Golden State Municipality Hopes Chapter 9 Brightens Future

Stockton, CA has a population of just over 291,000 people, making it slightly smaller than Pittsburgh. Located in the central part of the state, the city has just filed for Chapter 9 municipal bankruptcy. Unlike Pennsylvania, which has Act 47, oversight boards, and a receiver in the capital city of Harrisburg, California allows for bankruptcy filings without many conditions. California has a mediation process, and that is what just wrapped up for the City of Stockton.

Satisfying the various criteria to file (state has to explicitly authorize, filing must be done by a municipality, filing has to be voluntary, has to be insolvent, and has to have explored other options) Stockton has approved a "pendency plan" that describes how operations will continue during the filing. That plan states "…the city is insolvent. Now, only the difficult process of restructuring its long term financial obligations and personnel costs will enable the City Council to protect the community and make sure the City emerges from this financial crisis as a viable, sustainable institution".

Stockton has made significant reductions in headcount, with public safety employment falling 25% and non-public safety positions down 43%, bringing total general fund employment to 930, down from 1,350 in the 2008-09 fiscal year. In comparison, from the first Act 47 plan in 2004 to the revised plan in 2009, Pittsburgh’s headcount fell 10% (there were over 400 layoffs in 2003, prior to the Act 47 declaration).