In nearly eight years since the rollout of devolution in Kenya, most aspects of the devolved system of governance have been worth celebrating except the counties’ spending priorities. The devolved units have consistently overshot their recurrent expenditure thresholds while trailing development targets.
While the law – the Public Finance Management Act 2012 – requires counties to spend at least 30 percent of their cash on development projects and peg their wage bill at no more than 35 percent of their budgets, none of the 47 units has observed this guideline.
Instead, we have had financial years where some counties spend more than 80 percent of their allocations on wage bill alone with no cash ending on development projects. We believe it is against that background that the Commission on Revenue Allocation (CRA) has been advocating for drastic steps including retrenchment of excess staff to repair the finances of counties.
In the 2020/21 financial cycle that is just starting, the CRA is at it again, proposing that the National Treasury retain the recurrent budgets at last year’s level while raising development cash by Sh5.2 billion.
If Parliament approves the request, the counties will share Sh221.6 billion for their recurrent expenses and Sh100 billion for development. This intent should serve as a powerful signal to the counties that time for talking is fast running out.
Counties were meant to take development closer to the people, and since governors don’t appear to appreciate that of their own volition, the forcing hand of the Treasury should come in handy.
Reduced allocation for recurrent budget should ordinarily spawn painful measures as counties strive to live within a disbursement already weakened by inflation. Counties such as Nyeri have already indicated plans to shed excess staff through voluntary early retirement schemes.
But the State should not lose sight of the big picture even as it moves to compel a positive behavioural change through its conditional disbursements. Such drastic measures must be reinforced by a clearly spelled out punishment and reward system.
Otherwise, counties are not particularly known for fiscal discipline and, money being a fungible commodity, nothing can stop counties from raiding the projects’ kitty to pay staff.
We acknowledge the fact that counties inherited disproportionately high number of workers from the defunct local authorities. But it is also true that first crop of governors went into hiring spree without undertaking skills set audit or considering ability to pay excess personnel. A forcing hand is therefore necessary.