The Treasury has proposed a modest increase in county funding for the next financial year, but senators and governors are already signaling dissatisfaction.
In its draft Budget Policy Statement for 2026/27, the National Treasury is recommending that counties receive Sh420 billion, up from the Sh407 billion allocated this year.
Treasury CS John Mbadi said the allocation represents 21.87 per cent of the most recent audited and approved national revenue, as provided under Articles 203 (2) and (3) of the constitution.
“The proposed equitable share for the financial year 2026/27 of Sh420 billion is equivalent to 21.87 per cent of the most recent audited and approved actual revenues raised nationally,” Mbadi said.
Despite the increase, the announcement is expected to reignite long-standing tensions over revenue-sharing. Senators and governors have consistently pushed for higher allocations, with past proposals failing to meet their expectations.
For the previous financial year, counties rejected the Sh405 billion allocation approved by the National Assembly. Senators called for Sh465 billion, while governors demanded Sh536 billion, citing the rising costs of running devolved services.
The Commission on Revenue Allocation, which is responsible for recommending how funds are shared between national and county governments, had suggested Sh417 billion for counties.
After extensive mediation between the Senate and the National Assembly, the final allocation was set at Sh407 billion. Analysts say the new proposal for 2026/27 could spark a similar standoff, with the Senate likely to argue that counties remain underfunded.
The Treasury defended its proposal, pointing to revenue shortfalls and increasing expenditure pressures during the 2025/26 budget cycle. Mbadi said ordinary revenue was Sh90 billion below expectations by the end of September 2025, raising concerns about the feasibility of larger allocations.
“If this trend continues, it is bound to affect the projected ordinary revenue for FY 2026/27,” Mbadi warned. He added that, historically, the national government has absorbed revenue gaps independently, except in the 2024/25 financial year.
The draft statement also highlights worrying macroeconomic trends. Revenue collection relative to the country’s economic growth has declined over the years, with ordinary revenue as a share of GDP falling from 18.1 per cent in 2013/14 to 14.5 per cent in 2025/26.
This decline signals that the country’s revenue performance is struggling to keep pace with its expanding economy, potentially limiting the resources available for counties.
