PROVIDENCE — Mayor David N. Cicilline’s plan to close a projected $17-million deficit in the current fiscal year calls for major changes in health care, pension and wage benefits that all city employees must agree to.

Failure to do so, he said, would result in nothing less than a “financial meltdown.” In a news conference in his City Hall office yesterday, Cicilline said, “Unless we implement these structural reforms in every contract, every liquid asset would be spent down, our bond rating would be severely downgraded, and we would be unable to meet payroll.”

The concessions, applicable to union and non-union staff, include:

•An increase in the health insurance co-share to 15 percent for union personnel, and 20 percent for non-union workers.

•An immediate wage freeze, effective up to and including fiscal year 2010.

•An increase in the retirement age from 55 to 60 years for employees with less than five years of experience and 62 years for new employees.

•An increase in the number of years of service before an employee is eligible to receive full pension benefits to 30 years.

•A decrease in the allowance for disability pensions from 66.67 percent of salary to 50 percent of salary.

•Elimination of a paid holiday.

Cicilline is also mandating two furlough days for non-union staff and said he does not intend to fill 22 vacant firefighter positions and 8 police officer positions.

The Laborers’ International Union of North America, Local 1033, which represents about 1,900 employees, including City Hall workers, unanimously agreed to the proposed contract changes at meetings yesterday, according to Donald Iannazzi, the union business manager. The changes will be mandatory for all non-union staff.

Iannazzi said that the union agreed to the concessions because a majority (more than 70 percent) of them live in the city. “Our membership is Providence. The future of this city is the future of this union,” he said.

But the mayor’s plan hinges on all five city unions agreeing to the changes. If that happens, the city will save $13 million in the current fiscal year, according to the mayor; Local 1033’s agreement represents $450,000 in savings.

“The choice is clear: We, as a city, either reform these contracts or we can see a complete financial meltdown,” said Cicilline.

Cicilline has been meeting regularly with the other unions since the start of the year, but none have agreed to the mayor’s terms besides Local 1033. At least two other unions, the firefighter and police unions, have offered their own package of concessions, which differ from what Cicilline is asking.

“We remain agreeable to some concessions in the current and the next fiscal years, but at least my union has questions about the pension and health-care reforms,” said Paul Doughty, president of the city’s firefighters’ union.

The remaining $4 million to close the deficit would be pulled from the city’s rainy day fund. The city is also continuing to meet with universities and hospitals to either agree to a payment in lieu of taxes or a higher payment. Those and other non-profit entities are not obligated to pay property taxes.

Cicilline has said that he would not seek a midyear tax rate increase, but he did not rule out the possibility of layoffs. “Obviously, there will be some layoffs, but we are trying to limit the reduction in personnel. We are already a lean organization,” Cicilline said.

The mayor will submit his supplemental budget plan for the current fiscal year to the City Council Friday. City Council President Peter S. Mancini said yesterday that the council will likely call a special meeting on Monday to begin the budget deliberation process.

The first step is formally accepting the mayor’s proposal and referring it to the council’s Finance Committee, which will take it under consideration later in the week. The budget requires Finance Committee approval and two votes of approval by the full council. The process must be completed by the end of the fiscal year on June 30.

The city is facing one of the largest midyear deficits in recent memory as a result of a $9-million cut in state aid and a dramatic fall in city revenue that is approaching $8 million, according to the latest estimates. Both revenue declines are linked to the recession. The deficit, which Cicilline says has been mitigated by a $5.5-million reduction in city expenses this year, represents more than 2.5 percent of the city’s $641-million operating budget for this year.

(Correction: An earlier version of this story incorrectly reported the proposed changes in retirement eligibility. It also gave the wrong day for the budget's submission to the City Council and incorrectly included school clerks as part of Local 1033.)

pmarcelo@projo.com