City of Harrisburg, Penn., flag
City of Harrisburg, Penn., flag - 
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STEVE CHIOTAKIS: Harrisburg, Penn., is facing bankruptcy. The city's mayor has asked for state aid to avoid
defaulting on bondholders who are already
suing for overdue debt payments. But Harrisburg isn't the only city facing financial foreclosure.

Marketplace's John Dimsdale reports.

JOHN DIMSDALE: Harrisburg made a bad bet on a trash incinerator and now is runs a deficit larger than its budget. The city will enter a state recuperation program that includes painful service cutbacks and higher taxes. More and more cities are looking to states for financial rescue.

But the Urban Institute's Kim Rueben says in many cases, states have been hit harder than cities.

KIM RUEBEN: Local budgets are actually in better shape in that property tax revenues haven't really declined as much as state income taxes and sales taxes have.

Still, the National League of Cities finds 8 in 10 local governments are cutting services like police, fire and school programs. The League's Chris Hoene did the survey.

CHRIS HOENE: So there's going to be this push and pull, this negotiation between local and state governments about who funds services and covers the gaps.

Hoene says only a growing economy that generates more tax revenue will ease the situation.

In Washington, I'm John Dimsdale for Marketplace.