Mediation Committee moves closer to resolving Division of Revenue Bill

The Mediation Committee, a joint parliamentary body in Kenya, has successfully resolved the deadlock surrounding the Division of Revenue Bill, 2026. This critical legislative instrument, which dictates the equitable sharing of national revenue between the national and county governments, had faced an impasse due to differing figures proposed by the National Assembly and the Senate. The committee's breakthrough agreement on an allocation of KSh 428 billion for county governments for the 2026/27 financial year, and the subsequent presidential assent, marks a significant milestone for fiscal devolution. The resolution ensures timely disbursement of funds to counties, enabling them to plan and deliver essential services, and reinforces the constitutional mechanisms for inter-parliamentary dispute resolution.

The Division of Revenue Bill, 2026, a cornerstone of Kenya's devolved governance structure, recently navigated a contentious legislative path, culminating in a successful mediation process. This annual Bill is constitutionally mandated to determine the equitable share of revenue raised nationally that is allocated to the national and county levels of government. Its timely enactment is crucial for the financial stability and operational continuity of Kenya's 47 county governments, which rely heavily on these allocations to fund devolved functions such as healthcare, agriculture, and local infrastructure.

The legislative journey of the 2026 Bill was marked by a significant divergence in proposed allocations between the National Assembly and the Senate, necessitating the intervention of a Mediation Committee. The resolution of this dispute, leading to presidential assent, underscores the efficacy of constitutional mechanisms designed to foster inter-parliamentary cooperation and safeguard the principles of devolution. This article examines the legal framework governing revenue allocation in Kenya, the role and function of the Mediation Committee, and the broader implications of this resolution for public finance management and devolved governance.

Kenya's devolved system of government, established by the Constitution of Kenya, 2010, fundamentally reshaped the country's governance landscape, introducing two distinct yet interdependent levels of government: national and county. Central to the functioning of this system is the equitable sharing of nationally raised revenue, a process meticulously outlined in Chapter Twelve, Part 4 of the Constitution. Article 202(1) mandates the equitable sharing of revenue between the national and county governments, while Article 203(2) sets the minimum equitable share for counties at not less than fifteen percent of the total revenue collected by the national government.

The process begins with the Commission on Revenue Allocation (CRA), an independent constitutional body established under Article 215, which is tasked with making recommendations on the basis for equitable sharing of revenue between the national and county governments, and among the county governments. Subsequently, Article 218(1) requires Parliament to annually enact a Division of Revenue Bill, which divides the revenue raised by the national government among the two levels of government. This Bill is prepared by the National Treasury, taking into account CRA recommendations and those of the Intergovernmental Budget and Economic Council, as stipulated by Section 191(1) of the Public Finance Management Act, 2012. Should the National Assembly and the Senate fail to agree on a Bill, Article 113 of the Constitution provides for the establishment of a Mediation Committee to resolve the differences.

The Division of Revenue Bill, 2026, encountered a familiar legislative hurdle when the National Assembly and the Senate adopted different versions concerning the equitable share for county governments. The National Assembly had initially approved an allocation of KSh 420 billion, while the Senate sought a higher figure of KSh 454.7 billion, citing the increasing financial obligations of counties. This divergence triggered the constitutional mechanism under Article 113, leading to the formation of a Mediation Committee comprising an equal number of members from both Houses.

The Mediation Committee's mandate is to develop a version of the Bill that both Houses can pass. The recent announcement of a breakthrough agreement, settling on an equitable share of KSh 428 billion for county governments, demonstrates the effectiveness of this dispute resolution mechanism. This compromise figure, reached after seven mediation sessions, reflects a delicate balance between the counties' demand for increased resources to deliver devolved functions and the national government's fiscal constraints.

A crucial aspect of the agreement was the reinstatement of Clause 5 of the Bill. This provision is designed to shield county allocations from arbitrary reductions in the event of national revenue shortfalls, a measure that enhances fiscal predictability and stability for county governments. Without such a safeguard, counties would face significant uncertainty, potentially disrupting service delivery and development projects. The successful mediation and subsequent presidential assent to the Division of Revenue Bill, 2026, on June 15, 2026, now paves the way for the enactment of the County Allocation of Revenue Bill, which will detail the specific amounts each county receives. This structured process, while often challenging, is vital for maintaining fiscal discipline and ensuring that the principles of public finance, as enshrined in Article 201 of the Constitution, are upheld across both levels of government.

The successful resolution of the Division of Revenue Bill, 2026, through the Mediation Committee and subsequent presidential assent, is a testament to the robustness of Kenya's constitutional framework for intergovernmental fiscal relations. For legal practitioners, this outcome provides much-needed certainty regarding the financial year 2026/27 allocations to county governments, which is essential for advising clients involved in county-level projects, procurement, and public finance. The reinstatement of Clause 5, protecting county allocations from revenue shortfalls, is a particularly significant development, offering greater predictability in county budgeting and expenditure.

Practitioners should closely monitor the subsequent enactment of the County Allocation of Revenue Bill, which will itemize the specific allocations to individual counties. Furthermore, continued attention to the implementation of these fiscal frameworks, particularly regarding adherence to disbursement schedules and accountability mechanisms under the Public Finance Management Act, 2012, remains crucial. This resolution reinforces the importance of institutional dialogue and compromise in navigating complex fiscal policy, ensuring the continued functionality and development of Kenya's devolved units.