Experts say new revenue formula favours developed regions

The Commission on Revenue Allocation (CRA) has defended its third basis cash formula, saying it is plugging a gap created by the second framework.

In a policy brief seen by the Nation, the commission says the third basis formula puts health needs, fiscal responsibility and population as the most important considerations as opposed to the poverty index as was the case with the second formula.

With health leading at 17 per cent, the other criteria CRA wants factored in the revenue-sharing are agriculture (10 per cent), population (18 per cent), poverty (14 per cent), basic share (20 per cent), land area (eight per cent), rural access (four per cent), urban households (five per cent) and fiscal effort and prudence index at two per cent each.

ALLOCATIONS

On aggregate, the framework allocates 70 per cent of the revenue to enhancing public services, 26 per cent for promotion of balanced development, and four per cent to promote revenue collection and fiscal prudence.

Service incorporates a basic minimum allocation to every county and then uses an index derived from data on health facility gaps, primary health care visits and in-patient days.

CRA said for every 5,000 people, a community unit needs to be established; a dispensary for every 10,000 persons while a health centre should be established to serve a population of 30,000.

“Primary referral facilities serve a population of 100,000. The secondary referral hospitals or Level Five, are required to serve approximately one million persons while the tertiary referral hospital which focus on highly specialised services serve a cross-county population of approximately five million,” the commission said in its proposal.

It cited the weight of 17 per cent on health as above the 15 per cent the Abuja Declaration had asked countries to implement.

TRANSFER VARIABLE

The transfer variable for agriculture is based on a county’s proportion of rural households while that for other devolved functions is based on a county’s proportion of total population.

Urban services is based on the number of households.

The second basis allocated a weight of 45 per cent on account of a county’s proportion of the population, a position the CRA argues “was used as a basic measure of expenditure needs of county governments, yet a number of functions assigned to county governments have distinct expenditure measures”.

CRA also faulted the use of the depth of poverty to share revenue in the second basis formula, saying the measure “is volatile over different time periods as household incomes are affected by several factors, and not necessarily public policy.”

FIRST SHARING BASIS

The first basis of sharing funds to the 47 counties was approved in November 2012 and released Sh956.736 billion for financial years 2013/14 to 2016/17.

The second basis was approved by Parliament in June 2016 and used to share revenue for fiscal years 2017/18 to 2019/20 amounting to Sh932.5 billion.

It means counties have shared Sh1.8 trillion in the last seven years.

Economist David Ndii said the CRA formula should be abandoned as it goes against the overarching principle of public finance, “which should be an equitable society”.

The formula, he argued, is a return to the 1965 Sessional Paper No. 10 which institutionalised marginalisation by getting development money “to be invested where it will yield the largest increase in net output”.

HIGHLY UNDERSERVED

It said such a move should favour areas with “people receptive to and active in development”, setting years of neglect for Kenya’s poorest regions.

“Northern Kenya is highly underserved in terms of infrastructure. Marsabit County which is 66,000 square kilometres with a population of 460,000, is 45 times larger than Kirinyaga (1,500 square kilometres, with 610,000 people). What would be the rationale of allocating infrastructure money between Kirinyaga and Marsabit based on population?” Dr Ndii asked.

“If some tribal supremacists feel it is intolerable, there is always the alternative of a full federal system. Mombasa and Lamu can keep their ports. Turkana gets to develop its oil resources. Marsabit gets to charge for its wind resources. The Tsavo National Park reverts to Taita-Taveta. Tyranny of numbers, the domination of the weak by the strong, and ethnic superiority complexes is not an option. Without a commitment to equitable development, there is no social contract, which is to say, sooner or later, there will be no Kenya. Divorce is also an option.”

Former Mandera senator Billow Kerrow said the stalemate on the new revenue sharing formula is as a result of a historical misrepresentation of facts and statistics on the country’s Gross Domestic Product.

Mr Kerrow added that contrary to claims that counties in Mt Kenya have been side-lined in development and resource allocation despite their huge contribution to the country’s gross GDP, the converse is true “since the biggest contributors to the economy are Nairobi and Mombasa”.

“The formula has been crafted to channel resources to already developed regions,” Mr Kerrow told the Nation.