A wide variety of subfederal government structures exists in the Russian Federation. Indeed, "local government" can have a significantly different meaning from one oblast (region) to another. Models of local government vary, often according to local traditions and the priorities of regional leaders. Four (by no means comprehensive) basic models of subnational governments can be distinguished, each offering different degrees of budgetary autonomy.

Under this scheme, municipalities in larger cities and rayons report to the regional government (smaller cities could also be included in the rayon category). Financial dealings with federal government agencies (transferring funds, sharing taxes) are specified by branches of the regional governments. This pattern is typical of most Russian regions.

Many municipal governments in large and small cities and rural villages operate at levels below the rayon. Regional governments have been reluctant to recognize these governments as participants in intergovernmental fiscal relations (despite Article 1 of Russia’s Federal Law on General Principles of Organization of Local Self-Government, which asserts that the major criteria classifying a self-government are appointment of bodies of power by election, availability of municipal property, and an independent budget). At this level, local governments usually set up divisions of sublocal executive bodies that "interpret" the decisions made by the higher elected government authority.

Different regions have interpreted this model in different ways, but most have taken one of two approaches. In the first approach, regional bodies create an intermediate level of local rayon-level government in the rayons and cities—local self-government bodies that report back directly to the regional government. Local self-government bodies are also formed in all populated areas (small towns, rural districts, districts within cities), which also report back to the regional government. Financial relations between this second level of local government and the regional government work through the intermediate level created in this system.

Under the second approach, regional governments refuse to recognize all branches of local self-government as full-fledged participants in intergovernmental fiscal regulations. Instead, they delegate their intergovernmental fiscal powers to "traditionally" formed bodies of local self-government, disregarding any sub-rayon level municipal entities that may have spun off.

Model IV: Local Governments with No Budgetary Rights

Two common approaches actually eliminate the budgetary power of local government, even within elected representative and executive bodies.

Subfederal governments in the Russian Federation are highly diverse, with regions having two, three, and even four levels of government. Policy recommendations for regional and subregional government and budgetary reform must take into account this structural diversity if they are to be effective.