The Republican-led Alaska Senate on Monday afternoon formally pushed aside a bipartisan budget offer from the state House and passed a spending bill of its own instead, prolonging the Legislature's six-week impasse over a $5 billion budget deal.
The move came one month from a potential government shutdown and on the same day that 10,000 state workers were mailed warnings that without a budget deal, they could be laid off July 1.
The debate over the Senate's budget bill was punctuated by a pair of senators bickering over whether the letters amounted to "pink slips" or simply warnings. But the bottom line was that the 133rd day of the legislative session originally scheduled for 90 days would end without a deal.
The Senate's vote set off a series of procedural steps that would end with shifting the budget discussions to a formal structure called a conference committee, which brings together members of the House and Senate to resolve differences between the two chambers.
That was a setback from earlier in the day, when the Senate stopped its budget debate, just short of a vote, to allow its Republican majority to continue informal negotiations with House Democrats.
But those negotiations failed, undone by a dispute between the two groups of lawmakers over whether $30 million in cuts should come from canceling pay raises for state workers, or from an unspecified reduction spread across state government that would likely result in layoffs.
The Senate gaveled back in for its vote around 4:30 p.m. after a flurry of discussions and meetings — including one just beforehand between House minority leader Chris Tuck, D-Anchorage, and Senate President Kevin Meyer, R-Anchorage, in a fifth-floor conference room.
In the debate over the bill, senators in the five-member Democratic minority excoriated the decision by their Republican counterparts to reject the bipartisan deal that the House agreed to early Saturday morning.
"An olive branch was held out with the compromise bill we received. But rather than accept it, with this bill you set that on fire," said Sen. Bill Wielechowski, D-Anchorage. "The bill you have crafted completely blows up the compromise deal."
Sen. Anna MacKinnon, R-Eagle River, co-chair of the Senate Finance Committee, insisted that all the elements of the House deal remained up for discussion.
"There is no olive branch on fire," she said.
The House's budget deal included about $30 million added to a previous state spending plan — concessions made by the Republican-led majority to the Democratic minority. The deal also preserved the raises for state workers, though it balanced that cost with the $30 million unspecified cut.
Sen. Lesil McGuire, R-Anchorage, said her caucus on Monday made a counteroffer that would have preserved the $30 million in concessions in the House budget.
About half of that $30 million would go toward canceling a cut proposed to the state's per-student education funding formula, with the other half going toward Democratic priorities like the state's ferry and university systems.
McGuire said in an interview that the Senate was also prepared to add another $16 million in education grant money to the House deal, which would partially restore a cut originally proposed by Gov. Bill Walker. But her chamber refused to budge when it came to canceling the pay raises for state workers, some of which are contractually obligated.
Sen. Pete Kelly, R-Fairbanks, the co-chair of the Senate Finance Committee, on Sunday said those raises shouldn't be contemplated with the state facing multibillion-dollar budget gaps that he called a "deficit tsunami."
McGuire said she thought the Democrats would accept the deal and characterized their willingness to concede the pay raises as a "glacier that finally calved."
But that wasn't the case. Tuck, the Democratic leader, said his caucus remained committed to keeping the state's contracts with union workers, given that Democrats have already given up on many of their priorities. Those include big cuts in the state tax credits granted to oil companies, as well as expansion of the public Medicaid health care program to cover about 40,000 low-income Alaskans.
"We are committed to honoring those union contracts. There wasn't a price they could give us to go back on our word on that," Tuck, who works as a union representative, said in a phone interview late Monday.
"If they want to honor the tax credits to the tune of hundreds of millions of dollars, I don't see why we can't do that with labor contracts."
Pressure has built on the Legislature as it approaches the July 1 deadline -- the start date for a partial government shutdown if a budget deal isn't reached.
Thirty-day layoff warnings were scheduled to be mailed to 10,000 state workers no later than 3 p.m. Monday, according to a spokesman for the state's Department of Administration.
And on Monday afternoon, the administration of Gov. Walker sent a barrage of press releases detailing the potential impacts of a shutdown on each state agency, from docking all 11 of the state's ferries to suspension of the Alaska's shellfish testing program.
Lawmakers are at an impasse over how steeply to cut the budget in the face of a multibillion-dollar deficit stemming from a crash in oil prices. Taxes and royalties from oil production make up most of the state's revenue.
The Senate's Republican-led majority, the House Democratic minority and the House Republican majority each have different views on which programs should be scaled back. And consent from all three groups is needed to authorize spending billions of dollars from a state savings account.
The dispute among them has pushed the Legislature more than 40 days past the scheduled end of its 90-day session, which moved from Juneau to Anchorage last month.
House lawmakers were buoyant early Saturday after a bipartisan 32-8 vote on their budget deal.
But the Senate quickly quashed that enthusiasm, with members saying they needed to carefully review and negotiate the elements of the deal — even though the changes represented an increase in overall spending of less than 1 percent.
"Our job is not to rubber-stamp the work of the other body," Sen. Peter Micciche, R-Soldotna, said on the Senate floor Monday evening. "Our job is to carefully evaluate their actions and make sure they fit with ours."
The Senate's vote Monday evening to take the more deliberate step of passing its own budget and setting up the House-Senate conference committee came after hours of last-minute negotiations between the two chambers.
The Senate was originally poised to move its budget proposal forward Monday morning. But just before a vote would have been taken, Senate President Kevin Meyer, R-Anchorage, called for a lunch break.
As he headed into an elevator at the Legislature's Anchorage office building for a meeting with his Republican colleagues, Meyer flashed a reporter a few sheets of yellow notebook paper filled with handwritten text — an offer from Tuck.
"This is what Chris gave me," Meyer said. "We'll discuss it."
The letter and the talks, however, ultimately failed to produce an agreement.
By Monday evening, the House and Senate had appointed the members of their budget conference committee — the same members of the conference committee that was appointed at the end of the Legislature's regular session in April.
House Speaker Mike Chenault, R-Nikiski, released a statement late in the day saying he was disappointed in the Senate's decision to reject his chamber's compromise.
"Progress was reached. Now? We'll, unfortunately have to go to conference. Again," the statement quoted Chenault as saying. "We're back to square one after a month of negotiations."
Lawmakers said it was unlikely the conference committee's work would be resolved for several days.
Correction: An earlier version of this story said Monday was the 142nd day of the Legislature since it convened in January. It was actually the 133rd.