Political parties in Israel rely primarily on state financing for their election campaign. In the 2013 elections, for example, the state awarded about NIS 195 million in campaign funding. Consequently, decisions on which parties are entitled to funding and the amount of financing that each party will receive are of crucial importance. The method of allocating funds can affect the shape of the political map in Israel. The article below discusses the principal issues pertaining to campaign financing in Israel.
Direct party financing is a mechanism for transferring money from the state to political parties. The use of this mechanism is prevalent throughout the world: A study of 177 democratic and undemocratic states found that only a third of the countries surveyed do not provide state funding for political parties. Of the 34 members of the OECD, only one country does not use this mechanism: Switzerland (IDEA, 2015). It is noteworthy that in many states, including Israel, there is not only direct funding for political parties but indirect funding as well, in the form of, for example, broadcast time for election propaganda on television and radio. Many states have also formulated rules to regulate and limit contributions to parties and politicians, as well as spending by parties and politicians.
The sources of income of many parties in the democratic world have decreased greatly in recent decades, mainly due to a drop in the number of party members and the resultant decrease in income from membership fees. In parallel, while some of the expenses of the parties expenses have decreased—for example, due to greatly reduced activity in party branches—parties today are spending more money on propaganda, image consultants, media, and surveys. As a result, the overwhelming majority of parties find it difficult to finance their activities on their own. In such a situation, it is expected that parties will look for other sources of funding—primarily contributions from wealthy supporters. Reliance on these kinds of contributions, however, poses a danger that parties will become dependent on tycoons to the point at which there is the risk of corruption. State party financing has developed in light of these circumstances. It is designed to enable the sound operation of political parties, which are an integral part of any modern democracy, while reducing dependence on tycoons and the threat of corruption. In addition, state financing can contribute to equality and representation, since it enables parties that lack resources and that represent poor populations—i.e., populations that are unable to contribute money to parties or to pay membership fees—to participate in the political game as well.
State campaign financing also has negative repercussions. For example, state funding reduces the motivation of parties to maintain contact with the general public and with party members and to recruit new members, since parties can fund their activities without membership fees. In addition, in most cases campaign funding favors parties that are already represented in parliament, especially the big parties, and thus is relatively disadvantageous to new and small parties. This is because in most countries, including Israel, funding is awarded only (or almost only) to parties that are represented in the parliament, and is distributed proportionally in accordance with the size of their parliamentary representation.
State funding for political parties was adopted in Israel for the first time before the 1969 elections, and was subsequently established in law in the Party Financing Law, 1973. Party financing includes three types of funding in Israel:
- Campaign financing – This includes direct funding, which is the focus of this article, as well as indirect funding; that is, allocation of broadcast time for campaign propaganda on television and radio.
- Funding for current expenses – This funding is designed to cover the party’s expenses that are not related to elections.
- Funding for the party’s parliamentary staff.
Israel also has rules that regulate and limit contributions to parties or to candidates running in internal party elections, as well as the expenses of parties and candidates. The state also provides funding to party slates in local elections under the Local Authorities Law (Funding of Elections), 1993.
Campaign financing is based on “a funding unit” that is currently about NIS 1.375 million. This amount is updated in accordance with the cost-of-living index and is determined by a public committee composed of three members and chaired by a judge. In the 2013 elections, for example, the funding unit was approximately NIS 1.336 million. It should be noted that until 1994, the Knesset Finance Committee determined the amount of the funding unit, and it used its authority to continually increase it. This stirred public and legal criticism and eventually led to the amendment of the law. Transferring the authority to determine the funding unit to a public committee indeed lowered the amount: From a peak of NIS 1.8 million in 1997, it gradually decreased and leveled off at about NIS 1.3 million (Ben-Bassat and Dahan, 2014, p. 153).
The rules for allocating campaign funds are to the benefit of existing parties, and large parties in particular, and make things difficult for small and new parties. Parties that receive less than 1% of the votes receive no campaign funding. Parties that do not pass the electoral threshold but receive over 1% of the valid votes that were cast in the election receive funding in the amount of one funding unit. In the 2013 elections, Am Shalem and Otzma LeYisrael, which were not elected to the Knesset, each received one funding unit on these grounds.
Campaign financing for parties elected to the Knesset is based on the following formula: The number of funding units a party is entitled to receive is the average of the number of seats it won in the previous elections and the number of seats it wins in the current elections (for which it is receiving funding), plus one funding unit.
For example, Meretz was entitled to 5.5 funding units in the 2013 elections based on the following calculation: It won three seats in the 2009 elections and six in the 2013 elections for an average of 4.5 seats. One additional funding unit is then added, for a total of 5.5 funding units.All of the data on campaign financing allocated to the parties in the 2013 elections is based on State Comptroller, 2014: 92. (Hebrew).
The main rationale for basing the calculation on the average of two elections is a desire to “protect” parties that significantly weakened: If the campaign financing were determined only by the results of the current elections (for which it is provided), such parties would receive much lower funding than expected (based on the results of the previous elections), and would thus find themselves deep in debt. Using the average of two elections mitigates such loss of funding. The Kadima party in the 2013 elections is a salient example: The party sank from 28 seats in 2009 to only two seats in 2013. If its campaign financing had only been based on the 2013 elections, it would have received three funding units (two seats that it won in the elections plus one funding unit); but thanks to calculating the average of the two elections, it received 16 funding units (the average of 28 seats in 2009 and two seats in 2013, plus one funding unit).
In the case of a new party that did not win representation in the previous elections, its funding is not based on an average: It is entitled to a funding unit for each seat it wins, plus one funding unit. For example, Yesh Atid, which competed for the first time in the 2013 elections and won 19 seats, was entitled to 20 funding units.
Due to the method of calculating funding, the total number of funding units allocated to the parties is generally greater than 120. This derives in part from the “surplus” funding units—that is, each party that crosses the threshold percentage receives one funding unit in addition to the average of seats it won in the two most recent elections, and parties that are not represented in the Knesset but received over 1% of the votes also receives a funding unit.The total number of funding units awarded to all of the parties is also affected by the electoral success of parties whose funding is not based on an average of two elections—on the one hand, new parties whose funding is based solely on their success in the elections that usher them into the Knesset; and on the other hand, veteran parties that won representation in the past but did not reach the threshold percentage and thus are not entitled to any funding. Accordingly, a multiplicity of new parties increases the total number of funding units to be allocated, while a large number of veteran parties that disappear lowers this number. Thus, for example, the state awarded a total of 146 funding units to parties in the 2013 elections—about NIS 195 million.
Splits in existing parties during the course of a Knesset term have little impact on campaign financing. The law (Party Financing Law, Section 3(A)(2)) explicitly states that a party created as a result of a split from an existing party in the Knesset is treated as a new party for the purposes of campaign financing.It is important to note that here it does not matter whether the splinter group of MKs includes less than a third of the party’s MKs who “quit” or more than a third who “split”: In any case, these MKs are considered to comprise a new party for the purposes of campaign financing. Incidentally, it can be noted that there is significant distinction between those who “quit” and those who “split” in regard to the financing of current expenses—those who “quit” are not entitled to this funding, while those who “split” are entitled to this financing if the split occurs more than two years after the beginning of the Knesset term. For example, during the 18th Knesset, seven members of Knesset (MKs) from the Kadima party broke away to form the Hatnua party led by Tzipi Livni. However, Hatnua’s funding for the 19th Knesset was that of a new party that won six seats (and thus received seven funding units—six seats plus one additional unit). At the same time, the funding for the original party from which it spun off—the Kadima party—was not affected by the split. Another prominent example is the Labor Party: Its campaign financing in the race for the 19th Knesset was based on an average of the 15 seats it won in those elections and the 13 Labor MKs elected to the 18th Knesset, even though five of these MKs broke away to form the Atzmaut party. Thus, the Labor Party received 15 funding units (the average of 13 and 15, plus one). If Atzmaut’s spin-off had been figured into the calculation of funding, Labor would have received only 12.5 funding units (the average of eight MKs that remained in the 18th Knesset after the split and the 15 seats the party won in the elections for the 19th Knesset, plus one).
Sometimes MK do not officially break away from their party, but nonetheless compete in the following elections in a new party. For example, Eli Yishai and Yoni Chetboun are competing in the Yachad–Ha’am Itanu party even though they never officially split from the parties in which they were elected to the current Knesset in 2013, Shas and Bayit Yehudi (Jewish Home), respectively. Here too, the Yachad–Ha’am Itanu party will be considered a new party, and the campaign financing of Shas and Habayit Hayedudi will not be adversely affected.
There is one primary case in which the split does affect campaign financing. If a party list that was formed by merging two (or more) existing parties splinters into its constituent parties after the elections, the latter are not considered new parties for the purpose of campaign financing. An example of this is Yisrael Beytenu: Despite the fact that it ran in the previous elections as part of a joint list with the Likud, it will be considered a veteran party with 11 MKs (the number of MKs in the party when it split from the Likud) for the purpose of calculating funding units. According to the current surveys predicting a single-digit number of seats, this rule will help the party receive a higher level of funding than if it were considered a new party.
If two parties compete in a joint list, their campaign financing is based on the total number of seats the two parties received in the previous elections. For example, the joint Likud-Yisrael Beytenu list that competed in the 2013 elections received 37.5 funding units according to the following calculation: The two parties ran separately in the 2009 elections, winning a total of 42 seats (27 for the Likud and 15 for Yisrael Beytenu). In the 2013 elections, the joint list won 31 seats. The average of 42 and 31 is 36.5, plus one additional unit—37.5. It can be noted, incidentally, that a list composed of two or more parties has an advantage in another area: The more parties the list represents, the higher the limit on its election expenses—money that it is permitted to spend on its election campaign (State Comptroller, 2014: 93.)
The example of the joint Labor Party-Hatnua list competing in the current elections is particularly interesting. Only two MKs out of six who represented Hatnua in the end of the 19th Knesset are running on the joint list: Tzipi Livni and Amir Peretz. The other four MKs—Amram Mitzna, Elazar Stern, Meir Sheetrit and David Tzur—did not join. Nonetheless, the funding of the joint list will be calculated as if Hatnua in its entirety—with its six seats—had joined the list. Hypothetically, if the four Hatnua MKs who are not in the joint list were interested, they could declare themselves the representatives of the party. In such a scenario, it is reasonable to assume that Tzipi Livni and Amir Peretz would not have “taken” the party’s campaign financing with them. This is because of the rule stating that “the MKs comprising the majority of the party are considered the representatives of the party” (The Knesset Law, 1994: section 63). However, as noted, the four MKs did not do this.
Political parties spend large sums during election periods—for example, on propaganda, surveys, advisors and organization. Campaign financing by the state is used to pay for virtually all of these expenses—99% of the money the parties spent in the 2013 election campaign came from state funding (about NIS 195 million of some NIS 197 million).In practice, the parties spent much more than this sum—about NIS 242 million. As noted, their income was only about NIS 197 million, including about NIS 195 million in campaign financing from the state. The shortfall in revenues was not directly covered and turned into debt. Thus, one can say that the parties in Israel are completely dependent on campaign financing and general party funding from the state in order to operate. This stems from two main reasons: First, campaign financing in Israel is very high in comparative perspective—the highest among OECD states (relative to the number of voters) (Ben-Bassat and Dahan, 2014: 158). Secondly, parties find it difficult to finance themselves from contributions due to the strict limitations that exist in Israel in this area—a household is allowed to contribute a maximum of NIS 2,300 to a party in an election year (Party Financing Law: section 8(C)). In addition, party membership fees have dwindled.
Consequently, there is great importance in the way that financing is allocated among the various parties—this can affect the shape of the political map. Perhaps the salient example is the way in which campaign finance laws work to the benefit of the existing parties and the large parties in particular, thus helping to maintain the existing division of political power and making it difficult for new forces to succeed. Other important rules pertain to specific cases of mergers, splits and joint lists. This article attempted to sketch a general picture to help clarify the key rules of campaign financing and their impact on the political system.
Ben-Bassat, Avi and Mimi Dahan, 2014. Reforms, Politics and Corruption, Jerusalem: Israel Democracy Institute. (Hebrew)
Party Financing Law, 1973 (Hebrew)
Local Authorities (Campaign Financing) Law, 1993
Knesset Law, 1994
State Comptroller, 2014. “Report on the Results of Reviewing the Accounts of the Parties and Lists of Candidates for the Election Period for the 19th Knesset.” State Comptroller’s website (Hebrew)
IDEA, 2013. "Political Finance Database", IDEA Website
Assaf Shapira is a member of the research team of IDI's Political Reform project.