Friends have lately speculated about the prospect that some government agencies in California will file for bankruptcy. Among the questions asked: Can government file for bankruptcy protection? And if so, under what chapter of the bankruptcy law?

The answers are, yes and Chapter 9.

We learned this today as the Sacramento Bee was reporting that two more cities, Rio Vista and Isleton, may join Vallejo in seeking bankruptcy protection. There must be something in the water in the Sacramento River Delta.

The prospects for state and local government are, in a word, ugly.

The state faces a $28 billion shortfall in the next 20 months alone – with no sign that Democrats and Republicans are capable of breaking their impasse. So long as Democrats resist spending cuts and Republicans resist revenue increases, the state faces certain disaster. California is “… quite literally on the edge of a fiscal cliff,” in the words of an economic analysis published this week.

Meanwhile, local government is only beginning to understand the revenue implications of what once seemed unthinkable – the collapse of real estate prices. All of a sudden, many homes are worth less than the appraised value on the tax assessor’s rolls. Under the law, counties will be obliged to reduce those appraisals and in the process of doing so, lower revenues to local government.

The word is… ugly.