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EACEA National Policies Platform:Eurydice
Early childhood and school education funding


3.Funding in education

3.1Early childhood and school education funding

Last update: 27 November 2023


Financing of the preschool childcare institutions aims at providing children with care and allowing them to acquire preschool education.

Preschool child care institutions are mostly municipally owned and they are therefore financed from the budget of the local government. Parents also participate in covering the costs. The central government allocates support for in-service training of preschool teachers and for Estonian language courses for children whose native language is other than Estonian. 

In 2021/22, there are 59 private preschools or 11% of the total number of preschool child care institutions; the rest are municipal preschool child care institutions. Local municipalities may support private preschools, for example, if a municipality or a city does not have its own preschool or there is a shortage of preschool places.

To reduce the shortage of preschool places, offering of childcare services has also been legalised. Local governments shall compensate for the use of childcare service pursuant to the established upper limit. Compensation for the use of childcare services can be applied only in case the service is purchased from a service provider holding an activity licence.

Financing of general education is based on the constitutional right of all learners to obtain general education. The state and the local governments are obliged to sustain a required number of educational institutions. With regard to the ownership, general education schools divide into state, municipal and private schools. The vast majority, 82% of general education schools are municipally owned, 7% are state schools and 11% are private schools (in 2021/22). The school’s expenses are covered by its owner: the expenses of state schools are covered from the budget of the Ministry of Education and Research, those of municipal schools from the local municipality’s budget and private schools’ expenses are covered by a legal person in private law. 

In order to guarantee the right to free general education to all students, support from the state budget on equal grounds is allocated to both municipal and private schools to cover the expenses related to teachers’ and heads’ salaries and in-service training, textbooks and study aids as well as the school lunch costs of the students and investment costs. In addition, the central government allocates finances to cover the expenses related to the boarding school facilities created at the school. The number of students and classes at schools form the basis of calculation of the support. Support is allocated to the owner of the school, i.e. in case of a municipal school, to local municipality who can decide the usage of the funds and their distribution between schools. A reasoned application of the rural municipality or city government of the place of residence of the student is the basis for the admission of the student to a place in the boarding school facilities.

All expenses that exceed the state budget support must be borne by the owner of the school. 

Generally, this part of expenses is constituted by schools’ operational costs. This may also be the case with teachers’ salaries if these are, for some reason, higher than the support from the state budget. The financing model is based on the curricular volume established for students of different ages and on the number of respective classes at school. At the same time, several optimisation opportunities are used when calculating state budget support that schools should be implementing in case of a very small number of students – e.g., the establishment of composite classes.

Out of 37 vocational educational institutions, 31 are state schools, 4 are private and 2 are municipal schools.  In addition, vocational training is carried out in 5 institutions of professional higher education, all of them being state schools (2021/22). The main financing source of the schools is the state budget – 98% of students of the educational institutions offering vocational education study in state-financed study places; the ratio of students in payable study places is thus negligible. Private vocational educational institutions are generally financed through the state budget only in exceptional cases if in some field the demand for specialists is greater than the supply. 

Vocational education is mainly financed for two reasons: to create opportunities for further studies for young people with basic education and for those without basic education, and to prepare the required labour force.

The analysis of labour market needs is carried out in cooperation with different institutions and partners, organisations and unions of employers and employees, also various ministries and authorities as well as representatives of county governments in order to take into account of the regional aspect.

Schools may also be financed from allocations from municipality or city budgets, payable services related to a school’s main activities as established in the school’s statute (the goods and services produced during work practice), and from funds received from foundations, targeted and project-based allowances and other sources. 

Financial Autonomy and Control

Providing preschool education is entirely the responsibility of local municipalities who may cooperate to this end with other municipalities or private preschools (enterprises) and also with parents. Local governments and the managers of private child care institutions enjoy complete financial autonomy and financial supervision is exercised pursuant to the procedure established at state level, i.e. with private child care institutions by audit companies (in cases prescribed by law) and with municipal child care institutions by a local government or the National Audit Office of Estonia (Riigikontroll).

The administration of general education schools is primarily the responsibility of their owner, i.e. generally a local municipality (in other cases a private enterprise or the state). The minimum rates of teachers’ salaries are established at the national level and owners of schools must guarantee payment of minimum salaries to teachers working full time. In addition, the school and local municipality must provide students with school lunch (both in basic school and upper secondary school) and free educational literature (workbooks, exc. in upper secondary school). Support from the state budget is allocated to all schools (incl. private schools) based on uniform principles. The support allocated from the state budget is for specific purposes; by way of exception, support can be used also for purposes other than initially intended (teaching materials).

Every local municipality is responsible for its children’s educational opportunities. If there is no school in a municipality or a city or if a school exists but some students prefer to study at a school of a different municipality or a city, offsetting with the other local government will be performed.  Such expenses are usually related with the maintenance of the school buildings and other general administrative costs, which are not covered by aid of training allocated by the central government.

The educational institutions offering vocational education have an extensive essential and procedural autonomy. In addition to the state-commissioned study places, educational institutions can also offer payable study places and trainings. Drawing up of draft budgets and fulfilment of the budget is guaranteed by the head who is responsible for the lawful use of finances to the authority that has appointed the head to the office and to the council.

The condition for financing of educational institutions offering vocational education as established by the state is the quality of study: the Ministry of Education and Research approves study places for a school only in case the school fulfils the preconditions for guaranteeing quality of study. A school must have qualified teachers; curricula must be based on the professional standards and national curricula and approved by employers; the environment of teaching and learning corresponding to the requirements of the curricula must be created.

In case of all schools (general education and vocational schools as well as the schools providing higher education), supervision over finances is exercised primarily by the manager of the school; in addition, supervision is exercised pursuant to the procedure established at state level – the supreme body exercising supervision over the use of public money is the National Audit Office of Estonia. Financial accounts of private educational institutions are supervised by audit companies (in cases prescribed by law).   

Fees within Public Education

In a preschool child care institution, the costs of children’s catering, the management costs of the preschool child care institution as well as remuneration of the staff and the costs of teaching aids may be partially covered by parents – as a so-called study place fee. Local governments shall establish the rate for the amount to be covered by parents, which may be differentiated according to the age of the child, the financial situation of the family, etc. There are also municipalities where parents do not have to pay at all for a study place. According to the law, the share of costs per child covered by a parent may not exceed 20% of the nationally established minimum salary.

Studying in state and municipal general education schools is free of charge.  But owner of a private school has the right to establish a tuition fee, the payment of which is established in the contract signed by the representative of a student and the school. It is not allowed to change the tuition fee during an academic year and it is generally forbidden to raise the tuition fee by more than 10% between academic years.

In educational institutions offering vocational education study in the framework of state-commissioned education on state-financed study places and in full-time study is free of charge for students. In addition to private schools, state schools can also provide paid training if such demand exists.  The size of tuition fees is approved by the school board for every academic year and the sum may differ according to schools and curricula. A nationally established restriction forbids raising of tuition fees during an academic year and by more than 10% between academic years.  

Financial Support for Learners' Families

Family Benefits

Since 2004, parental benefit is paid from the state budget until the child reaches 14 months of age and since 2008, until the child is 18 months old, in the amount of the parent's previous salary or, in case of parents who had not worked, in the amount of the minimum salary. It is aimed at compensating for the loss of income due to raising of a small child.

Families are paid child allowance for every child until the child attains 16 years of age (in case of children enrolled in daytime study, 19 years of age). The size of the allowance for the first and second child in a family is 60 euros and for the third and subsequent children 100 euros. One of the parents of each child of up to 3 years of age is paid child care allowance. If the family has, in addition to a child of up to 3 years of age, also other children between 3 to 8 years of age, or the family has three or more children; child care allowance is also paid for each child between 3 to 8 years of age. Child care allowance is not applicable to children born after 31 August 2019. In 2020–2022, the state shall, step-by-step, incorporate the released resources into a new parental benefit system.

In case of families with seven or more children, one of the parents receives monthly family benefit. A family in which there are at least three children who receive child allowance shall receive, in addition to the above, an allowance for families with many children. For families raising three to six children, the allowance amounts to 300 euros per month; for families with seven or more children, the allowance amounts to 400 euros per month.

An allowance of 50 euros per month is paid to children of single parents, conscripts and of persons in alternative service.

According to the State Family Benefits Act, families are subject to partial reimbursement of expenses relating to the care, and raising and education of children.

Local authorities offer support from their budget to financially less secured families in covering the cost of a child’s catering to the extent of 50 to 100 per cent of the daily cost of catering. Support from the state budget is allocated for covering the school lunch expenses of students acquiring basic education and since 01.01.2015, also of upper secondary school students.

Additionally, owners of schools can apply for aid for school milk and vegetables funded from the European Union food programme. 

Tax benefits

One resident parent or representative of a child or his or her carer who takes care of two or more underage children may discount from one’s tax period income an additional tax-free income per every child under 17 years of age starting from the second child.

A resident natural person has the right to deduct the training expenses of himself or herself or a child, grandchild, sister or brother of less than 26 years of age or, if no such training expenses are incurred, the training expenses of one permanent resident of Estonia of less than 26 years of age, from the income which the resident natural person receives during the period of taxation. 

Grace period and other benefits

Repayment of the student loan principal can be suspended until the child attains three years of age (provided that the other parent of the child has not already been given a grace period on the same basis), and also for the time of compulsory military service or study as a resident.

During the grace period, the state shall pay the interest on behalf of the borrower. For the use of the benefits, an application shall be submitted to the bank along with the document attesting the right to receive the benefit, i.e., child’s birth certificate, military unit statement.

In case the borrower is not capable of working or the borrower constantly takes care of a child with profound or severe disability, or if the borrower dies, the state shall repay the study loan in full. If the study loan is obtained after the borrower was declared incapacitated for work or after the borrower’s child was established to suffer from profound or severe disability, the state shall not repay the loan amount.

Financial Support for Families of Pupils with Special Educational Needs

Child care services for a child with severe or multiple disability are in certain cases financed from the state budget until the child reaches 18 years of age.

Students with disabilities and their families are offered support for covering additional expenses deriving from the disability:

  • disabled child support is paid monthly to a disabled child of up to 16 years of age for covering additional expenses deriving from the disability and for activities foreseen in the rehabilitation plan, the amount depending on the severity of the disability;
  • disabled parent support is paid monthly to a disabled parent or representative of a child who raises a child of up to 16 years of age or a child of up to 19 years of age who studies in basic school, upper secondary school or vocational school or receives formal vocational education in an institution of professional higher education;
  • study support is paid monthly to a non-working disabled student who studies in year 10-12 of upper secondary school, vocational education institution or higher education institution and who has study-related additional expenses due to one’s disability;
  • in-service training support is paid for partial reimbursement of actual training costs to working disabled people for work-related and formal training.

Children who study at schools for students with special needs, who live at the school’s boarding school facilities and whose home is located outside the city or municipality of the school, will be compensated for travel between home and school up to four times a month. The travel costs of those students who travel between home and school on daily basis will be compensated for one return trip per day.

Financial Support for Learners

In case of general education schools, a student-based support from the state budget is foreseen to all schools (including private schools) for expenses related to study aids. Basic school students are offered free textbooks, workbooks, exercise books and work sheets; upper secondary school students receive necessary textbooks. Writing and drawing aids are generally paid for by parents.

School lunch must be organised for students by the owner of the school. Support from the state budget is allocated for covering the school lunch expenses of students. 

The local municipalities of the place of residence of children must arrange the children’s transport to school and back home. With rural schools, free school buses are often organised or public transport tickets reimbursed.

In boarding school facilities of municipal and private schools, state supported places are created for children from families with difficulties in coping. Based on the number of students admitted to state supported places of boarding school facilities, targeted support is allocated from the state budget to cover the operating costs related to the boarding school facilities (catering, accommodation and personnel).

Support is allocated from the state budget to compensate for the transport allowance of students of state upper secondary schools and students with special educational needs as well as the students whose permanent place of residence is not in the same local government area as the educational institution.

Students of vocational schools receive a study allowance. Study allowance is divided into a basic allowance and a special allowance. The basic allowance is paid on the basis of the study results of the student and it can be applied for by the students in full-time study or the students studying on the basis of a full-time study curriculum which has state commissioned study places. The precondition is that the student may not have exceeded the standard period of study of the curriculum. In 2021, the amount of the basic allowance is to 60 euros. Study allowance may not be received during academic leave. From the special allowance fund allowances can be granted to the students who are in a difficult economic situation. The procedure for the use of the special allowance fund shall be approved by the board of the educational institution.

An Estonian citizen or a person staying in the Republic of Estonia on the basis of a long-term residence permit or permanent right of residence, the duration of whose studies according to the curriculum is at least 9 calendar months or more, if he or she is enrolled in full- or part time vocational training on the basis of secondary education, or is a student having acquired secondary education studying according to a curriculum of formal vocational education at an Estonian vocational educational institution or at an institution of professional higher education, or is studying abroad at an educational institution and in a form of study similar to those specified above. Study loan to pupils the length of whose studies according to a curriculum is six to nine calendar months shall be granted once per academic year to the extent of one-half of the maximum rate. In the academic year 2020/21, study loan is capped at 1,250 euros where the duration of the borrower’s studies based on the curriculum is six to eight calendar months, and 2,500 euros where the duration of the studies based on the curriculum is nine or more calendar months.

Training expenses are tax-exempt to permanent residents of Estonia, students can deduct these from their taxable income. The amount of deductible training expenses shall not exceed that of taxable income. Training expenses comprise documented costs of studying in an educational institution holding an education permit or in a similar institution abroad or in payable courses organised by these institutions. The interests of a study loan are also regarded as schooling costs (same as in case of higher education).

The state budget contains support for covering the school lunch expenses of students aged up to 20 years without secondary education enrolled in stationary studies according to pre-training curricula.

Students in full-time and daytime studies are compensated for the travel between the school and home to the extent of up to 100% of the ticket price. Students living in boarding school facilities or rented apartments are reimbursed the travel expenses to the educational institution and back to their permanent place of residence (up to two round trips per month) and also transport expenses for travelling to the permanent place of residence and back during national holidays and school holidays are covered. For students travelling every day to an educational institution and back to the permanent place of residence, transport expenses are covered to the extent of one return ticket per up to 40 travelling kilometres per day of study.

Private Education

The owner of a private educational institution has a separate budget for the institution which stands apart from the accounting of his or her other enterprises and businesses. Once in every six months, the headmaster (director) of the private school must present the school board with an overview of the school’s educational activities, economic situation and usage of funds received from tuition fees to the school board once in every six months as well as inform the board without delay of a significant deterioration of the school’s economic situation and of precepts made by a supervisory institution.

A private school may receive a grant from the state budget or a local government budget. Teachers' salaries and costs of acquiring teaching aids of private preschool child care institutions may be covered from the local government budget, other support or donations.  In general, local municipalities support private preschool child care institutions from their budget in the amount of the cost of a place in a municipal preschool.

Tuition fees

The terms and conditions for establishment of a private general education school’s tuition fees, conditions for granting exemptions and lower rates of tuition fees are prescribed in the statute of the private school. A contract is signed with every student (or his/her legal representative), laying down the size of the tuition fee and the terms and conditions of its payment and reimbursement. The size of tuition fees is established by the manager of the private education institution and must not be amended during an academic year. The amount of tuition fee may be increased by up to 10% between two academic years, unless a contract between a private school and a student prescribes otherwise. 

The students of private schools offering general education are guaranteed to receive the same state budget financed support as students of municipal and state schools – support is allocated for basic school students’ school lunches, textbooks, workbooks and exercise books and upper secondary school students’ textbooks.

Parents are allowed to deduct tuition fees of private schools from their taxable income. 

Offering of state commissioned education to private educational institutions providing vocational education is carried out on the same grounds as in case of municipal and state education institutions. Schools must have developed the relevant curricula, employ qualified teachers and have a study environment corresponding to the curriculum.