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To improve public finances, the French state encourages local authorities, in particular at the commune level, to increase budget discipline. For the past thirty years, it has done this by imposing inter-municipal cooperation to streamline spending, and, more recently, by cutting the global operating grant (DGF), the funds transferred to the communes. As the DGF is also an instrument for vertical equalization, we have studied its performance, taking into account the existence of the FPIC (inter-communal equalization fund), a horizontal redistribution mechanism at the local-authority level. Our main empirical results, using a large panel dataset of French municipalities with more than a thousand inhabitants over the period 2018–2023, are twofold. First, the equalization of tax capacities is operated mainly through vertical transfer, as compared to the horizontal scheme, whose performance is modest. We also find a number of dysfunctions in the equalization schemes, undermining their effectiveness. Second, we show that local politics comes into play and introduces partisanship in the allocation of the vertical transfer, despite its formula-based definition. We would like to thank the journal’s Editorial Board and two anonymous reviewers for their comments and constructive criticism. This work benefited from discussions with participants at the sixty-second Congress of the Société Canadienne de Science Économique (Quebec City, May 2023) and with members of the Territoires Commission of the Conseil National de l’Information Statistique (Paris, November 2022). JEL Codes: D72; H70; H72; C23