Financing of educational institutions depends on the ownership of the institution. There are state, municipal and private educational institutions. All expenses of state-owned schools are covered from the state budget (central government as school owner). Municipal educational institutions are financed from the local government budgets, but the central government allocates support therefore. In addition, support from legal persons in private law, income from paid services, etc. may be considered both in the case of state and municipal educational institutions. The contribution from the European Union Structural Funds to education is high.
Expenses of a private educational institution are covered by the management of the private educational institution and, in certain cases, support is allocated by a local government or the state. Pursuant to an amendment to the Private Schools Act, from 2018, the state pays operating expenses support to the owners of private schools to the extent of 100 percent of the average operating expenses of municipal schools.
The state budget covers also the expenses of state-commissioned student places of private vocational schools and private institutions of higher education. All private educational institutions are entitled to establish tuition fees, and it is established by the owner of the private school and they must not be amended during an academic year.
A vast majority of the children attending preschool child care institutions (95%) attend municipal child care institutions that represented 89% of the total number of child care institutions in the academic year 2021/22. The expenses of a municipal preschool child care institution are generally covered by the owner, the size of the parental contribution depends on the rates established by the local government. Parents pay the so-called place fee and for meals. Support for preschool child care institutions’ teachers' in-service training and for project-based investment expenses is allocated from the state budget. In addition, at a request of the local government, support is allocated for Estonian language training for children whose native language is other than Estonian. Most of the government sectors' preschool education expenditures (370.6 mln euros) are covered by local municipalities (data from 2020). In 2020, the government expenditure on preschool education as a share of GDP was 1.36% (1.31% in 2019).
Out of students of basic schools and upper secondary schools, 89% study in municipal schools; 6% study in private and 4% in state schools. 83% of schools are municipally owned, 6% are state schools and 11% are private schools (2021/22). The expenses of the schools are covered by the school managing body (i.e. generally local authority or, with private schools, legal person in private law), support from the state budget covering the labour and in-service training expenses of teachers and heads, and expenses of teaching and learning materials and school lunch of students to both municipal and private schools. Until 2015, support was granted also for investments. In addition, the state allocates money to support boarding school facilities. Out of the government sector’s general education expenditures (743.4 million euros), 47% is covered by local municipalities and 53% from the central government (data from 2020). In 2020, the government expenditure on general education as a share of GDP was 2.7%.
In 2021/22 school year, vocational education was offered by a total of 37 institutions, out of which 5 are professional higher education institutions and the rest are vocational schools. 26 VET institutions are state-owned, 4 are private and 2 municipal schools (school year 2021/22).
Up to 2018, the state-funded vocational schools to the extent of the study places commissioned by the state for formal vocational education. The school budget was developed by multiplying the number of state-commissioned student places by the basic cost of a student training place and curricula group coefficients. As of 2017, the basic cost rate was 1,665 euros. Additionally, coefficients were applied to different curricula groups and in case of special educational needs.
As of 1 January 2019, a new Vocational Educational Institutions Act entered into force, amending the terms and conditions for funding vocational educational institutions, and replacing the funding of vocational educational institutions through state-commissioned education by the allocation of activity support. Activity support is a support allocated to a school for the organisation of high-quality vocational training and implementation of the development plan.
An educational institution offering vocational education may also earn from economic activities (sale of goods and services during work practice), providing payable services related to the main activity of the school as well as use other funding sources. Therefore, all educational institutions offering vocational education can also admit students to payable student places.
To sum up, in 2021/22 study year, 86% of vocational students studied in state schools, 12% in municipal schools and 1% in private schools. The central government contribution represents the majority (92%) of the government expenditure on vocational education (105.6 mln euros), while that of local governments counts for 8% (the 2020 data). In 2020, the government expenditure on vocational education as a share of GDP was 0.4%.
In the academic year 2021/22, there were 18 schools that provided study pursuant to higher education curricula: 6 of these were public universities, 4 private institutions of professional higher education, 7 institutions of professional higher education and 1 private university.
The higher education schools are mainly financed from the state budget (activity support for covering study costs, administrative costs, investments, and targeted financing). Universities also earn revenue from the provision of services related to the main activities for a charge and from the research and development activities. Institutions of professional higher education are financed from the state budget.
In 2020, the government expenditure on higher education was 299.6 million euro. The government expenditure on higher education as a share of GDP was 1.1% in 2020.
An adult learner can acquire basic and general secondary education in the form of non-stationary studies that are provided free of charge (the expenses are covered by the local government and the central government similarly to the funding of general education). Vocational educational institutions offer possibilities for studying in the framework of state-commissioned education in both the form of school-based and workplace-based study. In higher education, part-time study is payable for learners. Work-related training is paid by the learner him- or herself, by his or her employer, or some courses are funded by the EU structural funds. Covering of the formal education expenses directly related to employment and service relationships is not regarded as fringe benefits, i.e., the employer does not have to pay fringe benefit tax on the formal education costs of an employee covered by the employer.
The responsibility for state-financed training is divided between three ministries: training courses for the unemployed are financed by the Ministry of Social Affairs; training courses in enterprises are financed by the Ministry of Economic Affairs and Communications and all the other training courses of the adult population are financed by the Ministry of Education and Research. For people employed in the sector of agriculture, limited resources for education and training support exist in the budget of the Ministry of Rural Affairs. Non-formal education is payable for learners but the Ministry of Education and Research supports the operation of non-formal education training centres from the state budget.
In 2009–2020, the Estonian government expenditure on education as a share of GDP was between 5.6% (in 2014 and 2006) and 7.2% (in 2009), while in 2020, it was 6.4%. According to the budget of 2021, expenses on education increased by 6.2% compared to 2020 (based on the budget, in 2021, the total education costs of the government sector amount to 1 877 million euros). According to Statistics Estonia, in 2020, the household spending on education was, on average, 53.4 million euros.