NAIROBI, Kenya, Feb 7 – The Commission on Revenue Allocation (CRA) has proposed changes to its Third Basis for equitable share allocation among Kenya’s county governments.
This review follows concerns over data inconsistencies and the need for better alignment of resource distribution with functional assignments, prompting a call for a more comprehensive Fourth Basis.
“The Commission notes with concern the instability in sectoral data collected by MDAs,” the CRA’s report states.
It also emphasized the importance of stability, referencing Article 203 (1), which mandates that the criteria for revenue sharing must remain predictable and stable.
CRA’s analysis shows that the equitable share for the fiscal years 2020/21 and 2021/22 remained relatively stable.
However, for the 2021/22 to 2024/25 period, the allocation maintained 50% retention of the second basis, equating to Sh158.25 billion.
This was distributed based on the third formula, which considered parameters such as population, poverty levels, and land area.
Despite these efforts, CRA pointed out several challenges, including population-based measures being used in multiple sectors like health, agriculture, and roads, creating overlapping data that could skew allocation results.
The review also criticized the formula’s failure to fully align revenue sharing with the actual functions assigned to counties, potentially resulting in inefficient use of funds.
As the CRA moves towards implementing the Fourth Basis, stakeholders have proposed new parameters for consideration, including blue economy initiatives, economic growth, fiscal effort, water and sanitation issues, affirmative action for small counties, environmental performance, security, and disaster management.
However, many of these proposals have been largely rejected due to unreliable data in areas like the blue economy and environmental performance.
The CRA also dismissed proposals regarding fiscal effort and fiscal prudence, citing previous rejections by the Senate.
Nevertheless, several suggestions have been incorporated in the draft of the Fourth Basis, including an economic output incentive based on Gross County Product per capita, and enhanced affirmative action for small counties to ensure they do not receive less than their previous allocations.
The CRA’s revised framework for the Fourth Basis will focus on equitable resource distribution to address economic disparities, promote development, and improve service delivery across counties.
Parameters such as population size, geographical area, and poverty levels will remain core to the formula, with the weights adjusted to reflect the needs of individual counties.
A stabilization factor has been incorporated to ensure that no county experiences a reduction in funding compared to previous years, minimizing disruptions in county programmes.
Simulations indicate that counties like Nairobi, Kakamega, and Mandera are likely to see slight increases in their allocations, while counties with more stable indices, such as Kiambu and Machakos, may experience smaller adjustments.
