How counties cash will be shared out

By Luke Anami and Njiraini Muchira

Areas long neglected by the Government will from next year be guaranteed a fixed share of all taxes collected by the Government under proposals on sharing the national cake among counties.

But county governments in the affected areas can only use the money to provide basic services, including water, roads, health facilities, and electricity.

According to the Commission for Revenue Allocation (CRA), Article 204 of the Constitution gives the poorest counties a chance to catch up by making it a requirement for Treasury to give them 0.5 per cent of all national revenue. The cash will be dished out to the county governments once they are up and running next year. Under the Constitution, Treasury will have to set up an Equalisation Fund through which themoney will be directed to county governments in marginalised areas. This will end nearly 50 years of marginalisation for areas like Lamu, Wajir, Mandera, and Turkana, among others.

The fund will be in place for the initial next 20 years up to a time when the quality of those services in the marginalised areas is expected to improve, but Parliament can extend its lifeline. Any unspent money in the Equalisation Fund at the end of a financial year would be rolled over to the next year

Kenyans at the grassroots level will at last directly access funding from the national kitty, thanks to the Constitution they passed in August 2010.

Each county will decide which basic services need upgrading, and forward their choice to the Equalization Fund Co-ordination Committee steered by the CRA, with representation from relevant ministries and stakeholders.

Objective criteria

The committee will then make the final decision on which projects to fund based on objective criteria specified in the Policy on Alleviation of Marginalisation.

In a presentation on Thursday of its recommendations on revenue sharing for the counties, CRA used Sh200 billion, or 15 per cent of the total amount of revenue generated in Kenya.

"We have looked at the most equitable formula to allocate the funds and ensure there is fairness among all the counties," said CRA chairman Micah Cheserem.

"Our figures are based on the KNBS data, until and at such time that the Government shall notify otherwise," he added.

In terms of revenue distributed by population, Nairobi County will get the lion’s share of revenue followed by Kakamega, Bungoma, Nakuru and Kiambu, all accounting for 20 per cent of the Sh200 billion allocated to counties.

The changes will come a year before the country celebrates 50 years of Independence. It was the Sessional Paper No 10 of 1966 that instigated the current regional disparities, with the declaration that the Government should only allocate resources to areas with huge potential, a new level playing field has been developed in the sharing of the national cake.

The Equalization Fund that will take care of the marginalised communities has been factored in the new budgetary allocation formula.

Although the allocations put actual figures of the amount each county is entitled to get after CRA unveiled the allocation formula in February, the new setup will not come into place until June, next year, after the March 4 General Election.

The commission said that out of Sh610.7 billion collected by the central government in the 2010/2011 financial year, Sh200 billion-audited amount would be shared among the 47 counties.

Under the budgetary allocation proposals based on a formula released by CRA, Nairobi Country, which has the highest population of 3.1 million, and where poverty levels are also high at 22 per cent, will get the highest allocation of Sh11.7 billion.

Lamu with the least population of 101,539, but where poverty rates stand at 30.6 per cent, will receive Sh1.4 billion.

The five leading counties in terms of population get the biggest chunk of the devolved funds.

Fiscal responsibility

The counties with small populations that include Lamu (Sh1.4 billion), Isiolo (Sh1.9 billion), Samburu (Sh2.2 billion), Taita Taveta (Sh2.34 billion) and Tharaka Nithi (Sh2.35 billion) get the lowest.

While the allocations are in accordance with the Constitution that stipulates that county governments are entitled to 15 per cent of the national revenue, CRA ensured each country gets a share based on need assessment.

Each county will be allocated revenue based on five parameters: These include county population (60 per cent), equal share component (20 per cent), poverty levels (12 per cent), land area (six per cent), and fiscal discipline (two per cent).

Based on population the counties would share Sh120 billion, equal share (Sh40 billion), poverty levels (Sh24 billion), land area (Sh12 billion), and fiscal responsibility (Sh4 billion).

The commission used data from the 2009 census on population and housing from the Kenya National Bureau of Statistics and the Kenya Household Budget Survey of 2005/2006 even though part of the data, including population census in the parts of North Eastern, is still disputed.

Until the coming into effect of the county governors, the national government will continue to determine how to spend national revenues.

"We think the country will have a new Cabinet in June, next year, so the 2012/2013 budget will be run by the national government," he said.

Of importance is that CRA put in to rest the controversy on the actual amount meant to be share between the central government and county governments. According to the audited 2010/2011 Government exchequer receipts used by the CRA to make the allocations, devolved funds will mainly come from revenues collected by the Kenya Revenue Authority (KRA). Grants from foreign governments, loans from financial institutions and foreign governments, among others, would not be eligible for sharing. But in a move to ensure fairness, each county will get Sh851 million based on equal share and Sh85 million based on fiscal responsibility.

Counties with the highest poverty levels like Mandera where 85.7 per cent of the people are poor and Kakamega with a poverty rate of 52.1 per cent lead the pack in allocation at Sh1.15 billion and Sh1.13 billion.

Main beneficiary

In terms of land area Marsabit, which constitute 12.2 per cent of Kenya’s landmass and Turkana at 11.8 per cent, will get the highest allocations at Sh1 billion each.

CRA Director of Research Moses Sichei said the commission undertook about 3,000 scenarios that produced results that had glaring disparities, making the formula the closest the country can come towards achieving equity in resource allocation. In one sample based on per capita, CRA noted that Lamu would be the main beneficiary, with each individual getting Sh13,876 due to its small population.