The ongoing deadlock over the allocation of funds to counties has prompted the formation of an 18-member Mediation Committee tasked with resolving the impasse. The committee, which held its first meeting last week, will convene for its second session on Tuesday, November 12, 2024. Co-chaired by Kiharu Member of Parliament Ndindi Nyoro and Mandera Senator Ali Roba, the committee brings together nine representatives each from the National Assembly and the Senate.
The formation of this committee follows the National Assembly’s rejection of the Senate’s amendments to the Division of Revenue (Amendment) Bill, 2024, on October 16. The bill aims to revise the formula for sharing revenue between the National and County governments, a process crucial for ensuring that county operations remain funded and functional. However, the ongoing dispute stems from disagreements over the amount of money allocated to counties in the 2024/25 financial year.
At the heart of the stalemate is a significant discrepancy between the National Assembly’s proposal of Sh380 billion for counties and the Senate’s insistence on retaining the original Sh400 billion figure from the Division of Revenue Act, 2024. This difference in proposed funding is causing operational disruptions at county governments, as they rely heavily on these funds to finance critical services and development projects.
During the committee’s first meeting on November 7, Kiharu MP Ndindi Nyoro explained the rationale behind the National Assembly’s decision to propose a reduced allocation for counties. He noted that the National Assembly’s figures were informed by the fiscal constraints resulting from austerity measures taken to address the country’s growing deficit. “Initially, we had a budget of Sh4.2 trillion, but after the adjustments made in July, our expenditure plans were revised downwards, leading to a larger projected deficit,” Nyoro explained.
Despite the reduction, Nyoro reiterated that the National Assembly remains committed to supporting devolution, emphasizing the importance of finding a balance between county funding and the broader fiscal health of the nation. Similarly, Mandera Senator Ali Roba highlighted the maturity of devolution in Kenya, stressing that adequate funding for counties is crucial to maintain the momentum of devolution and ensure that public services are not disrupted.
The committee’s second meeting will focus on several critical issues. Key among them is the justification for the reduction in county funding by Sh5 billion compared to the previous year’s allocation. The committee will also delve into the basis for the projected Sh346 billion shortfall in revenue, examining the accuracy and reliability of the revenue forecasts used to set these figures.
Another important aspect the committee will review is the historical performance of county governments in generating revenue locally. This review will assess how well counties have performed in collecting their own revenues and whether the national government’s projections align with the actual revenue generation capabilities of counties.
The Division of Revenue (Amendment) Bill, 2024, was introduced as a result of the country’s revised revenue expectations. After a series of adjustments and withdrawals of various bills, this amendment seeks to ensure that the distribution of funds between the National and County governments reflects the reduced revenue collection forecast for the financial year 2024/25. The bill was first passed in the National Assembly on August 7, 2024, and the Senate approved it with amendments on October 3, before the current deadlock arose.
As the mediation process continues, it is becoming increasingly clear that resolving the funding impasse is vital not only for the functioning of county governments but also for the stability and effectiveness of devolution in Kenya. The committee’s role is pivotal in ensuring that both national and county interests are adequately balanced in order to safeguard public services and drive the development of local communities across the country.
The outcome of the Mediation Committee’s deliberations will likely have significant implications for Kenya’s devolution agenda, with both lawmakers and county governments eager to see the deadlock resolved in a manner that supports sustainable development and public welfare.
