Analysis of the Effect of Capital Expenditure, Balancing Funds, and Budget Surplus (SiLPA) on the Financial Performance of Regency/City Governments in Central Java Province for the 2023-2025 Period

Abstract

This study aims to analyze the impact of capital expenditure, balancing funds, and the Remaining Budget Overplus (SiLPA) on local government financial performance, measured by the fiscal independence ratio. The research focuses on 35 Regencies/Cities in Central Java Province from 2023 to 2025. Utilizing panel data regression with the , the results reveal that capital expenditure has a significant negative effect on financial performance, suggesting that fixed asset investments have not immediately boosted local own-source revenue (PAD). Conversely, balancing funds show a significant positive impact, proving that central transfer funds effectively act as a local economic catalyst. Meanwhile, SiLPA has no significant influence, indicating that budget surpluses are primarily used to cover subsequent deficits without leveraging fiscal independence. Findings suggest that local governments should enhance capital expenditure efficiency and improve budget planning quality.