Discussions are also ongoing about whether the Ministry of the Interior and the Ministry of Defense budgets should be treated on an equal footing, for instance, while concerns have been raised over making budget cuts in these areas given the current security situation.

Cuts to cover the estimated €175 million negative supplementary budget will still need to be found, however.

While some areas remain vague and/or subject to speculation, it appears that all 11 ministries, including those which have already implemented cuts, will be facing a 5 percent reduction in operational expenses, which could save an estimated €20 million.

Major state-owned firms such as the Port of Tallinn will also be contributing more to state coffers, via dividend payments, than was originally planned for this year.

Supplementary budget needs to be processed before midsummer break

The supplementary budget being prepared by the government and aimed primarily at making cuts is nearing completion, in a sense just in the nick of time, given that the midsummer break is a month away.

This supplementary budget must be processed at the Riigikogu; the government is expected to put it before parliament Thursday this week.

The state budget is prepared through the late summer and fall, with a view to being processed at the Riigikogu – legislation requires three rounds of voting – and passing before the end of the year preceding the year which that state budget pertains to.

Additional supplementary budgets are sometimes issued – for instance during the Covid pandemic – when it becomes clear that the annual state budget does not bring sufficient spending, or in this case cuts, to cover the year.

Education ministry needs to make further cuts

Minister of Education and Research Kristina Kallas (Eesti 200) has said she saw the latest draft of the supplementary budget last Friday.

Many entries to the table contained were the same as those seen inn Finance Minister Mart Võrklaev's (Reform) initial cuts proposal, Kallas said.

Along with the operational expense cuts, the education ministry alone will be required to save about €6 million.

Kallas noted that the Ministry of Education budget was already cut last year when funding was sought for teachers' salaries.

She said: "To make cuts once again now essentially means we have to decide which policy activities we will no longer undertake at the Ministry of Education."

"Salary cuts and so-called efficiency layoffs were already made in 2023," Kallas went on.

"Where are the workplaces we will cut, and where do we straight up say we won't be carrying out these things any more?"

Kallas had met with the ministry's undersecretaries on Monday to discuss the issue.

Kallas, who is also Eesti 200's vice chair, also spoke about how she had amended what she called the previous administrations mistakes in last fall's additional requests, adding that a supplementary budget is now necessary.

"If we don't make these smaller cuts now, they will inevitably carry over to the next year, by which time much larger cuts will be needed," Kallas said.

Cuts not to fall so heavily on local government

One significant amendment was made to Minister Võrklaev's supplementary budget proposal: A cut of around €30 million from the revenue base of local governments was removed, at the proposal of SDE.

Several Reform Party members were also on board with this, given it would have taken more funding from the Tallinn commuter belt municipalities even than the hotly debated "Robin Hood bill" would do.

Other areas where the cuts have evolved include government policymakers now expecting slightly more savings by postponing investments, while state foundations will have to contribute more to the cuts than previously planned.

Kristina Kallas said she recalls asking for €27 million for the transition to Estonian-language education last fall; her ministry must find an additional €2.7 million in cuts in respect of this.

Kristina Kallas said that the largest of these is expected to hit the Enterprise and Innovation Foundation (EISA), an organization formed from the merger of Enterprise Estonia (EAS) and KredEx.

She said: "The operational expense cut for foundations is 5 percent, save for hospitals and the cultural sector."

"While hospitals face a one percent cut, EISA has an additional €5 million cut on top of that 5 percent," Kallas explained.

Axe to fall on EISA

EISA has been in the line of fire for some time, both in the media and among politicians.

Revelations that the average monthly wage paid to EISA staff was €3,616 gross, over half the national mean monthly wage, the minister responsible for EIAS, Tiit Riisalo (Eesti 200), said restructuring and streamlining will be coming.

Interior Minister Lauri Läänemets (SDE) meanwhile said that the Enterprise Esotnia-Kredex merger led to rising and not falling costs

"We have an agreement to review other state institutions that have been merged but have not achieved efficiency, where the number of people has remained the same, increased, or other costs have risen," Läänemets said.

National security concerns

Läänemets' own ministry faces cuts in the range of €6 million to €7 million, something which he does not back on the grounds of national security.

"Security is security. It doesn't matter whether it falls under the Ministry of the Interior's area, or that of the Ministry of Defense," he said. "The principle so far has been that we should increase security [spending] rather than cut it."

Nonetheless, if necessary, Läänemets said he would be able to find ways to make cuts at his ministry and its subordinate agencies, adding that for every €50,000 saved, one person will lose their workplace next year.

Additionally savings made should not be plowed back into state coffers, but should be rerouted to other areas of national security, Läänemets argued, adding something similar should happen in the case of hospitals.

Health Minister Riina Sikkut (SDE) has proposed that a €20 million saving in health institutions could also be achieved next year.

"We are trying to direct hospitals to review their operational costs," Läänemets said with regard to this. "But the money saved will go towards reducing waiting times and treating patients."

No research development grants this year

Other areas due for cuts include research and development (R&D) funding, about half of which falls under the education ministry's area. Finance Minister Mart Võrklaev proposed reducing this funding budget entry by €19 million, given GDP has not grown as much as expected (R&D spend is set at 1 percent of GDP per annum).

Around 40 percent of R&D funding is controlled by the Ministry of Economic Affairs and Communications, with the remainder distributed between other ministries.

Cuts will not hit research grants and base funding for science, Kallas said, according to her proposals.

"However, there is €6.5 million in the government's earmarked reserve for sectoral research and development activities, which is currently unused," she added.

The remaining €12.5 million of the €19 million total R&D cut should be distributed among ministries based on how much science funding they receive, according to Kallas.

In any case, this will mean no development grants coming from the education ministry, Kallas went on.

She said: "The Ministry of Education holds development grants, which we have not yet distributed this year as of yet, so it is possible to direct cuts on these at present. In other words, we will not be announcing any development grants this year."

Development grants last year included those given to projects such as the development of an autonomous mobile power station and antibiotic-free protein production technology.

The education ministry is the only ministry whose main building is not located in Tallinn, but rather in Tartu.

The increasingly detailed supplementary budget draft still contains some items for which a clear agreement has not yet been reached.

For instance, Minister Võrklaev suggested that €18 million could be saved by postponing investments.

Supposedly, these are mostly costs that would carry over to the next budgetary year anyway. ERR has not yet learned which investments are referred to in the supplementary budget document, however.

A proposal to reduce the government's earmarked reserve has also not been clearly defined.

The money in that reserve is tied to specific activities, meaning that cutting the reserve would mean deleting some planned activities.

Greater dividends paid to state from state-owned firms to plug the gap

Even when the above cuts to foundations, science funding, earmarked reserves, operational expenses, and last year's approved additional requests are added to the table, a large part of the €175 million negative supplementary budget remains unaccounted for.

According to current plans, the difference will be covered by additional dividends.

The government made its decisions on state-owned companies' dividends last month.

The biggest changes concerned grid distributor Elering, which was expected to contribute €5 million to the 2024 sate budget.

The government however opted to take €20 million in dividends from the company.

The Port of Tallinn (Tallinna Sadam) and national lottery Eesti Loto also paid slightly more dividends than planned.

Also, the board of the national forestry commission, the RMK, met in March and decided it would transfer €88.7 million to state coffers.

Lauri Läänemets was unable to say whether this would be sufficient or whether the topic will be revisited.

The issue of dividends will be discussed last by the cabinet, he added.

The supplementary budget and details of all the cuts is due to be put to the Riigikogu on Thursday.

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