Fairness must inform Revenue Sharing

Posted by on 21st November 2014

Categories:   Uncategorized

The thinking around revenue sharing between National government and County government has been a subject of discussion for the past few months. The Commission on Revenue Allocation (CRA) has held various forums, finalized its proposals and sent them to the Senate for consideration and adoption. The new proposal is a slight departure from the current one and if adopted will be used for the next three years.

The current formula in operation is distributed as follows; population (45%), equal share (25%), poverty (20%), land area (8%) and fiscal accountability (2%). This formula has seen counties receive billions of shillings and although the Controller of Budget (CoB) has raised absorption issues, counties have been able to lay the ground work for devolution.

Yet, a critical concern has been whether there is adequate information and data to inform better resource allocation. There is need for better public awareness on how resources are shared and to establish avenues for receiving their views for consideration. Data is useful as it informs where the drivers of cost lie and determines prioritization of limited resources.

CRA has refined the current formula and reduced fiscal responsibility and poverty but added personal emoluments and development as new parameters while retaining the rest. The proposed formula includes; population (45%), equal share (25%), poverty (18%), land area (8%), fiscal responsibility (1%), personnel emoluments factor (2%) and development factor (1%).

The International Budget Partnership (IBP) organized a public forum to discuss this new formula where they invited the public but also CRA to hear views from Kenyans on what informed this new formula.  An emerging and profound issue from the forum and which Kenyans brought out during the IBP County visits is the issue of fairness. What are the parameters that should inform a fair division of revenues among counties?

To determine a measure of fairness, issues like poverty, disease prevalence, ability to generate revenue, and available data were some of the provoking considerations. On poverty for instance, would it be fair to allocate a county less resources than another based on its perceived wealth? On ability to generate revenue, would it be fair to allocate more resources to a county that generates more than the one that generates less?

A measure of fairness between the National and County governments is likely to be forever contentious. But the conversation must be had on how whatever resources have been allocated, as a basket fund, to counties will be fairly disbursed.

If adopted, the proposed formula will help reduce the inequalities that are not only among sub-counties but also among wards within a sub-county. A good transfer system should be predictable but also avoid sudden and drastic change.

This new formula includes historical realities like bloated staff in some counties and is futuristic in terms of the development factor taking over from poverty. The proposal promises stability which is crucial as it did not deviate much from the current one. Is it fair? What are your thoughts?