Counties face cash crisis as MPs, senators fail to agree on division of revenue

If it is not passed by Thursday, a fresh budget will be drawn up, putting counties in precarious position

In Summary

• In a stormy session, both the Senate and National Assembly teams maintain hard-line positions. Meeting collapses.

• The bill is crucial legislation spelling out sharing of revenue.

The session between representatives of the Senate and National Assembly collapsed yesterday
The session between representatives of the Senate and National Assembly collapsed yesterday

County governments are facing a cash crisis after MPs and senators failed in a stormy session to agree on division of revenue proposals, three weeks to the next financial year.

The session yesterday between representatives of the Senate and National Assembly collapsed. It was aimed at unlocking the impasse surrounding the Division of Revenue Bill, 2019.

In an acrimonious session, they failed to strike a deal as both the Senate and National Assembly teams maintained hard-line positions. The Senate backs the counties' call for more money, the assembly backs the Treasury and national government.

The bill is crucial legislation that spells out the sharing of revenue between the national and county governments for the 2019-20 financial year starting on  July 1.

If it is not passed by, Thursday, it would require a fresh budget to be drawn up, meantime putting the county governments in a precarious position. Some could literally shut down.

Both Houses of Parliament must pass the Bill for the President’s assent if counties are to get any money from the national kitty from next month.

Multiple sources at the meeting, co-chaired by Kikuyu MP Kimani Ichung’wa and Mandera Senator Mohamed Mahamud, said the National Assembly agreed to Sh316 billion, while the Senators insisted on Sh327 billion.

The difference is Sh11 billion, which the members were yet to agree on.

One lawmaker said they are hopeful they will reach a deal by Thursday to avert the looming cash crisis.

While the National Assembly sought to retain allocations to the national government as they are, senators sought further cuts to cash allocated to state ministries and departments.

The first target is the Sh10 billion increment under National Interest from last years’ Sh84 billion. The funds in this category are for security, national irrigation, safety nets, exam fees and the digital literacy programme.

Senators are also targeting allocation for NYS, which has been allocated Sh16 billion from last years’ Sh7.4 billion, an increase of Sh9 billion.

“We are dumbfounded that the National Assembly doesn’t want us (Senators) to look at the funds that are aligned to Article 203 of the Constitution,” a member of the team said.

“We took a study of every clause of the Bill from which we learned a lot that would help us avert this situation in future.”

Senators want the increment based on two factors — economic growth and increased revenue projections — which the Sh335 billion was based on.

The lawmakers said they accepted the reduction to Sh327 billion, factoring in the cost of inflation at 4.6 per cent.

“The Senate is particular on this matter. Our counterparts from the National Assembly have no justification. Our call for an increase in the county share of revenue is based on economic growth,” another member said.

On May 7, Senators voted to increase the allocation to counties by Sh25 billion, setting up a clash with the National Assembly over the legislation on sharing of revenue between two levels of government.

The Senate side is represented by Mahamud, Makueni Senator Mutula Kilonzo Jr, Majority Whip Susan Kihika (Nakuru), Narok Senator Ledama ole Kina and Nairobi’s Johnson Sakaja.

National Assembly Speaker Justin Muturi chose Majority Leader Aden Duale, Minority Leader John Mbadi, Ichung’wa, Kitui Central MP Makali Mulu, and Majority Deputy Whip Cecily Mbarire.

However, another member of the team from the National Assembly said the focus of yesterday’s meeting was not as much about the numbers but the factors that inform the revenue-sharing formula.

“We are almost reaching the conclusion. By Thursday, we should be in a position on this matter. We have made some good progress,” the member told the Star in confidence.

The lawmaker said the meeting, which took a long time, looked at the broad issues involving the costing of county function, adding that they are likely to avert the looming cash crisis.

The variables being considered before the changes are affected include baseline, inflation and costing of functions.

The impasse arose from the National Assembly’s rejection of an amendment to the Bill as proposed by the Senate, bringing to the fore the dangers posed by the supremacy battle between the two Houses.

The power struggle, one source said, persisted yesterday even as the National Assembly members attempted to deny their Senate counterparts the chance to change the Bill, citing lack of mandate.

The Senate amendment increased the total county allocations from Sh371.6 billion to Sh391 billion.

The row is centred on Senate's reservations that the monies were appropriated to the disadvantage of the county governments.

In meetings that ensued, Senators had scored a plus after they managed to convince the National Assembly to accept Sh314 billion as the baselines and not Sh304 billion as they had earlier stated.

Senators sided with the Council of Governors and the Commission on Revenue Allocation on the increased allocation, while the MPs endorsed figures provided by the National Treasury.

Yesterday, Council of Governors chairman and Kakamega Governor Wycliffe Oparanya warned that counties would grind to a halt if the Bill is not passed quickly.

"We as the Council of Governors call for a speedy solution to this matter so that crucial services to Kenyans are not interrupted from July 1. Essential services will obviously suffer if the Bill is not enacted in the next three weeks," he told the Star on the phone.

Even as the talks collapsed, counties are likely to be faced with more problems in the wake of the National Assembly vetoing conditional grants to support health facilities.

The move has seen Sh4.3 billion that was meant for the implementation of the Universal Healthcare project retained until a report on the four pilot counties – Kisumu, Machakos, Isiolo and Nyeri  — is received.

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