MULTI-INDICATOR SYSTEM FOR ASSESSING THE FINANCIAL INDEPENDENCE OF LOCAL BUDGETS AND THE METHODOLOGY FOR FORMING AN INTEGRAL INDEX

This article develops a multi-indicator framework for assessing the financial independence of local budgetsand proposes a methodology for constructing an integral Financial Independence Index (FMI). The study systematicallyanalyzes key indicators, including revenue autonomy, transfer dependency, vertical fiscal imbalance, tax autonomy,expenditure autonomy, fiscal effort, and own-revenue stability. The economic substance, calculation formulas, andnormative threshold values of each indicator are substantiated.Furthermore, a methodological approach to aggregating these indicators into a unified composite index throughnormalization and weighting procedures is proposed. Various weighting techniques, such as the Analytic Hierarchy Process(AHP), the entropy method, and regression-based approaches, are examined. The proposed methodology provides acomprehensive tool for evaluating the financial independence of local budgets, enabling interregional comparisons andassessing the effectiveness of fiscal decentralization policies