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PROVIDENCE, R.I. (AP) _ Gov. Don Carcieri is offering most state workers a choice between a cut in pay or benefits.

They can take a 5-percent pay cut, retroactive to July 1, saving the state up to $42.5 million. If they don�t want that option, they can start contributing to their health-insurance premiums immediately in return for the promise of a 1-percent wage increase next July 1, another a year later and a third six months later, on Jan. 1, 2006. No raises have been budgeted or offered for this year.

Most state-employee contracts are in their final year and have "wage-reopener" clauses that anticipate negotiations on pay issues, according to a report in Tuesday�s editions of The Providence Journal.

Unions representing workers whose contracts are in their final year could not be forced to accept the proposals, Carcieri spokesman Jeff Neal said.

But Carcieri doesn�t want to wait until those contracts expire.

"Gov. Carcieri believes and has stated repeatedly that it is time to get the compensation package for state workers back into line with those enjoyed by individuals in the private sector," Neal said.

Labor leaders dislike the proposals.

"I thought it was April Fool�s day. I actually couldn�t believe it," said Local 528 president Michael Downey, whose union represents about 550 non-teaching employees at the University of Rhode Island. "I have been involved (in union activities) since 1980 and it is probably the worst thing any governor has handed out to the state employees."

Jim Larisa, a union official who represents vocational therapists, clerical workers, inspectors and others at the Department of Labor and Training, said state workers are willing "to share some of the burden, but not all of it. I actually thought the proposal was a joke."

Carcieri wants a 20-percent employee co-payment toward the $152.9 million the state expects to pay Blue Cross & Blue Shield this year on the workers� behalf, and a 25-percent co-payment toward next year�s anticipated $165.5-million health-insurance tab.

The state budget office estimates these payments could save the state about $30 million annually. Conversely, every 1-percent pay increase costs the state about $8.5 million in wages alone, $10.1 million if you include elevated-benefit costs that go with it.

The administration also proposes requiring state workers pay $5 more for a routine doctor visit that now costs them $10; three times more for an emergency room visit that now costs $25; and anywhere from $5 to $15 more for a prescription this year and more in future years.

Local 2884 President Salvatore Lombardi said the 250 people he represents in 17 agencies across state government are not prepared for a pay cut or increased benefit costs.

"They understand that maybe a raise isn�t coming up and they have to grin and bear it ... but everybody is living on their paycheck," he said. "They have a standard of living based on today�s paycheck."