A panel of seven High Court justices unanimously declared on Tuesday that a government decision establishing regions of national priority was illegal because it discriminated against Israeli Arabs and because only the Knesset could make decisions involving such large sums of money and affecting so many people.

The court decision aroused strong reactions in favor and against.

Sderot mayor Eli Moyal told The Jerusalem Post it was not shameful for the state to "prefer Jews because this is the state of the Jews. Israel has a complex with which it must come to terms. It wants to be a democratic state and give Arabs [equal rights], but only on paper. It won't admit it prefers Jews. The government is afraid... and embarrassed to say it discriminates in favor of the Jews."

"The problem [now]," Moyal said, "is that the law says that Arabs are equal to Jews and there is nothing you can do about it but go around it." But, he added, "The state can change the law.

Meanwhile, MK Ahmed Tibi (United Arab List) said the court's decision was "a slap in the face of the Israeli government's systematic policy of discrimination against the Arabs. But the real test will be in the implementation of the decision."

"The decision is an imperative and correct measure," said Ayelet Frish, spokesperson of the Ministry of Negev and Galilee Development. "There must not be a policy that discriminates between Arab and Jewish villages or between Arab and Jewish citizens, and that is the attitude that determines ministry policy."

Shmuel Rifman, head of the Ramat Negev Regional Council, lashed out at the ruling, which also called for establishing clear, objective criteria for determining the status of national priority areas.

"There are criteria, maybe the court doesn't like them, but there are," said Rifman. "The government wants to encourage Jews to move to the Negev and Galilee and to encourage those already living there to stay there."

"Governments have determined the areas of national priority for years," he added. "The High Court can say, 'You need to help Arabs in the Negev and Galilee.' But why do you have to hurt the Jewish communities in the Negev and Galilee?"

Adalah attorney Marwan Dallal told the Post that both elements of the court decision were important. Not only did the justices reject discrimination against the Israeli Arab community, but they also ruled that the government did not have the authority to determine national priority areas in the first place. He said this ruling would apply not only to education, but to all other areas of life.

The petition was submitted in 2003 by the Arab Higher Monitoring Committee, the follow-up Committee on Arab Education and the Israeli Arab human rights organization Adalah against government decisions in 1998 and 2002 to establish areas of national priority which would receive special government benefits. The aim of the national priority plan was to encourage increased settlement in outlying areas in Galilee and the Negev and to improve the quality of life there to attract more people.

According to the plan, national priority area A for state benefits in education included some 500 Jewish cities, towns and villages and four Arab villages. The petitioners charged that the state had gerrymandered the map in order to deliberately exclude as many Arab communities as possible. The state maintained that the map was objective and based solely on the distance of the outlying areas from the center of the country.

The court found in favor of the petitioners on both counts. It ruled that the map was discriminatory and the government's residual powers did not include the right to make such a far-reaching decision. It said the ruling would go into effect in one year to give the state sufficient time to put an end to the existing system.

"Our conclusion that the government decision has led to a discriminatory and unacceptable outcome is not simply a matter of arithmetic, but of substance," wrote Supreme Court President Aharon Barak. "The government's decision deals with one of the most basic human rights: the right to education. The outcome of the decision is sullied by one of the most 'suspect' of all distinctions, the one based on nationality and race. We would expect that government policy in this realm would maintain equality between Jews and Arabs."

Barak wrote that even if the government had drawn its map on the basis of objective criteria - a claim it had not proven during the hearings - the results were nevertheless discriminatory.

"Illegal discrimination may be caused even without the intention or motivation of those who establish the discriminatory norm. When it comes to discrimination, what matters is the result," he wrote.

In his ruling, Barak pointed out that the benefits granted to communities included in national priority area A were substantial. They included a 75 percent subsidy for tuition costs of students training to be teachers, an 80% subsidy for teachers' housing rents, allocations for additional teaching hours, and grants of NIS 100,000 to community centers to encourage absorption of newcomers.

These benefits had to be measured against the severe socioeconomic conditions in the Israeli Arab sector including the fact that half the Israeli Arab cities, towns and villages were ranked in the bottom 20% of all communities in Israel and that 94% were ranked in the bottom 40%.

The statistics also showed substantial differences in the ratio of Israeli Arab students in Grade 12, their high-school drop-out rate and the number of high-school graduates compared with the Jewish sector.