County governments are facing a deepening financial crisis as runaway wage bills continue to drain resources away from development, threatening to derail the devolution dream.
A new report by Controller of Budget Margaret Nyakang’o shows that counties spent Sh220.64 billion on salaries and allowances in the financial year ending June 30, 2025, an increase of Sh10.8 billion within just a year.
The swelling wage bill has emerged as the biggest obstacle to devolved governance, starving critical projects such as hospitals, schools, roads, and water systems of much-needed funding.
The report reveals that employee compensation took up 47 per cent of total county expenditure of Sh470.23 billion and 41 per cent of revenue amounting to Sh533.11 billion.
Both figures overshoot the legal limits set by the Public Finance Management (County Governments) Regulations, which cap personnel costs at 35 per cent of revenue.
In some counties, salaries consume as much as 55 per cent of total income, leaving little room for service delivery.
Only eight counties met the legal threshold. They include Kilifi (24 per cent), Siaya (26 per cent), Tana River (27 per cent), and Nakuru (30 per cent). In contrast, counties such as Nyeri (55 per cent), Machakos (54.5 per cent), Baringo (53.4 per cent), Tharaka Nithi (53 per cent), and Taita Taveta (51 per cent) topped the list of violators. Other high spenders include Elgeyo Marakwet (51 per cent), Nairobi (50.8 per cent), Homa Bay and Lamu (50 per cent each), Murang’a (48 per cent), Kisumu (48 per cent), Bomet (48.6 per cent), Mombasa (47 per cent), Vihiga (47 per cent), Marsabit (43 per cent), Nyamira (44 per cent) and Busia (44 per cent).
As the wage burden soars, development expenditure has fallen to worrying lows. Counties spent Sh123.76 billion on development, only 26 per cent of total expenditure, with 23 counties failing to meet the minimum 30 per cent legal threshold.
Nairobi led the pack of worst performers, allocating just 12 per cent of its budget to development.
Machakos followed at 16 per cent, Kisumu at 17 per cent, while Kiambu, Kajiado and Nyamira spent less than 20 per cent.
Nyakang’o expressed concern that most counties had ignored recommendations of the 2024 National Wage Bill Conference, which required all state entities to cut wage bills to sustainable levels.
“The National Wage Bill Conference resolved that county executive committee members for public service should refine strategies and action plans to achieve a wage bill-to-revenue ratio of 35 per cent. These were to be approved by June 2024, but counties have not complied,” she said.
Her office was directed to ensure that personnel costs fall to the 35 per cent target by June 2028, but progress has been slow. Counties such as Turkana, Bomet, Kajiado, and Lamu were flagged for failing to submit any action plans at all.
The report also exposed a return to manual payrolls in some counties, raising accountability concerns. About Sh10.7 billion—five per cent of total wage spending—was processed outside the automated system.
Reasons given include delays in assigning payroll numbers to new employees, short-term contracts for politically connected staff, and arrears for retirees.
Garissa, Meru, Wajir and Tharaka Nithi were singled out for using manual systems that make it easier to conceal ghost workers and alter payroll records.
Nyakang’o warned that her office will take a tougher stance.
“The action plan should have a clear timeline with measurable milestones and be forwarded to the Controller of Budget for monitoring,” she said, adding that starting in the 2025–26 financial year, her office will not approve salary requests submitted on manual payrolls.
The report paints a grim picture of devolution’s future, with counties turning into bloated payroll centers rather than engines of grassroots growth and equity.
