Congressional Climate Camp #5: Bonus Session: Understanding Budget Reconciliation

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August 18, 2021

(Environmental and Energy Study Institute) ... Our fifth and final session looked at budget reconciliation, an oftentimes difficult-to-understand process that allows Congress to pass laws related to taxes, spending, and the debt limit with only a majority vote in the Senate (instead of a filibuster-proof 60-vote supermajority). The Senate Parliamentarian determined that the Senate can pass two budget reconciliation bills this year, for fiscal years 2021 and 2022. But how does the process work? What are the major challenges for Congressional lawmakers and their staff in drafting and passing reconciliation bills? And why does it matter for climate policy?

This briefing discusses budget reconciliation procedures along with do’s and don’ts for those involved in the process. A moderated, 40-minute discussion follows the two speaker presentations.

Highlights

Molly Reynolds, Senior Fellow – Governance Studies, Brookings

  • Budget reconciliation as it came to be used in the 1980s and 1990s and later in the 2000s and 2010s looks very different from how it was first conceived in the 1974 Congressional Budget Act (P.L. 93-344). Originally, the Act called for two budget resolutions every fiscal year and provided for a reconciliation process that would happen alongside the second resolution. The idea was that Congress might not want to set binding ceilings and rules on how much it would tax and spend in the first resolution, but rather use it as a target, with the second resolution in September (right before the start of the new fiscal year) being more binding. In instances where existing laws were not in line with new binding levels, Congress would need to act quickly. This need to act quickly is why expedited procedures were first implemented.
  • In the 1980s and 1990s, the process was used more for deficit reduction, with all committees being required, thanks to the reconciliation procedure, to share the burden of making cuts. Evidence does show that congressional majorities used reconciliation to advance their own goals even during this time, though there was large bipartisan support for some measures.
  • In the 2000s and 2010s, reconciliation became more of a one-off process to pass party priorities. Examples of this can be seen in the Affordable Care Act (P.L. 111-148) and Tax Cuts and Jobs Act of 2017 (Trump Tax Cuts, P.L. 155-97).
  • In 2021, reconciliation has merged some of these past processes. For example, the American Rescue Plan Act of 2021 (P.L. 117-2) used the 80s and 90s model of enlisting multiple committees to take action, but still acted as a tool to pass Democratic agenda items.
  • As the process has expanded and included more policy goals, there has been a greater potential for challenges and complications to arise. The boundaries of the reconciliation process are being stretched, and there is less certainty about what is allowed. Budgetary matters (spending and revenue) can generally be addressed through reconciliation. Increasing the federal minimum wage (initially proposed in the American Rescue Plan Act of 2021) was not allowed. As more policy is conducted through the tax code, it would appear that reconciliation's remit will increase.
  • It is important to remember that rules are a big constraint, but they are not the only barriers. There are other features of the process, outside of the Byrd Rule, that limit how reconciliation is used [the Byrd rule prohibits the Senate from considering extraneous items as part of a reconciliation bill or resolution. The presiding officer, with advice from the Senate Parliamentarian, decides whether an item is extraneous]. For example, the ample amounts of time needed for the process can be a challenge. There are also elements of the reconciliation process that ask committees to give up some of the powers they have, which is not always something that those committees favor.

Zach Moller, Deputy Director – Economic Program, Third Way

  • It is important to remember that reconciliation is truly all about the Senate because the rules are binding there.
  • It is also important to understand that reconciliation requires a budget resolution to start, and that the resolution's instructions must be followed (committee jurisdiction assignments, meeting a savings target, etc.)
  • Rules are binding in the base text of legislation and on the floor (i.e., amendments must be germane and cannot increase the deficit).
  • The Byrd Rule is also important [see above]. A senator on the floor would raise a point of order against a provision in the text or threaten to do so. The point of order has a super majority threshold [60-vote requirement], meaning the ability of budget reconciliation to get around the filibuster becomes moot. But if the point of order is sustained, only the offending material is removed based on mostly objective boundaries, meaning the whole bill is not necessarily taken down.
  • At the end of the day, this process is really about budgetary changes. Things that are clearly allowed include:
    • Changes to marginal tax rates, dates policy may expire (i.e., “rates and dates”).
    • Tax policy, though nothing too specific. For example, a tax credit for electric vehicles may be allowed, but a tax credit specifically for Tesla vehicles may be too specific.
    • Expanding or timing mandatory spending (except in the case of social security).
    • New direct spending programs with some limits (i.e., new mandatory spending). Such programs were included in certain provisions of the American Rescue Plan Act of 2021 (P.L. 117-2)
  • Things that are not allowed include:
    • Changes to social security.
    • Things that do not “score” budgetarily (i.e., no changes to civil or criminal code). For example, a bill could not ban coal power plants.
    • Provisions or policy from the wrong committee.
    • Long-term deficit increases (often, that means policies need to be designed on a temporary basis).
  • There is a lot of gray area. One of the Byrd Rule tests is known as the “merely incidental” test, and is subjective. Arguments are made to the Parliamentarian and he/she makes a ruling based on established precedent.
  • A key question to consider is: can you successfully say your policy change is about spending or revenue? There are edge cases that tend to fall out because of this challenge (such as targeting single entities, i.e., a tax credit only for Teslas). Providing waivers or exemptions tend to be merely incidental. Changing regulation on an industry is not usually accepted, but changing tax policy for an industry may be acceptable.
  • Lessons from the American Rescue Plan Act of 2021 (P.L. 117-2):
    • Direct spending from authorizing committees is more permitted than previously thought.
    • It is easier to fill up an existing pot of money rather than create a new pot of money or a new program with restrictions.
    • The American Rescue Plan Act had particular challenges with single-target provisions, meaning it will be difficult to get things that look like earmarks into infrastructure.
    • Ensure the bill text has clean jurisdiction boundaries.
    • Be careful about where the jurisdictions of an individual committee may reside.

Q&A Session

Q: Can you describe the role and selection of the Senate Parliamentarian?

  • EESI Executive Director Daniel Bresette: The Parliamentarian serves at the pleasure of the Senate and provides guidance on the rules of the Senate. She made headlines recently because she ruled that the minimum wage could not be increased through reconciliation.
  • Reynolds: The Parliamentarian is tasked with advising senators on whether a particular provision in a reconciliation bill complies with the Byrd Rule. This process is affectionately referred to as a “Byrd bath,” and anything removed during this process is referred to as “Byrd droppings.” She also has other jobs besides advising on reconciliation, such as advising on which committees bills should be referred to. It is important to understand that there is value in having an entity seen as an honest broker in the legislative process.
  • Moller: The media fascination with the Senate Parliamentarian can be seen as rather negative, as this person is not a political actor. They are like a referee in a sports game. The Parliamentarian has immense institutional knowledge.

Q: For someone who is thinking about how to approach reconciliation with the goal of having their boss’s priorities included in the mix, and they have something to start with that is written like a regular bill, what are some of the differences between an authorizing bill and reconciliation language? Are there elements that make authorizing text different from reconciliation text?

  • Moller: If you are already dealing with a tax policy bill, then you are starting from a good position for reconciliation, assuming it is not too expensive and does not have other issues [that would conflict with the Byrd rule, for example]. If you are starting from a more regulatory bill or are seeking to authorize a new program, make sure it is not something that needs to be supported by the traditional appropriation process. Direct spending language is needed. Staffers should look at the legislative language in the American Rescue Plan Act. You should realize that even with an extremely well-researched and written bill, compromises may need to be made to accommodate the Parliamentarian’s evaluation or leadership’s assessment of the risk of including certain provisions.
  • Reynolds: There may be a limit to how much appropriations committees are comfortable with authorizing committees converting programs into direct spending that can be reconcilable. Provisions that increase spending or cut taxes, unless fully paid for, can be a Byrd violation if they exceed a 10-year window. So, there may be a need to change the time horizon for a legislative idea. For example, the Bush tax cuts and parts of the Trump tax cuts had to include sunsets to meet the 10-year window issue.

Q: How many times can Congress use reconciliation?

  • Reynolds: There are two ideas to consider: What do the rules permit and what does the calendar allow for? First, under guidance from the Parliamentarian, each time Congress does a budget resolution, it can be followed by up to three reconciliations surrounding spending, revenue, and debt limits. If a bill touches all three, or more than one of the areas, then it counts as your three, or two of three shots, respectively. It can be hard to isolate these areas in three separate bills. It also takes a lot of time to do reconciliation and strategize priorities across issues. There are a lot of priorities at this moment for the new narrow majority, creating a timing restraint.
  • Moller: As for political floor time, the Senate "vote-a-rama" is important to understand—to do budget reconciliation you deal with the Senate vote-a-rama process twice. There are time constraints built into the resolution and reconciliation procedures, which means at the end of the imparted time, it is over—this is what allows the Senate to get around the filibuster. But, the “at the end of the time it is over” mechanism also means all the pending amendments, and there are hundreds, are up for a vote and you can vote continuously. At this time, the Senate floor is governed by unanimous consent, which expedites proceedings. It basically runs until all the senators get tired of voting. It is a tough process for staff and members, it eats up a lot of time, and senators have to take a lot of difficult votes. Moller expects that three budget reconciliations is probably the most that can be done over two years.
  • Reynolds: In a Senate where there are far fewer opportunities for senators to get votes on amendments generally, the vote-a-rama becomes an even more painful process because each senator realizes this might be their one chance to offer an amendment. All 100 senators are thinking the same thing, which makes the process very long and painful—this has become worse over time.

Q: What is the budget committee’s role in budget reconciliation? What is their staff working on during this time? Are they available as a resource for other Hill staff?

  • Moller: It is important to remember that reconciliation requires a budget resolution written by the budget committee. Who is on the committee can make a big difference. From a staff point of view, the budget committee contains a lot of the process experts on this—the experts on where all the numbers need to be and how they add up at the end of the day. Staffers should be in touch with their corresponding budget committee expert. For example, the budget committee staff with the environment portfolio. Keeping those lines of communication open is always recommended.
  • Reynolds: Because the majorities are so narrow in the House and the Senate, that is also a constraint on what resolutions might look like. There is a potential for disagreement within the Democratic caucus on things like what the overall size of the defense budget should be. As fewer things move through the legislative process, everything results in more political conflict.
  • Moller: It is important to note that the prior budget resolution used for the American Rescue Plan Act came from the Fiscal Year 2021 (FY21) budget resolution, and it was already halfway through FY21 when that happened. Democrats could use the FY22 budget resolution for another round of reconciliation, and it would be the first resolution to come out after the expiration of discretionary spending caps—making it that much more important.

Q: Are there quirks or little-known details about the reconciliation process that you want to make sure Hill staffers are aware of?

  • Reynolds: Sometimes, you need to come up with several iterations of a policy idea to get it to pass. It is important that staff know that if you have a policy goal, the first idea you have may not be allowed under the reconciliation process, so you need to find another way to do it. While at the same time, you have to keep in mind that everything is moving very quickly. For example, Republicans setting the individual mandate penalty [for healthcare insurance under the Affordable Care Act] to $0 is an example of a policy goal that had to be reworked to fit into reconciliation. It is all a very complicated process, and even experts run into challenges.
  • Moller: Staff need to realize that, in this case, this is a Democratic-only exercise, so what is in and what is out is also governed by a political process involving party leadership and the White House. As best as you are trying to recognize your boss’s interests, you have to do the political leg work in the caucus to gain support for the idea. Build a coalition to show more widespread support. The more expensive your provision is, the tougher it is to make that case, and it is important to know and express what you are taking out to put your provision in. Talking to authorizing committee professional staff is important as well.

Q: For someone trying to get up to speed on the reconciliation process, are there additional resources you recommend?

Highlights compiled by Ashlyn Devine

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Greenhouse Gases Regulated Emissions and Energy Use in Transportation Model Grenada gribble growers gua beans Guam guar Guatemala guayule Guerbet reaction Guinea Guinea Bissau Gulf states gulmohar Gumweed (grindelia squarosa) Guyana GWP gypsum h Haiti Halophytes harvest site processing harvesting Hawai'i hay hazardous waste hazelnut HBIIP Higher Blends Infrastructure Incentive Program HDCJ HDO-SAK (hydro deoxygenated synthetic aromatic kerosene) health health benefits health effects heat of combustion heat of vaporization heat-tolerance heather heating oil/fuel Heavy Duty Truck Rule heavy duty vehicles (HDV) hedging HEFA (Hydro-processed esters and fatty acids) HEFA50 helicopters hemicellulace enzymes hemicellulose hemicellulosic sugars Hemp hemp oil hemp seed herb hexanol HFO (Heavy Residual Fuel Oil) hibiscus high blend renewable fuels (HBRF) High Hydrogen Content Synthetic Paraffinic Kerosene (HHC-SPK) High Octane Fuel (HOF) High Octane Fuel Standard High Octane Gasoline (HOG) high 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