Cutbacks Loom for 2009 Budget

By ZIV HELLMAN
Article in Issue 11, September 15, 2008 of The Jerusalem Report. To subscribe to The Jerusalem Report click here. With the worldwide economic slowdown cooling off the Israeli economy as well, Finance Minister Ronnie Bar-On presented the government with two alternative proposals for the 2009 state budget, both laden with cutbacks, with one alternative reducing defense spending and the other cutting back instead on welfare. Despite opposition to both proposals by members of the Labor and Shas parties, the government adopted the budget alternative emphasizing socioeconomics and cutting the defense budget, by a vote of 13 to 12, on August 25. Given a clear lack of a majority supporting the budget in the Knesset, and disarray in Kadima as it heads towards September primaries and Olmert's impending resignation, most political observers, including senior government officials, have stated they regard the adopted budget proposals as temporary, while everyone waits for a new government to be formed before serious budget discussions can ensue. This year marked the first time that the Finance Minister presented two alternative budget proposals, with the government charged with choosing between them. Both proposals called for 319 billion shekels ($90b.) in state expenditures next year, 5 billion more than in 2008. The deficit will be held steady at 23 billion shekels ($6.5b.), about 1 percent of GDP. The Finance Ministry projects 3.5 percent GDP growth in 2009, down from an expected 4.2 percent this year. Bar-On's first alternative, which was adopted, imposes a reduction of well over 1 billion shekels in defense spending. The Defense Ministry strongly objected to its budget reduction, and received promises that some of its reduced funding will be restored in 2010. The second alternative, which was rejected, would have placed the burden of cuts on social spending, with a reduction of 1.2 billion shekels in social and welfare benefits, along with 160 million shekels less for local authorities. Provisions within the rejected alternative budget would have included a reduction of state-financed maternity leave and cuts in state child allowances. The proposed child allowance reduction was vociferously opposed by Shas, a party that represents a Sephardi ultra-Orthodox constituency, many with low incomes and large families. Shas's chairman, Industry, Trade and Labor Minister Eli Yishai, accused the Finance Ministry of ignoring "a million children under the poverty line." Despite the fact that state child allowances were spared cuts in the budget that was adopted, Shas voted against its adoption because 200 million shekels are slated to be reduced from allocations to yeshivas. Allocations for stipends to men studying in yeshivas will, under the adopted budget, be reduced to a little over 200 million shekels. At its peak a decade ago, the yeshiva budget reached 1 billion shekels annually. Seven Labor Party ministers also cast negative votes during the budget adoption sessions, in opposition to cuts of 352 million shekels from education and 300 million shekels from health-related spending. Labor had earlier countered Bar-On's suggested budget with their own alternative budget, based on proposals drafted by the chairman of the Knesset Finance Committee, Avishay Braverman, which would avoid many of Bar-On's reductions by increasing government spending next year by 2.5 percent. Labor Knesset Member Shelly Yacimovich, a member of the Finance Committee, has termed the budget process "overly mysterious, non-transparent and undemocratic." The budgeting tradition that has developed in Israel, in which the Finance Minister essentially presents the government and the Knesset with a take-it-or-leave-it budget proposal that "does not involve anyone else," she says, "makes government ministers superfluous." Bar-On justified the need for cutbacks by citing the tougher economic situation, already being felt in increasing unemployment and decreasing state tax receipts, and a series of recent spending commitments, totaling 12.7 billion shekels, undertaken by the government and Knesset without taking into account the effects they would have on the budget. Article in Issue 11, September 15, 2008 of The Jerusalem Report. To subscribe to The Jerusalem Report click here.