How to defuse the debate on county revenue sharing formula

By MUNGAI KIHANYA

The Sunday Nation

Nairobi,

19 July 2020

The transfer of revenue from national government to the counties is a hot topic in the political scene. There is perennial disagreement on how much is to be transferred and also on how to distribute the money. The current debate is on the distribution formula proposed by the Commission on Revenue Allocation (CRA).

Like the review of constituency boundaries, this debate splits the country into two halves along a straight line running from Suan in Trans Zoia County to Kipini in Tana River.

To the North of this line lies a sparsely populated region with very large counties while to the South there densely populated areas with small counties (including Nairobi). The people of the northern side say that land area is the most significant factor when allocating money while those in the southern side insist that population is the most important.

The CRA proposal will be the third revenue distribution formula since the promulgation of the 2010 constitution. The current method gives 45 per cent weight to population of the county and 8 per cent to the land area.

The new formula is more comprehensive than the current one. It weighs population at 18 per cent of total revenue, health (17%), poverty (14%), agriculture (10%), land area (8%), urbanisation (5%), roads (4%), fiscal efforts and fiscal prudence at 2 per cent each.

This makes 80 per cent of the revenue. The remaining 20 per cent is to be shared equally by all counties. That is, this amount will be divided by 47 and each county will get the resulting answer.

Clearly, heavily populated counties like Nairobi will see a bi decline in the amounts they get because the population weight has been cut by more than half. The CRA has give a comprehensive explanation for doing this and I encourage all to download and read its report.

Now, I must emphasise that these factors are not budget headings! These are weights for determining how much a county gets.

Looking at the weights given to population and land area, it is easy to see why there is wide disagreement. The money in question is significant: the two factors currently take 53 per cent and the proposes reduces this to 28 per cent of the total revenue.

I think one way of defusing the disagreements might be to reduce the weights given to these two factors to 10 per cent for population and 5 per cent for land area. Then we can shift the debate to where the “saved” 11 per cent should go.

As a city dweller, I would propose that the weight for urbanisation be increased to 10 per cent (equal to agriculture) and that for poverty be raised to 20 per cent. However, as noted in a previous column, I am very uncomfortable with factoring poverty: it implies that it is better to have many poor people because, that way, you get more money!

I would prefer using the growth rate of per capita Gross County Product. This will reward those counties that are working harder to uplift the livelihoods of their people.