Jaak Aab (Center) told ETV news show "Aktuaalne kaamera" (AK) Monday that the revenue base allocated to local governments is currently too low.

Too much is being used to cover rising costs in construction and other areas, leaving some planned projects on the back-burner.  

Investments are set to grow by four percent for 2023, per the state budget bill submitted by the government last week.

Ministry of Finance Deputy Secretary General Sven Kirsipuu told AK that: "Next year's aggregate volume of investments will be the largest in the last ten years, several foreign funds will be opened.

"Defense investments have increased, resulting in the fact that, compared with the EU average, we are about twice as high in investment level," he went on.

"The revenue base for local governments mostly depend on income tax receipts, ie. the general economic environment of the country and salary rises. I think beauty is in the eye of the beholder, however - you can always say this is by little, but at the same time income tax receipts are still growing," he went on.

Jaak Aab, a former public administration minister, said: "In the next four years, local governments will have a shortfall of around €500 million. This has been calculated, that is, the debt burden on municipalities will increase by €500 million and the investment capacity of municipalities will drop sharply."

Aab noted the removal of several key investments during the summer, namely the planned Tallinn Hospital, medivac helicopters, the western Estonian rail extension and healthcare sustainability and availability.

While there are shortages everywhere, to the tune of billions in the case of road construction, Aab said, even a €60-million investment would be sufficient to maintain current levels of infrastructure, he said.

Sven Kirsipuu stressed the importance of prioritizing, noting the example of the hospital as a way of covering all other price rises in construction and other areas, by striking off just one planned object.

Investments in the 2023 state budget total €775 million, as noted 4 percent more than for 2022, with those under the area of the Ministry of Defense making up the largest share for 2023, compared with those under the Ministry of Economic Affairs and Communications (ie. infrastructure projects) for this year.

At the same time, the bulk of 2023 investments fall outside the state budget, and, all told, the total investment volume of the government sector will be €2.3 billion next year.

Ongoing projects rather than those not yet commenced, are still covered.

In the next five years, five state high schools are due to be completed, as is the renovation of the National Library (Rahvaraamatukogu) and funding for the Viljandi Hospital.

The state budget bill itself is subject to a Riigikogu vote, with a view to passing by mid-December.

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