Two types of factors are thought to lead to fiscal stress of municipalities in Norway: municipal organization and spatial characteristics. Organizational and political factors include the rationality of the agency of government, the ability of the resource coordinator to achieve a balance, and the coordination of governmental policies. Spatial factors include industrial presence and north‐south regional differences. Only the two spatial variables are significantly correlated with the budget difficulties. Case studies, though, show organizational factors and the interplay between organizational and spatial factors can be important determinants for fiscal stres