The State Treasury will allocate NIS 15 billion to the National Insurance Institute (NII) in the 1996 budget year.

State budget transfers to the NII are earmarked principally for the following areas:

NIS 5.7 billion in payment of State-funded benefits.
NIS 2.4 billion for State participation in NII payments, as legally stipulated.
NIS 6.6 billion for State participation in funding of child allowances and old
age pensions, in pursuance of Article 32 of the National Insurance Law.
Treasury funding of some of the administrative expenses involved in execution of
National Insurance payments.

State-funded Benefits

In addition to the allowances given in pursuance of the National Insurance Law and funded fully or partially by insurance contributions (e.g. old-age pensions and survivors' allowances for insured persons, child allowances, general disability pensions, etc.) the NII also pays other benefits pursuant to other laws, or by special agreements between the State Treasury and the NII. As stated, these allowances, which are not funded by National Insurance contributions, but from the State Budget, will total NIS 5.7 billion in 1998.

The main State-funded benefits are presented below:

Assured Income

The Assured Income Law entitles certain population groups to an income supplement up to an amount specified in the law, thus ensuring them a minimum level of income. The groups entitled to assured income are:

1. Working age population - In 1997, the number of persons of working age receiving
assured income benefits increased considerably, from 81,000 in 1996 to 89,000 in 1997 (a
10% increase). An increase of 8% was also registered in 1996 in relation to 1995. In 1998,
the number of entitled persons is expected to be 95,000 on average, monthly.
2.Recipients of old-age pensions or survivors' allowances - In 1998,
70,000 recipients of old-age pensions and 36,000 recipients of survivors' allowances
(except for new immigrants) are expected to be entitled to income supplements. There was a
gradual decline in the number of recipients of old-age pensions and survivors' allowances,
who are not new immigrants, and who receive income supplements from the 1980's until 1995.
In 1996-1997 the numbers of persons in this category who receive income supplements has
remained stable.
3.Recipients of old age pensions and survivors' allowances who are not covered
by the National Insurance Law (see below).

Old Age Pensions and Survivors' Allowances for Persons who are not Insured

Under an agreement between the National Insurance Institute and the Ministry of Finance, in 1998 about 94,000 persons who are not insured for old-age pensions and survivors' allowances will receive these benefits with full funding of the Treasury (benefit not covered by the National Insurance Law). Most of them will also receive income supplements under the Assured Income Law.

Nursing Care and Disability Allowances

In pursuance of the National Insurance Law, the State Treasury funds 50% of disability allowances of "previously disabled persons" (i.e. persons who became disabled before April 1970). It also funds nursing care allowances for persons who qualify for such benefits under the Nursing Care Law but are not insured under the National Insurance Law.

Under an agreement with the NII, the State Treasury also funds the nursing care and disability allowances of new immigrants. (The National Insurance Law grants entitlement to new immigrants for nursing care allowances only after they have been in Israel for one year and for disability allowances only after two years. The allowances for immigrants, who have been in Israel for a shorter period are covered by the State Treasury.)

Mobility Pensions and Allowances

Under an agreement between the NII and the State Treasury, 14,000 disabled persons are entitled to Treasury-funded mobility allowances. They are also entitled periodically to a non-recourse (State-funded) loan for purchase of a vehicle.

Special population groups

The Treasury also funds payments for special groups, in pursuance of various laws. These allowances, which are paid through the NII with full Treasury funding, are as follows: pensions to Prisoners of Zion; pensions to victims of terrorist acts; alimony to women who have been granted alimony by a court of law, but whose husbands refuse to pay; injury and disability benefits to volunteers injured during their volunteer activities; study grants for one-parent families and pensions to victims of blood transfusions and of radiation.

Treasury Participation in Payment of National Insurance Premiums, as Stipulated by Law

Under the National Insurance Law, the Treasury will transfer the sum of NIS 2.4 billion to the NII in 1998 as participation in payments. This sum is included in the funding sources of NII allowances.

State Participation in Funding Old-age Pensions and Child Allowances

In pursuance of Article 32 of the National Insurance Law, the Treasury pays NIS 6.6 billion as participation in child allowances, old age pensions and survivors' allowances. This amount is determined in percentages out of the collection in those branches, as follows:

Child Allowances

In 1998 the participation will be 145% of the collection.

Until March 1993 participation in this branch was 80%. It rose to 100% following canceling of the "means test" for the first and second child allowance. In 1994, as stated, child allowance supplements for families of army veterans were gradually phased out, and the child allowances were increased. Treasury participation in child-allowance, relative to the insurance premiums collected, was then as follows:

Treasury Participation in Collection of Child Allowance Revenues

(in percentages)

Participation in 1998 should have been 160% of the collection. However, the Government has decided on the reintroduction of means tests for first-child and second-child allowances (see: "National Insurance Institute Allowances"). This will lead to a budgetary saving of about NIS 500 million in child allowances in 1997 prices, and accordingly government participation in the branch will be 145%.

Old age Pensions

For old-age pensions government participation is 15% of the collection.

Funding of the Encouragement of the Business Sector Law through the NII

In 1997 payments under the "Encouragement of the Business Sector Law" were suspended after the validity of the law expired. Total cumulative payments under this law, from 1992 to 1997, were NIS 2.6 billion (in 1997 prices, according to the average wage).

National Insurance Institute Pensions

In the 1997 budget year the transfer payments through the NII totaled NIS 27.4 billion (without payments for reserve duty)

The two largest areas of NII expenditure are old-age/survivors' pensions and child allowances. In 1997 payments of the former totaled NIS 10 billion (about 37% of the total expenditure) and of the latter NIS 5.6 billion (about 20% of the expenditure).

Expenditure percentages in 1997 in other areas are: disability - 12%; unemployment - 8%; work-accident compensation - 7%; assured income for persons of working age - 6%; nursing care - 4%; other - 0.2%.

Number of Persons Entitled to National Insurance Benefits: 1997

(in thousands)

Type of Benefit	No. of Recipients
Old-age and survivors	585
including: income supplement recipients	190
Child allowances (families)*	850
General disability	112
Work accidents (disability allowances and injury compensation)	75
Assured income (monthly average)	90
Maternity (grant)	120
Nursing care	70
Unemployment	100
* See details in next section

Income Tests for Child Allowances

By government decision, income tests will be introduced in 1998 on allowances for the first and second child in families with up to 3 children.

In a family where the father's income is less than 130% of the average wage, there will be no change in the child allowances; when the father's income is over 130% but less than 170% of the average wage, the allowances for the first and second child will be reduced by one third; when the father's income is over 170% of the average wage the allowances for the first and second child will be reduced by two-thirds; families with 4 children or more will be exempted from income tests.

The allowance for the first child is NIS 154 monthly, in August 1997 prices, and for the first two children, NIS 308 monthly.

The number of families entitled to a child allowance in 1997 is about 850,000. 54,000 families will not be affected by the income test. 188,000 families will be subject to reduction of a third of the allowance for one or two children, and 198,000 families will be subject to a reduction of two-thirds of the allowance.

This reform will lead to a budgetary saving of NIS 500 million in 1997 prices.

National Insurance Institute Revenues

Breakdown of NII current revenues

NII revenues for the insurance branches are divided basically into three types (not including subsidies contained in interest payments on the investments): insurance contributions from the public, transfer from the State Treasury stipulated by law, funding and pensions from the Treasury for old-age pensions and child allowances in pursuance of Article 32 of the National Insurance Law.

Breakdown of NII Revenues by Sources

(not including interest payments on investments) - in millions of NIS

Revenue Source	Sum	In percentages
Insurance contributions from the public	14,730	50
Treasury participation in old-age pensions and child allowances (in pursuance of Article 32 of the National Insurance Law)	6,610	22
Funding of allowances not covered by insurance	5,720	19
Transfers from the State Treasury, stipulated by law	2,420	8
Total	29,480	100

NII Tax Collection

In 1996, the NII collected three types of taxes:

1. National insurance contributions (from wage-earners, employers, self-employed and
individuals who come into none of these categories).
2. Parallel tax from employers.
3. Health tax from wage-earners, self-employed and persons in neither category.

In 1997, the parallel tax was abolished and accordingly collection by the NII was suspended; sick funds received their money through the Health Ministry.

Forecast Revenue from Collection of National Insurance Contributions and Health Tax for 1998

(in millions of NIS)

	Amount Collected
National Insurance contributions	17,150
Health tax	7,980
Total	25,130