Governor Rick Snyder signed into law Tuesday an overhaul of Michigan's school retirement system. The move has teachers staring at higher pension and benefit costs, the very day students were back to school.
Snyder says the law helps fix a $45 billion unfunded liability in Michigan's Public School Retirement system.
Teachers call it a promise broken they're prepared to fight in court.
"This is particularly tough for support staff, lower income staffers, who are going to feel the brunt of this and for retirees, people living on fixed incomes," Todd Tennis with the Coalition for Secure Retirement said.
The new law increases pension contributions for public school employees, doubles health insurance premiums for retirees and eliminates health coverage in retirement for new hires.
New workers will instead get a health reimbursement account and 401-K plan.
"It's not just about the short term, it's about the long term," Snyder said, at the Tuesday bill signing.
He says the law bails out an unsustainable program, cutting Michigan's unfunded liability by a third, to $30 billion.
"If we don't do anything it keeps piling up until it's untenable and then it crashes and nobody gets anything," State Representative Chuck Moss, R-Bloomfield Hills said. "The whole goal of this was to save the system, it's not to hurt anybody, it's not to cheat anybody, it's to save the system while it can still be saved."
Tennis agrees something must be done about the liability problem, but says the answer is not in employee pockets.
"Making changes to benefit levels is something we want to talk about," he said. "We want to negotiate, but really we need to shore up the structural deficiencies in this program in order to make sure we're not back here three or four years from now with the sky falling again."
Teachers filed a lawsuit Friday, saying the plan breaks contacts. They're calling for a judge to put a hold on the law until their legal challenge is decided.
Snyder expected the court battle and others, and expects to win.
"These are smart, good things to do, we're doing them in good faith," he said.
According to the state, retirement costs for schools have doubled since 2002 and were slated to grow to 35 percent of payroll by 2016 if no action was taken.
The new law also sets up a study group to examine what it will cost the state to move solely to a defined contribution plan, rather than the current hybriud plan. The group's report is due in mid-November.
In the meantime, teachers unions are planning information sessions across the state to guide school employees through the changes.