Main Article Content
This research aims to investigate the impact of local government fiscal capacity index toward education expenditure and health expenditure. By using cities and districts in the entire of Java Island as population and purposive sampling method with the criterion all cities and districts that submitted their financial report on time, this research uses regression for data analysis. The result shows that the fiscal capacity index as independent variable has a negative significant influence on both of local government education and health expenditures. Accordingly, the allocation for government education and health budgets mostly originated from central government transfer money such as general allocation funds (DAU) and specific allocation funds (DAK). This research proofs that most of local governments in Indonesia especially in Java Island have a small portion of fiscal capacity that is not sufficient to accommodate their basic services such as education and health.