REVENUE-SHARING FORMULA

Yes to one man, one vote, one shilling

We must seek to address the question of what is equitable and fair.

In Summary
  • It is not more of how much money a county receives but how the allocation meets those specific needs in each of the counties.
  • Senators must look at each individual county and its needs and see whether the proposed formula addresses them.

However, there is also agreement that a more developed county such as Nairobi with its huge population cannot be disadvantaged in favour of let’s say Lamu, as they both have different needs.

After the death of their father, three young men had a difficult time figuring out how to share 17 camels. In his will, the old man had stated that the eldest son would own half of the 17 camels; the middle one would get one third and the youngest one ninth.

It took the intervention of a wise man to break the deadlock where he added his own camel to make the math easy.

He divided by two and gave the eldest nine camels, and then he divided 18 by 3 and gave the second son 6 and finally divided 18 by 9 and gave the youngest two. The 17 camels were divided as their father wanted and the wise man took back his.

 

Over the last couple of weeks, Kenyans have been closely following the debate on the sharing of revenue among the county governments. There is currently a deadlock over the formula that the Commission on Revenue Allocation came up with.

It should not be lost to any of us that this is the third formula since we kicked off devolution and is as a result of lessons from the last seven years. There is also agreement that the current revenue-sharing formula is without a doubt insufficient.

The Constitution envisages revenue sharing based on equity, but also one that uplifts poorer counties. However, there is also agreement that a more developed county such as Nairobi with its huge population cannot be disadvantaged in favour of let’s say Lamu, as they both have different needs.

Lamu might prioritise road construction while Nairobi’s hospitals may need much more funding to cater to the huge population. And this is just the nature of devolution and what it is supposed to achieve.

Therefore, the revenue-sharing formula must be fair, and must support one man, one vote and one shilling. And this is why in this debate, other than arguing about who is losing what or who is gaining what, we must seek to address the question of what is equitable and fair. To start off, we must first go back to the CRA recommendation. According to the CRA, the proposed formula builds on lessons learnt from a comprehensive review of the second basis.

Lamu might prioritise road construction while Nairobi’s hospitals may need much more funding to cater to the huge population. And this is just the nature of devolution and what it is supposed to achieve.

In justifying the formula, CRA also said it follows a comparative analysis of financing transfer systems from other countries, and extensive consultations with the national government, county governments, public finance experts, and the public.

The formula, according to CRA, seeks to address six primary objectives: To enhance service delivery, to promote balanced development, to incentivise counties, to optimise capacity, to raise revenue and to incentivise prudent use of public resources.

 

In aggregate, the framework allocates 65 per cent of the revenue for enhancing delivery of public services, 31 per cent for promotion of balanced development, and four per cent to incentivise revenue collection and fiscal prudence.

So what’s the difference with the current formula? The current formula has population (45 per cent), equal share (26 per cent), poverty gap (18 per cent), land area (eight per cent), and development index (one per cent).

So in the new formula, the service delivery component looks at things like health, agriculture, rural households in a county while other functions are based on population. There is also a basic minimum allocation for each county.

The balanced development component has four variables: Roads, urban services, land area and poverty. The fiscal effort index measures a county’s effort to raise own source revenues from the economic activities within the county.

And so generally speaking, it is not more of how much money a county receives but how the allocation meets those specific needs in each of the counties.

Therefore, as this debate continues, senators must look at each individual county and its needs and see whether the proposed formula addresses them. There is data available from last year’s census that can be used for each of the parameters.

The debate on this formula should not be used to divide Kenyans on political or regional lines. It should be informed by what is best for the residents of the respective counties.