The Effect of Local Revenue and Central Government Transfers on Capital Expenditure In The City Of Surabaya (2015–2024)

Abstract

This research aims to analyze the influence of Regional Original Income (LOR) and Central Transfer Funds on Surabaya City Government Capital Expenditures in 2015–2024. In implementing fiscal decentralization, regional governments are given the authority to manage regional finances as an effort to support development through the allocation of capital expenditure. This research uses a quantitative approach with a causal associative type of research. The data used is secondary data obtained from the Surabaya City Government Budget Realization Report for 2015–2024. Data analysis was carried out using multiple linear regression with the help of the SPSS application and supported by classical assumption tests and hypothesis testing. The research results show that LOR has a positive and significant effect on Capital Expenditures, while Central Transfer Funds has a negative and significant effect on Capital Expenditures. Simultaneously, these two variables also have a significant effect on to 2 the budget adjustment policy during the COVID-19 pandemic which resulted in an increase in transfer funds not being followed by an increase in capital expenditure. These findings indicate that efforts to increase LOR need to be continued so that local governments have greater fiscal space to support development through capital expenditure.