Nairobi Senator Johnstone Sakaja said this was the only way to force the 47 devolved units to honour nearly Sh30 billion owed to the two pension schemes.
The counties are also holding nearly Sh13 billion in pay-as-you-earn tax contributed by current workers in the 2017/18 financial year.
Senators have threatened to cut counties’ equitable share of revenues to pay off debts owed to pension schemes to unlock retirement benefits for workers who served in the defunct local governments.
The legislators said Tuesday they would, upon getting full report of the debts owed to the Local Authorities Pensions Trust (Laptrust) and the Local Authority Provident Fund (Lapfund), sanction the deductions from the counties share of equitable revenue.
Nairobi Senator Johnstone Sakaja, who chairs the Labour Committee, said this was the only way to force the 47 devolved units to honour nearly Sh30 billion owed to the two pension schemes.
The counties are also holding nearly Sh13 billion in pay-as-you-earn tax contributed by current workers in the 2017/18 financial year.
Laptrust and Lapfund are yet to pay defunct municipal council workers their retirement benefits citing unremitted dues by the counties. If the Senate makes good its threat, counties will lose billions of shillings under the equitable share of revenue.
Nairobi County, for instance owed the two pension schemes Sh13.8 billion as of June last year.
“Once we get full verification of these debts, what each county owes Laptrust, LapFund and the Kenya Revenue Authority, we propose that we deduct the money here at source (county allocation revenue Act) and pay,” Mr Sakaja who is also the Senator for Nairobi said.
The proposal likely to be effected in the year starting July underlines a fresh bid by Parliament to force counties into paying off debts now running into decades as ageing former workers at municipal councils struggle to pay their bills.
Counties will get Sh316.5 billion as equitable share in the year starting July but the amount per county will be slashed if Parliament effects the proposal in a bid to unlock the retirement benefits for the former workers.
The devolved units already grappling with shortfalls in revenue collections and misuse of funds have over the years failed to clear the debts with some turning to selling property to the pensions schemes to clear the debts.
Nairobi, Nakuru and Kisumu have so far donated several residential estates to Laptrust to enable it recover the unremitted dues.
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