Why was Jerusalem striking and why it might happen again (sooner than you think)

Last week the streets of Jerusalem were full of garbage and the school system didn’t work properly. There were many rumors about why Jerusalem got into this situation, many of them focusing on Mayor Barkat’s political inspirations in the Likud Party. For me, as a member of the city council (in a different party than the mayor) and someone who was part of the decision making – it is important to convey exactly what happened, where the disagreements lie, and what is relevant or irrelevant.

So despite the temporary settlement that ended the strike, I prepared a detailed summary of the main questions and the numbers involved, attempting to explain the structural problems of Jerusalem and therefore why it all might happen again.

1. So, how big is the municipal budget?

The Municipality of Jerusalem has an annual budget of around NIS 5 billion. It is divided thus: NIS 834 million for welfare, immigration absorption etc.; NIS 252 million for culture and entertainment; NIS 1.5 billion for education; NIS 117 million for urban planning; NIS 919 million for general operations (maintenance, sanitation, infrastructure); NIS 67 million for information systems and business development; NIS 228 million for financial matters (interest, support of non-municipal entities etc.); NIS 202 million for administrative functions such as public relations and legal counsel; NIS 230 million for loan repayments; and NIS 33 million for pension and compensation. All of this is just to maintain the situation as-is, not taking into account the growth of the city, and most of it cannot be cut, mostly because it is tied up in contracts and other agreements.

2. Which revenue sources exist?

NIS 1.9 billion come from property taxes, NIS 408 million from other municipal taxes and fees (parking fees and tickets, construction fees, etc.,) NIS 1.5 billion in refunds from services under the responsibility of the central government (education, welfare etc.), and NIS 350 million for specific projects.

3. So, what is all this talk of “compensation”?

The city asks the national government to compensate it for decisions that serve national goals at the expense of municipal finances. The most important example is property tax exemptions: every year, Jerusalem loses a revenue of about NIS 670 million from exemptions set in national law, and this number grows by NIS 30 million every year. Since the city has no say in making decisions about exemptions, it has asked the government to compensate it for the lost revenue.

4. How big is the structural deficit?

Every year, the municipal budget contains a structural deficit of 2-3%, due to Article 3 and the natural demographic growth (around 17,000 new residents annually). The system just doesn’t allow Jerusalem to balance its budget.

5. So how can this deficit be overcome?

In order to fix the structural problem, the city receives the special Jerusalem Grant each year as befitting its status as the capital of Israel and in light of the many challenges facing it. Last year’s grant stood at NIS 628 million, and this year, Mayor Barkat asked that it be increased to NIS 800 million. And now the controversy begins. The Ministry of Finance claims that the increase is unnecessary, and that the city should close the deficit through raising property taxes, streamlining the administration and increasing tax collection. The municipality, rejecting the Ministry’s claims, demands that the government recognize the city’s importance (not only on Jerusalem Day) and cover the difference, in order to allow the city’s residents to enjoy the same standard of living that exists in other major cities.

6. So what do you say in response to the Ministry of Finance’s claims?

Jerusalem’s municipal system includes 9 employees for every 1,000 residents, compared to 15 in Tel Aviv. According to municipal statistics, over the last decade, tax collections has grown by 1.3% annually, amounting to hundreds of millions of shekels. And still, expenditure per capita is about NIS 2,000 below the average for the 15 major cities.

7. What else has the government agreed to fund?

Among the many projects that the government has agreed to fund is a subsidy for tzaharonim (“noon schools”), allowing children to remain in their kindergarten or elementary schools for additional hours while their parents are at work. Up until three years ago, parents were paying NIS 800 for this extension, just like in other cities. But the city’s socio-economic status and the outcome of the 2011 social protests have led to the creation of a subsidy reducing the price to around NIS 300. However, the funding for this and other items isn’t being transferred from the national government to the city, because of internal disagreements between the different ministries. With the funding delayed by five months and counting, the city simply cannot afford these programs.

8. What about the classroom situation?

Jerusalem’s population keeps growing, with about one in eight Israeli children – but far less from this proportion in classrooms and public buildings in general. The city needs 185 new classrooms every year, but the government only funds about 100. Over several decades, we’ve reached a situation where about 3,800 badly-needed classrooms are either nonexistent or in need for serious repairs. But since the city is obligated by law to supply them, it pays NIS 92 million every year to rent commercial properties for this purpose. But government approval is needed for a special loan to be taken out and cover this sum – and it too is being delayed.

9. So there is no way for Jerusalem to get out of this mess alone.

True. The way government funding and municipal budgets work is ill-suited to Jerusalem and the challenges facing it. A large share of Jerusalem’s population is poor, and for the city to be able to carry itself, it requires long-term investment and a structural increase in revenues. These things take a lot of time. We’ve made a lot of progress over the last eight years, with a burgeoning high-tech industry, an increase in tourism, more hotels and commercial properties (who pay more than residential properties in taxes relative to the cost of servicing them), and more projects on the road ahead. But that’s not enough.

10. So what is there to do?

Now we’re back to the Jerusalem Grant: the Ministry of Finance suggests a grant of NIS 525 million, but the mayor has asked for NIS 800 million.

11. Half a billion shekels isn’t enough?!

Not in 2017. In order to meet the expenditures listed above, such as tax exemptions, rent on classrooms etc., not to mention natural growth and its consequences, NIS 185 million more are needed. That is a sum that the city just can’t raise by itself.

12. And you are asking for more?

Yes. For us, it’s not enough to maintain the status quo – we want to take the city forward. We’re asking for an additional NIS 200 million to upgrade infrastructure in both West and East Jerusalem, improve parks and schools, add 100 social workers, and promote commerce, culture and sports.

13. So what is this strike all about?

It is about the unwillingness of the government to provide the city with the NIS 185 million needed to meet rising expenditures from natural growth, support the tzaharonim program, compensate for exemptions and the like and guarantee the loan needed for more classrooms, as well as the NIS 200 million needed for development.

14. Why is this such a mess?

Because the direct result of the deficit created as a result of these sums not being transferred is a need for budget cuts and layoffs, which greatly worry the municipal workers’ union. The mayor is not authorized to put the workers on strike, so he cooperates with the union, that has jurisdiction over most of them (that is why some of the privately-owned haredi kindergartens remained in operations). The union itself is facing legal challenges, and is not bound by what the mayor and the municipal leadership decide. While a strike can be prevented by court order, the union summoned its members to “informational meetings” that had the same effect. All this complexity caused a lot of this mess.

15. But there was a court order!

Correct. In order to prevent the strike, the Ministry of Finance asked the District Court to issue an injunction against the city. But the municipality claimed that this order has no effect, because it is the workers’ union carrying out the strike. I do not like this legal trickery, from either side, and I’m sorry it had to get there.

16. But why do the people had to suffer?

There are two main reasons for the strike. One is that some programs, like the tzaharonim, simply ran out of budget. The other is to put pressure on the Ministry of Finance to agree to the budget transfer. So yes, the people of Jerusalem suffer, but the alternative is to cut municipal services or raise taxes. So we’re left with the better of two bad options.

17. Isn’t this all done in the name of promoting Barkat’s national agenda in the Likud?

It’s true that Mayor Barkat has joined the Likud and wants to make a name for himself in national politics, and maybe even become Prime Minister one day. It is also true that he invests a lot of time and effort into it, and is in direct competition with Finance Minister Kahlon. It’s all true, but sadly, also irrelevant for the current situation, especially for us in Hitorerut. National politics have little to do with Jerusalem’s actual needs, as demonstrated above. Strikes are unpopular, especially for the mayor, who has been hit left and right. And if he gets the budget, will it propel him directly to the prime ministership? And if he doesn’t, will his political career come to an end? The answer is no. There is a lot of personal rivalry involved in this, but in the end, it’s not about petty politics, but about badly-needed resources. If you read carefully throughout this analysis, you would know that the least of our concerns is Barkat’s position in the Likud.

18. So what now?

We need a permanent, long-term solution for Jerusalem’s structural problems. Last year we also had a strike, with the city and the Ministry of Finance trading blames. But the team set up in order to provide practical and lasting solutions has never even met – and the result is that every year, the fight over the grant reopens. And after this tactical fight is over, that’s what we need to fight for – not more band aids, but true progress, for Jerusalem’s sake.