New Delhi, July 4 -- Toms River schools, one of New Jersey's largest districts, voted to file for Chapter 9 bankruptcy after refusing to raise property taxes another 12.9%.

This comes after last year's 9.3% increase, totaling a crushing 22% hike over two years for homeowners.

State officials had ordered the district to either pass this tax-heavy budget or shut down all programs immediately.

But, Superintendent Michael Citta declared summer classes would continue anyway, calling the state's demands "illegal and immoral." The bankruptcy filing pauses debts and lawsuits while the district reorganizes its finances.

Over seven years, New Jersey's school funding changes slashed $175 million from Toms River's budget, forcing 250 teacher/staf...