I want to build a site for the states and wonder if creating subs like california.domain.com is unnecessary or bad in anyway. Actually is it beneficial?
Each subdomain is treated as a seperate site by Google. In effect, for every state it would be treated as its own site and will have to earn Backlinks, PR, etc all individualy/seperately.. Whether that is good or bad depends on what your doing....
I think in your case it makes more sense for you to create subfolders instead of subdomains so they can get the benefit of the popularity of the domain.
If each subdomain will contain a considerable amount of content/pages, it is worth doing so. Having a subdomain creates enables two pages of your site to appear on one search result page as they have different URLs. But it entails more maintenance work so if you have 50+ subdomains consider the maintenance effort. If you have no other significant purpose, I'd suggest you go for subfolders instead.