Israel’s State Budget is Directly Linked to Dissolution of Knesset and Elections

Why is the Knesset automatically dissolved if the budget is not approved? When was this rule established, and when was the last time elections were brought forward due to the failure to pass the state budget? All the answers.

Photo by Yonatan Sindel/Flash90

Does failure to approve the state budget lead to elections?

Yes. Under Basic Law: The Knesset, if the budget is not approved by the Knesset by the end of March, or within 145 days of the establishment of a new government, the Knesset is automatically dissolved, and elections for the Knesset are held about three months later. (Note: Basic Laws are laws of quasi-constitutional status in Israel.)

When was the rule linking the state budget to the dissolution of the Knesset created?

For many years, no such rule existed. It was first adopted in 1992 as part of the new Basic Law: The Government, in the framework of the transition to the direct election of the prime minister, and it came into force together with the introduction of direct elections in 1996. However, the rule remained in effect even after direct elections were abolished in 2001.

Have elections ever been brought forward due to failure to approve the state budget?

This has happened only once. The 23rd Knesset did not approve the 2020 budget and therefore was dissolved in December 2020, with elections brought forth to March 2021. In fact, under Basic Law: The Knesset, the budget was supposed to have been approved as early as August. However, given the difficulty faced by the Netanyahu–Gantz government in passing the budget, the Knesset postponed the deadline for approving the budget by means of a temporary provision, extending it by 120 days, until December. When the budget was not passed even then, the Knesset was dissolved and elections were brought forward.
That said, conflicts surrounding the state budget, and fears that the budget would not be approved, have on several occasions in the past led indirectly to the dissolution of the Knesset. Coalition struggles over the budget contributed, in part, to the dissolution of the Knesset ahead of the 2003 elections, and partially ahead of the 2015 and 2019 elections. In all of these cases, however, the Knesset was formally dissolved for reasons other than failure to approve the budget.

What other mechanisms for dissolving the Knesset exist in Israel?

In addition to automatic dissolution due to failure to approve the state budget, there are other mechanisms for dissolving the Knesset and bringing forward elections:

• Dissolution of the Knesset by law, by a majority of at least 61 Knesset members in a third reading. This is the usual way in which the Knesset is dissolved.
• Dissolution of the Knesset by order of the prime minister, with the consent of the president of the state of Israel.
• Dissolution following failure to form a new government—after elections or following the resignation of a government.

In which other democracies does failure to approve the state budget lead to the dissolution of parliament?

Automatic dissolution of parliament, as in Israel, is very rare and exists only in Estonia. In a few other countries, such as Poland and Croatia, failure to approve the state budget can serve as grounds for dissolution by the head of state, but this is not an automatic dissolution.

Nevertheless, in almost all parliamentary democracies, failure to approve the state budget is considered a fundamental failure of the government and therefore triggers a political crisis. In some countries, the government cannot function in such a situation. In the United Kingdom, for example, the constitutional convention is that if the state budget is not approved by parliament, this is effectively considered a vote of no confidence in the government. In such a case, the prime minister may resign, allowing for the formation of an alternative government, or may turn to the monarch to request early elections. By contrast, in countries such as Germany, Sweden, Spain, and Belgium, failure to approve the budget is regarded as a political crisis, but governments sometimes continue to serve even under such circumstances.