Israeli Supreme Court Orders Separation of Coalition Funds Amid Election Budget Dispute

The Israeli Supreme Court ruled on August 7, 2023, that the Finance Ministry must separate urgent coalition funds from other budget transfers totaling approximately 462 million shekels. This decision came after the government attempted to transfer these funds during the election period, a move challenged by the New Israel Fund and MK Naama Lazimi from the Democratic Camp. The court panel, consisting of Justices David Mintz, Khaled Kabub, and Ruth Ronen, rejected Finance Minister Bezalel Smotrich's demand to either freeze all funds or release them entirely, instead mandating a split between urgent payments and other coalition allocations.

The controversy arose after the Knesset Finance Committee convened twice during the summer recess, on July 29 and August 4, 2023, to approve budget transfers. The second meeting was called with less than 48 hours' notice and without a detailed agenda, prompting opposition complaints and a legal petition. Approximately 2 billion shekels in budget transfers were approved on August 4, with 408 million shekels identified by the Finance Ministry as coalition funds and an additional 54 million shekels alleged by petitioners to be coalition-related.

These funds were allocated across ministries including Education, Settlement, and Religious Services, covering payments to religious institutions, education for ultra-Orthodox and religious sectors, settlement activities, and cultural projects in Judea and Samaria. Some funds were deemed urgent for payroll and operational expenses ahead of the school year. The Supreme Court initially froze the entire transfer but later proposed releasing only the urgent funds while keeping the rest frozen.

Smotrich opposed this division, insisting the court decide on the entire package at once. However, the court ordered the Finance Ministry to submit a list of urgent items exempt from the freeze, effectively forcing the ministry to separate the funds. Legal representatives criticized Smotrich's approach as coercive and likened the budget transfers to election bribes benefiting sectors close to the government. MK Lazimi accused Smotrich of threatening the judiciary and turning public funds into a private bank for coalition parties ahead of elections. The ruling underscores the judiciary's role in overseeing budgetary procedures during politically sensitive periods and maintaining parliamentary integrity.