Secrets of the Defense Budget Revealed

One: Spending on personnel accounts for about two-thirds of its total outlay.

Even though defense spending is the largest single component of the state budget every year, the defense establishment and the Finance Ministry go to great lengths to obscure figures that would reveal how much money is really being spent, and on what - thereby depriving the public of this information.

Few people know how much Israel actually spent on defense in prior years, how much will be shelled out this year and how much has really been budgeted for the next two years. The 2011-12 budget book released by the treasury on Tuesday includes a 2011 defense budget, comprising both the Israel Defense Forces and the Defense Ministry, of NIS 49.4 billion and a 2012 outlay of NIS 50.6 billion. But these figures are imprecise and don't accurately reflect how much Israel really spends on defense.

A closer examination of the budget reveals much higher projected defense spending - NIS 54.2 billon in 2011 and NIS 55.8 billion the following year. The 2010 budget actually provided for NIS 53.2 billion in defense outlays.

The discrepancy between the official budget figures and the real budgets are the product of a special privilege accorded the Defense Ministry: Some of the funds generated by the country's sales of defense equipment do not enter the general state coffers, but instead go directly to the Defense Ministry budget. Income from military sales around the world is expected to reach NIS 5 billion in 2011 and grow to NIS 5.3 billion the following year.

Also missing from the defense expenditure figures are the budgets of the Mossad, the Shin Bet security service and other defense agencies. Absent, too, is the portion of the Israel Police budget that relates to national defense (such as the Border Police ), as well as spending on the Home Front Command, the fund for demobilized soldiers and state support for loss-plagued defense industries.

Conservatively, one would have to add another NIS 10 billion to the official defense budget for the next two years in order to approximate the real level of spending on the country's defense. But on top of this, there are also indirect costs, such as the loss of production from soldiers doing their compulsory service or reserve duty.

Where does it go?

There has also been a change over the past decade in how the Defense Ministry spends the money it gets. Despite a drop in personnel, primarily in the number of civilian IDF employees, there has been a rise in the amount spent on routine operational costs in general and on personnel costs in particular. The amount spent on pension benefits has also ballooned, and rehabilitation services cost more as well. All of this leaves less available for equipment purchases.

In 2010, nearly 41% of the defense establishment's budget went to salaries, almost 13% to pensions and over 11% to rehabilitation services, meaning that nearly two-thirds of the budget went to personnel expenses in some form. Just 30% went to equipment acquisition and a negligible 5% to construction costs.

But it is not clear what the expense breakdown will be over the next two years, because that kind of detail is only released after the money is actually spent.

There are, however, some tantalizing details about spending that the budget does reveal. For instance, the average career soldier will cost the state NIS 442,000 a year this year, which comes to NIS 37,000 a month. In addition to salary, this includes pension contributions, travel expenses, food, medical care and other items.

Casting one's sights overseas, NIS 145 million has been budgeted in 2011 for defense attaches and emissaries abroad. As of the beginning of this year, there were 82 defense emissaries representing Israel around the world, including 53 Defense Ministry representatives. The rest were career soldiers. The average cost of maintaining a military emissary and his family abroad is $190,000 a year, and the average emissary serves overseas for four years.

The 2011 budget also allocates NIS 212.5 million for a security fence on the Israeli-Egyptian border. The project is designed both to reduce arms smuggling into the country and to combat the flow of illegal migrant workers crossing the border.

The treasury says the defense budget is reeling under the weight of career soldiers' salaries and pension benefits. The average retirement age in the civilian public sector is 61, but in the army, it is 46. Career soldiers get state-funded pensions for 36 years after 25 years of service, compared to 20 years of pension payments for 35 years of service in the civilian public sector.

In August of this year, the Finance Ministry struck a deal with the defense establishment under which the average retirement age for career soldiers will gradually rise to 50 in 2029.

The Finance Ministry said that in cabinet discussions of the government's economic plans for the next two years, the Prime Minister's Office proposed greater civilian oversight of the defense establishment's actual spending. However, the cabinet did not adopt this proposal.

The treasury also noted that Israel's high defense spending, both in real terms and in comparison to other countries, has a major impact on its economy and diverts funds from the country's other needs.