Committee Chair: Mr. Ya’akov Efrati, Director of the Israel Lands Administration
Committee members : Dr. Adi Brender, Supervisor for the Public Sector, Bank of Israel
Rabbi Mordechai Karlitz, former mayor of Bnei Brak
Ms. Anat Keinan, CEO, Discount Mortgage Bank
Prof. Eran Razin, Department of Geography, Hebrew University Jerusalem
Mr. Binyamin Ricardo, former Deputy-Director of the Local Authority Administration, Ministry of the Interior
Mr. Giora Rosenthal, former Director-General of the Center for Local Government
Mr. Uzi Zwebner, Adviser in the field of local authorities
Research Assistant: Adv. Inbal Kaneka
Among local authorities in Israel, there are considerable differences in the quality of budgetary management and the provision of services to residents. As a rule, the changes in the legal and budgetary environment in which local authorities have operated since the middle of the 1990s have meant that the debt owed by the local authorities to the banks has stopped growing, and its size relative to the authorities’ income, the GDP or the population has even decreased – despite the fact that the general grants from the government to the authorities have not increased relative to these variables. Thus, between the end of 1997 and the end of 2003, the overall debt of the local authorities to the banks (including overdrafts) remained almost unchanged, and, relative to the size of the population, the income and the expenses, it even decreased. Some 160 of the local authorities reduced their per capita debt in fixed prices during this period, compared with around 100 which increased their debt. As a result of this, significant stability was achieved in the operation of the local authorities until the crisis of 2003 - 2004, which reflected, to a considerable degree, the significant and sudden changes in the scale of budget transfers from the government. However, an examination of local government as a whole conceals the existence of severe budgetary and administrative problems in many local authorities, just as the media’s focus on the problematic authorities draws attention from the fact that most authorities are managed properly.
The changes in budgeting of the local authorities in 2003 and 2004 – including the attempt to make a further drastic cut in the general grant in 2004 – did not take into account the differences between the authorities. Generalized programs, which are not based on a detailed familiarity with the relevant local authorities, are problematic. This approach also resulted in erosion of the plan to merge local authorities (although even what was implemented is unprecedented), and in the need to abandon most of the additional cutbacks in local authority budgets planned for 2004, creating the potential for long-term damage to budgetary management. There was also a striking lack of symmetry in the plan to save the economy: wage cuts and increased municipal taxes mainly helped one group of local authorities, while the reduction in grants harmed another group of authorities. These ill-considered attempts to hastily carry out sweeping reforms without taking into account the differences between the authorities, led to considerable instability in the financial management of the authorities, and the subsequent struggle also led to an undermining of basic norms of government in many local authorities.
The attempts at a comprehensive method for dealing with the budgetary issue reflects a deeper problem: on the one hand, given the large number of local authorities in Israel, there are many reasons the government should become involved in supervising the way they are managed. On the other hand, the government is not capable of truly supervising the overheads of the authorities. Moreover, such an attempt to supervise so many local authorities requires the adoption of a uniform policy with regard to all the authorities – regardless of the quality of their management, the size of the authority and external influences, although such distinction that could lighten the supe