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Kalifornistan. Its been bankrupt for years now.

BINGO ! California, to its shame is now ranked among the countries most likely to DEFAULT.

Here's the description :

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Cumulative Probability of Default: 18 %

The Sacramento Bee: "Just how deeply in debt are our state and local governments?

The answer: No one knows for certain, since debt is scattered through myriad agencies in many forms, but well over a half-trillion dollars is a fair estimate."

Just days before Gov. Arnold Schwarzenegger and legislators finalized a water package, including an $11.1 billion bond issue, state Treasurer Bill Lockyer warned them not to do it.

California is already deeply in debt, Lockyer warned, has huge budget deficits and can't afford another big bond issue.

"The days of blithely heaping more and more debt burden on the general fund are over – at least they should be," Lockyer said.

The earmark-laden bond issue, the package's single most controversial element, raises an interesting question: Just how deeply in debt are our state and local governments?

The answer: No one knows for certain, since debt is scattered through myriad agencies in many forms, but well over a half-trillion dollars is a fair estimate.

Lockyer's warning pertained to the state's "general obligation debt," which currently stands at $59 billion, and there are an additional $50-plus billion in general obligation bonds that have not yet been sold. The biggest chunks of debt, however, are the unfunded obligations for pensions and health care of retired public employees.

The latest annual pension report from the state controller covers 2006, when the unfunded liability was $64 billion. But since then, state and local pension funds have lost at least $150 billion on investments, so a reasonable estimate of today's unfunded liability is $200-plus billion. A state commission, meanwhile, says the state-local liability for retiree health care is about $100 billion.

No one keeps complete data on local government general obligation debt, but it appears to be roughly the same as the state's, perhaps $50 billion, plus several billion dollars in debt incurred by local redevelopment agencies.

There are tens of billions in specialized state debt, such as veteran home loan bonds, "securitization" of tobacco lawsuit proceeds, and budget deficit bonds.

The interest that must be paid on all that state and local debt is probably an additional $100 billion, so we're already talking about well over $500 billion.

Then there are the off-the-books debts incurred to paper over years of state budget deficits, such as speeding up tax collections that will have to be refunded later, postponing periodic payments to schools, making promises to schools about levels of future financing, borrowing money from special funds and taking local government funds that must be repaid later.

The state's unemployment insurance fund, meanwhile, is about $7 billion in the red, and that deficit is expected to more than double in the next year and quadruple by the end of 2011. The state has been borrowing from the federal government, but sooner or later it will have to repay the feds, probably by taxing employers.

Conservatively, then, California is probably more than $600 billion in debt. Perhaps we shouldn't sweat another $11.1 billion. Or perhaps it will be the straw that breaks our back.