Governors get a blank cheque in county revenue sharing plan
Micah Cheserem, chairman Commission on Revenue Allocation. FILE
The legal gap that hands absolute control of county treasuries to politicians emerged among the top concerns Tuesday as the government launched a formula for sharing revenues among the 47 devolved units. The Commission on Revenue Allocation (CRA) said it would not attach conditions on how the funds - equivalent to 15 per cent of Kenya’s annual revenues - are utilised, saying each devolved unit would depend on its own institutions to enforce fiscal discipline.
“We will allow them to set their own spending priorities. Kenyans pushed for devolution because they wanted to have decision making power over resources at grassroots,” CRA chairman Micah Cheserem said in Nairobi when he unveiled the proposed revenue sharing formula. With the current budget of more than Sh1 trillion, governors would be directly in charge of Sh150 billion, more than Sh3billion per county on average before the allocation criteria announced Tuesday is taken into account. (READ: Ministries raise the alarm over limited budget for counties)
According to the proposed revenue sharing formula, the counties will each get equal share of the first 20 per cent of the official sealing to cover their basic (fixed) expenses.
“Given their different sizes, population densities and sizes, it is unfair to assume that all the 47 counties will incur equal running expenses,” Mr Davis Adieno, National Coordinator at National Taxpayers Association said, adding that further analysis was required to tighten the CRA formula.
The remaining 80 per cent would be distributed by CRA according to each county’s level of fiscal discipline, population size, poverty level and geographical size.
Fiscal discipline would however account for only two per cent compared to a weight of 60 per cent assigned to population size, 12 per cent for poverty and 6 per cent for the land size.
The 47 counties will initially take equal share of the 2 per cent for the first 3 years until the commission comes up with a criteria for evaluating and rewarding fiscal discipline.
“Given the history of official corruption in this country, assigning only 2 per to fiscal discipline is definitely not an adequate incentive to county officials to manage their resources prudently,” Mr Oduor Ong’wen, country director of Southern and Eastern African Trade Information and Negotiations Institute, said.
Public policy experts, including World Bank officials, however maintained that the national government needs to set criteria to guide all the counties on use of public revenues in order to stem rampant misuse as has been witnessed under the Constituency Development Fund. (READ: New offices dent public wage bill control plans)
Basing their fears on documented cases of misuse of devolved funds at local authorities and constituencies by politicians, analysts maintained that CRA should set guidelines that the national treasury can use to evaluate performance of county executives.
“CRA’s formula is simple, fair and equitable but without disbursement conditions, most of this money could end up paying for expensive life styles of executives,” said Roy Kerr, an analyst at Nairobi office of PricewaterhouseCoopers. Such a loophole, he added, would create room for officials to divert money from development to non-priority areas such as buying expensive vehicles and covering increased allowances or expensive medical cover for county executives.
“This is what used to happen in my country (South Africa) until the national government realised there had to be some form of control over provincial budgets,” he said.
The constitution guarantees the 47 counties 15 per cent of the national revenues. The remaining 84.5 per cent is allocated to national governments while 0.5 per cent will constitute equalization fund to be distributed according to a formula that is yet to be made public.
At the public hearings held in January, treasury unveiled a 1.14 trillion budget for 2012/13. If elections are held in December this year, the budget read in June would be split in two phases. The first phase would run the last part of the centralised system between July and December while the second part would come into force after elections to cater for devolved structures up to June next year.
“We are yet to agree on what aspects of the national revenue will be shared out but I can generally say it will be every receipt of the exchequer other than loans,” said Mr Cheserem, challenging voters to ensure that only people of high integrity are elected to serve in county assemblies, cabinet and executive committees.
If this will be the case, then 15 per cent available to counties will include national tax revenues, appropriation in aids and grants.
The Commission said it will rely on the 2009 census for population data and the 2005/6 Kenya Integrated Household Surveys of the Kenya National Bureau of Statistics. The two lists are already the subject of controversy with calls for a new index to be done.
With the big weight assigned to population size, Nairobi City with a total population of 3.1 million people would get the lion’s share of the 2012/12 county funds.
Other top allotees would be Kakamega County (1.66 million), Kiambu (1.62 million) and Nakuru (1.60). The three lowest recipients would be Isiolo (143, 294 people), Samburu (223,947 people) and Marsabit (291,166 people).
Apart from raising questions over the validity of statistics collected years ago, experts have warned that the proposed formula could skew allocation of resources in violation of the constitutional principle of equity.
“Assigning too much weight to population will only end up isolating regions that have been marginalised since independence,” said Mrs Kavetsa Adagala, a former Commissioner with the Constitution of Kenya Review Commission.
The CRA Commissioners however said counties will still get indirect funding as central government retains some functions such as health and education which are mainly performed at grassroots. “Furthermore, the government is yet to agree on the time line for phasing out devolved funds such as LATF and CDF which means they will continue to flow into the counties,” said Prof Wafula Masai, a CRA commissioner.
