Nope, they were done in by Proposition 13, and it was the outcome the taxpayers had in mind when they passed it. For decades, public employee unions have been using the dues money they extorted from their members to 'buy' politicians in legislative bodies. Those politicians (primarily Democrats), in turn, have given them everything they asked for. When the money ran out, they just raised taxes. With the possibility of raising taxes foreclosed, the politicians kept operating as usual, and this is the result. Vallejo started running a deficit during the 'good times', back in '04, but the band played on.
I watched the meeting last night, and highly recommend viewing it on the city's website. It's a great cautionary tale of just how ticked-off the public can be at a group of elected officials. Public comment went on for almost three hours, most of it pretty unpleasant.
There's some inaccurate figures floating around that overstate the problem. Cops, for example, are not "making 250 thousand a year", but the general story line of elected officials who let their city get locked into labor contracts that are indexed to things that don't track their revenue is pretty accurate. In part, the declaration was an effort to get the unions to agree to cuts, so in that sense it's part of the bargaining process. Whether they'll come to their senses or let it proceed to the courts is the open question.
For the purpose of discussion:
Top pay for an experienced Police Officer ‘lateraling’ in to the Vallejo PD is 102,000 a year.
Top pay in the same situation at LAPD is about 74 thousand, plus a signing bonus.