Cabinet Agrees to Trim Budget

The Cabinet agreed at its second lengthy session Sunday to cut the $19.1 billion state budget by about $200 million, excluding the military budget. The defense budget is to be discussed further by Premier Shimon Peres, Defense Minister Yitzhak Rabin and Finance Minister Moshe Nissim.

The agreed cut was considerably less than Nissim had hoped to force through the Cabinet, but he later said the actual cut gave hope for continued economic stability. The Central Bureau of Statistics announced Friday that the Consumer Price Index had remained unchanged in July and that the annual inflation rate was 15 percent.

Nissim said the Treasury now could begin planning reform in the capital market and tax system. These actions were strongly recommended in a letter to Peres from U.S. Secretary of State George Shultz that was publicized Friday.

The Cabinet further decided that until each minister presents a detailed plan to implement the cuts, there will be a 75 percent freeze on ministry contracts.

AREAS NOT AFFECTED BY THE FREEZE

Nissim said the freeze would not affect commitments dealing with the opening of the school year, the defense system, the Housing Ministry and development budgets. Peres, Rabin and Nissim decided last week that the defense budget would be cut by about $62 million instead of about $96 million as proposed by the Treasury. But Sunday, even this compromise was rejected by Rabin, necessitating the separation of the defense cuts.

Education Minister Yitzhak Navon said Sunday night that his cuts would reduce aid to cultural and sports institutions, including the nation’s museums and music organizations.

He said he couldn’t cut teachers’ salaries, as they already were held lower than promised the teachers in negotiations. He hoped teaching staffs could be reduced by attrition due to retirement, but some non-tenured teachers may have to be dismissed.