Ruto Signs Division of Revenue Act, Securing Sh428bn Equitable Share for Counties

President William Ruto has assented to the Division of Revenue (DoR) Act, 2026, formally allocating Sh428 billion as equitable share funding to Kenya's 47 county governments for the 2026/27 financial year. This legislative milestone follows extensive negotiations and a mediation agreement between the National Assembly and the Senate, resolving a prolonged deadlock over the allocation amount. The Act is critical for providing fiscal certainty to devolved units, enabling them to plan and implement essential services such as healthcare, agriculture, and infrastructure, thereby reinforcing the principles of devolution enshrined in the Constitution of Kenya, 2010. The allocation surpasses the constitutional minimum, reflecting a commitment to strengthening county autonomy and service delivery.

The Kenyan legal and political landscape recently witnessed a significant development with President William Ruto's assent to the Division of Revenue (DoR) Act, 2026. This Act formally allocates KSh 428 billion as the equitable share of national revenue to the 47 county governments for the upcoming 2026/27 financial year. The signing of this crucial legislation marks the culmination of a protracted legislative process, characterized by intense negotiations and mediation between the National Assembly and the Senate, which had previously been at loggerheads over the quantum of funds to be devolved.

This development is not merely a procedural formality; it is a cornerstone of Kenya's devolved governance system, directly impacting the operational capacity of county governments and their ability to deliver essential services to citizens. The equitable share forms the backbone of county financing, enabling them to fulfill their constitutional mandates in critical sectors such as healthcare, agriculture, water services, county transport, and early childhood education. The timely enactment of the DoR Act provides much-needed budget certainty for counties as they finalize their own financial plans ahead of the new fiscal year commencing on July 1st.

This article will delve into the legal framework underpinning revenue division in Kenya, analyze the implications of the KSh 428 billion allocation, examine the legislative journey of the Act, and discuss the broader significance for intergovernmental fiscal relations and the future of devolution in Kenya. It will highlight how the Act, a product of constitutional design and political compromise, continues to shape the fiscal autonomy and operational effectiveness of Kenya's devolved units.

The framework for public finance in Kenya, particularly concerning the division of revenue, is meticulously laid out in Chapter Twelve of the Constitution of Kenya, 2010. Articles 202 and 203 mandate the equitable sharing of nationally raised revenue between the national and county governments, stipulating that the equitable share allocated to county governments shall not be less than fifteen percent of all revenue collected by the national government, calculated on the basis of the most recent audited accounts. Article 218 further mandates Parliament to annually enact legislation to provide for the division of revenue.

Key institutions play pivotal roles in this intricate process. The Commission on Revenue Allocation (CRA), an independent constitutional body established under Articles 215 and 216, is tasked with recommending the basis for equitable sharing of revenue between the two levels of government and among the county governments. The National Treasury, guided by the Public Finance Management Act, 2012 (PFMA), prepares the Division of Revenue Bill, taking into account CRA's recommendations. The Bill then undergoes parliamentary scrutiny, requiring approval from both the National Assembly and the Senate, with the latter playing a crucial role in safeguarding the interests of county governments. The Council of Governors (CoG), representing the collective interests of the 47 counties, actively lobbies for increased allocations and timely disbursements, often engaging in intergovernmental dialogue and, at times, disputes.

Historically, the division of revenue has been a contentious issue, often leading to stalemates between the two Houses of Parliament. These impasses have, on occasion, necessitated mediation committees and even advisory opinions from the Supreme Court to provide clarity on constitutional mandates and procedures, underscoring the delicate balance of power and fiscal responsibility within Kenya's devolved system.

The KSh 428 billion equitable share allocated to county governments for the 2026/27 financial year represents a significant outcome of the intergovernmental fiscal negotiations. This figure emerged as a compromise following initial divergences, where the National Assembly had proposed a lower allocation of KSh 420 billion, while the Senate advocated for a higher amount, exceeding KSh 450 billion, aligning more closely with the Commission on Revenue Allocation's recommendation of KSh 458.9 billion. The final KSh 428 billion allocation is an increase of KSh 13 billion from the previous 2025/26 financial year and constitutes approximately 21 percent of the audited national revenue of KSh 2.05 trillion, comfortably exceeding the constitutional minimum of 15 percent stipulated in Article 203(2).

A crucial aspect of the newly enacted Division of Revenue Act, 2026, is the reinstatement of Clause 5. This provision is designed to shield county allocations from potential reductions should the national government experience revenue shortfalls during the financial year. This reinstatement is a significant victory for county governments, offering a degree of financial predictability and stability that has often been a point of contention in previous fiscal years. It addresses concerns about the vulnerability of county budgets to unforeseen economic fluctuations at the national level, thereby enhancing their capacity for consistent service delivery.

Beyond the equitable share, the Act also makes provisions for the Equalisation Fund, allocating KSh 10.25 billion. This fund, established under Article 204 of the Constitution, is specifically earmarked for historically marginalized areas to ensure they receive additional resources to bring their basic services to the level generally enjoyed by the rest of the country. This allocation underscores the constitutional commitment to addressing historical regional disparities and promoting balanced national development.

The legislative journey of the Division of Revenue Bill, 2026, itself highlights the inherent checks and balances within Kenya's bicameral Parliament. The Bill was first introduced in the National Assembly, passed with amendments, and then forwarded to the Senate. Differences in opinion between the two Houses, particularly concerning the equitable share, necessitated seven mediation sessions before a consensus was reached. This process, while often lengthy, is a testament to the constitutional design that ensures both national and devolved interests are considered in fiscal matters. Past impasses have even led to the Supreme Court issuing advisory opinions, such as Reference No. 3 of 2019, which clarified that the Division of Revenue Act must be enacted before the Appropriation Act and provided guidance on interim withdrawals by counties during legislative deadlocks.

The signing of the Division of Revenue Act, 2026, is a critical step towards solidifying fiscal devolution in Kenya, offering county governments the much-needed certainty to plan and execute their budgets for the 2026/27 financial year. The KSh 428 billion equitable share, coupled with the reinstatement of Clause 5, provides a more stable financial footing for counties to deliver on their devolved functions, which are vital for the socio-economic well-being of citizens across the nation. This legislative achievement underscores the ongoing commitment to the principles of public finance, including openness, accountability, and public participation, as enshrined in Article 201 of the Constitution.

For legal practitioners and public finance professionals, the Act provides a clear framework for county budgeting and expenditure. However, challenges persist, particularly concerning the timely disbursement of funds to counties, as mandated by Article 219, and the imperative for enhanced fiscal responsibility and accountability at the county level. Practitioners should closely monitor the implementation of the Act, especially the effectiveness of Clause 5 in practice, and remain vigilant regarding any future disputes that may arise in the complex intergovernmental fiscal relations. The ongoing dialogue between the national and county governments, facilitated by bodies like the Council of Governors, will continue to be crucial in ensuring the sustained success of Kenya's devolved system.