Last-minute bill could leave election wildcard Kahlon shortchanged

In its last days, the 19th Knesset is hard at work passing a dramatic and little-noticed campaign finance reform that may have a significant effect on the ability of new parties to compete with those already in the Knesset.

The new bill is intended “to lessen the dependence of political parties on the banking system,” the bill reads, by making it illegal for parties to borrow their campaign funds from commercial banks and replacing those loans with Treasury loans and higher advances on public campaign funds to which the parties are eligible.

The upshot: parties that have representation in the Knesset will have easier access to loans and receive a larger portion of their public funding in advance of the campaign. New parties, ones that do not have sitting MKs in the outgoing Knesset – for example, the party of popular ex-Likud minister Moshe Kahlon – may have a much harder time funding their campaign.

Under current campaign finance law, parties are eligible for some NIS 1.38 million ($345,000) in public funding for each of the party’s serving MKs in the outgoing Knesset. Thus, Likud, with 18 MKs, is eligible for roughly NIS 25 million ($6.3 million). Shas, with 11 seats, for roughly NIS 15 million ($3.8 million).

Some 60 percent of those funds, or NIS 825,000 per outgoing MK, are available in the weeks before the election, and the remainder is paid after the elections. To make up the difference, parties borrow from banks against their future public funding.

The new bill increases the portion of the funds available in advance from 60% to 85%, stipulates that parties may take out Treasury loans to make up the difference in campaign expenditures – and then forbids political parties competing in the elections from taking loans from commercial banks.

“The parties’ dependence on bank credit creates a structural conflict of interest with the role of members of Knesset as regulators of the banking system,” the bill’s authors note in the preface.

The bill, signed by MKs from every party currently represented in the Knesset, explains that its goal is to “enable the financial independence of political parties,” and notes that parties’ bank debts have been cited in the past by the state ombudsman and courts as a potential danger to politicians’ independence.

But that noble sentiment doesn’t help new parties, such as the as-yet unnamed party of popular former minister Moshe Kahlon.

Under the new bill, new parties are eligible for an NIS 5.84 million ($1.46 million) advance, or roughly five MKs’ worth in upfront funding. For Kahlon, who has polled as high as 12 seats in recent weeks, the relatively paltry advance, coupled with the new constraints on borrowing commercially, amounts to a financial strait-jacket on his capacity to campaign.

The bill is slated to pass into law by Monday, and will be debated in committee Sunday.

A spokesperson for Kahlon declined to comment on the bill, but sources close to the new party have suggested they were concerned about its implications.

Reached for comment, a Likud spokesperson said the party would not support the bill if it will harm the ability of new parties to run.

“If we understand in the [Sunday] debate that new parties will be harmed, we will change that [part of the bill],” the spokesperson said.