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Reconciliation: A Primer

12-06-2016

by Dom Ruscio, Partner

A day or two after the elections, word surfaced that GOP leaders in Congress planned to tackle some big-ticket issues in 2017. Chief among them: repeal of the Affordable Care Act; entitlement reform; and an overhaul of the tax code. To achieve those goals, congressional leaders plan to rely heavily on a tool—called budget reconciliation—that allows for expedited consideration of legislation. Discussion of the challenges and pitfalls Congress will face we’ll put off for another day. Instead, we’ll focus here on the mechanism lawmakers plan to use to pull off such an ambitious agenda.

Where did budget reconciliation come from and what is it used for?

Budget reconciliation is part of a two-step process established by the Congressional Budget and Impoundment Control Act of 1974—the same law that calls for Congress to pass a budget resolution each year setting out anticipated federal spending and revenues. First used by the House and Senate in 1980, a total of 20 reconciliation bills have been enacted into law since then--most notably to implement the Bush tax cuts of 2001 and 2003 and, perhaps ironically, to make changes to the Affordable Care Act. The primary purpose of reconciliation is to change existing law so that revenues (e.g. taxes) and spending are brought into line with budget resolution priorities. Though it generally has been used to reduce the deficit through spending reductions to entitlement programs or revenue increases, as noted above, reconciliation can be used to increase the deficit through tax cuts. Reconciliation also can be used to raise or lower the debt limit.

What are the steps to budget reconciliation?

Under the first step, instructions are included in the annual budget resolution that Congress adopts. Those instructions direct one or more committees to draft legislation that changes spending and/or revenues by specified amounts. For example, the House Ways and Means and Senate Finance committees could be instructed to trim the federal deficit by $x billion, while the House Education and the Workforce and Senate HELP committees might be tasked with coming up with $x billion in savings through changes to programs under their jurisdiction. Each of those committees is given a deadline for submitting legislation to its respective Budget Committee, which incorporates all submissions, without any substantive revision, into a single, omnibus budget reconciliation bill. 

Under the second step of this process, the budget reconciliation bill is considered in the House and Senate under expedited procedures and sent to the president for signature, or veto. As with any legislation, differences between House- and Senate-passed reconciliation bills are settled by a conference committee, after which both bodies vote on final passage of the compromise.

What are the procedural advantages of a reconciliation bill?

Most of the advantages rest in the Senate, where debate is limited to 20 hours (or 10 hours for a vote on a conference agreement), and reconciliation bills can be passed with only a simple majority, rather than the three-fifths majority usually required for controversial legislation. Since Republicans currently hold fewer than 60 seats in the Senate, reconciliation offers an attractive option for passing major changes to federal programs, like the Affordable Care Act.

Are there any limitations on what can be done through reconciliation? 

Yes, the contents of a reconciliation bill are tightly controlled. The bill can only be used to alter provisions in law that would officially have a federal budget consequence. Of particular note, the Senate has strict rules governing what can be included in reconciliation bills. The so-called "Byrd Rule" allows just one senator to block any provision deemed extraneous to reconciliation's basic purpose of changing the level of federal spending or revenues.  So, for example, regulatory changes imposed on the private sector insurance market—such as altering how state health insurance markets are organized or changing the requirement to cover adults under age 26—could not be included in a reconciliation bill.

Can a reconciliation bill be amended?

Yes, amendments may be offered when the House and Senate debate a reconciliation bill. However, the Congressional Budget and Impoundment Control Act of 1974 generally prohibits consideration of any amendment that would cost money without fully offsetting that cost.    

How often can reconciliation be used to make the changes Republican leaders want?

Reconciliation can only be used once per fiscal year. In early 2017, for example, Congress could use a fiscal year 2017 budget resolution that was shelved earlier this year as a vehicle for repealing sections of the Affordable Care Act as soon as possible. Later next year, lawmakers could pass a fiscal year 2018 budget resolution with reconciliation instructions addressing a tax code overhaul or entitlement reform.

Questions or comments? Contact Dom Ruscio at druscio@dc-crd.com


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