Defense Ministry Seeks to Shift Pension Costs to Treasury

With army pensions and social benefits skyrocketing, IDF warns costs could come at expense of military preparedness.

A proposal to shift some NIS 12 billion of non-military spending from the Defense Ministry to the Finance Ministry on an annual basis is being quietly debated at the highest levels of government with the aim of reaching an agreement before the 2014 budget goes into effect.

The NIS 12 billion covers expenses not directly related to combat, such as pensions for career officers, funding for the rehabilitation of injured soldiers and payments for bereaved families. Removing such expenses from the defense budget would reduce its total to an estimated NIS 40 billion.

The talks are being held at the senior level of the defense and finance ministries and are subject to the approval of Prime Minister Benjamin Netanyahu. Both ministries have confirmed they are discussing the issue.

The Defense Ministry said the change was necessary because of “the fiscal hole that’s been created.”

“In recent years, the budget lines for these items have increased due to higher spending requirements and higher prices that... stem from new legislation and collective work agreements for which the ministry receives no additional budget,” the ministry said in a statement.

Pension costs for the Israel Defense Forces are expected to grow by billions of shekels in the coming years due to an agreement signed by the defense and finance ministries a year ago that increased career soldiers' pensions. The added costs, the IDF argues, will come at the expense of spending on military preparedness if they remain part of the army’s budget.

This year the IDF's pension bill is projected to grow to NIS 6.14 billion, from NIS 4.36 billion in 2012. In 2014, the bill is projected to reach NIS 6.82 billion, a 56% increase over 2012.

Other categories of non-combat defense spending are growing as well.

The annual budget of payments to families of IDF soldiers killed during their service was NIS 1.47 billion in 2012 and is projected to grow to NIS 1.63 billion this year. Spending on rehabilitation for injured came to NIS 2.9 billion in 2012 and is projected to grow to NIS 3.29 billion this year.

The Defense Ministry has justified the proposal to transfer pension expenses to the treasury by pointing out that pensions for civilian government employees are paid by the Finance Ministry. In the current situation, defense officials say, non-combat expenses such as soldiers' pensions are being funded at the expense of military equipment and other items required for military preparedness or combat.

A major point of friction in the discussions has been the Defense Ministry's insistence on retaining the right to determine pension and disability benefits while at the same time transferring the cost to the treasury. The Finance Ministry wants to end special privileges that create unequal pension benefits among career soldiers.

Sources in the Finance Ministry said it would be a relatively simple administrative process to shift the army's pension system to the treasury, but administering the treatment of disabled veterans would be more complicated. Several hundred people, including doctors, nurses and social workers, are employed by the IDF to care for disabled soldiers and veterans. Finance Ministry officials have said they wanted to put the National Insurance Institute in charge of rehabilitation but that the defense establishment has objected.

Hagai Aharon