Israeli Budget Talks Run Late as Treasury Seals Deals With Ministers

Education and defense ministers on board but others holding out for better terms

Education Minister Naftali Bennett with Finance Minister Moshe Kahlon
Olivier Fitoussi

Treasury officials were engaged in marathon negotiations late into Thursday night as they sought to win cabinet approval of the 2019 budget before the day was out.

Education Minister Naftali Bennett didnt attend the cabinet meeting at all after earlier winning a 2.5 billion shekel ($730 million) increase in the education budget over 2018-19, which enables him to add 10 days to the school year at Passover and Hanukkah times for pre-schools and the first through third grades.

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Yisrael Beiteinu ministers were also on board. Defense Minister Avigdor Lieberman agreed to withdraw his demand for a 4.8 billion shekel supplement to the defense budget over three years in exchange for getting a 600 million shekel increase in old-age allowances moved forward to this year, paid retroactively.

Prime Minister Netanyahu sits for a meeting with various government ministers in Jerusalem on January 7, 2017.
Ohad Zoigenberg

The finance and defense ministries will appoint a special team to iron issues over the regular defense budget. Meanwhile, Immigrations and Absorption Minster Sofa Landver negotiated a reprieve from cuts to her ministry. Energy Minister Yuval Steinitz gave his backing to the 2019 budget as well.

Among the holdouts at press time were Environmental Protection Minister Zeev Elkin, who was still opposed to treasury plans to take 500 million shekels for the budget from a clean-up fund, and Labor and Welfare Minster Haim Katz, who wants to the budget to raise allowances for the handicapped.

Meanwhile, the Interior Ministry was still resting a treasury plan to take some 1.2 billion shekels from surpluses amassed by the Israel Airports Authority for the budget. Officials had yet to reach agreements with Public Security Minister Gilad Erdan, Agriculture Minister Uri Ariel or Culture and Sports Minister Miri Regev as of press time.

In addition, the treasury suffered a setbackwhen the Jewish national Fund decided that it would pay the 1 billion shekels the treasury is demanding from it to help with the general budget would be paid as taxes this year, rather than as a one-time tax-free payment in 2019.

The decision, which the JNF said had not been agreed to by the treasury, will leave budget planners with a 1 billion revenue shortfall in 2019 that will have to be paid for out of across-the-board spending cuts, officials said.

Bank of Israel Governor Karnit Flug took issue with the governments decision to raise the budget deficit to 2.9% of gross domestic product and said the budget failed to comprehensively address the problem of Israels low level of productivity.

Increasing productivity in the economy is the key to long-term, sustainable and inclusive growth, and to increasing the standard of living of all layers of the population over time, he said.