The safest way to achieve differential budgeting

The current discussion regarding differential budgeting is a wonderful opportunity to revive the national arnona fund initiative, and to recruit new political forces toward its implementation.

November 18, 2015 20:28
3 minute read.
THE TEL AVIV skyline; the area around the city is home to many Israeli start-ups

THE TEL AVIV skyline. (photo credit: REUTERS)


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Recently the discussion on differential budgeting has been renewed, rekindling the controversy regarding the gaps between weaker and stronger local authorities.

The matter of differential budgeting is of crucial importance, as its principles provide the clearest picture of the system’s commitment to social justice, while examining a deep rooted topic – the prominent gaps between local authorities in Israel. The question is whether the current discussion will succeed in achieving actual change in the initial distribution of budgets between local authorities in Israel.

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It is sufficient to note the strong words and accusations between heads of local authorities in order to understand that the implementation of a differential budgeting method faces a fortified political wall. It is easy to understand that for the heads of the strong local authorities, to willingly give up resources – mostly those provided by their own residents – is political suicide. The political fixation that prevents the implementation of differential budgeting does not stop with the strong municipalities, but continues to the mutual relationship between local and national politics, placing more and more obstacles on the road to implementing a just solution. Finally, similarly to many reforms that attempt to revolutionize the existing situation, the solutions that are put on the table tend to undergo a long series of compromises, delays, regulations and transitions of government, so that after a few years there is not much left of them at all.

What is, then, the right way to establish a growing equality in local authorities’ incomes without stepping on the political land mine and pitting the municipalities against one another? The solution is in the unequal payment of municipal taxes (“arnona”) which the government itself pays the municipalities. These taxes are levied on the municipalities by state institutions for national and public buildings located within municipal jurisdictions, including army bases, government institutions, governmental companies and other public bodies. These payments express an extreme form of inequality, resulting from the coincidental decision to establish a public facility on the land of a certain local authority and not another, and from the allocation of the resulting arnona payments from that facility.

The most discussed example is of course the arnona of the “Bahadim City” [IDF training base] in the Negev, which exposed an extreme, unjust inequality between the Ramat Negev Local Council, the Municipality of Yeruham, and the nearby Beduin villages. In this case, thanks to an agreement formed on the local level between the heads of the local authorities, a more just compromise was achieved in the area, but the questions still remains: why can’t arnona taxes from the army, at the Bahadim City, as well as in all other parts of the country, be used to improve the financial situation of local authorities throughout the country? In other words – why can’t arnona taxes coming from a public facility, funded in full from tax payers’ money and via the state’s budget – be funneled into a single central fund, which would be divided differentially between the countries’ local authorities, in favor of a fair initial distribution of budgets? The idea to establish a national fund for distributing arnona taxes paid by government institutions promotes the state’s commitment to social justice and a fair distribution of resources, as well as creating an achievable solution, circumventing the political hurdle and the complexity of finding a solution for differential budgeting. But the best reason to prefer the national arnona fund solution over any other is the simple fact that the state has already agreed on its establishment. According to government decision number 3963 from 2008 the state is required to establish such a fund, a decision which since then has been supported and backed by the Finance Ministry. However, similarly to many other government decisions, this decision has never been implemented.

The current discussion regarding differential budgeting is a wonderful opportunity to revive the national arnona fund initiative, and to recruit new political forces toward its implementation. Such a fund may also be established by way of a legislative process to be led by many Knesset members who support a just distribution of resources. In doing so we may achieve an effective and applicable solution for a just distribution of budgets between local authorities in Israel.

The author is general director of the Citizens’ Empowerment Center in Israel.

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