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The Interior Ministry is considering to initiate criminal proceedings against local authorities that improperly used funds transfered by the state to them as part of their rehabilitation plan, according to a State Prosecutor's Office affidavit submitted to the National Labor Court.

The court, led by Judge Steve Adler, will hold a session today over the state's proposal to solve municipality, religious council and fire department financial problems.

The session comes in response to the Histadrut Labor Federation's public sector strike three weeks ago, and takes place in the shadow of a threatened renewal of the strike. The union has said it will strike again if the problem of unpaid wages and benefits at dozens of local authorities, religious councils and fire departments is not solved quickly.

The State Prosecutor's Office claimed in its document that the majority of the 49 municipal authorities withholding salaries have solved the problem. "As of today, there is a problem of withholding wages in nine municipalities, and without a proper rehabilitation plan, it will not be possible to solve their problems," the affidavit stated.

In addition, the state said that the Interior Ministry has reports that four local authorities - Kfar Kara, Ramat Yishai, Mazkeret Batya and Lod - as well as the fire departments of Haifa and Eilat, maintain outstanding debts to employees' provident and pension funds.

"In addition to the state's debts, on December 24, an additional NIS 7.5 million budget was approved to cover the salary debts of the religious councils," the state wrote.