Press statement by H.E Peter Munya, chairman Council of Governors on division of revenue bill, 31st January, 2017
The Council of Governors is concerned that the National Assembly’s Budget and Appropriation Committee has published the Division of Revenue Bill, which denies County Governments adequate resources to provide services.
The Council of Governors states as follows:-
1. The Division of Revenue Bill contravenes article 203 of the Constitution on revenue sharing between the National Government and County Governments.
2. The National Assembly has factored in the National Government Constituency Development Fund as an issue of National Interest thereby reducing the shareable amount between the two levels yet the NGCDF Act mentions that the amount shall be part of the National Government shareable revenue after Counties have been allocated their share. National Interest functions should be agreed upon by the two levels of Governments as the functions to be implemented could be National or County functions since County Governments also implement projects that are of national interest e.g. youth polytechnics. Issues of national interest should be defined through an intergovernmental consultation.
The Bill breaches the law in the following aspect:-
Allocation of funds to the National Government Constituency Development Fund (NGCDF) before determining the equitable share between the two levels of government. NGCDF is a National Government fund which should be derived from the National Government portion of the equitable share. This is what is anticipated in the National Government Constituencies Development Fund Act, No. 30 of 2015 at Section 4(1)(a):
‘There is established a fund to be known as the National Government Constituencies Development Fund which shall- (a) be a national government fund consisting of monies of an amount of not less than 2.5% (two and half per centum) of all the national government's share of revenue as divided by the annual Division of Revenue Act enacted pursuant to Article 218 of the Constitution’
It is therefore a blatant violation of the NGCDF Act to classify the NGCDF as part of ‘national obligations’. The fund should therefore not be excluded from the National Governments share. In any case, the term ‘national obligation’ is not equal to ‘National Government obligations’.
Allocations based on National Interest under Article 203(1)(a) of the Constitution.
In the DoRB, one of the items considered under national interest is actually a National Government project- the primary school digital literacy program. National interest is not equivalent to National Government priorities. National interest must be determined by the two levels and must be based on priorities that contribute to the overall national goals, not just one level. Matters related to security, economics and youth empowerment are examples that could be factored as national interest.
3. The Bill has disregarded both the National Treasury’s and Commission on Revenue Allocation (CRA) recommendations without any justification. The Bill proposes an equitable share of Ksh.291 Billion to County Governments. However, CRA’s proposal was an equitable share of Ksh.331 billion while the National Treasury’s was Ksh.299 Billion. The Council of Governors had proposed an equitable share of Ksh.322.6 Billion based on the growth rate of 6.72% as a factor of inflation added onto Ksh.14.2 billion which is the sharing ratio of 80:20 on the shareable revenue balance. This should also apply to the National Government’s equitable share.
4. If at all inflation rate shall be used to compute the Counties’ shareable revenue, it should also apply to the national government. Inflation does not affect Counties alone. It is an economic issue within the monetary
policy of a Country. This formula was agreed upon by the Intergovernmental Budget and Economic Council (IBEC) Budget Committee on 11th November 2016.
5. There is no equity in the allocation as the proposed County equitable share by the Bill’s recommendation to Counties based on the total shareable revenue is only 18.7% yet there has been consistent revenue growth over the last three financial years.
6. The Bill has no allocation on the additional 32,000km of roads worth Ksh.8.4 Billion shillings of which an Inter-agency taskforce had recommended for allocation to the County Governments. This is also in addition to the transferred library function worth Ksh.319 million. For three consequent years CRA has recommended money for Roads which have not been forthcoming.
7. The Bill proposes that the equitable share of revenue to the Counties shall be based on the second generation formula as approved by Parliament in June 2016 using 7 parameters. In as far as the Council of Governors is concerned, the second generation sharing formula is yet to be approved by the Senate, which is the approving House.
8. The DORB has also highlighted that additional allocation to Counties are determined through the national MTEF budget process based on the weight attached to the national government policy objectives that the allocations are intended to support. County Governments are not National Government units but autonomous governments as outlined in Article 6(2) of the constitution therefore, revenue sharing should be based on the principles of devolution and Article 202 and 203 of the constitution.
9. The Council of Governors will resist this unconstitutional move by the Kenya National Assembly to take down devolution and re-centralise services.
H. E. Peter Munya
Chairman, Council of Governors