The places that need welfare funding the most are getting the least
Author: Taub Center Team Bulletin Articles

Is the current method for funding social services at the local level equitable?

How much of lical authorities budget is spent on welfare services

In Israel, local authorities are primarily responsible for providing the welfare services needed by individuals, families, and communities.

Social workers and other professionals employed in the local authority social service departments deal with the problems of around 464,000 households in distress who receive a range of services including care for the elderly, individuals with disabilities, and children at risk.

Currently, these services are funded by what is called the “matching” method: for every shekel invested by the local authority, Israel’s Ministry of Labor and Social Welfare allocates three shekels. In practice, this means that 75% of the local authority’s welfare budget is financed by the Ministry of Labor and Social Welfare and 25% by the local authority itself, though municipalities can, and do, add additional resources.

This funding method is the topic of much public debate. While many argue that, under the current method, the funding for social services is inequitable across local authorities, there is not much data available on the topic. Many of Israel’s decision makers agree that the “matching” method should be abolished or modified, though there is little consensus about what type of funding method should be adopted in its place.

A recent Taub Center study, conducted by Prof. John Gal, Shavit Madhala, and Haim Bleikh, sheds light on the extent of funding gaps between different local authorities and explores possible explanations for these gaps.

When looking at the percentage of a local authority’s budget that goes towards welfare services for its residents, localities of low socioeconomic ranking spend about 11% of their budgets on welfare services, as compared to about 6% among localities of high socioeconomic ranking.

There are also large differences among localities in Israel when looking at average welfare spending per client. While Israel’s strongest localities (a group of localities called the “Forum-15” that do not require central government development grants or balanced-budget grants) spend an average of NIS 9,095 per client annually, Arab Israeli localities spend an average of only NIS 3,387 per client.

In the Haredi localities, the average expenditure is NIS 8,749, compared to NIS 7,318 in the remaining Jewish localities.

Total annual expenditure per client by localityThe study explores a number of possible explanations for these funding disparities. One possibility that the researchers raise but do not find to be compelling is that weaker authorities are unable to meet their share of the funding costs in order to receive the full budget from the Ministry of Labor and Social Welfare.

Given that over 90% of local authorities do indeed spend the entire budget earmarked for them at the beginning of the year (or more) and that the few who don’t include authorities in both low and high socioeconomic clusters, this does not seem to be a major reason for funding disparities.

However, it is quite possible that authorities with fewer 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.

The researchers find that another possible explanation – differences in the types of care frameworks localities use to provide social services – does indeed explain over half of the difference in initial funding that localities receive from the Ministry of Labor and Social Welfare.

Different types of frameworks can have substantially different costs from one another. Localities of lower socioeconomic standing tend to use fewer out-of-home residential services, which are the most expensive type.

This, in turn, has an impact on the initial sum allotted to them by the Ministry (and, presumably, on the quality of care provided to clients): in the initial allocation, NIS 3,170 per client is allocated to localities of low socioeconomic standing, on average, as opposed to NIS 5,400 per client to the other authorities.

Haredi localities are an interesting exception. Though Haredi localities belong to lower socioeconomic clusters, they tend to use out-of-home care frameworks more and, as mentioned above, end up spending more per client than other Jewish (non-Forum-15) localities.

In addition to differences in the original allocation by the Ministry of Labor and Social Welfare, a third explanation for funding gaps is that more affluent localities tend to allocate more additional resources to welfare issues, beyond those required to receive funding from the Ministry of Labor and Social Welfare through the matching method.

Here again the Haredi localities stand out. They supplement the budget beyond what is required by the matching method, despite belonging to lower socioeconomic clusters.

Since the study’s publication, the researchers have continued to meet with national and local leaders, sharing their findings and adding much-needed data to the policy discussion on this topic.