FILE PHOTO - Texas governor Greg Abbott speaks during an interview on the floor of the New York Stock Exchange July 14, 2015. REUTERS/Brendan McDermid/File Photo

(Reuters) - Texas Governor Greg Abbott signed into law on Wednesday a bill aimed at addressing public pension problems in the state’s two biggest cities, Dallas and Houston.

The new law will increase retirement ages, hike worker and city contributions, limit cost-of-living (COLA) increases for retirees, and restructure governance.

In a tweet on Wednesday, Abbott wrote that he was “proud of the Texas legislature leading on pension reform that ensures fiscal soundness.”

The Dallas police and fire pension system was projected to become insolvent within 10 years if the city or the state did not act.

The new law cuts the Dallas system’s nearly $3.7 billion unfunded liability to $2.18 billion and boosts the funded ratio to nearly 50 percent from the current 36.8 percent, according to a bill analysis.

The Houston bill would help reduce the $8.1 billion unfunded liability in the city’s municipal, police, and firefighter funds by reducing benefits. The law also lowers the fund’s assumed rate of investment return from as high as 8.5 percent, one of the most ambitious rates in the country, to 7.25 percent, closer to nation’s average.

The city of Houston estimated that without any type of reform, the city would contribute $3.7 billion to the pension systems over five years. With reforms, the city will contribute $2.0 billion. The city estimates a savings of $1.4 billion, and an estimated debt service cost of $0.2 billion.