Based on the countycity level data in 2009, this paper constructs six fiscal decentralization indicators from dimensions of fiscal revenue, expenditure and autonomy, and uses multilevel linear method to make empirical research on the impact of city-county fiscal decentralization on local spending for compulsory education at county-level. The empirical results show that the city-county fiscal decentralization has a significant negative impact on budgetary funds per pupil at county-level. The increase in city-county fiscal decentralization will reduce the county’s own fiscal investment in local compulsory education, but the increase in the county’s fiscal autonomy will increase the county's own fiscal investment in compulsory education. The negative effect of city-county fiscal decentralization isn’t affected by the reform of fiscal management institution. Based on the findings, this paper proposes that the future fiscal institution reform should continue to increase local fiscal autonomy, and add restrictive provisions into the design of the fiscal transfer which are used to maintain the county’s fiscal effort to provide the local public goods.