The city of Stockton, Calif. is set to become the biggest city in the country to declare bankruptcy.
"We think Chapter 9 protection is the only choice left. If we get any agreements, those will be honored in Chapter 9," said City Manager Bob Deis.
The Associated Press reports that Stockton would be the seventh municipality to file for bankruptcy this year, following 13 government entities filing for bankruptcy last year.
Stockton's city council voted on Tuesday to pass an austerity budget that will slash health care benefits for retired city employees and cut employee pay and benefits to prepare for bankruptcy filing.
Stockton, which has a $26 million deficit, has the nation's second-highest rate of foreclosure and double the national unemployment rate.