BGOV Cheat Sheet: Budget Reconciliation


January 6, 2021 10:29 am

The budget reconciliation process is a powerful tool that allows lawmakers to advance spending and tax policies through the Senate with a simple majority.

Used in the past to advance major tax cuts and enact portions of the Affordable Care Act, Democrats may use reconciliation in 2021 to achieve their policy priorities and deliver President-elect Joe Biden legislative wins if they pull out victories in both Senate runoff elections in Georgia.

Still, there are key limitations that prevent it from being used on any type of legislation — and leaders would have to obtain sufficient support within their own ranks, including a narrow House majority and a 50-50 Senate where Vice President-elect Kamala Harris would break a tie.

What Is a Reconciliation Measure?

The term “reconciliation bill” describes legislation that would change spending and/or tax laws to meet the targets set by a congressional budget resolution. There can be more than one bill depending on the instructions in the budget resolution.

Only a simple majority is required for passage in the Senate. If everyone shows up, that means 51 votes. Debate limits (see below) mean the measures can’t be filibustered, and proponents don’t need the 60-vote supermajority that applies to most legislation under the chamber’s cloture rules.

What’s Been Done Through Reconciliation?

Reconciliation has been used to pass some sweeping measures, including:

  • The 2017 tax law (Public Law 115-97), which reduced corporate tax rates, eliminated the penalty under the ACA’s individual mandate, and opened up drilling in the Arctic National Wildlife Refuge.
  • Part of President Barack Obama’s 2010 health-care law in Public Law 111-152, which made changes to the initial ACA measure (Public Law 111-148) and also changed student loan policy.
  • President George W. Bush’s 2001 and 2003 tax cuts in Public Law 107-16 and Public Law 108-27.
  • President Bill Clinton’s 1997 expansion of the children’s health-care program in Public Law 105-33. The law also set up the sustainable growth rate for Medicaid reimbursements to physicians that later required “doc fix” legislation to prevent cuts in payments.
  • COBRA, the 1986 law that lets employees keep health insurance after leaving their jobs, provided they pay for it, in Public Law 99-272.
  • President Ronald Reagan’s 1981 reductions in welfare and food-stamp benefits in Public Law 97-35.

How It Works

Budget resolutions can include instructions to committees to report reconciliation legislation, often with a deadline, to meet spending and revenue targets.

The resolutions are internal blueprints that guide congressional deliberations of tax and spending policies and aren’t sent to the president. But both chambers must adopt the same budget resolution to set up the process.

The reconciliation instructions also can require reporting of debt-ceiling legislation, which can come in handy because the measure can also be passed with a simple majority.

If more than one committee receives instructions, then the individual committees first send their recommendations to the House and Senate Budget committees, which consolidate the proposals. If a single committee receives instructions (for example, just the House Ways and Means Committee on a revenue measure), its recommendation can be sent directly for a floor vote.

In 2017, with Republican control of both chambers and Donald Trump newly in the White House, there were two rounds of reconciliation.

The first, conducted under a fiscal 2017 budget resolution adopted early in the session, set up action on a bill to make changes to the Affordable Care Act. While the House passed a measure, the Senate didn’t, and the effort stalled.

The second round, under the fiscal 2018 budget resolution, set the stage for the tax package enacted at the end of 2017.

Time Limits

In the Senate, debate is limited to 20 hours, eliminating the possibility of a filibuster.

Not counted against that maximum: the minutes or hours spent offering and voting on amendments and motions. That typically results in a “vote-a-rama” with members on the floor holding back-to-back votes for hours.

The House typically adopts a rule limiting floor debate and specifying which amendments are made in order.

Byrd Rule

Under the Senate’s Byrd Rule, named after the late Sen. Robert Byrd (D-W.Va.), provisions in reconciliation bills are supposed to be budgetary in nature—affecting revenue or spending. The Senate parliamentarian provides advice on whether provisions comply.

If a provision doesn’t produce a change in outlays or revenue, it’s subject to a point of order. It takes 60 votes to waive the point of order and keep the language in the measure. The rule can lead to the trimming of things such as the details of provisions in the bills, reporting requirements, and even official short titles — as in 2017 when the “Tax Cuts and Jobs Act” was deleted from the GOP tax plan.

The rule applies to provisions in conference reports on budget reconciliation bills, which reflect compromises reached by House and Senate negotiators. If the House has adopted the conference report before the Senate deletes language as a result of the Byrd rule, then representatives have to vote again on the revised text.

The Byrd Rule also prevents reconciliation from being used to make changes to Social Security.

Recent Trends

Reconciliation was last used in 2017, also the last year both chambers adopted a traditional budget resolution. Adoption of resolutions has become much less frequent over the years, especially when there’s a divided Congress.

Budget enforcement has instead largely been through legislation that also adjusted spending caps under the Budget Control Act. For example, the two-year budget deal enacted in 2019 (Public Law 116-37) included budget enforcement provisions for fiscal 2020 and 2021.

The spending caps only ran through fiscal 2021, so there could be renewed interest in using budget resolutions to set top-line spending measures and for reconciliation purposes.