In recent years, the shift from a cost-based to an activity-based approach in drafting the state budget has drawn criticism from the Chancellor of Justice, the Auditor General, and several members of the Riigikogu.

Despite that, the 2025 state budget continues to follow the activity-based approach, meaning various indicators are used to measure progress towards achievement of set goals.

Auditor General Janar Holm sees this as the wrong approach and can even have metrics which seem both inappropriate and in any case are not being met.

As an example of one of these, Holm told "Aktuaalne kaamera": "We have a road construction plan. One of its metrics, for example, is the number of traffic fatalities. As we saw last year, the actual number of fatalities was much higher than the budget metric."

"In other words, the indicator and the real situation diverged, got worse. This should mean more money is needed for roads, given the actual situation is drifting away from the metrics. Yet, year after year, funding for roads falls," he went on.

Some criticisms also even come from within the coalition parties. Reform Party MP Aivar Sõerd, a member of the Riigikogu Finance Committee, told "Aktuaalne kaamera" the metrics "seem to live a life of their own, and in practice, no one seems to use them. These performance indicators are inadequate."

Deputy Secretary-General of the Ministry of Finance Sven Kirsipuu however said the very fact that criticisms related to activities and the progress or lack thereof was proof that the activity-based budget is in fact the way to go.

Kirsipuu said: "I think this is a very good example of how an activity-based budget works. Without this information, we wouldn't even be discussing it. Today, the information is available, and we can ask why we are reducing funding and what will happen with these metrics."

The Ministry of Finance also says next year's state budget has taken previous criticisms about its lack of transparency into account.

Other criticisms about the 2025 state budget, unveiled earlier in the week, concern transparency and clarity.

Chancellor of Justice Ülle Madise said: "I believe that when reform was implemented, in which information about how much revenue comes from taxes, state assets, and other sources was no longer presented in an understandable format—nor where exactly the expenditures go, including on ministry and agency payrolls, maintenance costs, training expenses, and estimated social benefits—this system change replaced those lines with result areas which aim to cover the goals of all ministries across the board. Such a reform was, I believe, done with good intentions"

"Unfortunately, it has now emerged that this year's state budget likely does not comply with the Constitution," she went on.

"This is because there are no clear revenue and expenditure lines that the Riigikogu can amend, or that make it possible to understand where the money is coming from and how taxpayer money will be spent over the course of the year."

"Furthermore, it is important to see where cuts could be made and where the Riigikogu believes more funding is needed, so those lines can be adjusted," the chancellor of justice went on.

The Constitution indeed stipulates that revenue and expenditure lines must be clear based on their economic substance, Madise added, and, as clearly stated in the Constitution, must be subject to

How much revenue is expected from, for example, taxes and state assets, as well as the size of expenditures for items like child benefits, pensions, and the healthcare system, among other things, should be clear from the state budget bill's explanatory memorandum, the justice chancellor noted.

While the coalition agreement includes a commitment to increase the transparency of the state budget, this does not seem to have happened to a significant extent, "Aktuaalne kaamera" reported.

Holm said while "technically, it is now possible for Riigikogu members to make amendments," unfortunately "there is still a clause which allows the minister to make completely different decisions on the most important points, even in areas where a member of the Riigikogu has proposed an amendment."

"The change that was made is superficial and is, in my view, unfortunately worthless," he added.

Chancellor of Justice Madise also addressed to Finance Minister Jürgen Ligi a little over a week ago about the draft law amending the State Budget Act.

She noted: "According to the bill, the annual state budget will include the distribution of expenditures by their substance, yet this budget annex is not binding on the executive branch."

Madise noted that, under Article 115 of the Estonian Constitution, the Riigikogu must pass the annual state budget as a law, and this law must include all state revenues and expenditures.

The relative position of the legislature to the executive is closer to its traditional definition – ie. that the executive does just that, executes things – than in some other countries.

"Article 116 of the Constitution affirms that the Riigikogu must be able to make substantive changes to the annual state budget, including reallocating expenditures. Estonia is not one of those countries where the legislature's constitutional role is limited to approving or rejecting a government's proposed budget," Madise continued.

"Even when setting expenditure caps based on their economic substance, the law can provide that minor, less significant changes don't require Riigikogu approval (for example, a minister could be granted the authority to reallocate expenditures within a set amount or percentage, as specified by law)."

"Setting limits on economically significant expenditures does not lead to major reorganization or costs for the state, as the budget's execution is already monitored based on the economic substance of expenditures," Madise continued.

"In conclusion, I believe that the proposed amendment does not ensure compliance with Article 115 of the Constitution. One way to resolve this issue is to include the distribution currently in the annex in the main body of the budget law and move the information currently presented in the budget into the explanatory memorandum," the justice chancellor added.

"In that case, it would be necessary to review and, if needed, amend the remaining provisions of the State Budget Act that regulate the structure and execution of the budget" she concluded.

Holm, Madise, and Sõerd in effect told "Aktuaalne kaamera" they agree that the Ministry of Finance should return to a cost-based budgeting approach, with the activity-based perspective serving merely as supplementary material.

Sõerd said: "And for those who are interested, let them examine these performance areas and whether the performance goals have been met, and what these performance areas entail. I believe, however, that there are few interested parties."

Sven Kirsipuu from the finance ministry however said the "two approaches are not mutually exclusive.

"They are complementary and needed for different purposes. There are no right or wrong answers here, I think. Debate should focus on the main role of the parliament— be it to discuss content and strategic goals or, in fact, to decide, for example, on the personnel costs of a museum or the Estonian Language Institute," he went on.

The state budget bill for 2025 has to be voted on three times at the Riigikogu before year end, before it can enter into law, pending presidential assent.

The 2025 state budget expenses and investments will rise by 3.8 percent to €19.1 billion; revenues by 5.2 percent to €17.7 billion, the Ministry of Finance said earlier this week.

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