Riina Solman: Local governments' financial situation not bad at all

Minister of Public Administration Riina Solman (Isamaa).
Minister of Public Administration Riina Solman (Isamaa). Source: Ken Mürk/ERR

With the exception of the periphery where help is indeed needed, and compared to past crisis years, the financial situation of Estonian local governments is not bad at all. Income has grown compared to other fields, Minister of Public Administration Riina Solman writes in her reply to Hergo Tasuja's comment.

Local governments' revenue has grown by over 9 percent for an additional €160 million. Therefore, talk of the imminent bankruptcy of local governments by our modern left-wing coalition partners the Social Democratic Party (SDE) is somewhat exaggerated. Allow me to assure you once more that local government revenue is set to grow next year, with the central government extending a helping hand to those in need.

Local governments are looking at an extra €300 million over the course of the coming fiscal period to help weather difficult times. This by boosting local residents' income and local governments' tax revenue for necessary investments, salaries and benefits. It could also be argued that 2023 is shaping up to be a good year for local governments.

Everyone wants life to improve where they live, whether in the city or the countryside. A few major urban areas are doing relatively well in Estonia. But I believe that people who want to start a family, work and raise children must have the opportunity everywhere in Estonia.

The task of regional policy is to close the gap in living standard between more and less successful regions by creating more opportunities away from major centers. The Estonian people must inhabit the entire country, instead of moving only to major cities. Sparse population near the eastern border is also a security risk.

I believe that most people agree it is necessary to offer economic incentives for businesses in rural areas, that smaller settlements need better transport links and that decent roads must lead everywhere people live. High-quality medical assistance and education must be available as close to home as possible for which purpose the salaries of medical workers and teachers need to be hiked.

There will always be the question of money and whether maintaining life in all corners of the land is economically gainful. I believe that the state should support the development of rural areas even when it is not economically sensible. This concerns vital services like post offices, schools, shops and medical institutions.

Local governments have a major role to play in organizing local life. Even though we do not always realize it, it is the local government that shapes our living environment and possibilities therein. Estonia carried out the administrative reform to make sure its local governments can offer citizens more.

I agree with those who find that the authority is further away in a larger local government and it is no longer possible to stop the municipality mayor on the street. At the same time, the change has allowed local governments to undertake larger projects and make investments.

The government has presented this year's state budget to the Riigikogu, with debates set to continue in the parliament. The possibilities of cities and other municipalities will be helped by an anticipated increase of €160 million in income tax receipt. Additional tax revenue and the equalization fund will see local governments' revenue base grow by 9.8 percent next year. Estonia has over €10 million for local governments to help with soaring energy prices and Ukraine refugees.

Good news continues with €250 million in European subsidies coming the way of local governments to be used for incubation and R&D through vocational schools and colleges, developing youth enterprise, industrial parks and remote working possibilities, creating multifunctional service centers and joint local government services.

Additionally, Ida-Viru County stands to receive €340 million from the Just Transition Fund to alleviate social, economic and environmental effects of the oil shale sector contracting. Specific activities are largely up to local governments and agreements. To this we can add local government infrastructure investments from CO2 quota trading proceeds worth a total of €60-70 million in 2023-2026.

We all get old and no one wants to be a burden to their loved ones. One major decision by this government is lending local governments strength in solving a long-time problem of helping people who cannot afford care home services.

Local governments will be allocated €39.2 million in 2023 and €56.7 million (through revenue base) in 2024 for organizing long-term care and cutting people's cost-sharing component.

These funds can also be used to pay for home care, which should make relevant services accessible to more people. Local government investments have not been forgotten either. The government's child and family benefits hike is set to markedly improve the coping of families with children.

Some local government heads have voiced displeasure over the discontinuation of coronavirus period measures. The reason is simple in that this particular crisis is over. Aid for local governments during the Covid crisis was necessary as their revenue was forecast to take a hit. But the coronavirus crisis was an exceptional event for both the central and local governments as economic activity all over Estonia was obstructed, which necessitated state aid, including through investments for livening up the economy and supporting people.

There will be no administrative restrictions on economic activity in 2023, and difficulties caused by soaring energy prices do not compare to the coronavirus crisis in terms of reach.

That is why policy measures are also different. The government has carried out the electricity market reform that considerably lowers local governments' need to support residents in paying their power bills. I have also proposed extending the electricity universal service to local governments.

In summary, 2023 will be a good year for many local governments.


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Editor: Marcus Turovski

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