Counties aren’t to blame for high wage bills; give them a break

Saturday January 25 2014

 

By Jason Lakin

The recent Controller of Budget report on county budget implementation has fuelled a polarising debate over devolution in Kenya. The fires have been stoked by a misguided Senate and a media bent on profiting from salacious stories.

While the debate over the report is welcome, we must be careful to avoid unnecessarily undermining confidence in devolution by failing to keep things in their proper context.

Let’s consider just two issues that have been skewed unfairly against counties: The issue of high spending on wages, and the issue of slow budget implementation.

We start with the wage bill. The narrative is that counties are frittering valuable resources away on wages. The truth is rather different.

The wage bill in Kenya is high because of choices that national government has made over the years, and continues to make.

Just a week after the Controller report, Treasury released a supplementary budget totalling more than half of the entire amount that counties received this year.

According to press reports, over Ksh80 billion ($940 million) of the supplementary budget will go for recurrent spending, with a large share of that for salaries (as is typical of supplementary budgets).

In 2012/13, the Controller of Budget estimated that the national government spent over 21 per cent of the total budget on wages. That figure fell in 2013/14, but part of the reason it did so is that national government offloaded certain salary costs to counties.

Keep in mind that the national government can reduce its apparent share of wages to total budget by increasing the amount it spends on paying off the debt, incurring new foreign loans, and utilising grants for development.

If we compare the share of wages in recurrent spending at national level, there is actually very little change between 2012/13 and 2013/14, with the figure dropping from 41.9 per cent to 41.3 per cent.

Counties cannot increase their budgets in these ways (yet) and are therefore likely to have a higher share of wages to total budget no matter what they do.

The Treasury has estimated that counties should spend about Ksh47 billion ($550 million) on devolved services in health, agriculture and so on.

The Commission on Revenue Allocation in December estimated that county running costs (just the cost of running the executive and the County Assembly) would be about Ksh38 billion or $447 million in salaries (plus another Ksh10 billion or $118 million in administration).

Unfortunately, the CRA provided no justification for these figures, making it hard to debate them. But they are based in part on salaries set by the Salaries and Remuneration Commission.

If they were accurate, that would mean that counties would have to start by spending about Ksh85 billion ($1 billion) on their wage bills. If we use rough figures of Ksh279 billion or $3.2 billion (CRA recommendation for grants to counties) and Ksh20 billion or $235 million (rough estimate of county own revenues), then counties would be spending at about 85/299, or 28 per cent of their budgets on wages.

Now, of course, the Treasury estimates may be too high, because national payrolls may be bloated and inefficient, and there may be ghost workers.

Over time, counties should purge these payrolls. And the CRA figures may also be too high, as it seems problematic to me to spend as much on running offices as counties spend on all devolved services. But we can hardly blame counties for starting with high wage bills under these conditions.

If the Senate were interested in supporting devolution, it would work to help counties figure out how to provide services while reducing the burden of this inheritance.

The Senate is also well placed to keep the challenges of budget implementation at county level in context by ensuring that these challenges are not viewed in isolation from the national budget implementation process.

One of the figures that has received a lot of attention lately is that only 7 per cent of county spending in the first quarter of FY 2013/14 was for development. But for national government, which (unlike most counties) had an approved budget in Q1 and already has procurement systems in place, only 21 per cent of spending was for development.

This in turn was less than 14 per cent of the budgeted figure. If the national government continued to spend development funding at this pace, it would spend only 55 per cent of its development budget by the end of the year.

I see no hysteria about this. I am not suggesting hysteria is warranted, but the response to county budgets is then disproportionate.

My point is not that counties have performed particularly well. My point rather is that if we look at the figures more dispassionately, understanding the inheritance that counties have received and the inevitable challenges of implementing a new system, the situation is hardly dire.

Hold counties to high standards, by all means, but give them a chance to work with what they have been given.

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

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