The heads of treasury made every effort to increase spending during the final weeks of 2007, to prevent, heaven forbid, the first state budget surplus in decades.
Thus, in December 2007 the government poured record funding of NIS 27.2 billion into government ministries, compared to an average of NIS 17.8 billion for the first 11 months of the year. The creative accounting by budget departments and the Comptroller General and other branches of the treasury was successful - but just barely. The state ended 2007 with a tiny deficit of about NIS 100 million, out of a budget of NIS 225 billion.
Why should the heads of treasury care if 2007 winds up with a one or two billion shekel surplus or even more, as the budget performance developed between January and November of last year? The answer is clear. Even though they planned the budget themselves, they were uncomfortable with the idea of social lobbyist asking: "If there is a budget surplus instead of the deficit forecasted for the end of the year, why are we being stingy with education, health and infrastructure budgets?" The media coverage that MK Avishai Braverman received in November, when he demanded that budgets of social ministries be increased, only increased the treasury's motivation to create a deficit at all costs.
There are two reasons for the budget's dramatic deviation from the deficit forecasted for 2007 by the government, and they are both the fault of the treasury. The treasury purposefully set its sights on lower than expected revenues from taxes, just NIS 179.5 billion. Actual revenues reached NIS 190.8 billion. The treasury is repeating this trick in 2008. It is aiming to collect NIS 190.0 billion next year - less than the amount collected in 2007, in spite of the 4.8% growth forecasted by the treasury itself. Last year saw tax revenues exceeding collection in 2006 by NIS 12.8 billion. Minimalist economists would target 2008 revenues at NIS 200 billion.
And the second reason for the huge deviation: NIS 4 billion in underspending. Such underspending repeats itself nearly every year. We have never heard of the treasury overspending its budget. Obviously, this is no coincidence.
The treasury erred twice to serve its own policy. The huge surplus in state coffers, compared to the original plan, allows the treasury to maintain its policy of reducing interest rates and national debt. As a collaborator on this policy, the central bank governor offers no criticism. This policy comes at the expense of increasing budgets of government ministries, defense, education, infrastructure and health, for instance. There would be nothing wrong with the policy if the treasury had only declared it openly, presented it to the government and the Knesset, in a clear, transparent and unambiguous manner.
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