Budget Reconciliation 101
Budget Reconciliation was born out of The Congressional Budget Act of 1974, which established the congressional budget process for determining national priorities. Reconciliation is a fast-track budgetary mechanism that enables policy changes related to spending, revenues, and federal debt limits to be enacted into law. This process requires only 51 votes in the Senate, or 50 votes with the vice president’s tie-breaking vote, allowing it to bypass the threat of a filibuster.
Reconciliation is typically used to address mandatory or entitlement spending programs, such as Medicare, Medicaid, federal civilian and military retirement, SNAP, and farm programs. However, Social Security is specifically excluded from reconciliation. Reconciliation has not been used to create or rescind discretionary spending, which is handled through the appropriations process. It is unlikely that reconciliation will be used for annual appropriations bills, though it has been used to provide mandatory funding for programs traditionally funded through appropriations. For example, the 2022 Inflation Reduction Act allocated $80 billion in mandatory funding to the IRS, directed by the Finance Committee. Future reconciliation packages may include instructions to rescind previously provided mandatory funding.
What is the reconciliation process?
The reconciliation process begins with the adoption of concurrent budget resolutions by the House and Senate Budget committees, which include reconciliation instructions. These instructions direct authorizing committees to propose legislation that meets specific targets for spending or revenue adjustments. For instance, the 2017 Tax Cuts and Jobs Act instructed the Senate Finance Committee and House Ways and Means Committee to increase the deficit by no more than $1.5 trillion over 10 years. Alternatively, reconciliation instructions can provide target ceilings or floors, such as in the 2017 American Health Care Act, which directed committees to reduce the deficit by at least $1 billion over 10 years.
Authorizing committees must report their recommendations to the Budget committees by the specified deadline. The Budget committees then combine these recommendations into a single reconciliation bill, which is reported to the floor. If the bill does not meet the specified targets, amendments may be made at the Rules Committee to ensure compliance.
The House and Senate then consider the reconciliation bill. In the House, the bill is typically debated under a rule set by the Rules Committee, while in the Senate, reconciliation enjoys privileged status with a debate limit of 20 hours. Following passage by both chambers, the bill is sent to the president for signature.
How Often Have Policymakers Used Reconciliation?
Since its establishment in 1974, lawmakers have passed 22 budget reconciliation bills, with five others approved by Congress but vetoed by the President. Reconciliation has been used for significant fiscal actions, such as major spending cuts during President Reagan’s first year in office, multiple deficit-reduction packages in the 1980s and 1990s, changes to the nation’s cash assistance program in 1996, and the large Bush tax cuts in 2001 and 2003. More recently, it played a role in amending the Affordable Care Act and altering the federal student loan program in 2010, enacting large tax cuts in 2017, and passing additional COVID-19 relief through the American Rescue Plan in 2021. Republicans also attempted twice to use reconciliation to repeal key parts of the Affordable Care Act; President Obama vetoed the first attempt in 2016, and the second attempt in 2017 failed to pass in the Senate.
Reconciliation bills cannot be filibustered, making the process particularly valuable when the same party controls the presidency, House, and Senate but lacks the 60 votes needed to overcome a filibuster. However, this has not always been the case. Twelve of the first 14 enacted reconciliation bills passed despite divided control of the presidency, House, and Senate, and each of those bills aimed to reduce projected deficits. Since 2000, however, seven of the eight enacted reconciliation bills occurred under unified party control, and six of those resulted in increased projected deficits. Notably, four of the nine reconciliation bills passed under one-party control did so with a 51-50 vote in the Senate, where the vice president cast the tie-breaking vote.
Senate Consideration of Reconciliation and the Byrd Rule
Reconciliation is a privileged measure in the Senate with expedited procedures, where debate is capped at 20 hours and only requires a simple majority to pass. After the 20-hour debate, amendments are immediately voted on in a process known as "vote-a-rama." Amendments must be germane (relevant to the subject matter the bill addresses) and pass by a simple majority.
The Senate’s Byrd Rule restricts the inclusion of extraneous provisions in a reconciliation bill, with enforcement via points of order.
Provisions are deemed extraneous if they meet any of the following criteria:
Do not affect spending or revenue changes.
Fail to meet the reconciliation directives set for the committee.
Fall outside the reporting committee’s jurisdiction.
Produce budgetary effects incidental to the non-budgetary elements of the provision.
Increase the deficit beyond the budget window.
Make changes to Social Security.
The Senate Parliamentarian evaluates potentially extraneous provisions, and if a point of order is sustained, the provision is removed, though the bill as a whole continues. The Byrd Rule can be waived with a 3/5ths vote in the Senate (60 votes). For instance, the 2021 American Rescue Plan Act included a provision to raise the minimum wage to $15 an hour, but the Senate Parliamentarian ruled that it violated the Byrd Rule, leading to its removal.
How Many Reconciliation Bills Are Allowed?
A maximum of three reconciliation bills are permitted each fiscal year: one for changing spending levels, one for altering revenue levels, and one for adjusting the debt limit. If a reconciliation bill addresses multiple categories, no other bills in the same fiscal year can cover those areas. A budget resolution can trigger any combination of these categories in a single reconciliation bill.
Reconciliation bills can also be passed with different budget resolutions across the calendar year. For example, in 2017, Republicans used reconciliation twice, once for the American Health Care Act (FY 2017) and again for the Tax Cuts and Jobs Act (FY 2018). Budget resolutions can also be passed after the appropriations process. In 2021, the Consolidated Appropriations Act provided funding in December, and a budget resolution was passed in February, followed by the passage of the American Rescue Plan through reconciliation in March.
What’s Next?
With Republicans controlling the White House, Senate, and House, reconciliation will be a crucial tool for advancing legislative priorities. In 2025, Republicans could introduce two separate budget resolutions (for FY 2024 and 2025), enabling the passage of two distinct reconciliation packages. This would allow Republicans to push through policies in various areas, including healthcare, immigration, energy, tax reforms, and the debt limit, which expires in early 2025.