You've seen dozens of Estonian state budgets drafted and there has been a major public debate about whether budgets should be activity-based or not. Is the 2026 budget any clearer to you than the 2025 one?

But why should it be clearer? The activity-based concept is also the basis for next year's budget. Yes, indeed, if you skim through the budget, of course, the same activity-based concept is being further developed. One observation is that the mass of indicators, performance metrics, has grown. There are more of them now, and the empty boxes that were there before have been filled with some kind of numerical value.

There are also technical changes. For example, the breakdown of ministry and government agency expenses, which was in an annex to this year's budget, is now included directly in the law. But otherwise, we're still dealing with the same activity-based concept, where expenditures are presented according to abstract outcome areas, programs and program activities. The effectiveness of the money allocated to these programs, activities and measures is supposed to be assessed and measured using performance indicators. But I must add right away that this does not mean the budget document or its explanatory memorandum matches the activity-based budget model as it exists in theory — far from it.

I also read through those performance indicators and some of them are downright absurd. For example, there's a program activity called "Strengthening Estonia's security environment," with metrics and target levels for 2026. It says that collective defense is defined in NATO's strategic documents as a core task. That's supposedly something we're putting state budget money toward. It's guaranteed in 2024, and it's guaranteed in 2026. Why would we even write something like that into the budget?

Exactly. And it's worth looking closer. The indicator you mentioned — I don't even know how to classify it. Some of these indicators fulfill themselves.

And with NATO, it's obvious that whether Estonia contributes €10 million or €100 million makes no difference at all. We've just written nonsense into the budget.

Yes, it's a self-fulfilling or completely pointless and unnecessary indicator. And that's the core of this issue: in theory, this program-based modeling of expenditures is meant to measure the effectiveness of how allocated funds are used. But in practice, it simply doesn't work out that way. The reality is something else entirely.

Take, for example, the Ministry of Finance's "Financially Savvy State" program. One of its subprograms is the implementation of fiscal policy, where the main component is interest payments. The indicator? "Payments made on time." That's been the same indicator for five years running. But think about it: if interest payments are not made on time, that means a state bond payment default. That has happened extremely rarely, most recently in Greece in 2014 at the height of the debt crisis, when institutions had to intervene. That's a sovereign default. That's a completely different situation. And yet it's listed as an indicator. Again, a meaningless metric.

Or another example: under the Ministry of the Interior there's a program on migration monitoring. The indicator is "average length of illegal stay in Estonia before a foreign national is apprehended." A hot topic now, as all of Europe is dealing with it, including us. The most recent figure for 2024 is 49 days. The indicator for next year's budget is 75 days. That's an increase. So the problem is that someone can stay here illegally, and before they're caught, two and a half months go by. In 2024, it was only a month and a half. What's the issue here? We don't get an answer by reading the explanatory memorandum. I checked that section — nothing. It just says such an indicator exists, it's somehow assessed and the migration authority deals with it. Let me start by asking, does this even have any measurable connection to the budget? Probably not.

Let me give another example from my own field. We know TV viewing and radio listening have been declining and will continue to decline. Yet there are indicators written into the budget measuring how much it decreases. That's entirely meaningless, because it will happen anyway. Even if ERR were given €1 billion, the trend wouldn't reverse. It's a natural process.

Exactly. But that's the problem. There's a huge number of such indicators, the values of which are explained with surveys. But someone has to conduct those surveys, which costs money. Developing and managing these programs is an enormous amount of work in itself. There are large IT costs in figuring out how expenses are allocated and divided among different programs. One civil servant's job can contribute to several programs. Then they calculate how much of that person's salary cost is allocated to one program, how much to another.

I'll give you another example from the Ministry of Education. There's a program on curriculum and property development. One indicator is "percentage of students who have not been repeatedly bullied during the past two weeks," broken down by grade level — fourth grade, eighth grade, 11th grade. The figures fluctuate. Sometimes they go one way, sometimes another. But what does this have to do with the budget? We can, of course, discuss bullying as a serious issue in other settings, like development plans or policy strategies. But why is it in the state budget?

All of these indicators together with the outcome areas illustrate the absurdity of the activity-based concept. The problem is that the indicators are artificial, self-fulfilling and often meaningless. We don't actually discuss fiscal policy on the basis of the activity-based concept. All decisions are made according to the classical budget model — expenditure- and resource-based. We talk about wage increases, for example, but even salaries don't fall directly into activity-based budget categories.

Another example: this year's budget has a chapter on "ministry expenditure cuts." By the way, I didn't find such a chapter in last year's budget, though I might be mistaken. But this year it's there. And what's being cut? Event costs, travel costs, energy costs, IT costs, rent costs. But these are not activity-based categories. They're classic expenditure categories. The whole thinking, discussion and decision-making process still happens within the framework and principles of the classical budget.

So should we just abandon this type of budgeting altogether? We could, for example, have 100 or 200 pages of tables showing how much money goes to each ministry compared to the previous year. That would give us a clear overview, including, say, of benefit payouts year to year. And from that we'd get a clear picture of Estonia's public finances.

Yes, we need a classical budget to see where the money really goes. Of course, the counterargument is that the Riigikogu doesn't need to know how much is spent on pens and paperclips. And indeed, it doesn't. But at least give us precision down to the nearest million euros. We don't even have that. A few years ago, there was debate about cutting the military orchestra. That line item wasn't in the budget, but its cost was over a million.

As a journalist, I'd even say it could be down to the level of pens. At least then we'd know how many pens were bought last year. We can't predict what will happen in 2026, but at least we'd have knowledge we could use to compare budgets.

Exactly. Comparability is a fundamental principle of the budget. The ability to compare how much was spent last year, how much will be spent next year, what the trends are, what the reasons are. That's the core principle.

Another argument from proponents of activity-based budgeting is that we now supposedly also have economic content. Take the "Financially Savvy State" program: it shows how much of the cost is labor and how much is operations.

But who is analyzing how much labor cost is in a given program? I haven't identified such people. Maybe some marginal value comes from seeing, say, for a certain agency — the Language Board, for example — total salary costs and total operating costs. Yes, those lines exist in the budget's explanatory memorandum. But operating costs themselves break down into many different categories: travel, training, events, rent, IT, vehicles and so on. Yet in the budget they're all lumped together. That's a transparency issue. From the programs, you cannot actually tell what the money is being spent on.

So your clear recommendation is that we should end this activity-based absurdity next year?

Yes, that's right. The Riigikogu should be presented with a classical budget — expenditure- and resource-based — that clearly shows where the money really goes. And as for the nearly 900 pages of activity-based material, let it exist. If there really are enthusiasts who want to analyze the indicators and try to find connections between program funding and indicator values, let them. I doubt there are many such enthusiasts in the Riigikogu, but perhaps somewhere there are.

There's also another aspect. A few years ago, the National Audit Office issued a rather devastating review of the five-year practice of activity-based budgeting. But enormous sums have been invested in building up this concept — not only the working hours of Ministry of Finance officials but also officials across all ministries. Every ministry has staff who must work on these models, allocate expenses and develop indicators. All of this costs a great deal.

So I ask: are expenditure cuts really so serious if we can afford such luxuries? I'd argue it's a major cost. I can't say how large, but a lot of money has gone into it. Throwing it away might not be wise.

Finally, the Constitution requires the Riigikogu to decide on revenues and expenditures. That means parliament must be able to read the budget and see where money is actually allocated and how it is actually spent.

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