Since the rollout of devolution, the issue of revenue allocation to county governments has been under discussion on various platforms. In February 2017, opposition leader Raila Odinga said that President Uhuru Kenyatta and his deputy William Ruto had starved counties of devolved funds.
Raila claimed that both the president and his deputy failed to give the counties enough funds. He promised that the National Super Alliance (NASA) coalition would amend the constitution to ensure that county governments get enough funds to address their challenges. NASA has incorporated this issue into their manifesto.
Therefore, the question is, has the president and his deputy starved the counties of funds?
The Constitution on revenue sharing
Article 202 of the constitution provides for the equitable sharing of national revenue between the national and the county governments. The county governments can also receive additional revenue from the national government’s share, which comes in the form of conditional allocations (or grants). The Division of Revenue Act (Article 218) divides this revenue between both levels of government and it is a document prepared every year by the National Treasury.
As outlined in Article 203, the equitable share of revenue that goes to the counties annually should not be less than 15 per cent of the revenue collected by the national government based on the most recent audited accounts approved by the National Assembly. The conditional grants added to the counties’ share of revenue include the Equalization Fund (Article 204) that goes to 14 counties identified as marginalized by the Commission on Revenue Allocation (CRA).
Money allocated to counties since the FY 2013/14
For the 2013/14 financial year, Parliament allocated the County governments KSh210 billion. This was inclusive of KSh190 billion in the equitable share of revenue and KSh20 billion as conditional allocations. The amount represents 22.5 per cent of the total shareable revenue for that year at KSh936 billion.
In the FY 2014/15, counties received KSh226 billion as equitable share and KSh14 billion as conditional grants. That amount comes to KSh240 billion. This amount represents 23 per cent of the total shareable revenue for that year at KSh1038 billion.
The county governments received KSh259.8 billion in equitable share in the 2015/16 financial year. In addition, they received KSh16.6 billion in conditional grants totalling to KSh276.4 billion. This represents 22.4 per cent of the total shareable revenue at KSh1242.7 billion.
For the 2016/17 financial year, the county governments shared KSh280 billion as equitable share of revenue and KSh21.9 billion as conditional grants. The total amount of KSh301.9 billion represents 21.9 per cent of the total shareable revenue of KSh1380.2 billion for that year.
Whether county governments are starved of money
This question will present different answers depending with whom you ask. For example, Dr Jason Lakin described the call for more money for Kenya’s counties as “reflexive”. He says it is “more a leap of faith than a rational calculation”.
The money that goes to the counties is based on various factors such as:
- The cost of providing the devolved functions and services (Schedule Four of CoK)
- Assumptions and adjustments made on revenue (such as percentage in revenue growth).
- Adjustments for inflation.
The county governments’ equitable share from 2013 to 2016 is above the constitutional threshold of 15 per cent as shown previously. To determine if counties are starved of money, apart from the factors mentioned above, there is a need to determine what resources are actually readily available for the county governments.
Resources available to devolve to counties
A study conducted by the International Budget Partnership (IBP) Kenya showed that, based on the 2012/13 budget, only 46 per cent of the total budget was readily available to devolve to the county governments. IBP-K says there is still need for a debate to determine how much of the 46 per cent is readily available for devolved functions. In addition, how much to channel through the equitable share or the conditional grants.
The national government also continues to hold on to funds that it should have devolved. It does this through government corporations performing devolved functions. IBP-K estimates that KSh65 billion is available to devolve to the counties. However, only part of this could eventually go to the counties, the minimum amount being roughly KSh28 billion.
The issue about county funding
A major issue about county funding is the capacity of county governments to absorb funds. In addition, how to define the right priorities. Are the county governments factoring in the change in priorities in every financial year?
There is room for discussion on how much money counties should receive through the Division of Revenue Act. IBP recommends Parliament to drive that conversation.
Therefore, to know if the Jubilee government is starving counties of devolved funds, we need to look at:
- how much the counties are receiving in relation to (the cost of performing) devolved functions;
- how much the counties are collecting from their own (local) sources and capacity to do so.
- the capacity of county governments to absorb devolved funds (including the balance brought forward from the previous financial year);
- what remains to devolve (including functions that national government corporations/parastatals perform); and
- the interval and which the National Treasury disburses money to the counties (usually monthly), and how much money in that sense, and the remaining balance (if any) at the end of the financial year.
Only then can we tell if the claim is true or false. For example, from the allocations sent to the counties, the fact is that the national government gets the giant share (nearly 80%). This can form the opinion that the government is indeed starving counties of funds.
