Who Provides Welfare and Education Services? Local Spending on Welfare and Education in Israel

Local elections are just around the corner, prompting the release of a new study by the Taub Center which analyzes local authorities’ investment in two central areas that affect the lives of residents — welfare and education. Local authorities play a central role in the development and financing of welfare and education services for their populations, and even more so since the events of October 7 which significantly raised the need for these services.

Taub Center researchers Prof. John Gal and Adi Tarabeih show the gaps in budgeting between local authorities belonging to the different socioeconomic clusters and point to the causes of these gaps.

This unique study is being published in advance of the Taub Center conference on February 20, 2024 that will deal with the relationship between local authorities and the central government.

The weakest local authorities (socioeconomic clusters 1 and 2) spend  two to four times more on welfare than the strongest local authorities

In 2021, local authorities spent NIS 36 billion on education and welfare services. Study findings show that between 2015 and 2021, there was a small increase in budget allocation out of total local authority budgets in these two areas. In welfare, the budget grew from 12% to 13%; in education, the budget rose from 35% to 37%. Despite this increase in spending across all local authorities, the increase was sharper in the weaker authorities.

Expenditure on education and welfare is not uniform across local authorities. The research shows that the weakest local authorities (clusters 1 and 2) spend a greater share of their budgets on these areas than the strongest authorities (clusters 9 and 10).

Local authorities from clusters 1 and 2 allocated 15% and 16%, respectively, from their budgets to welfare, while authorities from clusters 9 and 10 spent 8% and 4%, respectively.  This means that the local authorities that are dealing with more social problems in their populations also spend more of their limited resources dealing with these issues.

In education, the trends are similar. Local authorities from clusters 1 and 2 allocate almost half of their budgets to education, while authorities in clusters 9 and 10, spend between 19% and 36% of their budgets. These gaps likely reflect not just social reality but also a demographic reality — that is, the weaker local authorities have a greater share of children in their population and thus have a greater need to provide them with education services.

The amount of independent revenue sources available to weaker local authorities for welfare and education services is significantly less than in stronger local authorities

Welfare and education services in Israeli local authorities are partially financed from independent revenue sources available to the local authority. In welfare, the government decides on the size of the budget that will be given to the authority and makes that amount contingent on the local authority’s ability to match funding. In general, while the Ministry of Welfare provides 75% of the funding, the authority has to find the additional 25% from their independent sources in order to ensure the provision of these services and, if it seeks to offer additional services, to independently fund them fully.

The study shows that the local authorities of lower socioeconomic status, which deal with greater social distress, have limited available resources. In the stronger local authorities, average independent funding for welfare services was about 32% of their total expenditure in 2021. In weaker local authorities, participation in the welfare budget was much smaller, 27% on average.

In contrast to welfare services, the participation of the state in funding education is not contingent on local authority participation; local authorities increase their level of expenditure on education in accordance with their priorities and budget limitations. Here the gaps in local authority participation level are even greater: local authorities in clusters 1 and 2 funded 17% of their education budgets in 2021, while those in clusters 9 and 10 funded about 41%.

In a breakdown by population group, local authorities with non-Haredi Jewish populations allocated a great deal of their resources to education — about a third of their independent resources went to education — while Arab and in particular Bedouin localities had the lowest independent revenues allocated to education — 16% and 15%, respectively.  In the area of welfare, the trends are similar. Non-Haredi Jewish and Haredi local authorities used their own resources for about 30% and 33%, respectively, while Arab and Bedouin localities spent on average 27% and 23%, respectively.

Weaker local authorities allocate a greater share of their own revenues to welfare services but, in practice, each service user receives considerably less than in wealthy authorities

Taub Center researchers looked at the allocation of all the local authorities’ independent resources to welfare services and found that weaker authorities dedicated about one-fifth of all their revenues to covering welfare needs; this is in contrast to the amount allocated by stronger authorities, which varied between 1% and 3.5%. Nevertheless, the annual average expenditure per service user in weaker authorities was substantially less than that in stronger authorities: NIS 4,600‒NIS 6,700 for services users in clusters 1 and 2, versus NIS 10,000–NIS 11,000 in clusters 9 and 10.