Pension Costs Took 6.5% of 2015 Budget, Will Continue to Rise

But accountant general’s figures don’t include army bridge pensions.

Moshe Kahlon and Benjamin Netanyahu during a weekly cabinet meeting, June 13, 2016.
Israel Mark Salem

State contributions to pensions for public employees were 21 billion shekels ($5.4 billion) last year, 6.5% of the budget, and will reach 38.2 billion shekels in 2039, Finance Ministry Accountant General Michal Abadi-Boiangiu said yesterday.

The annual bill will exceed 23 billion shekels in 2020 and start declining after 2039. It will disappear in 2100, by which time the state’s pensions obligations will have moved off budget because state workers are now expected to contribute to their retirement savings, she said.

By then, the state will have paid out 746 billion shekels over the decades, Abadi-Boiangiu said, releasing her unit’s 2015 annual report.

Last year’s 21-billion-shekel tab actually understated the amount the government paid out, Abadi-Boiangiu said, because it excluded bridging pensions paid to army officers between the time they take mandatory early pension until the legal retirement age.

Under a defense-spending reform signed by Finance Minister Moshe Kahlon with then-Defense Minister Moshe Ya’alon, the terms of calculating bridge pensions, which cover the years between an average retirement age for army officers of 43 until they reach 67, changed substantially.

But Abadi-Boiangiu said the Defense Ministry failed to submit figures to the treasury, so her report did not reflect the full cost of bridge pensions.

In addition to the 21 billion shekels, the treasury also contributed 9 billion shekels last year to members of pension funds once controlled by the Histadut labor federation that were bailed out by the government.

Monthly pensions for government employees vary greatly, from a high of 41,288 shekels on average for civil and religious-court judges to a low of 6,923 shekels for teachers, the report showed.

The report also showed that the budget deficit in 2015 was just 2.2% of gross domestic product, or 24.9 billion shekels, its lowest since 2008. Thanks to unexpectedly high tax collection rates, the deficit was far lower than the 31.4 billion shekels the treasury had projected for the year, which would have been equal to 2.75% of GDP.

It also showed that civilian spending rose as a share of GDP while defense spending continued to decline. Civilian spending in 2015 was 28.2% of GDP, while defense spending was 6.1%.

The cost of interest on the government’s debt also declined, to 10.3% of GDP last year from 12.1% in 2010. Abadi-Boiangiu said the drop freed up 5 billion shekels from the 2015 budget for other uses.