Advertisement

County governors have set Kenyans on a journey that they must finish

Saturday September 20 2014

Kenyan county governors recently ran an advertisement claiming that they had tallied Ksh100 billion ($1.1 billion) in the national budget that could be immediately devolved to counties.

According to their numbers, this would bring the county share to 42 per cent of … something. And that was very close to 45 per cent of something — which is what their “Pesa Mashinani” referendum call is allegedly all about.

I am going to criticise the governors’ numbers, but I want to praise them first. The Council has been slow to embrace analytic work to back its positions.

The advert suggests they may have turned the corner. In spite of its flaws, the analysis underlying the advert was long overdue.

It was a reasonable first attempt to start interrogating the structure of the national budget and to identify specific figures to support the case, which I believe is a legitimate one, that the national government is clinging to some resources that could — and maybe should — be devolved. (It is an entirely different matter how much we are talking about, and whether this case demands resolution through a referendum).

This is work that the COG should have done as soon as they came into office. It is work that the Transition Authority and Commission on Revenue Allocation should have done even before that. So, let us recognise that the Council has at last started us on the journey we need to take.

Advertisement

This journey has been difficult because there is no simple link between what is in the budget and what is in the Fourth Schedule of the Constitution.

Fundamentally, the work of determining how much should go to which level of government requires a detailed analysis of the functions of government in the budget, and an attempt to align these with what the drafters of the Constitution had in mind when they assigned functions using different language and concepts.

But, for all of Treasury’s improvements in recent years, the budget remains opaque. It simply isn’t possible to know what money is being used for in many cases, and therefore whether that is a national or county responsibility.

In this context, it is easier to say what part of the budget cannot be shared than exactly what can be shared. For example, it is clear that the roughly Ksh360 billion ($4 billion) in Consolidated Fund Services in this year’s budget, most of which goes toward debt repayment, cannot be shared.

There is also over Ksh180 billion ($2 billion) in donor financing, most of it tied to specific projects and contracts with national government, that cannot be shared. That is Ksh540 billion ($6.1 billion) of the total budget in 2014/15 that is not shareable right off the top.

Another roughly Ksh100 billion ($1.1 billion) in local Appropriations-in-Aid (AiA) is a bit more complex, as some of that could potentially be shared. But remember that a substantial share of AiA is in the form of user fees that help with the running costs of institutions.

For example, university budgets are funded heavily by the fees they collect, as are regional hospitals. Even if these functions are devolved, the funding for them may not go to counties as part of the equitable share (the so-called 15 per cent), but may be in the form of a conditional grant to fund specific services.

Even if only half of the AiA in the budget could not be shared, we would have removed roughly Ksh600 billion ($6.8 billion) before even looking at the functions. This point is often missed in current debates.

Unfortunately, the Council made some errors in its analysis, and it also included external funding and AiA in the figures it demands for counties.

This accounts for at least Ksh22 billion ($248 million) of the Ksh100 billion ($1.1 billion) figure, which also includes a “10 per cent miscellaneous” amount that should not be taken seriously.

Some of the other figures require reform of state corporations such as devolution of road authorities, which are needed, but not necessarily by referendum.

We should also be careful to consider the regional aspect of what some corporations do, such as the water service boards, and whether simply dissolving them is the answer. Some regional institutions may need to be preserved, but reformed to give counties managerial control.

The Council also helpfully clarified the “45 per cent of what” question by suggesting, not unreasonably, that the base year for calculating the minimum share be the last audited, rather than last audited and approved, accounts.

This would allow us to use 2012/13 as the base year, rather than 2009/10. Note that if we did this, however, using the Council’s own numbers, the share counties are getting this year is 29 per cent of 2012/13 revenues, nearly double the minimum. And that is without any referendum.

The Council has started us on the journey. It is up to the rest of us to finish it.

Jason Lakin is a senior programme officer and research fellow at the International Budget Partnership. E-mail: [email protected]

Advertisement