3rd August 2020

Mandate on Revenue Sharing among Counties

1.The Principal Mandate of the Commission on Revenue Allocation according to Article 216 is to make recommendations concerning the basis for equitable sharing of revenue raised nationally between the national and county governments, and among county governments.

2.The mandate of the Senate, according to Article 217, is to determine, by resolution, the basis for allocating among counties the share of national revenue that is annually allocated to the county level of government.

3.In fulfilment of this mandate, the Commission developed the first basis in 2012, the second basis in 2016 and the third basis in 2019. The recommendation on the third revenue sharing basis was made to Parliament in April 2019.

4.The CRA recommendation on the third basis adopted a new framework that links revenue sharing to functions assigned to county government and uses the most recent data.

5.The four objectives of the third basis are informed by the provisions of Article 203(1) of the Constitution. These four objectives are:

i). To enhance service delivery
ii). To promote balanced development
iii). To incentivize fiscal effort
iv). To encourage counties to use money prudently

The summary of the basis submitted to Parliament is presented in Table 1.

  1. Table 1: Summary of the Third Basis

CRA Recommendation on Implementation of the Basis

 7. The Commission, aware of the likely impact of the new revenue sharing basis in terms of allocations to counties, made a provision for cushioning counties whose allocations were to decline by more than 5 percent. This would be achieved through an increase in the equitable share allocation to counties.

8.The Commission notes that since the submission of the recommendation in April 2019, two things have arisen that have complicated the process of making a determination on the basis by the Senate as follows:

a).That the equitable share allocation for Financial Year 2020/21 remained at the same level as Financial Year 2019/20 making cushioning of the losing counties impractical.
b). That the application of the new data arising from the Census 2019 has amplified the magnitude of the difference in allocations among counties.

9. The Commission remains available to provide technical input into the ongoing negotiations at the Senate.

Annex 1: Allocations to Counties Based on the CRA recommendation (Ksh.316.5 billion)