Come Here Often? (A Primer on Reconciliation)

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By Dom Ruscio, Partner, CRD Associates

By now most everyone knows that a budget resolution is essentially a blueprint outlining specific fiscal policy for the upcoming year and general priorities for the coming decade. The annual budget resolution also sets a limit on total discretionary spending—the amount of money the Appropriations committees have to allocate among the 12 annual appropriations bills.

Theoretically, budget resolutions follow the same path as any other legislation—almost. The legislation is formulated by the House and Senate budget committees, then debated and voted on in each chamber of Congress. Once both chambers pass their versions of the resolution, a House-Senate conference committee is appointed to iron out differences. The compromise, or conference agreement, must then be voted on by the full House and Senate.

But it bears noting that the budget resolution is not sent to the president for approval and therefore has no force in law, though it serves to guide Congress as lawmakers formulate legislative proposals for the year, including appropriations bills.

Budget resolutions surface every year, but recently, none have made it all the way through a House-Senate conference. Some years, in fact, House and Senate budget resolutions have barely made it through their respective committees.

With Republicans controlling both sides of Congress, this year may be different.

If. No, wait. Cue the herald trumpets and let’s give it the out-sized emphasis this deserves. IF the House and Senate manage to agree on a budget resolution there’s been talk that a process known as “reconciliation” will be implemented (or executed, depending on your perspective). If that happens, it could open the way to all sorts of changes in federal budget policy. Reconciliation could be a route to entitlement reform and/or revenue changes. It could even be used to loosen the tourniquet of spending caps imposed by the Budget Control Act.

So what is reconciliation exactly? It’s an outgrowth of the Congressional Budget and Impoundment Control Act of 1974. It was originally intended to fulfill a very narrow purpose: To reconcile the first budget resolution of each fiscal year with second budget resolution Congress passed in the fall. (Yes, Congress envisioned passing two budget resolutions each year. Can you imagine?) But over time reconciliation evolved into a much bigger tool in the budget arsenal.

Nowadays, the budget resolution—like the ones now wending their way through the House and Senate—may include reconciliation instructions to one or more congressional committees to develop legislation that changes existing law so as to bring spending or revenues into conformity with the resolution. For example, a budget resolution might assume that Medicare spending ought to be $6 billion less than projected. In that case, the resolution would include instructions to the House Ways and Means and Senate Finance Committees to come up with detailed legislation to achieve that amount of savings in Medicare.

Unlike a budget resolution, legislation generated by reconciliation instructions must be signed by the president in order to take effect.

Reconciliation bills have been enacted 23 times since the 1974 Budget Act was passed. It was the vehicle for President Reagan’s tax and spending cuts, three major tax cuts enacted during the George W. Bush administration and changes to the Affordable Care Act. (Bill Clinton failed to convince Congress to use reconciliation to pass his 1993 health reform plan.)

Reconciliation instructions come with a deadline.  If the budget resolution instructs more than one committee in a chamber, then the instructed committees submit their legislative recommendations to their respective Budget committees by the deadline prescribed in the resolution.  In cases where only one committee has been instructed, the process allows that committee to report its reconciliation legislation directly to its parent chamber, thus bypassing the Budget Committee.

The reconciliation legislation must then be debated and passed by the full House and Senate. In the Senate, debate is limited to 20 hours and amendments must be germane to the budget (i.e. have a direct effect on federal budget authority or outlays) and not include extraneous matter. The legislation cannot be filibustered and requires only 51 votes to pass. In the House, the Rules committee typically recommends a special rule for the consideration of a reconciliation measure that places restrictions on debate time and the offering of amendments. The House must pass the measure by a simple majority.  

So there you have it. The definition of reconciliation in just 723 words. 

Lisa Ellington

Big Thinkery, LLC, 1011 Kenilworth Court Northwest, Concord, NC, 28027