The development comes after senators flatly rejected a bid by the President to slash county funds to Sh380 billion from Sh400.1 billion in the current financial year.
The move has triggered mediation that could further delay the passage of crucial legislation to allow Treasury to release the funds.
However, Treasury and CoB can exploit provisions of the Public Finance Management Act that give them the leeway to release funds even without the passage of enabling legislation.
Section 134 of the PFMA (Regulations), 2012, provides that if the County Allocation of Revenue Bill submitted to Parliament for a financial year has not been approved, or is not likely to be approved, by the beginning of the financial year, the Controller of Budget may authorise withdrawals of up to 50 per cent from the Consolidated Fund based on the last County Allocation of Revenue Act approved by Parliament.
Governors already warned county governments would soon shut down if immediate measures were not taken.
“Several counties are facing a total shutdown. These depend on nothing except exchequer releases for their operations,” Mombasa Governor Abdulswamad Nassir said.
In the Senate, the lawmakers rejected President William Ruto’s proposal to slash the county funds following the withdrawal of the Finance Bill, 2024, after protests led by Gen Zs.
In the report backed by the House, the Senate Finance and Budget Committee maintained that the counties be given Sh400.1 billion, from the Sh380 billion suggested by Ruto and the Treasury.
“The sharing of the revenue shortfall occasioned by the rejection of the Finance Bill, 2024 of Sh346 billion between the two levels of government appears arbitrary.
"There is no justification for the reduction of the equitable share by Sh20.12 billion,” the report states.
The resolution has necessitated mediation with the National Assembly, which approved the President’s proposal weeks ago.
The committee argued that, although the proposed allocation of Sh380 billion to counties meets the constitutional threshold of 15 per cent, it is Sh5.4 billion less than the Sh385.4 billion allocated in 2023-24.
This is likely to impede county government operations and affect public services in the devolved functions.
The committee chaired by Mandera Senator Ali Roba said counties should not bear the consequences of revenue shortfalls by the national government.
“An attempt, therefore, to provide that counties shall bear any shortfall in revenues would be unconstitutional and in contravention of Article 219,” the committee said.
The senators argued counties are struggling to fund non-discretionary expenditures occasioned by the national government amounting to Sh39.98 billion.
The counties will inherit on their payroll Sh4 billion in terms of housing levy, Sh3 billion in enhanced National Social and Security Fund contributions and Sh5.3 billion for county aggregation and industrial parks.
Further, the counties will also cater for community health promoters’ payments to the tune of Sh3.23 billion, Sh5.64 billion for medical equipment services, and Sh2.85 billion towards the Integrated Payroll and Personnel Database.
There is also the Sh5.8 billion to cater for doctors’ collective bargaining agreement signed up to 2024.
“We will be doing injustice to our counties as senators if we agree to further lower the percentage of equitable share to the ordinary revenue that is raised nationally,” Vihiga Senator Godfrey Osotsi said.
