Has Israeli Army Met Its Match in Finance Minister Kahlon?

Officers in the career army seem happier to discuss military failings than their own financial arrangements.

Eliyahu Hershkovitz

Finance Minister Moshe Kahlon often says he “hates to argue.” He may be an experienced and battle-hardened politician, but he doesn’t have the right personality for long, drawn-out wars. He’s aware that this is problematic for someone in charge of the public coffers: When he decided to appoint Shai Babad as director general of the Finance Ministry last June, Kahlon explained his choice by saying Babad was “bad.” This means he knows how to fight, so there is someone to fight Kahlon’s battles for him.

But the fact that Kahlon hates to fight doesn’t mean he doesn’t know who it’s worth fighting with. That’s why the annual battle with the defense establishment over the military budget took such a surprising turn in recent weeks.

The traditional battle pattern is based on the entire senior leadership of the treasury demanding that the military become more efficient and transparent, and calling for budgetary restraint. The entire military establishment, meanwhile, is enlisted and produces a list of threats and scares, horrifying scenarios and a doomsday weapon: the halting of training exercises. Usually, the end arrives when Prime Minister Benjamin Netanyahu appears in the final act, rules to increase the defense budget by a few billion shekels and is seen as “Mr. Security.”

We saw none of that this time. Quite the opposite. Kahlon knows the language of the members of his former Likud party and their relations with Netanyahu, and has a lot of expertise on energy-saving. He did not waste it on battles that he knew Netanyahu would ultimately overrule him on. He saved his battles for two areas that he identified as places where he could make real achievements – the housing market and the banking system. In every other area, he is looking for evolutionary changes, not revolutionary ones.

“I have 10 Knesset seats. With that, I can’t fight all the battles that previous governments didn’t,” he told one of his own people recently. And this is how we must view the agreement over the defense budget, too.

His starting point needed to be last summer’s Locker Committee report, along with the IDF’s own multiyear proposal (known as the Gideon Plan). Locker recommended a series of revolutionary steps at the military’s management level. Some have now been adopted, some have not. One of the diagnoses of the Locker panel was that the discussion between the finance and defense ministries was disproportionate in terms of manpower: The military puts dozens of trained and experienced people up against three nice, hardworking officials from the treasury who are in charge of the defense budget, but who are incapable of handling all the pressure from above.

We have yet to see the final agreement, and it would be best not to hand out praise just yet with regard to military pensions because, somehow, surprises always pop up later. They always exceed what was planned.

From the details that have been released, though, it seems the most revolutionary thing in the budget is the Defense Ministry’s agreement to transparency toward the Finance Ministry – a promise that has been made in the past in various ways, but broken time after time. As for the rest of the items agreed upon, first and foremost the generous pension arrangements, there will be few major changes and they will leave professional soldiers as an especially privileged group within the public sector.

Finance Minister Moshe Kahlon walks past a giant projection of the Israeli flag.
Marc Israel Sellem

The agreement states that the number of serving officers entitled to a bridge pension (one paid out of the military budget until the retiree reaches the retirement age of 67 and his regular pension starts) will be reduced. A third of those serving in the professional army – senior noncommissioned officers – will retire with a bridge pension only at age 55 (compared to younger than 50 today). Another third will leave the army at age 35 with increased severance payments of some 300,000 to 500,000 shekels each ($77,000-$129,000), but without any additional pension rights – that’s in addition to what they and the army have contributed to their regular pension plans over their years of service.

The remaining third will retire starting at age 43 and receive a bridge pension through age 67. The maximum amount of this pension will be 12,000 shekels a month – less than the 14,000-shekels average that retired career soldiers who benefit from a regular noncontributory pension from the defense budget receive today.

So, what’s the bottom line? Hard to say. It very much depends on a number of questions: Who will the army release at age 35? Will it really become transparent? Will it keep its promises? And has it left a few surprises hidden deep in the agreement?

The speed with which Kahlon and Defense Minister Moshe Ya’alon closed the deal is surprising considering the history between the two ministries. The issues of pensions, salaries and manpower are not closed so quickly within the Finance Ministry. This speed surprised Netanyahu, too, who would have preferred to maintain the tradition in which the finance and defense ministers beat each close to death. The speed even surprised senior officials in the Finance Ministry.

The issue of pensions and employment conditions for the career army has gathered increasing public interest in recent years, and is considered one of the main points of friction between the military and Israeli society today: Professional soldiers have a hard time understanding why their pension arrangements cause such outrage. There are other points of friction – for example, the mediocre results of the army’s handling of the threats from Hezbollah and Hamas – but somehow, when we talk with career soldiers, they accept our criticism of their army duties far more easily than when we discuss their retirement arrangements.

The slogan of “We serve and protect the nation and pay a high personal price, therefore we deserve extra pension and retirement rights” has taken root here. You also frequently hear statements warning that if these pension rights are canceled, it will no longer be worth remaining in the military. This makes it sound like serving in the professional army is a financial consideration as much as one of values. The second economic explanation is that if soldiers are released into the job market at age 40 and over, they will have a hard time finding work – therefore, they must be provided with generous pensions and retirement deals.

It is easy to empathize with these claims, but they also have two problems: The first claim makes military service holy, and rewards it in a privileged fashion compared to other professions in the public service that are no less important. The second claim ignores the fact that there are others aged 40 and over in the Israeli job market facing the very same problem, but most don’t have such privileged benefits to cushion them: They have no union or lobby group behind them that takes care of their employment conditions and retirement arrangements.

P.S. The Haredim worked hard, too

It was not just the defense lobby that worked hard in recent weeks. The ultra-Orthodox lobby did not rest either, until it made absolutely certain that the only remaining legacy of previous Finance Minister Yair Lapid – the law for sharing the burden of military service – was buried, once and for all.

From the start, it was a relatively low-key law. But even the things that were included – enlistment quotas and criminal sanctions against draft dodgers – were postponed for a number of years (the quotas) or canceled (the criminal sanctions). It seems to be mere coincidence that the two matters concerning military service were concluded last week, but it is no coincidence that we are describing here two populations with opposite privileges: One has been awarded exemptions from military service for years; the other is overpaid with excessive privileges for continued military service. The choice of these two groups is one of the components of inequality in Israel: Whoever signs up for the career army finds a place in the top percentiles of wage earners and enjoys a huge number of benefits; whoever does not enlist in the army finds it hard to enter the workforce and fills the lowest two income percentiles.

More and more young people from the ultra-Orthodox community now understand this, and they are choosing to either enlist in the army or volunteer for national service. Their numbers are rising gradually, to the chagrin of their rabbis and many community leaders. This is because the formula for integration, service and learning a profession as the path to climb into the ranks of the higher wage earners is slowly defeating even the rabbinical decrees.