Stockton, Calif., a city of nearly 300,000, is slated to become the largest U.S. city ever to file for bankruptcy after the City Council approved a new budget that calls for defaulting on debt payments and slashing millions in pay and benefits for employees and retirees.
“It’s heart-wrenching to think about the implications,” said Mayor Ann Johnston.
Stockton officials have said since February their city’s finances are suffering the combined effects of fiscal mismanagement over two decades, too much debt taken on in good times and generous pay and unsustainable benefits for city employees and retirees.
Stockton has also suffered a sharp drop in revenue since the collapse of its once red-hot housing market. The housing boom transformed the farming city into a distant bedroom community of the San Francisco Bay area and its bust put Stockton at or near the top of national foreclosure rankings in recent years.
To keep its budget in balance, Stockton has cut more than $90 million in spending in recent years and slashed its work force, including a quarter of its police officers, a pressing concern with a surge in violent crime in the city.