Counties to get Funding as Senators Finally agrees on the Controversial division of revenue bill 2019



Statements By



5TH SEPTEMBER, 2019.Fellow Kenyans, ladies, and gentlemen of the Fourth Estate,

As you are aware, the annual division of revenue process for the Financial Year 2019/2020 has been ongoing. This process commenced with the publication, by the National Assembly of the Division of Revenue Bill, National Assembly Bills, No. 11 of 2019. The Bill set the equitable share of the revenue for the County Governments at Kshs. 310 billion, a drop by Kshs. 4 Billion from the allocation of Kshs. 314 Billion for the Financial Year 2018/2019.

It is noteworthy that the Commission on Revenue Allocation, whose primary role is to make recommendations concerning the basis for the equitable sharing of revenue between the two levels of government, had recommended a figure of 335.7 Billion as the equitable share of the revenue for the county governments.

This Bill was passed, without amendments, by the National Assembly and referred to the Senate for concurrence. The Senate, taking into account the recommendations of the Commission on Revenue Allocation, amongst other submissions, passed the Bill with amendments, to reflect Kshs. 335.7 Billion as the allocation to the County Governments.

As you will recall, the National Assembly rejected the amendments of the Senate and the Bill proceeded to mediation pursuant to Article 113 of the Constitution. The mediation process collapsed.

This led the Senate to publish a fresh Bill, the Division of Revenue Bill, Senate Bills No. 13 of 2019, providing for the amount of Kshs. 335.67 Billion as the share for the County Governments. The Senate passed the bill and referred it to the National Assembly for concurrence.

For the record, the National Assembly, having introduced the Bill in the Assembly, in a process unknown to the practices and procedures of our Parliament and comparative jurisdictions, withdrew the Bill and did not consider it further.

In response to the publication of the Senate of the Division of Revenue Bill, Senate Bills No. 13 of 2019 providing for the amount of Kshs. 335.67 Billion for the counties, the National Assembly published and passed the Division of Revenue (No. 2) Bill, 2019 that set the equitable share of the revenue for the County Governments at Kshs. 316.5 Billion. This Bill was referred to the Senate which proceeded to amend the Bill by-

increasing the equitable share to county governments from Kshs 316.5 billion to Kshs 335.67 billion; withdrawal of financing for the leasing of medical equipment; and the inclusion of an additional conditional allocation from development partners at the request of National Treasury.

The National Assembly rejected the amendments of the Senate and the Bill was referred to a Mediation Committee. The ongoing mediation process is, therefore, the second attempt, in this Financial Year, at resolving the impasse between the Houses on the enactment of the Division of Revenue Bill.

The main contention between the two Houses is the county equitable share allocation for the financial year 2019/20. The position of the Senate is that the allocation to the County Governments should be determined by increasing the previous year’s equitable share allocation, which was Ksh. 314 billion, by 6.9%, which is the 3-year average inflation.

The Senate has consistently championed the determination of the allocation of revenue to the two levels of government based on the recommendations of the Commission on Revenue Allocation and specific economic parameters, which may vary from year to year.

On the other hand, the National Assembly has consistently proposed allocations that do not take into account accepted economic parameters and that disregard the recommendations of the Commission on Revenue Allocation. As a result, based on the National Assembly’s proposals, while the National Government would enjoy a whooping 13.98% percent increase in the allocation of revenue in the financial year 2019/2020, the County Governments’ percentage increase would be a mere 0.79% percent.

The impasse on the Division of Revenue Bill, 2019, has not happened in a lacuna. Article 218 (1)(a) of the Constitution provides that the Division of Revenue Bill shall divide revenue raised by the national government among the national and county levels of government in accordance with the Constitution. Article 224 of the Constitution provides that “on the basis of the Division of Revenue Bill approved by Parliament under Article 218, each county government shall prepare and adopt its own annual budget and appropriation Bill in the form, and according to the procedure, prescribed in an Act of Parliament”.

As a consequence of not passing the Division of Revenue Bill and the County Allocation of Revenue Bill before the beginning of this financial year, the county governments have been precluded from conclusively preparing their own annual budgets and appropriation bills.

This not only contravenes the provisions of Article 203(1)(j) of the Constitution which requires stable and predictable allocations of revenue to counties but on a more fundamental level has also prejudiced the delivery of vital services by county governments.

It is now well settled that a definitive feature of the transformative nature of the 2010 Constitution is the introduction of a devolved system of government that guarantees the people of Kenya the right to manage their own affairs and to ensure proximate and accessible services throughout Kenya.

The precarious situation that county governments find themselves in is not only prejudicial to the delivery of public services but also erodes the constitutional imperative for equitable development.

As are aware, while the Division of Revenue Bill forms the basis upon which the two levels of government prepare legal instruments for public expenditure, the National Assembly proceeded to publish, consider and pass an Appropriation Act setting out the expenditure for the national government.

Therefore, while the operations of counties are likely to grind to a halt sooner rather than later, the national government has continued to operate unfettered. It is the position of the Senate that it is a flagrant violation of the Constitution for National Assembly and the national government to proceed and unilaterally determine the allocation to the national government independent of the enactment of a Division of Revenue Act.

Bypassing the Appropriation Act, 2019 the National Assembly, in effect, unlawfully and unconstitutionally allocated to the national government a share of revenue raised nationally without a determination of what that share should be and without an attendant allocation to the counties.

This is mischief that the Senate refuses to accept. In discharging its role as the protector of the interests of counties, the Senate filed High Court Petition No. 284 of 2019 in which the Senate seeks to challenge the constitutionality of various laws, among them, the Appropriation Act, 2019.

The Senate has been unwavering in its position that, pursuant to Article 202(1) of the Constitution, revenue raised nationally must be shared equitably among the two levels of government. The counties’ share of this revenue is a constitutional right and not an act of magnanimity on the part of the national government or the National Assembly or any other person or entity.

Indeed, it is Parliament which raises and allocates money between the national government and the counties. The duty to ensure that counties receive their share of nationally raised revenue was settled in Supreme Court Advisory Opinion No. 2 of 2013. It is therefore unfortunate that we still find ourselves in a position where we have to reiterate this very basic constitutional principle.

The Senate must express its disappointment at the manner in which the National Assembly has handled this matter. The National Assembly has, throughout this process, arrogated to itself the role of the defender and protector of the position and interests of the national government without any regard to the county governments.

While the Constitution contemplates that the mediation process shall be a negotiation undertaken in utmost good faith and with patriotism and fidelity to the public interest, the National Assembly’s conduct in this process, as has been evidenced by the nation at large, has been aggressive, combative, insensitive and even reckless.

The country has been treated to an unprecedented display of brinkmanship that is oblivious to the existential threat that the division of revenue impasse poses to the counties and to the system of devolved government as a whole.

In virtually all bicameral systems, the second chamber is deliberately designed to be the more circumspect, reflective, temperate and sober House of Parliament. It is for good reason. It is for a time such as this. The other House has demonstrated that it is unconcerned whether this impasse persists indefinitely. It is unconcerned whether the counties grind to a halt.

It is the ultimate irony that it is no bother of the National Assembly if the people of Kenya are denied basic services at the counties so long as the national government is adequately resourced. The Senate, by its design, composition, and role, cannot be complicit in such a project.

As we have shown, the process of passing the Division of Revenue Bill, 2019, has been arduous and the Senate is cognisant that we are fast approaching the end of the first quarter of the financial year and counties are yet to receive their share of nationally raised revenue.

The country is faced with the real prospect of shut-down of services at the counties. This would have a disastrous effect on critical sectors such as agriculture and health. For this reason, and for the reasons we have explained, the Senate, following a meeting held today, 5th September 2019, has made the painful but patriotic decision to advise our negotiators at the ongoing mediation process to agree to the allocation of Ksh.316.5 billion as the equitable share of nationally raised revenue to be allocated to the counties.

This has been a difficult decision for the Senate, but the Senate has been faced with a situation where it has to rise to its calling and put the overall national interest above short-term partisan considerations. We take solace in the fact that sometimes to win the war, one must be prepared to yield some battles.

We recognize that despite the many setbacks we have faced, the Senate has been able to enhance the allocation to the County Governments by Kshs. 6.5 Billion from the Kshs. 310 Billion in the first published Bill by the National Assembly to the current Kshs. 316.5 Billion. It is not enough, but it is progress and the Senate will live to fight another day.

The Senate will not allow the entire system of devolved government that is the basic pillar of our Constitution to be brought down by schemes such as this.

Accordingly, we will be advising the Senators representing the Senate in the ongoing mediation process to urgently meet with their counterparts in the National Assembly in order to immediately conclude this matter.

The decision taken by the Senate is without prejudice to its position in High Court Petition No. 284 of 2019 which suit we will continue to pursue as the petition seeks a determination on the constitutionality of the Appropriation Act, 2019 rather than the quantum of the monies to be allocated to the two levels of government. It is similarly without prejudice to any other matters in court in which the Senate is a party and in which similar issues are in contention. On this, we remain steadfast.

The protracted division of revenue process that the country has witnessed has fortunately come at a time when the country is in the throes of a robust constitutional reform discourse. The current impasse should serve as ample testimony for the need for any constitutional amendment to rank high in its agenda a guarantee of adequate resources for county governments free from the prospect of bullying, intimidation, and blackmail that has characterized the present process.

It is probably also ample testimony for the need for such constitutional reform to carefully consider a re-design of the composition and roles of the National Assembly that will ensure that that House at all times serves the national interest.

In conclusion, the Senate commends the Senate Committee on Finance and Budget and the Senators who have served on both Mediation Committees on the Division of Revenue Bill for their resolve and commitment to the principles of devolution and the national interest