The Congressional Budget Reconciliation Process

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This alert provides general background on the budget reconciliation process in Congress and articulates the many rules and restrictions that exist for considering amendments to a reconciliation bill on the Senate floor.

General Background

Established by Section 310 of the Congressional Budget Act of 1974, reconciliation is an optional procedure designed to bring revenues, spending and the debt limit into conformity with the budget resolution. In order for reconciliation rules to apply, first, the Congress must enact a concurrent budget resolution that includes reconciliation instructions directing authorizing committees to develop legislation achieving desired budgetary outcomes. Then, the appropriate committees develop legislation to satisfy the instructions of the budget resolution and report such language to the House and Senate floors. Legislation developed using reconciliation instructions creates expedited procedures for consideration in the House and Senate (majority vote threshold on final passage and amendments, and limited debate time in the Senate; special restricted debate rules (in nearly all cases) in the House).

What Needs to Happen

Step 1: President’s Budget Request

President-elect Biden’s Fiscal Year 2022 budget resolution will be submitted to Congress in early 2021. The release of the budget request will trigger action by the House and Senate Budget committees to write a budget resolution.

Step 2: Budget Committee Consideration in House and Senate

After Congress receives the president’s budget request, the House and Senate Budget committees will begin drafting the FY2022 budget resolution. With Democrats in control of both chambers (as it appears they will be at the writing of this memo), they will certainly include what are known as “reconciliation instructions” in the budget resolution. The existence of reconciliation instructions in the budget resolution gives the committees of jurisdiction great authority to initiate a process by which legislation can pass with a simple majority vote in the Senate.

Reconciliation instructions included in the budget resolution usually consist of several components and include information related to the House or Senate committee being instructed to report reconciliation legislation, the nature of budgetary changes that are intended by legislation within the committee’s jurisdiction, the budget time frame within which the changes will apply, and a deadline by which the instructed committees must submit their recommendations to the Budget Committee.

The House and Senate typically use multiple directives, in terms of the number of committees instructed and the types of budgetary changes designated, when initiating the reconciliation process. The FY2022 budget resolution will likely be no exception.

Step 3: Concurrent Budget Resolution Enacted

The House and the Senate must agree on identical budget resolution text, either by formal conference or by agreeing informally to the same language and passing an identical measure. The budget resolution is not law and does not require a signature by the president.

Step 4: Drafting and Reporting of Reconciliation Bills by Authorizing Committees

Once reconciliation instructions are formalized in the final concurrent budget resolution, the relevant authorizing committees will develop reconciliation legislation using their own committee rules procedures.

Step 5: Senate Floor Consideration

When multiple committees are given reconciliation instructions, the Budget Committee will typically combine each committee’s piece into an omnibus bill and prepare it for floor consideration by eliminating any provisions that run afoul of reconciliation rules.

Debate on a reconciliation bill itself is limited by statute to 20 hours, with debate on amendments limited to two hours equally divided between the majority and minority sides. Debate on second-degree amendments is limited to one hour equally divided between majority and minority sides.

Precedent established in the Senate allows for votes on an unlimited number of amendments (known colloquially as a “vote-a-rama”), and further allows for any senator to secure recognition to offer an amendment. For senators seeking amendments to modify a reconciliation bill on the Senate floor, the good news is that the amendment only needs a simple majority to win; the bad news is that there are a number of budget rules and procedural hurdles that make doing so very difficult.

Step 6: Senate Floor Amendment Process

See below.

Step 7: Conference Committee and Bill Signing

Once a reconciliation bill has passed both the House and Senate, the chambers can engage in a formal conference committee, or they can pass versions back and forth until both have passed an identical version. When an agreement is reached by the conferees, they submit to both the House and Senate a conference report that details the substance of the reconciliation legislation and includes the legislative text. Proceeding to conference reports in the Senate is another privileged matter that cannot be filibustered. However, if a conference report returns to the Senate and contains provisions that may violate the Byrd Rule, motions to strike these provisions under the Byrd Rule (see below) are in order. If Byrd Rule motions to strike are successful, only the offending provision is removed and the underlying reconciliation legislation remains intact. If this process occurs, the House would have to concur in the Senate’s version revised by the Byrd Rule. Once approved by both chambers, reconciliation bills follow the same legislative path to enactment as other legislation.

Drafting a Senate Amendment to a Reconciliation Bill

The primary goal in drafting a Senate floor amendment to a reconciliation bill (other than accomplishing the overarching policy aim) is to make it immune to budgetary points of order and other specific reconciliation restrictions in the Senate. If a point of order is raised against the amendment, and the parliamentarian agrees it violates rules articulated below, then the amendment will need 60 votes to overcome the point of order. Immunizing an amendment to points of order and other restrictions can ensure that only a simple majority is needed to win.

Amendment Must Be Germane and Deficit Neutral

  • The amendment must be “germane” to the bill (Section 205(b)(2)). Germane amendments include committee amendments (or those drafted by the committees of jurisdiction), amendments to strike a section of the legislation, amendments to change numbers or dates, and nonbinding amendments limited to matters within the jurisdiction of the committee reporting the bill. An amendment that does not fall into one of these categories may still be deemed germane if it substantively affects or limits some other provision of the underlying bill or amendment, without adding any new subject matter. Generally speaking, a germane amendment does not “expand the scope” of the bill.
  • The amendment must be deficit neutral (Section 310(d); however, an amendment to strike text is always in order, notwithstanding the deficit-neutrality requirement.

Amendment Must Survive the Byrd Rule

  • The Congressional Budget Act statute includes language that restricts the subject that can be included in the reconciliation legislation. Named the “Byrd Rule” after its author, former Sen. Robert C. Byrd (D-WV), the rule makes “extraneous” provisions subject to a point of order during Senate consideration of reconciliation legislation—whether those provisions are within the bill or within an amendment offered to the bill. If a Byrd Rule point of order against a provision is sustained, the provision is stricken from the bill or the amendment falls. Overruling a point of order made against an extraneous provision of the bill or an extraneous amendment would require 60 votes to succeed.
  • The Byrd Rule defines a provision as “extraneous” if it does not produce a change in budget revenues or outlays, if it falls outside the jurisdiction of the committee that submitted reconciliation legislation, if it produces a change in outlays or revenues that is merely incidental to the non-budgetary components of the provision, if it would increase the deficit for a fiscal year beyond the amounts included in the reconciliation measure or if it recommends changes in Social Security. The Senate parliamentarian has great authority to determine what provisions of the legislation fall within the scope of the Byrd Rule and therefore are extraneous.
  • Under subsection (b)(1)(A), a provision that does not change outlays or revenues in the net, but which includes outlay decreases or revenue increases that exactly offset outlay increases or revenue decreases, is NOT considered to be extraneous.

Examples of Different Types of Senate Floor Amendments That Navigated Procedural Constraints and Received a Roll Call Vote

Collins Amendment #675 to HR 1836

Economic Growth and Tax Relief Reconciliation Act of 2001

Approved 98-2

  • The amendment created an above-the-line tax deduction for the qualified professional development expenses of elementary and secondary school teachers and allowed a credit against income tax to teachers who pay for classroom materials.
  • The version of the bill that was amended by Sen. Susan Collins (R-ME) on the Senate floor (Grassley substitute amendment #650 considered as original text for purposes of amendment) includes an education section in Title IV. The Collins amendment adds a number of new sections to Title IV that include matter generally unrelated to the underlying amendment. The Grassley substitute includes provisions on education retirement accounts, 529 tuition savings accounts, employer-provided educational assistance, student loan interest tax deductions, exclusion of income from scholarship programs, tax-exempt financing rules for public school construction, and tax deductions for tuition expenses.
  • The Collins amendment, while dealing in the same policy sphere, expands the reconciliation bill beyond those included in the underlying bill. The underlying bill makes no mention of the tax treatment of professional development or the purchase of classroom materials, yet the Collins amendment provides individual tax deductions for each.
  • Reconciliation instructions included in the budget resolution (H. Con. Res. 83) make no mention of education or tax treatment for certain teacher-related expenses.

Snowe Amendment #741 to HR 1836

Economic Growth and Tax Relief Reconciliation Act of 2001

Approved 94-4

  • “Sense of the Senate” amendment regarding child tax credit language in the underlying bill.

Kennedy Amendment #698 to HR 1836

Economic Growth and Tax Relief Reconciliation Act of 2001

Rejected 43-56

  • This “strike and replace” amendment would have expanded the reach of the HOPE scholarship tax credit to include other costs of college, such as transportation, day care, cost of computers, books, etc., by increasing individual income tax rates on top earners, modifying lower rates included in the underlying bill.
  • The underlying bill includes language referring to coordination with the HOPE program, but the Kennedy Amendment attempted to create an entirely new section of the bill and authorize an expansion of the HOPE program.

Smith Amendment #680 to HR 1836

Economic Growth and Tax Relief Reconciliation Act of 2001

Approved 99-0

  • This amendment inserted a new section at the end of the bill excluding from taxable income survivor benefits paid to families of fallen law enforcement officers.
  • The amendment modifies Section 101(h) of the Internal Revenue Code, yet the underlying bill does not modify this section in any way. The underlying bill does modify other tax exclusion provisions.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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