I like your ideas of states losing statehood and being under federal oversight.
What we are seeing with Illinois, and we’ve seen with some cities such as Detroit, should be unthinkable. A unit of government, if run properly, should never be in a position where they are bankrupt.
Maybe this is too strident to say, but public officials who are presiding over the lead up to bankruptcy are derelict in their duties, and perhaps even violating laws themselves, to allow these situations to fester and get to the point of no return.
So what’s the solution? Raise taxes in Illinois? Can they sell bonds; won’t their bond rating go to junk bond status, which in turn will jack up interest owed by Illinois on existing debt, and become a vicious circle??
The solution is to start renegotiating pension agreements. The state can’t pay. Nothing is or ever was guaranteed.