Defense Budget to Grow, Education Spending to Shrink

The move is designed to increase funding to help Israel address problems regarding Iran.

Following consultations with Defense Minister Ehud Barak, the top brass and Finance Minister Yuval Steinitz, Prime Minister Benjamin Netanyahu has endorsed an additional NIS 1.5 billion for the defense budget, to be spread out over this year and next.

The move is designed to increase funding to help Israel address problems regarding Iran. The cabinet will also be asked to approve an additional NIS 425 million for the Health Ministry to finance swine flu vaccinations.

The proposals - a shuffling of NIS 1.925 billion from certain areas of the budget to others - will be brought to vote in a special cabinet session scheduled for tomorrow. The decision to shore up the defense budget first came under consideration a few weeks ago. The final details of the proposal waited for Netanyahu's return from the United States last week.

In order to avoid a budget shortfall, the government will be asked to trim NIS 1.2 billion from ministry budgets for 2009 and 2010, excluding the Defense Ministry. This represents a 2% cut of funding going to ministries.

In addition, coalition parties will be asked to give up 20%, or NIS 725 million, of the funding promised them under current coalition agreements. Cuts of generous funding for coalition parties' pet programs will be carried out in two equal increments in 2010 and 2011.

National Insurance stipends (funding for children, pensioners, Holocaust survivors and the handicapped), budget-balancing grants to municipalities, budgeting for building new classrooms, some financing for the Industry and Tourism Ministry and government ministry salaries will remain untouched.

The proposed cut will take its toll mainly on the Education Ministry and higher education, which are being asked to surrender NIS 63 million and NIS 51 million respectively.

According to the proposal, the new budget is necessary in order to "address defense-related needs including intelligence, home front preparation and the replenishing of stockpiles."

The Defense Ministry said yesterday that the extra budgeting had been earmarked for defense-related issues that were not included in the ministry's work plan, but declined to elaborate.

The Finance Ministry described the budget shuffle as rational and noted that the move involves the redirecting of 0.5% of the state budget to health and defense issues, and that the budget had been cut even more sharply in the past.

Just two months ago, Steinitz called on the Israel Defense Forces to trim its budget by NIS 3 billion, but this was rejected. The defense budget stands at NIS 48.6 billion for 2009 and NIS 53.2 billion for 2010 - the highest amount in Israel's history.

The figure constitutes 6.3% of expected gross domestic product next year and 15.1% of the overall budget - even before the planned NIS 1.5 billion addition. Israel is the biggest defense spender per GDP and as a percentage of the budget of all developed countries. This puts a drag on the country's ability to improve its credit rating with international rating companies.

The decision to increase the defense and health budgets by NIS 2 billion and trim NIS 2 billion in spending elsewhere came as a surprise to many observers. Opposition from coalition members, however, has been far less than expected.

Much of the criticism has been directed at the decision's timing, just two months after final approval of the two-year budget for 2009 and 2010. Many ministers were irked by the way they learned of the decision, through reports by TheMarker yesterday.

Critics say redirecting funds to the defense and health ministries, without the ministries being asked to seek funding for fresh needs, would undermine the government's efforts to generate economic growth and reduce unemployment.

Spokespeople for the Education Ministry, headed by Likud's Gideon Sa'ar, and the Absorption Ministry headed by Yisrael Beiteinu's Sofa Landver, criticized the proposed cuts to their ministries. Social Affairs Minister Yitzhak Herzog, meanwhile, complained that he had not been informed of the plan earlier.

A spokesman for the opposition Kadima party was harsher in his criticism, describing the plan as a slap in the face of the average citizen. "Netanyahu prefers to cut budgeting for students and welfare - anything but the corrupt budgets for his ministers without portfolio," he said.

Nevertheless, sources close to the situation say the proposal is expected to be approved by a broad majority in the cabinet, and that some ministers who objected yesterday are likely to change their minds by the vote. Netanyahu is also expected to require Likud ministers to vote for the proposal, and Barak, whose ministry is the big winner in the budget shuffle, is expected to do the same with ministers from the Labor Party, which he heads.