Stockton, CA files for bankruptcy

The city of Stockton will file for Chapter 9 bankruptcy protection after it failed to find acceptable terms for restructuring its ballooning debt. In a 6-1 vote the city council voted to adopt a budget that is tied to a bankruptcy plan.

The annual budget beginning July 1 calls for defaulting on $10.2 million in debt payments, as well as cutting $11.2 million in employee pay and benefits under union contracts. Those contracts could be voided by the bankruptcy court, a move likely to aggravate the deepening conflict between the public sector and public employee unions.

The city of Stockton with 292,000 residents becomes the largest U.S. city to go bankrupt, but the ongoing recession, along with right-wing instigated austerity measures, raises doubts about the solvency of the public sector at all levels as cities, counties, and states continue to struggle with declining tax revenues and increasingly expensive employee benefits. The aggravation of this conflict is quickly becoming the single largest struggle for worker rights since the 1967 Civil Rights Act.