On the very first day of the new calendar year, the Finance Ministry chiefs were horrified by the veritable tsunami of unbudgeted spending demands that greeted them. First and foremost among them were public-sector demands for pay raises, coming from the doctors, the Airports Authority workers, the port workers and others.

Just last week, a new wage agreement was signed with Israel's high-school teachers at an estimated cost of half a billion shekels. The recently signed agreement with the prosecutors, which brought them back to work after a lengthy strike, is estimated to cost taxpayers another NIS 10 million.

A top treasury official told TheMarker that the demands mounting on the desks of Finance Minister Yuval Steinitz and budget director Udi Nissan total more than NIS 10 billion.

"We ended 2010 brilliantly, with 4.5% economic growth and surplus tax revenues of NIS 12 billion," he said. "That's great. But we have to keep in mind that the global economic crisis isn't over yet and neither are its effects on the Israeli economy. The ministers and other officials read the figures in the paper, forget their responsibilities and are going nuts with monetary demands. Here a billion shekels, here an unexpected NIS 200 million, and that's just the start."

Unless the ministers come to their senses, or the prime minister puts an immediate end to all this, he predicted, Israel will not just need a new budget for 2012, but it will also need one for the second half of 2011.

Ministry officials said they were surprised by the inundation of demands that are creating pressure on the budget even before the year had even begun. But under no circumstances, they vowed, will the budget be breached this year or next.

"If we have to spend on unbudgeted items, the government will have to find a way to balance the budget by cutting elsewhere," the treasury official said. "It could hurt."

Emergency budgets

Among the unbudgeted items suddenly piling up at the treasury's door is the sum of NIS 850 million that Prime Minister Benjamin Netanyahu decided yesterday to transfer to municipalities around the country over the course of 2011 and 2012 to help finance their budget shortfalls. Another NIS 10 million is being given to the government-employed prosecutors in pay raises, and then there is the NIS 1.1 billion promised to the various coalition factions in exchange for their support of the budget.

That isn't all. Yesterday the cabinet approved Netanyahu's proposal to provide Sderot and the towns by the Gaza Strip with NIS 184 million in funding. On Sunday, Netanyahu plans to ask the cabinet to approve another proposal, this one to beef up the country's emergency preparation systems (major earthquakes, fires, etc. ) at a cost of NIS 350 million.

Another NIS 350 million is expected to be allocated, pursuant to another prime ministerial decision, for other emergency systems, such as hot-line centers at local authorities, building new communications systems for times of crisis and buying equipment for mass evacuation. Yet another NIS 100 million is to be set aside for managing other crises, mainly the fast-track procurement of equipment as needed.

During the first months of 2011, Netanyahu will have to make decisions on reforming Israel's firefighting system, at a cost of billions of shekels, and moving the firefighting emergency response system from the Interior Ministry and local authorities to a national firefighting authority, to be formed under the auspices of the Defense Ministry.

Yet another reform taking shape under the wing of the Prime Minister's Office, which is also expected to cost hundreds of millions of shekels, is the creation of a national authority to handle earthquakes, which would operate under the auspices of the national emergencies authority at the Defense Ministry. At present, such emergencies are the province of the National Infrastructures Ministry.

A month and a half ago, the chairman of the Histadrut labor federation, Ofer Eini, and Steinitz signed an agreement adding 2.25% to the salaries of all public sector workers, effective January 1, at a cost of NIS 2.25 billion. At the start of 2012, they will receive another 2% in their pay checks, at a cost of another NIS 4.25 billion.

Yesterday Eini and Shraga Brosh, chairman of the Federation of Israeli Economic Organizations, struck an agreement raising the private-sector minimum wage by 12%, from NIS 3,850 to NIS 4,500, in two installments: NIS 250 on July 1, 2011, and another NIS 200 on October 1, 2012. Treasury officials say the agreement cannot be applied to or imposed on the public sector, even if the industry, trade and labor minister agrees to it.

If, however, it is extended, that will pull another NIS 1.5 billion out of the state coffers.

Meanwhile, the port workers are threatening to strike unless they get paid another 4% beyond what the agreement between Steinitz and Eini would bring them, which is 6.25% for all public-sector workers over three years. The Airports Authority workers and doctors are also threatening to strike. Today, the Knesset Economics Committee will be discussing Housing Minister Ariel Atias' demand to pay homeowners mortgage subsidies in the periphery, a measure estimated to cost about a billion shekels.

Atias has the support of the prime minister and coalition, though. At the end of last week, Moshe Gafni, chairman of the Knesset Finance Committee, said with unconcealed pride, "Everything Bibi promised us, he's honored, to the last shekel." To which a treasury official remarked, "If they give, let them take. At the end of the day, we'll all pay the price."