The Knesset passed the 2026 state budget in its second and third readings late Sunday night, preventing the government’s collapse and averting early elections.
The state budget passed with 62 lawmakers in favor and 55 against following a full day of debates in the plenum, which began in the morning and carried on late into the night.
If the state budget had not been approved during the vote, the Knesset would have automatically dissolved, and elections would be called. By law, the budget must be approved by the end of March, when the fiscal year closes.
The 2026 state budget bill was approved by the Knesset Finance Committee on Monday last week, ahead of its final second and third readings in the plenum.
The budget approved by the committee includes an expenditure cap of approximately NIS 699 billion.
The Defense Ministry’s budget will total about NIS 142 billion. Due to the ongoing war, the defense budget was increased by more than NIS 30 billion.
The Education Ministry’s budget will be close to NIS 97 billion, the National Insurance Institute's budget will be nearly NIS 64 billion, and the Health Ministry's budget will be approximately NIS 63 billion.
Within the overall framework, the proposal authorizes government spending of approximately NIS 850.59 billion for the fiscal year 2026. This includes a regular budget of about NIS 621.75b. and a development and capital budget of NIS 228.83 billion.
Additionally, the conditional expenditure budget for 2026 will total NIS 77.27 billion, while the commitment authorization budget will stand at approximately NIS 196 billion, the Finance Committee stated.
Haredi parties had threatened to vote against
During the state budget’s first reading in the Knesset in January, haredi (ultra-Orthodox) parties, Shas and United Torah Judaism, had threatened to vote against it if they did not receive various concessions, primarily relating to the controversial haredi draft law that was being advanced. This caused a crisis within Prime Minister Benjamin Netanyahu’s coalition until agreements were reached and the budget ultimately passed its first reading.
The haredi parties were expected to vote in favor of the budget, despite past threats to vote against it in its first reading.
A United Torah Judaism spokesperson confirmed to The Jerusalem Post on Sunday that the party intends to vote in favor of the budget.
Netanyahu announced that the haredi draft bill had been “set aside” and would not be advanced during the war for unity reasons, at the beginning of Operation Roaring Lion.
Controversial reforms that were part of the budget bill, such as the sweeping reform to the dairy sector led by Finance Minister Bezalel Smotrich, were also removed, citing unity reasons.
Due to war-related expenses, an updated version of the state budget passed its first reading in the Knesset plenum two weeks ago, following its initial approval in January.
To help finance the war, a 3% across-the-board cut was applied to the budgets of all government ministries, the Finance Ministry said after the update.
The updated budget increased funding for the Defense Ministry by approximately NIS 32 billion.
It also approved nearly NIS 6b. in coalition funds for 2026, with hundreds of millions of shekels directed to haredi institutions as part of the proposal. Millions of shekels were also allocated for settlements in Judea and Samaria.
MK Vladimir Beliak (Yesh Atid), a member of the Finance Committee, told the Post that a record level of coalition funds expected to benefit the government is part of the state budget.
Smotrich praised the budget outline during a press conference in the Knesset on Sunday evening ahead of the vote.
“For the fourth time since I became finance minister, we are bringing the 2026 state budget for approval tonight."
"This is the first time since 1999 that a government has passed a budget in an election year, and during a war," he said.
“We are fully aware of the economic challenges of the past two and a half years, especially the current campaign against Iran. We are acting responsibly. War has high costs, and we are managing them carefully."
Smotrich said that the budget would lower the cost of living in the country.
“We expanded income tax brackets for the middle class, equivalent to up to NIS 10,000 per year in tax relief for working families."
"Combat reservists are now eligible for up to 4 tax credit points, worth up to NIS 12,000 per year. We also granted tax exemptions for new immigrants arriving during the war."
The finance minister also said that the budget would increase competition in banking.
“We are now returning money to the public through a special tax on banks. We are also advancing structural reforms to open the banking sector to competition."
Regarding the war effort, Smotrich said the defense budget increased to NIS 143 billion, with investments in systems such as Iron Dome, Arrow, and David’s Sling. An additional NIS 32 billion for rebuilding Gaza border communities and the North was included, he added.
Other aspects Smortich mentioned were NIS 6 billion to support reservists, a NIS 6.7 billion increase in education, and a NIS 4.3 billion increase in healthcare, including mental health.
Former prime minister Naftali Bennett, and leading rival candidate against Netanyahu in the upcoming elections, slammed the outline of the state budget ahead of the vote.
“The government is passing tonight the most reckless and most anti-Zionist budget in the history of the State of Israel,” he said.
“During wartime, Benjamin Netanyahu’s government and the ultra-Orthodox parties are delivering ten blows to the serving and working public: They are cutting nearly half a billion shekels from our children’s education, making across-the-board cuts to healthcare, transportation, and rehabilitation budgets for the Negev.