Lapid Rebuffs Army Demand for More Funding

Burgeoning military pensions are a major burden on Israel's defense budget.

Ofer Vaknin

After months of vigorous campaigning by defense officials for increased government funding for the Israel Defense Forces, Finance Minister Yair Lapid spoke out on the issue for the first time on Friday, saying that the defense establishment can cut spending in some areas so the government can maintain its fiscal discipline.

“We have absolutely nothing against the soldiers who defend our lives,” Lapid said on Friday. “They deserve not only what they get, but even more, both with respect to equipment and training. We have a professional dispute with the defense establishment over savings that could be made elsewhere in the military [so that we] also maintain the budget, which is the most basic aspect of proper management.” Lapid called for moving the controversy over defense spending out of the realm of public discourse, saying that the dispute between the Defense Ministry and his own Finance Ministry needs to be extracted from what he called “the current muck.”

“We’re talking about Israel’s security and Israel’s obligation to remain strong. Staying strong also means remaining strong from a budgetary standpoint so we have money left for education, social welfare and health,” Lapid added.

The defense establishment is demanding a 2 billion shekel ($573 million) supplement to this year’s defense budget. It is also demanding about 5 billion shekels more in funding next year than the Finance Ministry’s budget proposal calls for. The army has even scrapped plans for military exercises, claiming that it lacks the necessary funds. A major cause of the problem is the growth of pension payments to retiring career soldiers, but the Finance Ministry has adamantly opposed any additional budget for the military.

Finance Ministry officials have privately been highly critical of Lapid for his silence up to now in the face of an ongoing campaign by defense officials including Defense Minister Moshe Ya’alon and IDF Chief of Staff Benny Gantz for more funds. Prime Minister Benjamin Netanyahu, whose position makes him the ultimate mediator in the confrontation over defense spending this year and next, has not spoken out publicly on the matter. The thinking among defense and finance ministry officials is that his attention is focused on the Knesset’s election of a state president in June to replace Shimon Peres, but that he will give it closer attention soon.

At the core of the dispute over the defense budget are burgeoning army pension expenses that the government has been funding, which have risen by more than 50% in recent years. That’s essentially the amount of additional funding requested by the defense minister and IDF chief of staff. Politically, however, it would be difficult to convince the public that army pensions paid to career soldiers who retire at 46 should be funded through cuts to education, social welfare, health and infrastructure spending.

Although as a general rule, the Finance Ministry administers pension payments to civil servants and other national government employees, the defense establishment has its own separate pension system, which is nonetheless funded directly from government coffers. For many years, the annual cost to the government from defense establishment pensions was stable and predictable, in the area of 4 billion shekels. It crept up to 4.4 billion shekels in 2012, but then jumped sharply to 6.7 billion in 2013 and is expected to rise to 7.4 billion this year. It is the shortfall in funding these sums that is causing cutbacks in training and equipment, unless the treasury fills the gap.

Last year, the amount that the government paid out in military pensions represented more than a third of all government pension outlay, and the portion represented by the army is expected to grow. The average pension age in the IDF is 46, while in the civil service, it is 63.

An official panel to be headed by retired Major General Yohanan Locker is slated to recommend policy regarding the defense budget for the 10 years from 2016 to 2025. Due to the current disagreement between the finance and defense ministries, however, the committee has not yet gotten down to work. Those involved in setting it up believe that one of its main tasks will be to transfer the expense of funding military pensions from the defense budget to the Finance Ministry pension system.

Ilan Assayag