Knesset kicks off final budget debates

MKs will be called upon to approve two last minute flat budget cuts amounting to NIS 3.3 billion proposed by Finance Ministry officials.

Moshe Gafni
The Knesset began final discussion of the budget and Economic Arrangements Bill on Tuesday, ahead of its second and final reading.
The beginning of the debates reflected the lackluster legislative process the 2017-2018 budget has undergone, relative to past budgets, with committee chairmen presenting their chapters of the bills amid almost no heckling.
What started out earlier this year with a heated debate on whether the budget should be for one year or two ended up being two, with accelerated, last-minute committee debates overshadowed by other political issues like the planned evacuation of Amona and the closing of the Israel Broadcast Authority distracting MKs.
Finance Committee chairman Moshe Gafni (UTJ) seemed resigned to the budget, describing its various sections unenthusiastically and, at times, angrily or despondently.
Gafni, a veteran lawmaker in the Knesset tied with Prime Minister Benjamin Netanyahu and MK Amir Peretz (Zionist Union), said that in all his years in the Knesset – since 1988 with a short break – he’s never seen such “schlemiel-like behavior” from the Finance Ministry, and a budget rushed through committees so quickly.
“I’ve done this many times,” the perennial Finance Committee chairman said, “but this is the first time I wasn’t able to have a speech ready. I’m a bit angry.”
The deficit target of the budget is 2.9% for both 2017 and 2018.
MKs will be called upon to approve two last-minute flat budget cuts amounting to NIS 3.3 billion proposed by Finance Ministry officials.
One flat cut of NIS 1.2 billion was submitted and approved by the cabinet on Sunday, intended to finance “the application of existing coalition agreement” with the haredi (ultra-Orthodox) parties and Bayit Yehudi. Additionally, the flat cut would finance the Amona evacuation and post-evacuation arrangement, and the cost of keeping the Israeli Broadcasting Authority on air longer than originally planned.
The second flat cut of NIS 2.1b. – which passed in the Finance Committee on Sunday – is intended to finance part of Kahlon’s previously approved Savings Plan for Every Child. Under Kahlon’s plan, the state will make monthly deposits of NIS 50 into a savings account for each child under age 18, to be withdrawn by the child upon reaching the age of 18 or 21. The plan will cost the state budget NIS 2.65b. for the next two years.
The new Economic Arrangements Bill, legislation passed in tandem with each budget that outlines the basic economic policies that are meant to accompany it, seeks to encourage hi-tech and industry in the country and in the periphery specifically. The Finance Committee approved amendments to the Capital Investment Encouragement Law, which would reduce corporate tax from high-tech companies and traditional industry companies from 16% to 12% for companies located in the center of Israel, and from 9% to 7.5% for companies located in the periphery.
The EAB will also tackles the contested issue of Kahlon’s multiple apartment tax article. Kahlon’s plan, also known as the third apartment tax, is to impose an annual tax on owners of three apartments and more, amounting to 1% of the third and any additional apartment’s value. The tax would be capped at NIS 18,000 a year, and an array of amendments was introduced to the article prior to its approval by the Finance Committee last Friday.
Some good news might be available to immigrants via the EAB, due to the introduction of an amendment on Wednesday to the Aliyah-Absorbing Cities Law. The original law gave grants to municipalities with an olim population a 10% or more. This gave an advantage to cities like Ra’anana, where the olim population surpassed 10% but who are already socioeconomically strong. The new amendment would bestow grants on any municipality that has more than 500 olim who are socioeconomically disadvantaged.
Additionally, as a trade off on Yisrael Beytenu’s coalition agreement demand to grant pensions to retired olim whose country of origin does not pay their pension, the Welfare Committee approved an increase of up to NIS 750 a month in old-age allowances, at a cost of NIS 1.4 billion to the state.
An eight-hour plenum debate of the budget began on Tuesday, and was set to start for another six hours on Wednesday, before beginning votes on up to 220 objections to the budget and EAB, which could last well into Thursday. In an unusual move, the coalition and opposition agreed that the opposition could request that a minister respond to up to 30 of their objections, giving the lengthy voting process some debating intervals.
In Tuesday’s speeches, the opposition began airing its grievances against the budget.
MK Shelly Yacimovich (Zionist Union) railed against the flat cut of government ministries’ budgets, calling it lazy and a “blind guillotine.”
A flat cut “makes the state smaller and reduces social services,” she explained. “Next time you have to pay parent fees in school, remember these cuts…this general cut that we’re not supposed to feel. Rich people aren’t hurt by the flat cut, because they can pay for what they’re not getting, but poor people just won’t get what’s cut, like quality healthcare, welfare and education. It increases the gaps. The fact that we are at the top of the OECD for poverty didn’t just fall from the sky.”
MK Ya’acov Peri (Yesh Atid) called the budget bill “half-baked” and “full of holes.”
“There is no good news for the people of Israel here,” Peri said. “Instead of taking care of the citizens, [Finance Minister Moshe Kahlon] is busy giving political bribes, giving out millions of shekels from Israelis’ pockets to those close to you, MKs with special interests, just to stay on your chair.”