Charging for Local Social Services: the Case of Estonia

Abstract

Increasing fiscal pressure has forced local governments to seek new sources of autonomous revenues for financing public services. Charging users of social services has been modest, but with an aging society and growing social costs, this option needs to be reconsidered. This paper combines the results of the survey on the application of user charges on local social services in Estonian local governments (LGs) with the official financial and population statistics in order to discover trends and explore factors determining the application of user charges in a small, unitary, highly centralised, post-soviet country. We conclude that user charges are mainly considered as a source of information and additional income to partially cover service costs – the possibilities of increased efficiency and demand control have remained undervalued. The probability of charging users of social services tends to be greater if the income level of inhabitants is higher, reflecting the ‘ability to pay’ principle. Charging users is more probable in the municipalities where the social costs are higher in volume or in proportion to the budget’s expenditures.