The banks never believed it would happen to them. In a legislative blitz a few days ago, the Knesset passed a law that protects monies transferred by the government to the local authorities from seizure. The law puts the banks in a tough position. When they gave the authorities credit, it was agreed that if the authorities did not meet their debt repayments, the banks could seize the grants transferred by the government.
Now, in an unprecedented move, the government and the Knesset have made the banks' guarantees meaningless. Who knows, maybe next time the Knesset will pass a law reducing the debt by half? True, it is hard to feel pity for the banks, but still - should there not be a limit on the government's ability to intervene in signed contracts?
This harsh act (in the meantime valid for a limited period of six months) is the result of pressure exerted on the government by the heads of the local authorities, via not paying the salaries of the authorities' 20,000 employees, who became hostages. They are not to blame for the situation, but rather the heads of the authorities over the years.
In March 2003, Finance Minister Benjamin Netanyahu and Interior Minister Avraham Poraz presented an important plan designed to introduce some efficiency and logic into the organization of the local authorities. It called for some of the authorities to be merged, reducing their total number by 150 - from 266 to 116 - and for 270 salaried deputy mayoral positions to be cut. If the plan had been implemented, hundreds of millions of shekels of the authorities' budgets would have been saved and their economic situations would have improved.
There are currently dozens of local authorities with fewer than 5,000 residents, but they are served by council heads, deputies, accountants, legal advisers and dozens of workers - most of whose jobs would have been economized by the mergers. It is likewise also clear that most of the salaried deputy mayoral positions are nothing but jobs provided for political cronies, or a kind of gratuity the council head gives out in order to achieve a majority in the council.
Still, authority heads who have significant power in their party's central committees opposed the merger, and Netanyahu and Meir Sheetrit, minister without portfolio in the Finance Ministry, were frightened and withdrew, leaving practically nothing of the big merger plan.
The crisis in the local authorities has been with us for several years already. Every year it surfaces in the form of strikes and demonstrations. It is the result of faulty and corrupt management by the Interior Ministry and the local authorities over the past 20 years. From 1984 until 2003 (apart from short periods), the Interior Ministry has been controlled by Shas, which managed it using the "slips of paper" method. If a council head promised to build a ritual bath, he would be given handsome sums by the ministry. No one ever forced him to stick to his budget, no one demanded streamlining and cuts. Many authority heads turned the local council into a job machine for close friends and central committee members.
Even in the past three years, when the economy has been stuck in a crisis, the authorities enlarged their staffs and raised salaries, despite that fact that some of them were collecting only 20-30 percent of their potential property taxes and suffered from ongoing deficits of 70-80 percent of their budgets - clearly bankruptcy.
Interior Ministry sources explain that even the last cut to the balancing grants that the government transfers to the socio-economically weaker authorities contributed to the current crisis, because too much was cut. That's right - the cut was NIS 1.2 billion. Furthermore, explain the sources, balancing grant monies are not transferred automatically, but are rather awarded to authorities that sign recovery agreements - or 50 of the 120 whose situation is dire. This means the crisis is still very bad.
Netanyahu is handling the matter with kid gloves. He is not demanding that authority heads who failed go home. He is not forcing them to fire the many extra deputies and is not imposing the originally planned merger. The political power of the local authorities is deterring him. After all, he too will one day have to stand for election in the central committee.
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