Israel's Government Cuts Social Budgets While Boosting Coalition Funds

Over the period of 2023 to 2026, the Israeli government and Knesset allocated approximately 20.1 billion shekels in coalition funds, while simultaneously enacting cuts totaling 11.7 billion shekels to essential public services including education, health, welfare, and employment. The average annual expenditure on coalition funds during the current government's term reached 5.6 billion shekels, a fourfold increase compared to the eight years preceding its formation. This shift in priorities has led to significant reductions in specific areas, such as a 75% decrease in the budget for supervising and training early childhood daycare centers, from 190 million shekels to 46 million shekels, potentially contributing to an increase in unlicensed facilities.

These coalition funds, often established as conditions for parties joining the government, are intended to maintain coalition stability. However, analysis indicates that the growth in budgets for sectarian ministries has been 5.1 times greater than the increase for education, health, and welfare ministries combined. Approximately 5 billion shekels in the 2026 budget are designated as sectarian coalition budgets, funding entities like yeshivas, food card programs with sectarian criteria, and after-school programs for institutions not teaching core curriculum subjects. Additionally, 300 million shekels have been moved to the base budget for distinctly sectarian needs, including religious structures and strengthening Jewish identity.

The government, led by Finance Minister Bezalel Smotrich, implemented 5% across-the-board budget cuts for ministries in 2024-2025. Smotrich has defended the increased spending by citing the needs of the war, support for reservists, evacuees, survivors, and business compensation. However, the allocated funds also include budgets for yeshivas, sectarian food cards, and settlements, with nearly a billion shekels directed towards strengthening settlement activity, a significant portion of which has reportedly gone to illegal outposts.

In a separate development, the Knesset's Finance Committee approved the transfer of approximately 409 million shekels in coalition funds during an election recess. This decision was challenged in the High Court of Justice due to procedural irregularities in the committee's convening. While an initial request to halt the session was denied, an interim order was later issued freezing the transfer of these specific coalition funds, requiring a separation between urgent and coalition-related expenses. The Knesset maintained that its actions were lawful and consistent with previous practices during election recesses.