Eyes on Senate after MPs pass Sh385B kitty for counties

Counties, many of which are going through a serious cash crunch, will be allocated Sh385 billion in equitable share from the national government after the National Assembly passed the Division of Revenue Bill, 2023 yesterday.

The allocation will, however, be shared out subject to the approval by the Senate. The Bill will be tabled in the Upper House next week.

Despite intense haggling between the Council of Governors and the Commission for Revenue Allocation (CRA), the amount that the devolved units will get has been slashed by Sh40 billion.

Initially, governors had asked for Sh425 billion but this was whittled down at various levels, including at the Intergovernmental Budget and Economic Council, which Deputy President Rigathi Gachagua chairs and which has governors as members.

The reduced allocation approved by the National Assembly is likely to cause friction between MPs and Senators on one hand and the county chiefs on the other especially if the Senate ratifies the allocation that MPs have approved.

Interestingly, the Bill went through all the three stages on the same day before it was passed in a record two hours. 

This is an important piece of legislation because it allocates resources vertically between the national and the 47 county governments.

Consensus challenge

Counties need the money, which will be allocated from July to meet a mountain of debt and other obligations, including paying off an estimated Sh159 billion that they collectively owe suppliers.

Senators — the custodians of devolution — and the Council of Governors have in the past insisted that allocation be retained at Sh425 billion in shareable revenue.

The proposed equitable share to the counties is 24.5 per cent over and above the constitutional provision of at least 15 per cent of the last audited accounts of revenue as approved by the National Assembly.

The current allocation, according to Ndindi Nyoro, the chairman of the Budget and Appropriation Committee of the National Assembly, is Sh15 billion more compared to what was allocated in the current financial year based on Sh1.67 trillion which was the last audited revenue approved by the National Assembly for the 2019/20 financial year.

Counties will, however, receive another Sh44 billion in conditional allocations. Again, this will be subject to approval by the Senate.

Can’t pay, won’t pay

Earlier in the year, Gachagua while addressing a forum with governors, insisted that the government did not have enough resources to match the demands of the Council of Governors (CoG) who wanted the equitable share for 2023-2024 financial year increased to Sh425 billion. According to the DP, the government could only afford Sh380 billion.

The matter was escalated to President William Ruto and the amount was increased to the Sh385 billion that Parliament approved yesterday.

Despite the slight increase of Sh5 billion, governors accused the National Treasury of failing to build a consensus with the Commission on Revenue Allocation (CRA), whose mandate is to advise on how tax revenue is to be shared between the national and devolved governments. 

“The issue we had with the CoG is a simple matter… They are asking for Sh425 billion. CRA is saying in our scheme of mathematics, you can give Sh407 billion. As a national government, we are saying that is good. Sh425 billion is good but we don’t have it. Sh407 billion is better but we don’t have it. We only have Sh380 billion. We don’t have the money and we are being truthful. What we don’t want to do is to cheat the governors that we will give them money that we don’t have,” Gachagua had said.

Yesterday, Ndindi Nyoro — also the Kiharu MP — tabled the Budget committee’s report for debate even before the Bill was introduced in the House or read for the first time as required by Parliamentary Standing Orders. However, no member in the chamber at the time questioned the anomaly. Instead, they went on to debate it and pass it in quick succession.

The Bill’s revenue base is set at Sh2.57 trillion, which is to be shared between the national and the 47 county governments from July 1. Of the amount, the national government has been allocated Sh2.18 trillion, while Sh385 billion will be set aside for counties. Another Sh8.37 billion will be allocated to the Equalisation Fund, which is meant to speed up growth and development in regions that have been historically marginalised since independence. The money is meant to reduce inequality between them and the historically better resourced regions.

Should senators fail to agree with the decision MPs made yesterday, the stalemate is likely to cause a further delay in the passing of the Division of Revenue Allocation Bill (DoRa), meaning that counties will have to wait longer to receive already overdue allocations.

Revenue collection

Murang’a Governor Irungu Kang’ata is among governors on record asking the national government to release money to counties, arguing that some were experiencing difficulties meeting recurrent expenditure needs such as paying staff salaries and funding development, including paying contractors and suppliers.

Some counties like Kiambu have taken radical steps to cut down spending, a move that has left Governor Kimani Wamatangi, unpopular with his Executive team who have opposed the austerity measures imposed to help the county clear a huge pending bills backlog.

Unless any dispute between MPs and senators is resolved quickly, counties will be thrown into a financial crisis that will see critical services such as health care and water supply adversely affected. This will expose citizens to serious health hazards considering that at least six counties are grappling with cholera outbreaks and another 23 are battling drought.

Yesterday, the Cabinet warned that counties affected by drought are likely to slide further into crisis due to the January to March dry season. The crisis has necessitated the Cabinet to allocate Sh23.9 billion for the April to October period for interventions in food assistance, water supply, livestock protection, peace and security.

“The sectors most affected by the crisis include food security, livestock, water, crop production, education, among others,” said a Cabinet memo released yesterday. Some of these sectors, such as water and some aspects of basic education are devolved functions. They are likely to be hard hit unless money is released to counties sooner rather than later.

MPs yesterday urged their colleagues in the Senate to pass the Bill as it is to allow counties to function without further delays. They also urged counties to improve their revenue collection, instead of over relying on allocations from the national government, which is also struggling to meet its obligations.

“The national government is doing all it can to enhance its revenue collection. Counties have powers to levy taxes. They must enhance their capacity to raise their own revenue collection,” said Nyoro during debate.

Last month, while admitting that the government is struggling to pay monthly disbursements to counties, Gachagua said it was untenable for the national government to promise Sh425 billion when it was experiencing problems paying the Sh370 billion already in the Budget.

“President William Ruto and I are Christians. We swore with the Bible before God and the people of Kenya to always speak the truth,” he said. 

The fate of counties is now squarely in Senators’ hands.