Senate-National Assembly standoff over county revenue heads to mediation

A standoff between the Senate and the National Assembly over county funding has escalated, pushing the issue to a mediation committee after both chambers took conflicting positions on the Division of Revenue Bill 2024.

Members of the National Assembly voted to allocate counties Sh380 billion, as recommended by the National Treasury, citing fiscal pressures following the withdrawal of the Finance Bill, 2024. Treasury officials argued that reducing the allocation was necessary to address the deficit.

However, senators on Thursday unanimously rejected this proposal, with all 28 senators present voting against the revised Bill.

They argued that cutting the counties' allocation would severely harm devolution efforts. According to the Senators, the proposed cut would negatively affect key programmes that rely on county funding.

Senators stand firm against cuts

The chairperson of the Senate Finance Committee, Ali Roba, underscored the impact of the proposed Sh20 billion reduction, particularly on essential county projects.

Roba warned that critical national government initiatives implemented at the county level, such as the housing levy, hiring health workers, leasing of medical equipment, and National Social Security Fund deductions, would suffer.

“The proposed cut will severely affect programmes tied to non-discretionary expenditures totalling Sh39.9 billion,” he stated.

The Bill will now head to a mediation committee made up of members from both Houses to work out a compromise.

This step follows the refusal by President William Ruto to sign the Allocation of Revenue Act (CARA) 2024, which initially allocated Sh400.1 billion to counties.

The President returned the Bill to the Senate in August, recommending that senators amend the amount to Sh380 billion in the 2024/2025 financial year.

Push to disband NG-CDF

Senators have also pushed for the dissolution of the National Government Constituency Development Fund (NG-CDF), calling it unconstitutional.

They argue that the funds currently allocated to NG-CDF should be redirected to the counties to bridge the shortfall caused by the Treasury's proposal.

“The NG-CDF is unconstitutional, and these funds should be channelled to counties instead,” the senators insisted.

The National Assembly had allocated Sh68 billion to NG-CDF in the current financial year. However, this was reduced to Sh61.2 billion in Supplementary Budget I, following the withdrawal of the Finance Bill.

The High Court had earlier declared the NG-CDF Act 2015 unconstitutional, saying it violated the principle of separation of powers.

A three-judge bench of Justices Kanyi Kimondo, Mugure Thande, and Roselyne Aburili ruled that the National Assembly had failed to consult the Senate when enacting the law.

In response, MPs have vowed to appeal the ruling at the Court of Appeal and seek a stay order pending the appeal’s outcome.

Mediation process and delays

With both Houses at an impasse, Speakers from the National Assembly and Senate will refer the issue to a mediation committee, further delaying the passage of the crucial Division of Revenue Bill.

This Bill splits nationally generated revenue between the national and county governments and is critical for the functioning of the devolved units.

The Division of Revenue Bill 2024 is key to disbursing funds to counties, and any delay could disrupt essential county services.

To avert a financial crisis, the National Treasury, with approval from the Attorney General, has authorised the release of 50 per cent of county funds as an interim measure until the Bill is passed.

The ongoing dispute mirrors similar standoffs between the two Houses in 2017 and 2020, where disagreements over county revenue allocation led to delays in disbursing funds.

Parliament will now form a mediation committee with equal representation from both Houses to try and reach a consensus.