State, local governments reach agreement on state budget priorities

Minister of Public Administration Jaak Aab (second to right) together with representatives of the ELVL. Sept. 20, 2019.
Minister of Public Administration Jaak Aab (second to right) together with representatives of the ELVL. Sept. 20, 2019. Source: Ministry of Finance

Minister of Public Administration Jaak Aab (Centre) and the Association of Estonian Cities and Municipalities (ELVL) reached an agreement on Friday regarding the principles of planning the 2020 budgets of local governments. The most important priority will be increasing local governments' revenue base.

"We met for 2020 budget negotiations for the first time this spring, when we discussed proposals submitted by the ELVL and budget requests made by sector," Aab said in a press release.

"We agreed in spring that we would meet again in fall after the publication of the summer economic forecast, when a better overview of the state's options for drawing up the new year's budget has emerged," he added.

At the meeting, it was noted that restoring local governments' revenue base to pre-economic crisis levels was very important.

"Looking at the big picture, we have already addressed the concern, as the previous government decided to increase the municipal revenue base by €185 million over four years," Aab said. "However, it is important to continue to increase it within the framework of the new state budget strategy as well."

During negotiations on Friday, it was agreed that it is important to give local governments more freedom in using money allocated from the state budget.

"As a result of the administrative reform, we have significantly more capable local governments than before, which is why I consider it right to give them a greater role in organizing local life — including greater responsibility alongside a fatter wallet," the minister said.

Thus it is worth reviewing which tasks performed by the state thus far could be taken over by local governments in the future. To this end, representatives of the Ministry of Finance and local governments plan to launch discussions on possible changes in the coming months.

JLVL: Restore increase road maintenance budget

"During negotiations, we were divided on the financing model for maintaining local roads," JLVL deputy director Jan Trei said. The budget allocated to municipalities for road maintenance has been €29 million for the last eight years. The situation with local and gravel roads, however, requires significant improvement.

"The volume of resources allocated to local roads thus far has been insufficient, and is unfair compared to the amounts allocated to national roads," Trei continued. "Local roads make up 40.6 percent of all Estonian roads. In 2008, before the crisis, €40,456,074 was allocated from the state budget for the maintenance of local roads, which was significantly reduced in the following years. We asked for the level of resources allocated for road maintenance to be restored and increased in 2020."

Talks on increasing the road maintenance budget will be returned to within the framework of budget strategy talks next spring.

Members of the government committee led by Aab include representatives of the Ministry of Education and Research, Ministry of the Environment, Ministry of Economic Affairs and Communications, Ministry of Social Affairs, Ministry of Culture and Ministry of Finance. Budget negotiations are held annually.


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Editor: Aili Vahtla

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