Local government policy
The goal of the local government policy is to ensure a capable, functioning, and financially sustainable local level that provides high-quality services to its residents.
Read moreAdministration of place names
The main objective of the administration of place names is to ensure the harmonised use of place names in Estonia and the protection of culturally and historically valuable place names.
Read moreAdministrative reform 2015–2017
Overview of the implementation of the administrative reform in 2015–2017.
Read moreOverview of the Estonian local government system
There is a one-tier local government system in Estonia since reforming and restructuring of legal and financial basis for local self-government in 1993. All local government units – towns (Estonian linn) and rural municipalities (Estonian vald) – are equal in their legal status.
All local issues are resolved and regulated by local governments, which operate independently in accordance with law. Duties may be imposed on local governments only pursuant to law or by the agreement with the local government.
For decentralizing local power local authorities may form rural municipality or city districts with limited authority. The composition and operations of a rural municipality or city district is regulated by the statute of the local authority.
All local authorities are a part of a county. Local authorities can be members of a regional association of local authorities and national association municipalities (Association of Estonian Cities and Rural Municipalities).
In addition to the administrative units (town, rural municipality, county), the territory is also divided into settlement units: either villages, small towns or towns and cities without municipal status. Village is generally sparsely populated or densely populated rural area with less than 300 inhabitants. Small towns, towns and cities without municipal status are densely populated urban areas, of which small towns and towns generally have at least 300 inhabitants and cities at least 1000 inhabitants.
Publications
All local issues are organized by the representative body of a local authority – municipal council (Estonian volikogu) - which is elected by the residents of the rural municipality. Municipal council forms the executive body, i.e. municipal administration (Estonian valitsus).
Municipal Council
The council is elected at general, uniform and direct elections by secret ballot for a term of four years. Every Estonian citizen and citizen of the European Union who has the right to vote, who has attained 18 years of age by the last day for the registration of candidates and whose permanent residence is located in the corresponding rural municipality or city not later than on 1 August of an election year has the right to stand as a candidate. A person in active service in the Defence Forces or a person who has been convicted of a criminal offence by a court and is serving a prison sentence shall not stand as a candidate for election to a council.
The current council determines the number of members in the following council. The number depends on the population of a local authority, has to be an uneven number and at least 7.
Chairman (volikogu esimees) is the head of the council. The majority of the council elects the chairman of the council by secret ballot. The chairman organizes the work of the council, represents the council and fulfils other duties imposed by law or municipal statute. The position of chairman of the municipal council and deputy chairman may be remunerative based on a resolution of the municipal council and municipal council has the right to pay remuneration to its members for the participation in the work of the municipal council and compensation for expenses incurred in the performance of tasks assigned to them by the municipal council. Municipal council member can also be a member of the Riigikogu during his or her term of authority (in this case no remuneration will be paid).
The council may form both standing and ad hoc committees (alaline/ajutine komisjon) as determined in the statute of a local authority. Law prescribes only the formation of an audit committee (revisjonikomisjon) consisting of at least three members which verifies and assesses the activities of a rural municipality or city government. The chairmen of all committees and all members of the audit committee must be elected from among the council members. Formation and tasks of all other committees is to be regulated in municipal statute. Most local authorities foresee that half of the members of the committees have to be the members of the council (except the audit committee).
The management of the following issues is within the exclusive competence of the municipal council:
- decisions related to the budget, taxes, fees and duties, loans and municipal property;
- alteration of the boundaries of a local government, formation of municipal districts;
- approval of the statute and the development plan of the local government;
- decisions on general issues concerning municipal council and government (election of the chairman of the council and the mayor, confirmation of a new municipality, determination of the wage conditions for the council and government, formation and liquidation of municipal council committees etc).
The main function of municipal council is making the most important and strategical decisions about local matters in education, culture, social welfare or public health and direct the coordinated development of different aspects of local life.
Government
The government is appointed to office for the period of the authorities of the municipal council. The head of a government is the Mayor (linnapea, vallavanem), who is elected and released by council. The members of the government are confirmed to office on the proposal of the municipal mayor.
The government may include municipal employees or political appointees. Members of the council cannot be members of the government. While council sessions are generally open, government sessions are closed. Working procedures are determined by municipal statute.
Mayor
The mayor is also the head of the municipal administration. Usually the administration consists of departments and the office (kantselei). Organizational structure of municipal administration is determined by municipal council and differs in smaller and bigger municipalities, though every local authority has to have a position of the secretary of city or rural municipality secretary (linnasekretär, vallasekretär). The town or rural municipality is the head of the office. The main tasks of the secretary are to prepare the materials for the sessions of the government and the council. The secretary is also responsible for the regulations that are being passed to be legally correct. In Tallinn and in other larger local authorities the council office is separated from government office.
Towns and rural municipalities may be divided into municipal districts (linnaosa, osavald) with a limited authority. The general principles of the formation of districts is regulated by the Local Government Organisation Act. The formation of a municipal district is stated in the statute of the municipality which regulates also its competence, territory in which it operates and principles its assembly is formed and the chairman elected. As of the local government reform only the assembly is the obligatory body of district (instead of the administration which was obligatory before the reform).
The main tasks of local authorities are stated in the Local Government Organisation Act. According to the constitution functions may be placed to local authorities only by law or mutual agreement. All local issues are dealt with and resolved by local authorities unless assigned to other persons according to law.
The functions of a local authority include the organization of the provision of social services, the grant of social benefits and other social assistance, welfare services for the elderly, cultural, sports and youth work, housing and utilities, the supply of water and sewerage, the provision of public services and amenities, waste management, spatial planning, public transportation within the rural municipality or city, and the construction and maintenance of rural municipality roads or city streets unless such functions are assigned by law to other persons.
The functions of a local authority also include the organization of the maintenance of pre-school child care institutions, basic schools, secondary schools, hobby schools, libraries, community centres, museums, sports facilities, shelters, care homes, health care institutions and other local agencies if such agencies are in the ownership of the local authority. Payment of specified expenses of such agencies from the state budget or other sources may be prescribed by law.
Local authorities may arrange the provision of certain public services through the private sector (contracting out to private companies or non-profit organisations). They may also establish agencies or joint agencies with other local authorities for the provision of services and be a partner or shareholder in a company, found foundations or be a member of non-profit association.
If necessary some of the local services can also be used in another local authority while the local authority the person lives in has an obligation to compensate this.
Every city and rural municipality has to have a development plan and a budget strategy on the basis of which the development of different fields of life is integrated and coordinated.
A development plan has to stipulate at least the following:
- long-term directions in and needs for the development of the economic, social, cultural and natural environment and the health of the population;
- analysis of the current status of problems and opportunities by areas of activity;
- strategic objectives in areas of activity together with the effect to be achieved until the end of the development plan period;
- activities necessary for the performance of the strategic objectives until the end of the development plan period.
According to the Constitution of the Republic of Estonia, local governments have an independent budget, the bases and procedure for the formation of which are provided by law. The Ministry of Regional Affairs and Agriculture develops the principles of local government financing (incl. tax revenues, distribution of equalization and support funds) and financial management.
Estonian local government expenditure comprises 25% of the general government expenditure. The purpose of tax revenues and subsidies provided from the state budget is to ensure that local governments have sufficient resources to address local issues independently based on the law.
More than half of the total revenue of local governments is comprised of personal income tax paid by the residents of the local governments, part of which goes to the state. The land tax is allocated in full to local budgets. In addition to state taxes, the municipality may also impose local taxes on its territory (e.g., advertisement tax or parking fees), but their contribution to the local budget is small. Municipalities may also earn their revenue from the sale of services (e.g., kindergarten fees).
As tax revenues do not provide a sufficient revenue base, local governments receive support from the state budget. One type of support is the equalisation fund, which aims to help local governments with smaller revenues by supplementing their revenue base. The money of the equalisation fund comes entirely from the state budget. Another type of support is the support fund, which consists of sectoral support (e.g., support for teachers' labour costs, hobby group support, support for social services, road maintenance support, etc.). These funds are allocated according to relevant budget calculations. Project-based support is also provided from the state budget, for example, for investments (e.g., the European Union's structural funds). Local government budget issues are discussed between the government and the representatives of the national association of local governments.
The budget of Estonian local governments is independent, and the local government council approves the annual budget, which is prepared on an accrual basis. Local governments must have a development plan and budget strategy for at least the following four years. To ensure that the financial management of a local government is sustainable, the law prescribes limits to net debt and the requirement of balance between the income and expenses of operating activities. A loan can be taken to invest in the net debt limit.The limits apply both to the municipality itself and the divisions under its control.
The Ministry of Regional Affairs and Agriculture develops the financing (incl. equalisation and support fund division) and financial management principles of local authorities.
The main form of cooperation between local authorities and central government is the annual budget negotiation workgroups of the government committee established by the government and the delegation of the Local Government Associations Cooperation Assembly. The support allocated to local authorities, their cost base and matters concerning tax policy are discussed in the financial and tax policy workgroup formed by the Ministry of Regional Affairs and Agriculture.
Local governments shall provide the Ministry of Regional Affairs and Agriculture with information on the adopted budget, budget execution, and accounting. This information is published on the website Riigiraha.fin.ee.
Financial data about the government sector's activities
Local Government Finance Management ActProvides the principles of preparation, adoption, implementation and reporting of local government budgets
The purpose of the state supervision is to ensure the lawfulness and feasibility of municipal administrative procedures. External control is implemented by ministries, in some matters also by agencies and inspections and by Legal Chancellor (Ombudsman) and the State Audit Office.
Ministry of Justice exercises control over the lawfulness of local government administrative acts and procedures, Ministry of Finance over the lawfulness and justification of use of state assets. State supervision is carried out based on feasibility and purposefulness.
The Legal Chancellor carries out supervision over the legislation of local authorities for conformity with the Constitution and laws. The State Audit Office exercises control over the municipal use of state and municipal assets, allocations for specific purposes and subsidies granted from the state budget, funds allocated for the performance of state functions and funds of the European Union and performance of obligations to the EU thereof.
One of the most important and common forms of municipal co-operation is being a member of an association of local authorities, which operate according to the Local Government Associations Act, the Non-profit Organisations Act and other relevant laws. As of the local government administrative reform there is one national association (instead of two associations before the reform) and 14 regional associations (instead of 15 associations before the reform). Regional as well as national associations represent their members interests in relations with central authorities. Membership of an association is voluntary.
Currently there is one national association – Association of Estonian Cities and Rural Municipalities which was formed in 2018 by merging the activities of the Association of Estonian Cities (established in 1920) and Association of Estonian Rural Municipalities (established in 1921 and both re-established in 1990).
The objectives of a national association are through the joint activity of the local authorities:
- to foster the development of local government in general;
- to represent its members;
- to protect the common interests of its members;
- to promote co-operation between its members and to create possibilities for improved performance of the statutory functions for its members.
Until the formal consolidation on the activities of two national associations a joint organ, the Co-operation Assembly of Associations of Local Authorities (Omavalitsusliitude Koostöökogu) which was established in 1994 conduct negotiations with the Government of the Republic on behalf of both associations.
Regional associations perform local government functions on behalf of those local authorities where the council has decided that the functions should be performed jointly through the association (and the general meeting has decided should be performed jointly through the association) and also functions set by law.
According to the law, regional associations have to participate in the preparation process of national spatial plan and be involved in the management of public transport in the county where necessary.
The objectives of a county association are, through the joint activity of the local authorities in the county:
- to foster balanced and sustainable development of the county,
- to preserve and promote the cultural traditions of the county,
- to represent the county and the members of the association,
- to protect the common interests of its members,
- to promote co-operation between the local authorities in the county and
- to create possibilities for improved performance of the statutory functions of its members.
Last updated: 27.11.2025
