Check out the info on link, below:
http://www.realclearmarkets.com/articles/2009/02/should_we_let_california_go_ba.html
Excerpt from my link in post #16:
“While California technically can’t file for bankruptcy, a default on its debt would have shut down financing options for Sacramento and its municipalities until the state agreed to lenders’ demands that it get its fiscal house in order. At least one of the state’s municipalities, Vallejo, has already filed for bankruptcy and other cities and towns were on the brink before the budget compromise. “