Report On Consideration Of The Division Of Revenue Bill, 2026

THIRTEENTHPARLIAMENT-FIFTHSESSION-2026 SELECTCOMMITTEEONBUDGETANDAPPROPRIATIONS

REPORTONTHEDIVISIONOFREVENUEBILL,2026

TheClerk'sChambers National Assembly Parliament Buildings NAIROBI

March, 2026

M.22

TABLEOFCONTENTS

| I.OCHAIRPERSON'SFOREWORD. | |----------------------------------------------------------------------------| | 2.0PREFACE. | | 2.1EstablishmentandMandateof theCommittee | | 2.2MembershipoftheCommittee | | 2.3 CommitteeSecretariat YII | | 2.4TechnicalStafffromtheParliamentaryBudgetOffice VII | | 2.5Acknowledgements .vil | | 3.0REVIEWOFTHE2026DIVISIONOFREVENUEBILL | | 3.1 Background. | | 3.2ReviewofMacroeconomicandFiscalDevelopments. | | 3.3AnalysisoftheShareableRevenue.. 2 | | 3.4 Growth in the County Shareable Revenue | | 3.5AllocationEvaluationagainstArticle203(l)oftheConstitution | | 3.6 Deviationsfrom the Commissionof Revenue AllocationRecommendations... 4 | | 3.7 Equalization Fund Allocation | | 4.0STAKEHOLDERSUBMISSIONS. | | 4.1 The National Treasury | | 4.2 Council of Governors (CoG). | | 4.3 Commission of Revenue Allocation (CRA) | | 4.4 Intergovernmental Relations Technical Committee (IGRTC). 8 | | 4.5 Institute of Certified PublicAccountants of Kenya (ICPAK) 8 | | 4.6 Intergovernmental Budget and Economic Council (IBEC). 9 | | 4.8 Rift Valley Budget Hub. | | 4.9 Coast Regional Budget Hub 12 | | 4.10 Kenya Devolution CSO's WorkingGroup. .13 | | 4.1l Other Submissions.. 14 | | 6.0RECOMMENDATIONS 17 |

1.OCHAIRPERSON'SFOREWORD

The Select Committee on Budget and Appropriations is established under Article 221 (4 and 5) of the Constitution, Section 7 of the Public Finance Management Act, CAP. 412A, and Standing Order 207. Its mandate is to oversee the budgetary process in the National Assembly,whichincludesreviewingtheDivisionofRevenueBill.

The Division of Revenue Bill (National Assembly Bill No. 2 of 2026) was published on 19th February 2026. It was read in the National Assembly a First Time on Tuesday,February 24, 2026, and subsequently referred to the Budget and Appropriations Committee for recommendations, as outlined in Standing Order I27(2).

The Division of Revenue Bill aims to provide for the equitable division of revenue raised nationally among the National and County spheres of government for the 2026/27 Financial Year. This is broadly in line with Articles 202, 203, 205, and 218 of the passage of the County Allocation of Revenue Bill (CARB), which is crucial in finalizing budget estimates for the 47 county governments.

Importantly, Article 224 of the Constitution spells out that County Governments draft s a e d budgeting process at the sub-national level.

report on the review of the Division of Revenue Bill (National Assembly Bill No.2 of 2026) for the House's consideration and approval.

2.0 PREFACE

2.1EstablishmentandMandateoftheCommittee

• 1.Article221(4)of theConstitutionandSection7of thePublicFinanceManagement Act, 2012 provide for the establishment of a Committee of the National Assembly whose main role is to take the lead in budgetary oversight by the National Assembly. Pursuant to this constitutional provision,Standing Order 207 establishes the Budget andAppropriationsCommitteewithspecificmandatesasfollows:
• i.Examine theDivisionofRevenueBill;
• ii.Investigate,inquire into,and report on all matters relating to coordination, control, and monitoring of the national budget;
• ili.Reviewthebudgetestimates andmakerecommendationstotheHouse;
• iv.Examine theBudgetPolicyStatementpresented to theHouse;
• v. Examine bills related to the national budget, including appropriation bills; and
• vi.Evaluate tax estimates,economic and budgetary policies, and programmes with direct budget outlays.

2.2MembershipoftheCommittee

2. Pursuant to Standing Order 207(2), the Budget and Appropriations Committee as currentlyconstitutedcomprisesthefollowingHonourableMembers:

CHAIRPERSON

Hon. Atandi, Samuel Onunga, M.P. Alego Usonga Constituency ODMPARTY

VICECHAIRPERSON

Hon.(Dr.)Robert Pukose, CBS, M.P. EndebessConstituency UDAPARTY

MEMBERS

Hon. Chumel, Samwel Moroto, M.P. Kapenguria Constituency

Hon.(Dr.)Adan WehliyeKeynan,CBS,M.P. Eldas Constituency Jubilee Party

UDAPARTY

Hon. Mulu, Makali, PhD, CBS, M.P. Kitui Central Constituency WDMKenya Hon. Lekuton, Joseph, M.P. Laisamis Constituency UDMPARTY

Hon. Ongili, Babu Owino Paul, M.P. Embakasi East Constituency ODMPARTY

Hon. Mwirigi, John Paul, M.P. Igembe SouthConstituency UDAPARTY

Hon. (Dr.) Gogo, Lilian Achieng, M.P. Rangwe Constituency ODM Party

Hon. Wanjiku, John Njuguna, M.P. Kiambaa Constituency UDAPARTY

Hon. Guyo, Ali Wario, M.P. Garsen Constituency ODMPARTY Hon. Dr. Edwin Mugo Gichuki Mathioya Constituency UDAPARTY

Hon. Busia, Ruth Adhiambo Odinga, M.P. Kisumu County ODMPARTY

Hon. Ochieng, David Ouma, M.P. Ugenya Constituency MDGPARTY

Hon.Lesuuda, Josephine Naisula, OGW, M.P. Samburu West Constituency KANUPARTY

Hon. Robi, Mathias Nyamabe, M.P. Kuria West Constituency UDAPARTY

Hon.Muchira, Michael Mwangi,M.P. Ol Jorok Constituency UDAPARTY

Hon. Wangaya, Christopher Aseka, M.P. Khwisero Constituency ODMPARTY

Hon. Mwakuwona, Danson Mwashako, M.P. Wundanyi Constituency WDM - Kenya

Hon. Masara, Peter Francis, M.P. Suna West Constituency ODMPARTY Hon. Murumba, John Chikati, PhD, M.P. Tongaren Constituency FORD-Kenya

Hon. Kitilai, Ole Ntutu, M.P NarokSouth Independent Sergon, Flowrence Jematiah, M.P. Baringo County UDAPARTY

Hon.Abdirahman Mohamed Abdi, M.P. Lafey Constituency Jubilee Party

Hon. Kagiri, Jane Wangechi, OGW, M.P. Laikipia County UDA Party Hon. Mokaya, Nyakundi Japheth, M.P. Kitutu Chache North Constituency UDAPARTY

Hon. Mutuse, Eckomas Mwengi, OGW, M.P. Kibwezi West Constituency MCC Party

2.3CommitteeSecretariat

• 3.The CommitteeSecretariat is comprised of the following officers:

Mr. Danson Kachumbo Senior Fiscal Analyst/ Lead Clerk

Dr. Abel Nyagwachi Senior Fiscal Analyst

Mr. Ringine Mutwiri FiscalAnalyst/ClerkAssistant

Mr.SolomonAlubala Fiscal Analyst

Ms. Loice Olesia Fiscal Analyst

Mr. David Milimu Hansard Officer

Ms. Mercy Mayende MediaRelationsOfficer

Mr. Simon Ouko Serjeant-at-arms

Mr. Muchiri Mwangi Audio Officer

Mr. Jared Amara Office Assistant

2.4 Technical Stafffrom theParliamentaryBudgetOffice

4. The Committee received technical support from the following officers from the Parliamentary Budget Office.

FA Dr. Martin Masinde, OGW Director, Parliamentary Budget Office

Dr. Evans Kiganda Principal Fiscal Analyst

2.5Acknowledgements

5. The Committee expresses its sincere appreciation to the Office of the Speaker and the Office of the Clerk of the National Assembly for their support during the Office for providing technical assistance, which was instrumental in fulfilling its mandate to evaluate the Division of Revenue Bill(National Assembly Bill No.2 of 2026).

SIGNED

HON.ATANDI,SAMUELONUNGA,M.P. CHAIRPERSON,THEBUDGETANDAPPROPRIATIONSCOMMITTEE

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W:

2032

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3.0REVIEWOFTHE2026DIVISIONOFREVENUEBILL

3.1Background

• 4 The National Assembly adopted the Budget and Appropriations Committee's Report on the 2026 Budget Policy Statement (BPS) on Tuesday, 10th March 2026 which paved the way for the consideration of the Division of Revenue Bill (DoRB).
• 5 The Division of Revenue Bill is prepared in accordance with Article 2l8 of the Constitution, which outlines specific requirements for its timing and purpose. The Article mandates that the Bill, which seeks to allocate nationally raised revenue between the national government and the county governments, be tabled in Parliament at least two monthsbeforetheendof thefinancialyear.
• 6In this regard,the Division of Revenue Bill,2026,was published on 19th February2026 and read a First Time in the House on 24th February 2026. Subsequently, it was committed to the Budget and Appropriations Committee for consideration and to facilitate public participation under Standing Order I27(l) of the National Assembly Standing Orders.
• The Bill provides for the vertical sharing of revenue raised nationallybetween the national government andcountygovernmentsforthefinancialyear2026/27,inaccordancewith Articles 202, 203, 205, and 218 (2) of the Constitution. The basis for determining the sharing of revenue is the most recent audited accounts of revenue, as approved by the NationalAssembly.
• 8 The approval of theDivisionof Revenue Bill will paveway for the introduction of the County Allocation of Revenue Bill, which distributes the county's equitable share among the counties using the formula approved pursuant to Article 217 of the Constitution.
• 9 The Bill alsoprovides for allocation to the EqualisationFund in accordance with the provisions of Article 204(l) of the Constitution. The Constitution provides that 0.5 most recent audited and approved accounts of revenueby theNational Assembly,bepaid into the Fund.
• 10 The Division of Revenue Bill comprises four clauses, a schedule detailing the allocation of revenue raised nationally between the national and county governments, and an explanatory memorandum that explains the provisions of the Bill. Clause I specifies the short title, Clause 2 addresses the interpretation of the Bill, Clause 3 outlines its objectives and purpose, and Clause 4 defines the revenue allocations for the national and county governments.

• IIThe schedule to the Bill provides that the total shareable revenue for FY 2026/27 is estimated at Kshs.2,901,874,758,144 and is allocated as follows:

• i. National GovernmentShare

Kshs.2,472,272,587,719

• ii. County Government Equitable Share

Kshs.420,000,000,000

• ili. Equalization Fund

Kshs. 9,602,170,425

3.2ReviewofMacroeconomicandFiscal Developments

• 12 The National Treasury projects GDP growth at 5.0 percent in 2025 and 5.3 percent in 2026, up from 4.7 percent in 2024. The projections are anchored on a rebound in linkages and assumptions of favourable weather conditions; recovery in construction due to clearance of pending bills and resumption of stalled infrastructure projects; as well as lower production costs in industry and resilient performance in services, especially tourism and transport.
• 13 The National Treasury projects that ordinary revenue (primarily tax collections) will rise by Ksh 157.5 billion (5.7 percent), from Ksh 2,744.4 billion (14.4% of GDP) in the approved FY 2025/26 budget to Ksh 2,901.9 billion (13.9% of GDP) in FY 2026/27. This projected growth remains modest and trails the anticipated nominal GDP growth of over 9 percent.
• 14 Total expenditure and net lending for FY 2026/27 is projected at Ksh. 4,737.5 billion, representing an increase of Ksh. 435.7 billion from Ksh. 4,301.9 billion in the approved FY 2025/26 Budget Estimates. Given the gap between projected expenditure and revenues, the fiscal deficit, including grants, is expected to widen by Ksh. 216 billion, increasing from Ksh. 933 billion (4.8 percent of GDP) in FY 2025/26 to Ksh. 1,149.5 billion (5.5 percent of GDP)inFY2026/27.Theexpandeddeficitwillbefinancedthroughamixofexternal and domestic borrowing, comprising Ksh. 225.5 billion from foreign disbursements and Ksh.924billionfromdomesticsources.

3.3AnalysisoftheShareableRevenue

• 15 In the last 10 years, ordinary revenue has been performing below target; significantly affecting the projected equitable share to each level of government. While ordinary

revenuehasgrownbyover100%fromanactualcollectionof1,153.0billion inFY2015/16 to Ksh. 2,420.2 billion in FY 2024/25, it has generally fallen short of target by over 10 percentunderthesameperiod.

• 16 As a share of GDP, ordinary revenue has been declining from 18.1% in FY 2013/14 to a x 2025/26. A review of revenue collection in the first half of FY 2025/26 shows that ordinary revenuemissed the targetbyKsh.ll0.6billion,froman estimatedcollection of Ksh. 1,351.9 billion to an actual collectionof Ksh.I,241.3 billion.This is an indication that s
• 17 The underperformance in revenue collection has not only affected budget implementation by the national government, but also the transfer of equitable share to county ofKsh.205.4billion.
• 18 Whereas the Divisionof Revenue Acts protect the county equitable share against deductions arising fromrevenue shortfalls,revenueunderperformance has occasioned delays in timelytransfers.Over theyears therehasbeeninconsistenttransfersofthe Further analysisindicatesthatunder-disbursementshavegrown in tandemwiththeyearly increase inequitable share.For instance, while the allocation for FY 2023/24 was Ksh. 385.4billion,actualtransfersbytheendof thefinancialyearstood atKsh.354.6billion registeringashortfallofKsh.30.8billionwhichwasdisbursed inFY2024/25.

3.4 Growth in the County Shareable Revenue

• 19 The allocation of Ksh.420 billion to county governments represents an increase of Ksh. 5 billion (l.2 percent growth) from the previous allocation of Ksh.415 billion for FY 2025/26.Thisimplies thatoutof theprojectedshareablerevenuegrowthofKsh.157.5 billion in FY 2026/27, county governments are set to receive a marginal increase of 3.2 percentofthetotal.Analysisofpreviousallocationsindicatesthatthehighestrevenue adjustmentwasinFY2021/22,withanincreaseofKsh.53.5billionwiththesecondhighest beingKsh.27.6billion forFY2025/26.

3.5AllocationEvaluationagainstArticle203(l)oftheConstitution

• 20 Article 201 of the Constitution emphasizes the principles of public finance, underscoring the need for equitable sharing of nationally raised revenue between the national and county governments. The sharing of revenue between the two levels of government is supposedtotakeintoconsiderationthecriteriasetoutinArticle203(l)ofthe levels of government took into account these legal provisions by first setting aside allocations to cater foritems such as national interest,public debt and other national obligations.
• 21 To arrive at the equitable share for FY 2026/27, a total of Ksh.136.4 billion is set aside for national interest asperArticle203(1)(a)of theConstitution;Ksh.I,542.1billion forpublic debt related costs; and Ksh.876.1 billion for other national mandatory expenses such as pension contributions and constitutional institutions' salaries. From the foregoing, it is apparentthatthenationalgovernmentmayhavetoborrowtofundtransferstocounties.
• 22 Theproposedcountyequitableshareof Ksh.420.0billionwas thereforeinformed by continuous underperformance of revenue by the end of the fiscal year, increased debt serviceexpenditure,fiscalconsolidationcommitmenttoreduce thefiscaldeficitto5.3 percentof GDP,and limitedaccesstodomestic andexternal borrowing.The allocation of Kshs. 420.0 billion to county governments represents an increase of Ksh.5.0 billion from the previous allocation of Kshs. 415.0 billion for FY 2026/27.

3.6DeviationsfromtheCommissionofRevenueAllocation Recommendations

• 23 Article 218(2) of the Constitution and Section I91(5) of the PFM Act (Cap. 412A) require the National Treasury to give reasons for any deviation between their proposal for equitablerevenuesharingbetweenthetwolevelsofgovernmentandtheCRAproposal. Inthisregard,theBillevaluatestheCRArecommendationsforequitablesharetoeach level of government and how this differs from the proposed division of revenue as follows:
• a.Shareable revenue:Whereas the National Treasury projects the shareable revenueforFY2026/27tobeKsh.2,901.9billion,CRAhasarevenue projection amounting to Ksh.2,982.8 billion; a difference of Ksh.80.9 billion. The National Treasury attributed their comparatively modest revenue projection to major economic shocks that are likely to negatively affect

• forecastedrevenueinFY2026/27,whiletheCRArevenueprojectionisbased onyearlyrevenuegrowth.
• b. Equitable share: The National Treasury proposes to allocate Ksh. 2,472.3 billion to the national government, Ksh.420 billion to county governments and Ksh.15.2billion totheequalizationfund(inclusive ofKsh.5.6billion arrears), whereas the CRA proposes an allocation of Ksh. 2,513.7 billion, Ksh.458.7 billion and Ksh.9.6 billion to theseinstitutions respectively. CRA recommendations were partlyinformed by a higher estimated shareable revenue and theinclusionofattendanttotalresourcesforremunerationsofthe UHCworkers.TheNationalTreasuryproposes thattheUHCsalarybe allocatedasaconditionaladditionalallocationthroughtheCounty GovernmentsAdditionalAllocationsBill,2026.

3.7EqualisationFundAllocation

• 24 The Bill proposes to allocate Ksh.9.6 billion to the Equalisation Fund. This amount is in alignmentwith theprovisionsofArticle204(l)of theConstitutionwhichstipulates thatO.5percentof themostrecentauditedaccountsof revenuebepaid intothefund. Further, the National Treasury proposes to allocate an additional Ksh.5.6 billion as partial payments of arrears to the Equalisation Fund bringing the total allocation to the Fund toKsh.15.2 billion in FY 2026/27.

4.0STAKEHOLDERSUBMISSIONS

• 25 Pursuant to Article Il8(1) of the Constitution on public participation and Article 20l on the principles of public finance including openness and public participation, the Memoranda that was published in the newspapers and on Parliament's website.The Committee received submissions fromvariousstakeholders whose contenthas informed this report.
• 26 TheCommittee alsoheld consultative engagementswith theIntergovernmental Relations Technical Committee, the Intergovernmental Budget and Economic Council, Bajeti Hub,and theInstitute of Certified PublicAccountants of Kenya.Further,the Committee also engaged the Commission on Revenue Allocation, and the National Treasury to determine the resource requirements among counties and the available fiscal space to finance them.Further, written submissions were received from the

Council of Governors, Coast Regional Budget Hub, Rift Valley Budget Hub, Kenya Devolution CSO's Working Group and Individuals.

• 27 The concerns raised by stakeholders have been mapped to each stakeholder and the Committee's considerations are captured in the observations.

4.1TheNational Treasury

• 28 According to the National Treasury, the following circumstances informed the proposedDivision ofRevenueforFY2026/27:
• i. Ordinary revenue collection underperformance over the years amidst significant expenditure pressures. Indeed, a Ksh.ll0.6 billion shortfall in ordinary revenue was projected as at end of December 2025.
• il. ThecontinuedshoulderingofrevenueshortfallsburdenbyNational Government through budget cuts for the National Government entities whereas County Governments continue to receive their full allocation of equitableshare.
• ili. The macroeconomic assumptions in the BPS 2026 influencing resources available for allocation which include anticipated growth rates, inflation, and othereconomicperformanceindicators.
• iv. The need to finance mandatory expenditures under Article 203 (l) of the Constitution has always left the National Government with minimal and sometimes no resources to finance other obligations such as defense, roads and energy among others. In FY 2025/26, Consolidated Fund Services is taking trendisexpectedtoremainthesameinFY2026/27.
• V. The need to reduce public debt vulnerabilities and improve debt sustainability through the national government's fiscal consolidation plan, which aims to reduce the fiscal deficit inclusive of grants from 6.0 percent of GDP in FY 2024/25andFY2025/26,to5.3percentof theGDPinFY2026/27.

• High cost of servicing public debt. In FY 2025/26, public debt service will accountfor52percentofordinaryrevenuewhichishigherthantheaverage (41 percent) over the period FY 2016/17 to 2024/25.

4.2 Council of Governors (CoG)

• 29 The Council of Governors proposed specific amendments to the Division of Revenue Bill,2025,as follows:
• i. The equitable share to counties be increased from Kshs. 420 billion to Kshs.534.96 billion to cater for revenue growth adjustment, transitioning of UHC workers to county governments' payroll, implementation of the outstanding 3rd and 4th remuneration and benefits review cycles, and transfers underthefirstphaseofdelineatedandgazetteddevolvedfunctionsas undertakenbytheIGRTCinDecember2024.
• i. A total of Ksh.8.94 billion, being the cost for transitioning UHC workers to county governments' payroll, be included in the Division of Revenue for FY 2026/27 as opposed to being transferred as a conditional grant.

4.3 Commission of Revenue Allocation (CRA)

• 30 The Commission, in its FY 2026/27 vertical sharing proposal, recommended that the national government be allocated Kshs. 2,901.87 billion and county governments Kshs. proposed increase of Ksh.5.0 billion to county governments against a Ksh.152.5 billion increase to the national government does not amount to equity in the sharing of revenues between the two levels of governments for FY 2026/27. Indeed, the provision of Ksh.5 billion is inadequate to cater for the CAlPs intergovernmental obligations and 3% annual wage increments.

• 31 The conclusion of the unbundling and delineation of functions by IGRTC identified resourcesamountingtoKsh.65.9billionbeingutilizedbythenationalgovernment Ministries, Departments, and Agencies (MDAs) to perform functions assigned to county governments. The CRA therefore recommended that the national government enters national level for purposes of ensuring projects are completed and operationalized.

4.4 Intergovernmental Relations Technical Committee (IGRTC)

• 32 The Committee, on the status of implementation of Gazette Notice Vol. CXXVl-No.219 ondelineationoffunctionsandattendantresourcesintheFY2024/25,notedthatthe IGRTC concluded the unbundling and delineation of functions in December 2024 and embarkedonidentificationoffinancialresourcesfortransfertocounties.TheIGRTC submitted that the consolidated indicative budgetary resources identified for transfer to counties, excluding roads, forestry and energy sectors, are a minimum of Kshs.65.97 billion. The identified resources relate to Agriculture and Blue Economy; Lands; Housing
• 33 On the vertical sharing of resources, the IGRTC recommended that greater consideration should be given to Article 203(1) of the constitution, particularly Article 203 (1)(d) which specifies that allocations to county governments should be adequate for them to perform the functions that they have been allocated. It was noted that the functions earmarked by theIGRTCfortransfertocountieshadnotbeentakenintoaccountinthecounty equitableshare.

4.5 Institute of Certified Public Accountants of Kenya (iCPAk)

• 34TheInstituteof CertifiedPublicAccountantsofKenyaobserved thefollowingincounties: significant underperformance in Own Source Revenue (23% shortfall), low development expenditure absorption rates (26.3%), wage expenditure exceeding 35% threshold, non-

ReportontheTheDivisionofRevenueBill,2026

remittance of the outstanding Ksh.46.5 billion balance for Equalization Fund by the National Treasury, and lack of clear measures to address the pending bills issue despite the powers of stopping funds transfer given to the Cabinet Secretary responsible for Finance under Article 225 of the constitution. ICPAK therefore proposed the following:

• i. There is need to build capacity in revenue forecasting, adoption of realistic evidence-based revenue projections and fast-tracking the automation and integration of revenue collection systems across all revenue streams.
• ii. There should be timely disbursements of exchequer releases.
• ii. Tighter controls and monitoring mechanisms should be established to ensure wage expenditures do not surpass the set threshold.
• iv. allocation.

5. 35ICPAKfurtherobservedthatthelastauditedaccountsofrevenuewereofFY2020/21. This does not reflect the true status of the national government's revenue collection. There is need,therefore,toexpedite the approval of audited accounts so as to give a help increase the allocation to counties.

4.6 Intergovernmental Budget and Economic Council (IBEC)

• 36 IBEC expressed concern over the divergent revenue sharing recommendations from the National Treasury, the Council of Governors and the Commission on Revenue Allocation. Theysubmitted asfollows:
• P s ss u r determine the appropriate allocation to County Governments as an adjustment for projected revenue growth.
• i.Parliament should determine the appropriate placement of the Ksh.8.938 billion earmarked for UHC worker's remuneration as they transition their payroll to the county governments. COG and CRA have recommended that it be included in the

appropriated under the County Government Additional Allocations Bill (CGAAB) 2026/27.If thesefundsareplacedunder theCGAAB,IBECcautioned that the perennial delays in approval of CGAAB and subsequent release of funds may occasion industrial action and disrupt healthcare service delivery.

4.7 Bajeti Hub

37BajetiHubsubmittedasfollows:

• i. The transfer of functions gazetted by IGRTC represents an important progress to deepen devolution. However, this must be accompanied by attendant resources based on actual costing of service delivery. Bajeti Hub submitted that there is need for the national government to develop and publish a costing framework for each transferredfunctionandresourcetransferstocountiesshouldbeundertaken basedontheframework;
• ii. The National Assembly should push to fully devolve health functions as per the IGRTC Gazette Notice of 2024 by compelling the National Treasury to adhere to these provisions and allocate necessary resources to the appropriate level of government;
• i. The National Government is still heavily investing in primary healthcare functions that should be handled by the counties despite health devolution. This undermines the ability of counties to manage health services, hence denying them the muchneeded resources to improve primary healthcare services. For example, recruitment of health personnel such as Community Health Promoters (CHPs) is a primary responsibility of the county's governments, yet the national government continues to increase the allocation and targets of CHPs.In addition, Primary HealthcareNetworkswhichare anchored attheHealthCenters arethemandate role in their establishment and running.

4.8 RiftValleyBudgetHub

• 38Inits submission,the RiftValleyBudget Hubraisedthreekeyconcerns:inadequate allocations to counties, continued execution of county functions by the national government MDAs, and delayed disbursements causing cash flow challenges at the county level.
• 39The Hub noted that continued reliance on outdated revenue figures fails to reflect the current fiscal capacity of the national government, disadvantaging counties in receiving their fair share of resources which hampers the effective discharge of devolved functions.
• 40 The Hub argued that the Ksh.458.97 billion equitable share proposed by the CRA which is higher than the amount proposed in the DoRB reflects a more realistic assessment of the country's revenue growth and financing needs of county governments.
• ofthefinancialyeardespiteseveralresolutions adopted atIBEC.Thiscripplesservice delivery, erodes public trust and slows development in counties.
• 42 The Hub made the following key asks to the National Assembly:
• i. The National Assembly in conjunction with other oversight institutions to expedite the auditing and approval of national revenue accounts. This will ensure revenuesharingisbasedon accuratefinancial data.
• ii. EquitablesharetobereviewedandincreasedtoavalueclosertoKsh.458.97 billiontobetterreflectthegrowthinnational revenue.
• ili. The National Assembly should adopt the IGRTC report findings to ensure complete transfer of devolved functions and their corresponding resources.
• iv. The National Assembly should strengthen legal provisions to ensure counties National Treasury.
• Parliament should uphold PFM Act provisions that allow disbursement of up to 50% and ensure continuous funding to counties even in the absence of CARA and

• DoRA. This shall help avoid financial paralysis in counties due to delays in legislative approvals.
• e so n e e l e minimum ofKsh.700 billionby the National Assembly.

4.9 Coast Regional Budget Hub

• 43 The Coast Regional Budget Hub noted that Ksh.420 billion allocated for equitable share was based on FY 2021/22 audited accounts and that it is prudent to consider FY 2023/24 understates available resources for sharing and denies counties their fair share.
• 44 On the Equalization Fund, Coast Regional Budget Hub submitted ·that the national governmentshouldprioritizethefullsettlementofoutstandingarrearswithinaclear,time bound framework.It was noted that continued arrears defeat the constitutional purpose of the Fund, of accelerating access to basic services in marginalized areas and reducing historical inequalities.
• 45 The Hub noted that although there is an increase of Ksh.5 billion to county equitable share, this does not translate to improved service delivery. Delayed disbursements disrupt county planning and budgeting, and delays implementation of development projects thereby hampering effective service delivery.
• 46 Further, the Coast Regional Hub called for the reconsideration and revision of macroeconomicassumptionsmadewhichindicatethattherewillbenomajorshocks given the US-lsrael-lran conflict. This will help avoid overly optimistic projections of inflation, fuel costs, imports, growth and revenue performance which are likely to weaken budget credibility.

4.10 Kenya Devolution CSO's Working Group

• 47 Kenya Devolution CSO's Working Group, a national umbrella for Kenyan civil society networks across 47 counties submitted on four issues, namely: constitutional basis for the division of revenue, weak justifications for the county allocations, delayed transfer of functions, and failure to consider emerging issues determining the equitable share to counties.
• 48 The Group noted that the allocation of Ksh.420 billion to counties is 14.47% of projected ordinaryrevenueof Ksh.2.902trillion,incontraventionof theconstitution'sArticle 203(2) requirement of at least 15%. Additionally, latest audited accounts are for the FY 2023/24whiletheDoRB2026relieson2021/22auditedaccounts.Therefore,thetotal of atleastKshs.501.29billion at the current 21.9%proportion.
• 49 It was noted that the key justifications that determined the equitable share were increased expenditures on debt servicing by the national government, and underperformance of revenue growth that is below GDP growth. The group submitted that the ballooning debt acquisition and that underperformance of revenue is a revenue administration issue that shouldnotbereliedupontodenycountiesresources.
• county governments, limiting the optimal functioning of counties in delivering quality services. Further, it was observed that Resolution 2 of the 12th Summit held on 10th December2025affirmedthattheunbundledanddelineatedfunctionsshouldbepartof thebasisforDivisionofRevenueinFY2026/27butthishasnotbeenreflectedinDoRB 2026.
• 51 The group also noted that the additional Ksh.5 billion is too small to enable counties address emerging issues such asclimate-induced disasters(droughtsand floods),high pending bills, and active collective bargaining agreements.

52 The Group made the following key asks to the National Assembly:

• i. The National Assembly should increase the equitable share to at least Ksh.524.91 billion in consideration of the first phase of devolved functions by IGRTC amountingtoKsh.65.97billion.
• i. The National Assembly should expedite approval of audited accounts for FY 2023/24 and apply it as a basis for Division of Revenue for FY 2026/27.
• ili. The National Assembly to demand for valid and legal reasons for National Treasury rejectionofCRArecommendations.
• iv. Given the ever-increasing public debt, the National Assembly should sanction publishing of a detailed public debt inventory.
• V. Update and expand the CRA 20l5 costing study to cover all devolved and concurrent functions, using current service delivery standards and inflationadjusted costs and anchor costing results into the Division of Revenue process.

4.llOtherSubmissions

• 53 Other submissions were received from individuals who gave an array of proposals as follows:
• i.It was proposed that equitable revenue sharing should be integrating with a disbursement should be performance based. The projects should be of measurable national returns.
• i.It was further submitted that there is need to establish statutory special purpose development authorities to coordinate multi sector projects, mobilize financing, ensure accountability and facilitate PPPs.

• iii.It was submitted that there is need to base revenue decisions by considering countiesaseconomicunitswithbothneedsandpotential.Itwasobservedthat assetssuchasnaturalresources and liabilitiessuch asclimatevulnerabilitiesshould beconsidered.
• iv. Itwasproposed that thereis need toencouragecoordinatednational investment planning, the need for project appraisal and oversight, consideration of county balance sheet analyses in long term planning and the promotion of sustainable financingapproaches.

5.0COMMITTEEOBSERVATIONS

• 54 Having considered the content and analysis of the division of revenue bill, as well as the submissions from all the stakeholders, the committee has made the following observations:
• i.Over the years, the performance of shareable revenue has been below target, significantly affecting the transfers of projected equitable share to each level of government. Ordinary revenue as a share of GDP has declined from a peak of I8.1% in FY 2013/14 to 14.1% in FY 2024/25.This trend indicates that during this period, the
• ii. The persistent shortfall in revenue collection has continued to undermine budget execution inbothlevels of government.Over the years,actual transfers of the projected equitable share to county governments have consistently fallen short of target, thereby disrupting timely delivery of services. To illustrate, in the first half of transferofcountyequitablesharealsofellbelowthetargetbyKsh.33.2billion.
• ili. Whereasshareablerevenueissharedequitablyundertheprovisionsofthe Constitution, the national government has solely borne the shortfalls in revenue in any theburden of shortfalls solelyon thenationalgovernment leads to increased borrowing and weakens the government's fiscal position in the course of the financial year.
• iv. The National Treasury indicates that the proposed allocation of Ksh. 420.0 billion to county governments is arrived at by first setting aside allocations to national interest,

• publicdebt-relatedcosts,andothernationalobligations.Totalallocationstothese expendituresamounttoKsh.2,571.8billion,leavingabalanceofKsh.330.1billionout ofatargetedshareablerevenueofKsh.2,90l.lbillion.Thiscreates theimpression that the government may need to borrow to fund county governments.
• V. AnalysisoftheBillagainsttherecommendationofCRAindicatesthatwhilethe billion,theCRAhas estimated an amountof Ksh.2,982.8billion,registeringa deviation of Ksh.80.9 billion. The CRA proposes a revenue growth adjustment to counties of Ksh.35billionwhiletheNational Treasuryproposed anincreaseofKsh.5billion.The CRA submitted that the additional allocation of Ksh.5 billion is inadequate to cater for the annual salary adjustments of county government workers and even the CAlPs intergovernmental agreement obligations. The committee notes CRA's concern but is of the opinion that the CRA revenue projections are too optimistic and do not give a credible baseline for determination of equitable share.
• vi. The CRA proposed that the allocation for transfers of UHC workers of Ksh.8.9 billion be included in the county equitable share to ensure that counties are able to pay the salaries of UHC workers in perpetuity. Conversely, the National Treasury proposed that these funds be transferred as conditional allocation to counties through the annual CountyGovernmentsAdditional AllocationsBill(CGAAB).Thecommitteenotesthat monies allocated to counties in the division of revenue are strictly shared through the formula as provided in Article 217(l) of the Constitution. It follows therefore that the disbursement using the formula as opposed to the UHCworkers'payroll.
• vii. Severalstakeholdersobservedthatthelastauditedandapprovedaccountsofrevenue wereofFY2020/21,notingthatthisdoesnotreflectthetruenationalgovernment collection and thus, the equitable share to county governments is not accurately captured. The committee notes this concern and is happy to report that the National Assembly has since considered and approved the accounts of revenue for the FY 2022/23,andthisshallformthebasisfortheallocationofequitablesharefortheFY 2026/27.Further,theNationalAssemblyshallexpeditethe approvalofthepending auditedaccountsofrevenueforFY2023/24andFY2024/25.

6.0RECOMMENDATIONS

• 55 Having considered the above matters, the Committee recommends that this House approves theDivision of Revenue Billas follows:
• i. That, the basis for sharing of revenue for the FY 2026/27 is the approved accounts of revenue for the FY 2022/23 amounting to Kshs. 2,050,1 14,740,913.
• ii. That, the allocation of projected total sharable revenue for FY 2026/27 amounting to Kshs.2,901,874,758,144 is as follows:
• 56 Finally, the Committee requests that this House approves the Division of Revenue Bill, 2026 with the amendments as per the attached Schedule.

• a) National GovernmentShare

Kshs.2,471,624,184,439

• b) County Government Equitable Share

Kshs.420,000,000,000

• Equalization Fund

Kshs.10,250,573,705

SIGNED

HON.ATANDI,SAMUEL ONUNGA,M.P. CHAIRPERSON,THEBUDGETANDAPPROPRIATIONSCOMMITTEE

N!J·M·O

..DATE

Reporton the TheDivision ofRevenue Bill,2026

REPUBLICOFKENYA

NATIONALASSEMBLY

THIRTEENTH PARLIAMENT-FIFTHSESSION(2026)

BUDGETANDAPPROPRIATIONSCOMMITTEE ADOPTIONSCHEDULE

We, the undersigned Members of the Budget and Appropriations Committee, today..... ...do hereby affix our signatures to this REPORT OF BUDGETANDAPPROPRIATIONSCOMMITTEEONTHEDIVISION OF REVENUE BILL, 2026 to affirm our approval and confirm accuracy, validity and authenticity: -

| No | NAME | SIGNATURE | |------|-------------------------------------------------------|-------------| | | Hon. Atandi, Samuel Onunga, M.P. -Chairperson | | | 2 | Hon. (Dr.) Pukose Robert, CBS, M.P.- Vice Chairperson | | | 3 | Hon. Chumel, Samwel Moroto, CBS, M.P. | | | 4 | Hon. (Dr.) Adan Wehliye Keynan, CBS, M.P. | | | 5 | Hon. Mulu, Makali, PhD, CBS, M.P. | pnnu | | 6 | Hon. Lekuton, Joseph, CBS, M.P. | | | 7 | Hon. Lesuuda, Josephine Naisula, OGWW, M.P. | | | 8 | Hon. Robi, Mathias Nyamabe, M.P. | | | 9 | Hon. Ochieng, David Ouma, M.P. | | | 10 | Hon. Muchira, Michael Mwangi, M.P. | | | | Hon. Mwakuwona, Danson Mwashako, M.P. | | | 12 | Hon. Wangaya, Christopher Aseka, M.P. | | | 13 | Hon. Mwirigi, John Paul, M.P. | | | 14 | Hon. (Dr.) Masara, Peter Francis, M.P. | | | 15 | Hon. (Dr.) Ongili, Babu Owino Paul, M.P. | | | 16 | Hon. Wanjiku, John Njuguna, M.P. | | | 17 | Hion. (Dr.) Gogo, Lilian Achieng, M.P. | | | 18 | Hon. Guyo, Ali Wario, M.P. | |

| No | NAME | SIGNATURE | |------|----------------------------------------|-------------| | 19 | Hon. Murumba, John Chikati, PhD, M.P. | | | 20 | Hon. Busia, Ruth Adhiambo Odinga, M.P. | | | 21 | Hon. Kitilai, Ole Ntutu, M.P. | | | 22 | Hon. Sergon, Flowrence Jematiah, M.P. | | | 23 | Hon. Mokaya, Nyakundi Japheth, M.P. | luule | | 24 | Hon. Abdirahman Mohamed Abdi, M.P. | | | 25 | Hon. Mutuse, Eckomas Mwengi, OGW, M.P. | | | 26 | Hon. Kagiri, Jane Wangechi, OGWW, M.P. | | | 27 | Hon. (Dr.) Mugo, Edwin Gichuki, M.P. | |

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