Who’s to Blame for Poor Performance of Israeli Arabs' Local Councils?

Yes, they are mismanaged and collect less tax than their Jewish peers, but they've been deprived of control over their own land.

Israel's 123 local planning and building committees are in charge of issuing building permits, among other things. Most of them, 95, serve specific communities. The other 28, most of which are in outlying rural areas, are regional in nature.

Of the 95 committees serving individual communities, 91 are attached to Jewish towns and just four, in Rahat, Tira, Taibeh and Nazareth, are in Arab communities. This, despite the fact that 20 percent of Israeli citizens and one-third of Israeli communities are Arab.

Another 82 Arab communities are squeezed into the regional zoning committees. Eleven of these committees have jurisdiction over Arab communities only, while 10 more are responsible for planning in both Arab and Jewish communities - two of them with an Arab majority. Of the 13 regional authorities with an exclusively or majority Arab population, only five are headed by an Arab.

Sixty-five years after the founding of the state, and nearly 50 years after martial law for Israeli Arabs was lifted, the national struggle between Israel's Arabs and Jews continues to bubble under the surface. The government no longer talks about Judaization of the Galilee or expropriates Arab land only because it is owned by Arabs, as was done widely in the 1950s, but it nevertheless continues to wage a national struggle over the control of state lands.

As much as the State of Israel has progressed, it hasn't yet reached the point of trusting Arabs and giving them the most important administrative municipal resource, namely control over their own land. This vital resource is still firmly in the grasp of Jews.

The national struggle is also manifested in municipal border disputes. There are quite a few communities with both Arab and Jewish residents, as well as a number of mixed regional councils, with a single government that is responsible for both Arab and Jewish communities. Amazingly enough, not a single Jewish community is in an Arab local Arab government. It's always the other way around -- an Arab minority under local Jewish government.

Suspicious minds

The government's fundamentally suspicious attitude toward Arab local governments can't be overlooked when it goes searching them for administrative failings with a fine-tooth comb.

There are clearly acute problems in the administration of Arab local councils, including voting based on family ties rather than merit, low rates of local tax collection and mounting deficits. But there is also no doubt that Jews bear much of the blame for the problems of Arab municipalities.

A study conducted by professors Avi Ben-Bassat, Momi Dahan and Esteban Klor for the Israel Democracy Institute found that the rates of municipal property tax ("arnona") collection in Arab communities are vastly lower than in Jewish communities, even ones with comparable socioeconomic levels. These low collection rates no doubt attest to improper management by local councils.

However, the mitigating circumstances for Arab councils can't be disregarded. The study shows that the formula for calculating arnona, which includes discounts for poor municipalities, is skewed against Arabs. Within the three lowest socioeconomic clusters containing the absolute majority of Arab localities, per-capita local taxes are higher for Arabs than for Jews even though the Arabs are decidedly poorer. This means the calculation underpinning local tax discounts is tailored to the benefit of Jews and not Arabs who, for example, tend to have larger homes.

The real problem of the Arab councils, however, isn't local property taxes, it's taxes on businesses. Jewish communities depend mainly on business taxes for their revenues, but this source is mostly denied to Arab communities. In each socioeconomic cluster that was examined, revenues of Arab local councils from business taxes were immeasurably lower than those of Jewish local councils. It is safe to assume that the gap is partly due to administrative weakness and a lack of initiative on the part of Arab local councils. However, when we recall that most Arab local authorities wield absolutely no control over the key resource for building employment and business centers - namely, land - it is hard to blame the Arabs for lack of business initiative.

The government's role in providing direct budgetary assistance is another element in this complicated picture. A study by economist Ziyad Abou Habla found evidence of discrimination against Arab local councils in the so-called equalizing grants provided by the central government whose aim is to enable all communities to provide their residents with a basic basket of services. He found that Arab communities receive 33% less per capita than Jewish localities of the same socioeconomic level.

However, the study by Ben-Bassat and Dahan disputes this, claiming that equalizing grants to Arab communities have been greater on a per-capita basis than for their Jewish counterparts, which is a logical outcome considering the Arab communities are poorer. But even according to their findings the equalization grants have sharply eroded over the past decade and in any case are at least 20% lower than they should be.

The government indisputably fails to do its part in bridging the welfare and education budget gaps. Every study shows that Arab communities receive a similar share in these budgets to those of wealthier Jewish communities. The allocation is presumably equal but in fact perpetuates the gaps. The poor and less well-managed Arab communities stand no chance of attaining the amount of investment in education and welfare enjoyed by the wealthier Jewish local councils.

Affirmative action

The only thing that could help Arab local councils close the gaps - economic affirmative action - doesn't exist in Israel.

In light of all of the above, it's surprising to find that the situation for Arab local councils is actually improving, to the point where it's possible to speak cautiously about a turnabout. Their budget deficits have declined steeply over the past few years, and by 2011 they were nearly identical to those of their Jewish counterparts.

Some of the decline in these deficits must be credited to the Interior Ministry's massive intervention in recent years in the governance of Arab local councils, 93% of which were placed on a recovery program, under the oversight of an external auditor or even taken over by a state-appointed committee. This is to say the regulator applied massive pressure on local Arab government. The ministry, meanwhile, began to give the councils incentives to manage their affairs better, by linking part of the equalization grants to the rate of local tax collection. Grants provided in the framework of recovery programs also helped.

It is still too early to judge whether the recovery is temporary or permanent. But the combined supervisory and assistance measures have clearly begun to pay off, and the Arab mayors elected on Tuesday are starting off with a much lighter financial burden. This may allow them to begin talking about growth rather than cutting back and repaying debt. The state's job is to help them make this happen.

Alex Libak