The Institute for Advanced Strategic and Political Studies is pleased to announce the publication of Policy Studies No. 26, "Reform of Municipal Government Finance in Israel." The author of this study, Uri Resnick, held a Koret Fellowship with the IASPS Knesset Intern Program during the 1995-1996 academic year. Resnick's paper is the second in a series that was written by an Institute Intern during the course of his work as an economics research assistant to a Member of the Knesset. For the past year, Uri Resnick provided economic research to Labor Party Member Avigdor Kahalani. Resnick chronicles the historical development of municipal government finance in Israel. He documents the gross waste and mismanagement that characterize current funding arrangements and explains how local governments became heavily mired in debt and dependent on regular bailouts from the central government (read: taxpayers). The chief source of this debt-ridden system of municipal government is Israel's socialist roots and statist ideology, in which central government politicians have sought to control all aspects of social, economic, and political life. The central control inherent in socialism was further reinforced by the ideological goal of "population dispersion," in which settlements were established without any regard for their economic viability, thereby requiring periodic subsidies. Over the years, one blue-ribbon committee after another has examined various facets of municipal government finance, but few of their recommendations have ever been implemented. Resnick draws upon the successful reform programs in Denmark, Norway, New Zealand, and Australia to highlight the cost-saving benefits of privatizing municipal government services. In addition, he shows that halting central government subsidies to municipalities would force local government officials to rely on their own sources of revenues, thereby compelling local officials to use taxpayers' funds more efficiently.