The purpose of this paper is to explore and discuss the solutions municipal organizations employ to achieve financial sustainability. The paper thus aims at providing a theoretical overview on the subject of financial distress and financial sustainability, followed by a review of the New Public Management and New Public Governance discourse; it then uses and refines this framework in the light of empirical evidence from municipal organizations in Sweden to discuss how financial sustainability may be achieved. The empirical evidence is derived from the Swedish national municipality research program that was established to find out how municipalities cope with stressful situations, financial as well as organizational. The research suggests that the solutions for financial sustainability depend upon the size and organizational structure of the municipal organization and changes in the municipality’s political majority. Further, research findings show that the management or governance system of the municipality plays an important role in achieving financial sustainability, and the characteristic of the system, its communicative function, and resource perspective need to cohere with the basic characteristics of the municipal organization in order to be successful