The Finance Ministry released a draft of the 2019 state budget, with total expenditures coming to NIS 479.4 billion ($140b.) for next year.
The cabinet may convene to approve the budget on Thursday, as Finance Ministry officials meet with government ministers in order to ascertain revenue and tax figures.
In what may be an unprecedented change in priorities, expenditures for education are projected to exceed those for defense, with spending for schools set at NIS 57.1b., followed by defense allocations totaling NIS 55.7b. and National Insurance costs at NIS 44.2b.
“It’s a good sign that we don’t have to spend as much as we once needed to on defense,” said Prof. Dan Ben-David, who is affiliated with both Tel Aviv University and the Shoresh Institution for Socioeconomic Research.
“We’re becoming more and more like a normal country, worried about education and the future. But spending more money is not a substitute for serious, comprehensive educational reform,” he said, citing poor achievement levels nationwide, and in the Haredi and Arab school systems in particular.
Finance Minister Moshe Kahlon is also requesting to yet again postpone implementing an elongated school day, to save some NIS 1.2b. in 2019 and NIS 2.4b. in 2020.
And more affluent people making aliya reportedly would lose out under the proposed budget. Immigrants whose household assets are estimated at being worth more than NIS 500,000 would not be eligible for the absorption basket. The restriction would only apply to immigrants moving to Israel after January 1, 2019, and the move would be part of the goal to save the country NIS 130 million.
The 2019 budget also includes some NIS 100.7b. in debt repayments and NIS 39.1b. for interest.
The target deficit stands at 2.9% of GDP, despite a law meant to keep deficit spending no greater than 2.5% for that year.
In 2017, the deficit came out at 1.97% of GDP, according to Reuters, falling below predictions, partially due to a tax revenue windfall from multi-billion-dollar acquisitions of Israeli companies.
In terms of investment in transportation and healthcare, the current budget may fall short. Israel today suffers from traffic congestion thrice the OECD average. And the country has the one of highest hospital occupancy rates, leading to increased mortality rates from infectious diseases.
“This is not a budget that fixes Israel’s root economic problems,” Ben-David said. “Israel’s primary economic problems are very low productivity and very high rates of poverty and income inequality. Both require considerably better physical and human capital infrastructures – specifically in transportation, education and vocational training. These are the reforms that aren’t in here.”
Some possibly contentious budget-line items include a proposal to raise taxes on coal and petrochemicals, which could increase tax revenue by millions of shekels. A small tax increase on natural gas is also planned. While raising taxes on pollutants may be environmentally friendly, consumers would likely pay for it in increased electricity and housing costs.
The budget also plans to take away NIS 10m. from the Settlement Division of the World Zionist Organization, reducing its budget from NIS 36m. to NIS 26m.
Other cuts include reducing the Agriculture Ministry’s rural development grants by NIS 10m., cutting NIS 30m. from the Education Ministry’s training program and taking away NIS 11m. from adult Torah study. The Foreign Ministry would cut NIS 40m. from its headquarters funding within the next four years.
Some of the savings could be redirected in the future toward promised expansions in disability stipends. Yet after a year of heated public protest, the 2019 budget does not seem to include plans to significantly increase disability payments next year.
It is also unclear whether many budget-line items will be spent on what they were intended for. In other words, “the current budget presents a series of steps in which money earmarked for one purpose is directed at entirely different purposes,” TheMarker reported.
The budget highlights the ongoing financial dispute with the Israel Airports Authority. The Finance Ministry is asking the IAA to transfer NIS 1.2b. back to state coffers, or revenue it generates from airline fees and licenses. The IAA is already set to transfer NIS 300m. annually.
Netanyahu and Kahlon pursued the unusual move of passing a 2019 budget nearly a year in advance in order to stabilize the coalition, which won't have to deal with another budget before there legally has to be an election, in November 2019. The coalition partners are not expected to bring up major objections in Thursday's cabinet meeting.