A standoff is brewing over division of revenue between national and county governments with governors, senators and the Commission on Revenue Allocation (CRA) rejecting the Sh405 billion county allocation proposed by the National Treasury.
While MPs have sided with the National Treasury’s proposal, governors are demanding the devolved units be allocated at least Sh536.8 billion.
On the other hand, senators are pushing for not less than Sh465 billion in the financial year ending June 2026 while CRA’s figure is Sh417.43 billion.
The county chiefs are using the mediated Sh400.17 billion, the original allocation for the financial year ending June 2025, while CRA and Treasury are using the reduced Sh387.43 billion occasioned by the withdrawal of the Finance Bill 2024.
The hard-line stances have the potential of derailing budget approvals as they threaten to scuttle the smooth passage of the Division of Revenue Bill, 2025.
Making their case before the Senate Finance and Budget Committee on Tuesday, the Council of Governors (CoG) 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.
He said the expenditures include enhanced contributions to SHIF, the rollout of universal health coverage and the national government’s priority projects such as the county aggregation and industrial parks (Sh11.75 billion) as well as other priority programmes such as community health promoters compensation (Sh3.3 billion).
Others are housing levy deductions (Sh4 billion), NSSF (Sh6 billion), cost of procurement of new medical equipment (Sh39 billion), annual wage increments (Sh6.3 billion), and doctors’ salary adjustments (Sh3.45 billion).
“We acknowledge the Senate's recommendation of Sh465 billion as equitable share to counties. However, this may not adequately address the financing needs of the counties. The Bill should be amended to allocate Sh2.29 trillion to the national government and Sh536.88 billion to county governments,” said Governor Barasa.
Further, the governors said the proposal did not also factor in projected ordinary revenue growth, which should be shared equally between the two levels of government.
Mr Barasa argued that despite the expanded fiscal space and projected stable economic growth at 5.3 percent over the medium-term, the same does not reflect on division of revenue between the two levels of government.
The Kakamega governor said that the proposed counties’ equitable share allocation is not in sync with the growth trends in both ordinary revenues and the gross domestic product.
The county boss pointed out that for the last five fiscal years, between 2020 and 2025, counties’ equitable share of revenue has grown by a marginal Sh70.9 billion while that of the national government has grown by Sh702.6 billion.
During the same period, he said, ordinary revenue has grown from Sh1.8 trillion to Sh2.6 trillion and is now projected at Sh2.8 trillion for the financial year ending June 30, 2026.
Another contentious issue is the allocation of up to Sh77 billion to national government entities for functions that are constitutionally devolved.
Governor Barasa cited the failure to account for resources needed for unbundled and delineated devolved functions, funds still budgeted for under the national government through ministries, departments and agencies (MDAs) accounting for up to Sh77 billion.
The governor told the committee chaired by Mandera Senator Ali Roba that the current fiscal year’s budgetary allocations to MDAs should be identified and transferred through the Division of Revenue Bill, 2025.
For his part, Makueni Governor Mutula Kilonzo Junior accused the national government of diverting funds meant for counties to politically motivated projects.
He cited budgetary allocations to the national government for free maternity care (Sh2 billion), vaccines (Sh2 billion), family planning (Sh500 million), reproductive health (Sh1.8 billion), ASAL department projects (Sh2 billion), irrigation (Sh1 billion), agriculture subsidy (Sh14.5 billion), roads (Sh1 billion), and water (Sh435 million).
“This move undermines counties’ autonomy, creating unnecessary bureaucracy. If these funds were given directly to counties, we could achieve far more without wasteful duplication,” he said.
For its part, CRA has poked holes into the Bill, saying the national government should receive Sh2.4 trillion while counties get sh417.4 billion.
Defending their proposal, the Commission said county governments have conditional financial obligations that were meant to commence in the current financial year.
However, due to the downward revision of projected ordinary revenue for the current fiscal year, implementation of the specific programmes and projects estimated at sh25.03 billion have not been fully financed.
CRA chairperson Mary Chebukati argued that the equitable share allocation to the county governments has declined from 10.4 percent to 9.3 percent while allocation to the national government has increased from 56.7 percent to 57.5 percent.
“The decline in the share of allocations to the county government has a negative impact in the ability of governments to improve on service delivery to the citizens, amounting to a claw back on the objects of devolution,” said Ms Chebukati.
She explained that the Bill presents items of national interest as being synonymous to national government priorities yet national interests can be implemented by either level of government based on the law of subsidiarity.
“The Fourth Schedule has assigned functions to two levels of government. Therefore, the national government should not isolate some of its functions and budget for them as a national interest,” she said.
The CRA boss questioned why the Bill presented some statutory allocations, namely NG-CDF and Affirmative Action Fund, as deductions to be made before arriving at the shareable revenue yet the two are not part of items in Article 203 to be considered before arriving at the shareable revenue.
She said the allocation into the two Funds are made from the national government's equitable share of revenue.
Ms Chebukati said the Bill has allocated national interest Sh101.3 billion, the State Law office and DPP Sh10.5 billion, NG-CDF and Affirmative Action Fund Sh29 8 billion.
