Revenue standoff back to the Senate floor

The 12-member Senate committee formed to develop consensus on the controversial third generation revenue-sharing formula did not prepare a report as is the parliamentary practice, the Sunday Nation can reveal, detailing the sharp divisions that have characterised the matter.

Instead, the committee, which is chaired by Senator Moses Wetangula (Bungoma) and Johnson Sakaja (Nairobi), made oral submissions to the House leadership in which they provided two conflicting recommendations.

Besides the obvious politics, the data to be used to support the plethora of proposals on the table was a sticky issue that ultimately undermined any possibility of a deal.

The details emerged as the Senate resumes normal sittings on Tuesday after a month-long recess that was occasionally disrupted by a series of special sittings in an attempt to end the deadlock over the formula.

Shut down counties

On Friday, the Council of Governors assailed the Senate over the impasse and announced they will shut down the counties in the next two weeks should there be no solution on the issue. They warned that the protracted disagreement on the issue is undermining devolution. Governors have also called for dissolution of the Senate.

“The Supreme court ruling was very clear. It ruled that failure by Parliament to discharge such a critical legislative function, in the absence of an emergency not only violates the constitution, but exposes the country to existential danger. Such a Parliament must be considered to have run its course, hence its dissolution,” said Laikipia governor Ndiritu Muriithi

With no deal from the committee, the House will resume with the business that was on the floor before it adjourned to try to develop consensus.

Until the adjournment, the House was debating Nominated Senator Petronila Were’s amendment which seeks to suspend the implementation of the third generation formula until the allocation to counties reach Sh348 billion.

A source we talked to, and who did not want to be named out of fear of antagonising his colleagues, painted a portrait of bleak proceedings of the committee which were overwhelmed by the politics of 2022 and claims of bribery, pointing out that this mix only helped harden positions and undermine a possibility of a deal.

Hardline positions

“The formation of the committee entrenched the hardline positions from the two sides. From the word go, none of the side was willing to abandon its position,” he said, adding that some sessions veered into acrimony.

The committee is composed of six representatives each from the so-called gaining counties, or one man one shilling, and Team Kenya.

The blame is being directed to Team Kenya whose representatives are accused of having approached the committee sittings with a predetermined positions.

From the start, the team refused to a deal, a fact that sources say undermined the give and take spirit of negotiations.

According to multiple sources, the team, whose leadership revolves around Sakaja and Tharaka Nithi Senator Kithure Kindiki, insisted on the adoption of the proposal by Meru Senator Mithika Linturi.

Until the House adjourned to give the committee a chance to develop consensus, it had approved Linturi’s proposal which, in the absence of a deal, is the motion on the floor as the House resumes on Tuesday from the long recess.

Linturi has proposed that equitable share not exceeding Sh270 billion should be subjected to a formula with six parameters in which population would attract 45 per cent, equal share (26 per cent), Poverty 18 per cent, land area (8 per cent), fiscal effort (2 percent), development factor (1 per cent).

Equitable share above Sh270 billion should be subjected to a ten-parameter formula with population attracting 16 per cent, health (19 per cent), Agriculture (11 per cent), urban services (5 per cent), poverty (14 per cent), land area (8 per cent), fiscal effort (1 per cent), Roads (6 per cent), and basic share (20 per cent).

If the Linturi amendment is adopted, the 19 counties that stand to lose on their allocations, will lose the money totalling Sh1.8 billion in the current financial year.

Disadvantaged counties

While the Linturi amendment significantly reduces the range between those who will lose out and those who will gain, it does not have the mechanism to cushion the disadvantaged counties on the losses they will incur, besides, they will lose out this financial year

But the gains and losses are not as huge as the case has been with the recommendations of the committee.

Under the Linturi proposal Mandera will lose out Sh245 million, Kwale (177 million), Wajir (Sh175 million), Marsabit (Sh156 million), Kilifi (Sh153 million), Mombasa (Sh135 million), Narok (Sh130 million), Makueni (Sh107 million), Nyamira (Sh97 million) and Tana River (79 million), all totalling to Sh1.8 billion

Allocation due to Kiambu increases marginally by Sh160 million, Nandi and Nakuru (Sh149 million), Uasin Gishu (Sh142 million), Nairobi (Sh120 million), Trans Nzoia (Sh94 million), Kajiado (Sh87 million), West Pokot and Baringo (Sh83 million), and Kirinyaga (Sh79 million), respectively.

During the sittings of the committee, it was alleged Team Kenya refused to depart from this position, according to a source, but only changed the baseline from Sh270 billion to Sh273 billion whose implementation they proposed should be deferred by one year.

On the opposite end, the one man, one shilling team, dropped the use of square root in determining allocation to land allocation and proposed the implementation be deferred by two years.

The team also proposed the introduction of a cushion to ensure allocation to each county does not reduce by 10 per cent.

It also wants the Commission on Revenue Allocation to carry out a fresh review of data to ensure losses arising from health and roads parameters are addressed.

However, both sides agree, the application of the third formula should not disrupt county revenue forecasts and budgets, that the gains and losses resulting from the formula should be moderated to ensure a county’s revenue does not reduce significantly at the expense of others, and that the data used should be update, verifiable and beyond reproach.

The Sunday Nation has seen a policy brief prepared by the one man one shilling team, which shows it has revised its position and wants the formula proposed by the Committee on Finance adopted and implemented in a phased manner to avoid disrupting county plans and budgets, with a two year moratorium.

New formula

“Counties whose revenue is bound to reduce as a result of the new formula should be cushioned from the third year to avoid revenue shock,” the policy paper reads in part, adding that a 10 per cent cushion against an agreed baseline for the 2020/21 financial year is proposed.

The team wants the CRA to validate the accuracy and relevance of data used in allocation of revenue, and to review a fresh the completeness of the parameters used in the formula, especially on roads, health, agriculture, fiscal prudence and responsibility.

A brief presented to the committee by the National Treasury indicate that allocation to counties will increase progressively, capping at Sh341 billion in the 2023/24 financial year.

Meanwhile, deputy president William Ruto and ODM leader Raila Odinga are caught between a rock and a hard place over the formula when it comes to how Mt Kenya will perceive them when chips finally fall.

For Mr Ruto, it’s how he will maintain Mt Kenya support with his win-win call despite President Kenyatta openly calling for more resources to areas with more population, Mt Kenya being one of them.

Tangatanga group

 For Mr Odinga, the political reality of the day is that he has to side with the President, but that risks alienating a core constituency outside Luo Nyanza that he has cultivated to maintain since 2005.

So far the DP’s Tangatanga group has split into two camps, with one of crusading for a national patriotic approach while the other being circumspect and silently urging for Mt Kenya regional interest not only for the formula but also further engagements with Mr Ruto.

The first Mt Kenya group that echoes the DP’s call for a win-win formula revolves around Kikuyu MP Kimani Ichungwa, Mr Kithure, Kandara’s Alice Wahome, and Mathira’s Rigathi Gachagua.

The other team revolves around the boisterous Nakuru Senator Susan Kihika and Gatundu South MP Moses Kuria. This team which seems to be the silent majority is calling for caution not only towards the formula but also 2022 elections power matrix.

 Kiharu MP Ndindi Nyoro downplayed any differences saying Tangatanga was the first to crusade for one man one vote one shilling. “We started this before BBI proponents took it over. Let them know if they fail to deliver they should not even come to Mt Kenya, this is a major test for them,” he said.

Mr Nyoro, who is vociferous defender of deputy president said what matters for now is the outcome of the formula.