[UAH] Let’s end tyranny of numbers and understand what counties are getting - Comment - www.theeastafrican.co.ke

http://www.theeastafrican.co.ke/OpEd/comment/Let-s-end-the-tyranny-of-numbers-in-county-govt-funding/-/434750/1856074/-/wi530kz/-/index.html

Kenya's budget season always brings with it confusion and misreporting. This is the season when pull-out boxes in newspaper articles multiply, packed with eye-catching but often-meaningless numbers.

We are in for an extra helping of chaos this year given the complexity of a novel, two-tiered budget process for national and county governments.

It is likely that this time around citizens and the media are not the only ones groping their way, but public officials as well.

This is the first year in which we must have a Division of Revenue and County Allocation of Revenue Bill. These two masterworks determine how much money the national government will get, how much the counties as a whole will get, and how much each county will get in transfers.

How are these figures supposed to be arrived at? In the first place, the Commission on Revenue Allocation (CRA) is to offer its recommendations. Then the government prepares the Bills. These are submitted to parliament, along with an explanation of any changes from the CRA recommendations.

So, if CRA recommends that counties should get Ksh230 billion and Treasury recommends, say, Ksh198 billion, then an explanation of the reasons for the difference must be submitted to parliament.

It is then up to parliament to make the final decision. The key inputs in this process are not really the numbers, but the competing explanations for those numbers that may be offered by CRA and Treasury, and any additional debate emerging from parliament.

However, as often happens in Kenya's policy debates, the outputs trump the explanations. If you have been reading the press for the past couple of weeks, you have seen numbers like 154 billion, 190 billion, 210 billion, 231 billion, 237 billion, and so on. What you did not see was any explanation of where all these numbers were coming from. And without those explanations, it is not possible to have an informed opinion about the nature of the battle to fund counties.

Let's break this tyranny of numbers and aim to understand the meaning of these figures. First, although it has been repeatedly reported by the press that Treasury's initial proposal for the counties was Ksh154 billion, that is incorrect.

The issue here is the share of funding that will be given unconditionally (counties can spend the money as they wish), and the share to be given as conditional grants (funds must be spent on specific items). The initial Division of Revenue Bill from Treasury proposed just over Ksh154 billion in unconditional ("equitable share") funding, along with an additional nearly Ksh44 billion in conditional transfers, for a total of over Ksh198 billion.

CRA had proposed that counties receive all of their funds (Ksh231 billion) as an unconditional grant. The final agreement seems to be that the counties will get Ksh190 billion in unconditional grants and Ksh20 billion in conditional transfers, for a total of Ksh210 billion, which is more than Treasury wanted and less than CRA proposed.

How should we feel about that? Is CRA right to oppose all conditional funding? Is Treasury right to demand a large share of conditional funding? The media has not helped us to answer this question.

Treasury's view is predicated on the fact that there are certain funding sources that cannot be spent entirely as counties would like. For example, certain donor financing must continue to be used for specific purposes. Treasury has also raised the issue of providing financing to Level 5 health facilities, which cannot be given to all counties through the equitable share, because not all counties have Level 5 facilities.

There were also concerns that certain counties, particularly more densely populated and urban counties, would actually have to cut services if all transfers followed the CRA formula.

In light of all this, it is hard to understand the CRA view that everything should be given through the unconditional equitable share. The remaining question is: How large should the conditional transfer be? Treasury initially said it would cost about Ksh44 billion: Ksh17 billion for donor projects, Ksh10 billion for hospitals and Ksh17 billion to maintain services. They have now agreed to only Ksh20 billion in conditional transfers.

Will that really work? Remember that you cannot give money for donor projects, hospitals or services through the formula (unconditional grant) because the whole point is that these expenditures are not distributed according to the formula. Again, the formula gives counties money based on population, poverty and so on, but not every county has an L5 facility and the formula is not based on the costs of maintaining them.

We can assume that there can be no compromise on donor funds, which make up most of the Ksh20 billion. Does that mean that we should expect services, including L5 hospitals, to fall short? That is a scary thought.

Dr Jason Lakin is senior programme officer and research fellow at the Hivos Foundation & International Budget Partnership

Let's end tyranny of numbers and understand what counties are