A lot of municipalities are also being screwed pretty hard by state-level policies. Many states cap how much a municipality can raise through "legitimate" taxation (eg, property, sales and income taxes) while imposing mandates on what services the municipalities must provide. Meanwhile, municipalities have an even worse time taking on debt than the state government. So it's not too uncommon for a municipality to end up in the position of being unable to meet its obligations, having nothing left to cut, and no authority to raise taxes.