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Estonian state €26M short for maintaining current county bus service

Passengers getting on a free #70 county bus to Antsla at Tartu Bus Station. May 13, 2022.
Passengers getting on a free #70 county bus to Antsla at Tartu Bus Station. May 13, 2022. Source: Aili Vahtla/ERR

After more than five years of being free nearly across the country, regional bus service in Estonia went back to being paid starting Monday. Hopes of fare revenue allowing for improvements to the existing bus network have been dashed, however, as the state is significantly short on the funding needed even just to maintain the current network as is.

In recent years, fuel prices have increased, as have the consumer price index (CPI) and labor costs, and all of this has impacted the state-subsidized regional public transport system.

The Ministry of Regional Affairs estimates that it still needs to find an additional €26 million in funding this year just to maintain current public transport volumes, as the 2024 state budget currently includes approximately €50 million for subsidizing county bus services, but the actual need totals €76 million.

Another €5 million is needed to subsidize ferry services as well.

According to Andres Ruubas, director of the Public Transport Department at the Ministry of Regional Affairs and Agriculture, there are three options for coming up with the missing money, broadly speaking: tap the reserve for money, increase fares or pare down the bus network.

What the ministry wants, in particular, is to get this money from the government reserve as in previous years. Last September, for example, the government allocated €18,287,000 from its reserve for the operation of public transport, some €15 million of which went toward county bus routes.

"Well, we don't have any other options right now, but we're working well together here with the Ministry of Finance, and we're going to sit down this week as well and discuss what possible solutions there could be," said Minister of Regional Affairs Madis Kallas (SDE). "It's always easy to say you can review the contracts and then cut the route network so much accordingly, but we absolutely cannot allow that. We need to find additional funding to at least maintain the route network at its current level."

Kallas said that they have an agreement with the Finance Ministry that the necessary money will be found from outside the Regional Affairs Ministry's budget line. Nonetheless, the money needed for public transport has not been included in an earmarked contingency reserve this year.

"But in terms of the state budget, it would be possible to resolve this at the expense of other line items here," he explained. "Such is the agreement we've concluded with the Ministry of Finance, but now we'd like to get even more precise about what the content of this agreement will look like in practice."

According to the minister, it's yet unclear in which line item the missing money will be found.

"I simply see no option for us to not find a solution," he said. "It's more a question of getting it on the table as soon as possible so that we're not in the government or Riigikogu with this issue at one point and then it's already nearly the end of the year. That is why we're already actively working on this at the beginning of January already – so that all of it can be unambiguously and clearly established."

Only €2.5 million a year

At least part of the missing sum could also be made up by raising bus fares. Starting Monday, county buses across the country reverted to being paid again, with a fare of €1.50 per trip, and the option to buy a monthly bus pass for €25.

Nonetheless, paid public bus transport won't actually be bringing in much money for the state. Some counties had retained paid bus transport even as it was free elsewhere. Likewise, ridership on these routes consists largely of young people and the elderly, who will continue to ride free anyway. According to Ruubas, working-age adults account for just 17 percent of all county bus riders.

The ministry official said that the state is hoping to generate an additional €2.5 million in fare revenue with paid public transport, which will be going first and foremost toward patching the hole in the budget, not improving the transport network as originally hoped.

"This will actually be going back into the state budget, and will simply reduce taxpayers' need to pay for subsidies," he explained, adding that bus schedules could be improved to that extent at minimum.

"But mainly the issue is still the fact that this system is still short a huge amount of money," Ruubas emphasized.

He noted that if regional public transport hadn't reverted back to being paid, then regional public transport would have needed a total of not €76 million but approximately €78 million in subsidies this year.

According to Kallas, the entire county bus transport network will earn the state around €7-8 million in fare revenue this year. This means that even if they were to double the fare, that would still only double that revenue.

"Fare revenue alone certainly cannot be the answer," the regional affairs minister stressed. "We've agreed after all that we'll gradually increase fares if needed, but it can't be exponentially, because if this hike were too sharp, we'd lose a substantial amount of public transport users."

He added that the ministry is prepared to save and cut costs within its own sector, but cuts alone won't make up the entire missing €25-30 million.

"If anything, we're talking about one-tenth, if even that," he underscored.

According to Ruubas, the size of the public transport subsidy in the state budget hasn't been increased in years.

Public bus transport's funding needs, however, will continue to grow over the years ahead, as public transport centers have concluded long-term contracts with bus companies that are indexed according to changes in the CPI and fuel price index. 

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Editor: Aili Vahtla

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