It is hard to escape the conclusion that the entire case (Petition No. 368) brought against the imposition of budget ceilings on Kenyan counties by the combined efforts of the Commission on Revenue Allocation and the Controller of Budget missed the point.

This may in large part be due to a faulty petition, but the clarity of the decision also fails to impress.

To a layman, the issue at stake was whether or not the Controller of Budget has the authority to stop counties from approving or implementing budgets that violate suggested ceilings from the Commission on Revenue Allocation. The case was notorious because, at its heart, it was about whether county assemblies could be constrained from budgeting what most people felt were excessive amounts for themselves.

While many people (including this columnist) believed that county assemblies had failed to budget in the public interest, it was much less clear who, if anyone, could stop them. COB claimed to be able to play that role. It appeared that this case would tell us whether that was indeed so.

The paradox of the case is that it appears to uphold the legitimacy of the ceilings while stating categorically that COB cannot play this role. How does the judge arrive at this surprising result? As far as I can tell, he does so by giving that role to parliament.

If I were to summarise the key points in the decision, they seem to be the following: COB cannot reject any budget on the basis of illegality unless that budget has been found illegal in court; CRA is free to recommend budget ceilings.

While not part of the decision, there is also an implicit view that parliament is free to adopt CRA ceilings and force counties to follow them in using money approved through the Division of Revenue and County Allocation of Revenue Acts.

It comes as no surprise that CRA is permitted to make recommendations. It is rather odd that this issue was even brought to the court, since on a fair reading of the Constitution, all CRA does is make recommendations. The Attorney-General put forth the incomprehensible argument that these recommendations are binding, but the court found (rightly) that they were not.

There seem to be only two ways that recommended ceilings could become binding on counties: One is for COB to enforce them, which is in fact was what most of us thought had happened and what precipitated this court case. That, as I said, was found by the court to be illegitimate and to exceed the COB’s mandate. That is a major blow to COB.

The alternative is that parliament itself adopts these ceilings in sharing revenue with counties.

Did parliament actually adopt these ceilings? I had not thought so, but that appears to be the interpretation given to an amendment to the PFM Act 2012 that states:
“(2), the Commission on Revenue Allocation shall recommend to the Senate the budgetary ceilings on the recurrent expenditures of each County government.”

Since these ceilings are only recommendations, the question is when parliament actually adopted them. The judge does not say outright. But he seems to believe that the County Allocation of Revenue Act (CARA) 2014 “is the one that created the offending ceilings.”

The publicly available version of the CARA does not adopt any ceilings, however. Moreover, the Act was not passed until September 2014, meaning that it could not have been in effect in July and August when county budgets were being rejected by the Controller. It is therefore not clear that parliament did adopt these ceilings, or that they had been adopted at the time when the county budgets were being refused. It stands to reason that this cannot justify the rejection of county budgets in July 2014.

But it is important to consider the radical implications of this view. If indeed parliament did adopt ceilings, it would have the effect of making the entire equitable share to counties conditional on their following the ceilings. In other words, what is widely understood to be an unconditional grant to counties (Ksh227 billion in 2014/15) passing through the CRA formula would suddenly become a massive conditional grant.

What this decision does not tell us but we urgently need to know is: Did we truly create a system in which the entire share of money for counties could be conditioned by the national legislature?

Surely we did not intend to convert the equitable share into a conditional grant that could be withheld this year for failure to adhere to ceilings for the assembly, and next year to more onerous conditions on how the money could be spent? The judge did not rule on this, but the decision leaves this possibility open.

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