<![CDATA[Local governments are increasingly expected to maintain fiscal discipline while simultaneously expanding social protection, yet the implications of these competing objectives for welfare spending remain unclear. This study examines the effects of fiscal independence and financial efficiency on social assistance allocation in Indonesian local governments and investigates whether these relationships changed during the COVID-19 pandemic. Using panel data from 211 districts during 2018-2023, this study employs a fixed-effects regression model based on 1,266 observations derived from audited local government financial statements. The results show that fiscal independence is associated with higher social assistance allocation, whereas financial efficiency is associated with lower social assistance allocation, revealing an efficiency paradox in which stronger budget execution coincides with reduced welfare spending. The negative relationship became more pronounced during the pandemic-affected period and differed substantially between Java and Outer Java regions. These findings suggest that the effects of fiscal discipline on welfare spending are context-dependent and shaped by crisis conditions and regional differences in capacity. The study concludes that performance evaluation systems should balance budget discipline with social protection objectives. Unlike previous studies, this research simultaneously examines fiscal independence and financial efficiency while incorporating pandemic conditions and regional heterogeneity into the analysis of social assistance allocation.]]>
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