The main task of the local government of the future is creating an economic and living environment that fosters residents' income and well-being. The goal of local governments the size of the average Estonian county is to render Estonian cities and municipalities successful at coping, so they could rival Tallinn or Riga in terms of competitive ability, investments and cultural environment. This requires an overhaul of the local governments' funding model.

Additional support for local governments

Estonian local governments usually have two stable sources of income –individual income tax revenue and state support, including the equalization fund aimed at compensating local government for their lower income.

Right now, local governments get 11.96 percent of residents' income. This means that a resident whose salary is €1,000 contributes €119.6 to the local budget.

In order to motivate local governments to take an interest in boosting their residents' level of income, those sporting a less favorable geographic and strategic location should get a bigger share of income tax. That is the only way to deliver most local governments from their demotivating dependence on the equalization fund in terms of job creation.

This would mean giving local governments further from Tallinn and Tartu, which sport a lower revenue base, a greater share of income tax receipt instead of equalization support. It would boost local governments' freedom and responsibility in shaping their budget and alleviate differences caused by regional differences in level of income.

The other side of local government income – state support – is earmarked almost in full, meaning that the government gets to decide what its local counterparts can spend it on. The Nordics sport strong local autonomy and allow local governments to decide how to use their funds – whether to hike teachers' salaries or improve street lighting.

In Estonia, money for teachers' salaries is earmarked, with members of the central government busy boasting how much was allocated and where. We can hear ministers painting rising salaries as a personal feat, while discussions over the necessity of different subjects and the quality of education take a back seat.

Estonia's campaign to build state high schools is another example of the central government looking to control the agenda and not trusting local governments to make decisions. We can give similar examples of funding for local roads and many other earmarked funds.

Debt of unfilled promised due

But independent funding requires string and capable local governments that ideally cover their residents' daily area of activity. Several possible scenarios were mulled before the administrative reform five years ago.

I was in favor of creating local governments the size of an average Estonian county back then as it they would have fit in well with existing administrative structure and locals' perception. The administrative reform would have been relatively simple in that case, with only Harju, Ida-Viru and perhaps Tartu counties ending up with more than one local government. In the rest of Estonia, counties would operate as local governments.

This simple and logical plan failed, mostly due to opposition from then PM Andrus Ansip (Reform Party), and an alternative solution based on the logic of attraction centers was put in the works instead. This approach suggested people should be able to take care of important business and access services inside one local government, which is why municipalities were created around more important regional service centers.

Unfortunately, smaller municipalities to be merged did not always agree where those service centers were, with the need for compromise rendering the reform process much more complicated and negotiations ultimately culminating in several exceptions that have not justified themselves. Local agreements resulted in some rather peculiar formations that would have been unthinkable in the case of a top-down reform.

Situations where the goal was to form a municipality around an attraction center in some cases culminated in heads of peripheralized municipalities feeling mutual attraction instead and ultimately leaving the actual center outside the borders of the new municipality. Saaremaa was wiser in managing to turn the entire county into a single municipality. The pains of merging several previously independent local governments were quickly overcome, and the move has proved successful many times since.

Even though borders were merged and services reorganized, the fact that local governments were not given greater freedom and say in how they manage their affairs and local life has come back to bite Estonia. Changing the system of local government funding was meant to be an inseparable part of the reform, while promised remain unfulfilled. The time has come to pay that debt.

A soft-boiled and unfinished administrative reform necessitates another stage and round of mergers. This time, we should not back out of county-level administration as the 2017 reform showed that people's self-determination and sense of home are closely tied to historical administrative-territorial structure. One should never underestimate the human factor in effecting major change as it often determines success versus failure.

Boosting the independence of local governments is important both to create better conditions in the area and for livening up competition between them, with every city and municipality's residents standing to gain.

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