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Unions, led by the American Federation of State, County and Municipal Employees, have launched a furious legal challenge to the Detroit's bankruptcy petition, arguing that Michigan's constitution law does not allow public pension obligations to be diminished. But a federal bankruptcy judge dealt a blow to that tactic last week, halting any state lawsuits that would interfere with the bankruptcy proceeding. "Government entities declaring bankruptcy, it's really a government going to war with its own people," said Steven Kreisberg, director of collective bargaining for AFSCME. He said trying to reduce pensions is unfair to those who worked for years in good faith and expected to depend on those benefits in old age. The average pension for retired city employees other than firefighters and police officers is quite modest, Kreisberg said, at about $19,000 annually. Retired fire and police get about $30,000 in pension benefits, higher since they are not part of the Social Security system. While other cities in financial trouble might be willing to follow Detroit's lead, Kreisberg said the stigma of bankruptcy and its long-term damage to a city's financial future make that unlikely. But if there is a national epidemic of pension defaults, it could change what unions would demand in terms of funding levels. "We may seek legislation to guarantee that employers are making their payments," Kreisberg said. The AFL-CIO has called on President Barack Obama and Congress to offer immediate financial aid to Detroit. The labor federation also wants any federal aid to be matched by the state of Michigan. "As the nation emerges from the worst of the Great Recession, it is time for Congress and the White House to make it clear they will not turn their backs on our urban centers," said Lee Saunders, president of AFSCME and chairman of the AFL-CIO's political committee. But the White House appears reluctant to intervene. White House spokesman Jay Carney has said the city's insolvency should be resolved by local leaders and creditors and that the Obama administration has no plans to provide a federal bailout. Carney said the administration was ready to provide other forms of assistance, such as investment opportunities or help for blighted neighborhoods hit hard by the recession.
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