To pass the budget and save his government, Netanyahu must weave a tangled web

To pass the budget and save his government, Netanyahu must weave a tangled web

With a razor-thin coalition, the PM and finance minister are playing fast and loose with the public purse to prevent new elections

Haviv Rettig Gur is The Times of Israel's senior analyst.

Prime Minister Benjamin Netanyahu and Finance Minister Moshe Kahlon attend the weekly cabinet meeting in Jerusalem on August 5, 2015. (Marc Israel Sellem/Flash90/Pool)
Prime Minister Benjamin Netanyahu and Finance Minister Moshe Kahlon attend the weekly cabinet meeting in Jerusalem on August 5, 2015. (Marc Israel Sellem/Flash90/Pool)

If the Knesset doesn’t pass a state budget for 2015-16 by November 19, Israel goes to elections. That requirement — pass a budget or face the voters — is built into the Basic Laws that set the ground rules of Israeli politics.

It is a requirement that turns each year’s budget fight into a battle for survival for the entire political elite. It is a looming presence in politicians’ minds as ominous as any election.

But unlike an election, and though the results of this fight fundamentally affect the daily lives of all Israelis, few are paying attention.

For example, the Israel Defense Forces is currently locking horns with cabinet ministers over a 6.5-billion-shekel gap between what the army wants and says it needs to defend the country — NIS 62 billion ($16.4 billion) — and what the cabinet is willing to give it — roughly NIS 55.5 billion ($14.7 billion). That the gap alone is larger than most ministries’ entire budgets — indeed, larger than all investment in agriculture, sports, culture, immigrant absorption, scientific research and development, and the entire diplomatic service combined — sums up the outsize burden the defense budget constitutes on Israel’s economy.

No one doubts the importance of defense spending, but the debate over whether the money is used efficiently is a stilted one. A 10-percent cut in army expenditures through efficiency — for example, lowering the number or length of service of its less mission-critical draftees, shrinking its officer corps or instituting slightly less generous officer pensions, which kick in at age 47, even, perhaps, slicing into the bottomless pit of armaments acquisitions — is enough to increase by more than 60% the nation’s total spending on higher education.

That’s not necessarily an argument for a cut to the defense budget. The current budget may be entirely justified, more or less efficiently spent, and every shekel of it necessary to keep the nation safe. But with such sums at stake, and so many critical needs in Israeli civilian life insufficiently attended to, it is at least an argument for a more serious and transparent public debate.

Defense Minister Moshe Ya'alon in the Golan Heights, northern Israel, June 30, 2015. (Eden Moladavski/Ministry of Defense)
Defense Minister Moshe Ya’alon on the Golan Heights, northern Israel, June 30, 2015 (Eden Moladavski/Ministry of Defense)

That debate is not happening, and won’t happen for the foreseeable future. Last month’s Locker Report on the defense budget, commissioned by Prime Minister Benjamin Netanyahu and apparently, though not very loudly, backed by Finance Minister Moshe Kahlon, has been sidelined.

The Locker proposal is not an austerity plan. It would have grown the base defense budget to a relatively high NIS 59 billion ($15.6 billion) while freeing up huge sums inside the military through downsizing of personnel, in effect diverting billions in both new and freed-up cash to acquisition and combat training.

Yesh Atid MK Karin Elharar, chair of the Knesset State Control Committee, held a debate in her committee last week about a State Comptroller report that found the army has failed to curb inefficient spending despite demands that it do so by previous government committees. The debate overseen by Elharar, like the one taking place in the broader public arena, did not actually examine the defense budget itself or offer recommendations for a broader policy shift in defense spending.

Knesset State Control Committee chair Karin Elharar leads a committee meeting in the Knesset, June 08, 2015. (Miriam Alster/FLASH90)
Knesset State Control Committee chair Karin Elharar leads a committee meeting in the Knesset, June 8, 2015. (Miriam Alster/Flash90)

The 2015-16 budget passed the cabinet earlier this month by an almost unanimous vote, with one abstention: Defense Minister Moshe Ya’alon.

The budget now goes to the Knesset. It will be formally placed on the parliament’s docket on August 31, face its first plenum debate on September 2 and then go to committee for the labyrinthine amendments process. If it doesn’t pass its second and third votes in the plenum by November 19, winning the support of every one of the 61 coalition MKs, the game is up for the 20th Knesset — just six months after its birth.

Divide and conquer

It was no accident that Ya’alon was the only minister who failed to vote for the budget. It was a vote that speaks volumes about the limits and weaknesses of Israeli governance.

The 2015-16 defense budget is just over NIS 55 billion. The next-largest budget, the Education Ministry (not including public higher education), is just over NIS 47 billion. These two budgets alone account for more than 25% of projected public spending in the new budget.

But in the cabinet and Knesset, those who oversee these budgets, the ministers of defense and education, have, like all other ministers or lawmakers, just one vote each.

And so Netanyahu has spent the past few weeks systematically locking up the votes of ministers in smaller ministries, winning their support on the cheap in order to present a united front in the fight over the larger budgets.

Finance Minister Moshe Kahlon, center, with Finance Ministry director general Shai Babad, right, and ministry budget head Amir Levi as they present the proposal for the state budget for 2015 in Jerusalem, August 2, 2015. (Yonatan Sindel/Flash90)
Finance Minister Moshe Kahlon (center), with Finance Ministry Director General Shai Babad (right), and ministry budget head Amir Levi (left) as they present the proposal for the state budget for 2015-16 in Jerusalem, August 2, 2015. (Yonatan Sindel/Flash90)

Thus ministers found that their negotiations with Treasury officials went easier than they expected, and the budgets of the ministries of science, energy, agriculture, communications, housing, absorption and even the relatively large (at NIS 14.2 billion) internal security all grew dramatically in the 2015 budget.

Budget allocations are a government’s primary vehicle for implementing its policies and setting its priorities. But in Israel’s party-list system, in which a cabinet is composed of multiple party leaders competing with each other for the same voter vase, budgets are set in the scramble for votes, where a minister’s chief concern is usually to prove their political weight by successfully negotiating an expansion of their ministry’s budget.

Prime Minister Benjamin Netanyahu leads the weekly cabinet meeting in Jerusalem on August 5, 2015 (Marc Israel Sellem/POOL/Flash90)
Prime Minister Benjamin Netanyahu leads the weekly cabinet meeting in Jerusalem on August 5, 2015. (Marc Israel Sellem/Flash90/Pool)

Does the Energy Ministry actually need NIS 366 million? Or the Science Ministry NIS 1.2 billion? Did the Communications Ministry really need a 30% budget jump in a single fiscal year? That each ministry can make the case that it is spending these politically-won funds on worthwhile causes is beside the point. In a world where need always outstrips available resources, one of the most important questions in any modern nation’s political life is how public servants prioritize public spending.

In Israel’s case, a great deal of the prioritizing happens for reasons that have little to do with need or policy goals, and a lot to do with vote-buying. This is not a problem that began with Benjamin Netanyahu. It is built in to the nation’s system of parliamentary coalitions among nationwide party lists.

Some, including Finance Ministry Director General Shai Babad in a moment of weakness and magnanimity during a radio interview last week, argue that this system is fundamental to democracy, allowing the needs of different constituencies to be reflected in the national budget.

Kulanu party leader Moshe Kahlon (C) laughs with Likud's Ayoub Kara and Shas's Yitzhak Cohen in the Knesset plenum, May 4, 2015. (Miriam Alster/Flash90)
Kulanu party leader Moshe Kahlon (center) laughs with Likud’s Ayoub Kara (left) and Shas’s Yitzhak Cohen in the Knesset plenum, May 4, 2015. (Miriam Alster/Flash90)

But most of the ministries that swelled in the 2015-16 proposed budget are manned by Likud ministers who do not represent different constituencies from their prime minister. It is no accident that the budget of the perennially cash-strapped Foreign Ministry, whose minister is Netanyahu himself and thus not a vote that needs courting, is seeing its budget effectively frozen in 2015. And the defining battle of this budget, the one between Ya’alon and Netanyahu/Kahlon over capping the army’s hoped-for expansion of the defense budget, is a fight between two powerful state institutions, the Defense Ministry and the Treasury, not between voting constituencies.

Ironically, the very fact that the defense minister hails from Netanyahu’s own party has meant that the Treasury, backed by the prime minister, has worked with competing parties to leave Ya’alon alone in the ring. The 2015-16 budget proposal left at least NIS 4 billion earmarked under the “general” category for coalition parties to direct to causes and initiatives of their choosing — Jewish Home to settlement institutions; United Torah Judaism to ultra-Orthodox seminaries; and the like.

Playing chicken

The budget is actually composed of three bills — one that lays out the spending, an “economic efficiency” bill, and the Arrangements Bill.

The last is a vast omnibus piece of legislation with hundreds of stipulations. Some of these are legislative changes required for the spending bill to work: tweaks to tax rates, changes to personnel caps of various agencies, and the like.

But many of the articles in the bill are reforms that the government, or at least the Treasury, believe could not pass on its own in the Knesset. In the current bill, these include controversial reforms to the nation’s public broadcaster, the Israel Broadcasting Authority, as well as to the Israel Electric Corporation, and countless more.

Last week, the Knesset’s legal adviser Eyal Yinon wrote to the parliament’s speaker MK Yuli Edelstein that the latest Arrangements Bill is simply too large to be read by lawmakers and contains too many reforms unconnected to the budget — constituting a violation of the speaker’s own rules for minimizing the scope and length of the Arrangements Bill.

State Comptroller Yosef Shapira (R) hands the State Comptroller's report to chairman of the Israeli parliament Yuli Edelstein in the Knesset on May 05, 2015. (Photo credit: Isaac Harari/ Flash90)
State Comptroller Yosef Shapira (right) hands the State Comptroller’s report to Knesset Chairman Yuli Edelstein, May 5, 2015. (Isaac Harari/Flash90)

Edelstein, usually a close ally of Netanyahu, did not mince words in response. The Arrangements Bill “can’t pass in its current form,” he vowed last week.

Netanyahu doesn’t seem worried. If the Arrangements Bill doesn’t pass, neither does the budget — and the Knesset goes to elections.

When lawmakers can’t be enticed with public funds, their votes are ensured by what is effectively a game of “chicken,” daring them to vote against the measure at the cost of toppling the government.

The elephant in the room

Finance Minister Moshe Kahlon is a savvy parliamentarian. In the coalition talks to form the new government, he knew his ability to enact the housing and cost-of-living reforms he promised in the March elections would depend as much on his power in the Knesset as on his control of the Finance Ministry. Thus his biggest battle with Netanyahu was not over his party’s cabinet posts, but over the chairmanship of the Knesset Finance Committee.

Kahlon lost that fight. Netanyahu, having given him both the finance and housing ministries, needed to ensure the support of the ultra-Orthodox Shas and United Torah Judaism — and their demand was the same as Kahlon’s: the Knesset Finance Committee and the Finance Ministry. UTJ’s Moshe Gafni won the committee post; Shas’s Yitzhak Cohen is Kahlon’s deputy in the ministry.

The Finance Committee oversees almost the entire amendments process for the budget bill, and its chair has the power to stop the bill in its tracks. It is hard to overstate this single lawmaker’s de facto influence over policymaking, which arguably matches only that of the Knesset speaker and prime minister. Without Gafni’s okay, the budget freezes and the Knesset collapses.

And Moshe Gafni has one overriding condition for letting the budget through his committee: UTJ’s coalition agreement with Likud promises that a new ultra-Orthodox draft bill will be passed before the new Knesset passes its first budget. Gafni wants it done.

Under the current draft law, passed in the last Knesset through the joint efforts of Jewish Home and Yesh Atid, Israel’s ultra-Orthodox community, which largely ducks any form of military or civilian national service, is required to meet certain quotas for enlistment or face criminal sanctions for all the thousands of young Haredim in each year’s cohort who do not serve. The bill is all but unenforceable — even Yesh Atid chairman Yair Lapid has admitted as much — and is the biggest legislative whale from the last Knesset targeted for extinction by Haredi lawmakers in the new one.

MK Moshe Gafni on October 27, 2014. (Yonatan Sindel/Flash 90)
MK Moshe Gafni on October 27, 2014 (Yonatan Sindel/Flash90)

The renewal of the fight over Haredi enlistment could itself topple Netanyahu’s 61-59 majority. Many Kulanu and Likud lawmakers — figures such as the religious reformer MK Rachel Azaria (Kulanu) and Likud’s MK Yoav Kisch, who was part of the Shaked Committee that wrote the current law — will oppose canceling any draft requirements for the ultra-Orthodox. The current justice minister, Jewish Home’s Ayelet Shaked, cut her parliamentary teeth as a freshman lawmaker by heading up that committee. And the High Court of Justice, which overturned the older Tal Law on the grounds that it applied the military draft unequally between Haredi and non-Haredi Israelis, may yet enter the fray and create further problems for any new arrangement.

In early August, a Defense Ministry team began work on cobbling together a new draft law. Their task is herculean — develop a new policy that would hold up in the High Court, remove unenforceable criminal sanctions and mollify Haredi lawmakers, and still offer a credible national service policy that the current law’s supporters can live with.

It is telling that the task of drafting the new bill has not been handed to elected politicians in the Knesset. Under the coalition agreement with UTJ, it is entirely under the defense minister’s purview.

To be sure, the Haredi parties are as desperate as Netanyahu to avoid elections. The last time they were in the opposition, during the short 20-month lifespan of the 19th Knesset, bills such as the draft law were passed without meaningful opposition, while the new coalition has already allocated billions in public funds to cash-strapped Haredi schools and institutions.

The new bill may soften the existing law, but it won’t return to the unconstitutional framework of the old Tal Law. It will not be able to simply wipe away the essential demand for Haredi service. Haredi lawmakers will then have to make a fateful decision: Allow the passage of some sort of national service law, however unpalatable, or risk taking the coalition to the brink, and likely over it, in the battle for its removal.

Netanyahu may be counting on these parties, faced with that stark choice, agreeing to simply delay the issue until the next fiscal cycle, giving him until the end of 2016 — and the 2017-18 budget fight that awaits him then — to thread that fragile legislative needle.

This is a troubled time in Israeli politics, and not for the reasons most often cited in the public debate: growing partisanship, a stalled peace process, tensions with America or the Iranian nuclear challenge. Israel has faced far more visceral partisanship in the past, worse economic conditions, not to mention crises with its allies and bloody wars with its enemies. Such challenges will continue to face Israeli leaders in this troubled region.

But as they face those challenges, Israel’s leaders must also struggle with the fact that they oversee a fractured, sectoral parliament, a politics of narrow communal vying for the public purse, and an electorate that refuses to deliver a clear governing majority. Many billions of taxpayer shekels are being spent in the 2015-16 budget on Haredi schools that refuse to teach math past the fourth grade, on an army awash in money and short on oversight, and on countless initiatives by small ministries not for the value they bring to the taxpaying public, but simply to secure ministers’ votes for a broader budget most of them have scarcely read.

read more: