Finance Minister Yair Lapid and senior treasury officials will meet with Prime Minister Benjamin Netanyahu on Thursday to present their outline of a state budget for the remainder of this year and all of next.
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The meeting was initially due to be held Wednesday, but Lapid’s office said the ministry’s deliberations on the budget took longer than anticipated. In particular, it said, more time was needed to present Netanyahu with additional options for budget cuts.
But treasury sources said the real hold-up was a dispute between Lapid and senior budget division officials over which specific items should be cut. The proposed budget is slated to involve NIS 30 billion in government spending cuts, spread over the balance of this year and all of next, plus NIS 9 billion in new taxes or the elimination of tax exemptions − NIS 3 billion this year and NIS 6 billion in 2014.
In particular, Lapid opposed the treasury’s proposals to cut the higher education budget and increase university tuition. He also opposed the plan to revoke a tax credit for working women. Treasury officials spent the entire day Wednesday trying to find solutions to these disputes.
After hearing the treasury’s presentation on Thursday, Netanyahu will give his own opinions on some of the key issues, including the highly sensitive subject of cuts in the defense budget. The treasury will then revise its proposal in advance of a second meeting with the prime minister, expected to take place next week. The cabinet is due to hold its first meeting on the budget on May 5.
On Tuesday, Lapid met with Histadrut Labor federation chairman Ofer Eini. The Histadrut opposes the treasury’s plan to cut wages and benefits for public-sector workers, and it also opposes a planned cut in child allowances. Lapid and Eini are due to meet again next week in an effort to thrash out a compromise.
Meanwhile, behind the scenes at the Finance Ministry, an additional dispute has been raging over Lapid’s management style. Staffers say Lapid has not kept them in the loop regarding major decisions and has publicly taken issue with their budget proposals.
Typically, ministry sources charge, new ministers at least attempt to establish mutual trust with senior ministry staff. But Lapid, they say, has done quite the opposite, causing resentment within the ministry.
Over the past two weeks, Lapid has met on a regular basis with budget division head Gal Hershkovitz and budget division staff. During those meetings, the budget division spelled out its preliminary proposals for the budget, including painful cuts.
Treasury officials over the past six months have built a budget based on cuts in defense spending, National Insurance Institute allocations, public-sector salaries and infrastructure. They have also prepared a list of dozens of other possible cuts. The list was sent to Lapid to either accept or reject.
Senior treasury officials have also met with ministers and senior officials from other ministries to present their proposed budgets for each specific ministry. Due to the short time frame, these meetings took place even while discussions were still continuing within the Finance Ministry’s budget division.
But ministry staff were upset to learn through the media that their boss opposed raising university tuition and trimming income tax credits for working mothers by half a point. They also complained that they first learned of Yael Andorn’s nomination as the ministry’s new director general through the media. Lapid’s predecessors, they say, had been careful to give them a heads-up on such news before it was made public.
Sources close to Lapid’s bureau countered that choosing the director general is the minister’s prerogative and he has no obligation to inform the staff in advance.
Ministry staffers also claimed that Lapid did not inform them in advance of his decision to scrap the two-year budget system as of 2015.
However, sources close to Lapid insist that the budget division’s senior staff was informed before Lapid went public with the news.
Lapid’s office issued a statement Monday declaring he would not keep the proposed cut to tax credits for working mothers in the final budget proposal. The move would have added NIS 700 million a year to the state’s coffers. Treasury staff complained that the announcement was meant to make Lapid look like the “good guy,” the friend of working mothers, while setting them up as the bad guys at the ministry.
Ministry staffers were also upset by this week’s flap over university tuition. On Monday, Yoni Regev, the budget division staffer responsible for higher education, discussed plans for a possible tuition increase with national student union chairman Uri Rashtik. The next day, as the student union campaigned against the proposal, Lapid posted on Facebook that he would never allow such an increase to be implemented.
Ministry officials counter that contrary to Lapid’s post, Regev had full authority to present the proposed tuition hike when he met with Rashtik. While Regev made it clear at Monday’s meeting that any final decision would require Lapid’s approval, they said, ministry professionals believe the budget must include either a tuition hike or a cut in state funding for higher education.