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New Democratic Majority Could Use Budget Reconciliation Process

By Erlinda A. Doherty and Jocelyn Salguero | Jan. 11, 2021 | State Legislatures Magazine

With Democrats controlling the White House, and now the majority in Congress, lawmakers may use a powerful tool to advance tax and spending policies.

The budget reconciliation process, created by the Congressional Budget Act of 1974, was designed to enhance the ability of Congress to bring existing spending, revenue and debt limit laws into compliance with the fiscal priorities and goals established in the annual budget resolution. Budget reconciliation is an optional, expedited legislative process. If Congress intends to use the process, reconciliation directives must be included in the annual budget resolution.

Following are the major stages of the reconciliation process:

1. Each chamber passes budget resolution with reconciliation directives to individual committees.

2. Committees develop and report legislative language:

  • Specific committees report legislation in response to reconciliation directives.
  • When applicable, Budget Committee packages committee responses together and reports bill to the full chamber.

3. Each chamber considers reconciliation bill.

4. Chambers resolve differences.

5. President enacts or vetoes reconciliation bill.

In adopting a budget resolution, Congress is agreeing on its budgetary goals for the upcoming fiscal year. Any statutory changes concerning spending or revenues that are necessary to implement these policies must be enacted in separate legislation.

The reconciliation instructions designate the relevant congressional committee or committees that will have jurisdiction over the legislation. These instructions direct certain committees to craft legislative language increasing or decreasing federal revenues, spending levels or the debt ceiling.

Each committee has the discretion to decide on policy changes necessary to achieve the budgetary targets set by reconciliation directives. If more than one committee in either the House or Senate proposes legislative changes, then these recommendations are combined into an omnibus bill by the Budget Committee for expedited consideration in the full House or Senate.

A reconciliation bill needs only a simple majority, rather than 60 votes, for passage in the Senate. The budget cannot be stalled in the Senate by filibuster.

Other special rules, which are designed to protect the rights of the minority party, apply to reconciliation bills. Only policies that change spending or revenues can be included.

While this tool can be applied to a number of issues, it can’t be used for just anything. Reconciliation can only be brought up a maximum of three times per year per budget resolution. Congress has banned reconciliation from being used to increase deficits.

The largest restriction on budget reconciliation is the “Byrd Rule,” named for its chief sponsor, the late Senator Robert Byrd (D-W.V.). The rule, which was put in place in 1985, is aimed at preventing the use of reconciliation to move a legislative agenda unrelated to spending or taxes, and to some extent it limits Congress’ ability to use reconciliation to increase deficits—at least over the long term. The rule allows senators to block provisions of bills that are extraneous to reconciliation’s basic purpose of implementing budget changes, and it deters committees receiving reconciliation directives from adding a range of unrelated provisions.

Once the committees weave through these obstacles and finish the “vote-a-rama,” a final package is considered by both chambers of Congress and, if passed, the bill is sent to the president.

Since 1980, lawmakers have passed 25 reconciliation bills.

The budget reconciliation process has been used to advance major tax cuts and enact portions of the Affordable Care Act. Democrats may use the process this year to achieve mutual Biden administration and Senate priorities. This could also reinvigorate another round of COVID relief to states.

Jocelyn Salguero is a policy associate and Erlinda Doherty is committee director in NCSL’s State-Federal Relations Program.

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