ENHANCING THE FINANCIAL CAPACITY OF THE TERRITORIAL COMMUNITIES BY OPTIMIZING THE BASIC LEVEL CONFIGURATION OF ADMINISTRATIVE AND TERRITORIAL MANAGEMENT

The article focuses on the investigation of the possibilities for strengthening the financial capacity of territorial communities in Ukraine by optimizing the basic level configuration of administrative and territorial management. As a result of the study, it was revealed that, despite a number of successful results of the decentralization reform in Ukraine, a significant number (more than 80%) of territorial communities' budgets remain subsidized. The insolvency of territorial communities is largely due to both the existing perspective plans imperfection and the formation of a significant number of territorial communities not according to long-term plans and in violation of the approved methodology. As a result, the majority of territorial communities were subsidized and an excessive burden was placed on a minority of communities, due to the payment of reverse subsidies from which almost 70% of horizontal fiscal equalization occurs. It has been established that in Ukraine there is no legal definition of criteria for the territorial communities' capacity and methodological recommendations for a realistic assessment of the viability of territorial communities' financial capacity level. Enhancing the financial capacity of territorial communities in Ukraine by their consolidation must be carried out after determining the criteria for territorial capacity and developing a reasonable methodology for assessing the capacity of territorial communities, which should consider not only the financial component of the capacity, but also the demographic and geographical aspects, as well as the availability of infrastructure and the industrial capacity development. Community consolidation will be effective if only it combines industrialized communities with less affluent ones, and not adjacent rural communities with the same level of insolvency and subsidies. To optimize the inter-budgetary equalization system, it is necessary to consider options for (1) administrative consolidation of the united territorial communities; or (2) voluntary consolidation of the united territorial communities, or (3) revision of the spending powers distribution with differentiation of them according to the criterion of the territorial community population.