The government is targeting to deduct Sh20.12 billion from the funds allocated to counties as a fair share of revenue collected nationally in the current financial year following the rejection of the 2024 Finance Bill.
The planned reduction involves a proposed amendment to the Revenue Sharing Act 2024, which will force the 47 decentralized units to forgo part of the Sh400.12 billion allocated to them as their fair share, and share the burden of lost taxes equally with the national government.
Article 202 of the Constitution states that revenues collected at the national level shall be shared equally between national and local governments.
President William Ruto was last month forced to reject the 2024 Finance Bill and drop proposed revenue-raising measures amid youth-led anti-government protests that left a Sh346 billion shortfall in expected revenue collection.
Ndinde Nyoro, the Chairman of the Budget and Appropriations Committee of the National Assembly, has tabled the Division of Revenue (Amendment) Bill 2024, which if passed by both chambers, will see counties see their funding reduced for the current financial year.
In this regard, and in order to facilitate bridging the above-mentioned funding gap, as well as facilitate the national government to provide resources to critical areas, the bill proposes to reduce the equitable share of county governments for the 2024/2025 financial year by Shs20.12 billion, the bill memorandum states.
“The National Treasury proposes that both levels of government bear this deficit equitably.”
Since then, the national government has cut budget allocations to the executive, parliament, judiciary and constitutional offices to accommodate a deficit of Sh325.88 billion, leaving it with an additional Sh20.12 billion.
Dr Ruto has rejected the 2024 Finance Bill in a bid to quell protests as Kenyans, led by the youth, rejected the proposed taxes amid rising living costs and unemployment rates and on the grounds that the government has nothing to show for the tax hike.
The protests continued despite Dr Ruto’s rejection of the bill, his appointment of a new government, and his announcement of a series of measures aimed at appeasing Kenyans.
County governments rely on the fair share distributed by the National Treasury to pay salaries, fund development projects, and settle bills owed to contractors.
But provinces have had to contend with delays in disbursing funds amid revenue shortfalls and mounting debt payments, especially to China.
In the year ended last month, the Treasury failed to release Sh30 billion to the delegated units out of the agreed Sh385.42 billion set out in the Revenue Division Act 2023.
Counties have become increasingly dependent on the fair share of revenue, mainly due to the decline in their own revenue sources, which has negatively impacted their ability to operate smoothly.