"The chancellor has analyzed the current State Budget Act (the so-called base law) and, together with the auditor general, explained that it does not ensure the preparation of the state budget in a way that allows members of the Riigikogu to make changes to the distribution of expenditures and revenues in the annual budget itself. According to the Constitution, the Riigikogu must have that ability. The 2026 budget certainly takes the Riigikogu's rights into account better than the 2021 budget did," said the Office of the Chancellor of Justice's communications chief, Janar Filippov, in response to ERR's inquiry.

The chancellor continues to hold that the base law of the state budget should be amended.

"Expenses prescribed in other laws must not, and indeed need not, be divided into programs or assigned arbitrary performance indicators. For example, family benefits must be paid according to the law — it is clear which institution is responsible and how it must be done," Filippov explained.

He added that a performance-based budget could reasonably be applied only where funding is not predetermined by law — where it would indeed make sense to show what goals the money is meant to achieve and to measure progress toward those goals.

The government's draft state budget for 2026 passed its first reading in the Riigikogu on Wednesday.

The main change compared with the 2025 state budget — which drew criticism from both the chancellor of justice and the auditor general — is that in the 2026 draft and its explanatory memorandum, the breakdown of expenditures for ministries and government agencies has been moved from an annex directly into the law itself. However, the draft has also become more voluminous and remains based on the performance model, in which expenditures are presented according to abstract fields of results, programs and program activities rather than by economic purpose. This continues to make the budget opaque.

Under the Constitution, the Riigikogu must, by law, establish the budget for all state revenues and expenditures each year. The Riigikogu authorizes the executive branch to spend and, when necessary, makes amendments itself.

Over the past decade, Estonia has gradually shifted from a cost-based budget to a performance-based one. The 2020 state budget was the first prepared fully according to the performance model.

The 2025 state budget was adopted by the Riigikogu with coalition votes, as usual, though unusually, two coalition members abstained — former finance minister Aivar Sõerd and former culture minister Signe Kivi.

Debate over the 2025 draft budget also largely centered on issues of clarity and transparency. Although Prime Minister Kristen Michal's (Reform) coalition agreement promises that the state budget must be clear and transparent, the 2025 budget offered even less clarity than earlier budgets prepared under the performance-based model.