The Slovenian constitution guarantees local self-government to all inhabitants and local self-government can be executed in municipalities and other local communities. Although municipalities are foundational units of local self-government, they experience some very basic problems since the re-establishment in the middle of 1990s; those problems are closely connected with inadequate exercise of subsidiarity and connection principles from in 1996 ratified European charter of local self-government. Slovenia has larger number of undersized municipalities that report problems with normative overload and their administrative incapacity. According to the findings of empirical study presented in the paper, the latter is often the case in municipalities smaller than 5000 inhabitants. The authors are also analysing inadequately defined scope of municipal jurisdiction; Slovenian municipalities are currently responsible for local affairs that affect only municipal inhabitants, and that narrow scope of jurisdiction is in many cases causing problems in managing the municipality, especially in cases of smaller municipalities.