Amendments to the Party Financing Law: A Classic Conflict of Interest

In a classic conflict of interests, the parties dip into the public coffers before every election, flouting any semblance of fiscal responsibility.

Flash 90

We still don’t know how long the 23rd Knesset will survive. But we can expect that right before it is dissolved there will be Knesset members who will attempt to increase the funding the parties receive from the state, as was the case before the last several election campaigns. But, like other Knesset decisions—such as those relating to parliamentary immunity and MK's salaries—here too, our elected representatives are in a classic situation of conflict of interests. 

We begin with a description of how the mechanism works. Israeli political parties receive two types of state funding: funding for election expenses, and ongoing funding unrelated to elections. In both cases, the amount is based on a “funding unit,” which currently stands at around 1.4 million shekels, and on the size of the party’s Knesset faction: the more Knesset seats it has won, the more funding units it receives. Until 1994, the Knesset Finance Committee determined the size of the funding unit; and, as might be expected, its size was increased over and over again. In 1994, the Party Financing Law was amended, and the power to set the value of the funding unit was transferred to a three-member professional-- public committee, chaired by a judge. 

In recent years, however, this mechanism has been eroded. Time after time, the Knesset bypasses the committee and increases party funding. Because it cannot change the size of the funding unit—since this remains the exclusive province of the public committee—it amends the law so that each faction receives additional funding units. The Knesset employed this tactic in 2017 to increase each party’s monthly subsidy by 20%. Prior to the elections to the 23rd Knesset, the special campaign funding mushroomed by another 34%, or by around a total of 60 million shekels for all the parties 

In the last two years, the Knesset also relaxed the terms for parties to receive Knesset loans. . It has also repeatedly postponed the date on which the parties are required to submit the statement of their election finances to the State Comptroller. In fact, they have yet to file their reports for the elections to the 21st Knesset, which took place more than a year and a half ago. Today, the bill to dissolve the Knesset includes an amendment to the Party Financing Law that, although it would slightly reduce the financing for some of the parties in the next election, would further ease the rules on the loans the parties receive. 

Obviously, these decisions are tainted with conflict of interest. They undermine public trust in the parties and in the Knesset (which is already far from stellar) and are highly costly. The increase in party funding for the last Knesset elections cost the public purse around 60 million shekels. The decisions also encourage irresponsible fiscal conduct by the parties, which know that in the future they will be able to amend the law in order to resolve their financial woes.

To address this issue, the Knesset must adopt a reform that limits its ability to "play around" with party funding in any way it wishes. One idea (though probably not feasible) is to expand the authority of the public committee so that it would hold exclusive power to draft recommendations and/or take decisions on all matters related to party financing; not only the size of the funding unit, but also the rules for the formula that determines the subsidy and for loans, contributions, expenditures, and the submission of financial statements. Under this plan, the Knesset would no longer be able to set these rules. An alternative or supplementary proposal is that parties would be required to improve their financial management so that our tax money would be spent more efficiently. For example, it would be stipulated that parties may not spend all the funds they receive from the state on the election campaign, but rather--must invest a sizable chunk in other worthy endeavors, such as ideological activity, investments in the periphery, and the advancement of women. 

Finally, and unrelated to the needed legislative amendments, we can—and should-- demand that parties and Knesset members demonstrate responsibility. The parties must utilize their budgets in a more balanced and economical fashion—certainly in light of the economic crisis brought on by the COVID-19 crisis. Furthermore, MKs must understand, once and for all, that the rule of law requires them to avoid constant tampering with the rules of the game so as to serve their personal and political needs; and all the more so—with decisions involving a blatant and inevitable conflict of interest.

The article was published in the Times of Israel.