A parliamentary budget think tank has poked holes in the new county revenue-sharing formula proposed by the Commission on Revenue Allocation.
In a detailed analysis of the proposal, the Parliamentary Budget Office (PBO) has criticised the framework, arguing that some of the parameters lack a scientific basis
“Using baseless factors in determining revenue allocation among counties would be detrimental,” PBO said in a report released on Monday.
PBO is a non-partisan professional office of the Parliament whose primary function is to provide professional advice to the legislature with respect to budget, finance and economics.
In its review of the formula, it argued that the fourth basis for sharing revenue among the counties has incorporated a new parameter christened “stabilisation factor”.
According to PBO, the index is given to each county as a stabilisation index lacks a scientific basis. CRA, in its proposal, had argued that the factor has been introduced to promote harmlessness in the allocation factor to counties.
However, PBO held that the future of revenue allocation should point to some stability and predictability but not lean on ‘holding harmless’.
“It would be prudent if the transition effects from one basis to another were fixed by a scientifically generated deviation parameter,” the PBO’s review reads.
In it proposal, CRA has fronted five critical parameters that include equal share weighted at 22 per cent, population ( 42 ), geographical size (nine), poverty ( 14 ) and income distance ( 13 ) per cent, respectively.
According to PBO, the fourth basis for revenue sharing allocates a 42 per cent weight to the population parameter, reflecting the importance of population size as a key determinant of county funding needs.
However, PBO argued that the allocation has not had a steady pattern with weights of 45 in the first and second formulae and 18 per cent in the third.
“This cyclical trend is susceptible to abuse and can trigger manipulation of the population data, especially during the national censuses,” PBO stated.
It said analysis indicate that, whereas population is seen as a balancing indicator of all community needs in counties, it has several dy-namics that have not been considered over time in its application.
Populations in counties are made
up of different demographics. Old
people dominate some countries,
while others are made up of the
young generations.