How much my county

costs to run (and why it

matters)

30 September 2015

Jason Lakin, Ph.D.

Country Manager
IBP Kenya

County running costs: who cares?

The costs of running counties are part of our broader
understanding of how much it costs to run Kenyan
institutions, and the burdens and benefits of the 2010
constitution

Running costs are also important to help citizens

evaluate the distribution of their individual county
budgets among operations and services
Finally, running costs form the basis (or should) for
our understanding of how large the basic equal share
in the revenue sharing formula should be

Understanding overall costs matters

The overall amount that goes to running costs should
be understood as part of the cost we are willing to bear
for having functional devolved governments
We should be able to compare these costs to how
much we spend on other things: national government,
services, investment, deficit/debt and other things we
care about
For this to be meaningful, though, we need transparent
figures and a solid basis for calculations

Within counties: operations v. services

This is in many ways more important than the
recurrent v. development, or wage bill debates, we
normally hear: both doctors and drivers are recurrent
costs, and both are needed, but only one provides
direct benefits to citizens
We want to ensure that these costs are adequate, but
not excessive, in order to free up maximum funds for
services and investment

Basic Equal Share

The revenue sharing formula contains a 25%
weight for the basic equal share
This is intended to compensate counties for
basic administrative running costs which are
identical across counties
For example, a governor is paid the same in
every county, regardless of population, land
area, poverty, etc.
So some of these costs are fixed

Basic Equal Share (continued)

However, many other administrative costs in
counties are not fixed
For example, while the executive does not vary
that much from county to county, the assembly
does
Number of wards (and MCAs) is higher in
larger population counties
Administrative costs are likely higher in larger
land area counties as well

So the basic equal share

Should cover the minimum EQUAL costs
across counties, not ALL administrative costs
Other administrative costs are better
represented by population, land area, etc.
because they rise with those factors
Therefore, the way to calculate the basic equal
share is to base it on the administrative costs
of the smallest, least expensive unit

Example: Basic Equal Share

Suppose that the total cost of administration
across all counties was 1000 Ksh
That would make average costs about 21 Ksh
(1000 Ksh/47 counties)
Now suppose some counties had running
costs of as little as 10 Ksh and others of 30
Ksh due to their smaller/larger size
Then we should obviously not give everyone
21 Ksh

What should we give them?

One option is not to have a basic equal share at all, because the
costs are not equal
Another: give all counties 10 Ksh, because all counties have AT
LEAST 10 Ksh expenditure
Then, the rest of the amount is not given through the equal share,
since it is not equal, but is given based on population, land area,
etc. which is actually why one county has 30 Ksh while another
has 10 Ksh

In our example, we would give 470 Ksh to all

counties split evenly (10 Ksh each), but then the
remaining 530 Ksh would be given on basis of
population, land area, etc.

Summary
Analysis of running costs is about
understanding the cost of our institutions and
whether it is reasonable
It is also about understanding how our
counties are allocating funds between
operations and services
Finally, it is about ensuring equity in how we
distribute funds across counties, and
particularly the size of the basic equal share