City governments were better prepared to face the 1990-1992 recession than were state governments, and they adjusted their budgets with relatively less fanfare. The absence of widespread bankruptcy notwithstanding, the fiscal position of cities has deteriorated and some of the necessary adjustments were painful. Services were reduced as real per capita expenditure growth declined, taxes were increased, and the entire local government sector remained in deficit during the past six years. The problem has not been softened by federal or state policies; in fact, the flow of both federal and state aid slowed markedly during the late 1980s. A combination of economic and social forces suggests that many of the nation's older cities will not outgrow this fiscal stress and their budgetary well-being will be more dependent on state and federal policies.