IBP: International Budget Partnership: Open Budgets. Transform Lives.

Improving Israel's Budget Process by Strengthening the Role of the Legislature and Adding a Knesset Budget Office
by Shlomo Swirski
February 23, 1999
Cape Town

MR SWIRSKI: The agenda that seems to be common to all of us is the desire to affect policy. Not just to analyse numbers, not just to go through budgets, but to actually have an effect on public policy. Now the fact that there is a need to affect public policy is quite obvious. We had a demonstration yesterday, when we visited the Langa township. Going from Cape Town to Langa one can easily see that there are quite a few things that have to be done. In my country, in Israel, disparities are not as great or as dramatic, but they exist nonetheless. The Israeli budget process has worked over the years to the benefit of European Jews. At the same time, it has worked consistently to the disadvantage of Jews who came from Arab countries and of the Palestinians citizens of Israel.

Now one of the major problems we all encounter when we get into public policy advocacy is the relative weakness of the legislature. I think that is common to most if not all of us. Legislatures are weak and have been weak historically, perhaps since the time the state as we know it was established. The assumption that accompanies all our governments is that the executive not only executes policy, but also formulates it. This is something which we have to challenge, if we want our work to be effective in the long run. The project that the Adva Center in Israel has undertaken together with the CBPP in Washington is to formulate an agenda for reform of the budget process in Israel.

In our country, like in most countries to whose representatives here we've been listening to, the legislature is weak and the executive is very strong. We find that even when our work is very effective we get at some point to a block that stops us, and that is the weakness of the legislature.

Let me illustrate what I mean by making a short a historical digression. We took it upon ourselves to examine the historical origins of the budget process. It turns out it all started one January first, when the King woke up, and while waiting for room service, got to thinking about what he should do during the coming year. Of course, the first and obvious priority was to arrive alive at the next January 1st. Now how do you do that, how do you get to the next January 1st without being beheaded? Well the simple solution for kings at that time was to declare war. Why war? Because that keeps the army, which has the means of beheading you, as far away from you as possible. That is the historical origin of the military budget.

The second priority item was what I would call the "just in case" item. Just in case the first tactic doesn't work, just in case the army returns earlier than expected from war, you have to ensure your place in eternity. You can do that, of course, by giving money to the church. Nowadays we would call that the education budget, because it is the school system that inculcates the official version of history.

The third item would be a palace for the new wife of the king so that she is safely away while he fools around in the local palace. That would be the historical beginning of what today the IMF would term "contingent liabilities."

It was only after he made up his mind as to the agenda for the new year, that the King convened parliament and asked it to approve the necessary appropriations.

Even though it sounds funny, and of course I meant it to be, it is not too far off from what we are doing today. The executive is the branch of government that formulates policy goals, that formulates the public agenda, and Parliament is called upon to approve it. When the Israeli Parliament, as you may have read, rejected the budget presented by the Netanyahu government, and he had to go through an entirely new submission procedure, it may have looked like the Israeli Parliament is very strong. Well, it is not, because Netanyahu came back two months later and re-submitted the very same budget, with only a few minor changes. So we are back where we started: we want a more effective legislature.

A more effective legislature can be our best ally. When I say "we," I mean the NGOs. Without an effective legislature, we in the various NGOs cannot really achieve our goals. Now, I would like to specify which NGOs I have in mind. I want to remind everybody of the remark made yesterday, namely, that when we talk about civil society, we are talking really about two quite distinguishable sectors. On the one hand there is the corporate elite which, as you may know, were the first ones to be called civil society, back in the 18^th century. On the other hand we have the various groups that are below the corporate world, that are used and abused by the corporate world. These are groups that are often weak in both political and economic powers. The main and sometimes only door that is open to us is the door of the legislature.

However, that entry is not satisfactory. Let me give an example from my country. When the Israeli Treasury wanted to introduce a tax on stock exchange profits, under the Rabin government, it gained the approval of the legislature, it gained the approval of the media and of course that of most of the NGOs. But, you see, one day before it came up for the final vote in the Parliament, the heads of the major Israeli corporations came to Rabin's home, to which they had easy access, and convinced him to withdraw the motion. That is the kind of entry we would all like to have, but we don't, because that kind of entry is enjoyed by the corporate part of civil society, and not by the NGOs. That is why it is important to empower legislatures - because it is easier for all of us to access the legislature.

Now, together with the CBPP we undertook to write up a proposal for reform of the Israel budget process. I should point out that we are not in the position like that of IDASA which has strong, historical contacts with the South African executive. Neither are we in the position of the Center on Budget and Policy Priorities in Washington, who have good contacts in both the Executive and in Congress. So here we are in the position where we are launching a proposal that comes out of a relatively very small NGO, but we still hope that the idea will catch on and start a wide public debate in Israel.

Why do we need reform and what are the major needs that we address? In Israel, the power concerning budget formulation is concentrated in the executive, and to be more precise, it is concentrated in one arm of the executive, in one office, the office of the Budgets Division of the Finance Ministry. That division has been accused of being the one part of government that both sets and implements Israel's social and political agenda.

Let me explain. The budget is formulated in the Budgets Division. Most years the budget proposal is presented to the cabinet not more than one week before the cabinet budget debate. Ministers have very little involvement in the process. Once the cabinet approves the budget proposal, it goes to the Knesset, the Israeli Parliament. Parliament has two months to debate the budget, but its efficacy is very much reduced by the fact that all of the information relating to the budget comes from the Budgets Division. Macro economic data, expenditures, revenues, etcetera, etcetera, all come from that Division. When we approached the Chairperson of the Parliament's Finance Committee and offered information on various budget issues, he said: "I don't need your information, I have all the information I can handle." So we asked: "Where do you get your information?" And his answer was: "From the Budgets Division".

Now, it is quite clear from all the previous presentations that budget books are not transparent. Israel is no exception. There are many budget books. The ministers and then the members of the Parliament get something like 25 books they have to go over. But the actual debate is rather limited, most of the time. There is no real debate over priorities, over alternative policy agendas. And this is especially critical given that there is a growing appreciation in Israel of the need for what Warren Krafchik called reprioritisation. In Israel, reprioritisation refers to the relative share of each of the three major groups that I mentioned at the beginning - the European Jews, the Jews who came from Arab countries, and the Israeli Palestinians. If we want to achieve reprioritisation we need a stronger legislature.

We handed out a paper that contains a summary of our four major chapters. The first chapter is a discussion of the Israeli political process and the Israeli budget making process. The second chapter describes the United States Congressional Budgets Office, how it came about and what it does. The third chapter describes a few parliamentary systems and their ways of handling the budget process. The final chapter describes the proposed reforms in the Israeli budget process.

We started out with an idea that may seem far-fetched, especially as it comes from a small NGO, namely, to establish in the Israeli Parliament something similar to the U.S. Congressional Budget Office. It may seem far-fetched because of the very important differences between the Israeli Parliament and the U.S. Congress.

Our Parliament has never had any professional research organ of its own. A Knesset Budget Committee, if and when established, would be the first such organisation to be under the control of the Knesset. We would have to face the problem of where to locate that office. The logical place for it would be the Knesset Finance Committee. But the Knesset Finance Committee is composed along partisan lines. And we do not want a Knesset Budget Committee that is composed along partisan lines. We want rather something like the Congressional Budget Office, which has managed to establish a non-partisan position within a very partisan Congress.

We would also have to face the question of staffing. The Israeli community of economists is very small, relatively speaking. We do not have the kind of network of Non-Governmental Organisations dealing with public policy issues like that in the United States, where they have institutions like the Brookings Institute where people get proper training for a job with the Congressional Budgets Office, and to which they can retire after working for the CBO. These are some very basic problems that we would have to face.

Now the other obstacle is of course the opposition that we might encounter to our idea. First and foremost would be the people at the Budgets Division itself. The

Prime Minister's office position might be mixed: Israeli Prime Ministers would like themselves to have such an office that could serve as a counterweight to the Budgets Division, which is controlled by the Minister of Finance. So this is quite a complex relationship that we will have to deal with.

Now, any reform would have to involve various stages. We would have to begin with the laws that govern Israeli budget making at the present time. The most obvious beginning would be the establishment of a timetable for the budget process. Following the lines presented yesterday by Mr. Potter, the laws governing the budget process would have to establish clear cut missions for each of the government agencies, plus designated costs and expected outcomes.

So even though the vision of an Israeli CBO may look like too adventurous a proposition we will go ahead with it, because we think it is a good trigger towards reforming the budget process at all necessary levels and towards making parliaments more professional. Does that mean that all Knesset members have to be economists? Do they have to be lawyers? No, Knesset members have to be politicians, they have to represent the interests of people, but they have to have at their disposal a professional infrastructure that will enable them to evaluate proposals presented by the government as well as to draw up proposals of their own.

A reform that will equip parliaments with instruments such as the Congressional Budget Office does not necessarily mean that we, the NGOs, should step aside. On the contrary: we will have to work even harder, because we will have a better environment to work in. We should also remember that Parliaments, even when they have all the professional capabilities, can act irresponsibly. We have the example of the U.S. Congress that processes a budget of something like two trillion dollars, and enjoys the services of a CBO and other professional help, and still spent an entire fiscal year debating an item that costs not two trillion dollars, but actually less than one dollar, namely, the presidential zipper.

And one last point: empowering Parliament means that we can start having a more balanced process of setting up national agendas. We have heard this morning that the South African Finance Ministry has adopted a three year budget. Now this is a wonderful step forward; however, it is once more the executive setting the national agenda. I see no reason why the Parliament cannot devote at least a part of the Parliamentary session to a debate over the national agenda; maybe we can push for it to be a prerequisite before the executive comes up with a three year budget. A three year budget represents a great improvement over what we now have, for instance, in Israel, which is a one year budget. But it still doesn't solve the problem of who sets the public agenda. I think this is our challenge, both as NGOs and as citizens, to push our Parliaments to become an active part of setting up a national agenda. Thank you.

QUESTION: I'm curious how the proposed Knesset budget office would really address the issue of greater civil society involvement in the sense you mean it, not necessarily the corporate folks who have access to the Prime Minister's office, but the civil society players? The Knesset budget office is really a very professionalised group of people who might tend to be answerable or accountable in some way. I think a case could be made that the relationship that would be built would more likely be with the Knesset and their staff, rather than with groups more broadly positioned in civil society. They might well have a connection with you and your organisation or with a very few groups comparable to yours, but more broadly, I doubt that they would be connected with community based organisations or civil society organisations, especially over time. I wonder how you might address that.

MR SWIRSKI: The view that you express is a point well taken. It is a possibility that instead of having a changed Parliament we will have a more empowered executive in the sense that if it is people with the same professional orientation who are coming from the same professional school, they might act as a contact for the executive to influence the legislature. As far as how it could work the other way, let me make just two short remarks.

In the first place, the assumption is that one of the main products will be more transparent information, which we don't have now. ADVA is the only organisation that publishes on-line, independent information and analyses of the budget. There is one other organisation that makes post factum analysis of the budget. And we are a small organisation, we cannot possibly cover all aspects of the budget. So the first effect will be more information.

Now the other comment is that over the last four, five years there is a growing network of NGOs who have become involved in budget policy. Last year we had an Alternative Budget Debate in the Knesset, the Israeli Parliament, and there were some 250 people present representing some 50 NGOs. All those NGOs are now aware of budget issues, aware of the connection between the general budget and their own constituency's needs, and they would serve as a pressure group on the KBO to act in a way that is similar to the U.S. Congressional Budget Office.

QUESTION: Have you had a chance to assess the resource implications of establishing a Knesset Budget Office, how much will it cost, what kind of staff are you talking about, etc.

MR SWIRSKI: No, we have not and there is no infrastructure for making such an assessment right now. The Knesset doesn't have an operational budget of its own other than for secretarial services. So that will be one of the issues that we will have to study and propose. When we come to it, we'll exchange notes.

QUESTION: My question is similar to the one that I asked earlier which is that at the end of the day the legislature is really the organ that can make or break this process, but this is a wider question. Is there a way that people can think of trying to impart or involve legislatures, even potential legislators, very early on in these issues? For example, in many or some of the countries I work on, there is a requirement that says such a number will be women. It seems to me it would be important for organisations like the ones that are here to look at some of the issues about a women’s budget, about transparency, and so on. Now in your own case in Israel is there discussion of this? Basically my concern is that we will always get politicians deciding on these issues and that is the right way, but the capacity for them to do so will vary very widely, which kind of tips the balance towards the executive almost automatically. I don't know how far you have to keep running in order to try and even that playing field.

MR SWIRSKI: We are in the process. Progress has been made, in some cases less than in others. There is in the Knesset a women’s caucus, and we have provided them with an analysis of the budget from a women's point of view. Now it always goes back to the basic point, what is the legislature's input into the actual budget process? Because when the issue is brought up with the Israeli executive, what they do is to appoint a Prime Minister's Advisor on Women’s Issues, and that is it. After that, when female members of Knesset want to raise something the Prime Minister will say: "don't come to me, you don't have to come to me, you can go see my Advisor." This means you go around in circles. There has not been a large scale movement on the part of the people who formulate budgets to confront the issues of gender inequality.

QUESTION: This is just to share with you on this point that in India in almost all distinct bodies and the Parliament that they should have 33 percent of the seats must be reserved for women. In a number of municipalities for the first time we had a woman mayor. Perhaps in India we're the first country to push a 33 percent set aside forward. There were a lot of obstacles.

MR SWIRSKI: Yes, thank you for the suggestion. We just published some numbers based on the data of the United Nations Human Development Programme. Israel comes out very low on most indicators concerning women.

QUESTION: Now you first stated that the process is a very closed one. I wonder how closed it is. I can give you the example of Uganda, for instance, where you could describe the budget process as a pyramid more or less. At the beginning almost all ministries are involved by giving their estimates, submissions and so on, but as the process progresses more doors get closed so that at the end those who make the decisions are not necessarily those who started the process. So I don't know where your door gets closed in the process of making the budget.

MR SWIRSKI: The doors are closed in the sense that there is very little entry, very little accessibility, to that part of the process which relates to the formulation of the budget. Once the budget proposal is ready for presentation to the cabinet and then to the Parliament it becomes a much more open process, but by that time the entire weight of the executive’s power is applied to members of the Parliament to actually accept it, in a manner of take it or leave it.

You cannot go through all the million items and say: "well, this is wrong, this should be this way or that way." In other words, what I'm saying is that by that time it is a little bit late.

QUESTION: One of the groups in Washington that now depends on a Congressional Budget Office and is therefore a very strong supporter of the institution is the media. This is a fairly recent development for us in the United States. I wonder if you could comment about where the media fits in in terms of potentially being an ally to build the case for a Congressional Budget Office in Israel.

MR SWIRSKI: This is a very good and timely question. We are very proud of ourselves this year because for the first time since we started doing budget analysis the media, and I will shortly explain what it is, has, let us say, come our way. I will make a distinction between two types of media. There are the most popular newspapers, radio and some of the television shows that address the public at large. They've been quite open to our information, they've used it. We have had over the years very good media coverage. The part of the media that has been closed to us is the financial part of our most prestigious newspaper, the one newspaper that is read by the decision makers. Their economic section shares with the Minister of Finance budget division most of the basic tenets, they have the same basic agenda.

They've both come out in favor of lowering the maximum marginal tax rate. They've been in favor of cutting into welfare budgets. They've been in favor of reducing unemployment relief etcetera, etcetera. Now for that kind of media a Knesset budget office would be, the way we see it, a very welcome change, because they could now quote a very professional, highly respected body, that is an alternative to the budget division of the Minister of Finance. In other words, it would make media discussion more open, more willing to consider different alternatives.

QUESTION: Are you planning to be a government organisation or a Knesset organisation?

MR SWIRSKI: No, we ourselves, the Adva Center, plan to stay as we are. As far as the question of who is going to finance the Knesset budget office, the assumption is that it will come out of the general Knesset budget. The general Knesset budget is decided by the Knesset, it is part of the general governmental budget. We have not gone through all the details, but we will make sure to find in our proposal a way for that particular budget to be decided independently by the Knesset. In other words, we think that the Knesset should set up that budget, not the Minister of Finance, because otherwise they can control it.

QUESTION: Who would work in this organization?

MR SWIRSKI: I think it is best to refer you to the chapter on the Congressional Budget Office which for this purpose serves as a model. The Congress appoints the head of the CBO and then that person hires all the rest of the workers. I think that is one possible model.

QUESTION: I was wondering if you could talk a little about what you're going to do to try and bring the KBO into existence and who your allies are and what your strategy is and are you really going to do it in a year.

MR SWIRSKI: We were thinking of several steps. We have already brought up the issue with several members of the Knesset, with the previous speaker of the Knesset, who seems to be open to the idea. He of course knows about the CBO. Up till now he never thought it was a feasible idea, but he is willing to consider it. We are thinking of putting together a closed conference. We might invite people from the United States, perhaps somebody from the CBO, people from the CBPP, members of Knesset, people in some of the Israeli universities who are involved in budget issues. In this closed conference we can get a feel for how far can we go. For instance, in the proposal we pointed out that we should consider several possible models for the Knesset budget office. The minimum would be a body that interprets the budget and provides information on the budget for members of Knesset. A maximum would be a body that sets up the major economic indicators etcetera, which presently only the Budgets Division does. After that we'll have to find a way of opening it up to a public debate. Maybe after that meeting more members of the Knesset will want to get involved, or maybe we will talk with the media, conducting either individual sessions or providing a framework for some sort of open explanation of what this is all about.