PM Proposing Tectonic 'Social Justice' Budget Shift

Defense getting more money too despite Trajtenberg's recommendation to slash its budget.

Prime Minister Benjamin Netanyahu is scheduled to present a tectonic budget shift to the cabinet on Sunday. In an effort to meet at least some of the demands raised by the "social justice" protesters this summer, Netanyahu is proposing to move NIS 5.4 billion to education, housing and defense from other ministries' budgets.

Note that the NIS 5.4 billion is in gross terms: The three ministries are getting extra money but are also having money taken away.

The massive budget amendments would for the most part be in keeping with the recommendations of the Trajtenberg Committee. The committee, headed by Netanyahu's economic adviser Manuel Trajtenberg, was convened by Netanyahu to discuss Israel's social ills - ills that were showcased during the summer protests over the onerous cost of living and housing in Israel.

Under Netanyahu's proposed budget amendments, education would get a NIS 2.5 billion boost, in gross terms, and about NIS 2.2 billion in net terms.

The disparity is a result of a blanket cut to all ministerial budgets - including education, defense and housing - in order to pay for the additional funding. In other words, the government would be giving with one hand and taking with the other. Ultimately, education would receive NIS 2.2 billion.

Before the boost, the education budget for 2012 was NIS 36.3 billion.

Housing would be allocated an additional NIS 700 million in gross terms. The defense budget would grow by NIS 2.2 billion in gross terms, maybe. As usual the defense budget is the most opaque of the lot.

While the huge budget movements are Netanyahu's answer to Trajtenberg's recommendations, expanding the defense budget represents a slap in the face to his adviser. Trajtenberg had urged the defense budget be scaled back by NIS 3 billion a year, from 2012 to 2016. Defense Minister Ehud Barak managed to put the kibosh on that ambition, and Netanyahu sided with Barak.

Given the gravity of the hour, Sunday's cabinet session is set to be a long one, devoted to the NIS 5.4 billion budget shift and the Trajtenberg report chapter on education.

If the cabinet approves the plan on Sunday, it will be brought before the Knesset to be voted into law. The Knesset vote is expected before month-end. Of course, the final figures could be completely different after the Knesset vote.

Something has to go

The budget for 2012 was formulated in 2010, at which time the Finance Ministry agreed to plan budgets for two years at a time, rather than one, to facilitate long-term planning. But priorities have changed since the budget for this year was shaped, finance officials explained on Wednesday. Since the prime minister has no intention of breaching the budget, all spending on education, housing and defense must come at the expense of other planned government expenditures. As noted, if one department gets more money, another department must lose it.

Under Netanyahu's proposal, the extra funding would come from three sources. The first would be the flat cut to every ministry, totaling NIS 1.4 billion (hence the disparity between gross and net figures for the boost to education, housing and defense ). Another NIS 1.5 billion would come from the budget reserve for 2011-2012, and NIS 2.5 billion would come from specific cuts to various ministries - with a special emphasis on the defense budget yet again.

The defense budget in Israel is an opaque issue, but some figures are clear. The defense budget for 2012 totals NIS 55.8 billion. Under the new plan, defense would get NIS 2.2 billion more (or possibly as much as NIS 3 billion in gross terms ) - but it would lose money as a result of the flat cut to all ministries and other specific items. So how much extra, if anything, would defense be getting this year? That, as the cabinet will be told explicitly on Sunday, depends on whether the defense system behaves itself.

Among other undertakings, the defense system must be more transparent about spending if it is to get the extra money. It would also be required to have its budgets and expenditures vetted by a body other than itself, specifically by the accountant-general at the Finance Ministry.

The defense establishment has long resisted having its budgets overseen by the Finance Ministry.

Finance officials hypothesize that transparency and control over the defense budget would save the nation NIS 2 billion in the first year alone, and another billion shekels each following year.

Also, if the defense establishment wants to increase its spending, it would have to come up with its own resources. For instance, it could finally sell Israel Military Industries once and for all. It could vacate army bases sitting on prime land.

After all that, finance officials think the net addition in 2012 would be around NIS 1.5 billion.