The paper is devoted to research of specific relationships between central and local budgets. Considering the frontier status of local budgets it is proposed methodological approach to the allocation of local budgets by line sources of revenues and expenditure items. It is thoroughly analyzed the structure of revenues and expenditures of local budgets, as well as the source and specificity of their formation. Considering existing inequalities it is proposed to optimize the mechanisms of state and local budgets formation, mainly focusing on increasing of their transparency.
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