Grants from the state budget as an external source revenue for Polish municipalities

Decentralization of public finances resulted in the division of tasks between the Local Government Units (LGU): municipalities, counties and provinces. Together with the division of tasks sources of income were divided. Unfortunately own revenues, which were granted to municipalities are not sufficient to carry out these tasks. Therefore, municipalities (also other LGU) were equipped with additional - external sources of income. Earmarked grants from the state budget are specific income, which supports the development of the municipalities, enables the realization of many investments and supports the implementation of national development strategy. The aim of this research is to present earmarked grants from the state budget as a vital source of income and financial support for municipalities, which allow socio-economic development of a region. The research is based on method of critical analysis of Polish literature, legal acts as well as the statistical data analysis. The study covers years 2004–2013. JEL Codes: H70, H71, H20.