MPs, senators in Sh18.5b deadlock over county funds
The Senate in a past session.
Counties risk waiting longer to receive funds for the next financial year beginning July, after talks between senators and MPs to resolve a stalemate over how much the devolved units should get ended in disarray.
Despite senators significantly ceding ground on their demands to allocate Sh465 billion to counties in the financial year ending June 30, 2026, by Sh37 billion, MPs maintained they can only increase the Sh405.1 billion proposals by a paltry Sh4.4 billion.
The development now leaves the two parties at a Sh18.5 billion gap as the ensuing impasse threatens to drag on with the mediation committee still at loggerheads, with MPs adopting a take-it-or-leave-it stance.
The team held its first sitting on Friday, aiming to fast-track the passage of the Division of Revenue Bill, 2025, and facilitate the timely disbursement of county funds for the financial year beginning July 1.
The National Treasury allocated Sh405 billion to counties in the budget read by Cabinet Secretary John Mbadi last week against governors’ demands of Sh536 billion.
The National Assembly has also sided with the Treasury while senators have been asking for more funds to counties with Sh465 billion being their proposal captured in the Division of Revenue Bill, 2025.
The Bill is a key piece of legislation that, upon enactment, provides for the equitable division of revenue raised nationally between the national and county governments every financial year.
“When you are here, you should be representing the National Assembly and not the National Government. If we do not allocate more money to the counties, smaller counties will continue to pay salaries without any meaningful development,” said Elgeyo Marakwet Senator William Kisang’.
The 18-member mediation committee is co-chaired by Senate Budget and Finance Committee Chairperson Ali Roba (Mandera) and his National Assembly counterpart Samuel Atandi (Alego Usonga).
“There has been this notion that if Counties are given more money, the money will be stolen. Even if we hold this session till tomorrow, we will not allow counties to get Sh405 billion,” said Kisii Senator Richard Onyonka.
Kakamega Senator Boni Khalwale said the national government should cede more than Sh253 billion resources for devolved functions, including primary healthcare (Sh133 billion) and Sh120 billion for housing.
“I have not been persuaded as to why the National government should retain Sh133 billion for health, yet primary healthcare is devolved. We are not climbing down any further. It is Sh428 billion or nothing less,” said the Senate Majority Whip.
However, MPs argued that Kenya’s tight fiscal space cannot allow an increase in allocation to counties beyond the Sh409.5 billion.
Kilifi North MP Owen Baya, his Endebess counterpart Robert Pukose, Maryanne Kitany (Aldai) and George Kariuki (Ndia) defended the proposal, citing below par revenue collection by the Kenya Revenue Authority.
MP Atandi added that counties will now get Sh22 billion more in the coming fiscal year, an amount he said should be used to cater for the non-discretionary expenditure.
Governors have in the past said the current proposal on shareable revenue to counties has failed to factor in non-discretionary expenditures by the devolved units emanating from national government priority projects.
CoG’s Finance committee chairperson Fernandes Barasa said the non-discretionary expenditures have a cumulative cost implication of Sh73.78 billion.
“We should note that we are increasing the allocation from the current Sh387 billion to Sh409.5 billion. This is about Sh22 billion, which counties can use for non-discretionary expenses. We cannot get more than Sh22 billion,” said Mr Atandi.
“Let’s make promises we know we can keep. We must consider how much we can realistically collect and deliver,” he added.
"Let's be realistic"
MP Kitany added: “There is not much revenue being generated now that can support Sh428 billion for counties.”
“Let’s be realistic and operate within our means, even as we push the government to find new ways of raising revenue. The amount we have already allocated in the Bill is an increase from the previous fiscal year,” added MP Kariuki.
Senators, however, dismissed the arguments, accusing the national government of holding onto funds meant for devolved functions.
Senator Roba said counties are burdened with non-discretionary expenditures triggered by national policies, such as the affordable housing levy, enhanced contributions to the National Social Security Fund, contributions to the Social Health Authority, and stipends for community health promoters.
“These costs must be factored into the revenue share. Both levels of government stand to suffer if we don’t make progress. We must be alive to the fact that all legislation passed in parliament can still be challenged in court,” Mr Roba warned.
The co-chairs agreed to make further consultations and return with a figure in the next meeting with the hope of reaching a final consensus.
“We will hold internal consultations. There’s goodwill, especially from the Senate. But we need to conclude soon due to other looming constitutional deadlines,” said Senator Roba.