The recent political deadlock in Israel will soon take a toll on public services, say Ministry of Finance officials, as prospects of a new government forming seem to grow ever slimmer. With a likeness to Britain's Brexit chaos, Israel's two recent elections have ground the nation’s politics to a halt which may soon take a toll on Israel's already strained public services. Moshe Kahlon, Israeli minister of finance, warned last week that if a government is not formed soon, there will not be time to pass the 2020 budget, which would lead to an automatic 2 percent cut in funding for Israel's already strained public services.
Israel's second elections in a year have proved inconclusive, as both sides face great difficulty in forming a stable government. The Israeli parliament was dissolved in December 2018, and the two elections held since have not produced a clear majority for any realistic contender. In effect, Israel has been without a government for close to a year.
"The 2019 budget will expire on the 31st of December, and the 2020 budget will not be ready by the beginning of next year" said Mr. Kahlon. "We will be forced to implement a provisional budget" he added.
So, what happens next? The Automatic Budget Mechanism, also known as the "1/12 Budget System", is a provisional budgetary protocol that enters into effect when the government cannot approve its budget before the beginning of the fiscal year. In such cases the previous budget is automatically extended, meaning that government spending is restricted to one twelfth of the previous budget every month. The automatic budget will be replaced by the official budget as soon it is passed.
Although the 1/12 Budget System is an important stabilizing mechanism in cases of political deadlock and might be a marginally better solution than the American federal shutdown, one of its side effects is a cut in government spending.
"The natural population growth and the growth in demand for vital public services will mean that an automatic extension of the budget will correspond to a 2 percent reduction in funding of public services," warned a Ministry of Finance senior official.
Many of Israel's public services have been plagued by underfunding in recent years, with dire social consequences. The danger of an automatic cut in public spending was highlighted this week by a report published by the Israel Central Bureau of Statistics. The report revealed large disparities in access to public services between the Tel Aviv area and the northern and southern regions of Israel due to underfunding. According to the report, underfunding has led to huge disparities in health services between richer and poorer areas of Israel. Hospitals in the Tel Aviv area can afford 7 times more hospital beds than hospitals in other areas.
Another aspect of the automatic budget extension which has drawn widespread criticism is the fact that spending priorities are set by unelected Ministry of Finance officials. With no government in office, spending priorities are determined by the Ministry of Finance for as long as the budget extension is in effect. These unelected officials have the power to increase or reduce spending on various public services independently of the political system. This has been criticized in Israel as un-democratic by various social organizations, but until the political crisis is resolved, this is how the Israeli budget will be managed.