There is no approved state budget. Is Citizens Investing Declining?

Minister of Economy Eli Cohen argued that without a approved budget and a permanent government, all sectors of the economy receive less money. What does he mean? Globes whistle

Faithful readers and readers of the economic press are familiar with the term "one-part twelve." When the budget year begins without an approved budget law, treasury officials are allowed to allocate only one-third of each month, for each section, to just 1/12 of what it had in the previous year. But in an interview with Radio Jerusalem, Economy Minister Eli Cohen said something more surprising. Asked about the demand of ultra-Orthodox parties to increase funding for the yeshivas, he argued: "You cannot give any extra once a government and employees are not established under 1/12. But even in this proportion - the budgets that get even lower are relatively low, which hurts everyone."

Cohen tells us that not only is the budget not growing like in routine years, it is even shrinking. What does he mean, and is it true? We consulted "factors in the treasury" (economic newspaper or not?) And these are the conclusions.

The basic principle of budget distribution in the absence of a budget is laid down in section 3 (b) of the Basic Economy Law. He states that if the state budget is not approved by the beginning of the year, it is permissible to spend twelve months each month from the previous budget - plus indexation. In other words, the budget can grow in shekels, because of rising prices, but not in real terms.

This limited budget allocation is prioritized for certain uses: first, for expenses that the government is charged by laws, contracts and treaties; Then to run essential services; Then to the actions included in the previous budget law. Since 2014, these actions also include budget changes approved during the year.

Seemingly, these rules ensure that even in the absence of a government, the real value of the budget - that is, its purchasing power - will not decline relative to the previous year. But in a way it does go down. When the Treasury builds a regular budget, it takes into account, among other things, population growth. The law that restricts the annual increase in the budget explicitly rests on the assumption that the population will grow at the average rate of the previous three years. But the 1/12 budget ignores the population growth, which stands at close to 2% a year in Israel. Therefore, the actual expenditure per resident is smaller than the expenditure in the previous year.

2020 is not the first year that the Israeli government is running without an approved budget. At the end of 2014, for example, the Knesset dissipated before voting on the budget proposal. Until elections were held, a coalition was formed and a budget was formulated, and by the time the Knesset finally approved it - more than ten months had passed. Most of 2015, public funds were allocated sparingly, using the 1/12 method.

Bottom line: Cohen's words are correct. In the absence of an approved budget, the government's monthly expenditure is the same as 1/12 of the previous year's expenditure, but since population growth is not taken into account, per capita expenditure decreases.

Research: Uriah Bar-Meir

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