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The absurdity of campaign financing in Israel

Parties should not be allowed to use state funding for ongoing expenses to cover the debts accrued during political campaigns

How is this for an absurdity? The state awards a very generous public financing package to political parties for election campaigns. The Israel Democracy Institute conducted a study to compare election financing in Israel and in OECD countries in the years 2007-2011, and indeed found that Israel provides the highest level of financing in an election year. And yet, time and time again, the parties go over their budgets and find themselves in significant deficits by the time the election campaign is over.

So it comes as no surprise that political parties rely almost entirely on state funding. In the 2015 election campaign, such funding totaled NIS 183 million, accounting for 97 percent of the parties’ income for those elections, and in 2017 — which was not an election year — 80% of the parties’ income came from public funds. The parties make up the remainder from donations, membership fees, and by selling real estate assets. When comparing Israel to other countries, we find that only in Hungary are the political parties (slightly) more reliant on public funding.

Percentage of Public Funding in Political Parties’ Income in 18 Democracies, 2010-2014

Country Direct State Funding, of the overall income (%)
Hungary 81.6
Israel 81.2
Austria 79.9
Belgium 75.4
Portugal 74.2
Sweden 71.3
Norway 69.2
Ireland 68.5
Spain 67.8
Poland 54.9
Italy 53.7
Czech 48.1
Denmark 44.1
France 43.9
Netherlands 36.2
Germany 35.5
Canada 34.2
Britain 8.8

Source: Poguntke, Thomas, Susan E. Scarrow, and Paul D. Webb, “Party Rules, Party Resources and the Politics of Parliamentary Democracies: How Parties Organize in the 21st Century,” Party Politics 22, 6 (2016): 664.

Nevertheless, in election campaigns, the parties’ expenses far exceed their income. For example, in the 2015 elections, parties spent some NIS 246 million more than their income. Despite the generous state funding, not a single party elected to the Knesset, managed to keep within the framework of its budget during the campaign. As a result, almost all the parties ended the elections in debt, sometimes reaching millions of shekels (with the only exceptions being HaTenua and Hadash).

Why does this happen, and can the situation be rectified?

In the course of election campaigns, parties tend to throw economic caution to the wind. They are fighting for their political survival, and to achieve this goal, are prepared to spend any amount of money on propaganda, party activists, strategic and image consultants, and more. Often, the dynamics resemble those of the Arms Race, in which one party spends a lot of money on its campaign, and the opposing parties do exactly the same, so as not to lag behind – even if there is no real need for such spending.

Furthermore, the parties know that they can rely on an additional source of state funding to cover their deficits – funding for ongoing expenses. Campaign funding and funding for ongoing expenses are two separate funding mechanisms, which originally had two different purposes. Campaign funding was intended to help parties manage their election campaigns; and funding for ongoing expenses was intended to cover other expenses such as maintaining contact with the public, activities featuring their ideologies, and internal democratic processes, with parties receiving generous funding from the latter source: In 2017, state funding for ongoing expenses for all the parties stood at NIS 130 million. The state allows the parties to use these funds for any purpose they see fit, and in fact — most of these funds are used to cover debts accrued during their election campaigns. As a result, the parties have no money left to spend on the important activities that this funding was intended to cover.

To remedy this situation, we propose erecting an “Iron Wall” between campaign funding and funding for ongoing expenses, so that the parties will not be able to use the latter to cover the debts accrued by the former. This will encourage the parties to try and maintain a balanced budget during the election campaign, and will automatically free up funding for ongoing expenses.

The State of Israel is very generous in party funding, but it allows them – and indirectly even encourages them – to squander their money and neglect some of the key activities that political parties in democratic countries are supposed to conduct. The time has come to remedy this situation and ensure that public funds are used for their intended purpose.

About the Author
Dr. Assaf Shapira is a researcher at the Israel Democracy Institute’s Center for Governance and the Economy.
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