Cabinet Expected to Approve 2% Across-the-board Cuts

Cutbacks needed to offset costs of Gaza fighting

Reuters

The cabinet is expected to approve about 2 billion shekels ($561 million) in across-the-board cuts from the 2014 budget to fund the cost of Operation Protective Edge, this summer’s military confrontation with Hamas and its allies in the Gaza Strip.

The savings from the cuts will in part provide an immediate allocation of about 1.5 billion shekels to the Defense Ministry for some of the costs incurred in the fighting. The plan, to be presented to the cabinet today by Prime Minister Benjamin Netanyahu, Defense Minister Moshe Ya’alon and Finance Minister Yair Lapid, includes a 2% reduction in the base budget of every government ministry except the Defense Ministry.

The cuts will not include direct salary expenses at the various ministries, but they are expected to have an impact beyond this year because the lower budgeted amount will be the basis for any increases next year and beyond.

Cabinet ministers were only informed of the proposal, which went through a number of drafts, late on Friday. After the plan’s expected approval by the cabinet, it will also require Knesset Finance Committee consent.

Two cabinet members, Environmental Protection Minister Amir Peretz (Hatnuah) and Housing and Construction Minister Uri Ariel (Habayit Hayehudi) have already come out against the plan. Peretz said the cuts will hit poorer Israelis hardest, including many residents of the south. Instead, he suggested, the costs of the fighting should be funded by additional taxes on high-income earners. Ariel sent a highly critical letter to Netanyahu objecting to the fact that the cuts will provide a lower base for ministry funding in future years.

By virtue of the size of its overall budget, the Education Ministry will suffer the largest cut in actual shekel terms – 695 million shekels, including funding for public schools and higher education. [See detailed coverage below]. The Transportation Ministry is expected to lose 247 million shekels, almost all of which will come from the ministry’s development budget.

The immediate 1.5 billion shekels in savings will cover expenses incurred by the Defense Ministry and costs associated with supporting Israeli communities near the Gaza border, the region that bore the brunt of the shelling, resulting in the widespread departure of residents for other parts of the country.

Assuming that the proposal is approved, state funding for local governments will fall by 70 million shekels for the remainder of the calendar year. The Housing Ministry budget for the balance of the year will be cut by 67 billion shekels, and the Social Affairs Ministry’s by 63 million shekels. The Economy Ministry cut is slated at 54 million shekels and the Public Security Ministry at 51 million shekels. The Health Ministry is to lose 50 million shekels.