Senate team should back CRA push for prudent spending, own-source revenue

In the last few months, the country has witnessed unending squabbles among senators over the proposed third generation revenue sharing formula by the Commission on Revenue Allocation (CRA).

Both proponents and opponents of the proposed formula have assumed hardline positions while the country awaits the outcome and counties continue to suffer from lack of funds.

Section 203 Constitution mandates the Senate to determine the basis of allocation of national revenue among the counties based on the advice and recommendation of the CRA. However, the recommendations submitted by the CRA to Parliament in April 2019 have been subsumed into our high-octane politics without being accorded fair debate.

In 2019, following nationwide consultations, the CRA developed a new formula whose rationale was pegged on service delivery, promotion of balanced development, incentivising counties’ capacity to raise own revenue and to prudently use public resources.

The formula also sought to reduce the revenue allocation volatility from year to year and bring stability and predictability to revenue allocation as required by the Constitution.

The new revenue allocation proposal is premised on 10 parameters to be applied to sharing the Sh316.5 billion allocated to counties — health (17 percent), agriculture (10 percent), population (18 percent), basic share (20 percent), land area (8 percent), roads (4 percent), poverty (14 percent), urban service (five percent), fiscal effort (two percent), and fiscal prudence (two percent).

The proposed parameters, whilst in line with the finance-follows-function principle of the Constitution, have generated a heated and divisive debate that appears to have no solution in sight, three months into the 2020/2021 financial year.

Fuelling the debate is the argument that 19 counties stand to lose revenue with focus on population as opposed to land area as a basis for the division of revenue. Opponents to the new formula claim that the principle of population size disadvantages marginalised counties inhabited mainly by pastoralist communities while proponents are touting the ‘one man one shilling’ allocation.

Even as political brinkmanship has taken a centre stage, it is important to note that the Constitution provides an elaborate mechanism on how to resolve such disputes through consultation. Senators must also set aside their personal interests given that some of them may be eyeing governor positions in the next Parliament.

The Constitution under Article 201 outlines the principles of public finance that guide the revenue sharing basis; key among which is the principle of equitable development for an equitable society.

Stakeholders, including political institutions, professional bodies, faith-based organisations, civil societies and the media, should come out and support and strengthen independent and constitutional offices such as the CRA.

In this case, they should support the CRA’s focus on equity and not equality. The equity principle is indispensable given the history of marginalisation of certain parts of our country.

As a country, we may not be in a position to achieve the ‘one man, one shilling’ allocation at the moment. However, all counties must be allocated adequate funds for service provision and additional funding for development given their needs, population and state of service infrastructure.

The parameters of fiscal effort (two percent) and fiscal prudence (two percent) to incentivise counties’ capacity to raise own revenue and to prudently use public resources allocated are critical and should be retained at the CRA’s proposed rates.

To lessen national taxation burden, it is high time the counties put extra effort in raising their own source of revenue. They should exploit inert opportunities that are yet to be exploited within their respective jurisdictions.

The Council of Governors and the national government should encourage devolved units to take this less travelled path for the benefit of county residents. This should be supplemented by strict observance of fiscal prudence in the use of public resources. Kenyans want accountability in the use of public funds.

To resolve the revenue sharing standoff, the Senate Committee on Finance and various senators have proposed amendments to the proposed CRA formula. Until the ninth sitting, 11 proposals had been tabled at the Senate.

The 12-member team set up to build consensus should demonstrate sobriety in negotiations with the goal of finding a lasting solution for the benefit of all Kenyans.

Cognizant of the fact that consensus is not always easy to achieve, the members from different political persuasions need to set aside their personal interests, negotiate and cede ground where necessary for a lasting solution.

Ms Mwaura is the chairperson, Institute of Certified Public Accountants of Kenya.