Voters in New London on Tuesday voted against the budget and increasing taxes by 7.5 percent.
The city council approved the increase in an effort to increase revenue and save dozens of fire and police jobs that were in jeopardy, but a local group obtained enough signatures to take this matter to a vote and it failed on Tuesday.
Officials from the mayor's office said they are working on a new budget proposal that will include what they called tough but fair cuts.
The referendum included two questions. One was to approve the 2012-2013 budget. The other was to approve a 27.22 mil rate.
Earlier this month, the city’s finance director warned that the city could run out of money in the coming year because it has no financial cushion.
James Finley, executive director of the Connecticut Conference of Municipalities, said most towns in the state try to keep 5 percent of the budget in its fund.
New London’s fund balance is $312,000.