Stage set for protracted talks as senators, MPs clash on county funds

A fresh standoff is looming in Parliament after senators rejected a Sh420 billion allocation to county governments.

The decision will automatically trigger protracted negotiations with the National Assembly over the Division of Revenue Bill, 2026.

The Senate has instead proposed an enhanced allocation of Sh454.7 billion for the 2026–27 financial year.

The development has ignited yet another battle between the two Houses over how to share revenue between the national and county governments.

The disagreement mirrors past disputes that have often delayed the passage of crucial revenue-sharing laws, threatening timely disbursement of funds to devolved units.

With the two chambers now sharply divided, the Speaker of the bicameral Parliament is expected to constitute a mediation committee to negotiate and agree on a compromise figure.

Senators argue that the Sh420 billion approved by the National Assembly is too low and fails to reflect the financial realities facing counties.

Vihiga Senator Godfrey Osotsi said the figure falls below recommendations made by the Commission on Revenue Allocation.

“The Sh420 billion being proposed is far much lower than what the Commission on Revenue Allocation had recommended. CRA proposed Sh458 billion, while the Senate Finance Committee has proposed Sh454 billion,” Osotsi said.

Majority leader Aaron Cheruiyot signalled that senators are prepared for a drawn-out battle to push for a higher allocation.

“My interest in this Bill is that we must be ready to engage in a battle with the National Assembly to secure, at the very minimum, Sh450 billion for counties. That process takes timeand we must begin it,” he said.

The Senate’s position is backed by its Finance and Budget Committee, chaired by Mandera Senator Ali Roba, which tabled a report justifying the higher allocation.

The committee cited rising inflation, economic growth pressures and the need to hire community health workers as key reasons for increasing county funding.

The proposal is significantly higher than the National Treasury’s Sh420 billion recommendation, which is likely to be supported by the National Assembly, as has been the trend since the advent of devolution.

Governors, however, are pushing for an even higher allocation of Sh534.4 billion through the Council of Governors, widening the gap between stakeholders.

They argue their proposal reflects the real financial pressures facing counties, including salary obligations, health sector reforms and the transfer of additional devolved functions from the national government.

According to the governors, their demand includes Sh35 billion to account for revenue growth, Sh8.94 billion for the absorption of Universal Health Coverage workers.

Others are Sh10.06 billion for salary reviews by the Salaries and Remuneration Commission and Sh65.97 billion tied to functions earmarked for transfer to counties.

“The national government has already implemented all SRC salary cycles, leaving counties behind. This is discriminatory and has triggered industrial action that will escalate if not addressed,” the governors said in a statement.

They further argue that billions of shillings currently held by ministries, departments and agencies should be transferred alongside the devolved functions.

The Commission on Revenue Allocation has recommended Sh458.7 billion for counties—higher than the Treasury’s proposal but still below the governors’ demand.

CRA projects that shareable revenue will rise from Sh2.6 trillion to Sh2.98 trillion in the next financial year, an increase of Sh342.6 billion. Of this, Sh2.5 trillion would go to the national government, with counties receiving Sh458.7 billion.

Senators maintain that a higher allocation is necessary to stabilise county finances, clear pending bills and prevent service disruptions.

Beyond the allocation dispute, the Senate has also pushed for greater accountability and transparency in the use of public funds.

Lawmakers have directed the Treasury to submit, by June 30, 2026, a comprehensive impact assessment of all conditional allocations made to counties since the inception of devolution.

The report is expected to detail actual transfers, pending disbursements and the status of projects in each county.

The Senate has also instructed the Intergovernmental Relations Technical Committee to finalise, within six months, the costing of devolved functions in collaboration with the Treasury and the Council of Governors.

To improve financial planning, senators are advocating for the fast-tracking of a revenue forecasting model to help counties better estimate their own-source revenue.

At the same time, they have taken a firm stance on fiscal discipline, warning that counties that fail to implement pending bills action plans within the first quarter of the financial year risk having their funds suspended under Article 225(3) of the constitution.

The Treasury has also been directed to provide a timeline for integrating the Human Resource Information System with the Integrated Financial Management Information System, as well as an action plan to address unremitted pension deductions.