Government Reveals Some Details of Israeli Army Spending Reforms

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Finance Minister Moshe Kahlon and Defense Minister Moshe Ya'alon shaking hands, November 18, 2015.
Finance Minister Moshe Kahlon and Defense Minister Moshe Ya'alon shaking hands, November 18, 2015.Credit: Olivier Fitoussi

Two months after the finance and defense ministries reached an agreement on military spending, and salaries and pensions, officials held a snap news conference Monday to disclose at least some of the details.

The key part of the agreement calls for increasing the army’s basic budget, starting next year, by 3 billon shekels ($760 million) annually, to about 59 billion shekels, without any concessions from the defense establishment.

The details were announced by Shai Babad, the Finance Ministry’s director general; Amir Levy, the head of the treasury’s budget division; Sasson Hadad, who heads the Defense Ministry’s budget division; and Dan Harel, its director general.

The budget for rehabilitation of injured soldiers – which is now about 5 billion shekels annually – will be taken from the Defense Ministry, but will remain under its supervision.

At the same time, the plan calls for trimming back spending on pay and pensions for career soldiers by 1.5 billion shekels annually. However, this will only happen after the Israel Defense Forces completes planned reforms concerning the career army’s salaries and pensions.

This is unlikely to occur before 2024. Even then, officials said the two ministries had not calculated how those savings would be achieved in detail.

The news conference, called for early Monday morning and announced only a few hours in advance, was a tense affair. Officials declined to answer questions and treasury officials seemed at odds with their counterparts at the Defense Ministry over some elements of the plan.

Treasury officials insisted that the plan included elements of the recommendations made by the government’s Locker Committee on defense spending reforms, which Defense Minister Moshe Ya’alon had sharply opposed. Defense officials insisted that none of the Locker proposals were included.

Still, both sides did agree that the plan would end the bitter annual feud between the two ministries over defense spending. “We haven’t sought any budget supplements for coming years. The mudslinging between us and the treasury is over,” declared Harel.

The press conference came after Finance Minister Moshe Kahlon announced what he termed a historic agreement with Defense Minister Ya’alon last November, which will lead to wide-ranging reforms in what critics call a bloated pay and pensions system for career soldiers.

The plan came after weeks of secret negotiations between the two sides, which Harel said was punctuated by frequent crises.

But Kahlon and Ya’alon never provided details of the agreement, despite promises that they would be released soon. Many media organizations have filed Freedom of Information suits seeking to obtain details, but officials said that much of the plan is classified for national security reasons. Yesterday’s news conference shed only limited light on the plan.

In the 2015 defense budget, the defense establishment received 2.1 billion shekels in supplemental spending in the final week of the year, even though the budget itself was only approved by the Knesset a month before.

For the next four years, officials said yesterday, the agreement called for a fiscal framework that aims to do away with repeated increases over the course of the year.

The defense establishment’s basic budget this year is 56.1 billion shekels, and any additions will hinge on the army undertaking the reforms outlined in the Kahlon-Ya’alon agreement. In 2017-2020, the basic budget will grow annually to 59 billion shekels, but the increase doesn’t depend on reforms being undertaken, the officials added at the press conference.

The army will receive budget supplements because of rising costs, which are delineated in the plan, and for spending items not included in the basic budget. These include 375 million shekels for what was described as a “special supplement,” and 300 million shekels for reforming the career army, including personnel cuts.

However, special spending items will be covered by the treasury, not the Defense Ministry. These include the billions of shekels in costs for relocating army facilities from the center of the country to the Negev; erecting a security fence on the Jordanian border; pay rises for enlisted soldiers; and protecting Israel’s offshore natural gas facilities.

The plan calls for the number of career soldiers to drop from the peak of 44,000 in March 2013 to 40,000 by 2017. New pay and pension terms will also be put in place, starting in 2021. The number of officers with the rank of colonel or higher will be reduced, while 32 job titles, such as economists and attorneys, will be handed to civilians. Finally, terms for early retirement will be toughened.

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