The Citizen Handbook

Fundamentals of Devolution

Financial & Human Resources

Revenue Allocation

The Constitution stipulates that county governments have reliable, stable and predictable sources and allocations of revenue. This will ensure they can perform their constitutional functions and deliver services within their jurisdictions.As mentioned in the guiding principles of public finance, the national and county governments should equitably share national revenue. The national government receives 85 per cent of this revenue, while the 47 counties split up the remaining 15 per cent.

In addition to any national legislation, the Constitution provides specific criteria for determining fair national revenue allocation to the counties, including public debt and other national obligations, county fiscal capacity, and the need to cure economic inequalities among and with counties.

Responsibilities of Parliament

Every five years, the Senate will determine by resolution the basis for annual revenue allocation among the counties. At least two months before the end of each fiscal year, Parliament should introduce two pieces of legislation concerning national revenue allocation – Division of Revenue Bill and County Allocation Revenue Bill.

   · Division of Revenue Bill – This piece of national legislation will divide the national government’s revenue among the national and county levels of government.

   · County Allocation of Revenue Bill – This legislation will divide among the counties the revenue allocated to the county level of government.

Commission on Revenue Allocation

The CRA is responsible for proposing to Parliament its recommendations for the allocation of revenue between the national and county governments. Before Parliament votes on relevant financial matters, it must consider recommendations of the Commission. The CRA may also make recommendations on other financial matters concerning the county governments. CRA is composed of a chairperson, two persons nominated by political parties in the National Assembly, five persons nominated by political parties in the Senate and the principal secretary from the Ministry responsible for finance. No member of the CRA may also be a sitting member of Parliament.

Equalization Fund

Article 204 of the Constitution stipulates the establishment of the Equalization Fund, which is to receive one-half per cent of all the revenue collected by the national government each year. The Fund seeks to address inequities that may exist between counties and within marginalized areas and groups by funding basic services including water, healthcare, roads, health facilities, and electricity. The money dispersed from the Equalization Fund may be conditional or unconditional grants. The life of the Fund is a fixed period of 20 years with the possibility of extension by the National Assembly.

Spending and Raising Revenue

Article 209(3) of the Constitution permits county governments to levy property and entertainment taxes in their county, and any other taxes authorized by Parliament. Counties may also impose charges for the services they provide. Each county will deposit all money raised or received on behalf of the government into its own revenue fund. Any county government may borrow money so long as the national government guarantees the loan and it receives approval from the county government's assembly. County governments, according to Article 224 of the Constitution, should prepare and adopt their own annual budgets and appropriation bills in the form and procedure prescribed by Parliament and based on national revenue allocations in the Division of Revenue Bill referred to above.

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