Press Release: Social Service Budgeting in Israeli Local Authorities
December 03, 2017
Employees of social service departments in local authorities deal with some 465,000 households in distress. The services they provide are financed through matched funding: for every shekel invested by the local authority, the Ministry of Labor and Social Welfare supplements NIS 3, such that in practice 75% of the welfare budget is financed by the Ministry of Labor and Welfare and 25% by the local authority.
The study (which will be published in the State of the Nation Report 2017 this month) examines the budgeting patterns of welfare services in local authorities in Israel and the gaps between the different localities.
The findings show that it is difficult to attribute this disparity to local authorities’ inability to meet their share of the funding, although it is quite possible that authorities with fewer resources request a relatively small sum from the Ministry out of fear that they will not be able to finance their shares. On the other hand, the data clearly show that the average initial sum allocated by the Ministry of Social Welfare to the weaker authorities – particularly to the Arab Israeli localities – is lower, primarily due to differences in the types of care given in the different localities.
Another reason for the discrepancy is the willingness and ability of stronger localities to allocate more resources to social welfare issues beyond what is required to receive funding.
- The average welfare expenditure stands at 11% of the total budget in localities of low socioeconomic standing, and at 6% among those with a high socioeconomic ranking.
- The average per-client expenditure in strong localities without balanced-budget grants and government development grants (Forum-15 localities) is NIS 9,095, while in Arab Israeli localities the expenditure is only NIS 3,387. In the Haredi localities, which are categorized as part of the low socioeconomic cluster, the average expenditure is NIS 8,749, compared to NIS 7,318 in the remaining Jewish localities.
- A gap that disadvantages the weaker authorities emerges already with the initial allocation by the Ministry of Labor and Social Welfare: NIS 3,170 allocated to the localities of low socioeconomic standing, compared to NIS 5,400 to the other authorities.
Most of the gap between localities in per-client budget allocation can be explained by types of care frameworks: the weaker authorities use fewer out-of-home frameworks, which are the most expensive.
Israel’s Supreme Court is currently reviewing a petition on the subject of inequality in the welfare services provided by local authorities. A report submitted in the framework of a petition notes the problems associated with the matching method, which requires local authorities to contribute 25% of the cost of funding social services, and with the absence of clear criteria for the allocation of resources by the Ministry of Social Welfare. This research study conducted by Taub Center researchers Prof. John Gal, Shavit Madhala and Haim Bleikh, which will be published in the Taub Center’s State of the Nation Report 2017, addresses the source of gaps in social service provision that residents receive in strong and weak localities, and explores a number of possible explanations. The comprehensive study includes an analysis of 253 local authorities in Israel – Jewish, Haredi, and Arab Israeli – across the spectrum of socioeconomic statuses.
There is considerable inequality in the financing of welfare services between strong and weak local authorities
Under the Welfare Law of 1958, the primary responsibility for the welfare of individuals, families and communities rests with local authorities, whether these services are provided to the community by local social services departments or by welfare institutions from outside the locality. The Ministry of Labor and Social Welfare is the main source of funding for the welfare activities of the local authorities, and is responsible for determining relevant policies and regulation.
The data show that, not surprisingly, the lower a locality falls in socioeconomic ranking, the greater the welfare needs of its residents and the more the locality is required to allocate a large portion of its budget to addressing welfare issues. Accordingly, in localities that belong to the three lowest socioeconomic clusters, welfare expenditure accounts for 11% of the total budget, on average, and in the localities belonging to the three highest socioeconomic clusters, it constitutes an average of 6% of the budget.
While the share of welfare expenditure out of the locality’s budget tends to increase when the locality is weaker socioeconomically, the data show that the total per-client expenditure is actually smaller when the locality is weaker.
While the average per-client expenditure in the Forum-15 localities (autonomous authorities that do not receive balanced-budget and development grants from the government, and are considered the strongest socioeconomically) is NIS 9,095, among Arab Israeli authorities it is only NIS 3,387. In contrast, the Haredi local authorities are exceptions to this rule: even though they have a low socioeconomic ranking, the average per-client expenditure (NIS 8,749) is high in comparison to the per-client expenditure in other Jewish municipalities (NIS 7,318).
Thus, according to data collected by the Taub Center researches, there is considerable inequality between various local authorities, and those who require assistance the most and live in localities of low socioeconomic status are the ones to which the fewest resources are allocated. This trend is likely to increase the social inequality that already exists between different population groups in Israeli society.
The main explanations for inequality are gaps in the sums allocated by the Ministry of Labor and Social Welfare and additional self-generating income in wealthy localities
Over NIS 4 billion out of the Ministry of Labor and Social Welfare’s budget (NIS 5.5 billion as of 2014) was allocated to fund the welfare activities of local authorities. The distribution of the budget for localities is based on formulas determined by the Ministry, and are calculated each year based on several criteria, including the number of client files handled by local social service departments, the type and size of the locality, its socioeconomic status and other indicators that are not made public.
Over the course of the budget year the Ministry reexamines the budgeting, and increases or cuts funding in accordance with new needs that may have arisen, or the local authority’s willingness to provide its share of the funding. The authorities may also expand their provision of services through funding from an independent source, such as philanthropic foundations or tax funds.
It is possible that the budgeting for social services and the matching method create inequality between local authorities
It is widely argued that the matching method of funding creates inequality between local authorities and harms residents in need of assistance. According to this argument, authorities with very few financial resources, whose residents are most in need of welfare, are unable to fulfill the funding costs required on their part in order to receive the full budget from the Ministry of Social Welfare, and therefore end up providing more limited social services.
The research of Gal, Madhala, and Bleikh examines this issue, but it is difficult to determine the degree to which the ability to supplement funds with self-generated income affects the size of the budget. The vast majority of authorities (92%) utilize the entire budget earmarked for them at the beginning of the year, and receive additional funds over and above the initial allocations.
Of the 20 localities that do not utilize the budget allotted to them, only eight are ranked in a low socioeconomic cluster (all are Arab Israeli localities), assumedly due to their inability to produce the share of funding required of them. The other 12 authorities are ranked among the high socioeconomic cluster, and in these cases it seems likely that they do not need the full sum in order to adequately provide welfare services.
The data signify that most of the authorities actually did manage to meet the funding level required of them in order to receive the full government budget, and even spent more than the required sum. However, it is quite possible that authorities with few resources request a relatively small sum from the national government in order to avoid a situation where they cannot meet their share of the funding later in the year.
Employees in the Ministry of Labor and Social Welfare have indicated that requesting a smaller allocation than is needed may result from a locality’s inability to send clients to out-of-home care frameworks as a result of difficulties in obtaining funding.
Institutions that provide clients with out-of-home residential services are considered to be a particularly expensive component of welfare costs, and the general assumption is that weak authorities might prefer to request funding for some of their clients to participate in community-based frameworks rather than in out-of-home frameworks because of the cost, even if the latter is considered to provide better treatment for them.
Weaker authorities receive less funding, mainly because they refer clients to lower-cost care frameworks
A second explanation examined by the Taub Center researchers for gaps in welfare expenditure between local authorities focuses on the initial allotment from the Ministry of Labor and Social Welfare. According to Ministry policy, when resources are allocated, preference is given to weaker localities with a high concentration of needy people.
However, despite this decision, a gap that disadvantages the weaker authorities exists even from the Ministry’s initial allocation: the average per-client expenditure is NIS 3,170 for the localities of low socioeconomic status, compared to NIS 5,400 for the rest of the authorities.
The end-of-year per-client budget data, after adjusting for utilization of the budget and the needs of the authorities, show that the gap is even greater: NIS 3,630 in the lower socioeconomic clusters and NIS 6,078 in the other localities.
Gaps in the average allocation earmarked by the Ministry are also prominent when examining localities by their demographic composition: NIS 2,682 in Arab Israeli localities, NIS 5,483 in Jewish localities, and even higher sums in Haredi and Forum-15 localities.
To explain gaps in the Ministry of Labor and Social Welfare allocation to the various localities, the researchers examined the characteristics of the care frameworks used by each authority. The care frameworks can be divided into direct services provided by social workers in local social service departments, community-based frameworks, and out-of-home frameworks.
The analysis points to large differences between the authorities in the share of clients cared for in community-based and out-of-home frameworks. In Arab Israeli localities, these frameworks are less frequently used than in the Jewish sector, and in the Haredi localities they are used considerably more frequently than in the other localities. The study also finds that, as the share of Haredi residents in a locality increases, there are increased rates of participation in out-of-home and community-based frameworks.
To explain the differences in per-client expenditure between sectors, the researchers conducted a multivariate analysis. They found that gaps in allocation between the sectors may be explained by differences in the characteristics of care in different authorities as well as by different demographic and socioeconomic characteristics.
In particular, they found that the different care frameworks contribute a great deal in explaining the phenomenon – this is the source of 64% of the variance that can be explained.
The third explanation for gaps in welfare expenditure among the local authorities is their ability to supplement the budget beyond what is required to receive Ministry funding. As stated above, the matching method means that local authorities are supposed to finance 25% of the welfare expenditure for the locality
The Taub Center study finds that almost all of the localities add funds beyond the required amount, but wealthy localities tend to add more additional resources than poor localities: the rate of self-generated income out of total welfare expenditure is 30% on average in Arab Israeli localities, 36% on average among the Forum-15, and 37% on average among Haredi localities (though, as previously stated, they belong to lower socioeconomic clusters).
These supplements mean that in overall per-client expenditure for welfare services there are even greater gaps than were seen in the original budgetary allocation by the Ministry of Labor and Social Welfare.
The researchers write: “The study’s findings on social service budgeting among Israeli local authorities and its examination of the factors underlying the budgeting system, underscore the need for a reexamination of the existing budgeting system and the adoption of policies that will ensure equal access to care for the needy, regardless of where they live.”
The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.
For details, or to arrange an interview, please contact Anat Sella-Koren, Director of Marketing, Communications and Government Relations at the Taub Center for Social Policy Studies in Israel: 050-690-9749.