Tension in coalition mounts over last minute budget demands

Tension mounted in the coalition on Thursday after Agudat Yisrael, the hassidic faction within the United Torah Judaism party, sharpened its tone against Prime Minister Benjamin Netanyahu over its claim that the budget does not grant the party what was promised in the coalition agreements, including over NIS 600 million in retroactive funding for its school systems since the beginning of 2023.

Radio Kol Chai's Avi Rabina reported on Thursday that Agudat Yisrael was officially threatening to bring down the government by voting against the budget if it did not receive the funds. The party would even be willing to have Housing Minister Yizhak Goldknopf resign in order to return to the Knesset after resigning from it as part of the Norwegian Law, just so that it will have the fourth MK, which is necessary in order to challenge the 64-member coalition, Rabina reported.

United Torah Judaism is built in a zipper alignment, between Agudat Yisrael and its fellow party, the Lithuanian haredi Degel Hatorah, with Agudat Yisrael first. The party won seven seats in the election, ergo four for Aguda and three for Degel, as they are known colloquially. Goldknopf resigned from the Knesset under the Norwegian Law. This brought in Degel's MK Yizhal Pindrus, and gave Degel a 4-3 edge in the Knesset. According to the Norwegian Law, Goldknopf's return to the Knesset would push Pindrus back out and return Agudat Yisrael its fourth seat.

The Jerusalem Post was not able to confirm Rabina's report, but an advisor for Aguda's Jerusalem and Jewish Tradition Minister Meir Porush confirmed to the Post on Wednesday that if the party's demands were not met, it would convene its Council of Torah Stages to decide on whether or not to support the budget.

KAN reported on Thursday evening Finance Minister Bezalel Smotrich issued an ultimatum of his own – if Agudat Yisrael gets what it wants, he will resign. According to KAN, Degel Hatorah leader MK Moshe Gafni, who is also the Knesset Finance Committee chairman, and Shas chairman MK AryeH Deri, also oppose the demands.

The prime minister's office reportedly pressured Finance Ministry Budget Department head Yoav Gardos into meeting with Agudat Yisrael representatives in an attempt to find a source for the funds. Professionals at the finance ministry oppose the move both due to "its effect on Israel's economy and a practical difficulty in making retroactive payments," according to KAN.  

An unusual conflict in Knesset

An unusual spat broke out between Degel and the Likud and Otzma Yehudit on Thursday over an entirely different issue – MKs from the latter parties ascending to the Temple Mount in honor of Jerusalem Day.

Gafni penned a letter Netanyahu, in which he asked the prime minister to prevent MKs from visiting the site. According to Gafni, the act led to widespread incitement in the Muslim world, and also did not show sovereignty, but rather "a violation of the sanctity in the Jewish people's holiest place and the place to which it is most connected."

Otzma Yehudit responded sharply, with a member of the party saying to Channel 7 in response that "MK Gafni is welcome to quit the coalition, everyone will see why the fully right-wing government fell."

Tension also remained high on Thursday between Otzma Yehudit and Finance Minister Bezalel Smotrich's Religious Zionist Party, over what Otzma claims is an unfair division of coalition funding between the two parties. Otzma MK Yizhak Kroyzer reiterated on 103FM claims that the two sides had agreed to divide the coalition funds equally, but that Smotrich eventually awarded his fellow party member, National Missions Minister MK Orit Struk, nearly three times as much funding as the Development of the Negev and Galilee and National Resilience Ministry headed by Otzma's Yizhak Wasserlauf.

Kroyzer said that he hoped the sides would find a compromise, and did not threaten to oppose the budget votes next week.

Local authorities call off the strike

The Federation of Local Authorities in Israel (FLA) announced on Thursday that it would not continue its strike over the government's initiative to form a Municipal Tax Fund, and instead will focus on challenging the initiative directly in court, the Federation said in a statement on Thursday.

In a meeting between the leadership of the FLA, which represents approximately 200 of Israel's cities and local councils, and of the Federation of Regional Authorities, which represents 54 regional authorities, the sides decided that they would appeal as soon as the initiative passes into law. The initiative, which is set to begin its operation in 2024, is part of the government's 2023-2024 Economic Arrangement Bill, which is expected to pass into law alongside the 2023-2024 budget on Wednesday.

"The Municipal Tax Fund Bill is a distorted bill that changes the foundations of the relations between the central and local authorities. It is an unequal law, which is based on false data presented by the finance ministry, and was advanced aggressively and illegally," the two federations claimed.

They added that the Fund will not help the housing crisis and claimed that it was promoted for "other foreign" reasons. The FLA announced that it had formed a task force to coordinate the legal, bureaucratic and practical steps against the government.

The Fund's purpose is to redistribute wealth amongst the local authorities in order to incentivize them to earmark more land for housing and less for commercial purposes, with the long-term goal of lowering housing prices. The FLA claims that the fund penalizes well-run municipalities by taking a chunk of their earnings, and could even lead to the financial collapse of some municipalities; that it discriminates against Israeli-Arab municipalities that suffer from insufficient urban planning; and a number of other arguments.

Finance Minister Bezalel Smotrich in a letter on Thursday to Attorney General Gali Baharav-Miara demanded to receive private legal representation for the state's opinion in a suit filed by the Manufacturers Association of Israel against the FLA over the strike. Smotrich wrote that he was "astounded" by the state's "weak, stuttering and squirming" opinion, and that he fully expected the state's legal representatives to present his position – that the strike was "savage and illegal," and in effect was an "abuse of power and lack of responsibility" by the local authorities.

Smotrich added that Interior Minister Moshe Arbel sided with him, and that it was a basic right for a side in legal proceedings to receive representation that reflects his position.