Senators fail to agree on revenue sharing formula

A proposal to have the third basis formula for allocating funds to county governments deferred for two years failed after senators voted against it Tuesday. 

The latest development came as Siaya Senator James Orengo accused President Uhuru Kenyatta for being inaccessible at the time the House needed his guidance.

The report of the Finance and Budget Committee that considered the formula as developed by the Commission on Revenue Allocation (CRA) had recommended that the formula that will see counties with huge population gain while those with huge land mass and smaller population lose, be applied from 2021/22 financial year.

However, an amendment by Murang’a Senator Kang’ata Irungu saw the majority of the Senators vote against it.

By the time of going to press, the committee was discussing the report by the committee chaired by Kirinyaga Senator Charles Kibiru as originally moved.

Tuesday's attempt by the Senate was the sixth time in a month the lawmakers were trying to pass the new formula.

But before adopting the report, the senators will be required to deal with an amendment by Makueni Senator Mutula Kilonzo Junior that seeks to cushion counties from losing any allocation.

However, many have opposed it on the basis that it is not a subject of public participation and could therefore raise a constitutional issue if adopted, as it drastically alters the formula by CRA according to Article 271 (1) of the constitution.

“I urge the Senators to pass this formula. This is the minimum you can ever take to the counties,” Mr Kibiru noted.

Under the CRA proposal, 29 counties are gaining while 18 are losing out on the new formula that is a radical shift from the first and second as it expands the parameters for the shareable revenue among the counties.

Going by the CRA parameters, it means that counties with high poverty levels and small populations will lose out on the equitable horizontal share compared to those with high populations.

Earlier attempts by leader of minority James Orengo (Siaya) and Moses Wetang’ula (Bungoma) to have debate on the committee report deferred to another sitting was shot down by 40 senators against seven.

While contributing to Mr Kang’ata’s amendment, Mr Orengo had said that a little more time would have served to build consensus among the Senators for an agreeable formula.

“I am totally disappointed today because we do not know where we are going. I have been pleading to members, let’s be smart, like Justice Odunga says- like a guided missile. The figures they show, I can tell you that if population was the measure, it is not what counties with high populations are getting,” Mr Orengo said.

Mr Orengo said had the President been accessible, the divisive nature of the new formula would not have been witnessed.

“We have lost our minds. We would not be here if the president was accessible. I am not saying it for me but for the country,” the Siaya Senator noted.

Leader of Majority Samuel Poghisio also supported noting that marginalization has been cured by the amendment.

“This formula profits the so-called losers more than the gainers. Had we not politicized this matter, we would have reached a middle ground,” Mr Poghisio noted. 

According to CRA, the new formula is meant to enhance service delivery, promote balanced development, and incentivize counties to optimize capacity to raise revenue as well as incentivize prudent use of public resources.

According to the sixth schedule of the constitution, the first and second determinations of the basis of the division of revenue among the counties shall be made at three year intervals rather than every five years as provided for in Article 271 (1) of the constitution.

Subsequent formulae shall, however, be applicable after five years.

The first basis Formula was passed by the National Assembly on November 27, 2012, to serve for 3 years but instead it served for four years- 2013/14, 2014/15, 2015/16 and 2016/17.

The sharing was based on five parameters- population 45 percent, poverty gap 20 percent, land area 8 percent, basic equal share 25 percent and fiscal responsibility 2 percent.

It sought to achieve service delivery and redistribution of resources.

The formula was largely tailor-made to reward poverty and as such counties slackened on development as they competed to be poor so that they could get enhanced allocation.

The second basis formula passed by parliament on July 6, 2016 – to serve for 3 years 2017/18, 2018/19 and 2019/20. It was based on six parameters- basic equal share 26 percent, population 45 percent, land area 8 percent, poverty 18 percent, fiscal effort 2 percent and development factor 1 percent.

It was designed to provide adequate funding to enable county governments undertake functions assigned to them, correct economic disparities and minimize the development gap.

It was also meant to stimulate economic optimization and incentivize counties to optimise capacity to raise revenue.