Senate formula ignores fiscal prudence

From left: Senators John Kinyua (Laikipia), Majority Whip Irungu Kang'ata (Murang’a) and Samson Cherargei (Nandi) after Senate passed the revenue formula on September 17, 2020.


Photo credit: Jeff Angote | Nation Media Group

What you need to know:

  • The fiscal effort index is calculated by dividing own source revenue collections of a county with the total revenues of the county.
  • ODM leader Raila Odinga praised the intervention of President Uhuru Kenyatta in the matter, pointing out that the government’s offer of Sh50 billion additional funding to counties had helped to break the stalemate.

While passing the controversial revenue-sharing Bill, senators dropped the fiscal prudence indices from the formula, which was meant to promote accountability among governors.

The Senate ‘kamukunji’ held on Thursday agreed to pass the formula as proposed by a committee established to consider it before senators unanimously passed it.

The team, which received overwhelming support from senators, who identified themselves as Team Kenya, dropped the proposal by the Commission of Revenue Allocation (CRA), which included both fiscal efforts and fiscal prudence indices meant to control the “appetite” of governors.

Coincidentally, seven of the 12 committee members — Moses Wetang’ula (Bungoma), Johnson Sakaja (Nairobi), Mutula Kilonzo Jnr (Makueni), Samson Cherargei (Nandi), Moses Kajwang (Homa Bay), Susan Kihika (Nakuru) and Ledama ole Kina — are said to be interested in governor seats in the 2022 polls.

The Senate dropped the provisions that would have punished counties that did not prudently utilise allocated resources by giving them less cash in subsequent years, hence promoting accountability.

It adopted a formula whose parameters are population, weighted at 18 per cent, health (17 per cent), agriculture (10 per cent), urban services (5 per cent), roads (8 per cent), poverty (14 per cent), basic share (20 per cent) and land area (8 per cent).

Revenue collections

The fiscal effort index is calculated by dividing own source revenue collections of a county with the total revenues of the county.

Fiscal prudence is arrived at by considering four variables, namely audit reports, development expenditure and the effectiveness of both the internal audit committee and the County Budget Economic forum.

ODM leader Raila Odinga praised the intervention of President Uhuru Kenyatta in the matter, pointing out that the government’s offer of Sh50 billion additional funding to counties had helped to break the stalemate.

“The President's intervention helped the country break the unfortunate stalemate that was also being used by populist politicians to profile revenue-sharing as a county against county or region against region contest over national resources, thus polarising the nation. In the end, however, the nation has won over vested partisan political interests,” Mr Odinga said.

Sh53 billion

One man, one vote, one shilling proponents Senate Majority Whip Senator Irungu Kang’ata and Gatundu South MP Moses Kuria praised the formula.

“We now have 28 per cent of the newly devolved funds totalling to Sh53 billion going to our Mt Kenya region. Murang’a County which was to lose Sh15 million has now gained Sh800 million,” Senator Kang’ata said.

However, Kiharu MP Ndindi Nyoro argued that Mt Kenya lost.

“Using the national per capita allocation as the baseline, we ought to have received Sh84 billion but we got less Sh10 billion,” MP Nyoro argued.

Elgeyo Marakwet Senator Kipchumba Murkomen said that the big fight after the passing of the revenue bill will come in March/April next year when the additional Sh50 billion promised by President Kenyatta is expected to be factored in the budget for counties.

Former Council of Governors chairman Isaac Ruto congratulated the Senate for the passing the formula but cautioned that counties are not receiving a fair and equitable percentage of revenue commensurate to the level of service delivery that counties are charged with.

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