A local government fiscal crisis occurs when there is reasonable concern over a government's ability to pay its bills on time and its revenues and expenditures are consistently imbalanced. States can respond by reviewing audits, approving bonds, withholding funds, or taking over financial operations. Early warning signs include an inability to adopt budgets on time, expenditure increases outpacing revenue growth, and long-term liabilities growing faster than inflation. Understanding common factors among distressed cities allows for earlier detection and prevention of full-blown financial emergencies.