: Financial and
Fiscal Systems of Hungary, 1968, New York, Volume II, pp. 216-
217, and Financial and Fiscal Systems of Poland, 1968, New York,
Volume III, p. 317.
?I For example, in September 1967 the Central Committee of the
Communist Party and the Council of Ministers jointly resolved -to
continue the reduction and abolition of taxes on the wages of
workers and employees."(/zoestiya, 27 September 1967, p. 1).
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Type of Tax
Billion
Rubles
Total
18.36
Personal income tax
16.99
Agricultural tax
0.29
Bachelor and small-family tax
1.08
The personal income tax is paid at a progres-
sive rate ranging from 1 to 13 percent, and tax
payments are differentiated according to sources
of income and size of family. The growth of these
taxes in recent years is attributable to the general
rise in wages as well as the greater number of
lower paid workers receiving wages above the
tax-free minimum wage (70 rubles per month in
1977). More than one-half of the personal income
taxes enter the revenues of the republican
budgets.
The agricultural tax and the bachelor and
small-family tax are included entirely in the
revenues of the republican budgets. The agricul-
tural tax dates back to the New Economic Policy
(NEP) of the 1920s. It is a progressive tax levied
on persons having an income from farming on
private plots. The bachelor and small-family tax
was introduced in 1941 as a wartime revenue
measure. Both the payers of the tax and the
various exemptions have been revised frequently
since that time.
Other private sector revenues, which totaled
1.32 billion rubles in 1975, include the net pro-
ceeds from a 3-percent lottery loan (281 million
rubles in 1975), a republic-sponsored cash-or-
commodity lottery that brings in about 250 mil-
lion rubles annually, and miscellaneous local taxes
and fees. These sources of income have increased
very slowly under Brezhnev and typically consti-
tute less than 1 percent of total budget revenue.
The Budget Surplus
Since World War II, the USSR consistently has
run an annual surplus of budget revenues over
expenditures. The planned surpluses in 1965-77
have fluctuated between 150 million and 310
million rubles. The actual surpluses have had an
even wider range-from 700 million rubles in
1965 to 5.5 billion rubles in 1976 (see table 13).
The record budget surpluses of recent years may
have resulted partly from a greater utilization of
nonbudgetary resources, as seen in the substantial
short-term bank credits drawn by industrial en-
terprises, state farms, and trade organizations.
Futhermore, improvements in the state's finan-
cial oversight and auditing operations have result-
ed in sizable above-plan revenues.
Very little is known about the end use of the
budget surplus. A portion of the surplus for each
year is possibly carried over as budget revenue
into the new year.62 However, the remainder, as
well as momentarily free budget resources real-
ized during the budget year, is used for expand-
ing the credit resources of the state banks. The
exact relationship between the budget and the
" As with other areas of the Soviet economy, more reliable
information on the budget surplus is available for the period before
World War II than for more recent years. In the earlier period, the
annual budget surplus was sometimes transferred entirely to the
budget revenues for the following year; on other occasions, part of
the surplus was sent to the state banks for the expansion of credit
resources and a part was used for formation of a "state reserve." See
Arthur Z. Arnold, Banks, Credit, and Money in Soviet Russia, New
York: Columbia University Press, 1937, pp. 242, 384.
Table 13
USSR: State Budget
Billion Current Rubles
1965
Plan Actual
Revenues ........99.70 102.32
Expenditures .... 99.54 101.62
Surplus ...... 0.16 0.70
1966 1967
1968 1969
1970 1971
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
105.54
106.30
110.25
117.16
123.91
130.84
134.10
140.03
144.93
156.70
160.97
165.96
105.39
105.58
110.02
115.24
123.60
128.56
133.90
138.53
144.66
154.60
160.77
164.15
0.15
0.72
0.23
1.92
0.31
2.28
0.20
1.50
0.27
2.10
0.20
1.81
1972 1973 1974 1975 1976 1977
Plan Actual
Revenues ........ 173.81 175.11
Expenditures .... 173.61 173.22
Surplus 0.20 1.89
Plan Actual Plan Actual Plan Actual Plan Actual Plan
181.84 187.78 194.30 201.32 208.60 218.77 223.7 232.2 238.94
181.61 183.98 194.09 197.38 208.41 214.52 223.5 226.7 238.73
0.23 3.80 0.21 3.94 0.19 4.25 0.2 5.5 0.21
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annual extension of bank credit is difficult to
ascertain, however, because the bank's balance
sheets are not available and because credit re-
sources are also formed from the free resources of
enterprises, personal savings deposits, and specific
budget allocations for the expansion of long-term
credit (included in the budgetary expenditures
residual).
The Budgets of the Union-Republics of the USSR
Since 1965 the budgets of the republics have
played a diminishing role in the distribution of
national financial resources (see table 14). These
budgets comprised 58 percent of state budget
expenditures in 1965, 51 percent in 1966, and
between 48 and 49 percent after 1966. This
downward trend is due primarily to a decline in
the republican budgets' role in FNE. Several
factors explain this development:
? In 1965 the Sovnarkhoz (regional economic
council) system of organizing the economy
along regional lines was replaced by the more
traditional arrangement of branch ministries.63
This resulted in the transfer of key industries
(geographically concentrated mostly in the
RSFSR) from republican to all-union jurisdic-
tion. Whereas the republics distributed 66 per-
cent of state budget funds for FNE in 1965,
" The Sovnarkhozy had been introduced by Khrushchev in 1957
as a replacement for the ministerial system. They were an attempt
to correct some of the ministries' alleged shortcomings, such as
-empire building- and lack of attention to regional economic
coordination,
their portion fell to 52 percent in 1966 and has
fluctuated between 46 and 49 percent since
that time.
? Under the current leadership, those areas of
the economy typically financed at the all-union
level have registered the greatest rise among
budgetary expenditures. For example, the rap-
idly growing outlays on defense, which accord-
ing to many Western experts consume almost
one-third of all budget funds, are financed
largely if not entirely from the all-union
budget.
The republican budgets have continued, how-
ever, to finance the majority of the state budget's
expenditures for social programs. For example,
about 85 percent of budget outlays for education,
90 to 95 percent of the allocation for health, and
more than 90 percent of social security spending
flow through the republican budgets.
Revenues of the republic budgets consist of
payments from the profits of enterprises under
republic jurisdiction, agricultural tax, income tax
on collective farms, forestry revenues, bachelor
tax and local taxes and fees, 50 percent of the
revenue from state lotteries, and slightly more
than one-half of personal income taxes In addi-
tion, each republic receives a share of the turn-
over tax receipts in an amount established annu-
ally by the budget law. In the 1977 plan, for
example, the percentages of turnover tax retained
by the republics ranged from 41 percent in
Latvia to 100 percent in Kazakhstan.
Table 14
USSR: Major Budget Expenditures of the Union-Republics
Total
(Billion
Current Rubles)
Percent of
State Budget
Financing the
National Economy (FNE)
(Billion Current Rubles)
Percent of
State Budget
for FNE
Social-Cultural
Measures (SCM)
(Billion Current Rubles)
Percent
of State Budget
for SCM
1965
58.45
58
29.74
66
26.73
70
1966
53.75
51
23.62
52
27.88
68
1967
55.88
48
24.92
47
29.22
68
1968
61.63
48
28.03
48
31.72
66
1969
66.50
48
30.70
49
33.76
65
1970
73.98
48
35.08
47
36.79
66
1971
79.25
48
38.23
48
38.86
65
1972
83.60
48
40.29
47
41.10
65
1973
87.88
48
41.83
46
45.53
68
1974
95.69
48
46.88
47
46.04
65
1975
104.80
49
52.53
47
49.46
64
1976
106.90
47
NA
NA
NA
NA
25
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APPENDIX
Statistical Tables
Table
USSR Expenditures
1965
1966
1967
1968
1969
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Total
99.54
101.62
105.39
105.58
110.02
115.24
123.60
128.56
133.90
138.53
Financing the national econ-
omy
92.36
44.92
43.85
45.18
46.92
52.76
50.19
58.73
58.32
62.38
Industry and construction
20.6
20.99
22.4
21.06
21.87
23.53
23.9
24.15
22.2
24.68
Agriculture and procure-
ment
7.0
6.77
6.5
6.30
6.35
6.96
9.0
9.27
9.2
10.85
Trade
2.0
2.27
2.7
2.84
3.17
4.92
4.0
6.09
6.5
6.43
Transportation and commu-
nications
2.9
2.83
2.7
2.61
2.66
2.62
2.3
2.65
2.6
2.89
Municipal economy and
housing
Residual
3.8
6.1
4.23
7.82
4.2
5.3
4.53
7.84
4.08
8.78
5.05 }
9.68
11.0
j' 5.25
U1.32
4.9
12.9
5.89 1
11.64 J
Social-cultural measures
37.45
38.16
40.38
40.76
42.92
43.48
45.81
48.31
51.12
51.86
Education, science, and cul-
ture
17.2
17.51
18.71
18.73
19.67
20.09
21.0
21.85
23.2
23.31
Health and physical
culture
6.5
6.67
7.06
7.10
7.40
7.45
7.7
8.14
8.4
8.55
Social welfare measures
13.8
13.98
14.61
14.93
15.85
15.94
17.1
18.32
19.5
20.00
Defenses
12.79
12.78
13.43
13.40
14.50
14.50
16.70
16.70
17.70
17.70
Administration '
1.15
1.28
1.32
1.41
1.44
1.51
1.53
1.62
1.60
1.72
Loan service
0.10
0.10
0.10
0.10
0.20
0.20
0.20
0.20
0.2
0.20
Budgetary expenditures resid-
ual and reserve funds of the
Councils of Ministers
5.69
4.38
6.31
4.73
4.04
2.79
9.17
3.00
4.96
4.67
Because of rounding, components may not add to the totals
'Estimated.
Probably excluding outlays for most of military R&D, space, i
other defense related items.
' Including financing for all local and central government
departments, and the courts and judicial organs.
The budget plan includes Reserve Funds of the Councils of
budget categories in the actual budget; that is, the plan measure
measure includes only the expenditures residual.
26
shown.
nternal security forces, procurement of major weapons systems, and possibly
agencies, such as planning and financial bodies, ministries, government
Ministers. Presumably, these are normally reclassified under the functional
includes both the Reserve Funds and the expenditures residual. The actual
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A-1
of the State Budget '
Billion Current Rubles
1970
1971
1972
1973
1974
1975
1976
1977
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Plan
144.66
154.60
160.77
164.15
173.61
173.22
181.61
183.98
194.09
197.38
208.41
214.52
223.5
226.7
238.73
63.50
74.55
77.00
80.44
82.63
84.93
86.53
91.33
95.12
99.68
102.63
110.70
114.5
118.5
123.39
23.9
30.53
29.6
32.53
32.0
34.05
33.9
36.45
36.7
40.59
42.3
47.01
48.0
NA
49.1
9.5
12.37
10.9
12.91
12.1
13.38
15.0
15.45
15.1
17.45
17.6
19.08
18.3
NA
19.4
6.1
6.26
6.0
6.39
6.3
6.55
6.5
6.80
6.80B
3.71
4.0
4.43
4.4 2
NA
4.4
2.8
3.11
3.0
3.11
3.2
3.49
3.2
3.59
3.8
4.14
4.5
9.96
4.9
NA
5.3
21.2
6.46
6.5 2
7.00
5.6
7.33
6.0
7.42
6.2
8.18
7.2
8.80
8.2
NA
9.2
t 15.82
21.0
18.50
23.4
20.13
21.9
21.62
26.5
25.61
27.03
26.42
30.7
NA
36.0
54.80
55.94
58.50
59.44
62.94
63.49
67.51
67.34
70.28
71.30
76.82
77.04
80.5
80.7
83.85
24.5
24.77
25.8
26.30
27.4
27.95
29.9
29.81
31.2
31.57
33.3
32.79
34.1
33.8
34.8
9.2
9.28
9.3
9.62
9.7
10.03
10.2
10.50
10.7
10.97
11.2
11.47
11.5
11.8
12.0
21.1
21.89
23.3
23.52
25.8
25.51
27.9
27.03
28.4
28.76
32.3
32.78
34.9
35.1
37.1
17.85
17.85
17.90
17.85
17.90
17.90
17.90
17.85
17.65
17.65
17.43
17.43
17.43
17.4
17.23
1.70
1.66
1.77
1.78
1.8
1.8
1.82
1.85
1.86
1.92
1.99
2.01
2.0
2.1
2.03
0.1
0.10
0.1
0.10
0.1
0.08
0.1
0.10
1.1
1.10
1.1
1.10
1.3
1.3
1.30
6.71
4.50
5.50
4.54
8.29
5.02
7.75
5.51
8.08
5.73
8.49
6.24
8.0
6.7
10.93
27
Approved For Release 2006/01/30 : CIA-RDP79600457A000700140001-1
Approved For Release 2006/01/30 : CIA-RDP79600457A000700140001-1
Table
USSR: Planned Expenditures for Financing
1965
1966
1967
1968
1969
Billion
Current
Rubles
Percent
Billion
Current
Rubles
Percent
Billion
Current
Rubles
Percent
Billion
Current
Rubles
Percent
Billion
Current
Rubles
Percent
Total
75.8
100
81.8
100
86.5
100
96.3
100
116.5
100
From the budget
42,4
56
43.8
54
46.9
54
50.2
52
58.3
50
From other sources
33.4
44
38.0
46
39.6
46
46.1
48
58.2
50
Industry and construction
40.1
100
42.8
100
45.7
100
51.8
100
59.8
100
From the budget
20.6
51
22.4
52
21.9
48
23.9
46
22.2
37
From other sources ......
19.5
49
20.4
48
23.8
52
27.9
54
37.6
63
Agriculture and procure-
ment '
12.4
100
13.2
100
13.5
100
16.4
100
17.2
100
From the budget
7.0
56
6.5
49
6.4
47
9.0
55
9.2
53
From other sources
5.4
44
6.7
51
7.1
53
7.4
45
8.0
47
Trade
2.9
100
3.7
100
4.2
100
5.3
100
7.9
100
From the budget
2.0
69
2.7
73
3.2
76
4.0
75
6.5
82
From other sources
0.9
31
1.0
27
1.0
24
1.3
25
1.4
18
Transportation and
communications
8.3
100
8.4
100
8.8
100
9.2
100
11.1
100
From the budget
2.9
35
2.7
32
2.7
31
2.3
25
2.6
23
From other sources ......
5.4
65
5.7
68
6.1
69
6.9
75
8.5
77
Municipal economy and
housing
4.3
100
4.6
100
4.6
100
NA
NA
5.6
100
From the budget
3.8
88
4.2
91
4.1
89
NA
NA
4.9
88
From other sources
0.5
12
0.4
9
0.4
11
NA
NA
0.7
12
Residual
7.8
100
9.1
100
9.7
100
NA
NA
14.9
100
From the budget
6.1
78
5.3
58
8.8
91
11.0
NA
12,9
87
From other sources
1.7
22
3.8
42
0.9
9
NA
NA
2.0
13
'Excluding collective farms.
Estimated.
28
Ap'pro\ie7d For Release 2005/01130 : CIA-RDF19B00457A000700140001-1
Approved For Release 2006/01/30 : CIA-RDP79600457A000700140001-1
A-2
the National Economy (All-Source Financing)
1970
1971
1972
1973
1974
1975
1976
1977
Billion
Current
Rubles
Percent
Billion
Current
Rubles
Percent
Billion
Current
Rubles
Percent
Billion
Current
Rubles
Percent
Billion
Current
Rubles
Percent
Billion
Current
Rubles
Percent
Billion
Current
Rubles
Percent
Billion
Current
Rubles
Percent
129.0
100
154.9
100
169.8
100
180.0
100
198.4
100
210.8
100
227.5
100
251.0
100
63.5
49
77.0
50
82.6
49
86.5
48
95.1
48
102.6
49
114.5
50
123.4
49
65.5
51
77.9
50
87.2
51
93.5
52
103.3
52
108.2
51
113.0
50
127.6
51
64.5
100
78.8
100
87.0
100
93.3
100
102.5
100
110.7
100
120.6
100
128.9
100
23.9
37
29.6
38
32.0
37
33.9
36
36.7
36
42.3
38
48.0
40
49.1
38
40.6
63
49.2
62
55.0
63
59.4
64
65.8
64
68.4
62
72.6
60
79.8
62
19.4
100
23.9
100
27.6
100
31.0
100
32.7
100
37.1
100
37.3
100
40.9
100
9.5
49
10.9
46
12.1
44
15.0
48
15.1
46
17.6
47
18.3
49
19.4
47
9.9
51
13,0
54
15.5
56
16.0
52
17.6
54
19.5
53
19.0
51
21.5
53
7.4
100
7.7
100
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
7.1
100
6.1
82
6.0
78
6.3 '
NA
6.5 '
NA
6.8 '
NA
4.0 '
NA
4.4 '
NA
4.4
62
1.3
18
1.7
22
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
2.7
38
12.3
100
13.3
100
14.5
100
15.8
100
17.6
100
18.8
100
19.6
100
20.5
100
2.8
23
3.0
23
3.2
22
3.2
20
3.8
22
4.5
24
4.9
25
5.3
26
9.5
77
10.3
77
11.3
78
12.6
80
13.8
78
14.3
76
14.7
75
15.2
74
NA
NA
NA
NA
6.6
100
NA
NA
7.5
100
NA
NA
9.9
100
NA
NA
NA
NA
6.5 '
NA
5.6
85
6.0 '
NA
6.2
83
7.2
NA
8.2
83
9.2 '
NA
NA
NA
NA
NA
1.0
15
NA
NA
1.3
17
NA
NA
1.7
17
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
21.2
NA
21.0 '
NA
23.4 '
NA
21.9 '
NA
26.5 '
NA
27.0
NA
30.7 2
NA
360 '
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
29
Approved For Release 2006/01/30 : CIA-RDP79600457A000700140001-1
Approved For Release 2006/01/30 : CIA-RDP79600457A000700140001-1
Table
USSR: Budget Redistribution of Funds,
1965
1966
1967
1968
1969
Industry and construction
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Budget allocation
20.6
21.0
22.4
21.1
21.9
23.5
23.9
24.1
22.2
24.7
Payments from profits
19.4
19.0
22.4
21.4
23.6
25.7
28.5
32.6
32.4
32.6
Net contribution to
the budget
-1.2
-2.0
0
0.3
1.7
2.2
4.6
8.5
10.2
7.9
Agriculture and procurement
Budget allocation
7.0
6.8
6.5
6.3
6.4
7.0
9.0
9.3
9.2
10.9
Payments from profits
1.9
1.6
1.5
1.8
1.4
1.8
1.6
1.7
1.5
2.0
Net contribution to
the budget ..... ...........
-5.1
-5.2
-5.0
-4.5
-5.0
-5.2
-7.4
-7.6
-7.7
-8.9
Trade
Budget allocation
2.0
2.3
2.7
2.8
3.2
4.9
4.0
6.1
6.5
6.4
Payments from profits
0.7
0.7
0.6
0.6
0.6
1.0
1.3
1.3
0.9
1.1
Net contribution to
the budget
-1.3
-1.6
-2.1
-2.2
-2.6
-3.9
-2.7
-4.8
-5.6
-5.3
Transportation and
communications
Budget allocation ...... . .....
2.9
2.8
2.7
2.6
2.7
2.6
2.3
2.7
2.6
2.9
Payments from profits
5.0
5.3
6.0
6.2
6.9
7.0
8.0
7.5
7.7
7.4
Net contribution to
the budget
2.1
2.5
3.3
3.6
4.2
4.4
5.7
4.8
5.1
4.5
Municipal economy and
housing
Budget allocation
3.8
4.2
4.2
4.5
9.1
5.0
NA
5.2
4.9
5.9
Payments from profits
0.8
0.9
0.9
1.0
NA
1.1
1.1
1.3
0.9
1,4
Net contribution to
the budget
-3.0
-3.3
-3.3
-3.5
NA
-3.9
NA
-3.9
-4.0
-9.5
' Because of rounding, components may not add to totals shown.
2 Estimated.
30
Approved For Release 2006/ 1/30 :
Approved For Release 2006/01/30 : CIA-RDP79600457A000700140001-1
A-3
by Major Branch of the Economy '
Billion Current Rubles
1970
1971
1972
1973
1974
1975
1976
1977
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Plan
23.9
30.5
29.6
32.5
32.0
34.1
33.9
36.5
36.7
40.6
42.3
47.0
48.0
49.1
35.1
37.5
37.5
38.2
42.1
41.4
40.2
40.1
41.3
43.0
45.8
46.3
44.3
50.3
11.2
7.0
7.6
5.7
10.1
7.3
6.3
3.6
4.6
2.4
3.5
-0.7
-3.7
1.2
9.5
12.4
10.9
12.9
12.1
13.4
15.0
15.5
15.1
17.5
17.6
19.1
18.3
19.4
1.4
2.3
1.5
2.4
1.6
2.5
1.9
2.5
2.0
2.6
1.8
2.5
1.9
2.2
-8.1
-10.1
-9.4
-10.5
-10.5
-10.9
-13.1
-13.0
-13.1
-14.9
-15.8
-16.6
-16.4 -
-17.2
6.1
6.3
6.0
6.4
6.3
6.6
6.5
6.8
6.8'
3.7
4.0'
4.4
4.42
4.4
1.1
1.3
1.0
1.3
1.3
1.5
NA
1.9
1,4
1.8
NA
1.9
NA
1.7
-5.0
-5.0
-5.0
-5.1
-5.0
-5.1
NA
-4.9
-5.4
-1.9
NA
-2.5
NA
-2.7
2.8
3.1
3.0
3.1
3.2
3.5
3.2
3.6
3.8
4.1
4.5
5.0
4.9
5.3
7.5
7.6
8.0
7.9
8.1
8.4
8.3
8.7
8.4
9.4
9.4
10.5
10.1
11.7
4.7
4.5
5.0
4.8
4.9
4.9
5.1
5.1
4.6
5.3
4.9
5.5
5.2
6.4
NA
6.5
6.5'
7.0
5.6
7.3
6.0'
7.4
6.2
8.2
7.2
8.8
8.2
9.2'
1.1
1.6
1.3
1.9
1.6
2.0
1.6
2.2
1.7
2.4
NA
2.5
1.6
1.8
NA
-4.9
-5.2'
-5.1
-4.0
-5.3
-4.4'
-5.2
-4.5
-5.8
NA
-6.3
-6.6
-7.4'
31
Approved For Release 2006/01/30 : CIA-RDP79600457A000700140001-1
Approved For Release 2006/01/30 : CIA-RDP79600457A000700140001-1
Table
USSR: Expenditures for Social-Cultural
1965
1966
1967
1968
1969
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Total
37.45
38.16
40.38
40.76
42.92
43.48
45.81
48.31
51.12
51.86
Education, science, and
culture '
17.2
17.51
18.71
18.73
19.67
20.09
21.0
21.85
23.2
23.31
General education
NA
8.31
NA
8.75
NA
9.13
9.5
9.89
NA
10.36
Cultural-enlightenment
work
NA
0.42
NA
0.47
NA
0.52
NA
0.58
NA
0.65
Training of cadres
NA
3.25
NA
3.56
3.7
3.95
3.9
4.29
4.3
4.60
Science
NA
4.13
NA
4.49
NA
4.93
NA
5.40 '
NA
5.77 '
Publishing
NA
0.08
NA
0.10
NA
0.12
NA
0.12
NA
0.12
Art and broadcasting
NA
0.30
NA
0.36
NA
0.43
NA
0.50
NA
0.57
Health and physical cul-
ture '
6.5
6.67
7.06
7.10
7.40
7.45
7.7
8.14
8.4
8.55
Health .
NA
6.39
NA
6.80
NA
7.12
NA
7.78
NA
8.16
Physical culture
NA
0.04
NA
0.04
NA
0.05
NA
0.05
NA
0.04
Social welfare measures ....
13.8
13.98
14.61
14.93
15.85
15,94
17.1
18.32
19.5
20.00
Social security, of which:
NA
9.05
NA
9.74
NA
10.37
NA
11.26
NA
12.02
From state social insur-
ance
NA
6.50
NA
7.14
NA
7.75
NA
8.38
NA
9.05
State social insurance
NA
4.04
NA
4.33
NA
4.72
NA
5.47
NA
6.29
Aid to mothers
NA
0.96
NA
0.46
NA
0.45
NA
0.45
NA
0.44
For collective farmers'
welfare fund
NA
0.44
NA
0.40
NA
0.40
NA
1.14
NA
1.26
'Components exclude capital investment.
Estimated.
32
Approved For Release 2006/01/30 : CIA-RDP791300457A000700140001-1
Approved For Release 2006/01/30 : CIA-RDP79600457A000700140001-1
A-4
Measures in the State Budget
Billion Current Rubles
1970
1971
1972
1973
1974
1975
1976
Plan
54.80
24.5
NA
NA
NA
NA
NA
NA
9.2
NA
NA
21.1
NA
NA
NA
NA
NA
Actual
55.94
24.77
10.75
0.70
4.85
6.43
0.12
0.63
9.28
8.74
0.05
21.89
12.74
9.77
7.33
0.44
1.38
Plan
58.50
25.8
NA
NA
NA
NA
NA
NA
9.3
NA
NA
23.3
NA
NA
NA
NA
NA
Actual
59.42
26.30
11.23
0.75
5.15
6.92
0.12
0.71
9.62
8.98
0.05
23.50
13.62
10.58
7.78
0.43
1.69
Plan
62.94
27.4
10.0
NA
5.2
NA
NA
NA
9.7
NA
NA
25.8
NA
NA
NA
NA
NA
Actual
63.48
27.95
11.88
0.80
5.57
7.30
0.11
0.80
10.03
9.39
0.05
25.50
14.45
11.35
8.30
0.42
2.34
Plan
67.51
29.9
NA
NA
5.7
NA
NA
NA
10.2
NA
NA
27.4
NA
NA
NA
NA
NA
Actual
67.34
29.81
12.91
0.87
6.17
7.50
0.12
0.86
10.50
9.89
0.06
27.03
15.11
11.93
9.12
0.41
2.40
Plan
70.28
31.2
NA
NA
NA
NA
NA
NA
10.7
NA
NA
28.4
NA
NA
NA
NA
NA
Actual
71.30
31.57
13.37
0.93
6.63
7.90
0.14
0.97
10.97
10.08
0.06
28.76
16.08
12.73
9.89
0.40
2.39
Plan
76.82
33.2
NA
NA
6.5
NA
NA
NA
11.2
NAA
N
32.3
NA
NA
NA
NA
NA
Actual
77.04
32.79
13.85
07..982
0
94
7..81
0
1.12
11.47
10.4097
0.
32.78
18.17
14.34
11.85
0.39
2.38
Plan
80.5
34.1
NA
NAA
N
NAA
N
NA
11.5
NAA
N
34.9
NA
NA
NA
NA
NA
Actual
80.74
33.79
14.28
1.04
7.39
7.90
0.15
1.18
11.85
07 100..85
35.10
1921.
15.24
12.75
0.37
2.77
33
Approved For Release 2006/01/30: CIA-RDP79600457A000700140001-1
Approved For Release 2006/01/30 : CIA-RDP79600457A000700140001-1
Table
USSR: Revenues of
1965
1966
1967
1968
1969
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Total
99.70
102.32
105.54
106.30
110.25
117.16
123.91
130.84
134.10
140.03
Social sector
91.79
93.89
96.65
97.02
100.37
107.09
112.77
119.44
121.64
127.41
Turnover tax receipts
39.1
38.66
39.5
39.31
40.70
40.06
42.2
40.80
43.0
44.54
Payments from profits
31.6
30.87
35.2
35.67
37.18
41.82
43.8
48.00
48.0
48.02
Income tax on organiza-
tions
1.5
1.54
1.1
1.15
1.12
1.27
1.15
1.14
Social insurance receipts
5.5
5.56
5.9
6.00
6.29
6.39
26.8
7.12
30.6
7.78
{
Residual
14.1
17.26
15.0
14.89
15.08
17.55
22.37
25.93
Private sector
7.91
8.43
8.89
9.27
9.88
10.07
11.14
11.40
12.46
12.62
State taxes on the
population
7.3
7.70
8.1
8.44
9.04
9.32
10.3
10.50
11.5
11.60
State loans
0.18
0.22
0.26
0.13
0.28
0.36}
Local taxes and
0.6
{ }
0.8
{
j
0.8
{
1.0
{
lotteries
0.55
0.61
0.58
0.62
0.62
0.66
Budget surplus
0.16
0.70
0.15
0.72
0.23
1.92
0.31
2.28
0.20
1.50
'Because of rounding, components may not add to the totals shown.
'Estimated.
34
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Approved For Release 2006/01/30 : CIA-RDP79600457A000700140001-1
A-5
the State Budget'
Billion Current Rubles
1970
1971
1972
1973
1974
1975
1976
1977
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Plan
Actual
Plan
144.93
156.70
160.97
165.96
173.81
175.11
181.84
187.78
194.30
201.32
208.60
218.77
223.7
232.2
238.94
131.37
142.86
146.11
151.25
157.82
159.30
165.26
170.87
176.57
183.03
189.67
199.09
202.9
211.3
216.7
46.6
49.38
54.1
54.46
57.4
55.57
57.9
59.14
62.0
63.47
66.1
66.61
69.9
70.7
73.3
50.4
54.16
54.8
55.56
60.7
60.03
60.6
60.03
62.6
64.43
69.1
69.71
69.9
70.6
78.4
1.23}
1.40
( 1.351
1.51
1.47
1.46
1.5
1.5
1.5
34.3
8.20
{
37.2
8.71
}
39.7
9.14
46.8
9.75
{ }
52.0
10.41
{ }
54.5
11.06
{
11.5
12.2
13.0
29.89
31.12
33.21
40.44
43.25)
50.25
50.1
56.3
50.5
13.56
13.84
14.86
14.70
15.99
15.81
16.58
16.91
17.73
18.29
18.93
19.68
20.8
20.9
22.2
12.7
12.74
13.7
13.72
15.0
14.79
15.6
15.83
16.7
17.12
17.9
18.36
19.6
19.6
20.9
( 0.47}
0.33
0.34
0.38
0.44
j. 0.56
j 0.6 .}
0.9
1.2
{. }
1.0
{ )
1.0
k. 1
1.0
{. 1
1.0
1
1.2
1.3
1.0.63
0.65
0.68
0.70
0.73
1 0.76
t 0.7
0.27
2.10
0.20
1.81
0.20
1.89
0.23
3.80
0.21
3.94
0.19
4.25
0.2
5.5
0.21
STAT
35
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STATINTL
STATINTL
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CENTRAL INTELLIGENCE AGENCY
WASHINGTON, D.C. 20505
I March 1978
Dear Larry:
Enclosed are six copies of one of the two reports
you recently requested for passing to various pro-
fessors in your area:
ER 77-10529, The Soviet State Budget Since 1965,
December 1977.
The other report -- ER IR 75-3, The Economic Impact
of Soviet Military Spending, April 1975 -- unfortunately
is restricted to official users only. In its stead I
propose to send you Part III of this year's hearings on
the Allocation of Resources in the Soviet Union and China
before the Joint Economic Committee. This document con-
tains the testimony of Admiral Turner on the same subject
matter and summarizes the essential findings of the
official use only document. Copies of the Congressional
report will be forwarded to you when available, probably
in a week or two.
Economic Research
Enclosure:
As stated
Distribution:
Original - Addressee
1 - Associate Coordinator for
Academic Relations, NFAC (w/o encls)
2 - EO/ER (w/o encls)
47--:-PPG/R&D (w/o encls)
2 - SA/ER (w/o encls)(1-chron;l-gen11)
OSA/ER: 1 March 1978
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STATINTL
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STATINTL
ADMINISTRATIVE - INTERNAL USE ONLY
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7 December 1977
MEMORANDUM FOR: Chief, Distribution Section, P&PD/OL
FROM: Chief, Registry and Dissemination Branch, PPG
SUBJECT:
4
Dissemination of OER Report, ER 77-10529
(425-1218-77), The Soviet State Budget Since
1965, UNCLASSIFIED
Attached is the dissemination list for subject report. Five hundred
(500) copies will be picked up or forwarded to PPG/R&D,
Please n-tify
copies for distribution.
Attachment: a/s
PPG/R&D,
25X1
A. ST TIffki
hen you receive the remaining
ADMINISTRATIVE - INTERNAL USE ONLY
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..
RECORD OF REVIEW OF OER PUBLICATIONS FOR. SECURITY/SANITIZATION APPROVAL
SUBJECTANA
El? 7-7- /0 6:29, 77ze 519 rise it ,5441e et-017 el- 5%-