No -bankruptcy means you renege on your debts and lose your credit rating. This would cost the California taxpayers big dollars in years to come (higher interest etc). Bankruptcy would be a disaster for California and any other state.
Bankruptcy does not mean you can't pay your debts eventually if you wish, simply that they cannot put you in jail or take away everything you own to collect on them.
CA's credit rating is already in the toilet because of Davis, and he keep borrowing more. The new bonds he intends to issue have NO state guarantee attached to them. Perhaps a bankruptcy would stop this madness.
Orange County ( from the new TV show ) has a economy bigger then many states and went Belly up about 10 years ago.
They have come out of it much better off then when they started.
http://www.oc.ca.gov/recovery/