Much of the city's financial picture was made clear this week with the release of a proposed $521 million budget.  Depending on the outcome of some union lawsuits against the city, the deficit for next year is between $26 million and $43 million.   

The city has been in mediation talks with creditors and most of the employee unions since March to resolve $760 million in unfunded liabilities and debt. 

Stockton City Manager Bob Deis says mediation is the best hope the city has for recovering from its financial woes.  The other two options are bankruptcy, or cutting police, fire, and city staff budgets. 

Stockton has already missed three bond payments since an audit ordered by the current City Council discovered the city's financial situation was as terrible as it is. 

The city is relying on bond insurance to pay bond holders.