No, seriously, why do they? It's not like the construction workers don't get paid their wages if they aren't given such projects, and, unless you are buying the resources from overseas, the only cost for the construction materials for the state is wages/salaries of the workers who are involved in the relevant processes.
Am I being swindled?
When you buy buildings you are buying the resources, having them shipped in, and having foreign contract workers come in with that to actually build it for you using their equipment. It's just it abstracts this away for the sake of gameplay. It's like when buildings are purchasing and importing the goods they need, it's abstracting the actual delivery of them from outside.
It may be a game setting to enable a more complicated build option (so if you're still in the tutorial campaign this may be disabled, I'm not sure), but if you look down at the right corner where you have "finance with rubles" and "finance with dollars" boxes, there should be a third one to the right of them that uses local resources and labor. That doesn't cost money (directly, but if you're filling warehouses of material with the auto-import purchase option that will cost money) but requires construction offices staffed with transport and heavy construction vehicles, as well as busses to take workers to the site, and you need to be sourcing all of those things from somewhere.
From where?
If you are requisitioning resources within the country, i.e. you are requisitioning them from another part of the state, it makes no sense to have them cost money.
If you are requisitioning them from abroad, then it should be made clearer that your state can't spare any resources for the city, I think. Albeit, I guess, you are already getting all of the explicit stuff from abroad.
The people who work on transporting resources within the country are not going to not be paid if they aren't working on these projects, either. Where does this money go?
Firstly, why does your state not have construction workers?
Secondly, why can't you requisition the workers from the USSR or another planned economy?
Yeah, I have only glanced at the tutorial.
Why can't you source it from your own state? Why are your options limited to either producing the resources within the city, or trading internationally with the USSR or, bleh, the western powers?
A neighboring country, either Soviet or Western depending on the currency you use for this.
Because you don't have local construction coordinating offices and vehicle depots yet, so you're relying on outside help.
You do, but they want compensation. It's kind of a gamification of... Actually, you know what? Given the time period it defaults to (starting in 1959), I'm just gonna blame Khrushchev. Maybe it's an alternate history where he was even more revisionist and did more Gorbachev level dipshittery with trying to liberalize the central planning.
A more realistic answer is that you're entirely independent and just maintain neutral terms with both the Soviets and the West, so even though you can freely trade with both neither is going to come in and build things for you or make any sort of demands of you. Which is ludicrously unrealistic considering you're sitting on huge deposits of oil, coal, metals, and uranium, but that's city builder logic for you.
You're running an independent border republic roughly the size of something like Andorra, maybe a little bigger. Everything outside your borders is foreign, even the Soviets.
Which has the silly implication that there are no other cities under your state, or your state has no industry for producing construction materials and educating construction workers domestically outside of this specific city.
Well, the workers aren't going to go wageless/salariless regardless of whether or not they are working on the project, and I don't think that there even were contract workers in the USSR.
You would have to pay the relevant state for this sort of deal, though.
How does this work? Where am I getting the initial funding? Who am I? Who authorised this? What is this madness?
In the second campaign, the backstory is that you're basically supposed to be an eastern european country that was colonized by a western power that built some infrastructure to aid in resource extraction, except you revolted against them, gained autonomy, and established a socialist state of sorts, with your objective being to attain autarky and modernize the scattered villages throughout the country.
So there at least, I'd guess the $2,000,000 balance is from seizing the US-backed dictator's wealth, and the 10,000,000 rubles you start with were either the result of selling captured western equipment to the Soviets or a sort of hands-off foreign aid grant from alternate timeline more-liberal-brained Khrushchev.
This made me think of two things, one related to the game and one not. The first is that nothing domestically involves currency that you deal with, all the money is foreign currency used for trade; that means that your internal economy is running purely off some kind of labor voucher system and abstracting away both the wages workers earn and what they spend on goods and services as an overall balanced and isolated system.
The second is that AFAIK starting under Khrushchev (IIRC) there was a tacit acceptance of a so-called "second economy" in the USSR, which involved comparatively small scale private exchange for crops grown in personal plots, craft goods, and contract services like repairwork that existed outside the centrally planned institutions.
Tangentially, that's making me think about the centralized state-run farm equipment depots in the game, and how one of Khrushchev's more notably hair-brained and disastrous reforms was privatizing that sort of thing so that farmers had to own and maintain their own tractors, which made maintaining them way more expensive and reduced overall agricultural efficiency since "idk lmao everyone do it for themselves" is much worse than having centralized depots staffed by mechanics whose whole thing is maintaining them and who have all the tools and materials on hand to do so in one place. Also that contemporaneous to that in China, farm machinery was rare and the rural communes weren't really communes yet, so the farmers who'd managed to get access to tractors and the like quickly turned around and became private contractors who'd go and use the tractors on other farmers' fields for compensation and within just a couple of years of that being the status quo it was already creating a problematic wealth inequality between farmers in general and the sort of contractor tractor-kulaks that had to be addressed by the state.
Have you heard of Liberman, by the way?
His reforms were truly worthy of the name.
You do spend a lot less money if you do have other cities under your state, but that's usually not the case if you start a new game on a random map though. You can set up a custom map with a starting city tho (it's sometimes hard to get to a stage where sewage works on an edit-map since you can't test the sewage system as you go along)