The necessary arrangements

Is the Economic Arrangements Bill an efficient policy tool - or an ideological assault on democracy.

By ZIV HELLMAN
Protest 521 (photo credit: Marc Israel Sellem)
Protest 521
(photo credit: Marc Israel Sellem)
IT’S THAT TIME OF THE YEAR again, when Israelis wonder what surprises will be uncovered in the Economic Arrangements Bill, an omnibus bill annually attached to the government’s budget proposal for the past 25 years. This year, a furor broke out with revelations that the bill, which passed a first reading in the Knesset, already contained an allocation of NIS 111 million for income supplements to yeshiva students, only days after Benjamin Netanyahu’s government had pledged to delay a decision on the controversial matter by sending it to committee.
The item was still in the headlines when, a few days later, careful reviews of the bill uncovered an article levying income taxes on university student scholarships – an imposition that was expected to raise government revenues by about NIS 111 million, thus giving the impression that the government intended to make university students pay for the money to be transferred to yeshiva students.
And all this came only weeks after Knesset Speaker Reuven Rivlin had a showdown with the Finance Ministry, demanding and receiving the latter’s agreement to remove 40 percent of the articles in this year’s Economics Arrangement Bill, and submit each of them separately for Knesset approval. These articles included proposed reforms of the public television and radio broadcasting systems, increased authority for the supervisor of capital markets, abolishing tax reductions for foreign sports players, increased earthquake-proofing of building structures, and increasing the supply of housing with the intent of lowering property prices.
At the time, Rivlin, who denounced attempts to “bypass the Knesset” by way of the bill, said that “this is a new era for the Economic Arrangements Law,” further stating that “if the government wants to add an important reform to the Economic Arrangements Law, it can – as long as a public debate is conducted.”
The Economic Arrangements Bill has been the object of criticism for years. Its critics have charged it with being essentially anti-democratic in construction. “By bundling together a large number of disparate items in one bill and forcing the Knesset to vote on all of them together, yes or no, the Economic Arrangements Bill disrupts the balance between the executive and legislative branches,” says Avi Ben-Bassat, professor of economics at the Hebrew University and a senior fellow at the Israel Democracy Institute. “Add the fact that the bill is attached to the budget proposal, which if not passed can lead to the dissolution of the Knesset, and you can see why the entire institution of the Economic Arrangements Bill is extremely problematic and must be changed.”
The increasing public criticism this year, coupled with the public show of force that the speaker of the Knesset displayed on the issue, has led to the impression that perhaps the time has come to review the need for the Economic Arrangements Bill.
“We have seen in the current budget season that the Economic Arrangements Bill contains a tremendous amount of legislation that the Knesset is being asked to adopt in total, even after many items were removed at the demand of the Knesset speaker,” Meir Sheetrit, a Member of Knesset for Kadima and a former finance minister, tells The Report. “There are more unknowns than knowns lurking there. The government is making a mockery of itself. The pendulum has long swung too far.”
But such talk has been heard many times before. In 2007, a forum of more than 30 civil society organizations issued a prominent call for the repeal of the Economic Arrangements Bill, pointing out that the Supreme Court had expressed an opinion that the form in which the bill is submitted to the Knesset is not suitable to a democratic legislative process and that the attorney general had also criticized the law. The call went unheeded.
The Economic Arrangements Bill has survived for 25 years because successive governments have found it very convenient.
It has survived all challenges to date, and without a concerted effort by the Knesset itself to implement changes, it seems most likely that in a couple of years, we can once again expect to see surprises popping up in the next Economic Arrangements Bill.
THE ECONOMIC ARRANGEMENTS Bill was invented shortly after the establishment of the National Unity Government of September 1984. At the time, the economy was immersed in the gravest crisis in its history, perceived as a possible precursor to economic collapse. On July 1, 1985, the government adopted temporary emergency economic regulations, an action that was approved by then-attorney general, Yitzhak Zamir, who told the Knesset Finance Committee, “I personally believe that the economy is on the verge of an economic catastrophe.”
When the emergency economic regulations expired later that year, the government, intent on their continued implementation, bundled the approximately 40 regulations into one omnibus bill, which it called the “Economic Arrangements Bill,” and requested Knesset approval. The bill passed after a relatively short debate.
The economic stabilization plan – which included many more elements than the Economic Arrangements Bill, including, perhaps most importantly, agreements on painful reforms on the part of government, industry, and labor – was successful in saving the economy and getting it back on the road to recovery.
But instead of being regarded as a oneoff emergency measure, once the precedent was set, successive governments found it very convenient, year after year, to adjoin an economic arrangements bill to the proposed budget. As time went on, more and more articles were added to the bills, some of them only indirectly connected to the budget.
The Finance Ministry, charged with formulating the bill, made use of it in some cases to push through legislation that it especially  wanted but had previously not managed to pass muster in the Knesset, or to cancel or delay implementation of private member bills involving large budgetary expenditures that threatened to expand the budget deficit.
Governments have even tried to sanitize the bill by giving it different names. In 1997 the Ministry of Finance changed the name of the bill to “The Law for Enhancing the Growth and Employment for the Attainment of the Budget Goals,” and seven years ago it was again renamed, this time to “The Law for Curing the Israeli Economy (Legislative Amendments to Attain the Budgetary and Economic Policy Goals).”
None of those attempts changed the way nearly everyone, including government ministers, refers to the bill, using the same name used by the original composers of the bill in 1985.
“The original intent of the bill was to enable legislation relating to emergency budgetary matters,” notes Sheetrit. “But every government [since 1985], without exception, has made use of it and it has grown to monstrous proportions.”
The sense that in recent years there has been increased reliance on the part of the Finance Ministry and the government on articles in the Economic Arrangements Bill seems to be well founded. The bill for the years 2009-2010 was 370 pages long, and contained nearly 270 articles. It included elements lifted directly from agreements between the government and the Histadrut Labor Federation.
This year’s bill, before Rivlin demanded changes to it, included an attempt to revive the Wisconsin (“workfare”) Plan, a program intended to require welfare recipients to seek work, which failed to obtain a Knesset majority for its extension; a provision to increase fines on individuals who provide false information to the National Insurance Institute; an article to permit greater competition in the telecommunications market; an article to encourage more capital investments; and reforms in taxation and child allowance payments. Perhaps the most outrageous element was the proposed tax on university scholarships.
The Knesset had previously approved the taxfree status of scholarships, with the support of Finance Minister Yuval Steinitz. Yet that same Finance Ministry is now trying to revive the tax by burying it deep in the articles of this year’s Economic Arrangements Bill.
Even Rivlin, however, has expressed support for including in the bill goals that he would like to see advanced. For example, he has been quoted as approving the initiative to permit greater telecommunications competition, chiefly by letting a fifth major telecommunications competitor enter the market, a reform that he himself first proposed when he was communications minister nearly 10 years ago.
THE MOST FREQUENT CRITICISM raised against the Economic Arrangements Bill is that it is “antidemocratic” because it ties too many disparate laws into one bill that Knesset members must vote on in one vote, without giving consideration to the possibility that a Knesset member may support some of the articles and oppose others. Add to that the fact that the bill is bundled with the budget vote and the pressure on the Knesset to approve what many consider essentially a Finance Ministry wishlist is very strong.
More than a decade ago, in an outburst in the Knesset, then-Knesset member Maxim Levy complained, “For many years this law turned into an anti-democratic law, which empties the Knesset committees of any content...
The government cancels laws that were legislated in the Knesset committees after much toil… and here comes the government one night and asks this coalition machine to erase and run over laws....”
A further complaint is the way the bill is given special treatment in its preparation; it is placed in a separate category from regular bills. The list of aspects in which the Economic Arrangements Bill differs from a regular bill is long. The fact that it is an omnibus law by intent already distinguishes it from a regular bill, as does the convention that the primary responsibility for its formulation lies with the Finance Ministry, rather than the specific ministries responsible for implementing the disparate articles of the bill.
The increasingly wide scope of the bill has also sparked opposition. The first Economic Arrangements Law, in September 1985, was completely related to the 1986 national budget.
Over the years, however, the Ministry of Finance started to incorporate issues that were not directly related to the budget of the approaching financial year, ranging from the status of army veterans and reserving highoccupancy vehicle lanes on roads leading to Tel Aviv, to the length of school days and textbook loans in schools.
Furthermore, the concentration of deliberation on all the broad aspects that the bill may cover in the Finance Committee, as opposed to other Knesset committees who specialize in topics appearing in the bill, has angered Knesset members. In 1985, it was decided that the Budget Bill and the Economic Arrangements Bill would be dealt with exclusively in the Finance Committee. Since the Economic Arrangements Bill and the state budget are presented to the Knesset by the Finance Ministry simultaneously, about two months before they must pass a final reading in the Knesset, this creates a situation that has made thorough deliberation of both difficult.
Over the years, the Knesset’s House Committee has adopted the practice of dividing up some elements of the Economic Arrangements Bill to be referred to specialized subject committees in the Knesset, or to joint committees bringing together members of the Finance Committee and other committees.
This has somewhat blunted this criticism, but critics complain that this still gives the coalition too much power because it can refuse to send a particular article of the bill to a subject committee if it senses that the committee is likely to reject the article and because the joint committees are usually dominated by the Finance Committee. The Ministry of Finance has traditionally backed the view that only the Finance Committee should review the bill because of its impact on the overall budget.
Knesset members have tried to “fight back” by tabling reservations to elements of the bill, but very few reservations have ever been adopted. The most prominent example of a law passed through a reservation to the Economic Arrangements Bill is the successful effort by the political party Tzomet, in 1997, to merge the Nature Reserves Authority and the National Parks Authority, achieved by a reservation appended to the bill that year. But that example can actually be regarded as an antiexample: rather than cancelling an article of the bill that Knesset members objected to, the members of Tzomet managed to pass a law that the minister of the environment at the time, Raphael Eitan, wanted to enforce, by smuggling it into the bill through a reservation.
The practice of filibustering against the bill hasn’t scored any major gains, either. The longest filibuster in the course of a debate on the Arrangements Law was that of MK Michael Eitan (Likud), who on December 29, 1992, spoke for nearly 11 hours, finally forced off the podium by orders of the Knesset doctor, who feared for his health. The speaker of the 14th Knesset, Dan Tichon, was repelled by the filibuster attempts, which never failed to amount to very little, exclaiming “what is going on adds no dignity to the House.”
THE ECONOMIC ARRANGEMENTS Bill also has its defenders. Several privatization initiatives that have added competitiveness to previously slowmoving economic sectors and significantly increased consumer benefits were enacted into law by way of the bill. In 1998, then-minister of finance Ya’acov Ne’eman alluded to this when he told the Knesset House Committee that in his opinion, “economic policy measures are part of a single system, a single unit, which influences economic life in the course of the year... Therefore, there is no alternative to bringing amendments to other laws within the framework of the budget, even if they are not budgetary laws in the narrow sense, but deal with directing the activity of the economy, and influencing the level of prices.”
The Finance Ministry for many years defended the aspect of the bill that cancelled or delayed implementation of bills that had previously been adopted in the Knesset by claiming that it was defending the budget from the threat of irresponsible deficits caused by private member bills promising entitlements and benefits to constituents without regard for their financial costs. This argument has been heard less frequently lately, after a 2002 law went into effect requiring any private member bill whose passage would cost the state budget more than five million shekels ($1.4 m) to be approved by at least 50 Knesset members, thus avoiding “late night grabs” in which a handful of Knesset members meeting in the plenum at strange hours would pass far-reaching laws that later required an effort to undo.
One of the most outright defenders of the bill has been Prime Minister Benjamin Netanyahu, which may be one reason that the scope of the bill has increased in recent years.
Speaking as finance minister in 2005, Netanyahu told the House Committee that the Economic Arrangements Bill was a necessary adjunct to the budget because the budget alone cannot achieve all the aims of the government’s economic policy without the support of additional laws, as expressed in the bill. “The budget is merely a function of policy,” he said.
“The budget expresses certain important aspects of economic and social policy, but it is impossible to exhaust or implement this policy outside the general context of the laws.”
Netanyahu went on to defend the way the bill is pushed through the Knesset by appealing to a need for speed in passing important elements of policy. “It is true that the means in our decentralized political structure to pass decisions is to pass them in a packaged format.
What does that require? It requires extremely difficult and concentrated work by the Knesset, but the alternative is that these laws will not come to be. The alternative that there should be no laws in order to go through a slower process, which is more pleasant for the Knesset, implies that there will be no growth, or that unemployment will not decrease from 11% to 9%, and soon 8%, but will remain and increase... I am an admirer of transparency, but speed is sometimes necessary, especially in crisis situations. We are a state that is frequently in the clutches of several crises all at once. The speed in passing laws, the decisions and the reforms, require more rapid action – true, at the expense of slower deliberation. But if I must choose between the two, and let us assume that instead of 40 reforms we would pass three, nothing would happen; we would crash and we would, like a certain South American country, carry out barter on the streets for several years until we would discover that we must make these changes.”
Ben-Bassat, however, claims that ideology, more than expediency, lies behind the increased use of the Economic Arrangements Bill, specifically an ideology that seeks to reduce the government’s degree of involvement in the economy. “The more controversy there is regarding how much government involvement there should be in the state, the more the attempt to push through one ideological viewpoint becomes problematic,” he says.
“Fast-track legislation, through the Economic Arrangements Law, is a blow against the proper functioning of democracy.”
DESPITE ALL THE SOUND AND fury in the debate on the Economic Arrangements Bill, there is currently no clear path for doing away with it.
Even the High Court of Justice has been petitioned on the issue. In a ruling in November 2004, the court criticized the Economic Arrangements Bill, stating that it is an inappropriate legislative procedure that does not enable thorough and exhaustive deliberation on complex and essential issues.
But the court found no legal grounds to reject the law and has therefore refused to intervene in the controversy. The court wrote that “the Knesset – and it alone – can change the rules of the game.”
A thorough background paper studying the issue issued by the Knesset’s Research and Information Center in 2006 looked into several suggestions for eliminating the bill or significantly amending the way it is used, and concluded that each was flawed.
One suggestion, which was raised several years ago by the former Legal Council of the Knesset, Zvi Inbar, is for the Knesset to return to the situation that existed before 1985, with no Economic Arrangements Bill, and legislative initiatives connected to the government’s economic policies each dealt with separately and in depth. It seems unlikely, however, that a sitting government, led by any political party, will readily embrace such a move, out of concern that the Knesset as it currently operates would be unable to cope efficiently and punctually with the task of the needed legislative amendments.
Attempts to establish clear criteria that determine what should or should not be included in the Economic Arrangements Bill have to date not been successful. The problem is compounded by the fact that there is little agreement among the various bodies involved in the definitions regarding the criteria that should apply. Since any legislation that is more than symbolic must involve a significant outlay of money for its application, it is possible to claim that virtually any legislative initiative is connected in some way to the state budget and economic policy in general.
It appears that the most substantial change that might reasonably be expected, if there is sufficient political resolve, is to demand that the Ministry of Finance improve its staff work in presenting both the budget and the Economic Arrangements Bill, to increase clarity and
transparency in what Knesset members are expected to vote for, without hiding “surprises” in the fine print.
“Knesset members have [from September] until December to learn the details of budget proposals,” notes Sheetrit. “That is sufficient time for anyone who wants to invest an effort and understands the budgeting process to study it. The problem is that there is little transparency in the budget proposal. Too many items are unclear. The work done by the Knesset Finance Committee, in studying the budget, is not sufficiently serious. Various ministers are invited to make presentations, and there is some discussion, but the budget, perhaps with some minor variations, is always adopted just about ‘as is.’ I suggest splitting the Finance Committee into two: one which will continue all the work the Finance Committee does today except for budget review, and a full-time Budget Committee, whose task will be to review the budget, and how it is being implemented, all year round.
That will hold the executive branch to true accountability by the Knesset, which will not only approve the budget, but keep an eye on its application.”
Even Sheetrit, however, sounds resigned to many more years of repeat performances of the presentation of the Economic Arrangements Bill. “In 1998 and 1999, I, as a member of the governing coalition, proposed doing away with the Economics Arrangements Bill,” says Sheetrit, “but both the opposition and members of the coalition opposed the suggestion.
Without real political will, it cannot be changed. You can lead a horse to water….”