Israel's Coalition Funds Skyrocket Amid War and Tax Hikes

Israel has seen a dramatic increase in "coalition funds," discretionary government money allocated to coalition parties, which has surged from approximately 700 million shekels in 2022 to about 8 billion shekels in 2024. The current Netanyahu government has distributed over 21 billion shekels in coalition funds between 2023 and 2026, primarily benefiting ultra-Orthodox educational institutions, yeshivas, religious services, and settlements. This spending occurred while Israel's ranking on Transparency International's Corruption Perceptions Index dropped from 30th to 35th place for 2025, with a score of 62, down from 60 in the previous year. Researchers attribute this decline to public fund misuse, conflicts of interest, political attacks on law enforcement, and expanded political appointments.

Coalition funds, described by the Treasury as "political agreements with budgetary significance," bypass standard professional budget planning. Instead, parties receive funds in exchange for coalition support and then allocate them to affiliated groups. The current government's allocation represents a more than eightfold increase compared to the previous government's 700 million shekels in 2022. In 2023, 5.7 billion shekels were distributed, followed by 7.9 billion in 2024 and 4.6 billion in 2025. An additional 2.4 billion was approved in March for 2026, and a controversial 790 million shekel transfer to yeshivas and ultra-Orthodox institutions was pushed through in August, bypassing the Attorney General's directive.

Beyond these official figures, the total amount allocated through other means, such as tax benefits for settlers and funding for settlement programs, is even higher, reaching an estimated 7.3 billion shekels this year alone. This surge in coalition funding has occurred concurrently with a national war, a significant increase in the government deficit, rising taxes contributing to the cost of living, and cuts to public services. The government also established three new ministries, Settlement Affairs, Heritage, and Jerusalem and Tradition, whose combined budgets have nearly quintupled to approximately 5 billion shekels over four years, serving primarily sectoral interests.

Significant portions of these funds are directed towards ultra-Orthodox educational institutions, including yeshivas and kollels, with budgets increasing far beyond demographic growth. The settlement sector also receives substantial funding, with a large portion allocated to settlements in the West Bank and support for illegal outposts. This spending contrasts sharply with cuts made to essential services like health, education, and welfare, totaling approximately 11.7 billion shekels. The total amount allocated to coalition funds is nearly double the amount cut from these services, suggesting the cuts could have been avoided.

Furthermore, hundreds of millions of shekels have been moved to the base budget, removing them from special oversight. Mechanisms like the "green track" and reduced reporting detail obscure the flow of funds, making oversight difficult. In one instance, 790 million shekels were transferred to yeshivas and ultra-Orthodox institutions in late March, bypassing the Attorney General's objections and a High Court ruling prohibiting funds to institutions whose students evade military service. The opposition leader Yair Lapid stated, "There has never been anything like this in the history of the Knesset."