However, there is an intensive debate going on about decreasing the number of local government units as well as reviewing their functions and main principles of financing. For purposes of protecting joint interests and fulfilling joint tasks, municipalities and towns can work together or establish associations of local governments. Currently, there are 16 regional and three national associations of local governments in Estonia. National associations have a significant role in policy development and in the decision-making process concerning local government and the annual budget of the National Support Fund. According to the constitution, all local issues are managed and resolved autonomously by local authorities.
Local authorities have an independent budget.
Duties may be imposed on local authorities only pursuant to the law or through an agreement with them, and expenditures related to state duties which are imposed on a local government must be funded from the state budget. Only Estonian citizens may stand as candidates for local council elections. The council is headed by the chairman. The executive body of a local authority is set up and managed by the mayor or the head, who is elected by the local council for a three-year term. The local government budget procedure is provided in the Municipal and Town Budget Act, Local Taxes Act and the Act on Correlation between Municipal and Town Budgets and the State Budget.