This article gives a survey of the process of local government reform from the perspective of the basic legislation which has regulated the process during the last seven years.
Restoration of the system of local government in Estonia after an interval of 40 years (counties and rural municipalities were abolished in 1950) was a major step in the development of a civil society and could only begin when the conditions of Soviet state order were becoming more liberalised. At that time, the possibilities for decentralisation of territorial government became possible and were expressed in the general concept of the Economic Autonomy of Estonia (IME) project and in the Principles of Economic Autonomy for Estonia Act of the Estonian SSR. The latter provided that the interests of the local population should have priority in the development of every region of the republic and that the initiative for change should come from them. The territorial administrative system of the Estonian SSR was to consist of county cities, townships and rural municipalities as the primary or lower level administrative units to be formed on the basis of and administratively subordinate to city, township and village soviets, and cities and counties of the republic as the secondary or higher level administrative units to be formed on the basis of cities and administrative districts subordinate to the republic. The Act prescribed that the local soviets of people’s deputies guided by the principles of the IME project were to function as local government authorities and manage the social and economic life in their respective territories. The Act provided the principle of local government budgetary autonomy and provided that the observance of resolutions passed within the competence of a local soviet of people’s deputies was compulsory for enterprises, institutions, organisations, officials and other persons in the territory of the local government. In order to commence economic activities or use natural resources, a person or institution had to obtain a permit from the local soviet of people’s deputies of the respective territory. The Act declared that the competence of local government authorities was to be provided for in Estonian SSR legislation concerning local government which also was to provide the procedure for formation and function of local executive bodies.
Guided by the general concept of the IME project and the Principles of Economic Autonomy for Estonia Act, the Estonian SSR Supreme Council passed the resolution of 8 August 1989 concerning administrative reform in the Estonian SSR. The resolution prescribed the administrative reform for the republic during 1990-1994, including the following:
1) decentralisation of power in the republic to the levels of local government, and a clear distinction between the functions of state and local government; and
2) reorganisation of territorial administrative structure.
The target date for commencement of administrative reform was established as 1990. The resolution foresaw as part of administrative reform, the criterion of a two-level administrative structure, single and uniform for all of the Estonian SSR. The primary administrative level was to consist of local government rural municipalities, townships and cities, and the higher administrative level was to consist of counties and cities of the republic as regional levels of local and state government.
The obligation to implement administrative reform in the respective territories was imposed on the local government representative bodies (councils). The resolution of 8 August 1989 also provided that the local government representative bodies were to revise and adjust the borders of the primary level administrative units considering the opinion of the local population, with any changes to be approved by the ESSR Supreme Council. A committee for the preparation of administrative reform was formed from the deputies to the Supreme Council.
8 August 1989. The Supreme Council passes the Local Soviet of People’s Deputies Election Act which provides the legal basis for the first democratic elections during the post-war period. The elections were held on 10 December 1989.
10 November 1989. The Supreme Council passes the Principles of Local Government Act of the ESSR (PLG). Under the conditions at the time, it was a piece of legislation of good quality which created a sound legal basis for restoration of the local government system. The PLG provides the concept of local governance: independent decision making and management of issues of local life by the local population directly or via relevant bodies within the legislative framework of the ESSR and proceeding from the interests of the population and development peculiarities of each administrative territory. The PLG establishes that local government is based on the administrative territorial division of Estonia. A primary level local government is, in accordance with rural municipality and city legislation, to ensure solutions to matters of local importance concerning independent economic activities, bearing in mind the interests of the population. A higher level local government is, in accordance with county and city legislation and proceeding from the interests of the population and state regional policy, to ensure a balanced development of all spheres of life, and implementation of and supervision over adherence to legislation of the Estonian SSR in the respective administrative territory. Rural municipality, city and county legislation was never passed however.
Under the PLG, the population exercises local governance:
1) directly through a referendum, a public meeting, or by way of a citizen’s initiative either via various associations or individually; or
2) through local government bodies.
The PLG also provides the main principles of local government. These include:
1) self-management, self decision-making and self-administration proceeding from the interests of the population of the given administrative unit, development peculiarities in its territory and local possibilities;
2) legality and law enforcement;
3) the contractual character of relations between local government bodies of various local governments, and between local government bodies and other legal and natural persons;
4) regional economic autonomy; and
5) consideration of public opinion by and transparency of the activities of local government bodies and their accountability to the population.
The local government bodies are:
1) a council,
2) a rural municipality mayor, township mayor, county governor and city mayor;
3) a rural municipality, township, county and city government; and
4) an audit committee.
A council elects the council chair and deputy chair from among its members by secret ballot. The chair of a rural municipality, township or city council is, respectively, the rural municipality, township or city mayor. Councils nominate their respective county governors and mayors of cities of the republic. County governors and mayors of cities of the republic cannot be members of the councils. The law permits a primary level council to form a council consisting of village, hamlet, township and city district managers, and a higher level council to form a council consisting of rural municipality, township and city district mangers and city mayors, which are both consultative bodies.
During the term of authority of a council, the government acts as a collective executive body which is appointed to office by the council on the proposal from the manager or the mayor. The members of the government are rural municipality or township mayors, the county governor or the city mayor, his or her assistants and members of the government (advisers). The rural municipality, township or city secretary is a member of the government due to his or her office. Government members, except rural municipality, township or city mayors, cannot be members of the respective council.
The PLG provides that a council and a government have the rights of a legal person. Local government bodies are independent within the limits of their jurisdiction and may, by agreement, delegate the right of decision-making in matters within their competence to bodies of other levels of the administrative system, together with the resources necessary for the fulfilment of such decisions. The PLG lists nine functions within the jurisdiction of local government bodies and eighteen functions within the exclusive jurisdiction of a council of a primary level local government. The jurisdiction of town councils of county and cities of the republic is stated in the following general words:
“A council of a county city or a city of the republic has jurisdiction for independent management of the spheres of life where the common interests of the population of several administrative units and state management are interwoven, or the management of which is delegated to the council on the basis of contracts concluded with bodies of primary level local government.”
A council is permitted to form a management board for co-ordination of its work consisting of the chair of the council and representatives of social organisations and social movements represented in the council.
A county governor or mayor of a city of the republic as the leader of the respective government is responsible before the council for fulfilment of the resolutions of the council, for implementing state policies and for law enforcement in the respective county or city and is, in these areas, responsible before the Supreme Council and the Government of the Republic. He or she also has the right to participate in the work of the Government of the Republic with an advisory right to vote.
The Supreme Council is to approve the nomination of county governors and mayors of cities of the republic not later than within one month after their nomination by the respective councils. If the Supreme Council does not approve a candidate, the council must nominate a new county governor or city mayor within two weeks after the resolution of the Supreme Council. If the candidate is not approved a second time, the Supreme Council itself resolves the matter.
Pursuant to the PLG, a rural municipality, township or city council may, based on the initiative of the local population, divide rural municipalities, townships or cities into districts which are local government sub-units in the given administrative territory.
The PLG also provides the principle of municipal ownership as the basis for the economic activities of a local government. It applies to property transferred pursuant to procedure provided by law to a local government by the state and by municipal enterprises, institutions and organisations established by local government bodies, and also to other property, including budgetary and non-budgetary funds. A local government must have its own independent budget.
The PLG provides legal guarantees to local governments concerning state regulation of local government, modification of borders and names of administrative units, formation of new and abolishment of administrative units, effectiveness of local governance, and administration of local government bodies.
Pursuant to the PLG, the procedure for development of a local government regional management system during the initial stages of administrative reform is to be regulated in accordance with the relevant resolutions of the Supreme Council, the decree of the Presidium of the Supreme Council concerning creation of a primary level local government administrative system and other legislation. The higher level local administrative units fulfil the functions of the primary level local administrative units until legal recognition of the latter pursuant to valid procedure.
Certainly the PLG is not free of contradictions. Of these, the insufficient legal regulation of relations between representative and executive bodies, and the double subordination of county governors and mayors of cities of the republic to both the council and the Government of the Republic which created opportunities for political manoeuvring, serve as examples.
17 November 1989. The ESSR Supreme Council passes the Budget Act of the Estonian SSR which provides for the state budget and local budgets as separate independent parts of the budget system of the republic, regulation of revenue and expenditure of local budgets, and other issues relating to local budgets.
6 December 1989. The Presidium of the ESSR Supreme Council passes the decree concerning creation of the local government administrative system. The decree fixes the principles for implementation of administrative reform. As of 1 January 1990, the former districts are renamed as counties, and the cities subordinate to the republic are renamed as cities of the republic. The procedure for formation of primary level local government units is established. The soviets of people’s deputies of villages, townships and cities subordinated to a district are to submit their by-laws and plans for the socio-economic development of their respective rural municipalities, townships or cities to the expert committee of the Presidium of the ESSR Supreme Council. Based on the opinion of the expert committee, the Presidium of the Supreme Council approves the status of the local government of a rural municipality, township or city which then obtains the rights of a local government administrative unit as of the date of adoption of the corresponding resolution. In retrospect, the procedure for granting status to local governments contained in the decree of 6 December 1989 may, as a whole, be assessed as positive.
28 December 1989. The taxation Act of the ESSR is passed. The Taxation Act establishes the revenue of the state budget, local government units and state specific-purpose foundations from taxes and state fees. The Act provides that a local budget receives, according to the local tax rates, the income tax of enterprises, value added tax, natural resources tax, investment tax and capital tax. The land tax, transport vehicle tax, income tax of individuals, activity licence tax, performance permit tax and state fees are to be paid exclusively to the local budget. The Act does not differentiate between different local government levels provided for by specific tax legislation. Misunderstandings and conflicts between the Supreme Council and the Government concerning who is to specify the taxes lead to amendment of the Taxation Act on 28 March 1991. The amendments specify the types of taxes to be levied by the Supreme Council and by the Government. The Taxation Act grants a local government the right to levy additional taxes within the limits established by the Government of the Republic, in addition to those provided for in the Act.
22 January 1990. The Presidium of the Supreme Council passes the decree concerning the status of local government senior employees (chair and deputy chair of the council, county governor, mayor and rural municipality, township or city secretary) which establishes their temporary status and specifies certain issues of local government administration relating thereto.
1 March 1990. By regulation, the Government of the Republic repeals the Regulation of 17 August 1940 concerning the abolishment of the Union of Rural Local Governments and the Union of Estonian Cities.
7 March 1990. The Presidium of the Supreme Council passes the resolution concerning the formation of an expert committee for issues of administrative reform.
22 June 1990. The Government of the Republic of Estonia passes the regulation concerning creation of the primary level local government administrative system. The aim of the regulation is to expedite the course of administrative reform and to facilitate the development of primary level local government units which have an independent budget, municipal property, the right to impose local taxes and regulate enterprise, and make decisions in matters of legal order, public utilities and use of natural resources.
The resolution was a remarkable contribution to the development process of the local government system. It provided specific tasks to be performed by fixed deadlines for county and city of the republic governments and for several ministries concerning among other things supervision of preparation for local government status by city, township and village soviets, access to information, and determination of a procedure for formation of local government budgets. In the opinion of S. Mäeltsemees, the chair of the administrative reform expert committee of the Presidium of the Supreme Council at the time, it was due to this resolution that the first local government units (rural municipality of Muhu and city of Kuressaare) could be restored in September of 1990.
5 July 1990. The Government of the Republic of Estonia passes the regulation concerning the approval of by-laws of a municipal enterprise. By-laws define a municipal enterprise as an economic unit engaged in enterprise, as a legal person operating in all areas of activity not forbidden in the Republic of Estonia and whose supervisory body is the local government executive body.
17 January 1991. The Government of the Republic of Estonia passes the regulation concerning the temporary procedure for administration and granting the right to use the natural environment and natural resources being transferred into the jurisdiction of executive bodies of primary level local government administrative units.
11 February 1991. The Government of the Republic of Estonia passes the regulation concerning the formation of the Administrative Reform Committee of the Government of the Republic of Estonia.
14 March 1991. The Government of the Republic of Estonia passes the regulation concerning the regional political division of the territory of the republic and regional tax incentives and their granting procedure. The Government considered it necessary to grant tax incentives to enterprises depending on the location of operations of the enterprise according to the “Zones of rural municipalities and village soviets of the Republic of Estonia for 1991" and to enterprises located and operating in certain towns or townships.
Also at this time it was decided to form a Regional Policy Committee of the Republic of Estonia.
18 April 1991. The Presidium of the Supreme Council passes the resolution concerning the implementation of §§ 18–20 of the decree of the Presidium of the ESSR Supreme Council concerning the status of local government senior employees of 22 January 1990.
14 June 1991. The Government of the Republic of Estonia approves the by-laws of the Administrative Reform Committee. The committee is an Estonian Government body whose principle tasks are defined as the improvement of state management of administrative reform, analysis and solution of issues, preparation of proposals relating to the activities and structure of state government bodies, the restoration of the local government system, and co-ordination of activities of state government and local government bodies and their associations.
11 July 1991. The Presidium of the Supreme Council of the Republic of Estonia passes a decree concerning standardisation of terms and titles of local government, and a resolution of the same date establishing the precise procedure of acceptance, registration and review of by-laws and development plans of the city, township and village soviets who apply for local government status. Pursuant to the resolution, by-laws and development plans must be reviewed by the corresponding higher level local government councils or governments before their submission to the expert committee. However, the negative opinion of or refusal to give an opinion by a higher level council or government does not exclude review of an application by the expert committee or the Presidium of the Supreme Council.
16 July 1991. The Government of the Republic of Estonia passes the regulation concerning the activities of ministries of the Republic, state boards and local government bodies in the implementation of administrative reform. The aim of the regulation is to ensure the restoration of the local government system, improve state management of administrative reform, co-ordinate the activities of state government and local government bodies and to specify more clearly their respective functions and jurisdictions. The regulation sets out specific tasks to be fulfilled by the Administrative Reform Committee of the Government of the Republic (e.g. to formulate in co-operation with the unions of local government proposals for a feedback information system for monitoring the course of administrative reform and regional policy measures in local government units by 1 January 1992), by the Ministry of Justice (e.g. to make proposals concerning improvements and amendments to legislation concerning local government by 1 November 1991), by the Ministry of Finance (e.g. to analyse in co-operation with the Ministry of Economic Affairs and the State Chancellery the structure, division of functions and funds for salaries of local government bodies and their conformity with the primary level local government structures being created, and to make proposals for necessary amendments) and so on.
20 August 1991. The Supreme Council of the Republic of Estonia passes the historic resolution on Estonian state independence. The resolution proclaims Estonian state independence and seeks the restoration of diplomatic relations of the Republic of Estonia. It also prescribes that a Constitutional Assembly be formed to prepare and submit to a referendum the Constitution of Estonia, and that elections for parliament be held in 1992 pursuant to the new Constitution.
27 September 1991. The Government of the Republic of Estonia approves the procedure for municipalization of state assets which regulates the transfer of assets from state ownership into municipal ownership pursuant to the Principles of Ownership Reform Act of the Republic of Estonia.
8 October 1991. The Government of the Republic of Estonia passes the regulation concerning the procedure for levying local taxes. Pursuant to the regulation, local government councils may levy local taxes (except on individuals), upon consent of the Ministry of Finance, if such taxes are not deducted from income subject to the income tax of individuals and if it does not result in the need for greater state budget funding due to a greater work load on the local bodies of the National Taxation Board.
31 October 1991. The Government of the Republic of Estonia issues the order concerning approval of instructions for drafting local government budgets for 1992.
1 November 1991. The Government of the Republic of Estonia passes the regulation concerning the measures for ensuring the course of administrative reform and socio-economic development in the city of Kohtla-Järve and Ida-Viru County.
26 November 1991. The Government of the Republic of Estonia passes the regulation concerning the measures to be implemented by local governments in order to ensure fulfilment of the first stage of administrative reform and to carry out land reform. The regulation imposes an obligation on county governments to ensure in co-operation with village, township and city councils submission pursuant to established procedure of the required documentation necessary for recognition of local government status; proposes to the Presidium of the Supreme Council to amend the procedure for review of documentation submitted for recognition of local government status of primary level administrative units; and provides the principle that it is unreasonable to form new administrative units and abolish existing ones before recognition of local government status in a county and before the corresponding local government bodies have commenced their activities. The regulation also prescribes that the Administrative Reform Committee of the Government of the Republic, the Ministry of Economic Affairs and other relevant ministries, together with the expert committee for administrative reform of the Presidium of the Supreme Council, the Union of Estonian Cities, the Union of Rural Local Government, the Union Establishing Estonian Rural Municipalities and other relevant institutions and organisations are to determine the main directions for local government related research and development work for 1992. The establishment of a foundation affiliated with the Administrative Reform Committee of the Government of the Republic is also prescribed, with the aim to facilitate local government related training and provision of state funding for research.
4 March 1992. The Government of the Republic of Estonia approves the procedure for transfer of land without charge from state ownership into the municipal ownership of local governments pursuant to the Land Reform Act of the Republic of Estonia and for retention in municipal ownership of land which is not subject to restitution or privatisation under the Land Reform Act.
27 March 1992. By regulation, the Government of the Republic of Estonia repeals the regulation of 11 February 1991 concerning the formation of the Administrative Reform Committee of the Government of the Republic of Estonia and the regulation of 14 June 1991 concerning approval of the by-laws of the Administrative Reform Committee of the Government of the Republic of Estonia.
28 June 1992. By referendum, the Estonian population adopts the Constitution of the Republic of Estonia on the basis of § 1 of the Constitution which entered into force in 1938. The Constitution is the supreme legal basis of the current local government system. The provisions of the Constitution are also the basis for drafting other legislation regulating local government. As an analysis of the provisions of the Constitution would be beyond the scope of this article, only a list of the provisions are provided.
The entire Chapter XIV of the Constitution is devoted to local government. It states:
§ 154. All local issues shall be resolved and managed by local governments, which shall operate independently pursuant to law.
Duties may be imposed on a local government only pursuant to law or by agreement with the local government. Expenditure related to duties of the state imposed by law on a local government shall be funded from the state budget.
§ 155. The units of local government are rural municipalities and towns. Other units of local government may be formed on the bases of and pursuant to procedure provided by law.
§ 156. The representative body of a local government is the council which shall be elected in free elections for a term of three years. The elections shall be general, uniform and direct. Voting shall be secret.
In elections to local government councils, persons who reside permanently in the territory of the local government and have attained eighteen years of age have the right to vote, under conditions prescribed by law.
§ 157. A local government shall have an independent budget for which the bases and procedure for drafting shall be provided by law.
A local government has the right, on the basis of law, to levy and collect taxes, and to impose duties.
§ 158. The boundaries of local government units shall not be altered without considering the opinion of the local governments concerned.
§ 159. A local government has the right to form unions and joint agencies with other local governments.
§ 160. The administration of local governments and the supervision of their activities shall be provided by law.
In addition to Chapter XIV, local government is also mentioned in the following sections of the Constitution: 30, 42, 44, 45, 46, 51, 52, 79, 104, 131, 133, 139, 142 and 143.
13 August 1992. The Supreme Council passes the resolution concerning establishment of the procedure for and conditions of privatisation of state and municipal assets. The procedure regulates privatisation of state and municipal assets pursuant to the Principles of Ownership Reform Act in cases where the value of the object being privatised is more than 600 000 kroons.
4 September 1992. The Government of the Republic of Estonia passes the regulation concerning the procedure for municipalization of state assets.
9 December 1992. The Riigikogu passes the resolution concerning the administrative units without local government status. The resolution provides, among other things, that in order to ensure the continuation of administrative reform, the Government of the Republic has the right to grant, after having heard the opinion of the expert committee affiliated with the Presidium of the Supreme Council, local government status to primary level administrative units not having such status. Such primary level administrative units are required to submit the documentation necessary for applying for local government status to the expert committee by 30 December 1992.
17 February 1993. The Riigikogu passes resolutions on the proposal to the Government of the Republic to initiate a bill for the draft Procedure for Change of Name of Administrative Units Act and on the proposal to the Government of the Republic to initiate a bill for the draft Procedure for Formation of Administrative Units Act.
5 May 1993. The Riigikogu passes the Use of Money Received from Privatisation of State and Municipal Assets Act.
12 May 1993. The Riigikogu passes the resolution on drafting legislation concerning local government. According to the resolution, the Riigikogu, in drafting legislation concerning local government, must proceed from the principle that local administration may only be organised in rural municipalities and towns where the respective councils are elected in general, uniform and direct elections. At the county level, the formation of the county council as the delegated representative body of the county’s local governments is prescribed. The resolution provides that state administration within a county is conducted through the county government.
19 May 1993. The Riigikogu passes the Local Government Council Election Act.
27 May 1993. The Government of the Republic approves the articles of association of the Federation of Unions of Estonian Local Governments.
2 June 1993. The Riigikogu passes the Local Government Administration Act (LGAA). To date, the Act has been amended 13 times and some of the amendments are discussed below. As the LGAA is a major piece of legislation specifying the tasks, responsibility and administration of local government, mutual relations between local governments and their relations with state bodies, some of its provisions are reviewed herein more closely.
The LGAA provides, in accordance with the Constitution, that local governance must be effected in the form of a rural municipality or city (§ 2). Thus, the Act does not consider townships, cities of the republic and counties as local government units. Section 68 of the LGAA provides that as of the entry into force of the Act, a township obtains the status of a rural municipality and a city of the republic obtains the status of a city.
Of the principles of local government, the provision of public services under the most favourable conditions should be noted. Only councils and governments are regarded as local government bodies in the LGAA. The LGAA does not contain the quorum requirement for a council session which was provided for in the Principles of Local Government Act of the ESSR. As for the tasks and competence of local governments, they have the right to decide and administer the issues of local life which have not been placed in the competence of some other level of government by law (voluntarily assumed functions: clause 6 (3) 2)). Titles of legislation issued by local government bodies are brought into concordance with the following principles of administration theory: a council and a government have the right to issue regulations as legislation of general application; a council has the right to pass resolutions as legislation of specific application; and a government has the right to issue orders (§ 7). Each local government unit has its by-laws and a development plan (§§ 8, 9). In practice up to this time, cities of the republic had not had by-laws. Since rural municipalities and cities are persons in public law pursuant to the Act (§ 10), local government bodies, the structural units thereof and local government institutions do not have the rights of a legal person.
The LGAA provides for the institution of a county council which is to act as a county governor’s advisory body to assist in achieving concordance of county-wide matters and consists of representatives of all local government units of the county. The LGAA provides for the right of local governments to establish joint institutions (§ 12) and to participate in international organisations (§ 13). The Act lists the circumstances under which the powers of a council member are prematurely terminated or suspended (§§ 18, 19) and regulates the rights and duties of an alternate member of a council. The LGAA separates the offices of rural municipality or city mayor and council chair. It provides that resolutions concerning levying local taxes and changing tax rates can only enter into force together with the entry into force of the budget or a budget amendment (§ 36). It prohibits a rural municipality or city from granting or securing loans. However, the amendment of 11 October 1994 provides an exception for granting study loans within the limits of the amount prescribed for that purpose in the city or rural municipality budget. The LGAA regulates in greater detail the formation and administration of local government and city districts, and co-operation between local governments.
The Act provides the procedure for contesting council and government legislation. Under the procedure, everyone has the right to apply to a council or government for an amendment or annulment of legislation issued by the council or government if the person’s rights are unlawfully restricted by such legislation. If the council or government does not amend or annul the legislation, the applicant has recourse to a court. The LGAA also changed the principles of supervision of local government activities concerning the hierarchic procedure for suspension, annulment and protesting of local government legislation. The Constitution and the Administration of Activities of the Legal Chancellor Act prescribe that supervision over local government legislation of general application is conducted by the Legal Chancellor. The Legal Chancellor also controls the constitutionality of such legislation. The County Administration Act and Local Government Administration Act Amendment Act of 23 November 1994 provides that a county governor has the right to supervise the legality of legislation issued by councils and governments of local governments. If a county governor finds that council or government legislation of specific application is unconstitutional, he or she may make a written proposal that the legislation of specific application or a provision thereof be brought into concordance with the Constitution, a specific Act or other legislation within fifteen days. If the council or government do not or refuse to do it within fifteen days after receipt of the written proposal of the county governor, the latter may file a protest in an administrative court pursuant to procedure provided for in the Administrative Court Procedure Code. The same amending Act grants a county governor the right, on the basis of §§ 14 and 160 of the Constitution and § 12 of the Administration of Activities of the Legal Chancellor Act, to apply to the Legal Chancellor for a review of the constitutionality of local government legislation of general application or a provision thereof. The Government of the Republic Act which entered into force on 1 January 1996 also contains this procedure.
A county governor has also the right to supervise, in the cases and to the extent provided by law, the legality and reasonableness of use of state assets which are in the use and possession of local governments. The LGAA establishes the requirement that by-laws of local governments must be approved or brought into concordance with law within three months after the date of appointment to office as a result of the local elections of the rural municipality or city government.
16 June 1993. The Riigikogu passes the Rural Municipality and City Budget Act which enters into force on 1 January 1994. The Act provides the procedure for preparing, passing and implementing budgets of rural municipalities and cities. According to the Act, an independent budget of a local government consists of all revenue and expenditure in the budget year (initially 1 April to 31 March and as of March 1995 from 1 January to 31 December) which must be balanced as a whole. Budget revenue consists of:
1) income from taxes;
2) income from municipal enterprises, agencies and assets;
3) monetary benefits and income intended for specific purposes;
4) loans and interest; and
5) other income.
Budget expenditure is assigned for:
1) fulfilment of obligations required by law;
2) fulfilment of obligations arising from agreements;
3) financing of other needs;
4) establishment of reserve capital within at least 1 per cent of the budget expenditure.
9 June 1993. The Riigikogu passes the Law of Property Act which provides for real rights, their content, creation and extinguishment, and the basis for other laws regulating real rights. According to the Law of Property Act, it may be provided by law that within the territory of a local government, the local government has a right of pre-emption to immovables.
16 June 1993. The Riigikogu passes the State Budget Act which provides that rural municipalities and city governments may in the case of a temporary shortfall apply for a short term loan from the state budget to maintain cash flow.
29 June 1993. The County Administration Act is passed and establishes the county as the administrative unit of state territory which is administered through county governments and other state government agencies.
27 July 1993. The Government of the Republic of Estonia passes the regulation on the procedure for transfer of land into municipal ownership.
10 August 1993. The Riigikogu passes the Interaction between a Rural Municipality or City Budget and the State Budget Act which determines the allocation of funds from the state budget to rural municipality and city budgets and provides the bases for balancing these budgets. The Act provides for allocation of funds from the state budget into local budgets for:
1) compensation for exemptions granted by law with respect to personal income tax and state living allowance;
2) supplementing budget revenue;
3) financing wages and social benefits and medical insurance payments of elementary, basic, secondary, evening and gymnasium school teachers, as well as family doctors;
4) financing capital investments;
5) financing expenditure associated with state obligations placed by law on a rural municipality or city; and
6) other cases prescribed by law.
According to the Act, the funds allocated from the state budget for supplementing income may be used for equalisation of budget revenue and for the establishment of rural municipality and city benefit funds. In order to equalise budget revenue, rural municipalities and cities are divided into 12 categories.
10 August 1993. The Riigikogu also adopts the resolution on renaming townships in the Republic of Estonia under which seven townships are granted city status. The Government of Estonia is granted the right until the announcement of results of local government council elections on 17 October 1993 to decide on granting city or rural municipality status to other townships on the bases of the council applications which are submitted by 16 August 1993.
On the basis of the 10 August 1993 resolution of the Riigikogu, the Government of the Republic passes the regulation of 25 August 1993 under which five townships are granted city status and eleven townships are granted rural municipality status. The townships granted rural municipality status are denied the right to use the words “township”, “township council” or “township government” in their operations and on their symbols.
25 August 1993. The Riigikogu passes the Administrative Structure of the Territory of the City of Kohtla-Järve Amendment Act which dissolves the Viivikonna township as an independent administrative unit.
27 October 1993. The Riigikogu passes the Law of Property Act Amendment Act which, along with later amendments provides that as of 1 December 1993 until 1 January 1999, according to §§ 256–275 of the Law of Property Act unless otherwise provided by law, the local government has an actual right of pre-emption to all immovables in all types of transfers on its administrative territory, except in a transfer by the state or local government, or in a transfer to a spouse, descendants, parents, sisters and brothers, and to their descendants, as well as in a sale by auction, or transfer to the state or a local government. The Act also provides that a local government is prohibited from encumbering an immovable owned by it with a pledge.
29 October 1993. By regulation, the Government of the Republic of Estonia reorganises the Local Government and Regional Development Department of the State Chancellery into the State Local Government and Regional Development Board in the Ministry of Internal Affairs. The Board’s duties among other things include:
1) drafting and analysis of state policy on local government and presentation of appropriate proposals to the Government of the Republic;
2) resolution of regional development issues and development of state regional policy guidelines and corresponding measures;
3) in co-operation with the Ministry of Finance, development and enhancement of state policy on local government budgets and an appropriate state benefit system;
4) resolution of issues in the administrative division of the state;
5) facilitation of the relationships between local government bodies and local government associations and the Government of the Republic; and
6) advising local government bodies and other such things.
The by-laws of the Board are approved with the 7 April 1994 regulation of the Minister of Internal Affairs. The Government of the Republic Act of 13 December 1995 does not provide for the State Local Government and Regional Development Board in the Ministry of Internal Affairs.
16 December 1993. The Riigikogu passes the Taxation Act which provides that local taxes must be established by the council on the basis of law. The taxes established by councils may not restrict the free movement of people, products or services. The collection of local taxes is managed by the rural municipality or city government.
15 February 1994. By regulation, the Government of the Republic of Estonia approves the procedure for issuing building permits on state and municipal land.
25 February 1994. The Government of the Republic approves that the county municipal assets which had been transferred into county government administration on the basis of the County Administration Act be transferred into state ownership. The county governments are required to give to local governments a list of assets not necessary for performance of state functions and by 31 March 1994 in concordance with appropriate ministers to present to the Government of the Republic proposals concerning property which should be transferred into local government ownership at their request.
9 March 1994. The Local Government of Paldiski Administration Act is passed.
31 March 1994. By regulation, the Government of the Republic of Estonia approves the procedure for allocating funds from rural municipality and city government benefit funds, and for transfer of funds from the state budget to rural municipalities and cities.
20 April 1994. The Riigikogu amends the Use of Money Received from Privatisation of State and Municipal Property Act.
27 June 1994. The Riigikogu passes the Response to Petitions Act which provides the procedure for review of memoranda and petitions whose procedure for review is not provided by other laws. According to the Act, local governments and their officials are required to register the memoranda and petitions addressed to them and to respond to them in writing within one month (if further investigation is needed within two months) after receipt of a petition or memorandum. With respect to the memoranda and petitions of members of the Riigikogu, local governments and their officials are required to respond within ten days (if further investigation is needed within one month) after their receipt.
21 September 1994. The Riigikogu passes the Local Taxes Act which provides for local taxes, their establishment procedure and requirements. The Act lists the following as local taxes: personal tax, local income tax, sales tax, boat tax, advertising and announcement tax, roads and streets closure tax, motor vehicle tax, keeping of domestic animals tax and entertainment tax. The collection of the above-mentioned taxes is managed by the rural municipality or city government who may for collection of local income tax and sales tax sign an agreement whereby the local division of the Tax Board with the consent of the central agency of the Tax Board undertakes collection of these taxes. The levying of local taxes is voluntary for a council but upon levying a tax, the tax rate established by law must be observed.
28 September 1994. The Riigikogu ratifies the European Charter of Local Self-Government which was signed in Strasbourg on 15 October 1985 and which entered into force on 1September 1988. The Republic of Estonia pledges to observe all the articles of the Charter in the territory under its jurisdiction. Undoubtedly, this is an important national decision whereby the Estonian state accepts the democratic principles of local self-government adopted by the member states of the Council of Europe.
23 November 1994. Districts are dissolved by the passing of the County Administration Act and Local Government Administration Act Amendment Act.
The session of the Government of the Republic on 13 December 1994 approves the Regional Policy Overview. According to the overview, the main functions of regional policy are the following:
1) development of conditions to enable healthy entrepreneurship in all regions of the state;
2) development of a state-wide communications infrastructure;
3) assistance of purposeful regional restructuring of the rural economy;
4) creation of an opportunity to succeed for developing areas;
5) guaranteeing of regional access to primary services such as basic education, primary medical care, communication, and others; and
6) creation of a national database for monitoring and directing regional development and making the corresponding information publicly accessible. The direction and co-ordination of state regional policy is a responsibility of the Ministry of Internal Affairs.
17 January 1995. The Government of the Republic approves the procedure for use of funds allocated for investments to rural municipality and city budgets.
19 January 1995. The Riigikogu passes the Anti-Corruption Act which provides the legal bases and principles for prevention of corruption and for bringing an action against persons connected with corruption. The Act also regulates the communication and public disclosure of economic interests of an official of a local government agency and of a non-staff public servant performing the duties of an official who is performing administrative, supervisory, review or management duties, and provides restrictions on employment and authority. According to the Anti-Corruption Act, the councils of local governments are to establish a specific procedure for the Act’s implementation within three months after its entry into force. The quality of the above-mentioned Act is low, contradictory and allows for multiple interpretations.
25 January 1995. The Riigikogu passes the Public Service Act (PSA) which enters into force on 1 January 1996. The Act regulates the state and local government public service and according to the Act, a council has within its competence the approval of the structure and staff of a local government agency, and of salary rates. According to the Act, public servants are divided into officials, support staff and non-staff public servants. Office titles of local government officials are established by the regulation of 20 February 1996 of the Government of the Republic. The PSA also regulates employment in the public service, the rights and duties of service of a public servant, incentives, promotion of officials and disciplinary action, evaluation of an official, suspension of a service relationship of an official, reserve of officials, length of service, and other such issues.
3 February 1995. By regulation, the Government of the Republic of Estonia approves the procedure for allocation of funds from the Benefit Fund to rural municipality and city budgets, and for transfer of funds from the state budget to rural municipalities and cities.
9 February 1995. The Local Government Administration Act Amendment Act among other things provides for a tax.
22 February 1995. The Riigikogu passes the Administrative Division of the Territory of Estonia Act which provides the procedure for administrative division of the territory of Estonia and for alteration of boundaries and change of name of administrative units. The Act establishes that the administrative division of the territory of Estonia into administrative units must also be the administrative division of the territory of Estonia. A county, rural municipality or city is an administrative unit. State administration is exercised in counties, which are divided into rural municipalities and cities in which local government is exercised. Districts may be formed in a rural municipality or city pursuant to procedure provided by law. A rural municipality may be divided into townships, villages and other territorial units.
The Act provides that the capital of the Republic of Estonia is Tallinn.
An alteration of boundaries or change of name of an administrative unit is prescribed in the following cases:
1) amendment of list of administrative units; or
2) transfer of a part of a territory from one administrative unit to another; or
3) adjustment of boundaries of an administrative unit due to land management needs.
An alteration of boundaries of rural municipalities or cities may be initiated by:
1) the Government of the Republic by making an appropriate proposal through the county governor to the respective council; and
2) a council desiring to alter rural municipality or city boundaries by presenting a formulated resolution to other appropriate councils. The resolution of a council requesting alteration of rural municipality or city boundaries is presented along with all the necessary documentation to the county governor who will present them along with his or her opinion to the Government of the Republic within two months after receipt of the resolution. Alteration of boundaries of an administrative unit is decided by the Government of the Republic. An adjustment of boundaries of an administrative unit due to land management needs is decided by a government agency authorised by the Government of the Republic.
A council will adopt a reasoned resolution in order to request a change of name of a rural municipality or city and presents it to the county governor who will present it along with his or her opinion to the Government of the Republic within one month after receipt of the resolution. Change of name of a rural municipality, city or county is in the competence of the Government of the Republic. In changing the name of a local government unit, the Government proceeds from local historical, geographical, natural and other conditions and takes into account the wishes of the residents of the rural municipality or city. The Act provides that administrative unit boundaries are to be demarcated pursuant to procedure established by the Government of the Republic.
16 March 1995. The Government of the Republic of Estonia approves the by-laws and membership of the State Regional Policy Council.
17 March 1995. The Commercial Code is passed amending the provisions of the LGAA concerning enterprises and provides that a rural municipality or city may found local government agencies which are not legal persons in order to offer services, and may be a shareholder in a commercial undertaking which is significant for the development of the rural municipality or city.
3 April 1995. By regulation, the Government of the Republic of Estonia approves the list of administrative units of the territory of Estonia.
4 April 1995. By regulation, the Government of the Republic of Estonia approves the list of local government units for which no consent of the local government or permission of the Government of Estonia is required for transfer of land to a legal person entered in the register in Estonia.
31 May 1995. The Riigikogu passes the State Procurement Act which specifies the procedure for state procurement and provides for the rights, obligations and liability for violation of the Act of persons connected with state procurement. State procurement is also the purchase of things or ordering of construction work or services if done from rural municipality or city funds, from funds received as revenue from the economic activity of a local government financed by the rural municipality or city budget or from funds received from a transfer of local government assets.
1 June 1995. By regulation, the Government of the Republic of Estonia establishes the procedure for expert analysis and concordance of a resolution on an application for change of name of an administrative unit of the territory of Estonia.
The request for change of name of a rural municipality is sent to the Place Name Committee of the Government of the Republic for expert analysis and for concordance by the Ministry of Internal Affairs. The Place Name Committee will present its opinion on the request for change of name of a rural municipality to the Ministry of Internal Affairs within one month of receipt of the request. The Minister of Internal Affairs will present a corresponding draft Government resolution to the Government of the Republic along with his or her opinion within one month of receipt of the opinion of the Place Name Committee. The name of a rural municipality is amended by a regulation of the Government of the Republic which also amends the list of administrative units of the territory of Estonia.
Also, according to the regulation of 1 June 1995, a rural municipality (township) may receive city status on the basis of a proposal formulated as a resolution of the rural municipality council. The proposal is made to a county governor who will forward it along with his or her opinion to the Ministry of Internal Affairs within one month after receipt of the resolution. The Minister of Internal Affairs will present a corresponding draft Government resolution to the Government of the Republic along with his or her opinion within one month after receipt of the proposal to this effect. City status will be granted by a regulation of the Government of the Republic which also amends the list of administrative units of the territory of Estonia.
13 December 1995. The Riigikogu passes a new Interaction between a Rural Municipality or City Budget and the State Budget Act which repeals the Act of the same name passed in 1993. The Act provides the specification principles for budget allocations made by the state. From the state budget, funds are allocated to budgets:
1) from state taxes on the basis of law;
2) for the Benefit Fund budget; and
3) for allocations intended for a specific purpose.
The allocations are used for the following:
1) performance of functions granted to a local government by the LGAA;
2) performance of other state functions granted to local government by law;
3) fulfilment of obligations arising from agreements between the Government of the Republic and a local government;
4) reimbursement of decreased revenue or an increase of expenditure due to state legislation or during a budgetary period after approval of the budget;
5) reimbursement of restrictions due to protection of objects in nature; and
6) other purposes specified during allocation. The Act establishes the principle that budgets of local governments do not participate in covering expenditure of the state budget.
3 April 1996. The Riigikogu passes the Use of Money Received from Privatisation Act. According to the Act, the administrator of privatisation must transfer money received from privatisation of municipal property less the debts associated with the privatised property and the expenses associated with privatisation of the property within 12 working days from receipt of the money into special accounts as follows:
1) 25 % to the local government ownership reform reserve fund;
2) 50 % to the local government dwelling fund; and
3) 25 % to the Compensation Fund.
The local government council will decide on the use of money received from the privatisation of property acquired with local budget funds after 1 January 1991 or returned to the local government.
16 May 1996. The Riigikogu passes the new Local Government Council Election Act.
29 May 1996. The Riigikogu passes the Administrative Division of the Territory of Estonia Act Amendment Act. The following items should be highlighted:
1) The purpose of the Administrative Division of the Territory of Estonia Act is to provide the bases and procedure for amendment of the administrative division of the territory of Estonia, for organisation of territorial administration and for alteration of boundaries and change of name of administrative units.
2) The Act introduces the term “territorial administration organisation” which means the division of the territory of Estonia into administrative units and the term “administrative unit” which means a unit based on administrative division, whose status, name and boundaries are determined by law and other legislation and within whose territory the state or local government administration is exercised. The legislator defines the administrative unit as idem per idem.
3) The term “territorial units within a rural municipality” (townships, villages, and other territorial units) is replaced by the term “population units” (settlements and districts). A rural municipality is divided into settlements which are villages, townships and cities within the municipality. A city as an administrative unit is also a settlement with the same boundaries. A city may be divided into districts. The type, name and division lines of population units are designated on the bases of and pursuant to procedure specified by the Government of the Republic on the basis of requests from rural municipality and city councils. Population units are the basis of accounting for state actions, such as the organisation of statistical and postal address systems, and maintenance of registries and cadastral registries.
The terminology used by the legislator poses the following questions:
1. What is a city within a rural municipality? Pursuant to the Constitution and the LGAA, rural municipalities and cities as local government units have equal legal rights. According to legislation presently in force, cities are not part of rural municipalities. If a city as a population unit is part of a rural municipality, then what are its functions? A population unit is not a local government unit, and thus it does not exercise local government functions. According to the Constitution, cities are local government units.
2. What is the relationship between a district and a city district?
3. If a rural municipality is divided into settlements which are villages, townships and cities as population units within the municipality, how can a city also be a settlement within its boundaries?
4. What are the division lines of a population unit? An important element in understanding the text of any law is the familiarity of words which is usually determined by the frequency of usage.
4) The Act introduces the concept of “amendment of territorial administration organisation” which involves the formation of one or more administrative units on the basis of one or more current administrative units. Alteration of administrative unit boundaries is associated with the following cases:
1) amendment of territorial administration organisation;
2) inclusion of a territorial unit from one administrative unit into another administrative unit; and
3) adjustment of boundaries of an administrative unit due to land management and building planning needs.
5) A new provision is introduced in the Act according to which the amendment of territorial administration organisation and of a rural municipality or city within a county authority as well as amendment of the status of a county are decided by the Riigikogu, and similarly with respect to rural municipalities and cities are decided by the Government of the Republic.
6) Amendment of territorial administration organisation is added to the provisions of the Act concerning alteration of rural municipality and city boundaries on the initiative of the Government of the Republic or a corresponding council. In this regard, the management of drafting potential amendments to the Constitution and other legislation associated with amendment of territorial administration organisation or alteration of boundaries in co-operation with appropriate government agencies and local government bodies is added to the functions of a county governor. The list of documents to be presented to a county governor by a council to amend territorial administration organisation and to alter boundaries on the initiative of the corresponding council is amended.
7) The provisions on implementation of territorial administration organisation are added to the Act.
The process of local government reform in Estonia in summary has, like in every European country, its certain peculiarities. These result from the fact that reform in Estonia started under occupation conditions and had as its objectives restoration of the local government system which had been destroyed by Soviet power and establishment of the foundations for restoration of independence. Local government reform was part of the reform of state authority by reorganising society on the bases of democratic principles. A. Almann writes in an article entitled “Local Government Reform: Reasons, Goals and Solutions to a Local Government Model”: “While continental Europe and especially France with its appropriate studies were role models in the decentralisation local government, the pre-war system was the guide in drafting the organisation of local government.” The procedure for granting local government status to primary level administrative units was also quite unique, in that it was foremost based on their own initiative and capability to get organised. Hence, administrative units who had local government status and those that did not, operated both simultaneously at the primary level. It is significant that local government reform in Estonia has not taken place in isolation, but has been continuously accompanied by other reforms such as ownership, land reform and others, in which local government reform has played an important implementing role.
To a degree, the speed of implementing local government reform was influenced by the fact that by the 10 September 1992 session of the Presidium of the Supreme Council of the Republic of Estonia where the process of local government reform was reviewed, 236 primary level administrative units out of 249 had been granted local government status. When the Government of the Republic approved the list of administrative units of the territory of Estonia on 3 April 1995, it listed altogether 45 cities and 209 rural municipalities. There were also 4 townships among the rural municipalities.
Local government reform has conceptually undergone many changes compared to the beginning of the process. When a resolution was passed in August 1989 to carry out local government reform, the goal was to democratise and decentralise power to local government authorities and to create a two-tiered local government system by 1994. The transformation of the local soviets of people’s deputies system into a two-tier local government system was principally and successfully completed by 1992. During the process of drafting and adopting the Constitution, the political forces which desired a single-tier local government came to the forefront, using terms such as decentralisation of power, exact definition of responsibility, reduction of bureaucracy and others.
The period following adoption of the Constitution has been a contradictory one for local governments. On the one hand, the legislator has by now established the basic legislation regulating local government. Undoubtedly, regulation is better than a legal vacuum. On the other hand, the provisions of established Acts have often been declaratory and contradictory. Many legal academic and local government circles have expressed their concern over the current direction of local government reform due to elements of state policy on local government which have departed from the initial goals of administrative reform. One example cited is the apparent decentralisation of power where the central authority imposes the performance of certain state functions on local governments without allocating sufficient monetary resources for those functions. In the resolution adopted on 11 February 1994 at the National Discussion Day of Local Governments, the local governments declared: “Amendments in legislation implemented under the auspices of Estonian administrative reform are not supported by a defined conceptual foundation ... The administrative system currently being designed is state focused in its orientation.”