Petah Tikva failed to raise the mandatory 11.4 million shekels ($3.3 million) by last week's deadline and despite getting an extension, they said on Tuesday they could not raise the money.
"Hapoel Petah Tikva have decided to withdraw their appeal [to present a viable budget], as a result... the club will not be able to play in the Premier League next season," Israeli FA spokeswoman Michal Grundland said in a statement.
The declared budgets for Israel's richest clubs for the season which begins on August 20 are about four times bigger than the required minimum.
Hapoel Kfar Sava will replace Petah Tikva, who start the season with a nine-point deficit. Petah Tikva finished third from bottom last season and won a relegation play-off against Kfar Sava who finished third from top in the second division.
Petah Tikva, one of two clubs from the central Israeli town near Tel Aviv, have suffered boardroom disputes recently. They were a top side between the 1950s and 1980s and won five consecutive league titles between 1959 and 1963, still a record.
