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Second sun: Suddenly, Kenya’s independent commissions are rising to the original task

Wednesday July 26 2017
BD CRA 2406A.JPG

Commission on Revenue Allocation chairman Micah Cheserem (right) with the chief executive George Ooko during a past briefing. FILE PHOTO | DIANA NGILA |

By JASON LAKIN

The past couple of weeks have seen two independent commissions that I have frequently criticised in this column make major shifts in approach: The Commission on Revenue Allocation (CRA), and the Salaries and Remuneration Commission (SRC).

In both cases, the commissions deserve praise for delayed moves in the right direction. I take up the CRA here, and the SRC in my next column.

CRA’s shifts concern their marginalisation policy and the Equalisation Fund (EF) that the policy guides. Here are the highlights: First, the Commission finally acknowledges that there is a need to address within-county inequality and that the EF is a tool for doing so.

Second, the CRA acknowledges that the EF is too small to operate on its own and needs to be used to leverage other funding sources. Finally, the CRA has admitted that using a large equal share to distribute the EF among marginalised areas runs counter to equity, a point my organisation made during last year’s Equity Week.

It may seem that these admissions would be uncontroversial, but they are not. Certainly, the first point is not a consensus view. This reflects the history that led to the development of the Equalisation Fund. Unfortunately, this history is not straightforward.

It appears that the Equalisation Fund was designed as a “catch-up” fund that would ensure that the most marginalised parts of the country would catch up to the prevailing conditions in key service areas.

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This was quite sensible: The main funding stream for counties, the “equitable share,” funds counties on the basis of objective service needs, but cannot also be expected to fully address the redistributive needs of aiding marginalised areas.

It is common across the world to use different funding streams and mechanisms to achieve these two goals: Formula-based support to fund ongoing costs, and special funding to rectify inequalities, particularly in infrastructure.

The problem is that the way the Equalisation Fund was designed in the Constitution does not match this ambition. First, it is too small to achieve the level of redistribution needed.

If it were fully funded through 2016/17, the EF would have spent only about Ksh20 billion ($200 million) cumulatively compared with the total funding for counties through the equitable share of Ksh957 billion ($9.57 billion). And that does not include national funding for education and large-scale infrastructure that is also inequitably distributed around the country. This level of funding cannot achieve catch-up.

Second, the fund, unlike the equitable share, is explicitly designed for marginalised “areas,” and not marginalised “counties.” If distinctions in law are generally intended to translate into distinctions in policy (otherwise, use the same language), the EF was not designed for counties.

In fact, as a fund that could be used directly by national government, or through a conditional grant, it is clear that the Constitution intended the EF to be used in ways that the bulk of county resources would not be used.

If the intention of the EF was to support marginalised counties, two things would have to be true: one, the Constitution would have explicitly mentioned counties, rather than areas, and two, the Constitution would have simply made this an additional fund flow to counties, rather than a national fund or a conditional grant.

The latter point is particularly clear: there is no need for a separate mechanism of this type if the unit of marginalisation is the county. If that were the intention, the EF would have been given to marginalised counties to develop themselves. It was not.

The fact that the EF is so small suggests that it was intended to address marginalisation at a lower level where such funding could actually make a difference. In my view, the most logical construction is that the purpose of the EF was to address Kenya’s severe intra-county inequalities.

The waters have been muddied by CRA itself over the years, because the equitable share formula incorporates redistributive parameters, and the EF thus tends to benefit the same counties that benefit from this part of the equitable share.

It would be more transparent to have separate funds that do separate things. But given the size of the EF, the decision to do redistribution at county level through the equitable share, and at sub-county level through the EF, is a reasonable compromise.

It is also consistent with addressing one of the unintended side effects of decentralisation globally, which is that devolved funds often tend to concentrate at the capitals of the next level down (counties) and not spread through the subnational territory. A fund that counteracts this by targeting marginalised areas within counties is essential.

CRA took a bold step to breathe life into the constitution in 2012 with its redistributive revenue sharing formula. It is now taking the next bold step today by focusing on inequalities within counties. Bravo.

Jason Lakin is head of research for the International Budget Partnership. E-mail: [email protected]

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