On Tuesday, the parliamentary chamber voted down the funding for a second time, despite the requested amount being reduced to CHF66.5 million.
The House of Representatives supports the funding that cannot be released until both chambers agree.
In instances where parliamentary chambers cannot agree on funding matters, the decision that involves less public outlay takes precedent.
Cantons wanted the money to fit out new refugee centres, having exhausted all the facilities that were offered by the army.
Last year Switzerland registered 24,500 asylum-seekers, which was 64% more than the previous year. This excludes some 75,000 Ukrainian refugees, who received a special protection status through an accelerated registration process.
Refugee numbers this year are estimated anywhere between 27,000 and 40,000.
The situation has been made worse by an Italian decision to maintain a ban on re-admission of refugees from neighbouring countries that it imposed in December.
This prevents Switzerland from sending refugees back to Italy.
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The Swiss Federal Supreme Court has overturned the conviction of a commodities trader who had been given a suspended sentence and fined CHF72 million.
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Swiss government plans more accommodation for asylum seekers
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The Swiss government has asked parliament to set aside CHF132.9 million ($155 million) to create additional accommodation for asylum seekers.
Swiss asylum requests expected to remain high in 2023
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The head of the State Secretariat for Migration says that the economic consequences of the Ukraine war are expected to keep asylum requests high.
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If you want to start a conversation about a topic raised in this article or want to report factual errors, email us at english@swissinfo.ch.