It’s Division of Revenue (DoR) season in Kenya again! It seems like it is always DoR season, largely because key actors in the drama do not stick to the script.
To remind us: DoR is when we decide how much money of the budget should go for national and how much for county governments.
This year, something curious has happened. The Commission on Revenue Allocation, which is meant to kick off the process with its recommendations by December 31, is very late. And the National Treasury, which is only meant to get into the act by February 15 with its Budget Policy Statement (BPS) and draft legislation, is very early.
We should have already had a month of debate about CRA’s recommendations. Instead, we are debating Treasury’s approach two weeks early. So be it.
One thing that must be said is that Treasury has taken a quantum leap in terms of the comprehensiveness of its approach to revenue sharing in this year’s BPS.
We have a much fuller discussion of conditional grants than we have had in the past. Some of us who take an interest in such things have been complaining that Treasury has arbitrarily kept some conditional grants (such as that for free maternity) in the main budget but not in the DoR, while other grants (such as that for Level 5 hospitals) were in the DoR but not in the main budget.
This kind of thing leads to fragmented policy and budget-making, and makes it very difficult to understand the overall distribution of funds to counties.
That has been partially remedied in this year’s BPS by bringing all of these grants together in one discussion about division of revenue, along with their allocation criteria.
This also allows us to finally have a more serious discussion about interesting questions such as: Why is the free maternity grant allocated on the basis of county population, while the allocation for leasing of medical equipment is based on the CRA formula? The difference between the two approaches is that a population-based grant is less redistributive than a grant based on the CRA formula.
Why should we follow two different approaches to distributing health funds? One plausible reason is that when it comes to running services like delivery of babies, we need to look at the number of mothers delivering, which is closely related to population.
When it comes to equipment, however, we need to look at some of the historical gaps in access to capital and use the grant to compensate marginalised areas. Plausible, but is this right? This is something parliament must debate.
Equally important is the question of whether we have our priorities right in allocating more than twice as much to free maternity as to the medical equipment scheme. Given the different distributional approaches, this means we are allocating more of the health budget based on population than on marginalisation. Again, plausible, but worth debating.
(As an aside, health sector stakeholders argue that both of these programmes are under-funded. The 2015/16 Health Sector Working Group report claims that free maternity needs another Ksh1.7 billion for full implementation at hospital level; equipment lease needs another Ksh2.5 billion.)
Another interesting development is the inclusion of a share of the Road Maintenance Levy Fund (RMLF) as a conditional grant for counties. This is a bid to resolve a vexing issue: What to do with funding streams that are for dedicated purposes but where that function has been devolved.
RMLF flows to the Kenya Roads Board for road maintenance of both national and county roads. While some have argued that part of this money should be devolved as part of the unconditional equitable share, Treasury has taken an equally reasonable approach and proposed it as a conditional grant to ensure that the money continues to go for roads maintenance.
The money set aside is 15 per cent of the RMLF. This should also raise questions for public debate: currently, roughly 15 per cent of RMLF is set aside for the Kenya Urban Roads Authority, but another 32 per cent goes for link/constituency roads under the Kenya Rural Roads Authority (KRRA).
Altogether, this is as much as half of the RMLF that goes to what should be considered “county roads,” so why is the grant only for 15 per cent? Part of the reason may be parliament’s unwillingness to devolve KRRA, and if so, let us discuss this openly.
Of course, the main thing everyone wants to know is how much money the counties are going to get compared with previous years. And, as usual, everything depends on definitions.
By adding in free maternity this year, Treasury has taken the right approach to conditional grants, but has also complicated our ability to compare funding across years in a consistent way. I will analyse this in my next column.
Jason Lakin is Kenya country director for the International Budget Partnership. E-mail: [email protected]