Senate to mull over revenue sharing formula

The Revenue Sharing Formula to determine the amount each county will receive from the National Treasury in the next financial year starting July will be among the top items on the agenda when the Senate resumes sittings on Tuesday.

The formula arrived at will be used to share the proposed Sh290 billion that the national government has earmarked for counties in the 2016/2017 year.

But all is not well, as the formula may again be rejected by the Senate, which would result in continued use of the existing formula.

Last year, the Senate rejected a proposed formula by the Commission for Revenue Allocation, citing lack of consultations that led to “a weak formula”.

(READ: Governors want funds allocation formula changed)

According to the law, the revenue sharing formula should be reviewed every five years, though it was exempt in the first instance where the formula was to be changed after the first three years.

The first three years expire in June 2016 and a new formula should be in place, an increasingly impossible scenario since senators and governors from 16 counties officially recognised as marginalised have teamed up to reject the current formula.

NEW FORMULA VS EXISTING FORMULA

Last year, the Commission for Revenue Allocation’s new formula was rejected by a majority of senators, most from the less endowed counties.

If a new formula will not have been enacted by June, counties will continue using the existing formula - which has five parameters: population, land area, basic equal share, poverty index and fiscal responsibility.

Two other new parameters - development factor and personnel emoluments - were introduced in the rejected draft last year.

They will make a comeback but with amendments.

Application of what weight should be accorded to “equal share, population, land size, and personnel emoluments” are among the contentious issues the senators will be considering when the matter comes up before the House.

Senator Mutahi Kagwe said the new formula will be tabled soon and that it is up to senators to reject or accept it.

“The Finance Committee on which I sit has done extensive consultations. We will present the formula as prepared by CRA when we resume,” he said.

MARGINALISED AREAS

Senators from marginalised areas seemed to close party ranks when they rejected the 45 per cent allocated to population parameters.

They said this would favour a few counties which constitute the minority.

“How can Nairobi with all its development - good schools, universities, hospitals and a small land mass - get a big allocation of Sh12 billion?

This big allocation is due to population parameters. Counties which are small in size but have nothing to show for it, like Marsabit and Wajir, receive a fraction of Nairobi’s allocation,” said a Jubilee senator.

SESSIONAL PAPERNO. 10, 1965

The senator said the formula is designed to entrench Sessional Paper Number 10 of 1965 on development that devolution came to cure.

The sessional paper, designed by then Economic Planning minister Tom Mboya and assistant Mwai Kibaki, earmarked high potential areas for development, leaving out less potential areas.

The sessional paper is blamed for internal exclusion, where high potential counties ended up having undeveloped areas like Kieni in Nyeri, Tharaka in Tharaka Nithi and Mwea in Kirinyaga.

It is also said to have created external exclusions, such as marginalisation of the entire Northern Kenya, giving rise to historical injustices.

Senate Majority Leader Kithure Kindiki, when approached on these realities, said the senators would make a decision on the floor.

“The beauty of the senate is that every county has one vote, unlike the National Assembly where Nairobi has 18 votes.

Therefore, all 47 senators will make a binding decision on the formula,” he said.

POPULATION PARAMETERS

But Senator Mutula Kilonzo Jr (Makueni) said it would be catastrophic to change the population parameters, which remain at 45 per cent.

“The moment we reduce the population parameter by 2 per cent, we will have Lamu as the highest in allocation and Nairobi as the lowest.

We did the permutations in the committee and we saw that it would look abnormal,” he said.

In the current scenario, Lamu will receive the least allocation of about Sh2.5 billion while Nairobi will receive Sh15 billion.

The senator said counties should be rewarded for prudent collection of revenue.

Kiambu and Nairobi were the best in revenue collection last year.

EQUALISATION FUND

He further said the Equalisation Fund, which is yet to be effected, would help the 16 officially recognised marginalised counties in development.

Personnel emoluments also faced rejection, since the draft sought to have counties that inherited a large workforce to get 2 per cent of available money.

The counties include eight that were former provincial headquarters - Mombasa, Garissa, Nyeri, Embu, Nakuru, Kakamega, Kisumu and Nairobi.

Also in the group are some counties that have defunct municipalities.

“They inherited a bloated workforce and it is only fair that they receive an extra shilling to deal with that problem,” said Senator Mutula.

Prof Kindiki said there was no legal obligation to carry the burden of the former local government employees.

He predicted a spirited debate on this issue. “Any county, big or small, has economic potential.

Devolution must open all areas to development and this can only be done if there are more funds,” he said.

Counties without headquarters - like Tharaka Nithi, Laikipia and Nyandarua - will benefit from the development parameters.