<p>We study the dynamic impact of intergovernmental transfers on the budgets of intermediate governments. While the existing empirical literature has focused almost exclusively on local governments, intermediate governments typically operate under different structural conditions, managing large social-sector programs with rigid, labor-intensive spending and relying on broader and more elastic tax bases. These differences imply that the adjustment to transfer shocks may not map one-to-one into the patterns documented for local governments. Using Argentina as a representative case of a multi-tier federal system and methods of dynamic analysis, we find that a positive shock to federal transfers induces, in the short run, a more-than-proportional increase in spending and a modest rise in own tax revenues, generating a temporary deficit. In the long run, provinces return to fiscal balance through persistent spending adjustments and a gradual rise in own tax revenues. Transfers also display persistence after the initial shock. Importantly, both the scale and the composition of these responses -driven almost entirely by current spending, accompanied by shifts in the tax structure toward indirect taxation- differ from those typically observed for local governments. Results are robust to multiple checks, including tests addressing the potential endogeneity of transfers and the impact of fiscal regime changes. The paper provides new evidence on the fiscal behavior of intermediate governments and clarifies how their adjustment mechanisms differ from those of local governments.</p>