Pursuant to the Constitution, the Riigikogu shall pass as a law the budget of all state revenue and expenditure for each year. The Government of the Republic shall submit a draft state budget to the Riigikogu not later than three months before the beginning of the budgetary year. The procedure of drawing up, adoption and implementation of the state budget has been established by the State Budget Act. The legislative proceeding of the draft state budget by the Riigikogu is conducted pursuant to the above-mentioned Act and the Riigikogu Rules of Procedure Act.

The state budget is drawn up for one budgetary year. It establishes, pursuant to the law, the revenue the state will receive and the expenditures allocated for the fulfilment of the duties of the state with the use of the revenue in the forthcoming budgetary year.

The draft state budget is deliberated by the Riigikogu at three readings. At the first reading, the Minister of Finance makes a report on general principles of the draft state budget and gives an overview of the condition of the Estonian economy and the main objectives of the Government of the Republic.

After the close of the first reading, members, standing committees and factions of the Riigikogu may submit motions to amend; the motions must conform to § 20 of the State Budget Act. The Finance Committee considers the motions to amend and introduces the accepted amendments into the draft budget. The Government of the Republic also gives its opinion about the motions to amend.

At the second reading, deliberation of the provisions takes place. After the close of the second reading and at the third reading of the draft state budget, only factions and standing committees of the Riigikogu may submit motions to amend.

The state budget shall be passed by a majority of votes in favour, i.e. more votes of the members of the Riigikogu shall be in favour of the adoption of the budget than against. The adopted state budget shall enter into force at the beginning of the budgetary year. If the Riigikogu has not passed the state budget within two months after the beginning of the budgetary year, the President of the Republic shall declare extraordinary elections to the Riigikogu.