Is the State of California bankrupt?

It sure seems like California is insolvent. Just today we heard that Arnold Schwarzenegger contacted Hank Paulson to let him know that the State is having liquidity problems (see pdf) and needs help. California ranks as the world's 9th largest economy with a population of over 30 million people, so this is quite worrying.

The state had an economy that was going gangbusters during the boom. That certainly aided U.S. GDP growth a few years back. Now, house prices are way down in California -...

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