The County Allocation of Revenue Bill, No. 10 of 2026

SPECIALISSUE

Kenya Gazette Supplement No. 107 (Senate Bills No. 10)

REPUBLICOFKENYA

KENYA GAZETTESUPPLEMENT

SENATE BILLS,2026

NAIROBI, 30th April, 2026

CONTENT

| Bill forIntroduction into theSenate | | |--------------------------------------------|-----| | The County Allocation of Revenue Bill,2026 | 137 |

THE COUNTY ALLOCATION OFREVENUEBILL,

2026

ARRANGEMENTS OFCLAUSES

Clause

• 1—Short title.
• 2Interpretation.
• 3-Object.
• 4-Equitable allocation of county governments' share of
• revenue.
• 5—Budget ceilings for recurrent expenditure.
• 6—Funding of transferred functions.
• 7—Report on actual transfers.
• 8-Books of accounts to reflect National Government
• transfers.
• 9Financial misconduct.
• 10-Applicablerevenue-sharing formula.

FIRST SCHEDULE:

ALLOCATION OF EACH COUNTY GOVERNMENTS' EQUITABLESHARE OFREVENUERAISED NATIONALLY, FINANCIAL YEAR

2026/2027

SECOND SCHEDULE:

COUNTY 2026/2027

GOVERNMENT BUDGET CEILINGS OF RECURRENT EXPENDITUREIN FINANCIAL YEAR

THE COUNTY ALLOCATION OF REVENUE BILL,

2026

A Bill for

AN ACT of Parliament to provide for the equitable allocation of revenue raised nationally among the county governments for the 2026/2027 financial year; the responsibilities of national and county governments pursuant to such allocation; and for connected purposes

ENACTED by Parliament of Kenya, as follows-

1. This Act may be cited as the County Allocation of Revenue Act,2026. 2. In this Act -

"Cabinet Secretary" means the Cabinet Secretary responsible for matters relating to finance; and

"revenue" has the meaning assigned to it under section 2 of the Commission on Revenue Allocation Act.

• 3.Theobjectof this Actis to-
• (a) provide, pursuant to Article 218(1)(b) of the Constitution, for the allocation of an equitable share of revenue raised nationally among the county governments, in accordance with the resolution approved by Parliament under Article 217 of the Constitution for the financial year 2026/27; and
• (b) facilitate the transfer of allocations made to counties under this Act from the Consolidated Fund to the respective County Revenue Funds.

4. (1) Each county governments' equitable share of revenue raised nationally, on the basis of the revenue sharing formula approved by Parliament in accordance with Article 217 of the Constitution in respect of the financial year 2026/27 shall be as set out in Column F of the First

• Schedule.
• (2) Each county government's allocation under subsection (1) shall be transferred to the respective County Revenue Fund in accordance with a payment schedule htho
• Short title.

Interpretation.

Cap. 428.

Object.

Equitable allocation of county governments' share ofrevenue.

Cabinet Secretary in accordance with section 17 of the Public Finance Management Act.

5. The budget ceilings for recurrent expenditure for be as set out in the Second Schedule. 6. (1) Where a county government has transferred a function to the National Government pursuant to Article 187 of the Constitution, the respective county executive in consultation with the National Government shall determine the cost of the transferred functions.

• (2) The respective county assembly shall appropriate such monies as may be required for the transferred function inaccordance withthedeterminationmadeunder subsection (1) and the allocation shall not be less than the amount appropriated by the county assembly in the preceding financial year.
• (3) The monies appropriated under subsection (1) shall betransferred to theNational Government.
• (4) A national government entity to which a county government function has been transferred shall submit a quarterly report to the Senate and the respective county assembly on the status of the discharge of the devolved function.
• (5) The Auditor-General shall, no later than three months after the end of a financial year, prepare a special audit report on the financial and non-financial performance of an entity to which a county government function has been transferred.
• (6) The Auditor-General shall submit the report under

8. subsection (5) to the Senate and the respective county assembly. 7. The Cabinet Secretary shall publish a monthly 10. report on actual transfers of all allocations to county governments. 8. (1) Each county treasury shall reflect all transfers by the national government to the county governments in its books of accounts.

• (2) The estimates of revenue of each county shall separately reflect the total eaiitahle revenne sharennder

Cap412A.

Budget ceilings forrecurrent expenditure.

Funding of transferred functions.

Report on actual

transfers.

Books of accounts toreflectNational Government

transfers.

section 4 of this Act transferred to the County Revenue Fund.

• (3) A county treasury shall as part of its consolidated quarterly and annual reports required under the Public Finance Management Act report on actual transfers received by the county government from the national government, up to the end of that quarter or year in the format prescribed by the Public Sector Accounting Standards Board or in the absence of a format prescribed by the Board, in. the format prescribed by the National Treasury.

9. Despite the provisions of any other law, any serious or persistent non-compliance with provisions of this Act constitutes an offence under the Public Finance Management Act. 10. For the avoidance of doubt the allocation of the equitable share of revenue to county governments under section 4 of this Act shall be in accordance with the fourth determination of the basis of the division of revenue among (7) of the Constitution.

Cap.412A.

Financial misconduct.

Cap.412A

Applicable revenue-sharing

formula.

FIRSTSCHEDULE

Allocation ofEach County Government's Equitable Share of Revenue Raised Nationally in theFY2026/27.

| | SNCounty | Baseline Allocation ofKsh.387.425billion AllocationEquitableshare | Baseline Allocation ofKsh.387.425billion AllocationEquitableshare | Affirmative Action Allocation Ksh.4.46 billion C | Additional equitableshare above Ksh.391.885 (Ksh. 62.858 billion) Allocation Equitable Share | Additional equitableshare above Ksh.391.885 (Ksh. 62.858 billion) Allocation Equitable Share | | | |----|------------------|---------------------------------------------------------------------|---------------------------------------------------------------------|----------------------------------------------------|------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------|----------------|----------------| | | SNCounty | factor A | B | Affirmative Action Allocation Ksh.4.46 billion C | Ratio D | E | | | | | Baringo | 1.72520 | 6,683,873,223 | | 1.72966 | 1,087,230,381 | | | | 2 | Bomet | 1.81070 | 7,015,121,755 | | 1.86926 | 1,174,980,485 | 7,771,103,604 | 7,771,103,604 | | 3 | Bungoma | 2.88331 | 11,170,673,599 | | 2.88722 | 1,814,853,751 | 8,190,102,240 | 8,190,102,240 | | 4 | Busia | 1.93971 | 7,514,935,582 | | 1.91057 | 1,200,949,705 | 8,715,885,287 | 8,715,885,287 | | 5 | Elgeyo- Marakwet | 1.24585 | 4,826,732,019 | 371,666,667 | 1.37031 | 861,353,988 | | | | 6 | Embu | 1.38605 | 5,369,896,832 | 371,666,667 | 1.45307 | 913,375,871 | 6,654,939,370 | 6,654,939,370 | | 7 | Garissa | 2.13988 | 8,290,447,365 | | 2.54094 | 1,597,185,439 | | | | 8 | Homa-Bay | 2.10887 | 8,170,280,800 | | 2.05968 | 1,294,677,533 | | | | 9 | Isiolo | 1.27083 | 4,923,507,187 | 371,666,667 | 1.45440 | 914,206,015 | 6,209,379,869 | 6,209,379,869 | | 10 | Kajiado | 2.15397 | 8,345,013,610 | | 2.37612 | 1,493,588,356 | | | | 11 | Kakamega | 3.35046 | 12,980,503,320 | | 3.00387 | 1,888,179,239 | 14,868,682,559 | 14,868,682,559 | | 12 | Kericho | 1.73930 | 6,738,465,302 | | 1.90440 | 1,197,073,461 | 7,935,538,763 | 7,935,538,763 | | 13 | Kiambu | 3.17318 | 12,293,696,674 | | 3.36630 | 2,115,997,070 | | | | 14 | Kilifi | 3.14121 | 12,169,843,476 | | 2.78414 | 1,750,057,303 | 13,919,900,779 | 13,919,900,779 | | 15 | Kirinyaga | 1.40654 | 5,449,272,719 | 371,666,667 | 1.43077 | 899,355,722 | 6,720,295,108 | 6,720,295,108 | | 16 | Kisii | 2.40197 | 9,305,835,688 | | 2.22317 | 1,397,444,619 | | | | 17 | Kisumu | 2.16954 | 8,405,328,573 | | 2.14881 | 1,350,704,921 | | | | 18 | Kitui | 2.80983 | 10,885,968,099 | | 2.67333 | 1,680,404,655 | | | | 19 | Kwale | 2.22634 | 8,625,411,603 | | 1.96101 | 1,232,656,334 | | | | 20 | Laikipia | 1.39047 | 5,387,034,732 | 371,666,667 | 1.49418 | 939,216,478 | | | | 21 | Lamu | 0.84002 | 3,254,430,723 | 371,666,667 | 1.00162 | 629,598,120 | | | | 22 | Machakos | 2.47718 | 9,597,223,940 | | 2.51745 | 1,582,423,166 | | | | 23 | Makueni | 2.19328 | 8,497,308,272 | | 2.07237 | 1,302,651,040 | | | | 24 | Mandera | 3.01752 | 11,690,618,560 | | 2.48517 | 1,562,130,417 | | | | 25 | Marsabit | 1.96093 | 7,597,151,194 | | 2.19995 | 1,382,846,527 | 8,979,997,721 | 8,979,997,721 | | 26 | Meru | 2.56678 | 9,944,340,480 | | 2.63727 | 1,657,741,021 | | | | 27 | Migori | 2.16431 | 8,385,076,399 | | 2.15818 | 1,356,592,228 | | | | 28 | Mombasa | 2.03902 | 7,899,674,038 | | 2.09263 | 1,315,388,176 | | | | 29 | Murang'a | 1.93892 | 7,511,867,031 | | 1.97966 | 1,244,376,274 | | | | 30 | Nairobi City | 5.20842 | 20,178,711,957 | | 5.35763 | 3,367,708,246 | | | | 31 | Nakuru | 3.52765 | 13,666,997,646 | | 3.40969 | 2,143,268,780 | 15,810,266,426 | 15,810,266,426 | | 32 | Nandi | 1.89613 | 7,346,071,107 | | 1.84169 | 1,157,653,266 | | | | 33 | Narok | 2.38546 | 9,241,860,519 | | 2.28621 | 1,437,067,275 | | | | 34 | Nyamira | 1.38349 | 5,359,987,994 | | 1.47861 | 929,424,271 | 6,661,078,932 | 6,661,078,932 | | 35 | Nyandarua | 1.53230 | 5,936,521,652 | 371,666,667 371,666,667 | 1.53358 | 963,980,940 | 7,272,169,259 | 7,272,169,259 |

| | SNCounty | Baseline Allocation ofKsh.387.425billion | Baseline Allocation ofKsh.387.425billion | Affirmative Action Allocation Ksh.4.46 billion | Additional equitableshare above Ksh.391.885 (Ksh. 62.858 billion) | Additional equitableshare above Ksh.391.885 (Ksh. 62.858 billion) | Total Equitable Share | |----|----------------|--------------------------------------------|--------------------------------------------|--------------------------------------------------|---------------------------------------------------------------------|---------------------------------------------------------------------|-------------------------| | | SNCounty | Allocation Equitable share factor | Allocation Equitable share factor | Affirmative Action Allocation Ksh.4.46 billion | Allocation Ratio | Equitable Share | Total Equitable Share | | | SNCounty | A | B | C | D | E | F=B+C+E | | 36 | Nyeri | 1.68255 | 6,518,609,255 | | 1.63324 | 1,026,624,557 | 7,545,233,812 | | 37 | Samburu | 1.45144 | 5,623,228,509 | 371,666,667 | 1.47988 | 930,227,826 | 6,925,123,002 | | 38 | Siaya | 1.88462 | 7,301,473,431 | | 1.95979 | 1,231,887,880 | 8,533,361,311 | | 39 | Taita- Taveta | 1.30764 | 5,066,138,383 | 371,666,667 | 1.39582 | 877,389,031 | 6,315,194,080 | | 40 | Tana-River | 1.76156 | 6,824,718,834 | | 1.72077 | 1,081,644,079 | 7,906,362,913 | | 41 | Tharaka- Nithi | 1.13558 | 4,399,508,312 | 371,666,667 | 1.24210 | 780,760,904 | 5,551,935,883 | | 42 | Trans-Nzoia | 1.94631 | 7,540,500,922 | | 1.94947 | 1,225,400,726 | 8,765,901,648 | | 43 | Turkana | 3.41054 | 13,213,283,30 | | 2.93876 | 1,847,249,521 | 15,060,532,841 | | 44 | Uasin-Gishu | 2.18685 | 8,472,398,961 | | 2.18307 | 1,372,235,353 | 9,844,634,314 | | 45 | Vihiga | 1.36618 | 5,292,921,648 | 371,666,667 | 1.48892 | 935,905,105 | 6,600,493,420 | | 46 | Wajir | 2.55606 | 9,902,799,041 | | 2.61640 | 1,644,622,968 | 11,547,422,009 | | 47 | WestPokot | 1.70607 | 6,609,735,714 | | 1.69885 | 1,067,868,853 | 7,677,604,567 | | | Total | 100 | 387,425,000,000 | 4,460,000,000 | 100.00000 | 62,858,157,879 | 454,743,157,879 |

SECONDSCHEDULE(S.6(1))

| County Government Budget Ceilings on Recurrent Expenditure in FY 2026/27(Figures inKenya Shillings) | County Government Budget Ceilings on Recurrent Expenditure in FY 2026/27(Figures inKenya Shillings) | County Government Budget Ceilings on Recurrent Expenditure in FY 2026/27(Figures inKenya Shillings) | County Government Budget Ceilings on Recurrent Expenditure in FY 2026/27(Figures inKenya Shillings) | County Government Budget Ceilings on Recurrent Expenditure in FY 2026/27(Figures inKenya Shillings) | County Government Budget Ceilings on Recurrent Expenditure in FY 2026/27(Figures inKenya Shillings) | |-------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------| | SN | | CountyAssembly Ceilings | CountyAssembly Ceilings | County Executive Ceilings | County Executive Ceilings | | | COUNTY | FY2024/25 | FY 2025/26 | FY 2024/25 | FY2025/26 | | 1 | Baringo | 847,469,122 | 847,626,854 | 496,161,163 | 528,170,814 | | 2 | Bomet | 755,816,719 | 731,537,286 | 468,730,626 | 498,289,418 | | 3 | Bungoma | 1,074,221,694 | 976,506,613 | 562,059,982 | 601,422,211 | | 4 | Busia | 859,603,045 | 869,947,142 | 514,728,802 | 549,189,312 | | 5 | Elgeyo- Marakwet | 682,127,598 | 684,431,351 | 445,655,740 | 472,763,673 | | 6 | Embu | 653,997,909 | 651,091,348 | 445,585,855 | 472,693,787 | | 7 | Garissa | 1,010,212,868 | 995,206,383 | 510,888,235 | 544,919,368 | | 8 | Homa-bay | 901,349,007 | 913,968,214 | 538,863,664 | 575,775,034 | | 9 | Isiolo | 571,957,767 | 515,234,218 | 376,492,992 | 398,239,140 | | 10 | Kajiado | 797,493,878 | 833,655,216 | 459,200,063 | 488,452,144 | | 11 | Kakamega | 1,440,150,864 | 1,282,977,973 | 631,900,264 | 678,615,072 | | 12 | Kericho | 801,439,308 | 808,829,560 | 491,924,215 | 523,933,866 | | 13 | Kiambu | 1,332,680,576 | 1,233,843,597 | 642,094,266 | 688,809,074 | | 14 | Kilifi | 871,651,828 | 867,147,393 | 528,153,096 | 562,613,607 | | 15 | Kirinyaga | 667,134,062 | 666,664,869 | 436,378,706 | 463,333,283 | | 16 | Kisii | 1,051,143,180 | 1,061,001,255 | 569,351,784 | 608,714,014 | | 17 | Kisumu | 993,261,872 | 799,826,065 | 522,102,171 | 638,237,442 | | 18 | Kitui | 1,025,218.850 | 1,007,699,946 | 556,906,939 | 593,818,310 | | 19 | Kwale | 667,152,528 | 675,305,556 | 447,387,205 | 474,495,138 | | 20 | Laikipia | 511,501,082 | 526,142,878 | 406,459,778 | 430,810,140 | | 21 | Lamu | 502,735,064 | 479,609,506 | 373,334,857 | 395,081,004 | | 22 | Machakos | 957,194,136 | 970,874,933 | 540,775,483 | 577,686,853 | | 23 | Makueni | 964,631,315 | 847,824,561 | 494,768,774 | 526,778,425 | | 24 | Mandera | 917,936,058 | 974,349,992 | 511,948,091 | 543,957,742 | | 25 | Marsabit | 741,494,088 | 792,562,104 | 458,101,332 | 490,972,864 | | 26 | Meru | 1,033,230,263 | 1,040,373,863 | 565,023,558 | 604,385,788 | | 27 | Migori | 936,954,113 | 941,149,982 | 538,507,125 | 575,418,495 | | 28 | Mombasa | 862,807,953 | 736,274,590 | 497,268,190 | 529,277,841 |

| County Government Budget Ceilings on Recurrent Expenditure in FY 2026/27(Figures in Kenya Shillings) | County Government Budget Ceilings on Recurrent Expenditure in FY 2026/27(Figures in Kenya Shillings) | County Government Budget Ceilings on Recurrent Expenditure in FY 2026/27(Figures in Kenya Shillings) | County Government Budget Ceilings on Recurrent Expenditure in FY 2026/27(Figures in Kenya Shillings) | County Government Budget Ceilings on Recurrent Expenditure in FY 2026/27(Figures in Kenya Shillings) | County Government Budget Ceilings on Recurrent Expenditure in FY 2026/27(Figures in Kenya Shillings) | |--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------| | SN | | County Assembly Ceilings | County Assembly Ceilings | County Executive Ceilings | County Executive Ceilings | | | COUNTY | FY2024/25 | FY 2025/26 | FY 2024/25 | FY 2025/26 | | 29 | Murang'a | 813,710,947 | 851,528,548 | 515,207,988 | 549,668,499 | | 30 | Nairobi City | 1,603,909,510 | 1,569,710,435 | 775,756,999 | 834,726,105 | | 31 | Nakuru | 1,121,659,233 | 1,139,437,714 | 622,626,699 | 666,890,648 | | 32 | Nandi | 811,140,379 | 797,267,097 | 492,132,433 | 524,142,084 | | 33 | Narok | 878,624,509 | 927,319,735 | 499,621,001 | 531,630,652 | | 34 | Nyamira | 689,414,409 | 698,351,387 | 444,949,706 | 472,057,639 | | 35 | Nyandarua | 758,345,693 | 785,219,049 | 469,042,680 | 498,601,472 | | 36 | Nyeri | 760,288,009 | 763,643,931 | 492,365,209 | 524,374,860 | | 37 | Samburu | 569,616,860 | 605,962,163 | 400,557,424 | 633,218,705 | | 38 | Siaya | 759,893,500 | 770,412,462 | 491,970,700 | 523,980,352 | | 39 | Taita-Taveta | 706,797,720 | 694,446,178 | 450,325,811 | 477,433,743 | | 40 | Tana-River | 710,218,891 | 612,807,695 | 422,272,274 | 446,775,992 | | 41 | Tharaka-Nithi | 508,533,605 | 513,863,636 | 404,731,372 | 429,081,734 | | 42 | Trans-Nzoia | 664,759,854 | 663,677,259 | 474,454,626 | 504,013,417 | | 43 | Turkana | 863,842,883 | 946,217,760 | 510,888,235 | 551,543,287 | | 44 | Uasin-Gishu | 887,273,308 | 767,346,325 | 498,842,007 | 530,851,658 | | 45 | Vihiga | 703,918,304 | 704,103,951 | 467,917,374 | 497,476,165 | | 46 | Wajir | 992,853,943 | 937,865,189 | 502,524,835 | 542,527,721 | | 47 | West-Pokot | 699,024,354 | 711,194,510 | 447,670,353 | 474,778,286 | | | Total | 39,936,392,658 | 39,192,038,271 | | 23,414,610,68225,250,626,877 |

MEMORANDUMOFOBJECTSANDREASONS

The principal object of this Bill is to make provision for the

allocation of revenue raised nationally among the county governments for the financialyear2026/27.

Clause 1 of the Bill provides for the short title while clause 2 defines

thevarious terms used in the Bill.

Clause 3 of the Bill contains the objects and the purpose of the Bill which is to provide for the allocation of revenue raised nationally among county governments for the financial year 2026/27 as well as the transfer of the county allocations from the Consolidated Fund to the respective County Revenue Fund.

Clause 4 of the Bill deals with the allocation of equitable share of

revenue raised nationally to each county government.

Clause 5 of the Bill provides for budget ceilings for recurrent expenditure for county governments in accordance with section 107(2)(a) of the Public Finance Management Act No. Cap 412A.

Clause 6 of the Bill provides for the modalities of funding of transferred functions from a county government to the National

Government.

Clause 7 of the Bill provides for the publishing of monthly reports by the Cabinet Secretary, on actual transfers of all allocations to county governments.

Clause 8 of the Bill provides for the respective county treasury to reflect the total allocations from the national government separately in the County Finance Bill and reflect all transfers in the books of accounts.

Clause 9 of the Bill provides for the actions constituting financial

misconduct.

Clause 10 of the Bill provides for use of the fourth determination of the basis of the allocation of revenue among counties as approved by Parliament pursuant to Article 217(7) of the Constitution.

Dated the 9th April, 2026.!

ALIIBRAHIMROBA,

Chairperson,

Standing Committee on Finance and Budget.

EXPLANATORY MEMORANDUM TOTHE COUNTY ALLOCATIONOF REVENUEBILL,2026

Background

1. This memorandum is prepared as an attachment to the County Allocation of Revenue Bill (CARB), 2026 in fulfilment of the requirements of Article 218(2) of the Constitution and section 191(5) of the Public Finance Management Act, Cap. 412A. 2. Article 218(2) of the Constitution requires that the Bill be submitted to Parliament every year together with a memorandum 3. explaining: 4. (a) the proposed revenue allocation set out in the Bill; 5. (b) the extent to which the Bill has taken into account the provisions of Article 203 (1) of the Constitution; and 6. (c) a summary of any significant deviation from the recommendations of the Commission on Revenue Allocation (CRA), with an explanation for each such deviation. 3. Section 191(5) of the Public Finance Management Act requires that the Bill be accompanied by a memorandum which explains: 8. (a) how the Bill takes into account the criteria set out in Article 203(1) of the Constitution; 9. (b) the extent, if any, of the deviation from the recommendations of the Commission on Revenue Allocation; 10. (c) the extent, if any, of deviation from the recommendations of the Intergovernmental Budget and Economic Council; and 11. (d) any assumptions and formulae used in arriving at the respective shares mentioned in subsections 191(2) and (3) of the Public Finance Management Act. 4. The memorandum is also prepared based on the approved fourth basis for revenue allocation among county governments pursuant to Article 217 of the Constitution. On 24" June 2025, Parliament approved the Fourth Basis for allocation of the share of national revenue among the county governments.

Explanation of the Allocations to the National and County Governments asProposed in theBill

1. The Division of Revenue Bill proposes an allocation of KSh. 2,436.9 billion to the National Government and KSh. 454.7 billion to county governments for the financial year 2026/27 as equitable share of revenue raised nationally. The allocation of KSh. 454.7 billion translates to an increase of KSh. 39.7 billion or 9.6 % from a base of KSh. 415.0 billion allocated in the financial year 2025/26 (see Table 1).

Table 1:Equitable Revenue Share Allocation to County Governments forFinancialYear2026/27

| BUDGETITEM | Amount (KSh. million) | |-----------------------------------------------------------|-------------------------| | 1. Baseline (i.e., allocation in the previous FY 2025/26) | 415,000 | | Add: | | | 2.Adjustment for Revenue Growth | 39,743 | | Equitable Revenue Share allocation for FY 2026/27 (1+2) | 454,743 |

Source:National Treasury

2. The proposed allocation of KSh. 454.7 billion to county governments equitable revenue share is informed by the following factors: 2. (a) Performance of FY 2025/26 Revenues: As at end of December 2025,ordinary revenues for FY 2025/26 recorded a shortfall of KSh 115.3 billion from the target. If this trend continues, it is bound to affect the projected ordinary revenue for FY 2026/27; 3. (b) Over the years, the National Government has continued to solely bear shortfalls in revenue in any given financial year except for FY 2024/25; 4. (c) The macroeconomic assumptions outlined in 2026 Budget Policy Statement (BPS), including anticipated growth rates, inflation, and other economic performance indicators, which influence the resources available for allocation; 5. (d) Declining ordinary revenue as a percent of GDP which indicates that revenue collection is not keeping pace with economic growth. Ordinary revenue as a share of GDP has declined from a 6. high of 18.1% in FY 2013/14 to 14.1% in FY 2024/25 Budget s 7. (e) Consolidated Fund Services (CFS) is accounting for 48.5% of ordinary revenue in the FY 2025/26, up from 16.4% in FY 2013/14, pensions and interest payments tripling their share of revenues to 8.7% and 39.8% from FY 2013/14 to FY 2025/26. This trend is expected to remain constant in FY 2026/27; 8. (f) The spending allocation for FY 2026/27 and medium-term is guided by the Government's fiscal consolidation plan intended to reduceannual uptake of debt and thereby reduce debt vulnerabilities and improve debt sustainability. The implementation of thefiscal consolidation plan by the Government which is aimed at reducing g the fiscal deficit inclusive of grants from 5.9 percent of GDP in FY 2024/25 to 5.3 s h continuous rationalization of expenditures by eliminating noncore expenditures while improving efficiency in implementation of development projects to contain expenditure growth, and stabilize debt; 9. (g) Increased expenditures for National Government for purposes of 10. debt servicing; 11. (h) The proposed Equitable Share for financial year 2026/27 of KSh. 454.7 billion is equivalent to 22.2 percent of the most recent audited and approved actual revenues raised nationally of KSh. 2,050.1 billion for financial year 2022/23. The allocation is therefore in line with the provision of Article 203 (2) and (3) of the Constitution.

Evaluation of the Bill against Article 203(1) of the Constitution

3. Fiscal Capacity and Efficiency of County Governments: The s s ' billion equitable share to county governments. Similarly, it is expected that the county governments will also grow their Own Source Revenue (OSR). The National Treasury has instituted measures to support county governments enhance their revenue collection. These include the National Rating Act, 2024, development of the County Governments Revenue Raising Process Bill, 2023, the Model Tariffs and Pricing Policy for adoption by county governments and recommendation for an Integrated County Revenue Management System. 4. County governments' ability to perform the functions assigned to them and meet other developmental needs of the county

governments: As explained above, the baseline for the equitable share allocation for thefinancialyear 2026/27was derivedfrom theDivision of Revenue Act, 2025. This baseline is informed by costing of expenditure for devolved functions done at onset of devolution, which has been the basis for equitable share over the years. KSh. 8.9 billion has been identified by the Ministry of Health as the total attendant remunerations for Universal Health Coverage (UHC) Workers to be transitioned to permanent and pensionable terms within counties in the financial year 2026/27. This allocation is proposed to be allocated to county

5. Developmental needs of the county governments and their ability to perform their assigned functions: County governments are allocated equitable share of revenue which is an unconditional allocation to enable them have autonomy to plan, budget and implement development projects based on county priorities and account for the same. In addition, Article 209 of the Constitution has assigned counties revenue raising powers and as such counties are expected to improve and maintain sustained collection of their own source revenues. 6. Economic disparities within and among counties and the need to remedy them: The Fourth Basis for horizontal revenue allocation among counties was approved by Parliament in 2025 and is applicable has taken into account the following parameters;1) The Baseline Allocation Ratio; 2) Affirmative Action Allocation; and 3) The Fourth Basis indices namely: - (i) Population (45%); (i) Basic Share index (35%); (iii) Poverty Index (12%); and (iv) Geographical Size (8%). The baseline sharing was based on the Third Basis which is premised on eight governments in Part II of the Fourth Schedule of the Constitution.

The three components contained in the Fourth Basis are as follows: -

• The Baseline Allocation Ratio- This is derived from each county's allocation for Financial Year 2025/26. The Baseline Allocation Ratio ensures that each county maintains what it had already secured in the FY 2024/25 out of KSh. 387.43 billion, which is meant to ensure that no county loses on revenue,hence holding all Counties harmless.
• The Affirmative Action Allocation- This component provides for equitable share amounting to KSh.4.46 billion that has been ring-fenced to cater for and be shared equally among the 12 smaller counties that are not favoured by the other parameters such as population and geographical size. This component

• considers disparities among counties and aims at equitable
• distribution of resources across all counties in line with Article 203(1)(g).
• The Fourth Basis indices- The third component of the formula
• shares out the difference amounting to KSh. 62.81 billion using the parameters of the approved Fourth basis which are Population Index, Equal share Index, Poverty Index and Geographical Size Index. The Population Index is based on the 2019 Kenya Population and Housing Census whereas the Poverty Index is based on the 2022 Kenya Poverty Report by the Kenya National Bureau of Statistics

7. Need for Affirmative Action in respect to disadvantaged areas and groups: KSh. 15.8 billion has been set aside for the Equalization Fund in financial year 2026/27. For purposes of Division of Revenue in financial year 2026/27, KSh. 10.2 billion has been allocated being 0.5 per e s (i.e., KSh. 2,050.1 billion), in line with Article 204 of the Constitution. Further, the National Treasury has provided an additional KSh. 5.6 billion towards settlement of arrears to the Fund, in line with the commitment made to Parliament to progressively clearaccrued arrears.The Equalisation Fund is used to finance development programmes that aim at reducing regional disparities among beneficiarycountiesin water, education, health and infrastructure sectors. 8. Need for Economic Optimization of Each County: Allocation

• of resources to county governments was guided by the historical costing of equitable share of revenue allocated to county governments in the financial year 2026/27 is KSh. 454.7 billion, an allocation which is KSh. 39.7 billion higher than KSh. 415.0 billion allocations in financial year 2025/26. This is an unconditional allocation which means that the county governments can independently plan, budget and spend the funds. With these allocated resources, therefore, county governments are able to prioritize projects and allocate resources, thus optimizing their potential for economic development.
• 9.Stable and Predictable Allocations of County Governments' Vertical Share of Revenue: The county governments' equitable share of revenue raised nationally has been shielded from possible shocks in performance of total revenues raised nationally more so in the advent of the effects of projected global economic downturn in 2026. Clause 5 of the Division of Revenue Bill, 2026, provides that the National Government

will bear the cost of any shortfall in revenue raised nationally in FY

2026/27.

• 10.Need forFlexibility inResponding toEmergenciesand Other Temporary Needs: The National Government has allocated KSh. 2.0 billion towards the Contingencies Fund established pursuant to Article 208 of the Constitution. This Fund will be used to finance urgent and unforeseen expenditures in the two levels of government to meet the demands arising from needs in all Counties that suffer from calamities in the manner contemplated under sections 19, 20 and 21 of the Public Finance Management Act. In addition, the Public Finance Management Act mandates each County Government to set up County Emergency Fund to respond to urgent and unforeseen expenditures within their jurisdiction.

11. It should be noted that after taking into account all the other factors contemplated under Article 203(1) of the Constitution, including the needs of county governments, there are no resources left to finance other National Government needs, such as defence, roads, energy among others. In fact, the National Government is left with a financing gap of KSh108.2billiontofinanceNationalGovernmentotherdevelopment priorities and non-discretionary expenditures such as salaries for National Government staff. This implies a huge negative financing gap that may occasion additional borrowing which may distort the fiscal framework already set out in the 2026 Budget Policy Statement and negatively impact on the fiscal consolidation plan.

Summary ofDeviations from the Recommendations of the Commission

onRevenueAllocation

12. The Division of Revenue Bill, 2026 proposes to allocate county governments an equitable share of KSh. 454.7 billion from the shareable revenue raised nationally to be shared among county governments using the Fourth basis formula for sharing revenue approved by Parliament under Article 2i7 of the Constitution. The Commission on Revenue Allocation (CRA), on the other hand, recommends county governments' equitable share of revenue of KSh. 458.9 billion as an unconditional allocation to be shared among county governments using the fourth basis formula for sharing revenue approved by Parliament, pursuant to Article 217 of the Constitution. The proposed allocation and CRA has occasioned a variance of Ksh.4.2 billion. 13. The variation of Ksh. 4.2 billion between the proposed allocation and CRA is occasioned by: - 3. (a) Adjustment for Revenue Growth from the baseline: - The proposed an increase of KSh. 39.7 billion to county governments

• equitable share, from the FY 2025/26 baseline, CRA has proposed an increase of KSh. 35.0 billion, in FY 2026/27, resulting into a difference of KSh. 4.2 billion. Whereas CRA allocation is largely premised on projected revenue performance, there may be a likelihood of this growth not being attained whereby projected ordinary revenuesforFY2 2025/26 underperformed by KSh 115.4 billion as at end of December 2025. Secondly, most of the projected ordinary revenue will go towards financing mandatory expenditures under Article 203(1) of the Constitution including public debt.
• (b)Remuneration of Universal Health Coverage (UHC) Workers: - CRA has proposed an allocation of KSh. 8.94 billion, as equitable share, in FY 2026/27 to fully transition UHC workers to permanent and pensionable staff. However, the DORB, 2026 has not provided for transfer of the same as part of equitable share. Article 187 of the Constitution require that, when a function is transferred from one level of government to another, arrangements shall be made to ensure that the resources necessary for the performance of the function are transferred. In this regard, therefore, both the National Treasury and the CRA have proposed that the attendant total resources for remunerations of the UHC workers be allocated to county governments in FY 2026/27. However, while the CRA has proposed that these resources be allocated as part of the County Equitable Share of revenue in their recommendations on division of revenue for FY 2026/27, the e e e s s conditional additional allocation to county governments through the County Governments Additional Allocations Bill, 2026 to align with actual UHC payroll spread across counties.
• (c) Assumptions Used in Arriving at the Respective Shares: Both the National Treasury and the CRA have made varying assumptions in arriving at the respective proposals on County Equitable Share for FY 2026/27, as discussed in paragraph 14 for
• the National Treasury; and paragraph 15 for CRA.

14. In arriving at the respective allocations to National and county

• level of governments, the it was guided by the following economic assumptions:
• (i)
• That there will be no major economic shocks negatively affecting forecasted revenue in financial 2026/27;
• (ii) That Ordinary revenues projected at KSh 2,901.9 billion
• (13.9 percent of GDP) in financial vear 2026/27 will he

attained. This revenue performance will be underpinned by the on-going reforms in fiscal policy and revenue administration;

• (ili) That fiscal deficit shall reduce from an estimated 5.9% of GDP in FY 2024/25 to 5.3 percent of the GDP in FY 2025/26 and 3.2% of GDP over the medium term with strong primary surplus so as to stabilize growth in public debt;
• (iv) That there shall be stability in interest rates and foreign exchange rates;
• V That inflation shall remain stable within the government target of 5±2.5 percent;
• (vi) Implementation of the Medium-Term Revenue Strategy ( progressively strengthen tax revenue mobilization efforts to 20.0%of GDPover themediumterm;
• (vii) That projected public debt/GDP ratio will decline to the debt anchor of 55±5 percent of GDP in PV terms over the medium term, supported by the medium-term fiscal consolidation efforts;
• (vili) Sustained positive Credit Rating by various Agencies including Moody's, S&P and Fitch, will positively influence Kenya's borrowing costs and accessto international capital markets;
• (ix) A sustained national economic growth momentum with projected GDP growth of 5.3 percent in 2026;
• (x) That County governments will continue to enhance their Own Source Revenues to reduce overreliance on national transfers and improve their fiscal sustainability.

15. In arriving at the allocation of KSh. 458.9 billion, the CRA was informedbythefollowingfactors:

• (a) A stable macroeconomic environment that is characterized with low inflation, low interest rates and a stable exchange rate;
• (c) That projected revenue growth of 13.1 per cent will increase 2,639.7 billion in the financial year 2025/26;
• (d) The need to provide adequate resources for each level of g Schedule of the Constitution.

Conclusion

16. The proposals contained in the Bill considers the financial objectives set out in the 2026 BPS and are intended to achieve fiscal sustainability against the backdrop of escalating expenditure pressure on the fiscal framework occasioned by an increase in Consolidated Fund Services (CFS) and the persistent underperformance of ordinary revenue.

17. The proposed KSh. 454.7 billion allocations among county governments as equitable share of revenue is equivalent to 22.2 percent of the audited and approved revenue for financial year 2022/23. This is above 15 per cent minimum threshold required under Article 203(2) of the Constitution. The proposed equitable share allocated to county governments in the County Allocation of Revenue Bill, 2026 has also taken into account the approved Fourth Basis Formula for Revenue Allocation pursuant to Article 217 of the Constitution.