Reduce it to a territory; expunge the current government/leadership; establish martial law to clean up the crime; appoint a federal commission, like a bankruptcy court, to supervise getting the state back on track.
After a complete audit, hold a state election to replace the government with new people...new, RESPOMSIBLE people.
During this time, no representation in US Congress.
It has to rebuild its credit, and credibility, meet its obligations.
That would result in new prisons being built to house corrupt politicians. Jobs growth!
Pay state and local pensions at whatever level they were actually funded, only. The funding that should have been was likely mostly spent on pay increases to the same folks, and so lobbied for by the same folks. So they already have what's 'missing.' RICO as many of the state employee union funded politicos as possible as well as the union officials for triple damages. The Rats want to tax the rich; well, those are the remaining rich! Just as the political/government worker cabal has ended up with whatever money is left in Cuba and Venezuela.