Israel's budget under threat as Likud dispute with haredi faction unresolved

No advancements were made as of press time on Sunday in the impasse between Housing and Construction Minister Yitzhak Goldknopf’s Agudat Yisrael faction and Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich over Goldknopf’s demand to receive over NIS 600 million in additional coalition funds, a spokesperson from the party said.

The impasse developed into a crisis last week after Goldknopf threatened that if it does not receive the extra funding, his faction will vote against the 2023-2024 national budget bills this week. If the budget bills do not pass into law by Sunday at midnight, the Knesset immediately disperses and an election is called.

Agudat Yisrael is a hassidic faction that, along with the Lithuanian-haredi Degel Hatorah faction, comprise the ultra-Orthodox United Torah Judaism Party. UTJ’s Knesset list is made up of alternating Agudat Yisrael and Degel Hatorah MKs, beginning with Aguda. The party won seven seats in the election and, accordingly, Aguda has four MKs and Degel three.

The party won seven seats in the election

However, on January 6, Goldknopf resigned from the Knesset under the “Norwegian Law,” which enables ministers to resign from the Knesset but also to return to the legislature if they are fired or resign from their ministerial position. Goldknopf’s resignation from the Knesset brought in Degel’s MK Yitzhak Pindrus, and gave Degel a four-three edge.

The coalition is at 64 MKs, and therefore four MKs are necessary to thwart a law such as the budget, which requires 61 to pass.

If Goldknopf resigns as a minister, he will return to the Knesset as an MK, and Pindrus will be pushed out. Agudat Yisrael will then have four MKs, and the power to topple the government.

Voting on the budget is expected to begin on Tuesday evening, and ministerial resignations only come into effect 48 hours after they are filed. To give Agudat Yisrael the power to topple the government, Goldknopf could resign in the coming days.

“Coalition funding” is a part of the budget with funds earmarked for fulfilling political agreements made during coalition negotiations. The coalition funding in this budget, which reaches an unprecedented NIS 13.6 billion, includes a significant rise in funding of haredi private or semi-private schools beginning in 2024.

The extra funding that Agudat Yisrael is demanding is to cover retroactively the costs for its education systems during 2023. The party claims that this was part of the coalition agreement between it and the Likud during coalition negotiations in December.

The party also argues that this was the agreement with the Likud already in September, during the 2022 election campaigns. The deadline to hand in party lists was September. The “Belz Agreement” crisis developed between Agudat Yisrael and Degel Hatorah, which nearly caused them to run as two separate parties.

What is the Belz Agreement?

The Belz Agreement was a deal between then-education minister Yifat Shasha-Biton and the Belz Hassidic group, which is one of the largest groups within Agudat Yisrael, for the hassidic students to begin studying core secular studies with Education Ministry oversight, and the school system would receive funding in return. Belz and other Hassidic groups, whose education systems were in financial distress, agreed to the deal.

Degel Hatorah refused to accept this, and warned that if Agudat Yisrael went ahead with the program, the two parties would not run together. This would likely have led one of the parties to fall under the election threshold (3.25%), and wasted votes for the right-wing bloc. Prime Minister Benjamin Netanyahu, in response, promised Agudat Yisrael that he would supply the same funding that the Education Ministry would have provided as part of the Belz Agreement – except without the Education Ministry’s oversight, and therefore, without a demand to study a core secular curriculum.

Agudat Yisrael argues that that promise, which was made in September 2022, included funding for 2023, and not just 2024, and since the current distribution of coalition funding does not include 2023, the party is threatening to oppose the budget.

Otzma Yehudit clash with Smotrich's Religious Zionist Party

Tension also remained high on Sunday between Otzma Yehudit and Smotrich’s Religious Zionist Party over the coalition fundings earmarked for Otzma’s Development of the Negev and Galilee and National Resilience Minister Yitzhak Wasserlauf.

According to Wasserlauf, Otzma Yehudit and RZP had agreed to divide the coalition funds equally. However, Smotrich eventually awarded his fellow party member, National Missions Minister MK Orit Struck, NIS 1.3 billion in funds, while Wasserlauf only received NIS 450 million.

Otzma Yehudit in response on Wednesday decided to break coalition discipline and supported two bills proposed by the opposition, which consequently passed their preliminary readings.

Unlike Agudat Yisrael, however, Otzma Yehudit has not explicitly threatened to vote against the budget. However, a spokesperson for Ben-Gvir said on Sunday that “all options were on the table,” and that a final decision would be made on Tuesday.

The debate in the Knesset plenum over the budget is scheduled to begin on Monday at 9 a.m. and last until Tuesday evening at 8:30 p.m., a total of 35 and a half hours straight. During this time the plenum will debate the package of seven laws that make up the national budget. MKs will not remain in the plenum the entire time, but will rotate in and out to rest.

The prime minister, finance minister, opposition leader and Knesset Finance Committee chairman will then summarize the debate, and then voting on the hundreds of sections and reservations for their second and third reading will commence.

The coalition hopes to pass the entire package into law by the end of the week, perhaps as early as Wednesday. However, it scheduled another plenum session at 10 a.m. on Sunday, May 29, in case this is delayed. The budget must pass on May 29 at midnight or else the Knesset automatically disperses and an election is called.

Another threat to oppose the budget came from Noam MK Avi Maoz, who sent a letter to the cabinet secretary on Friday saying that without a government decision laying out the funding for a “Jewish National Identity Authority” that he was promised during the coalition negotiations in December, he would oppose the budget as well.

Cabinet Secretary Yossi Fuchs responded that the government could not bring up such a decision at short notice, and implied that it was Maoz’s responsibility to propose the budget details of the authority.

Maoz, initially appointed Deputy Minister in the Prime Minister’s Office, on February 27 resigned from the position, claiming the government did not intend on fulfilling Noam’s coalition agreement.

Maoz did not respond to a query about the status of his threat.