How devolved funds will be shared out

 By MUNGAI KIHANYA

The Sunday Nation

Nairobi,

04 March 2012

The Commission on Revenue Allocation (CRA) has published the proposed formula to be used in sharing out the devolved government funds amongst the counties. The following parameters will be considered in the revenue distribution: (1) Population, (2) Basic Equal Share, (3) Poverty Level, (4) Land Area and (5) Fiscal discipline.

These parameters have been allocated varying weights (60 per cent for population, 20 for basic equal share and so on) according to the commission’s wisdom in interpreting the constitutional provisions on equitable sharing of revenue. It is not my intention to challenge this interpretation; I wish only to demonstrate how the formula will be applied.

Before putting figures into the formula, it is important to clarify that the money to be share is the “revenue collected” by the national government. This is not the same as the “national budget”! The latter includes debt money and this will not to be given to the counties directly.

In the 2011/2012 financial year, the national government expects to collect about Sh710 billion. According to the constitution, at leas 15 per cent of this amount (that is, Sh106.5 billion) will go to the county governments next year.

To start with, there is the Basic Equal Share that each county will get. This has been allocated 20 percent of the available funds; that is 20 per cent of Sh106.5 billion, which comes to Sh21.3 billion. This money will be divided equally amongst all the 47 counties, thus each will get about Sh453 million.

The next category is the population quota with 60 per cent of the funds, or Sh63.9 billion. To share out this money, we first divide it by the total number of people in Kenya and then we multiply that result by the population of each county.

According to the last census, Kenya had about 38.6 million people in 1999. Thus the population quota per person is Sh1,655. This is figure to multiply by the county population.

For example; Nairobi is the most populous county with 3.14 million people in 1999, so it will get Sh5.2 billion (Sh1,655 x 3.14 million people) under this category. With a population of just 101,000, Lamu county will get only Sh167 million. At this stage, Nairobi will have over Sh5.6b in its kitty while Lamu will not even have reached one billion (Sh453m + Sh167m = Sh620m).

The same kind of calculation will be applied to the Land Area quota and in this case 6 per cent of the funds (Sh6.39b) will be distributed to the counties. The money will be shared at the rate of Sh11,000 per square kilometre.

Thus, with only 696 square kilometres, Nairobi will get only Sh7.5 million while Lamu with Sh70m. But the capital city is still far ahead of the coastal county in terms of total funds – Sh5.6b versus Sh690m respectively.

The poverty quota is not be a straightforward matter mainly because this is a negative concept: it is like measuring darkness instead of brightness! Next week, I will demonstrate one method of sharing out this money.