In the discourse on the reform of the finances of local government units in Poland, which has been ongoing since the beginning of 2024, there has been a proposal to abolish the historical division of local government tasks into their own tasks and the state government administration tasks assigned to local government units. This postulate, which is quite surprising from the constitutional point of view, becomes particularly justified after analysing the long-term subsidy disputes between the state (State Treasury) and local government units of all levels (lasting since the beginning of the first local government reform in 1990). It can be assumed that the above postulate appeared as a response to numerous rulings of common courts, administrative courts and the Constitutional Tribunal on targeted subsidies granted to local government units from the state budget, most of which, unfortunately, were unfavourable to these units. In particular, the case law on targeted subsidies for public administration tasks, despite the commission nature of these subsidies, has systematically revealed and confirmed the strong inequality of the parties to the subsidy legal relationship between the state and local government. This has led to a widespread acceptance of the phenomenon of co-financing of the costs of the implementation of state tasks by local governments and, at the same time, to a general discussion on the legal admissibility of such co-financing. The purpose of the article is to analyse the legal nature of the subsidy relations between the state and local governments and to indicate the direction of their urgent reform (modification). The above analysis was carried out on the example of targeted subsidies granted to Polish local government units for the implementation of tasks delegated (commissioned) from the scope of state administration – based on court decisions and the case law of the Constitutional Tribunal made in this regard. The analysis used a dogmatic method (literature research) and an empirical method based on the study of judgments and decisions of administrative courts, common courts and the Constitutional Tribunal.