Next year's state budget will allocate €119.8 million for public transport – nearly €32 million less than this year. Actual budget needs, meanwhile, exceed even that – totaling €46 million.

"€165.7 million is needed for next year to fulfill current contractual obligations, cover infrastructure charges as well as bring the new [Elron] trains into service," said Andres Ruubas, Public Transport Department director at the Ministry of Regional Affairs and Agriculture.

Minister of Regional Affairs and Agriculture Piret Hartman (SDE) told ERR that there is an agreement between coalition partners to cover the shortfall from the state budget reserve.

"We'll likely be submitting that application in the first half of next year," she said. "Of course we'll try to find savings of our own, but we will definitely need to submit an additional request to the state budget, because there's no other way to ensure the functioning of public transport."

The minister explained that they will submit a request to the Ministry of Finance for the corresponding [funding] need, and the latter will then bring it to the government.

"This can be submitted as needed throughout the year," she continued. "This year, we started requesting [additional money] in June, if I'm not mistaken, and finally reached a decision by the beginning of August. So it definitely does take some time."

This year, €18.2 million has been allocated from the government's reserve for public transport subsidies.

According to Hartman, driving up costs next year are the entry of Estonia's new Škoda trains into service as well as rising railway infrastructure charges. For example, next year, Elron will have to pay €4 million more in infrastructure charges than this year. These charges account for as much as 70 percent of Elron's overall costs.

"This is one area where we really can't just say we're not willing to pay that," she stressed. "If we want to keep the trains running, we have to account for infrastructure charges."

Asked whether the shortfall in state funding might lead to higher fares and ticket prices, such as for trains, Hartman replied that ticket prices do indeed need to be reviewed.

"When it comes to [passenger] rail service, even Elron itself has said they'd like to reach the point where ticket revenues could cover as much as 50 percent of costs," she said, adding that currently, it's at 40 percent. "But the timeline and approach [for reaching that target] is something we're currently talking about [with Elron]."

Hartman: Hiking bus fares not possible

According to the regional affairs minister, however, there are certain types of transport for which fares or ticket prices shouldn't be raised.

"Definitely in terms of bus services, I currently see no real opportunity for raising bus fares, because we cannot discourage folks from using public transport," she acknowledged. "We saw that when we tried to standardize [fares], that immediately raised a lot of questions and understandably caused outrage in Pärnu. But I believe standardizing [fares] is fully justified. That said, it's not a good time right now to raise prices for certain types of public transport."

County bus services, which are subsidized by the state, will be taking a significant financial hit in next year's budget: from €74 million this year to €58.5 million next year.

Hartman explained that the ongoing practice for keeping county routes running relies on additional funding requests.

"Currently, the government has agreed that seniors, schoolchildren and kindergarten-aged children ride for free, and we aim to stick to that principle," she noted. "What we need to review are the conditions for county route contracts. These are inconsistently organized in various regions, and often not the most practically, so preparations are underway for new procurements."

She added that efforts are being made to ensure that no routes are canceled.

"During state budget negotiations, I presented public transport funding to the government," the minister said. "I identified why budget needs remain so high and highlighted potential savings, as well as what the actual [budget] needs are for the coming years. I very much hope that next time, the government will reach the point in budget negotiations where the budget reflects actual needs rather than a figure agreed on four years ago that always requires mid-year adjustments."

A recent change to the procurement for ferry services Hiiumaa and Saaremaa introduced a so-called profit cap on the operator. This means that if profits exceed a certain percentage, the excess must be paid back to the state. Hartman believes similar terms should be considered for bus route procurement conditions as well.

Ferry ticket price hike could pose difficulties

€22.6 million is earmarked in Estonia's 2025 state budget for ferry routes, down from €29 million this year – or by around a quarter.

"I myself will also start talks with the big islands next week to see how we could better organize [ferry links]," Hartman said.

"It's clear that changing ticket prices would be challenging for the islands right now," she acknowledged. "The cost of living is already higher there today, and businesses are likewise facing higher input prices."

The minister noted, however, that public transport funding needs more solutions than just asking for extra money from the reserve.

"There's no point in us lying to each other – this system is simply under-resourced right now," she said. "If we want to keep all of Estonia well connected – and I currently see no way to reduce connections – then we definitely need to significantly improve public transport."

For example, by the end of this year, the Ministry of Regional Affairs and Agriculture must propose principles for reforming Estonia's public transport centers.

"The entire public transport system is currently under reform," Hartman noted. "We're reviewing how it's organized, where we can improve efficiency, where we could better synchronize various transport modes as well as where we could achieve savings."

Unlike in previous years, the latest state budget bill and letter of explanation did not specify what sums were allocated for public transport subsidies; the relevant numbers had to be requested from the ministry.

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