by county, FY2017/18

However, over the past two fiscal years (2019/20 and 2020/21), there has been considerable debate and contention on the equitable share for counties between the Senate, National Assembly, Council of Governors, and other institutions, particularly the CRA and National Treasury. This has often resulted in delays, with the CARA only being passed weeks or months into the fiscal year. Because counties cannot pass their budgets before the CARA is finalized, these delays have a knock-on effect on counties’ budgeting and ability to meet their financial obligations. The Constitution of Kenya of 2010 mandated that the CRA make recommendations for the basis (formula) for revenue allocation among county governments; the first two iterations would last three years and the third one, five years. The start of FY2020/21 saw a protracted lack of consensus on proposals for the third basis for county allocation of revenue formulas. With the previous formula having lapsed, the CARA could not be passed before a new formula was agreed upon. Moreover, in FY2020/21, the impact of COVID-19 on the national fiscal situation further negatively affected the timely release of the equitable shares for May and June 2020.

The equitable share has helped enable those counties that are lagging behind in service delivery, which are typically poorer and more sparsely populated, to start to catch up. Figure 4.5 provides an overview of the horizontal incidence of intergovernmental fiscal transfers—both equitable shares and conditional grants—across Kenya’s 47 counties for the latest year available (FY2017/18). For completeness, it also shows the distribution of OSR across the counties.

Figure 4.5 instantly highlights the dominant role that the equitable sharing of national revenues plays in determining the overall horizontal incidence of county resources in Kenya. In contrast, conditional grants and county OSR (as already noted above) play a much more limited role in determining the overall horizontal distribution of county finances.

The horizontal allocation of the equitable share is determined by parliament, in line with the constitutional and legal framework, upon the CRA’s

FIGURE 4.5

Per capita intergovernmental fiscal transfers and OSR in Kenya, by county, FY2017/18

30,000

K Sh per capita 25,000

20,000

15,000

10,000

5,000

0 Nandi KakamegaNakuru Trans NzoiaUasin GishuSiayaNairobiKerichoBometKisii BungomaMigoriKiambuMurang'aHoma BayKisumuNyamiraBusia MachakosKajiadoVihigaKilifi MakueniNyeri NyandaruaBaringo West PokotKirinyagaNarok Elgeyo MarakwetMeruKituiEmbuKwale MombasaTurkanaLaikipia Tharaka NithiTaita TavetaManderaSamburuGarissaWajir Tana RiverLamu MarsabitIsiolo Equitable share Conditional grants Local revenue

Source: Controller of Budget, annual county budget implementation review report, FY2017/18. Note: OSR = own-source revenue.