The Ministry of Finance is likely to announce a further across-the-board cut in ministry budgets in 2017-2018 if the Jewish National Fund (JNF) does not accept the cabinet approved agreement for NIS 2 billion appropriated from JNF funds for financing infrastructure projects over the next two years. The additional 1% cut will be added to a 4.5% cut agreed at the cabinet meetings for approval of the state budget.
The cabinet resolution, formulated in coordination with JNF management, has become a focus of internal JNF political struggles. "We were astounded to discover that the proposal submitted to the cabinet by the Ministry of Finance included a proposal that grossly violated the agreement signed by the state and the JNF in 2015," JNF chairman Daniel Atar and AMIT chairman Shimon Susan wrote to Minister of Finance Moshe Kahlon. Susan was appointed to represent Kulanu, Kahlon's party, and is considered close to him.
Meanwhile, no date has been set for the JNF board of directors meeting, which was to have announced its acceptance of the agreement with the Ministry of Finance. The state cannot force a decision on the JNF without its consent. The JNF said in response, "The JNF chairman and board are acting according to what is good and right for the Jewish people and Israel."
According to the cabinet resolution when the budget was approved, if the agreement is not ratified by September 12, Kahlon will be instructed to cut NIS 1 billion from the ministries' budgets in both 2017 and 2018. This will almost certainly be accomplished by a 1% across-the-board cut in the ministerial budgets, after a 4.5% cut in each of the following years has already been decided.
JNF's political clout results from the fact that all the Zionist parties (except for Yesh Atid) have members on its board of directors, and benefit from the money and jobs it distributes. Before the last elections, the Yisrael Beitenu Party threatened a coalition crisis if the government forced a settlement on JNF, as demanded by then-Minister of Finance Yair Lapid.
JNF has amassed an estimated NIS 4-5 billion from the marketing of land it owns through the Israel Land Authority (ILA).
JNF owns 22% of the land in the central and northern regions (two million dunam 500,000 acres). Under public pressure, the state and JNF signed an agreement in 2015 under which JNF undertook to pay the state NIS 1.2 billion in 2016 and NIS 1 billion more in 2017 in exchange for extending the covenant between the state and JNF for two more years. This covenant provides JNF with protection, including, among other things, a tax exemption and protection against auditing by the State Comptroller, the Ministry of Finance director of wages, and the Ministry of Finance Accountant General.
The agreement has not been implemented to date, because the committee of four that was to have decided on the projects for which the money would be allocated was disbanded. JNF says that it has given the state NIS 250 million to date in the form of lost revenue from its land marketed free of charge by ILA in the framework buyer fixed price ventures. JNF adds that the cumulative loss of revenue will reach NIS 450 million by the end of 2017.
The cabinet resolution reached on August 11, following a meeting between the JNF board and the Ministry of Finance, stated that JNF would pay NIS 750 million for development budgets (instead of the NIS 1 billion in the original 2015 agreement) by October 1, 2016. NIS 1 billion will be paid by June 1, 2017 (instead of NIS 800 million in the original agreement), and a further NIS 1 billion by June 1, 2018. The resolution stated, "Insofar as it is not ratified by JNF institutions by September 12, 2016, the Minister of Finance will be instructed to deduct NIS 1.05 billion from the 2017 budget and NIS 1 billion from the 2018 budget, with the division of the cuts among the various ministries being proportional."
The cabinet resolution stated, "The state has been giving JNF billions of shekels over the years, derived, among other things, from betterment of land by the state. This betterment is financing primarily from the state's budget and its activities, but the profit from this betterment is not being provided regularly and continuously for public use; some of it is being accumulated by JNF. Furthermore, under the covenant between the state the World Zionist Organization and under tax law, JNF is not bearing any tax burden, since it is exempt from taxes."
In their letter to Kahlon, Atar and Susan wrote, "It is very regrettable that the resolution is based on a false representation of the principles of the proposal supposedly agreed with the JNF board - a statement with no basis in fact."
They add, "No less outrageous is the distorted and biased explanation depicting JNF in a negative light… it would have been better had the Ministry of Finance taken stronger action to implement the agreement on the use of the money allocated to JNF for national enterprises, instead of taking unilateral measures in the dead of night."
Published by Globes [online], Israel business news - www.globes-online.com - on September 4, 2016
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