Tyranny of numbers hits debate on revenue sharing among counties

A proposal on revenue sharing among counties that would favour densely populated regions has caused a big division in the Senate.

The failure by the Senate to agree on the third basis of revenue sharing formula has consequently thrown counties deeper into financial crisis as it will now take longer for the devolved units to share out Sh316.5 billion allocated to them as equitable shareable revenue in the 2020/21 financial year.

A special sitting of the Senate called on Tuesday to discuss the formula adjourned without debate after Minority Leader James Orengo called for further consultations on the various proposals submitted by lawmakers.

THIRD GENERATION FORMULA

The Nation Tuesday learnt that adoption of the third generation formula was held back after Mr Orengo restrained his three colleagues from Nyanza from casting their vote for the formula that has been vehemently opposed by senators from the sparsely-populated northern part of Kenya.

Three senators — Johnson Sakaja (Nairobi), Boniface Kabaka (Machakos) and Prof Sam Ongeri (Kisii) — have opposed the formula even though their counties stand to gain more money.

The failure by the legislators to agree on the formula means that debate on the County Allocation of Revenue Bill, 2020, which had been shelved pending a decision on the formula, will remain in abeyance.

The Bill is the legal instrument that details the horizontal share of the revenue raised nationally but which is allocated to the 47 counties.

It is calculated at not less than 15 per cent of the last audited accounts of the national government as approved by Parliament.

SHARING CRITERIA

To determine the parameter weights in the third basis, Commission on Revenue Allocation developed 10 criteria for sharing revenue among the counties.

They are health index on which the commission placed 17 per cent weight, agriculture (10 per cent), population (18 per cent), poverty (14 per cent), basic share (20 per cent), land area (eight per cent), rural access (four per cent), urban households (five per cent), fiscal effort (two per cent) and prudence index (two per cent).

CRA Chairperson Jane Kiringai said the commission intended to share out the money on the basis of a qualitative analysis of each county’s needs to ensure equity, help the poor counties catch up with the rest, and take into account the outcomes of previous investments.

“This formula proposes measures of expenditure needs aligned with devolved services,” she said during the launch of the proposal.

“It is a departure from the previous ones, with key attention placed on strengthening the link between the constitutional mandates of the counties and the devolved monies transferred to counties.”

LESS POPULOUS COUNTIES

If the Senate adopts the formula, 18 counties, mainly the less populous and marginalised, will lose up to Sh17 billion as the remaining 29 snap the amount.

The central region counties are among the 29 devolved units that stand to benefit from the disputed formula.

“We are supporting this formula because all the money should go to the people because they are the ones who pay taxes,” said Nyandarua Governor Francis Kimemia, whose county is among those the formula favours.

Nyeri Governor Mutahi Kahiga said the formula will ensure that the one-man, one-vote, one-shilling strategy is achieved.

“In Nyeri, we will be receiving about Sh400 million due to our dense population which we have not been receiving previously,” he said.

Ten counties under the Frontier Counties Development Council (FCDC) have opposed the new formula.

Mandera Governor Ali Roba, who is also the FCDC chairman, argues that if implemented, the formula will only further marginalise arid and semi-arid counties.

EXISTING POLICIES

To determine the parameter weights, the commission was guided by existing policies on devolved functions, binding conventions on some of the devolved functions, actual expenditures by county governments and transfer shares from nationally raised revenues for key devolved functions.

The formula was submitted to the Senate Finance Committee and after consultations, it developed a synthesised version tabled in the House on Tuesday.

Essentially, there are already five proposals which the House must consider as it tries to unlock the financial deadlock that could interrupt basic services should it persist.

Apart from the proposal by CRA, there is the report of the Finance Committee, which contains amendment to the CRA proposal. Still, three senators have proposed amendments to the committee’s report, all in an attempt to end the deadlock.

CAPPED EXPENDITURE

While CRA had capped expenditure on health index at 17 per cent in the allocations, the committee has improved the same to 20 per cent, arguing that expenditure need will be determined by three measures: health facility gap, three years’ average number of primary health care visits to levels 2 and 3 health facilities at 60 per cent, and a three-year average in patients in levels 4 and 5 hospitals at 20 per cent.

On agriculture, the committee, which is chaired by Kirinyaga Senator Charles Kibiru, recommends that its expenditure should be determined through the county’s proportion of rural households as provided for the in the 2019 population Census.

Of the 20 per cent weight on basic share, the committee proposes that the funds should be distributed such that 19 per cent is shared equally among all counties and one per cent be shared based on inverse of a county’s population.

The committee reduces the weight on land index from eight, as proposed by CRA, to five per cent and recommends that land parameter should be measured using the county’s proportion of land area on what it calls county proportional distances — which is the square root of the county land area from the headquarters to the furthest point.

ROAD ACCESS INDEX

The committee proposes that the road access index be determined by the county rural access index, which is the proportion of a county population who have access to a motorable road within two kilometres based on data at Kenya Roads Board.

The committee further reduced the weight on fiscal effort from two per cent as proposed by CRA, to one per cent, prudence index from two per cent to one per cent and raised weight on rural access from four per cent to seven per cent.

The weight on fiscal effort will be pegged on the ratio of a county’s three-year average actual own source revenue to the gross county product based on data from the office of the Controller of Budget and the Kenya National Bureau of Statistics.

However, senators Mwangi Githiomi (Nyandarua), Ledama ole Kina (Narok) and Abdullahi Ali (Wajir) have brought further amendments to the report, which Mr Orengo used to justify his adjournment motion.

In his amendment, Mr Githiomi wants 70 per cent of total allocation to the counties shared equally by all the 47 counties, while the remaining 30 per cent to be subjected to the criteria developed by CRA with population and health index getting the lion share.

“The proposed amendments are not simple. We need to study thoroughly to understand them,” Mr Orengo told the House, justifying support for his adjournment motion.