“Once that occurs, California will need to live with the cash in it’s pocket.”

IMO, a more likely scenario is that the feds bail out CA (“TBTF”), plus other states. Maybe the bondholders will be paid in full (ala AGI bailout), or maybe they will take haircuts (ala GM bailout), I don’t know, but I highly doubt the feds make the pensioners take a haircut. (Did any GM pensioners (union or non-union) take a haircut?).

Haircuts and cram-downs have to happen at some point to get rid of the debt. 100% bailouts may happen on a case by case basis, but the net result will be offsetting currency debasement.