Analysis

Big Stakes Are at Play in Israel's Coalition Talks

The agreement will dictate much future policy, so ministry officials are trying hard to influence it

President Reuven Rivlin formally tasks Prime Minister Benjamin Netanyahu with forming the next coalition, Jerusalem, April 17, 2019.
Olivier Fitoussi

A modest graph in the 2018 Bank of Israel annual report is promising to become a major component of the coalition agreement that will form the basis of Benjamin Netanyahu’s next government. The graph shows per student spending on education relative to per capita gross domestic product. The figure has grown a lot in the last decade and is at its highest level since the early 2000s.

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This is especially the case this time around. The lesson learned when the previous Netanyahu government was formed in 2015 is the importance of the coalition agreement in setting national priorities. In the past, each agreement was a general statement of principle, but in 2015 it became a replacement for setting national priorities for the budget.

Each minister came with his or her list of budget demands, which were incorporated into the pact and tied the hand of budget planners in the coming years.

The child savings programs, the reforms in nursing care, Machir L’Mishtaken (Buyer’s Price) – all these huge and costly programs were casually inserted into the coalition agreement and later became mandatory. Ministers no longer fought over money during the budget-making process; they had already won their demands before the government had been formed.

The same process is expected to repeat in 2019. This will include a series of fiscal demands that will make the job of the Finance Ministry’s budget people hard. Ministry officials are already observing with trepidation the coalition talks now getting underway.

To serve as a counterbalance, officials, particularly at the National Economic Council chaired by Prof. Avi Simhon, are preparing their own list of proposals. The idea is to raise issues in front of Prime Minister Benjamin Netanyahu and the candidates for the key cabinet portfolios that can go into the coalition agreement.

Some of these are already known. For instance, there’s the so-called metro law that would make possible the formation of an integrated railway network for the greater Tel Aviv area quickly. The idea is to prevent local authorities, ministries and regulators from trying to block it.

Another is raising the pension age for women, a political land mine that previous finance ministers didn’t touch. The wisdom is that if the clause in the coalition agreement calls for it, it will be easier for the next finance minister to back the change.

One hot new topic is a law that would curb unions’ power by banning strikes by workers providing essential services or by mandating binding arbitration. Netanyahu has long advocated such a law and Gila Edri, the head of the railroad workers’ committee, played into his hands by recently calling a wildcat strike.

Another proposal is to introduce a congestion tax to cope with Israel’s clogged city streets. Yisrael Katz, who was transportation minister in the last government, opposed the tax, but he’s unlikely to keep the portfolio in the next cabinet. Meanwhile, New York City has introduced such a levy, giving the idea more credibility. Putting a congestion tax into the coalition agreement would preempt Katz’s successor from blocking the move.

Other issues revolve around education, and they’ve arisen because of that Bank of Israel graph. It showed that investment in education has reached levels of the early 2000s, but it also shows that spending per student in elementary school remains about 8% lower than the average for countries in the Organization for Economic Cooperation and Development. At the high school level, the gap is even wider.

On the whole that should be good news because the gaps used to be much wider. But officials aren’t happy. The education budget has doubled since 2008 and is now the government’s biggest spending category after defense. But Israeli students’ performance hasn’t shown significant improvement: Young Israelis rank 40th in the international PISA exam.

The Education Ministry has been lavished with growing budgets and has introduced one program after another to boost student performance such as mandatory education from age 3, summer school, smaller classes and kindergarten aides. But there is precious little to show for it.

Fifteen years ago, the Dovrat Committee proposed a package of reforms, many of which were subsequently adopted. Now the time has come for another government commission. The goal is to examine again the structure of the education system and make recommendations about what should be changed to improve classroom performance.

If such a clause finds its way into the coalition agreement, it could be the most revolutionary of them all.