Home / Government / Articles / What is the budget reconciliation process and why is it important?

When Congress passed the budget resolution for fiscal year 2022 in August 2021, it included instructions on how it could change existing laws through a procedure called budget reconciliation. This procedure allows Congress to avoid Senate filibusters to make new policies.

Congress is currently considering a reconciliation bill that would set a minimum corporate tax, add credits for renewable energy and electric vehicles, and allow Medicaid to negotiate the price of some prescription medications among other changes. It remains to be seen whether the reconciliation bill for FY22 will pass through both chambers of Congress and become law.

What is a reconciliation bill?

Reconciliation is a tool that Congress can use to change laws that affect the country’s budget, and it is potentially easier to pass than a regular bill. However, as part of the budget process, reconciliation bills are limited to changing laws that affect the national budget.

Reconciliation bills are potentially easier to pass because the time that the Senate can spend debating the bills is limited to 20 hours. This is in contrast with ordinary bills, which senators can threaten to delay or prevent from reaching a vote through indefinite debate. Using debate of a bill or the threat of indefinite debate to prevent a bill from receiving a vote is called a filibuster. Even though most bills technically require a 51-vote majority to pass, the rules of the Senate require 60 senators to vote for cloture, meaning to end debate of a bill. This also stops a filibuster and sets a bill up for a vote by the full Senate.

In practice, this means that a reconciliation bill needs 51 votes to pass in the Senate, as opposed to 60 votes to avoid a filibuster. Reconciliation doesn’t have the same benefit in the House, where members are always limited in how much time they can speak when debating legislation.

Despite this benefit, reconciliation bills also have some important limitations. These limitations were established in the 1980s through what’s known as the Byrd rule. This rule tries to prevent the expedited reconciliation process from being abused. According to the Byrd rule, every measure in a reconciliation bill must relate directly to budgetary issues: government spending, revenue or taxes, or the debt limit. This means that measures that don’t have any budgetary effect can’t be included in a reconciliation bill.

The Byrd rule also says reconciliation bills can’t include any measures that increase the national deficit beyond a 10-year budget window or that make changes regarding Social Security trust funds. Additionally, any proposed measure in a reconciliation bill must be within the jurisdiction of the Senate committee that proposes it.

The Byrd rule, along with other legislative rules and practices in the Senate, is enforced by the Senate Parliamentarian. The parliamentarian decides when the Byrd rule has been violated and can strike provisions from the bill that are in violation of the rule.

How does the budget reconciliation process work?

Reconciliation is part of Congress’ annual responsibility of developing a budget resolution and is governed by the rules set out in the Congressional Budget Act of 1974. This process kicks off at the beginning of each calendar year when Congress receives a budget proposal from the president.

After receiving the president’s proposed budget, Congress puts together a budget resolution, which sets the level of spending, revenue, and deficit for at least the next five years. Budget resolutions need to be passed by both the House and the Senate, but don’t need presidential approval.

Reconciliation is meant to speed up the timeline for changing laws that affect the budget. As part of the budget resolution, Congress can give directions, or reconciliation instructions, to specific House or Senate committees to recommend changes to existing laws within their jurisdictions to achieve a specific budgetary outcome, such as increasing or decreasing spending levels.

For FY22’s reconciliation, Congress’ instructions allow various House and Senate committees to increase the budget deficit by up to $1.98 trillion between FY22 and FY31. It also tells the House Ways and Means and Senate Finance committees to provide at least $1 billion in deficit reduction over that same period.

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If Congress can’t pass a budget resolution, it typically avoids a government shutdown by maintaining the budget at the levels set during the previous year’s resolution through something called a continuing resolution. However, reconciliation can only happen if a full budget resolution is passed.

Once congressional committees receive reconciliation instructions through a budget resolution, they must propose drafted legislation by a specific date. The Budget Committee in the House or Senate then packages the recommendations from each committee into a bill without making significant changes and sends it to the House or Senate floor for debate and a vote.

Any amendments made to the bill proposed by the Budget Committee also must relate to budgetary matters, and they can’t increase the deficit unless they strike an entire provision of the bill.

Once both the House and Senate agree to the same version of the reconciliation bill, it goes to the president for approval. Like most other bills, the president can veto a reconciliation bill, and Congress can override the president’s veto with a two-thirds vote in both the House and the Senate.

How many reconciliation bills have been passed?

Since reconciliation was established by the Congressional Budget Act of 1974, Congress has passed 26 reconciliation bills as of the publication of this article. Out of these, 22 were approved by the president and signed into law.

Of the 41 fiscal years from the first reconciliation bill in 1981 to fiscal year 2021, reconciliation was used in 23 years. There were two separate reconciliation bills in three of those years. Accounting for the fact that reconciliation was not possible in the 11 years when no budget resolution was passed, reconciliation has been used in 23 out of the 30 (77%) budget resolutions since 1981.

Reconciliation is used in most years that a budget resolution is passed

Status of budget resolutions and reconciliation bills, by year
Fiscal year Budget resolution passed Reconciliation bill passed Reconciliation bill signed into law
1981 ✔️ ✔️ ✔️
1982 ✔️ ✔️ ✔️
1983 ✔️ ✔️ ✔️
1984 ✔️ ✔️ ✔️
1985 ✔️
1986 ✔️ ✔️ ✔️
1987 ✔️ ✔️ ✔️
1988 ✔️ ✔️ ✔️
1989 ✔️
1990 ✔️ ✔️ ✔️
1991 ✔️ ✔️ ✔️
1992 ✔️
1993 ✔️
1994 ✔️ ✔️ ✔️
1995 ✔️
1996 ✔️ ✔️
1997 ✔️ ✔️ ✔️
1998 ✔️ ✔️ ✔️
2000 ✔️ ✔️
2001 ✔️ ✔️
2002 ✔️ ✔️ ✔️
2004 ✔️ ✔️ ✔️
2006 ✔️ ✔️ ✔️
2008 ✔️ ✔️ ✔️
2009 ✔️
2010 ✔️ ✔️ ✔️
2016 ✔️ ✔️
2017 ✔️
2018 ✔️ ✔️ ✔️
2021 ✔️ ✔️ ✔️

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