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ELECTION 2022

Senate seeks to unlock deadlock on revenue sharing formula

COUNTIES
By Roselyne Obala | Feb 3rd 2016 | 5 min read

Senate is rushing against time to unlock the impasse of finding a new formula for sharing revenue in counties.

A deal is still far from being reached following increasing criticism on proposed parameters for the distribution of resources among counties, as the Senate engages various stakeholders to come up with the best Second General Formula (SGF).

But even so, the Finance Committee, chaired by Mandera Senator Billow Kerrow wants senators to reach a compromise on a new version of the proposed formula after rejecting the parameters that had been proposed for consideration as key determinants in sharing of the monies.

Senate is expected to deliberate on a compromise formula when the House resumes business next week to end the stalemate, failure to which counties will make do with the current formula, whose three-year term is ending in March.

The current formula, which both the House and the Commission of Revenue Allocation (CRA) has been working to replace uses five parameters; population, land area, basic equal share, poverty index and fiscal responsibility in revenue distribution.

Two other new parameters: development factor and personnel emoluments have been proposed to be included in the new formula, but the same have attracted opposition from sections of senators and governors.

The Standard has established that CRA wants personnel emolument to counties to be a conditional grant of Sh5.2billion to assist in offsetting the huge salaries which are eating into the county governments' development budget.

Senate also wants an incentive introduced to entice counties to increase their revenue collection base, noting that presently, they are performing dismally and rely fully on the national revenue shared between the two levels of government.

According to committee members; Minority Leader Moses Wetang'ula (Bungoma), Mutahi Kagwe (Nyeri) and Mutula Kilonzo Jnr (Makueni), they have engaged various stakeholders in order to re-look at options that will not disadvantage any county.

But CRA believes that the standoff is not as a result of the formula but failure by the leaders to agree and dispense the matter.

"We have discussed and come up with a proposal that will be tabled in the House once we resume," disclosed Wetangula.

Kagwe affirmed that the committee has had extensive deliberations on the matter and they can only have one formula application at a time.

"The committee has deliberated on this issue and kind of agreed. At the end of the day, every formula is going to be a compromise. We have tried as much as possible to reach a compromise; consoling factor is that because revenue is increasing, every county will be getting more money.

At the end of the day, we cannot say there are counties that will be disadvantaged, after three years we will still look at the formula and decide either to retain it or not," said Kagwe.

He recalled that after the House rejected the proposed formula, the committee together with other stakeholders went back to the drawing board and made some adjustments.

"We revised the formula. It was slightly reviewed to come up with a compromised formula, which is likely to be tabled in the House when we resume. If not, the old one continues, but we must have the capacity to reach compromise and be done with it," he appealed.

Senator Kilonzo Jnr said the initial formula recommended by CRA was rejected over lack of proper consultations.

"There was little justification for the changes proposed. There is a push and pull between people advocating for emphasis on population and land size, "noted the Makueni Senator.

He continued, "Both the protagonists think that they will benefit from an increase in one and reduction on the other. A delicate balance needs to be met. On my part, I think we should encourage an incentive for revenue collection. It will change the focus."

Commissioner Rose Osoro also concurs with the Senators that unless they agree on the new formula, the old one will be used until such a time a new one will be adopted.

"For now, we are not seeing much coming from the Senate but we hope they will agree. The formula is not the problem, it's the method of distribution," she said.

She also faulted the proposed efficiency parameter to reward counties that are efficient in revenue collection, saying governors' have already opposed the move as the environment they are operating in is very volatile.

"Governors have obvious reasons but still the environment some counties are operating in, is not conducive. They are unable to raise revenue due to political interference and court cases. It might also cause uproar in the counties, since locals might not be willing to participate. The percentage is also negligible."

She added, "We have lobbied enough. We believe we will reach a compromise. We also propose to have the personnel emolument as a conditional grant."

Senator Kagwe called for continuous engagements, especially with all devolution players, noting that in the disagreement of the National Assembly and the Senate over the 2013/2014 Division of Revenue Allocation, the Supreme Court, ruled that there must be a negotiated document between two Houses.

Governors have opposed the proposals by senators, saying it will further marginalize counties, especially those disadvantaged by the past regimes.

They insisted that the proposal presented by the CRA does not cure historical injustices, instead rewarding other already developed counties.

In the first CRA submission on the second revenue sharing formula rejected by the Senate, population remained at 45 per cent, equal share (25 per cent), poverty (18 per cent), land area (eight per cent), fiscal responsibility and development factor at one per cent each and personnel emolument at two per cent.

The governors have even suggested that the present formula can continue to be used as the Senate and CRA reach a consensus that will not disadvantage many counties.

They have supported the retention of other parameters such as population at 45 per cent, equal share (25 per cent), poverty (20 per cent), land area (eight per cent) and fiscal responsibility at two per cent.

CRA, which is constitutionally mandated to recommend to the Senate the formula for sharing of revenue, has altered the formula that has been used to determine the allocation in the last three financial years.

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