Fist, Congress needs to pass a statute allowing states to declare bankruptcy.
Then you work out a deal with the bond holders Detroit style to reduce debt. All public employees on a pension would receive a buyout for whatever is left in the fund.
It would also need to be accompanied by a law banning collective bargaining for pay and benefits for all public employees to prevent this from happening again. Short of the above they will just end up doing this again in twenty years.