Skyrocketing Employee Costs Drive Another California City To The Edge Of Bankruptcy

Calling Stockton's fiscal problems "chronic and severe," city officials have declared a state of fiscal emergency for the second time in two years, The city is facing a $37 million budget gap this year, a 60% increase from last year's $23 million shortfall, according to Bond Buyer.

City officials project the budget deficit will grow to $48 million by 2014 if nothing is done to reign in ballooning employee costs. Public safety personnel costs alone eat up 80% of the Stockton's general fund.

Like Vallejo, Stockton's fiscal woes are largely the result of skyrocketing employee costs and a major drop in revenue due to the collapse of the housing market. Both cities experienced major growth during the housing bubble, only to be locked into lavish labor contracts when the bubble burst.

Vallejo has yet to emerge from bankruptcy since the city filed for Chapter 9 protection in 2008.
(Excerpt) Read more at businessinsider.com