The Division of Revenue Bill, 2026
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2026/27 Revenue Allocation for National and County Governments
The bill proposes the following equitable division of nationally raised revenue for the 2026/27 financial year:
- National Government: KSh 2,472,272,587,719
- County Governments (Equitable Share): KSh 420,000,000,000, representing 21.9% of the KSh 1,920,434,085,078 audited revenue for 2021/22.
- Equalisation Fund: KSh 9,602,170,425, which is 0.5% of the 2021/22 audited national revenue.
Increase in County Equitable Share and Key Allocations
The equitable share for County Governments for 2026/27 sees an increase of KSh 5,000,000,000 from the previous financial year's allocation of KSh 415,000,000,000. This increase aims to facilitate enhanced service delivery. Additionally, KSh 2,000,000,000 is allocated to the Contingencies Fund to address urgent and unforeseen expenditures at both levels of government, as per Article 208 of the Constitution and Sections 19-21 of the Public Finance Management Act, Cap. 412A.
National Obligations and Debt Servicing Increase
The bill details increased allocations for critical national obligations:
- Public Debt Costs: Expected to rise by KSh 104,200,000,000, from KSh 1,437,900,000,000 in FY 2025/26 to KSh 1,542,100,000,000 in FY 2026/27.
- Other National Obligations: Including mandatory pensions and financing for constitutional offices and statutory bodies, these are projected to increase by KSh 64,700,000,000, reaching KSh 876,100,000,000 in FY 2026/27. This includes significant increases for Constitutional Commissions (KSh 51.4 billion), the Independent Electoral Commission (KSh 35.8 billion), and Teachers Service Commission (KSh 15.6 billion).
Differences with Commission on Revenue Allocation (CRA) Recommendations
The bill's proposed KSh 420,000,000,000 equitable share for county governments differs from the Commission on Revenue Allocation's (CRA) recommendation of KSh 458,900,000,000, resulting in a KSh 38,900,000,000 variance. This variance is largely due to differing assumptions on revenue growth and the National Treasury's proposal to allocate KSh 8,940,000,000 for Universal HealthCare (UHC) workers as a conditional additional allocation through a separate bill, whereas CRA included it in the equitable share.
Bill No.
No. 2 of 2026
Gazette No.
Supplement No. 14 of 2026
Sponsor
SAMUEL ATANDI, Chairperson, Budget and Appropriations Committee.
Background
This Bill, cited as the Division of Revenue Bill, 2026, aims to establish the equitable division of nationally raised revenue between the National Government and County Governments for the 2026/27 financial year. It fulfills the constitutional requirements of Article 218(1) of the Constitution and Section 191(5) of the Public Finance Management Act, Cap. 412A, to ensure proper government functioning and continued service delivery across Kenya.
Key Amendments
The bill is structured into preliminary provisions and a schedule detailing the revenue allocations.
- Short Title (Clause 1): The Act may be cited as the Division of Revenue Act, 2026.
- Interpretation (Clause 2): Defines key terms, including "Cabinet Secretary" responsible for finance and "revenue" as defined under section 2 of the Commission on Revenue Allocation Act, Cap. 428.
- Object and Purpose (Clause 3): Reaffirms the Act's purpose to provide for the equitable sharing of national government revenue among national and county levels of government for the 2026/27 financial year, consistent with Article 202(1) and 203(2) of the Constitution.
- Allocations (Clause 4): Stipulates that revenue raised nationally for the 2026/27 financial year shall be shared equitably as set out in the Schedule to the Act.
New Obligations
The bill sets forth the financial framework for the 2026/27 fiscal year, creating direct obligations for revenue distribution:
- Total Sharable Revenue: KSh 2,901,874,758,144.
- National Government Allocation: KSh 2,472,272,587,719.
- County Government Equitable Share: KSh 420,000,000,000. This amount constitutes 21.9% of the KSh 1,920,434,085,078 audited and approved revenue from the 2021/22 financial year, surpassing the 15% minimum threshold mandated by Article 203(2) of the Constitution. This reflects an increase of KSh 5,000,000,000 from the KSh 415,000,000,000 allocated in the 2025/26 financial year.
- Equalisation Fund Allocation: KSh 9,602,170,425, representing 0.5% of the KSh 1,920,434,085,078 audited national revenue for FY 2021/22, in line with Article 204 of the Constitution. An additional KSh 5,600,000,000 is provided to clear accrued arrears to the Fund.
- National Interest Programs: Total allocation for these programs is projected to be KSh 136,400,000,000 for FY 2026/27, an increase of KSh 11,100,000,000 from FY 2025/26. This includes increased funding for security operations, the National Safety Net Programme, school examination fees, Youth Empowerment Programme, and national irrigation & fertilizer clearance.
- Public Debt Servicing: Allocation for public debt related costs is expected to increase by KSh 104,200,000,000, reaching KSh 1,542,100,000,000 in FY 2026/27.
- Other National Obligations: An estimated KSh 876,100,000,000 is allocated for mandatory pension contributions, financing constitutional offices (e.g., Parliament, Judiciary, Constitutional Commissions), and other statutory bodies. This represents an increase of KSh 64,700,000,000 from FY 2025/26.
- Contingencies Fund: KSh 2,000,000,000 is allocated to the Contingencies Fund, established under Article 208 of the Constitution, for urgent and unforeseen expenditures at both levels of government.
Deviations from CRA Recommendations
The proposed equitable share for County Governments (KSh 420,000,000,000) differs from the Commission on Revenue Allocation's (CRA) recommendation of KSh 458,900,000,000 by KSh 38,900,000,000. This variance is attributed to:
- Revenue Growth Projections: The National Treasury proposed a KSh 5,000,000,000 increase for county equitable share based on revenue growth, while CRA proposed KSh 35,000,000,000, reflecting different projections and consideration of historical revenue underperformance and mandatory expenditures.
- UHC Workers Remuneration: CRA recommended KSh 8,940,000,000 for Universal HealthCare (UHC) workers as part of the equitable share, while the National Treasury proposes to allocate these funds as a conditional additional allocation through the separate County Governments Additional Allocations Bill, 2026.
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