Hard Look / Finance Ministry Paranoia

A few weeks ago Transportation Minister Yisrael Katz made plans to attend the Air Show in Le Bourget airport, near Paris. Under ministerial protocol set by the Finance Ministry, the trip needed approval by the Transportation Ministry's accountant general.

The accountant general had no objection to Katz's trip; the Air Show is, after all, the world's biggest aviation event.

Except for one thing. Katz asked to be housed at the same hotel as the defense minister.

The request sparked a row. The Transportation Ministry's chief accountant wanted to know the name of said hotel and how much it would cost. In the course of his inquiry he learned that the Defense Ministry would be sending a delegation of 40 to the Air Show.

Hotel rooms for the delegation had been reserved a year in advance, given past history of difficulty finding accommodation during the fair. Advance reservations did in fact ensure that rooms would be available, but it didn't save the state a sou.

Defense Minister Ehud Barak it seems would be staying in a ?2,500 per-night suite. The ministry's director general would be staying in more modest quarters, costing a mere ?1,500 per night.

Most of the delegation, including secretaries and personnel from Army Radio, are staying at deluxe hotels that cost far more than the maximum allowed by the state's Accountant General, $300 per person per night.

The Defense Ministry's standards turned out to much higher than the Transportation Ministry's. Actually, higher than the accountant general approved for the entire government.

When details of the Defense Ministry's Air Show extravaganza came to light, the Finance Ministry noted that all costs above approved amounts for overseas trips are considered private expenses, and are therefore taxable.

His reminder was fruitless. A Defense spokesman said it wouldn't scale back the size of the delegation to the Air Show, that the cost of the room where ministry's director general would be staying is actually far less ("tens of percent") less than the ?1,500 that had been quoted (when the affair was publicized the director general apparently opted to give up the room reserved for him and go for a less expensive one. However, since the room was reserved in advance, chances are that the Defense Ministry will have to pay for it anyway.)

He also said that most of the delegation, including the minister's entourage, would be staying in rooms within the accountant general's budget.

The spokesman described the criticism as "mudslinging, populist demagoguery". "The rooms are relatively cheap, for Air Show week rates," he assured.

The transportation minister, by the way, managed to find a room at the last minute for ?400 per night.

One can be paranoid, but still right

Defense is the only ministry unfettered by Finance Ministry control over its budget. Overseas travel for instance is subject to scrutiny at all other ministries. Then there's Defense, which sponsors hundreds of trips a month.

Generally speaking, Defense is free to do as it pleases within the constraints of its own budget, and evidently this freedom can be abused.

The Air Show incident is the Finance Ministry's paranoid fears come true: that if it loosens control over any aspect of the state budget, and doesn't keep a tight grip all government spending, the results are waste, not to mention corruption.

Nearly all experts within and outside of government admit that the treasury's paranoia is firmly rooted in reality.

"It's part of the organization's culture," admits even Ra'nan Dinur, outgoing director-general of the prime minister's office. "The ethos is 'grab what you can'."

The Finance Ministry's paranoia was born in the 1985 stabilization plan, when it turned out that lack of management, lack of fiscal responsibility and failure of good governance in governments between 1974 to 1985 reduced the state to near-bankruptcy.

Eleven years of fiscal abandonment stopped only when the abyss threatened. The conclusion of all subsequent treasury officials and Bank of Israel officials alike, has been that the political organ simply cannot be trusted with the responsibility behaving sensibly when catastrophe approaches.

So Finance Ministry officials, backed by the Bank of Israel, undertook a sort of hostile takeover of the national budget. They seized all of the power, leaving politicians helpless to squander money as they see fit.

The 24 interim years have not improved the attitude of Finance Ministry officials toward politicians, partly because of the plethora of private member bills. Knesset members approve laws without once thinking how they'll fit in Israel's priorities.

Even the Knesset's research center found the Knesset to be a negative anomaly. In most civilized countries it is parliaments that rein in the governments' tendency to overspend. Here it's the opposite.

Motti Shapira, who lead a team pushing reforms during Ehud Barak's government, calls it Finance's paranoia. The cost of this paranoia, Shapira argues, is already very dear.

"The entire process of national budgeting centers on this paranoia. The Finance Ministry is convinced that all ministers want is increase their workforce and waste money, and that no one is a party to the treasury's concern for fiscal responsibility. The result is that the stressed-out Finance Ministry assumes all responsibility for budgeting. The result is a centralized, archaic and inefficient government. Our government is gridlocked, and its time we found a way to release it," says Shapira.