A whole year's GDP
At the offices of the government, the local authorities and the universities, in the Israel Defense Forces, the Shin Bet security services and the Mossad, as well as in the rest of the public sector, all the joy-riding has been at the expense of the state budget, such that today the pension burden stands at the massive sum of NIS 490 billion.
Amir Peretz and the big workers committees are not very apprehensive about losing control of the pension funds. They are gripped with fear, however, over the appointment of external managers for the funds. The Histadrut labor federation officials know that the new managers, who will no longer be Peretz appointees, will search every corner and leave no stone unturned until they discover hair-raising affairs of corrupt misappropriation of the workers' funds - from before Peretz's time.
Similarly, the members of the funds never even guessed that they were abused due to the fact that representatives of the big committees took care only of their constituents and not of all the members.
The Histadrut also used the money in the funds to finance its various activities. So far this has been discovered with respect to only the building workers' fund, because it already has an external manager. This small fund financed various Histadrut activities such as the Hapoel sports clubs, Na'amat (the working mothers' organization), Hanoar Ha'oved Vehalomed (the Labor Party youth movement), the Hapoel Hamizrahi labor union and Mishan centers, as well as the purchase of valuable buildings registered in the Histadrut's name, and the granting of immense unlinked loans to the Histadrut. At the height of this corrupt process the fund employed 450 workers and maintained 15 branches throughout the country, which were run by cronies who received phenomenal salaries, and a fleet of 65 cars.
The real problem with the pensions, however, is much greater. At the offices of the government, the local authorities and the universities, in the Israel Defense Forces, the Shin Bet security services and the Mossad, as well as in the rest of the public sector, all the joy-riding has been at the expense of the state budget, such that today the pension burden stands at the massive sum of NIS 490 billion, equivalent to Israel's entire annual gross national product.
All the factories and companies in the public sector invented a method that would ensure their employees a pension without it being recorded in their current budgets - the non-contributory pension system. Instead of the workers and the state setting aside a total of 17.5 percent of a worker's wages each month, they did not set aside a single agora - on the assumption that it would always be possible to levy more taxes on the public in order to finance the pensions in the future. If funds had indeed been set aside the whole time, the system would have been forced to waste less, economize on manpower, streamline and cancel double payments - but successive governments did not want to do this.
What is even worse is that the economic program approved by the Knesset yesterday contains practically nothing concerning the civil servants' pensions, whereas there are harsh measures (too many) against members of the Histadrut's pension funds. The only burden placed on the civil servants is that they will start deducting 1 percent of their wages in January 2004, and an additional 1 percent in January 2005 - but that is a purely symbolic burden compared to the blow leveled at the members of the Histadrut's pension funds.
There will now be a minuscule deduction, but there is no ceiling on the insured wages of public sector employees, their pensions will not be calculated according to their average wage and they will not be charged a 2-percent management fee. Why this blatant discrimination? Do Finance Ministry officials think that "one's own poor come first"? Are they afraid of increasing the ongoing burden on the state budget?
This is, after all, a bigger time bomb than the Histadrut's pension affair. In another 10-15 years, half the budgets of the local authorities will be spent financing the non-contributory pensions of their workers. This impossible situation will force the state to again raise municipal and other taxes to finance the pensions.
True, the treasury did recently manage to transfer public sector employees (only new ones) from non-contributory to contributory pensions, but why not force all the government and municipal employees to fully finance their own pensions starting today, just as it is demanding from the members of the Histadrut's pension funds?
There is an even more frustrating angle: the pensions of the IDF, whose cost is as much as NIS 100 billion. The security services are the last ones in the system that have still not switched to contributory pensions. The IDF continues to refuse, even though there is no reason why the non-combat echelons of the IDF should continue to retire at age 40. There is no reason in the world for an economist at military headquarters to start receiving a pension at such an early age. There is no reason for the senior administrative staff in the adjutancy to retire with pensions at such a young age, and to live for many long years at the taxpayers' expense. Let there be no mistake here: There is no intention to harm the fighting echelon, which will continue to retire early, but the fighting echelon is only 20 percent of the IDF.
Finance Minister Benjamin Netanyahu and senior officials at the treasury were very courageous when it came to imposing a heavy burden on the pension fund members and legislating all the other amendments. Why can they not do the same in the case of state employees and the IDF? Has fear paralyzed them?