Another U.S. city on the brink of bankruptcy… Stockton, California, a farming town near San Francisco with a population of 292,000, is meeting with creditors and labor unions this week to discuss how it can avert filing for bankruptcy due to its massive budget deficit . In an attempt to avert bankruptcy, the city laid off almost 200 city employees, including a quarter of its police force. With the numbers not adding up, and facing a budget deficit of $2.00 million in 2012, the city was forced to ask creditors and the labor unions to sit down and discuss budget cuts in order to reduce the budget deficit for this year. See if this sounds familiar dear reader. Before the recession—during the good times—the city took on a large amount of debt, expecting that continued growth going forward would pay for it; no budget deficits in sight. Well, now that revenues are down drastically, this debt has the city in a stranglehold. Stockton’s city council is aiming to reduce the current budget deficit by $15.0 million, which would include defaulting on debt payments on the municipality’s bonds along with other budget cuts. That is just scratching the surface on the city’s terrible financial situation. Stockton has unfunded liabilities—mostly made up of pensions and health insurance—of $450 million. Although high, it was more manageable when the city took in revenues of over $203 million. For 2012, the city is hoping that revenues will exceed $160 million! That is quite the budget deficit! During the good times, the average home price in Stockton was $431,000, which helped increase city revenues and keep the crime rate relatively low (no budget deficit). In 2011, the average home price fell to $142,000 and unemployment is the eighth highest, when compared to all cities in the U.S., at 15.9%. The crime rate—when compared to other U.S. cities—now falls in the highest group; among the top 10 across the nation! In response to the bankruptcy of Vallejo, California, in 2008, the State of California passed a law that forced cities to work with an evaluator for at least 60 days to discuss budget cuts, before being able to file for bankruptcy with the courts. Stockton has now initiated this process. If no agreement is reached on its budget deficit, then this will be the next city to fall. As we move deeper into 2012, Stockton will unfortunately not be the only city we will hear about, as budget deficits grow throughout the U.S. It is important to note however that the cities across the U.S. have been instituting budget cuts in an attempt to balance their budget deficits. In 2010, $433 billion in …