The 2010 constitution and the 2012 Public Finance Management (PFM) Act fundamentally altered the Kenyan budget process. The new rules expanded Parliament’s role in the budget process and shifted the National Treasury’s role from one of command to one of persuasion. How well are these players adjusting to the new game? We looked at the 2015/16 national budget to answer this question. Here is what we found.

TABLED BPS APPROVED BPS

Ksh 1,396 Ksh 1,410

11

4.1

6.6

0.8 0.50.2 0.1 0.1

Controller of Budget

IndependentPolice Oversight

Authority

Min ofIndustralization

(Jua Kali)

JudiciaryEthics and Anti- Corruption

Commission(County Operations)

Auditor GeneralParliamentaryService

CommissionSenate Monitoring

and Evaliuation

ParliamentaryService

CommissionOperations

State DepartmentPlanning

(A�rmative Action,CDF, Uwezo, ESP Centers

0

1

2

3

4

5

6

7

The Role of Parliament and the National Treasury in Developing the 2015/16 Budget

Figure 2 shows which sectors received the main increases. Parliament itself was a big recipient of the increased spending, as were constituency funds associated with Parliament (such as the Constituency Development Fund, CDF). More than 80 percent of the changes are due to these increases. However, Parliament also made smaller increases to the budgets of other oversight institutions, including the Auditor General and the Controller of Budget.

Figure 2: Parliament’s increases to the Budget Policy Statement by Ministry, Department and Agency (Ksh billions)

The next big opportunity for Parliament to stamp its authority on the budget is when the budget estimates are tabled in the National Assembly at the end of April. What did Parliament do at this point?

The National Treasury, in violation of the PFM Act, tabled a ministerial budget that was Ksh 97 billion larger than what Parliament had approved in February. Taking into account other changes, this meant a Ksh 74 billion increase in the total budget deficit. Parliament did not take note of this, nor did it act to reverse the increase in its review of the budget estimates. Instead, it made minor cuts in the budget of just over Ksh 1 billion.

Parliament’s Role in the 2015/16 Budget

The tabling of the Budget Policy Statement (BPS) in February is Parliament’s first big opportunity to influence the national budget. Parliament has the power to decide on the total size of the budget and how it is distributed across key sectors when it amends and approves the BPS.

Parliament’s Budget and Appropriations Committee report on the BPS sent mixed messages on their plans. Some parts of the report emphasized reducing the total size of the budget and controlling the deficit, while other parts suggested increasing the budget by Ksh 48 billion.

So what did Parliament actually do? As Figure 1 shows, Parliament increased the budget for ministries, departments and agencies (MDAs) by about Ksh 14 billion. Given that Parliament did not identify any new revenues, this extra spending added Ksh 14 billion to the deficit.

Figure 1: 2015/16 Budget for Ministries, Departments and Agencies: Tabled versus Approved Budget Policy Statements (Ksh Billions)

A NEW BUDGET PROCESS?

Parliament’s Role in the 2015/16 Budget2

Figure 3: Increases in Expenditure, Revenues, and Deficit between the Approved Budget Policy Statement and the Tabled Budget Estimates (Ksh billions)

Expenditure (Billions) Revenue (Billions)

ItemsApproved Budget Policy Statement

Budget Estimates ItemsApproved Budget Policy Statement

Budget Estimates

MDA Expenditure 1,410 1,507 Local Revenue 1,348 1,358 County Share 262 261 Grants 54 74 Interest/Pensions 221 229 Total 1,893 1,997 1,402 1,432 Increase in Expenditure 104 Increase in Revenue 30 Increase in Deficit 74

Some additional small changes in the budget were made by Parliament, although the rationale for these changes is unclear. To the extent possible, Table 2 captures the reasons that were provided by Parliament for the biggest increases and decreases in absolute allocations at the MDA level.

National Treasury

% Change between Approved BPS Ceilings and Tabled Gross Estimates 2015/16

Vote Recurrent Development Total1 Commission for the Implementation of the Constitution -32% - -32%2 Independent Electoral and Boundaries Commission 20% -20% 19%3 Independent Police Oversight Authority -1% - -1%4 Kenya National Commission on Human Rights -8% - -8%5 Salaries and Remuneration Commission 94% - 94%

Parliament% Change between Tabled and Approved Gross Estimates

Vote Recurrent Development Total1 Commission for the Implementation of the Constitution 47% - 47%2 Independent Electoral and Boundaries Commission 14% 44% 14%3 Independent Police Oversight Authority 24% - 24%4 Kenya National Commission on Human Rights 28% - 28%5 Salaries and Remuneration Commission -22% - -22%

Parliament did, however, decide to continue to defend the budgets of some independent commissions and oversight agencies (with the exception of the Salaries and Remuneration Commission). After the increases passed at the BPS stage, Treasury proceeded to cut some of these budgets again. Parliament responded by increasing them again. This can be seen in Table 1 below.

Table 1: Changes Made by National Treasury and Parliament’s Response in the 2015/16 Budget Estimates

1000

1200

1400

1600

1800

2000

2200

County Share Interest/Pensions Local Revenue

EXPENDITURE (BILLIONS) REVENUE (BILLIONS) EXPENDITURE (BILLIONS) REVENUE (BILLIONS)

GrantsMDA Expenditure

1,410 1,507

DEFICIT = 491 DEFICIT = 565

1,3481,358

54 74

262261

221

229

Approved Budget Policy Statement (March) Tabled Budget Estimates (April)

Parliament’s Role in the 2015/16 Budget 3

Table 2: Largest Increases and Decreases at Ministries, Departments and Agencies Level Between Tabled and Approved Estimates (Ksh)

National Treasury’s Role in the 2015/16 Budget

Treasury initially proposed a budget of nearly 1.4 trillion for MDAs in the BPS tabled in February. Infrastructure/energy, education, and security accounted for 65 percent of sector allocations in the proposed budget. Figure 4 below shows the changes in sector distribution between 2014/15 and 2015/16.

Absolute Change between Tabled and

Approved Gross Estimates

Vote Program Recurrent Development Total Reasons for changes in allocation

Largest Increase in Program Allocation

1State Department for Water and Regional Authorities

Water Resources Management

- 1,100,000,000 1,100,000,000 Capital allocation increase to the Water Services Boards

2Ministry of Industrialization and Enterprise Development

Industrial Development and Investments

- 1,057,862,658 1,057,862,658

An increase in allocation to Kenya Industrial Training Institute - KITI (Ksh 120 million), New Kenya Cooperative Creameries- KCC (Ksh 400 million), Kenya Industrial Property Institute - KIPI (Ksh 300 million), and Kenya Industrial Research and Development - KIRDI (Ksh 638 million)

3State Department for Science and Technology

University Education 1,007,676,286 - 1,007,676,286

A recurrent allocation increase of Ksh 500 million to the University of Nairobi Collective Bargaining Agreement and Ksh 507.7 million for University of Nairobi for Operations and Maintenance

4Independent Electoral and Boundaries Commission

Management of Electoral Processes

500,000,000 30,000,000 530,000,000 Additional funds were to cater for voter registration

5State Department for Science and Technology

Technical Vocational Education and Training

- 500,000,000 500,000,000 Increase capital allocation to TIVETS by Ksh 500 million

6 State Department of Transport Road Safety - 300,000,000 300,000,000 Upgrading the motor vehicle inspection centers and purchase of safety enforcement vehicles

7Office of the Director of Public Prosecutions

Public Prosecution Services 178,000,000 - 178,000,000 To recruit new prosecutors and pay for their health cover In addition an allocation for witnesses and victims

8National Police Service Commission

National Police Service Human Resource Management

121,000,000 - 121,000,000For development of a scheme of service for police officers, recruitment of police officers and the Police Vetting Program

9Commission for the Implementation of the Constitution

Commission for the Implementation of the Constitution

100,000,000 - 100,000,000 Completion of mandated programs and winding up

10Kenya National Commission on Human Rights

Protection and Promotion of Human Rights

100,000,000 - 100,000,000

Largest Decrease in Program Allocation

10State Department for Science and Technology

General Administration, Planning and Support Services

-200,000,000 - -200,000,000A reduction in allocation for goods and services under the General Administration Program

9Salaries and Remuneration Commission

Salaries and Remuneration Management

-200,000,000 - -200,000,000

8 State Department of Transport Air Transport - -300,000,000 -300,000,000The reduction was re-allocated to the Road Safety Program

7State Department for Commerce and Tourism

Tourism Development and Promotion

- -300,000,000 -300,000,000 Re-allocated to Ronald Ngala Utalii College

6State Department for Education

General Administration, Planning and Support Services

-300,000,000 - -300,000,000 A reduction in allocation for goods and services

5 The National Treasury Public Financial Management - -325,000,000 -325,000,000 Reduced allocation for IFMIS re-engineering

4State Department for Science and Technology

Youth Training and Development

-76,710,513 -430,965,773 -507,676,286The Ksh 507.7 million was moved to the University of Nairobi for Operations and Maintenance

3State Department for Environment And Natural Resources

Environment and Natural Resources Management and Protection

-1,000,000,000 -100,000,000 -1,100,000,000

2 The National TreasuryGeneral Administration Planning and Support Services

-1,700,000,000 - -1,700,000,000Reduction from Human Resource Reforms and Defined Contributory Scheme

1 The Judiciary Dispensation of Justice -200,198,073 -1,612,101,927 -1,812,300,000

Average Absolute Change in Individual Programs -14,213,346 -237,835 -14,451,181

Parliament’s Role in the 2015/16 Budget4

As Figure 4 shows, sector allocations have shifted significantly between 2014/15 and 2015/16, with the infrastructure sector claiming a larger share of the budget as education and security fell. There was limited narrative explanation of these changes. The BPS stated that the bulk of budgetary resources would go to “social” sectors, defined as education and health. However, as Figure 4 shows, the share of the budget allocated to education has fallen and health has remained more or less the same. The budget for security, despite being mentioned as a priority sector, has also fallen. The one explanation

Figure 4: Sector Allocation Changes between 2014/15 and 2015/16, Budget Policy Statement 2015

0%

5%

10%

15%

20%

25%

30%

Infrastructure +Energy

22%

27%Share of the Total 2014/15 Share of the Total 2015/16

26%

22%

16%15%

8% 8%6.4% 6.2%

5.2%4.6% 4.1% 4% 4% 3.9%

3.1% 3.1%2.6% 2.5% 2.1%

0.3% 0.4%1.8%

Education Security State Administration

Planning andDevolution

Parliament, AG,Judiciary andConstitutionalCommissions

Water andRegional

Development

Health Agriculture InternationalRelations and

Commerce

Land andHousing

Gender, Youthand Culture

Treasury has not given an explanation of these changes. This is inconsistent with the fact that Treasury must now sell its proposals to Parliament and the public. Treasury also changed the names and location of programs in the budget between the BPS and the tabled estimates, suggesting ongoing challenges in adopting the program budget format.

Conclusion

Both Parliament and National Treasury are still adapting to their new roles in the budget process. The “budget-making” Parliament is still largely following Treasury’s lead without challenging key choices, such as the sector distribution of the budget, the growth in the deficit, and the ongoing confusion in defining the programs (and therefore objectives) of key ministries. The National Treasury is failing to follow the PFM Act and is yet to embrace the need for full explanations to persuade Parliament of its budget priorities.

Vote Program % Change between the Tabled BPS Ceilings and Tabled Gross Estimates 2015/16

Recurrent Development TotalLargest Increase in Program Allocations

The Presidency Cabinet Affairs 272% 957% 427%State Department for Planning National Statistical Information Services 133% 1,410% 274%State Department for Coordination of National Government General Administration, Planning and Support Services 176% - 219%

State Department for Commerce and Tourism Tourism Development and Promotion 12% 351% 212%Ministry of Information, Communications and Tech General Administration Planning and Support Services 132% 519% 205%

Largest Decrease in Program AllocationsState Department for Planning Public Service Transformation -43% -37% -43%Ministry of Land Housing and Urban Development Government Buildings -77% -11% -43%State Department of Transport Air Transport -2% -67% -46%State Department of Transport Government Clearing Services -51% -100% -58%State Department for Science and Technology Youth Training and Development -90% -62% -76%

Total Voted Expenditure 2% 15% 8%

given that was consistent with budget changes was for the infrastructure sector, where increases were framed in terms of a greater focus on energy, roads, and rail.

Treasury significantly increased the total budget between the BPS and the tabled estimates, which increased the deficit. As can be seen in Table 3, which summarizes the five largest increases and decreases at program level during this period, Treasury also made significant changes to programs.

Table 3: Major changes by Treasury between the Tabled Budget Policy Statement and Tabled Budget Estimates