Those two cities used a new state mediation process to contemplate bankruptcy over a period of several months — a stark contrast to San Bernardino's quick-fire decision under a dire cash crunch.
Before Stockton, a California city had not filed for bankruptcy since Vallejo in 2008.
Jerry Newfarmer, president of government consulting firm Management Partners, said some of California's most financially stressed cities are inland, where housing prices plummeted. But he said many municipalities made tough cuts ahead of time, and he doesn't foresee a flood of new bankruptcies.
In the counties that are home to Stockton and San Bernardino, the share of homes in some stage of foreclosure was more than three times the national average in 2011, according to foreclosure listing firm RealtyTrac.
Since Congress added Chapter 9 to the bankruptcy code in 1937 to allow municipalities to seek protection, about 640 government entities have filed. About half of states allow cities to seek bankruptcy protection, which is considered a measure of last resort because it can raise cities' borrowing costs, Spiotto said.
For many years, municipalities muddled through tough financial times with support from states, and in places such as Michigan, some are still doing so.
"I think this cries out for the need for increased oversight and the ability to provide forms of bridge financing to work through it," Spiotto said.
Taxin reported from Orange County, Calif. Associated Press Writers Michael R. Blood and Robert Jablon contributed to this report from Los Angeles.
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