CRA in fresh push for capable counties to fund own budgets

At least six counties have the potential to fund more than half of their current budget if they fully exploit their revenue bases and manage the collections prudently.

Commission on Revenue Allocation revealed on Tuesday that Nairobi, Kiambu, Kajiado, Mombasa, Kisumu and Machakos can sustain themselves without relying on exchequer share.

The commission argues that owing to high debt, counties need to improve their own source revenue and not rely solely on allocation from the centre.

Nairobi, according to the fresh data by CRA, has the potential to finance 236 per cent of its budget followed by Kiambu at 76 per cent, Kajiado (75 per cent), Mombasa (70 per cent), Kisumu (69 per cent) and Machakos at 53 per cent.

CRA chairperson Jane Kiringai said on Tuesday this would be possible if the governors of the respective county governments improved their revenue administration and reduced leakages.

“Nairobi is one county that in the view of the commission does not need to get money from the centre if they did the right thing,” Kiriangai said.

“This is important and is going to be an important part of the devolution conversation going forward,” the CRA boss said during the unveiling of the revenue share recommendation for financial year 2022-23.

Kiringai asked Parliament to consider working on ways through which the counties with capacity can be allowed to fund themselves and their allocations from the exchequer offloaded to other funding needs.

“We could do it. One of the things we have tried to do is to have a revenue sharing parameter to ensure the capacity for counties to source their own revenue is inbuilt in the formula.”

CRA chair added, “We hope those who come after us will infuse it in the fourth basis revenue sharing formula. With the debt situation, we are walking a tight rope in determining the revenue sharing.”

A total of 34 other county governments can only finance up to 20 per cent, with 15 counties capable of financing less than 10 per cent of their budgets.

Kiringai said the failure by many counties to meet their own-source revenue targets has slowed the desire for counties to significantly cater to their own budgets.

CRA data shows that Nakuru can fund up to 47 per cent of its budget, Uasin Gishu (29 per cent), Nyeri (26.8 per cent), Meru (26.4 per cent), Trans Nzoia (23.3 per cent), Makueni (21.5 per cent), Kirinyaga (21.4 per cent), and Kakamega (20.4 per cent).

“In effect, financing devolution in Kenya will continue to rely on nationally raised revenues unless a constitutional amendment assigns more taxing powers to county governments,” the CRA boss said.

Counties with the lowest capacity include Wajir (2.3 per cent), Tana River (2.6 per cent), West Pokot (2.8 per cent), Samburu (2.9 per cent), Marsabit (3.7 per cent), Mandera (3.8 per cent), Isiolo (4.8 per cent), Garissa (5.6 per cent), Tharaka Nithi (6.7 per cent), Bomet (7.7 per cent), and Vihiga (8.3 per cent).

She spoke in Nairobi as CRA unveiled its recommended that counties would receive Sh370 billion in the next financial year dashing hopes of governors to net an additional Sh381 billion.

County bosses have rejected the CRA proposal saying the proposed amount would not be sufficient to ensure optimal implementation of devolved functions.

The council chaired by Embu Governor Martin Wambora proposed additional funding of Sh381.45 billion, bringing the total to counties to Sh751.5 billion.

“The CoG position is informed by the Constitution of Kenya Amendment Bill, 2020 which recommends that counties be allocated by not less than 35 per cent,” the council said.

The CRA further allocated Sh1.76 trillion for the national government and Sh6.8 billion for the Equalisation Fund stemming from projected revenue of Sh2.14 trillion.

CRA said the share was informed by slow economic growth, a constrained fiscal framework, need to contain public debt, and the need to finance and provide security for the 2022 elections.

Kiringai said stretching the caps to accommodate the request by counties would mean more borrowing and budget cuts for state agencies.

“Each level of government should operate within the budgets they were allocated last year and the surplus offloaded towards debt repayment,” the CRA chairperson said.

She said the increment of about Sh50 billion in the current year, which has been maintained in the new share, is sufficient for county operations.

“We believe the allocation is sufficient to create the stimulus needed to generate the economic growth,” Kiriangai said.

“From the numbers we see, if the CoG is angling for additional revenue, they need to tell us whether to borrow the additional amount or tax Kenyans more,” the CRA boss said.

CRA further revealed that efforts are also being made to credit rate counties to enable them to access additional funds from the capital markets.

County governments have a framework borrow for development financing up to a maximum of 20 percent of their total revenues.

-Edited by SKanyara