Counties staring at cash crisis. Here’s why
The National Assembly.
What you need to know:
- The stalemate on the proposed law will head for mediation as both sides take hardline positions, with the Budget and Appropriations (BAC) arguing the government is facing financial constraints.
- The speakers of both Houses will be required to appoint a mediation committee consisting of an equal number of members to attempt to develop a version of the bill agreeable to both chambers.
Counties are staring at a possible cash crunch after a National Assembly Committee rejected the Senate amendment to the Division of Revenue Bill, 2024 to allocate Sh400 billion as shareable revenue to the 47 devolved units.
The National Assembly’s Budget and Appropriations Committee (BAC) has retained its proposal to allocate Sh380 billion to counties as approved in the Division of Revenue Bill, 2024.
The decision to reject the Senate’s amendments means that the bill will be headed for mediation between the National Assembly and the Senate to allocate an agreeable amount to county governments.
“The committee rejects the Senate’s amendment to increase the amount of sharable revenue to counties to Sh400 billion,” the committee said in a report to be tabled in the House on Tuesday.
The committee has proposed that the amount of money allocated to counties as the shareable revenue be retained at Sh380 billion as approved by the National Assembly.
The stalemate on the proposed law will head for mediation as both sides take hardline positions, with the Budget and Appropriations (BAC) arguing the government is facing financial constraints.
The speakers of both Houses will be required to appoint a mediation committee consisting of an equal number of members to attempt to develop a version of the bill agreeable to both chambers.
Article 113 of the Constitution stipulates that if the mediation committee fails to agree on a version of the bill within 30 days, or if a version proposed by the committee is rejected by either House, the bill is defeated.
Two weeks ago, the Senate overturned the Sh380 billion proposed shareable revenue to the 47 counties.
Senators unanimously endorsed the amendment by the Senate Finance and Budget Committee, arguing that they will take nothing less than the Sh400.1 billion earlier approved in the Division of Revenue Act (DoRA), 2024.
The Division of Revenue Act, 2024 was revised to cut budgetary expenditure following the collapse of the Finance Bill, 2024.
President William Ruto in June conceded to pressure from young protesters and the concerns of Kenyans and asked the National Assembly to withdraw the bill in its entirety.
“I decline to assent to the Finance Bill 2024, and refer the Bill for reconsideration by the National Assembly with the recommendation for the deletion of all clauses thereof,” Dr Ruto said in the memorandum notifying Parliament of his reservations about revenue raising law.
The government was banking on the passage of the bill to raise Sh347 billion in the financial year 2024/25 to plug the deficit on Dr Ruto’s Sh3.92 trillion budget.
The government is currently proceeding with the revenue-raising measures outlined in the 2023/24 financial year following the withdrawal of the Finance Bill, 2024.
While approving the proposal to increase the sharable revenue to Sh400.1 billion, 29 senators collectively passed the Division of Revenue (Amendment) Bill 2024 (National Assembly bill) amendments blocking the proposed slash of Sh10 billion to county governments after the collapse of the Finance Bill, 2024.
The Senate’s Finance and Budget chairperson Ali Roba argued that the National Assembly approvals sought to review the shareable revenue schedule in the projected shortfall to be borne by both levels of government.
He said the schedule as presented covers a reduction in shareable revenue, proposes shareable revenue reduced from Sh3.9 trillion to 2.6 trillion, and proposes further that the National government gets Sh2.23 trillion, maintaining Sh400.16 billion for counties as passed in previous DoRA.
The Senate committee noted that the total shareable revenue is 2.6 trillion and based on the percent of audited and approved revenue of Sh1.57 trillion for the financial year 2020/21.
The national government is to get Sh2.2 trillion, while Sh8 billion for the Equalisation Fund, of which 0.5 per centum is Sh7.8 billion and arrears Sh147 million.
The counties’ equitable share is Sh400.1 billion, translating to 25.48 percent of the 2020/21 financial year.
