Bail us out: Governors cry to Treasury as pension debt hits Sh103 billion

Governors in crisis are pleading with the Treasury to pay and rescue them as pension arrears hit Sh103.2 billion, threatening the retirement future of as many as 200,000 workers.

Council of Governors chairman Ahmed Abdullahi said counties cannot offset the debt from their current allocations, warning that failure by Treasury to intervene could spell doom for them.

“Mistakes were made and in certain instances we just have to have bailouts,” Abdullahi said during the Devolution Conference that ended in Homa Bay on Friday.

Treasury Cabinet Secretary John Mbadi, however, slammed counties for what he termed “criminal acts” that have jeopardised the welfare of workers.

In a startling revelation, Mbadi said pension arrears had ballooned from Sh23.3 billion in 2023 to Sh103.2 billion by October last year.

“Analysis of unremitted contributions submitted by Laptrust, Lapfund, CPF, NSSF and the Public Service Superannuation Fund indicates that a substantial portion of the debt is owed by county governments,” Mbadi said.

He termed the failure to remit pension deductions as outright theft. 

“If you are supposed to pay a salary to an employee and part of it is pension, there’s no justification to pay half and hold onto the other half. That is criminal,” the CS said, warning governors against mortgaging workers’ futures. 

He described the practice as unfair and unjust.

“This money belongs to people who will one day retire. You are killing their future. Please, whatever it takes, counties must now start the culture of remitting all deductions promptly,” Mbadi said.

While acknowledging the magnitude of the crisis, the CoG boss maintained that counties cannot shoulder the entire burden, especially historical arrears.

“Part of this debt is historical and cannot be paid from the current equitable share,” Abdullahi said, insisting that Treasury must intervene.

The Senate County Public Investments committee in its tabled and approved report in the House, shows the counties are yet to remit more than Sh80 million to pension schemes as at March 2023. They include the Local Authorities Provident Fund (Lapfund), the Local Authorities Pension Trust (Laptrust) and the County Pension Fund (CPF).

Analysis by the Controller of Budget of data on outstanding pension contributions, however, shows that arrears declared by the counties differ from what is disclosed by the pension firms. 

The crisis has already triggered institutional responses.

Last year, Mbadi formed an 18-member multi-agency task force on Non-Remittance of Pension Deductions by County Governments to establish the actual arrears and propose a repayment strategy.

“The object of appointing the task force is to actualise the government’s commitment to the timely remittance of pension deductions to pension schemes by county government entities,” Mbadi said in a gazette notice.

The task force followed a Senate resolution directing Treasury to form a team to address the ballooning pension liabilities.

The team is to submit bi-weekly reports to the National Treasury Cabinet Secretary and Senate on its activities.

The Senate County Public Investments Committee chaired by Vihiga Senator Godfrey Osotsi had raised the alarm over the unremitted deductions.

“County governments have a long-standing problem with pension remittances — both from defunct local authorities and from the devolved units themselves,” Osotsi said.

The task force, chaired by Albert Mwenda, the Treasury’s director of Budget, Fiscal and Economic Affairs, has been mandated with formulating a payment framework to enable counties to clear outstanding arrears.

Other members include Albert Kagika (Director of Pensions, National Treasury), Samuel Kiptorus (Intergovernmental Fiscal Relations Department), Bernice Mwangi (Office of the Attorney General), Theodora Ochichi (Office of the Controller of Budget), David Kitetu (Intergovernmental Relations Technical Committee), and Moses Waitara (Local Authorities Provident Fund).