Senate blocks CRA formula, protects county funds

The Senate Finance and Budget Committee has opposed the Commission on Revenue Allocation’s (CRA) proposed revenue-sharing formula, introducing major changes to protect counties from losing funds.

In its report tabled before the Senate, the committee led by Mandera Senator Ali Roba recommends that no county should receive less than what it was allocated in the 2024-25 financial year.

The proposal introduces a baseline allocation of Sh387.42 billion, which will be the minimum amount shared among the 47 counties going forward.

"The first Sh387.42 billion (being county equitable share for FY 2024-25) be shared among counties based on the baseline allocation factor derived from each county’s allocation for FY 2024-25," the report reads.

This move is expected to shield 31 counties that were set to lose revenue under the original CRA proposal.

The committee has also dismissed the commission’s plan to include a "stabilising factor" that aimed to soften the transition by asking the Treasury and Parliament to allocate at least Sh417 billion to counties.

Instead, the Senate panel proposes that any additional funds beyond the Sh387.42 billion be distributed using a revised formula.

The committee has increased the weight of the basic share from 22 per cent to 35 per cent, giving all counties a more balanced start.

Population remains the most weighted factor at 45 per cent, showing no change from both the CRA proposal and past formulas.

However, the poverty index was reduced from 14 to 12 per cent. Governors had criticised the poverty parameter, arguing it encouraged poor performance.

"We should not be seen to be rewarding poverty….. that the poorer you are the more money you get," said Mombasa Governor Abdulswamad Nassir when he appeared before the committee.

Geographical size has been assigned an eight per cent weight, slightly lower than the nine per cent proposed by CRA.

The panel also removed the ‘income distance’ index, which the CRA had weighted at 13%.

The report noted that the income distance data was not specific to each county.

"The data used to generate the Income Distance index is not directly derived from each county. The KNBS applies a top-down approach to determine each county’s contribution to GDP," the committee explained.

If passed, the new system will guide revenue-sharing among counties for the next five years from 2025-26 to 2029-30.

This aligns with Article 217 of the Constitution, which requires the formula to be reviewed every five years.

However, the Sixth Schedule of the Constitution had previously set three-year intervals for the first two reviews.

In past revenue-sharing formulas, population has consistently carried the highest weight. For instance, the first framework assigned it 45 per cent, with equitable share at 25% and poverty at 20%.

The second-generation formula followed a similar path, giving population 45% and adjusting other factors like the development index and fiscal responsibility.

Currently, the National Assembly has allocated Sh405 billion to counties.

The Senate has suggested a higher figure, Sh465 billion, which may influence how much extra funding will be available beyond the baseline.

If the new formula is approved by the Senate, it could offer a more stable and fair system for county funding while correcting gaps in the CRA proposal.