Decentralization of the public administration system in Ukraine is one of the most urgent tasks. Decentralization is one of the forms of development of democracy, which allows creating the foundation for the independence and viability of local authorities, provides an opportunity for local authorities to participate in the development of the territory entrusted to it, promotes the effective provision of public services to the population of the region. The reorganization of the budget system is not limited to improving the relationship between the levels of the budget system, as this is not enough for real decentralization of decision-making in the issues of drawing up and implementation of independent local budgets. The main direction of research should be the separation of financial flows between the state and self-government, which is based on the division of powers, functions and responsibilities. The subject of the study is the impact of fiscal decentralization on the financial capacity of local budgets.The purpose of the article is to assess the level of budgetary and financial decentralization in Ukraine at the present stage and to find ways to further strengthen the financial capacity of communities and regions.