Where the Shekel Drops / Two-year Budget Gets a Second Life

Finance minister plans to legislate the practice, but the proposal has its foes.

The Finance Ministry has drafted new legislation requiring all future state budgets to span two years, Finance Minister Yuval Steinitz recently told members of the Knesset Finance Committee.

The bill would have two caveats: The government could propose special single-year budgets in two cases - election years and financial crises.

Why build a two-year budget in the first place, when the rest of the world moseys along with one-year budgets?

The-two-year-budget initiative, begun in 2009, was designed to give the government more ability to act over the long term.

Steinitz's bill had been frozen in the Knesset in anticipation of early elections, but with the expansion of the governing coalition, Steinitz plans to defrost it, said Finance Ministry sources.

If the Knesset passes the bill, the election-year clause will immediately become relevant, since elections are set to take place by autumn 2013.

The question then will become whether the next budget will be for one or two years. The officials charged with drawing up the budget are divided on how best to answer this question.

Supporters of a one-year budget for 2013 say it's unacceptable for the current government to set fiscal constraints that a new government will face. This would be a violation of basic democratic principles, they say.

In the face of such arguments, a Finance Ministry spokesman says next year's budget will indeed be for one year. Ministry officials seem to have gotten the message and are preparing the 2013 budget figures with a single year in mind.

But Avi Simhon, the chairman of the finance minister's advisory council, and officials in the Prime Minister's Office say a decision has not yet been made and that Benjamin Netanyahu and Simhon will soon meet to hash it out.

A spokesman for the Prime Minister's Office says the people there expect a two-year budget with a special mechanism for adjustments for the second year.

One problem is that tax revenue this year is falling far short of target (as set in the 2012 budget ), making it all the harder to predict tax revenue in 2014. That in turn makes it all the more difficult to build a budget for 2013, let alone 2014. Hence the need for future adjustments, possibly even significant ones; some people say this is reason enough to eschew two-year budgets entirely.

Senior partners in Likud's governing coalition - Shas, Yisrael Beiteinu and now Kadima - have yet to be consulted on the matter. But it's safe to assume that these parties aren't particularly eager to commit to a two-year budget for 2013 and 2014. That alone could scuttle Steinitz's legislative initiative.

At TheMarker, our best guess is that the next budget will be for one year, and this will be the end of the two-year budgets, forever more.