Many commentators on the 2025 budget have had much to say about potential cuts to the public sector. According to a new policy paper recently published by Dr. Ronen Mandelkern, a researcher at Tel Aviv University’s department of political science, the Ministry of Finance plays a central role in weakening Israel’s public sector, and in order to solve the problem, the ministry must be restructured. The research, conducted in collaboration with the Yesodot Institute for Public Policy and the Arlozorov Forum, is especially relevant as the Knesset continues its work on the budget for the upcoming year and the associated reforms that will be needed to finance the budget.
“We know that there is a problem with investment in public and social services,” Mandelkern told Davar. “The state budget is too limited in social and environmental investments. We saw what social services were like on October 7.”
He said the Finance Ministry’s budget division has hampered the various ministries’ abilities to provide services to the public. “On the macro level, by virtue of its role, the budget division is primarily committed to preserving the budget, and only secondarily to social services. This means that its DNA tends to reduce the budget rather than expand it,” Mandelkern said.
The budget division also often restricts a ministry’s ability to move money around from one internal area to another, he said. “For example, if a ministry realizes it needs more money in one area and less in another, the division often restricts the ministry’s ability to make those adjustments,” he explained. “As a result, ministries often end up not spending large portions of the money allocated to them, which leads to further de facto cuts.”
According to Mandelkern, there’s a consensus that the budget division has too much power—even among those in the division itself. Some analysts have suggested ways to make the budget division function better, but Mandelkern argues that the solution needs to cut deeper.
“The way the division thinks is derived from its position and role within the government. We saw how managers in the public service promote one policy when they are in the budget division, and when they move to another division, they promote a different policy,” he said. “Moreover, when we examined how economists view the relationship between the political system and the professional bureaucracy, we found that economists in the Ministry of Finance hold more technocratic views—they believe in giving more power to the professional ranks over the political ranks.”
Some critics of plans to restructure the budget division note that the division serves as a gatekeeper to government funds. They say that reducing the power of the division might just put more hands in the political echelon, ultimately weakening the public sector.
Mandelkern acknowledged the need for a balance between the professional and political echelon. “There needs to be a balance between the factors, and additional ministries besides the Ministry of Finance need to be strengthened,” he said. “The current government uses the budget in a very political way, for the purposes of its far-right agenda. When the political echelon is committed to a goal, the professional echelon’s ability to enact influence is weak.”
“We want to strengthen the professional ranks across all ministries and ensure that all ministries acquire the expertise that the budget division has gained in drafting laws, while also increasing the autonomy of other ministries, especially in day-to-day management on a micro level,” he continued. “We want to retain the power of the division at the macro level as the coordinator of the state budget. There are professional ranks in other government ministries with very high capabilities, ministries that are strong in management and professional ability. Our way of advancing change is through these ministries.”
Mandelkern’s research into the budget division is innovative in that it looks at several different courses of action to address the problem and highlights the advantages and disadvantages inherent in each of them. The suggestions are based on discussions with various stakeholders and previous work on the topic.
Alternative 1: Strengthening Trust Mechanisms and Dialogue
This proposal would maintain the current legal and structural situation while attempting to strengthen dialogue mechanisms between the budget division and the government ministries. Mandelkern said that this proposal would not do enough to address the problem.
“Solutions need to come at an institutional and formal level,” he said. “I support steps that enhance trust, but relationships, especially in politics, are based on the distribution of power and influence. And that distribution needs to be more fitting. You can’t build policy on this.”
Alternative 2: Abolishing Conditional Agreements in Budget Summaries and Making Them Public
Under the current structures, ministries have private meetings with representatives from the budget division to close deals on the budget. “A ministry comes in and says it wants to increase its budget, for example, for a new service, and the division says: no problem, but in return, you will make another change in the ministry or promote a certain reform,” Mandelkern explained. This proposal would get rid of that process of backdoor dealmaking.
“There are two problematic aspects to this process,” he said. “One—it’s not transparent to the public. It’s an unreasonable arrangement. There is currently a petition on this issue in the Supreme Court.”
The second issue with the current system is that it interferes with the ministries’ operations. “The division should organize needs based on substantive considerations, according to government decisions,” Mandelkern said. “Today, this is a central tool for advancing micro-level changes that stem from the division’s narrow efficiency focus, through competition and privatization. Sometimes, this crosses into the core professional issues of ministries, such as how to deal with environmental questions.”
One challenge in this proposal is that it aims to abolish a norm that isn’t formally organized and isn’t anchored in law.
“The negotiations between ministries and the budget division can’t just end,” Mandelkern acknowledged. “I think the budget agreements will continue to be somewhat hidden. But the phenomenon needs to be minimized, and the control of the budget division over the day-to-day management of ministries needs to be weakened.”
Alternative 3: Linking Promotions in the Budget Division to Experience in Other Ministries
“The idea was to make promotion to a coordinator role within the budget division conditional on having two years of experience in the budget departments of other ministries, managing the budgets of those ministries,” Mandelkern explained. “This could encourage the infusion of professional knowledge and considerations from other ministries into the budget division, including those that are not only aligned with its internal perspective.”
Mandelkern said that the report did not recommend this proposal, finding it to be insufficiently ineffective. “It’s a move that’s hard to formalize at the organizational and administrative level, because the length of service in roles between ministries does not sync,” he said. “We’re not against the move, but we don’t stand behind it as something that will lead to change.”
Alternative 4: Budgetary Autonomy for Government Ministries
Currently, the budget division has control over the transfer of funds between budget lines and the use of budgetary reserves. This proposal would give the division control and oversight over the overall budget size of a ministry but allow the ministries to manage the use of the budget themselves.
“There’s an argument that in such a situation, ministries and ministers will do whatever they want without oversight, but there are gatekeepers within the ministries,” Mandelkern explained. “There are control mechanisms, the budgeting units, and the accountant general of the Ministry of Finance.”
He explained that this process would ideally happen gradually to ensure that oversight is maintained and that funds are still used properly. “We proposed starting with a pilot with the stronger ministries that can handle it. This would also make it more politically feasible,” he said.
Mandelkern said that this proposal is justified both from a sociodemocratic perspective and from a governance perspective, noting that the proposal was discussed in the Knesset’s governance committee as far back as 2013.
Alternative 5: Establishing an Authority for Promoting Reforms as an Alternative to the Budget Division
“The central entity in the government today that promotes long-term plans is the budget division,” Mandelkern explained. “Based on this, there has been success in staying within the budget framework and reducing the deficit, but we haven’t succeeded in social and environmental strategy, and we’re in trouble in these areas. This reflects the power relations in the government’s strategic thinking. We want a reform body that helps promote long-term thinking, which takes into account other professional considerations and includes representatives from both the Budget Division and other ministries.”
One concern about this proposal is that it would simply turn into the old budget division. “We certainly know that powerful bodies act to preserve their power, and there is a danger that this will happen with a new body that might be established,” Mandelkern said. “Our goal in this document is to present a compass for the right way forward. Such an authority is essential at this point in time. We need to plan for recovery, return to growth, and do so equitably. This requires long-term thinking with strategic integration. There are bodies in the Prime Minister's Office that were created to promote long-term thinking, with serious professionals and implementation capabilities. They need to have more power.”
Mandelkern’s final analysis proposes combining three of the alternatives: abolishing the conditional budget agreement, gradually granting ministries budgetary autonomy, and establishing an authority to promote reforms separate from the budget division. “We believe that implementing these proposals in parallel will complement and strengthen each other,” Mandelkern said.
While Mandelkern and others have pointed to the budget division as a force used by the current right-wing government to promote its policy, MInister of Finance Bezalel Smotrich has actually tried to weaken the division. That attempt results from a desire to politicize the system, Mandelkern said.
“Ultimately, the Ministry of Finance is unable to act as a gatekeeper against politicians when they want something,” he explained. “The Ministry of Finance only manages to preserve the budget by cutting ministry budgets after politicians have received what they wanted. Therefore, we need to expand the definition of who the gatekeepers are and who the professional ranks are that need to be strengthened.”
This article was translated from Hebrew by Paul Weissfellner.
