Estonian parliament approves 2020 state budget

Photo: Arvo Meeks

The Estonian parliament passed the state budget bill for 2020 in the third and final reading on Wednesday. 

The bill that sets the volume of the state's expenditures at 11.6 billion euros and estimated income at 11.8 billion euros next year was passed in the 101-seat chamber by a vote of 55 to 44.

Compared with this year, expenses are to increase by approximately 240 million euros, while income is to rise by 760 million euros.

The 2020 budget bill is in a nominal balance, next year's structural deficit will be 0.7 percent of the gross domestic product (GDP), while the structural deficit will contract to 0.2 percent in 2021 and the budget will run a nominal surplus.

The tax burden will remain stable at 33.2 percent of GDP in the next two years and is estimated to decline to 32.7 percent of GDP in 2022.

The government sector's debt burden is to decrease in both euros as well as a share of GDP. While debt burden was 8.8 percent of GDP this year, the government sector's debt burden is to be 8 percent of GDP in 2020. In absolute sums, the government sector's debt burden is to decline from this year's 2.4 billion euros to 2.3 billion euros.

The average old-age pension in Estonia will rise by 45 euros next year, representing the biggest rise in pensions in 12 years. The amount of money earmarked by the government for the extraordinary pension hike is 20.8 million euros. The measure will rise the old-age pension for a person with 44 years spent in employment to 528 euros from the present 483 euros per month. For the payment of all categories of pensions taken together the state budget for 2020 allocates 1.98 billion euros.

The budget of the Health Insurance Fund will increase by almost 140 million euros, of which 115 million euros is a result of higher social tax receipts. The contribution paid into the budget of the Health Insurance Fund by the state on behalf of old-age pensioners not in employment will rise by almost 25 million euros.

Funding for research and development in the state budget will grow by almost 16 million euros compared with 2019. Financing of research grants and basic financing of research institutions will grow by 5.3 million euros. The state budget sets out 219.1 million euros for research and development activity, and financing for research in the state budget equals 0.75 percent of GDP.

Defense spending will grow to 615 million euros and remain on a level of at least 2 percent of GDP. That includes expenditures for the hosting of allies, which in 2020 will amount to approximately 10 million euros. It also includes additional defense investments in the amount of 20 million euros. Estonia will strengthen its military capability by means of large-scale equipment procurements. 

Additional money has been earmarked in the state budget for bigger salaries for teachers, social workers getting their pay from the state, workers in the fields of culture, sports and internal security. Seven million euros has been earmarked for increasing the pay of internal security workers, 2.2 million euros for people employed in the fields of culture and sport and one million euros for social workers. In addition, the state will continue providing municipalities with 15 million euros a year in total to enable keeping the average pay of kindergarten teachers on a par with the minimum pay of school teachers.

The incomes of Estonia's municipalities will surpass 2.3 billion euros next year, being almost double the figure for 2010. Rapid growth in the incomes of municipalities has happened both on the back of good inflow of tax revenue as well as the decision of the state to increase the amount going into the municipalities' equalization fund additionally by 185 million euros in 2018-2021.

During the third reading of the budget bill party groups and members of the Riigikogu filed proposals in the framework of regional investments concerning support for third sector and civil society projects, the sum total of which is 4.3 million euros. Additional money was allocated to local communities, kindergartens, schools, extracurricular activities of children, women's associations, congregations and volunteer organizations. 

The biggest change is related to national transitional aid for farmers, or top-up payments, which will rise by five million euros to 10.3 million euros in total in 2020.

From 2020, the state will have a new budget structure. Alongside the previous budget, which is described in terms of expenditure, the state budget will henceforth consist of programs led by ministers. This means that the government sets performance targets for the programs and, to achieve them, state authorities are to provide services of agreed quality, volume and cost.