Breaking Recent Trend, Israel's Finance Minister Likely to Recommend 1-year Budget for 2013

Yuval Steinitz has been pushing for a two-year budget; change could come in light of 2013 elections.

Finance Minister Yuval Steinitz is likely to recommend a one-year state budget next year, rather than the two-year budget for 2013 and 2014 he previously advocated, according to a senior government source.

Until recently, Steinitz had been pushing for a two-year budget - as was enacted for 2009-2010 and for 2011-2012 - despite advice to the contrary from ministry staff. Steinitz appears to have reconsidered for two main reasons. Firstly, elections must be held by the end of 2013 and it was thought inappropriate to pass a budget extending beyond the life of the current government. Secondly, there has been concern that a major decline in government revenue could force drastic revision of any 2014 budget that might be passed.

Israel is the only country in the world that has recently enacted two-year state budgets. No other public entity - local government, for example - has followed suit. Steinitz is nonetheless an ardent proponent of the two-year budget for the long-term planning possibilities it provides, seeing it as one of the major accomplishments of his term as finance minister.

Ultimately it is Prime Minister Benjamin Netanyahu who decides, based on a recommendation from Steinitz. Steinitz' final decision on the matter is expected this week or next.

As far as is known, Netanyahu has not yet given major consideration to whether the budget should cover one or two years.

A senior government source said policy makers generally prefer a two-year budget. "But there is real ambivalence," the source said, "due to the slowdown in the economy, concern that the slowdown will leaded to incorrect projections and concern over the need for endless adjustments to a two-year budget due to continued declines in state tax receipts."

With regard to the prospect of elections at the end of next year, the source also acknowledged that it was inappropriate to impose a 2014 budget on the next government.

In fact, legislation proposed recently by Steinitz providing for a two-year state budget contains two exceptions - one for election years and another for periods of financial turmoil, when the state would revert to a one-year budget.