Financial Sustainability of Russian Cities

The article examines the financial sustainability of the largest municipalities in the Russian Federation. The relevance of the topic comes from a persistent divergence between the growing expenditure commitments of cities and the shrinking opportunities for their own revenue generation. The study aims to comprehensively analyze the factors influencing the stability of local budgets, assess the current financial condition of Russia’s largest cities, and identify systemic risks to their development. The empirical basis of the study contains budgetary indicators and other statistics of 14 major cities with populations over one million for the period from 2020 to 2025 (excluding Moscow and St. Petersburg). The authors applied a methodology based on the calculation of four key indicators: the coefficients of basic budgetary balance, fiscal autonomy, financial independence, and the level of investment activity. Additionally, the share of regional capital cities in the total population and the aggregate revenue of local budgets were analyzed. The results of the analysis demonstrated deep inter-municipal differentiation and the presence of regional asymmetries. Based on the data obtained, the authors typified and developed five models of municipal financial behavior: a sustainable balanced model, a conservative-accumulative model, an investment-active model, a problematic model, and a model with medium sustainability. The authors conclude that a high dependence on intergovernmental transfers, rigid expenditure regulations, and the centralization of tax innovations at the federal level remain the key vulnerability factors for municipal budgets. To ensure long-term stability, mechanisms for expanding the own-revenue base of municipalities are proposed.