Shekel counts

Experts analyze Jerusalem's 2006 budget, the first to be balanced in years.

jerusalem 88 (photo credit: )
jerusalem 88
(photo credit: )
For Eli Zituk, municipal treasurer, presenting the 2006 budget to the municipal council felt like the first day of calm after a long, stormy season. But this week, as he spoke with In Jerusalem regarding the budget, Zituk was pleased. Money from the national government is flowing into municipal projects, the municipality's account is in the black, and, for the first time in many years, the municipality presented the municipal council with a balanced budget: NIS 2.888 billion. In contrast, Tel Aviv's budget for 2006 is NIS 3.42b. - although its population is about half of Jerusalem's. And Tel Aviv has been balancing its budget for three consecutive years. Yet balancing the budget in poverty-torn, intifada-stricken Jerusalem is no small feat - and it's an achievement that both the municipal coalition and the opposition salute enthusiastically. Back in 1999, Zituk recalls, when then-municipal general manager Ra'anan Dinur brought him urgently to the municipality, he was in shock. The cumulative deficit had reached the almost unfathomable figure of NIS 600 million. The deficit for that year alone came to NIS 60m. For five years, Zituk had represented the Finance Ministry in the United States, responsible for Israel's enlistment of foreign currency. He was used to more stringent standards. And under his guidance, gradually, the situation has certainly improved. By the time the 2000 budget was ready, the city could claim an NIS 6m. surplus. But then came the intifada, and finances began to crumble again. The deficits slid quickly into the hundreds of millions. The yearly deficits grew larger. By 2003, some city officials really did believe that the city might go bankrupt and have to "shut down." There was even talk that the Interior Ministry would have to appoint a controlling committee to administer municipal affairs. "The only reason that didn't happen was that nobody dared doing that to the capital," quips one of the high ranking clerks in Kikar Safra. So Jerusalem has come a long way towards financial solvency. But Zituk and his team are the first to admit that they are not magicians: this balanced budget is the result of the municipal rehabilitation program, which the municipality began to implement in late 2004, as a pre-condition set by the government before it would agree to provide funds. The municipality agreed to cut back, "and things have begun to improve from the moment the government opened its purse strings," Zituk says. Mayor Uri Lupolianski promised that fiscal viability would be a major priority for his administration. He succeeded and attributes the success to proper municipal functioning, government support, more effective collection of taxes and payments and the rehabilitation program. Yet unsurprisingly, despite their support for the stringent financing, the municipal opposition remains critical. After all, a budget is not merely an accounting of income and expenditures. A budget is a statement of intent and priorities. What does the current budget tell us about Lupolianski's intents and priorities for our city? Ruth Ralbag ("Jerusalem Will Succeed") holds a high-ranking financial position in the Health Ministry and has an extensive background in finance and accounting. Zituk takes Ralbag's criticisms seriously. "Ralbag knows what she is talking about, and when she speaks, even if it is criticism, we all listen very carefully," he admits. And Ralbag has plenty of criticism, to which Zituk attempts, not always successfully, to respond. First of all, according to her analysis, this budget is anything but balanced. "The 'balance' is based on the assumption that the government will permit a 2 percent increase in arnona (municipal taxes)," she notes. "But this is only an assumption. It could turn out that the government will not permit the increase, and then where will the money come from?" Ralbag posed the question to the deputy mayor in charge of finance, Eli Simhayoff. "His answer was unacceptable. He said that he would have to look for alternative sources of income. I don't think that's serious." Zituk acknowledges, "Ms Ralbag is right in principle." But, he continues, "First of all, we we didn't have any other choice, since we are totally dependant on the government in this issue. Second, I cannot imagine a situation where the government would not allow us to charge more in this coming year." The Finance and Interior ministries determine the arnona rates once a year, usually at the end of the year when the national budget is approved. This gives the municipalities enough time to prepare their own budgets accordingly. But the national budget has still not been approved, so Zituk had to estimate the rate of increase. He assumes the increase will be about 3%, yet the municipality, "to be cautious," based its figures on a 2% increase. Municipalities are entitled to request supplementary increases, but Lupolianski has already announced that he will not request this supplement. Zituk insists that he does not believe that the ministries won't increase the arnona rates, but, when pushed, says, "Since we are in an election year, if the government does decide not to raise the arnona, I will go back to the municipal finance commission and ask for a change in one or more of the other lines of the budget... In any case," he adds, "let's not forget that we're talking about NIS 20m. out of a total budget of close to NIS 3.5 billion. Let's not lose a sense of proportion." Ralbag further notes that only 541 of the planned 1,000 workers have left the municipality to date, due to difficult negotiations with the workers' committees. Municipal officials remain optimistic that they will complete the rehabilitation process in the near future. The process of creating a budget is long, complex and tedious. It begins in July, when the mayor indicates the general trends and projects that he wants to emphasize. Then Zituk and his assistants must speak with the heads of the various departments to discuss their particular needs and projects. Zituk clarifies, "Once the mayor has indicated what's going to be the major issue, we work around this issue and even the heads of the different departments know that in order to increase their budgets, they should work within this framework." "On the other hand," Zituk continues, "We do not work from a tabula rasa every year. We know what the city needs, but the path indicated by the mayor is the main line." Referring to the municipality's surveys of residents' preferences, Zituk states, "The citizens have asked more than once to put the emphasis on the physical aspects of the city. We are doing what the citizens request. This year, Lupolianski declared that he has decided to give cleaning and improving the physical appearance of the city first priority." The total budget allocated for this purpose in 2006 is about NIS 100m. This includes NIS 15m. from the regular budget and NIS 85m. from what Zituk refers to as the "irregular budget," which, he explains, is an "outstanding sum that doesn't really exist in other cities." A closer look at the budget gives reveals a different set of priorities. In 2005, the budget for the department of "physical improvements was NIS 11,664,000. In 2006, it will come to NIS 13,645,625. Thus, the "big money" that is supposed to bring about the major changes actually comes from the "development budget," which is almost entirely based on governmental, and not municipal, funds. For years, under mayor Ehud Olmert and Teddy Kollek, this development budget was used for roads and bridges. From now on, the municipality is saying, it will be used for trees, flowers, cleaning and maintenance. Ralbag says this reflects a serious problem in the budgetary priorities. Not that she's against cleaning up the city, she says, but, "In the framework of the municipal rehabilitation program, there was a large cutback in the numbers of employees in the education department. And the increases in education, welfare, sports and culture are smaller - NIS 30m. for the education department and NIS 20m. for the welfare department." "Seventy-five percent of these sums come from the government, and only the remaining percentage comes from the municipality," she accuses. "For the residents of this city, that means that education is not a high priority. This is absurd, since we all know that education is precisely the most important issue for citizens." Zituk retorts, "We have added NIS 30m. to education, NIS 20m. to welfare. I know this is not enough. It is never enough, especially if you take into consideration the poverty in the city. But we are doing the best we can with with what we have." Ralbag also asks how the money is being used. "We have been told that the municipality is collecting more of the money that it is supposed to receive. But where is this money going? What is being done with the money? In 2005, we received NIS 50m. more in arnona than we had anticipated, but nobody tells the municipal council or the residents what is being done with the money. "Could it be," she challenges, "that the professionals are dictating to us, the elected officials, what the priorities should be?" When Lupolianski first took office, he announced that the days of the "Great Infrastructure Projects," so favored by Olmert, were over. And indeed, in his first speech to the city council, the mayor declared that his eyes were focused in different directions - more welfare, more cleanliness, more beauty, and especially more services to the citizens. "These are the mayor's priorities," Zituk reiterates. But Ralbag is unimpressed and contends that the expenditure on physical projects is still too high. "These are all important issues, but they do not bring any hope to our city." The budget, she argues, does not attend to the acute problems facing Jerusalem, including poverty, domestic violence, drugs and alcohol and youth at risk - not to mention the problems stemming from the political situation and the conflict with the Palestinians. "I didn't find any message for any of these problems in this budget," Ralbag accuses. Despite the criticisms, Zituk believes that the current budget reflects "a great job, well done." He says, "We have succeeded in bringing back the big money from the government after the critical cuts made by then-finance minister Binyamin Netanyahu. Netanyahu cut the special allotment to the capital down to NIS 90m.; we brought it back up to NIS 130m., and now, this year, it's back to NIS 150m." The so-called "balancing grant," provided by the government to municipalities that embark on rehabilitation programs has dropped from NIS 120m. at its highest to NIS 76m. this year. "This is also very low," Zituk says, "but it's a significant improvement and we will hope it will get better... I know it is not even close to what Jerusalem needs and deserves - but still, it is getting better and we are all grateful to the government for it." Ralbag sees no reason to thank the government or to credit the mayor or his administration with the governmental grants. "The government owes this money to the capita and to the residents. Nobody is doing us a favor." Outside of municipal politics, opinions regarding the budget are mixed, too. Social activists, like Tammi Molad-Hayo, remain critical. Molad-Hayo, who hopes to run on the Labor list for the Knesset, is known for her activism on social and welfare issues. In analyzing the budget she says that "improving infrastructure in the city is certainly the right thing to do. And hopefully the light rail really will be ready some day. "But why doesn't the mayor promise that all the public gardens in the city will be upgraded, properly lighted, clean and well-maintained, with full accessibility for the disabled? Why isn't this a goal to strive for? Or really making the city wireless, as he once promised?" But more significantly, she criticizes what she sees as the lack of social vision. "The municipality should make sure that there is enough investment in other, human, 'infrastructures' such as schools and kindergartens. "And why not," she challenges, "declare that Jerusalem is the capital of education. Why doesn't the mayor take a pledge that within a maximum of three years, every child will have a place in a real classroom? Or, that the municipality will finally offer a real solution to the people forgotten and abandoned in [the caravan site at] Givat Hamatos? "And you can call me a dreamer, but why can't the mayor and the municipality promise to do something about public housing. Poor people are citizens, too, and they deserve some attention from our representatives." Molad-Hayo concludes, "Cleaning the streets is important, but it's not the only issue. I would expect the mayor to show more concern for human needs. And this budget does not provide an answer to these issues."