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Only with federal guarantees of their debt or a massive tax increase will they still be standing.

And even for the votes, I don’t think that the Obama administration would guarantee California’s debt. Once they do it for one state, they have to do it for all states. And there are states that are even bigger basket cases in terms of their debt structure and budget deficits than California - eg, Illinois. I could see Obama flinging money into California with “grants” and “support,” but even that is no longer getting the job done.

The liabilities are *huge* - not just in California, but in at least ten of the fifty states. The pension liabilities are growing and CalPERS’ rate of return on their investments isn’t meeting what they have assumed will be happening going forward. Every year that passes, more public employees retire and draw on CalPERS. This year alone, CalPERS has told the legislature they need an additional $700 million (first call was for $660 million) to stopgap the pension withdrawals in the face of inadequate investment returns. That situation gets only worse every year for the next 10 years as the boomers retire.

As interest rates stay low, the pension funds’ problems in both the public and private sector get worse. Bernanke is exacerbating this pension problem all over the US with his zero-rate policy.

The feds cannot take on the liabilities of these states without forcing the bond rating agencies’ hands - there is no one alive in the markets who would believe that Uncle Sugar is still AAA rated if Uncle takes on these states’ liabilities, even only as guarantees.

The California debt issue is going to come to a head in the next couple of years. Ahnuld has kicked the can down the road just about as far as he can. The only way forward is to either enact a massive tax/fee increase or slash spending in ways that will make liberals howl like ruptured ducks. We know a priori real spending cuts will not ever happen.

So it comes down to big tax increases are in California’s future, which will drive more productive people and businesses out of the state, which will exacerbate their structural fiscal deficit. At best, the tax increases buy California two additional years.

Lather, rinse, repeat.

The only solution to this is a governor like Christie, who is willing to take on the teachers’ unions (and the problem in CA is the same as NJ - it is teachers, and spending on “education”) and fight to win, rather than draw. Whitman isn’t going to be that person. We know Moonbeam isn’t that person.

California is pretty much a dead horse that hasn’t flopped over yet.