Sh400.1 billion deal averts county cash crisis: Governors relieved

Governors have accepted a proposal by MPs of Sh400.1 billion as equitable revenue share in the next financial year, coming down from their demand of Sh439.5 billion.

Council of Governors Chairperson, Anne Waiguru, on Tuesday, May 28, 2024, the amount negotiated by the Senate and the National Assembly are acceptable.

The Kirinyaga governor said the council wanted more funds to go to the counties but the Sh9 billion increase from Sh391.1 billion earlier proposed can still work.

“This is the result of negotiations and though we wish to have more resources, we consider Sh400.1 billion an improvement and acceptable,” she said.

Lawmakers struck a deal with the government over allocation to devolved governments for the 2024/25 financial year.

Last month, the National Assembly approved Sh391.1 billion as equitable share to counties as proposed by the Treasury. Senators, however, rejected the allocation contained in the Division of Revenue Bill, 2024, insisting on Sh415.9 billion.

The MPs reached a compromise on Monday, agreeing to the Sh400.1 billion, averting a cash crisis in counties. The negotiations went into the evening.

Kiharu MP Ndindi Nyoro, who co-chaired the mediation, hailed the deal as a win for devolution “since it is the first time the two Houses have agreed on the issue”.

The National Assembly Budget Committee chairman told governors to use the money prudently.

“It is in the spirit of give-and-take that has enabled us to resolve this matter and allow counties to get their increased allocation,” Mr Nyoro said.

His co-chairman, Meru Senator Kathuri Murungi, said it is a step in the right direction.

“After lengthy deliberations, we agreed that devolution is working and should be supported by ensuring counties get sufficient funds,” the Senate Deputy Speaker said.

County governments were staring at a cash crunch as the impasse on allocation threatened to delay disbursements.

The point of departure was the proposed additional Sh24.8 billion to counties by the Senate.

The National Assembly last month approved Sh391.1 billion as equitable share to counties as had been proposed by the National Treasury.

However, senators rejected the allocation contained in the Division of Revenue Bill, 2024, holding on for Sh415.9 billion to be given to the 47 counties.

The senators adjusted the amount by at least Sh24 billion, saying Sh391.1 billion would have meant that the increase from the allocation in this financial year would be a “paltry” Sh5.6 billion.

The Senate Finance and Budget Committee said there was no way county governments would only get an increase of Sh5.6 billion in equitable revenue share against non-discretionary financial obligations of more than Sh34 billion.

Committee chairman and Mandera Senator, Ali Roba, defended the stand, saying devolved governments would inherit on their payroll Sh4 billion in terms of the Housing Levy, Sh3 billion in enhanced National Social and Security Fund (NSSF) contributions and Sh5.3 billion for county aggregation and industrial parks.

“The counties will also carter for community health promoters’ payment 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,” Senator Roba said.

There is also the Sh5.8 billion to carter for the doctors’ collective bargaining agreement signed up to 2024.

The National Assembly Budget and Appropriations Committee rejected the amendments from the Senate, resulting in the standoff.

Mr Nyoro said the budget policy statement had a budget of Sh4.18 trillion, which was later reduced to Sh3.91 trillion.

The Kiharu MP, however, added that the counties’ allocation of Sh391 billion still stood despite the slash.

“Our country and devolved governments operate on a fixed and thin resource envelope,” the MP added.

Triggered a standoff

The dispute over allocation of revenue triggered a standoff between the two Houses, leading the Speakers to refer the matter to a mediation committee, a process that would further delay the passage of the crucial bill.

The law provides for the formation of a mediation committee consisting of an equal number of members from either House of Parliament to strike a consensus.

The High Court in 2020 ruled that the Division of Revenue Bill must be approved by Parliament before the tabling of the budget estimates and the reading of the budget speech by the Treasury Cabinet Secretary.

It meant that county governments would not be able to get exchequer releases until the bill is approved by Parliament.

It is not the first time Parliament has faced such a quagmire. It happened in 2017 and 2020.

In the absence of the law, the National Treasury could advance cash to devolved governments as an administrative tool to prevent operations from grinding to a halt.

Such a scenario was witnessed in 2017.

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