Israel Signs Deal on Massive State Bailout With Hebrew University of Jerusalem

The government will give $200 million to the university, which, in return, has committed to a $776-million recovery plan

The campus of the Hebrew University of Jerusalem.
Daniel Bar-On

Representatives from the Finance Ministry and the Council for Higher Education signed an agreement with the Hebrew University of Jerusalem on Wednesday which is designed to put it on firmer financial footing in the face of major pension obligations that the university has been facing. 

The agreement calls for the government to provide 70 million shekels ($20 million) annually for the next 10 years in addition to the other government support that the university receives. In return, the university has committed to a 2.7 billion shekel recovery plan, the largest in its history.

The plan calls for the sale of hundreds of millions of shekels of real estate, salary cuts and staff reductions. The university has also committed to cover its accumulated deficit from its own sources and not at the expense of its academic activity. Among other commitments is one to boost the number of students engaged in high-tech related study by 70%, increasing the enrollment of ultra-Orthodox students from 350 to 1,000 and attracting more Arab students.

Even prior to the signing of the agreement, about half of Hebrew University’s pension obligations were being funded through the state’s higher education budget. The additional 70 million shekels per year is designed to help the university meet its pension obligations over the next decade, when they are expected to reach a peak.

The university had been running a chronic negative cash flow and was facing a cumulative deficit of 1.8 billion shekels. In 2015 alone, Hebrew University paid 636 million shekels of its annual budget for so-called defined benefit pensions, which the university is obligated to pay out of its own pocket. The pension obligation has made it difficult for the university to invest as it would wish to in teaching and research. Hebrew University claimed that the government was in breach of a prior commitment to cover defined benefit pensions for its faculty. The Finance Ministry accused the university of wasteful spending.

The pension demands were not the only source of difficulties. They also included other issues such as administrative problems, special salary conditions for some faculty and the challenges of running a university with six campuses – three in Jerusalem, one in Rehovot, a veterinary hospital at Beit Dagan and a joint campus with Bar-Ilan University in Eilat.