The day after tomorrow the Cabinet plans to ask the Knesset to approve a bill making the next budget a two-year budget for fiscal years 2011 and 2012.

We contend that a two-year budget is not appropriate for Israel. It is even less appropriate at a time like this, when there is still global uncertainty regarding economic developments in the near future and when Israel and the region are beleaguered by political and military instability.

To the best of our knowledge, the Cabinet’s proposal is without precedent. It proposes to apply the same legislative process set down by law for approving a one-year budget – to a two-year budget. In all the countries that have adopted multi-year budgeting, limitations are set on those budgets. In some cases, only parts of the budget are approved for two years; in others, parliaments hold debates and votes on the second budget year following receipt of an audit of the implementation of the first year’s budget; in still others, various agencies are allowed to formulate their own budgets. None of these limitations have been proposed – to date – by the Cabinet.

We recall the statement made by the head of the Finance Ministry Budget Department regarding the proposed two-year budget: “It will give us budgetary flexibility . . . in the form of the right to reduce an allocation by five percent – in order to free up that five percent for a change in priorities.” In other words, the Budgets Department will take the place of the Knesset when it comes to the budget-making process.

The conclusion that begs to be made is that the proposed bill will do serious damage to the existing system of checks and balances between the legislative and executive branches of government.

We thus call on you to reject the Cabinet proposal.

Alternatively, we recommend amending the bill to balance the inordinate amount of power that the bill will give to the office of the Prime Minister and the Ministry of Finance. Three examples:

· Limiting the two-year budget to the budgets of the Ministry of Defense, the budgets of the economic ministries, and debt payments. These amounted to about 40% of the total budget in fiscal 2009-2010.

· Conditioning implementation of the budget for the second year on a debate and vote in the Knesset.

· Conditioning approval of any change of five percent or more on the approval of the Knesset Finance Committee and other Knesset committees that may be relevant.

Yours truly,

Dr. Shlomo Swirski

Academic Director, Adva Center