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Proposed funds sharing formula for counties to be sealed tomorrow

By Rawlings Otieno | July 12th 2020

Counties will have to re-adjust their budget plans if the proposed third basis formula for revenue allocation is passed by senators in a special sitting tomorrow.

There has been a protracted battle between counties that will lose billions of shillings and those gaining, if the third basis formula as proposed by the Commission of Revenue Allocation (CRA), is passed as is.
Proponents of the formula have argued that money should be allocated based on population while those opposing the formula contend that land mass must also be taken into account since it takes a long distance to render service to people, especially in vast counties.

And now some senators are proposing that since the allocation to counties as passed in the Division of Revenue Bill still stands at Sh316.5 billion, then the counties losing the funds should be cushioned on a 2.5, 5, 7 or 10 per cent respectively in subsequent years. The proposed formula has divided senators, with those from counties with high population throwing their weight behind it while those from sparsely populated counties crying foul.

Showdown now looms at the Senate where a protracted battle will ensue among the Senators when they resume tomorrow in a special sitting to adopt or reject the motion for the formula.

Leaders from counties with large land mass but sparse population have opposed the formula, complaining that if adopted by the Senate, their region will lose up to Sh17 billion.

In the third basis formula proposal, 18 devolved units will lose their funds, which include Mombasa, Kilifi, Turkana, Nyamira and Tana River among others. The proposed formula has adopted a sector-specific funding approach and it places focus on the performance and pressure of the population on specific sectors, fiscal discipline and accountability and revenue performance.

Constitutional mandate

Article 217 (1) of the Constitution mandates the Senate to determine the basis for sharing national revenue that is annually allocated to the counties.
BBI proponents argue that at least 45 per cent of revenue should got to counties but the recent budget has pegged the funds at about 10 per cent.

Senate Minority Whip Mutula Kilonzo Jrn (Makueni) said senators are still trying to bridge the contentious issues adding that the proposed formula has caused serious distortions on shareable revenue ranging from gains of Sh1.8 billion to losses of a similar amount among the counties.
“We meet at 11am on Monday to build consensus on the best way forward, failure of which we will have a noisy session at 2.30pm leading to a vote,” said Kilonzo Jrn.

According to Meru Senator Mithika Linturi, the proposal by CRA to cap land factor as a parameter at 7-8 per cent affects only three of the largest counties which are seen to benefit from about a third of all the funds on the land area parameter.

Senator Ledama ole Kina (Narok), whose county is losing funds, opposed the formula and instead is proposing that the third basis for revenue sharing among county governments be as indicated by CRA.

Nandi Senator Samson Cherargei, whose county is gaining, said they will pass the formula as it is, adding that other counties have been getting conditional grants and are also entitled to Equalisation Fund.

“We will pass the proposal as it is. We will have curative legal measures on those counties that are losing in this formula,” said Cherargei.

According to CRA, the formula seeks to address four primary objectives: enhance service delivery; promote balanced development; incentivise counties to optimise capacity to raise revenue; and incentivise prudent use of public resources.

On implementation of the third basis, the Commission recommends a phasing-in of the formula to avoid disruption in service delivery and development programmes.

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