Defense Ministry, Treasury Agree on $15.6 Billion Defense Budget for 2016

Both claim victory after deal, but army seems to have held ground on major issues.

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

Next year’s defense budget will be about 60.5 billion shekels ($15.6 million), according to a decision reached Sunday by Defense Minister Moshe Ya’alon and Finance Minister Moshe Kahlon, and approved by a Knesset defense committee.

The official budget will be less, 56.1 billion shekels, but the two ministers have already agreed on an extra 4.4 billion shekels in funding the defense establishment will receive in 2016.

The defense budget committee, headed by MK Tzachi Hanegbi (Likud), approved the budget by 8 votes to 4.

A good atmosphere has reportedly prevailed in the talks between the Finance Ministry, Defense Ministry and Israel Defense Forces this year, and in recent days both sides made major efforts to present the budget deal as a historic breakthrough. However, it seems the changes are less dramatic than the two ministries made them out to be.

The defense establishment will receive extra funding beyond the official budget next year, and agreements on other matters do not particularly conform to the recommendations of last summer’s Locker Committee on the defense budget, which Ya’alon and the IDF brass opposed.

The defense establishment compromised on some points, but was able to block changes that it did not want.

The result is that the treasury has agreed to the multiyear plan formulated by IDF Chief of Staff Gadi Eisenkot, with some minor amendments.

The agreement does not place real pressure on the defense establishment to streamline, except for some improvements to defense-establishment transparency that will help the treasury.

The defense establishment is especially proud of the fact it was able to quash the treasury’s demands that certain items – including the move of IDF military bases to the Negev; security for oil rigs at sea, to be provided by the navy; and the privatization of Israel’s military industries – be funded completely from within.

Funding for these projects will still remain external to the defense budget. However, it seems the Finance Ministry understands these agreements differently than defense officials, because if the Finance Ministry believes the defense establishment is not meeting its obligations to streamline, it is expecting to go back to demanding internal defense funding for some of these projects.

Security sources say the sides have agreed that the defense budget could exceed 60.5 billion shekels in future years. However, this question is also open to interpretation and the details have yet to be hammered out.

The treasury and Defense Ministry have also agreed in principle to further shorten service for men, by two months to 30 months (beginning in 2020). It also decided on partial implementation of the Goren Committee’s recommendation to restrict the numbers of disabled veterans receiving full benefits, although this will not affect disabled soldiers already receiving benefits.

The sides also reached agreement on pension conditions – in favor of the Defense Ministry’s position. The IDF and Defense Ministry were strongly opposed to the Locker Committee’s recommendation that very few officers should receive bridging pensions when they retire from the army at age 42, instead receiving a retirement bonus.

In the end, the sides agreed on a model proposed by another committee and different from the Locker idea: The number of career officers reaching full pension age will be reduced by establishing another exit point from the career army at age 35. In addition, the army will hand over about 40 of its functions every year to civilians, in units like the Military Advocate General and the chief of staff’s financial adviser, thereby also reducing the number of officers reaching full or partial pension age.

This will mean only a few hundred officers will receive bridging pensions. However, implementation will depend mainly on the good intentions of the army; there is no real external oversight on the matter.

The bottom line is that the ability of the treasury to oversee or enforce the agreements is limited, with Kahlon relying mainly on Chief of Staff Eisenkot’s reforms. The latter has already shown he is willing to compromise and take risks to improve the readiness of the army. These are important steps, but they remain the responsibility of the IDF, without the treasury or other entities being able to exert real influence.

Gili Cohen contributed to this report.