Knesset kicks off budget debates

Kahlon calls to expand coalition; opposition submits a record 32,000 objections.

The Knesset (photo credit: KNESSET SPOKESMAN'S OFFICE)
The Knesset
MKs began a long week of debating the 2015-2016 state budget in the plenum on Monday, ahead of final votes later this week.
The opposition submitted a record 32,000 objections to the draft budget, most of which they are likely to withdraw, and the final vote is expected to take place on Thursday.
Prime Minister Benjamin Netanyahu mocked the opposition lawmakers’ efforts, saying that the massive number of objections proves that they are not serious.
“We will pass the budget this week,” he told a Likud faction meeting. “This budget is good and responsible. It preserves an appropriate and responsible macroeconomic framework for the Israeli economy, yet it also adds billions to education, welfare and health, along with important reforms to lower the cost of living, make our bureaucracy more efficient and promote Israel’s economy.”
Netanyahu said the economy is strong and he will make sure it continues that way.
“We need 24-hour discipline; we proved that we’re good at that. The small margin [of two seats between the coalition and opposition] is what decides, and we will keep it and pass the budget,” he added.
Finance Minister Moshe Kahlon (Kulanu) noted that the budget was particularly difficult to approve, given the coalition’s razor-thin majority of 61 seats, and the need to put the whole budget together within six months of the government being sworn in.
“After two years in which a state budget was not approved, yesterday a budget was passed in the Finance Committee and we, of course, believe and hope that tomorrow it will pass in the Knesset plenum,” he said.
Kahlon called for expanding the governing coalition, saying Israelis wanted to see unity in their leadership.
Among the accomplishments he praised in the budget and the accompanying economic arrangements law was an agreement on defense spending, which would raise conscript salaries 50 percent and reform the Defense Ministry’s spending habits, and increase salaries of capital police by NIS 10,000 a year.
The Finance Ministry, he said, would lend support to the Jerusalem Municipality to help boost businesses affected by the wave of terrorist stabbings, though he insisted the funds be disbursed incrementally to ensure proper oversight.
Shas chairman Arye Deri said that “with God’s help we kept our election promises to the ‘invisible’ and weak people.”
The development of the Negev and Galilee minister cited as victories for his part the increases in National Insurance Institute child allotments, the public housing budget and the minimum wage, as well as canceling value-added tax on water and electricity for the poor and on public transportation for all.
“It was a difficult battle, and I respect those who disagreed with us. I am very happy that this government is keeping its agreements. I thank the members of my faction for their contributions; they can be proud of these social achievements,” he said at a Shas faction meeting.
Knesset Finance Committee chairman Moshe Gafni (United Torah Judaism) presented the budget in the plenum, and praised the cooperation between coalition and opposition MKs who worked on it.
Gafni discussed the defense budget, which the committee set at NIS 56.1 billion with an option for an additional NIS 3b. over the course of the year.
“There was a real problem with the defense budget. Israel is a threatened state and defense is central to its budget. This year... the joint [Finance and Foreign Affairs and Defense] subcommittee voted against the budget and said it’s unrealistic,” he recounted.
Gafni said there was a dilemma as to how to move forward, and thanked the security cabinet for reaching a compromise on Saturday night.
Earlier, opposition leader Isaac Herzog (Zionist Union) called the proposal “a budget of nothing.”
“This is a budget to strengthen, oil and upholster the government and not a state budget,” he lamented. “This is a budget of surrender and subservience to pressure groups that sit in the Prime Minister’s Office and run the country, extremist groups that are not interested in the citizens of Israel.”
According to Herzog, the coalition is interested in West Bank settlements instead of the Negev and the Galilee.
“This government has no right to exist. It is not the government of Israel, but the government of Yitzhar and Itamar [in Samaria],” he said.
The final budget totals came to NIS 383.86b. for 2015 and NIS 424.81b. for 2016. For both years, the deficit target was set at 2.9% of GDP, which, given growth estimates for 2015, would see an increase in the debt-to-GDP ratio for the first time since the global financial crisis. The original targets for the years were 2.5% and 2%, respectively.
As happens almost every year, the budget law set a new deficit path for future years to bring Israel’s debt down to a “sustainable” 60% of GDP. The deficit will supposedly drop to 2.5% of GDP in 2017, and shrink 0.25 percentage points each year until it hits 1.5% in 2020, where it will remain.
The International Monetary Fund has noted with opprobrium that the new debt paths Israel sets are virtually meaningless, given its inability to stick to them. A new budgetary law will require new spending to identify revenue sources that conform to deficit and spending limits for three years ahead. To pay down previous deficit spending, Israel will pay out NI 38.7b. in 2015 and NIS 39.4b. in 2016.
Despite having a curtailed time period for approving the budget, the Knesset Finance Committee voted on every section of the budget individually for the first time, which Gafni said increased transparency.
In the final accounting, the defense budget will rise from NIS 57b. in 2015 to roughly NIS 60b. in 2016, though NIS 3b. is dependent on reforms in the Defense Ministry. Overall spending on security and public order will remain stable at just over NIS 74b.
Spending on so-called “social” ministries (education, welfare and the like) will rise a combined NIS 10.4b., from NIS 129.7b. to NIS 140.7b., though that total represents a 3% cut from the original growth path (save education, which managed to salvage most of its budget during the debates).
The economic arrangements bill that passes alongside the budget also includes several new policies. Among them: cuts to child allotments will be partially reversed; the creation of a “savings account” for every child, which he or she can access after the age of 18; passage of the Sheshinski 2 Commission’s recommendations on taxing non-oil and gas natural resources (such as potash); an infrastructure and jobs fund for the Negev to be funded by such natural resource taxes; and reducing interest rates for certain eligible mortgages.