Who’s afraid of recurrent expenditure? The entire media and analyst industry, it seems

Saturday May 2 2015

 

By Jason Lakin

As someone who devotes most of his time to studying public finances in Kenya, nothing irks me more than the casual attitude taken by the media, analysts and citizens toward fiscal policy.

Karuti Kanyinga is one of Kenya’s finest minds, but in an otherwise well-argued Sunday Nation piece on April 26, in which he analysed the “Okoa Kenya” Bill, he suggested that increasing the share of county revenues from 15 to 45 per cent of total revenues was “a good proposal,” without providing any justification.

Why do people believe that when it comes to such matters, we can simply toss around numbers without any basis?

This attitude is deeply embedded in the media, which covers budget stories in an entirely frivolous manner. So-called facts are repeated countless times until they acquire the veneer of truth, without anyone bothering to fact-check them.

These “facts” then make their way into opinion pieces where they are protected by virtue of the customary right of everyone to their own opinions. 

No less than the acting editorial director of Nation Media Group, which publishes this newspaper, recently opined that counties spent less than 20 per cent of their budgets on development, and the rest on “salaries, big cars and houses, and local and overseas travel for county officials” (“Great work, but wanton spending,” April 24).

I don’t know which budgets Tom Mshindi has analysed, but I know that this statement stinks.

Aside from the fact that counties also spent their recurrent budgets on things like medicines and fertiliser, the implicit view is that counties are like large CDF baskets and should spend all of their money on development and not waste it on “salaries.”

Does Mr Mshindi realise that a substantial share of the county wage bill goes to health workers? Does he prefer that counties put up empty clinics, without access to water, electricity, medicines or doctors in order to craft a budget heavy on “development” spending? 

Nation Media Group is not alone in spreading misleading information about devolution and public finance; the Standard ran a front page story misquoting the Commission on Revenue Allocation last year, then ran an advert from CRA clarifying the issue, and then ran an editorial repeating the original front-page error the next day (the error was about the amount of money that would go to counties in 2015/16).

Major media houses have also misreported the findings of the CRA ceilings court case (on whether or not the CRA could limit the budgets of county assemblies). Contrary to what everyone seems to think, the judge found that CRA recommendations are not binding, and that the Controller of Budget cannot enforce them. 

When academics and the editors of the largest media groups in the country take a casual attitude toward our public finances, what exactly do we expect from the public? There have been countless articles written since the Okoa Kenya Bill was released, but not a single analysis of what the intended change in revenues would actually amount to. 

Let’s do the maths quickly, to the extent that it can be done. The Bill changes the 15 per cent minimum revenues for counties to 45 per cent, but also changes the base from the most recent audited and approved accounts to the revenues in the “preceding financial year.”

It is not clear exactly what is meant by this, because the revenues in the preceding financial year sounds like the current year (we are currently setting county revenues for 2015/16, so the preceding financial year is the current year, 2014/15).

But the revenues in the current year are unknown, because the year is not over yet. So would we use the proposed revenue targets This is likely to lead to government manipulating the targets to serve their interests (for example, make them lower if you want to give less money to counties) and was part of what the constitution sought to avoid. 

But let’s put that aside and assume that it is based on the current year revenue targets. Shareable revenue for 2014/15 as per the targets in the Division of Revenue Act 2014 was roughly Ksh1.026 trillion, meaning counties would get Ksh462 billion in 2015/16, instead of the proposed Ksh258 billion.

Is it no longer considered fashionable to provide justifications for such radical shifts? Even last year’s analysis by the Council of Governors estimated only about Ksh100 billion in the national budget that should be transferred to counties.

My organisation’s own analysis, released a few weeks ago, found the actual number is between Ksh28 and Ksh65 billion.

Why, pray tell, are the supporters of Okoa so certain that taking an extra Ksh200 billion from the national government won’t impact negatively on national functions like education or security?

And more important, why isn’t anyone asking them to justify themselves? 

Jason Lakin is Kenya country director for the International Budget Partnership. E-mail: [email protected]