Expected Early Elections Make It Unlikely Knesset Will Pass 2013 Budget

Failure to push through budget might sharply curtail government operations.

If Prime Minister Benjamin Netanyahu brings the next elections forward to early next year, as expected, it is unlikely his government will pass the 2013 budget this year.

The law requires that next year's budget be submitted to the Knesset by the end of October. This gives the cabinet very little time to debate the document and forge an agreement among the coalition parties to assure a parliamentary majority.

Next year's budget, therefore, would be passed by the next elected government. In the meantime, government operations could be sharply curtailed, with lower revenue streams for suppliers who normally do business with the government. Elections must be held by the fall of next year.

If the budget is not passed this year, each ministry would simply be allocated funds at the same rate as provided in this year's budget. Every month, each ministry would receive one-twelfth of the total amount it was allocated this year.

Defense and education in focus

Because of the huge additional expenses planned for in 2013, reversion to a "one-twelfth" budget would badly crimp the plans of a number of government ministries. The defense and education ministries are expected to have a particularly tough time if no budget is passed on time.

The cabinet has done little debating on a budget proposal for next year, and it certainly has not presented one to the Knesset.

If Netanyahu forgoes a 2013 budget and opts for elections early next year, several months are likely to elapse after an election without a budget in place. A newly elected government would need time to submit its own ideas to the Knesset. This means that until April or May, ministries would be left with monthly proportional allocations based on their 2012 budgets.

In the absence of an approved budget, the spending gap between what has been planned for next year and what has been allocated this year could reach as high as NIS 25 billion.

In addition, this year, major changes were made in the budget already in place; most notably, the education and defense ministries received additional funds. The proportionate one-twelfth funding would be based on the original budget and would not include any amounts added during the year. That would put the two ministries, education and defense, whose funding was substantially boosted, in a particular bind.

Generally, at the end of a year, unspent funds provide ministries with initial funding for the new year. This year, however, those funds are expected to be more limited than in previous years, compounding the situation.

Due to the major disparities between projected budgets this year and next, in the absence of an approved 2013 budget, the Finance Ministry's accountant general would be expected to force ministries to trim their operations. The law does not allow nonpayment of salaries or amounts that the government has committed to pay based on signed contracts.

Meanwhile, any other government spending plans would be at risk. Any planned spending that has not been formalized by a binding contract - for example, public tender proposals that have not been finalized - would be deferred.

And another factor could come into play, because Accountant General Michal Abadi-Boiangiu has the authority to shift funds among ministries. The Education Ministry, for example, has committed to offer free preschool education from age 3, a program not in this year's budget. If there is a major funding crunch at the Education Ministry, the accountant general could provide the funds from other ministries in less dire financial straits.

Whatever the details, the absence of an approved budget for next year is expected to cause major problems for government operations and the economy as a whole.