The budget reconciliation process on Capitol Hill will soon play a central role for many of the legislative priorities of the new Congress. Republicans – who have unified control of government – will use this process as a tool to pass major parts of President-elect Trump's agenda. The reason is well-known: reconciliation bills aren't subject to Senate filibuster, and the scope of allowable amendments is limited. However, reconciliation is a complex process governed by strict rules and parliamentary procedures, such as the Byrd Rule. As such, intra-party debates over strategy can present challenges.
The Republican conference and President Trump are debating whether to have one reconciliation package or two. The one-bill strategy, endorsed by Speaker Mike Johnson, would concentrate legislative efforts and simplify passage in the House of President Trump's comprehensive agenda. In contrast, the two-bill strategy, championed by Senate Majority Leader John Thune, would enable Republicans to expedite the passage of border security measures while reserving more complex issues like tax (which typically require more extensive deliberation and drafting) for a second bill.
Given the importance of this process in the coming year(s), this alert provides a topline overview of reconciliation and answers the frequently asked questions we receive from our clients.
Background
The reconciliation process is designed to bring revenues, spending, and the debt limit into conformity with a congressional budget resolution. There are two major stages to the process: (1) the adoption of reconciliation instructions in a budget resolution and (2) the enactment of reconciliation legislation implementing changes to revenue and spending law. A budget resolution can only provide for one reconciliation bill for revenue, spending, and the debt limit respectively. Therefore, if a reconciliation bill has both spending and revenue provisions, then a subsequent reconciliation bill affecting spending or revenues is prohibited within that fiscal year.
The real impact of this process can be seen in the Senate. One of the characteristics of the upper chamber is the availability of endless debate over measures. Most measures in the Senate are "debatable", meaning that there must be a mechanism to end that debate. To accomplish that goal, Senators supporting a measure will file a "cloture motion" that will seek to end debate. These cloture votes require 60 votes to pass. In other words, 60 Senators must vote in favor of ending debate. This is why it is commonly said that legislation needs 60 votes to pass in the Senate.
Reconciliation allows senators to avoid these procedural hurdles and functions as a fast-track process by limiting debate time and allowing legislation to pass with a simple majority. Since the process began, Congress has passed 23 reconciliation measures into law, many of which focused on key policy initiatives such as tax reform, health care, welfare reform, and student loan program reform. The most recent reconciliation bills signed into law include the 2022 Inflation Reduction Act (IRA), the 2021 American Rescue Plan Act (ARPA), and the 2017 Tax Cuts and Jobs Act (TCJA).
What Are Reconciliation Instructions?
The process is initiated by the passage of a budget resolution in both chambers that includes reconciliation instructions for specified committees of jurisdiction. Any legislative committee with jurisdiction over spending, revenue, or the debt limit may be directed to report reconciliation legislation. These instructions require the named committees to develop and report legislation that would change laws within their respective jurisdictions relating to spending, revenue, or the debt limit. Once a committee of jurisdiction has drafted legislation that complies with the instructions, the legislation is sent to the budget committee of the relevant chamber, which then packages the various bills together into one reconciliation bill.
How Is Reconciliation Considered in the House?
In the House, once the Budget Committee has reported the compiled reconciliation measure, its floor consideration is typically governed by a special rule reported from the House Rules Committee. That special rule dictates the maximum time for debate and what amendments will be permitted. Traditionally, no amendment is in order that would increase spending or decrease revenue levels relative to the base bill without equivalent decreases in spending or increases in revenues (i.e., it must be deficit-neutral), unless the rule specifically modifies or waives this requirement.
In addition to these special rules, the House rules allow for a motion to recommit the bill before the House votes on final passage. Because members from the minority party have preference to make this motion, this allows the minority party one final opportunity to offer amendments to the bill.
How Is Reconciliation Considered in the Senate?
The Senate is where reconciliation creates the greatest challenges to consideration of a bill. Notably, the process prevents endless debate, meaning the measures (motions and the underlying bill) are subject to time limits and require only a majority of senators for passage. Additionally, specific limits are placed on the content of amendments that may be offered to reconciliation legislation and the duration of their consideration.
The first step is the "motion to proceed" to consideration of a reconciliation bill. This motion is subject to a simple majority vote. Once the motion to proceed is agreed to, debate on the underlying bill is limited to 20 hours, with debate on any amendment limited to two hours, equally divided by the majority and minority.
Even after the 20 hours have expired, there is no limit to the number of amendments (or motions) senators may offer. This unlimited amendment loophole, though rarely employed, may prove particularly advantageous to senators wishing to stall a reconciliation bill's advance. Senators can continue to offer amendments and force votes until they physically are no longer able to do so. At some point, however, the chamber proceeds to final passage.
Additionally, there are significant rules governing the content of amendments to reconciliation bills, including that they must be germane to the underlying bill and cannot increase the deficit. More on that below.
Who Determines What Is Germane for the Purposes of Reconciliation?
The Senate Parliamentarian advises the presiding officer and other senators on whether amendments offered during the reconciliation process are germane. On occasion, the Parliamentarian is called upon to provide leadership with a list of the submitted amendments that he or she considers germane or non-germane in advance of their amendment being offered. This process is commonly referred to as a "Byrd Bath", for reasons explained below.
Like other Congressional Budget Act points of order, the germaneness requirement can be waived, but a 3/5 majority vote is required to do so. With Democrats unwilling to assist in the Republicans' reconciliation effort, it is unlikely the germaneness requirement will be waived.
What Is the Byrd Rule?
The Byrd Rule, named for the advocacy and authorship of late Senator Robert Byrd of West Virginia on this very issue, makes "extraneous" provisions subject to parliamentary objections ("points of order") during Senate consideration of reconciliation legislation—whether those provisions are within the bill or within an amendment. The Rule was developed to protect the rights of the minority and restore Senate tradition. It is actually codified in statute (2 USC § 644), so this is a rare occasion when federal law, as opposed to chamber rules, governs the Senate process.
In practice, the Byrd Rule treats any provision that does not change the level of spending or revenues as extraneous. Specifically, it defines a provision as extraneous if it –
- Does not have a budgetary effect (i.e. does not change outlays or revenues);
- Worsens the deficit when a committee fails to achieve its reconciliation target;
- Is outside the jurisdiction of the committee that submitted the provision;
- Produces a change in outlays or revenues which is merely incidental to the non-budgetary change; and
- Increases deficits for a fiscal year outside of the reconciliation window; or
- Recommends changes in Social Security
A point of order can be raised by any senator and subsequently goes to the presiding officer for consideration. Typically, the presiding officer is guided by the opinion of the Senate Parliamentarian. If a point of order is sustained, the provision is stricken from the bill or amendment. Appealing the rule of the chair requires 60 votes. If, however, no senator makes an objection, material that violates the Byrd Rule may remain in the legislation or amendment. As discussed previously, it is unlikely that provisions deemed "extraneous" will be overruled by the chamber, given the need for 60 votes and Democratic opposition to Republican efforts.
In the event that there is a conference between the two chambers and a conference report contains extraneous items under the Byrd Rule, a point of order could be raised and sustained. In that case, the report is defeated, and the Senate must consider further amendments with limited debate. The Senate will then send the amended report back to the House, where it can be further amended. This dynamic makes the Byrd Rule a significant factor in reconciliation conferences, with Senate majority conferees likely to avoid including provisions that could violate the rule. However, it should be noted that the chances of a conference are slim.
It is also worth noting that technically, the parliamentarian's rulings are advisory and can be overruled by the presiding officer. While Majority Leader Thune has signaled he would oppose such efforts, he will almost certainly come under pressure to overrule the parliamentarian on extraneous Republican policy priorities.
Updates to the Byrd Rule
With each reconciliation bill consideration, the parliamentarian is presented with new extraneous issues upon which she or he must rule. These rulings set a precedent for what can and cannot be included in future packages. For example, with the IRA's passage in 2022, Democrats tried to include immigration reform provisions, claiming that including a pathway for undocumented immigrants would raise the budget deficit by $139 billion, and thus can be included as a budget measure. The Senate Parliamentarian ultimately ruled against this effort, thereby establishing that immigration reform cannot be included in any reconciliation package.
Republicans drafting the package in the 119th Congress must adhere to existing precedents, including the Byrd Rule, when determining the contents of their bill. As they try to incorporate numerous policy priorities, this process will likely result in new Byrd Rule precedents and raise points of order.
What If There Is a Veto?
Under the Constitution, a reconciliation bill (like any other bill) must be signed by the president to become law. Congress, of course, may override such a veto by a 2/3 vote in each chamber. With Congress and the administration under the control of the same party, the likelihood of a veto is relatively small.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.