Populous counties to get more cash in new revenue formula

Tuesday, October 22nd, 2019 06:14 |
CRA commissioner Dr Irene Koech
CRA commissioner Dr Irene Koech

Heavily populated counties are set to win big in a proposed new revenue sharing formula, with the Commission on Revenue Allocation (CRA) having suggested a 20 per cent boost on the population parameter.

The commission, which is awaiting results of the recent population census, has already tabled the third generation formula at the Senate for consideration and among the improvements put forward is an increase from the current 45 per cent under the population parameter to 65 per cent.

CRA commissioner Dr Irene Koech said the draft formula, which comes at a time when some senators have been protesting shortchanging of populated regions, focuses on enhancing service delivery and promoting balanced development.

“Our work (creating the formula) is technical and we rely on the official data from Kenya National Bureau of Statistics and other agencies on the population,” she said, adding that CRA will use the fresh census results when determining the disbursements, hopefully by the start of the next financial year.  

Challenge formula

Preliminary results from the Sh18.5 billion counting exercise conducted in August are expected to be out next month, while the in-depth analytical details will be released after one year.

Under the population parameter, CRA has picked various indices from the devolved units besides the basic minimum share which covers 20 per cent, health (17), agriculture (10) while the other services cover 18 per cent.  

Kiambu Senator Kimani Wamatangi, who in 2014 challenged the revenue sharing formula in court, had early this year called for the suspension of the review of the formula until a credible census is conducted.

“Monies are allocated to regions so that they can benefit the people and because CRA has been reviewing the formula, my request is that we should first conclude the census so that the commission can do the review based of the correct number of population in respective counties,” he said.

Under the current formula, population covers 45 per cent, basic equal share (25), poverty (20), land area (eight) and fiscal responsibility (two per cent), and Wamatangi protested that it shortchanged populated counties because the 2009 census “was skewed”.

On the development parameter, Koech said they proposed that the amount to be allocated per county be decided based four variables— roads, urban services, land area and poverty— since demands for such development vary depending on the counties.

Raise revenue

On roads, counties will get a four per cent allocation based on a framework that, according to the commission, uses a rural access index. Urban service component will attract five per cent; this index uses the number of urban households while land area will get eight per cent; and this uses the proportion of the land size of a county while poverty index (14 per cent), is based on the proportion of poor people in a county.

Further the new formula seeks to incentivise counties to optimise their capacity to raise local revenue using a two per cent allocation under fiscal responsibility, which rewards counties that maintain financial discipline such as meeting revenue target.

Get less

“If a county collects more money than collected in the previous  financial year, you qualify for more allocation under the parameter but when you collect less, you get less allocation,” Koech said.

During the last financial year, according to CRA, 18 counties shared the Sh6.3 billion under the parameter, with Lamu county being the major beneficiary with a Sh1.2 billion allocation.

Other counties which benefitted from the kitty are Mombasa, Machakos, Samburu, Kericho, Marsabit, Embu, Kisumu, Baringo, Makueni, Meru, Lamu, Bomet, Kilifi, Turkana, Siaya, Nyandarua, Bungoma and Nandi. Failure to meet its revenue target, saw Kiambu county, which in the past years had qualified under the parameter, lose an allocation of at least Sh400 million.

Koech said dependence on the national exchequer was detrimental to devolution.

To ensure transparency and accountability, such as ensuring not more than 70 per cent is spent on recurrent expenditure and that at least 30 per cent is used on development, a two per cent to incentivise prudent use of resources has been proposed.

More on National