Senators in crunch meeting over ‘contentious’ revenue formula amid looming cash crisis

Some 19 counties set to lose Sh15 billion if new formula is adopted

In Summary

• Senators clash over formula that will see 19 counties lose Sh15 billion

• Speaker Lusaka has convened a special sitting to discuss the proposed new revenue sharing formula

Senate Speaker Ken Lusaka during an interview with the Star in his office at Parliament Buildings, Nairobi, on Monday
Senate Speaker Ken Lusaka during an interview with the Star in his office at Parliament Buildings, Nairobi, on Monday

A Senate committee will convene a crunch meeting on Monday to unlock the impasse over the proposed new revenue sharing formula among counties, amid a looming cash crisis in the devolved units.

The senators have clashed over the contentious formula proposed by the Commission on Revenue Allocation after revelations that about 20 counties could lose up to Sh15 billion, if the method is applied.

The third generation formula will determine how the 47 counties will share the Sh316.5 billion allocated to them in the 2020-21 budget.

The Finance and Budget committee, which has been considering the formula since last year, has failed to reach a middle ground after senators whose counties stand to lose billions rejected it.

“We have a meeting tomorrow [Monday] to determine how to proceed,” Minority Chief Whip Mutula Kilonzo Jr, who is a member of the committee,” said.

 “The proposed formula is very contentious. Once applied, over 20 counties will lose the revenue they received in the last financial year,” Kilonzo added.

Last Friday, Speaker Kenneth Lusaka gazetted a special sitting of the House on Tuesday to discuss the formula whose stalemate has stalled the approval of the County Allocation of Revenue Bill, 2020.

The Bill splits the Exchequer allocation among the 47 counties.

Its passage is overdue and further delays could plunge the devolved units – some of whom rely entirely on the national allocation – into a serious cash crunch.

But nominated Senator Isaac Mwaura, who served as the vice chairman of the panel until reshuffles were done last week, sought to allay fears of a looming cash crisis.

“They can withdraw up to 50 per cent pending the approval of County Allocation of Revenue Bill, 2020. So, it is fine,” he said.

Article 217 of the Constitution stipulates that the revenue-sharing formula be reviewed every five years.

However, the Sixth Schedule of the Constitution further provides that the first and second determinations of the basis of the division of revenue among the counties were to be made at three-year intervals.

The last formula was reviewed five years ago.

Last year, CRA developed a new formula and sent it to the Senate for approval. However, the method has been pending in the Finance and Budget committee since then.

The proposed formula adopts sector specific-funding approach unlike the current one that places more weight on the land mass, population and poverty level.

The formula assigns health 15 per cent, basic share 14 per cent, agriculture 10, while population has been weighted 18 from 45 per cent in the current formula. Landmass has been assigned five per cent and urban area given similar weight.

If applied, some 19 counties, including Mombasa, Kwale, Kilifi, Mandera, Wajir and Garissa, will lose more than Sh15 billion.

Mandera will lose Sh2.09 billion, Wajir will forgo Sh1.4 billion, Kwale Sh1.2 billion and Kilifi Sh1.1 billion.

Other losers are Marsabit (Sh984 million), Narok (Sh853 million), Mombasa (Sh682 million), Makueni (Sh574 million), (Nyamira Sh560 million), Tana River (Sh499 million), Tharaka Nithi (Sh499 million) and Garissa (Sh484 million).

Kilonzo said the loss will be detrimental to the counties, adding that the committee will not hesitate to recommend to the House the retention of the current formula as they seek opinions on how to improve the proposed one.

“Our work is to minimise such discrepancies or find a way to cushion counties. When all fails, the option is status quo, and request for more resource,” he said.

The Makueni senator said the problem has been caused by the new population data released last year and the fact that the shareable revenue has not changed from last year's.

However, the formula would give more cash to some 28 counties, if adopted.

Some of the big winners are Kiambu (Sh1.3 billion), Nairobi (Sh1.2 billion), Uasin Gishu (Sh923 million), Nandi (Sh788 million), Kajiado (Sh765 million), Nakuru (Sh744 million) and Laikipia Sh660 million).

Others are Trans Nzoia (Sh656 million), Kirinyaga (Sh538 million), Baringo (Sh537 million), Bomet (Sh456 million) and West Pokot (Sh444 million).

In April, Nairobi Senator Johnson Sakaja protested the continued use of the obsolete formula, saying that it was disadvantaging some counties.