Civilian public services have employed a high proportion of the labor force and consequently have absorbed a high share of Israel's GNP. Spending on health, education, and welfare services rose from 17 percent of GNP in 1968 to 20 percent in the early 1970s. The level of spending on civilian public services remained constant at about 20 percent through 1986. The share of the total civilian labor force employed in civilian public services rose from 22 percent in 1968 to 30 percent in 1986.

The civilian services primarily responsible for these high outlays were education and health services, whose share increased from 50 percent of the total in 1969 to more than 60 percent in 1986. At the other end of the scale were economic and general services, whose expenditures declined from 33 percent of the total in 1969 to 23 percent in 1986. The share of other welfare services (including immigrant absorption services) remained constant. The decline of general and economic services reflected a transfer of some of these functions from the public sector to the business community and a decline in direct government intervention in the economy.

Unlike social welfare and economic services, which were directly funded by the government, until the early 1970s education and health services received substantial funding from foreign sources. In 1968, for example, the government financed only 70.5 percent of Israel's education services. By 1978 the government's share had increased to 84.5 percent. Whereas in 1968 the Jewish Agency financed about 20 percent of the total national expenditure on education from foreign aid funds, by 1978 only 7.6 percent came from foreign aid, and this percentage has decreased further since. The result was an added burden on the taxpayer, equal to approximately 22 percent of the national expenditure on education. Direct private financing of education expenditures contracted from 9.5 percent of the total in FY 1968 to 1.7 percent in FY 1978. The key element explaining this latter drop was the institution of free, compulsory secondary education in the late 1970s.

Health services' funding followed a similar pattern. The government's share rose from 53 percent in 1968 to 62 percent in 1980. Here, however, the Jewish Agency's participation decreased even more sharply, from 20 percent of the total national expenditure on health in 1968 to nearly zero in 1980. The added burden of government financing from internal sources over the decade was almost 30 percent.

In both health and education, the trend illustrated a transition from foreign financing to internal resources and a switch from direct private financing (and independent fundraising by nonprofit institutions) to the imposition of a greater burden on the central fiscal system. In the past, when these services were expanded, the cost often was carried by aid from abroad. As this source began to dwindle, the cost increasingly shifted to the government, which for political reasons could not reduce these public civil expenditures.

Data as of December 1988