This research aims to assess the impact of administrative-territorial reforms in Armenia, with a focus on how amalgamation has affected the relationship between community revenues and expenditures. It also evaluates the effects of fiscal decentralization on local economic development. Regression analysis conducted as part of the research indicates that, following amalgamation, communities in Armenia have become increasingly dependent on state budgetary support relative to their own income sources. This trend has contributed to a notable decline in local tax autonomy. Simultaneously, a ten-year analysis of Armenia’s community budgets reveals a consistent increase in own-source revenues. However, this growth does not always correspond with a higher level of income decentralization. This discrepancy can be attributed to the fact that, despite the administrative-territorial reforms, communities in Armenia remain heavily reliant on state grants. As a result of this continued dependence, substantial state-funded investments (e.g., road construction projects and the development of preschool educational facilities) are still implemented directly through central government support. The analysis presents a nuanced and somewhat contradictory view of the effects of amalgamation. On the one hand, it underscores the importance of capital investment in amalgamated communities, made possible by state funding. On the other hand, it points to a decline in fiscal decentralization and the weakening of local financial independence.