Israeli Treasury Officials Stage Revolt Over Budget for Army

In a stormy meeting they demand changes to key pact on pay, pensions for career soldiers.

Finance Minister Moshe Kahlon, left, with Defense Minister Moshe Ya'alon.
Marc Israel Sellem

Treasury officials staged an open revolt on Monday against the controversial deal signed by Finance Minister Moshe Kahlon with the defense establishment, setting the size of the army’s budget for the next five years in exchange for reforms in pensions and pay for career soldiers.

In a stormy, seven-hour meeting called to review the agreement, a host of officials who had not been party to the negotiations leading up to the agreement reached a week ago voiced strong objections to it, sources said. The deal’s opponents included Accountant General Michal Abadi-Boiangiu and Wages Director Kobi Amselem, some of the ministry’s most senior officials.

The opposition could reopen the war between the finance and defense ministries, which the pact Kahlon reached with Defense Minister Moshe Yaalon was meant to solve. Yaalon’s stand on the matter, nor that of Defense Ministry director general Dan Harel, is known.

“The goal isn’t to go into war with the defense establishment but to reach an agreement with them. If one side made a mistake, there’s no reason not to let him fix it,” one treasury source told TheMarker.

Treasury officials called for major changes in the agreement, but sources said it was unlikely that Kahlon would be able to demand the pact be opened for renegotiation except in the most egregious cases.

Sources said it was possible that most of the amendments to the agreement could be agreed on very quickly, within a few days, and then brought to the security cabinet for approval.

Treasury director general Shai Babad convened Monday's meeting, which included Amir Levy, head of the budgets division, who represented the treasury in the talks with the defense establishment.

Sources said Abadi-Boiangiu’s participation in the negotiations had been limited to a single phone call she took while in London. She and Amselem objected that they had not been brought into the negotiations even though the agreement constitutes a critical component of fiscal policy.

The agreement guarantees the army a baseline budget of 59.1 billion shekels ($15.2 billion) annually for the next five years. In exchange, the army agreed to reduce the number of career officers and trim their pay and pensions, which has emerged in recent years as an increasingly large part of defense spending.

But it emerged during the meeting that the budgets division conducted the talks without consulting legal and actuarial experts about the costs and implications of the deal.

Officials: IDF pensions too generous

The deal’s opponents faulted the agreement for awarding career army officers overly generous bridge pensions – money given to those retiring from army service long before they’ve reached the legally pensionable age – that would set a bad precedent.

Among other things it will guarantee career soldiers a pension based on their full last salary, rather than the top rate of 70% as is common for wage earners elsewhere. Another dangerous precedent is a 260% rate of severance pay set in the agreement, which on average will work out to 500,000 shekels per employee.

Opponents said the agreement does almost nothing to reduce the cost of army bridge pensions. They said the government is at risk of increasing its actuarial costs rather than lowering them, as it expected to be able to do after 2033. Opponents also criticized what the budget division had portrayed as its biggest achievement in the negotiations with the army, namely reducing the number of career officers by allowing some to retire as early as age 35. But officials said they were doubtful they would be able to ensure enough career soldiers took the early-retirement option.

Officials expressed concern that the original terms for the bridge pensions were not rewritten under the agreement, which could spur other civil servants to demand early-retirement options, too. That would include all other security personnel like police and prisoners service employees, they warned.