County Governments Continue To Advocate For Allocation Of More Funds; How Much Is Enough?

By Evans Kibet and Brenda Holo

Since inception of devolved governments, allocation of funds to counties in Kenya has been a contested issue, and the 2024/2025 financial year is no exception. Among the sticky issues are the growth of county revenue from one year to next, county functions that are still implemented by the national government and distribution of conditional grants. Already, the Council of Governors (COG) has rejected the Ksh. 391.1 Billion equitable share for county governments as proposed by the National Treasury in the Draft Budget Policy Statement 2024, advocating for an increase to Ksh. 450 Billion.

The Council of Governors argues that the proposed Ksh. 391.1 Billion is insufficient to meet the growing financial demands faced by counties. Indeed, adequate financial support to county governments is paramount for advancing national development objectives and ensuring seamless delivery of basic service and equitable development across the country.

It is important to note that counties are highly dependent on this revenue, the equitable share and conditional allocations, to effectively carry out their functions and serve their people. This is because the revenue they collect from their own sources of revenue is barely enough to finance even a significant portion of their budgets. For instance, the Office of the Controller County Governments Budget Implementation Review Report for the financial year 2022/23 shows that County Governments had a total revenue Ksh. 466.01 Billion  to finance their budgets out which only Ksh. 37.81 Billion (8%) was raised  from own source revenue. This dependency is higher in marginalized counties such as Wajir and Marsabit whose own revenue was less than 1%  of their total expenditure compared to counties such as Nairobi and Mombasa whose own source revenue financed up to 30% of their total expenditure for the financial year 2022/23.

The big question that lingers is how much is enough?

As is with our constitutional framework for revenue sharing, there is no straight answer to this question. Among other factors that ought to be considered, is the need to ensure that county governments are able to perform the functions allocated to them i.e. Finance to follow functions. This conversation will even get more pronounced in 2024 as the Commission on Revenue Allocation reviews the recommendations for the 4^th basis of sharing resources.

Before its disbandment, the Transition Authority made notable progress to unbundle and cost some of the functions assigned to County Government in the 4^th Schedule. While it is the Counties that advocated for the process to be expedited, the outcome did not favor them. Almost all the 14 functions were transferred to County Government, but to date the question remains, ‘Were all the functions accompanied with all resources that the national government used to spend to deliver the same functions?’

Taking the case of ECDE function, a county such as Baringo County would need close to a billion shillings annually to maintain 4 ECDE teachers^[1] per ECDE centre in all the 1,153 operational public ECDE centres, going by the SRC recommended minimum wage averaging at Ksh. 15,000 per month. Due to financial constraints, the annual budget for the entire Department of Education and Vocational Training has hardly gone beyond Ksh. 400 M. This partly explains the struggle by the County Governments to recruit adequate ECDE teachers and remunerate them fairly among other requirements for effective and efficient service delivery. So, before we join the recent bandwagon of recentralizing the ECDE function, let’s ask what has been done to adequately finance the function. The same is observable in all the 47 counties and across sectors.

Even worse, some national government Ministries, Departments and Agencies (MDAs) continue to spend monies on functions meant for county governments. A case in point is the water sector where Water Works Development Agencies are allocated funds for drilling of boreholes and repair of rural water projects, among many other functions that are a preserve of county governments according to the Constitution.

Second and most important principle is that the allocation to counties ought to be progressive. The constitution of Kenya in Article 203 (2)  provides that the most recent audited accounts of revenue received, as approved by the National Assembly, forms basis for division of revenue between National and County Governments.

The Budget Policy Statement 2024 has proposed Ksh. 391.1 Billion which is 24.86% of the recently audited revenue of Ksh. Ksh 1.573 Billion for FY 2019/20. This is unfair going by the trend in revenue growth. For instance in 2022/23 Kenya recorded preliminary ordinary revenue of over Ksh. 2.0 Trillion which is much higher than the Ksh. 1.5 Trillion realized in the FY 2019/20. This represents 33% growth in revenue yet the proposed equitable share represents a growth of 24% (from 316.5 Billion in the FY 2019/20). Continued use dated audited revenue as a basis for divisions of revenue, implies that counties are getting the shorter end of the stick.

A much bigger problem is the late disbursement of the equitable share to county governments. It takes the council of Governor’s consistent outcries, including threats to shut government, for national treasury to disburse funds to county governments. Cash flow Research^[2] by International Budget Partnership Kenya and the Rift Valley Budget Hub has shown that there has been slow disbursement of equitable share and conditional grants. Disbursements to counties are lowest in the first two quarters (less than 40%) and peaks during the last quarter of the financial years. For instance, the Quarterly Economic and Budget Review Report^[3] for the first half of the FY 2023/24 shows that National Treasury shows that as at December 2023, the national treasury had disbursed Ksh. 141 Billion which is only 37% of the equitable share allocation of Ksh. 385 Billion in approved budget for FY 2023/24. In some occasions, disbursements are made very late in the financial year such that counties do not have ample time to spend before the close of the financial year.

Generally county governments continue to face financial constraints that hinder their capacity to deliver essential services effectively. This also limits the opportunity for citizens to hold the County Governments accountable for the prudent utilization of public funds and the delivery of quality services.

While Kenya’s devolution is taunted as a significant reform in governance and development structure, the desired transformation will not come until the question of financing is addressed and addressed objectively. The Budget Policy Statement is not the final decision and thus subsequent conversations that culminate into passage of Divisions of Revenue Bill and the County Allocation of Revenue Bill provide citizens an opportunity to append their voice in this important decision. In doing this it will be important to keep in mind the services we expect of County Governments and the financing challenges experienced by county governments so far.

Mr.Evans Kibet, is a Programs Officer at CEDGG and Coordinator, Rift Valley Budget Hub. Ms.Brenda Hollo is a communication Intern at CEDGG. (Centre for Enhancing Democracy and Good Governance)