CRS Examines Budget Reconciliation Process

The budget reconciliation process is an optional procedure under the Congressional Budget Act of 1974 that operates as an adjunct to the annual budget resolution process. The chief purpose of the reconciliation process is to enhance Congress's ability to change current law in order to bring revenue and spending levels into conformity with the policies of the budget resolution. Accordingly, reconciliation probably is the most potent budget enforcement tool available to Congress for a large portion of the budget.

Reconciliation is a two-stage process in which reconciliation instructions are included in the budget resolution, directing the appropriate committees to develop legislation achieving the desired budgetary outcomes, and the resultant legislation (usually incorporated into an omnibus bill) is considered under expedited procedures in the House and Senate.

Reconciliation was first used by the House and Senate in calendar year 1980 for FY1981. As an optional procedure, it has not been used every year. During the period from 1980 to the present, 20 reconciliation measures were enacted into law and three were vetoed.

Under a revised timetable in effect since FY1987, the annual budget resolution is scheduled for final adoption by the House and Senate by April 15. The current timetable prescribes June 15 as the deadline for completing action on any required reconciliation legislation, but there is no explicit requirement to that effect.

The record of experience with reconciliation legislation over the period covering 1980 to the present indicates considerable variation in the time needed to process such measures, from the date the reconciliation instructions take effect (upon final adoption of the budget resolution) until the resultant reconciliation legislation is approved or vetoed by the President. The interval for the 23 reconciliation measures ranged from a low of 27 days (for the Omnibus Budget Reconciliation Act of 1990) to a high of 384 days (for the Tax Increase Prevention and Reconciliation Act of 2005). On average, completing the process took about five months (150 days), well beyond the two months contemplated by the timetable in the 1974 Congressional Budget Act.

With regard to the use of reconciliation by congressional session, action on 11 such measures was completed during the first session and on 12 such measures during the second session. Congress and the President have shown the ability to initiate the reconciliation process and conclude it reasonably early in the same session; in the case of eight bills (for seven different years), reconciliation measures were enacted or vetoed before the end of August. On the other hand, the reconciliation process can be lengthy and drawn out; in four instances, reconciliation measures were not enacted or vetoed until December, and in five other instances, carried over to the following year.

This report will be updated as developments warrant.

                            Contents

Overview of the Budget Reconciliation Process

Under the Congressional Budget and Impoundment Control Act of 1974 (P.L. 93-344, as amended), the House and Senate are required to adopt at least one budget resolution each year.¹ The budget resolution, which takes the form of a concurrent resolution and is not sent to the President for his approval or veto, serves as a congressional statement in broad terms regarding the appropriate revenue, spending, and debt policies, as well as a guide to the subsequent consideration of legislation implementing such policies at agency and programmatic levels. Budget resolution policies are enforced through a variety of mechanisms, including points of order.² The House and Senate Budget Committees, which were created by the 1974 act, exercise exclusive jurisdiction over budget resolutions and are responsible for monitoring their enforcement.

In developing a budget resolution, the House and Senate Budget Committees rely on baseline budget projections prepared by the Congressional Budget Office (CBO). A budget resolution typically reflects many different assumptions regarding legislative action expected to occur during a session that would cause revenue and spending levels to be changed from baseline amounts. However, most revenue and direct spending³ occurs automatically each year under permanent law; therefore, if the committees with jurisdiction over the revenue and direct spending programs do not report legislation to carry out the budget resolution policies by amending existing law, revenue and direct spending for these programs likely will continue without change.

The budget reconciliation process is an optional procedure that operates as an adjunct to the budget resolution process.⁴ The chief purpose of the reconciliation process is to enhance Congress's ability to change current law to bring revenue and spending levels into conformity with the policies of the budget resolution. Accordingly, reconciliation probably is the most potent budget enforcement tool available to Congress for a large portion of the budget.

Reconciliation is a two-stage process. First, reconciliation instructions are included in the budget resolution, directing the appropriate committees to develop legislation achieving the desired budgetary outcomes. The instructed committees submit their legislative recommendations to their respective Budget Committees by the deadline prescribed in the budget resolution; the Budget Committees incorporate them into an omnibus budget reconciliation bill without making any substantive revisions.

The second step involves consideration of the resultant reconciliation legislation by the House and Senate under expedited procedures. Among other things, debate in the Senate on any reconciliation measure is limited to 20 hours (and 10 hours on a conference report) and amendments must be germane. The House Rules Committee typically sets limitations on debate and the offering of amendments during consideration of reconciliation measures in the House.

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. In some years, budget resolutions included reconciliation instructions that afforded the House and Senate the option of considering two or more different reconciliation bills. Once the reconciliation legislation called for in the budget resolution has been approved or vetoed by the President, the process is concluded; Congress cannot develop another reconciliation bill in the wake of a veto without first adopting another budget resolution containing reconciliation instructions.

 

Figure 1. Major Stages of the Reconciliation Process

 

 

 

Reconciliation was first used by the House and Senate during the administration of President Jimmy Carter, in calendar year 1980 for FY1981.⁵ As an optional procedure, it has not been used every year. During the period covering FY1981 to the present, 20 omnibus reconciliation measures were enacted into law and three were vetoed (see Table 1).

                   Table 1. Budget Resolutions and Resultant

From 1980 into the 1990s, reconciliation was used to reduce the deficit through reductions in mandatory spending, revenue increases, or a combination of the two. Reconciliation also has been used, however, to reduce revenues and, in a few instances, to increase spending levels in particular areas.⁷ In 2006, reconciliation was used to reduce mandatory spending and revenues, yielding a net increase in the deficit.⁸ In the first session of the 110th Congress, the Senate adopted a rule prohibiting the use of reconciliation in a manner that would increase the deficit or reduce the surplus (Section 202 of the FY2008 budget resolution, S.Con.Res. 21). The House adopted a similar rule at the beginning of the 110th Congress, but amended the rule at the beginning of the 112th Congress to prohibit the use of reconciliation in a manner that would cause a net increase in direct spending (House Rule XXI, Clause 7).

With regard to spending reductions, the reconciliation process for the most part has applied to mandatory spending programs and not discretionary spending programs (which are subject to other budget enforcement procedures).⁹ In some years, the reconciliation process has been used to increase the statutory debt limit (which typically is addressed through different procedures); in 2000, efforts were made in the reconciliation process to reduce the debt held by the public.¹⁰

Timing of Legislative Action

Time of Year That Reconciliation Is Scheduled to Occur

As originally framed, the 1974 Congressional Budget Act required the adoption of two budget resolutions each year. By May 15 of each year, the House and Senate were scheduled to complete action on a budget resolution setting advisory targets; by September 15, just before the beginning of the fiscal year on October 1, the two chambers were scheduled to adopt a budget resolution setting binding limits. It was contemplated that reconciliation would be used in conjunction with the second budget resolution, as a device to make any "last minute" changes in pending legislation or current law necessary to bring the budget resolution policies to fruition. The 1974 Act prescribed a 10-day period to accomplish reconciliation, requiring that the process be concluded by September 25.

After several years' experience with the congressional budget process, congressional leaders realized that reconciliation could not be used to make major changes in revenue and direct spending laws and still fit within such a compressed time frame and occur so late in the session. Therefore, when the House and Senate first employed reconciliation in 1980, it was initiated in the first budget resolution, adopted in the late spring. The following year, reconciliation again was used in connection with the first budget resolution. Shortly thereafter, the House and Senate abandoned altogether the practice of adopting a second budget resolution.

These changes in congressional practice were formally incorporated into the 1974 Congressional Budget Act several years later under amendments made by the Balanced Budget and Emergency Deficit Control Act of 1985 (Title II of P.L. 99-177). The changes, which first took effect for FY1987 and still remain in effect, require the annual adoption of only one budget resolution and authorize the inclusion of any reconciliation instructions in it. The deadline for the adoption of the budget resolution was advanced by one month to April 15. Under the revised timetable, two months are allowed for reconciliation; a deadline of June 15 was established for the completion of action on any required reconciliation legislation.¹¹ To enforce this deadline in the House, a prohibition against the consideration of a July adjournment resolution if reconciliation is not completed was placed in Section 310(f) of the 1974 Act; the Senate has no comparable provision.

Overall Record of Experience

The record of experience with reconciliation legislation over the period covering 1980 to the present indicates considerable variation in the time needed to process such measures, from the date the reconciliation instructions take effect (upon final adoption of the budget resolution) until the resultant reconciliation legislation is approved or vetoed by the President. As Figure 2 shows, the processing interval for the 20 enacted and 3 vetoed reconciliation measures ranged from a low of 27 days (for the Omnibus Budget Reconciliation Act of 1990) to a high of 384 days (for the Tax Increase Prevention and Reconciliation Act of 2006). On average, completing the process took about five months (150 days), well beyond the two months contemplated by the timetable in the 1974 Congressional Budget Act.

With regard to the use of reconciliation by congressional session, Congress has not ostensibly favored one session over the other. As Table 2 shows, action on 11 such measures was completed during the first session and on 12 such measures during the second session. It should be noted, however, that five of the measures (the Omnibus Budget Reconciliation Act of 1983, the Consolidated Omnibus Budget Reconciliation Act of 1985, the Deficit Reduction Act of 2005, the Tax Increase Prevention and Reconciliation Act of 2005 and the Health care and Education Reconciliation Act of 2010), enacted between February and May of the second session, were from reconciliation directives included in the prior session.

Congress and the President have shown the ability to initiate the reconciliation process and conclude it reasonably early in the same session; in the case of eight bills (for seven different years), reconciliation measures were enacted or vetoed before the end of August. On the other hand, the reconciliation process can be lengthy and drawn out; in four instances, reconciliation measures were not enacted or vetoed until December, and in five other instances carried over until the following year.

Adoption of Reconciliation Instructions

During the period covering from 1980 to the present, Congress adopted 20 budget resolutions containing reconciliation instructions (see Table 3). The House and Senate adopted four of these budget resolutions (for FY1994, FY2000, FY2001, and FY2004) on time, but the others were adopted behind schedule. As Table 3 shows, most of the budget resolutions that contained reconciliation instructions were adopted in April, May, or June, but one was adopted as late as August and another in October. During years when reconciliation was used, budget resolutions were adopted, on average, about 48 days after the prescribed deadline.

 

Figure 2. Number of Days Needed to Process Reconciliation Acts

 

 

 

Notes: The "number of days" refers to the interval from adoption of the budget resolution to the enactment or veto of the reconciliation act.

Nonetheless, timely or tardy adoption of a budget resolution does not necessarily ensure that the reconciliation process will proceed quickly or slowly. For example, in two of the years that the budget resolution was adopted on time (FY1994 and FY2000), 131 days and 161 days, respectively, were needed to complete action on reconciliation legislation. In 2005, the FY2006 budget resolution was adopted only 13 days behind schedule, but the second of two reconciliation measures generated thereunder was not enacted into law until 384 days later.

Another factor that can affect how quickly or slowly reconciliation legislation is processed is the amount of time given to committees to prepare their reconciliation recommendations. As Table 3 indicates, the initial deadline for committee submissions, included in the budget resolution, ranged from about one week to over five months after adoption of the budget resolution; the longer deadlines were used largely to accommodate the August recess. In some cases, the submission deadline was extended one or more times.¹²

House and Senate Action on Omnibus Reconciliation Legislation

As indicated previously, the House and Senate together completed action on 23 different budget reconciliation bills during the period covering from 1980 to the present; 20 of them were enacted into law and three were vetoed. (The text of one or more other measures considered separately sometimes was incorporated later into an omnibus budget reconciliation bill.) On occasion, one chamber has considered reconciliation legislation that was not considered by the other chamber. During the second session of the 106th Congress, for example, the House and Senate passed the Marriage Tax Relief Reconciliation Act of 2000, but it was vetoed by President Clinton. The House passed five other reconciliation measures during the session, but the Senate did not act on any of them.¹³

Table 4 provides information on the dates of initial consideration by the House and Senate of these 23 measures, as well as the dates that the two chambers acted on the relevant conference reports. As the table shows, the Senate devoted more than twice as many days (78 days) to initial consideration of these measures than did the House (32 days). Initial Senate consideration of these measures ranged from two to eight days, while House consideration took one or two days, except in 1989 (when the House considered the Omnibus Budget Reconciliation Act of 1989 for six days).

    Table 4. Dates of House and Senate Action on Reconciliation Legislation

The interval between adoption of the budget resolution and enactment into law (or veto) took more than the average of 150 days for 10 of the reconciliation laws. Although the timing of action on these measures is explained by many factors, the following were some of the major controversies associated with each:

• Omnibus Reconciliation Act of 1980 -- child nutrition programs, cost-of-living adjustments for federal retirees, mortgage subsidy bonds, and the crude oil windfall profits tax;

• Omnibus Budget Reconciliation Act of 1983 -- aggregate levels of spending reductions and revenue increases;

• Consolidated Omnibus Budget Reconciliation Act of 1985 -- trade policy, Superfund cleanup tax, and tobacco price supports;

• Omnibus Budget Reconciliation Act of 1987 -- the "fairness doctrine" for broadcasters, Rural Electrification Administration loan prepayments, a nuclear waste disposal site, and corporate tax changes;

• Omnibus Budget Reconciliation Act of 1989 -- reduction of the capital gains tax and repeal of the 1988 Medicare Catastrophic Coverage Act;

• Balanced Budget Act of 1995 -- Medicare, Medicaid, student loans, nutrition programs, and the Earned Income Tax Credit;

• Taxpayer Refund and Relief Act of 1999 -- aggregate level of revenue reductions and triggering of a sequester in direct spending programs;

• Deficit Reduction Act of 2005 -- Medicaid, pension reform, oil drilling in the Arctic National Wildlife Refuge (ANWR); and

• Health Care and Education Reconciliation Act of 2010 -- health care reform.

This report was originally written by Robert Keith, formerly a Specialist in American National Government at CRS.

² The congressional budget process, and its enforcement procedures, are discussed in more detail in CRS Report 98-721, Introduction to the Federal Budget Process, coordinated by Bill Heniff Jr.

³Direct spending is generally provided in substantive law under the jurisdiction of the legislative committees, in contrast to discretionary spending, which is provided in annual appropriations acts under the jurisdiction of the House and Senate Appropriations Committees. Most direct spending programs are entitlements, such as Social Security, Medicare, federal civilian and military retirement, and unemployment compensation.

⁴ For a detailed discussion of the budget reconciliation process, see CRS Report RL33030, The Budget Reconciliation Process: House and Senate Procedures, by Robert Keith and Bill Heniff Jr.

⁵ The Senate considered a revenue-reduction bill for FY1976 (H.R. 5559) under reconciliation procedures in December 1975. It was initiated under a second budget resolution for that fiscal year and was not considered to be a reconciliation bill in the House; the bill did not become law. This report presents data on the timing of action on reconciliation measures initiated in conjunction with budget resolutions scheduled for adoption in the spring and thus excludes Senate consideration of H.R. 5559 in 1975.

⁶ For more information, see CRS Report RL31443, The "Deeming Resolution": A Budget Enforcement Tool, by Megan S. Lynch.

⁷ CRS Report RS22098, Deficit Impact of Reconciliation Legislation Enacted in 1990, 1993, 1997, and 2006, by Robert Keith.

⁸ CRS Report RL33132, Budget Reconciliation Legislation in 2005-2006 Under the FY2006 Budget Resolution, by Robert Keith.

⁹ CRS Report RS22277, Savings in Mandatory Outlays in Selected Reconciliation Acts, by Robert Keith.

¹⁰ For more information on this topic, see CRS Report RL30714, Congressional Action on Revenue and Debt Reconciliation Measures in 2000, by Robert Keith (out of print; available CRS), and CRS Report RS21519, Legislative Procedures for Adjusting the Public Debt Limit: A Brief Overview, by Bill Heniff Jr.

¹¹ An explicit requirement that Congress complete action on any necessary reconciliation measure was established in Section 310(f) of the 1974 Congressional Budget Act by Section 201(b) (at 99 Stat. 1040) of the 1985 Balanced Budget Act. Section 13210(2) of the Budget Enforcement Act of 1990 (Title XIII of P.L. 101-508) deleted this requirement from Section 310(f), but left unchanged the reference to the deadline in the general timetable set forth in Section 300.

¹² For more information, see CRS Report R41151, Budget Reconciliation Process: Timing of Committee Responses to Reconciliation Directives, by Megan S. Lynch.

¹³ For more information on these measures, see CRS Report RL30714, Congressional Action on Revenue and Debt Reconciliation Measures in 2000, by Robert Keith (out of print; available from the author); ibid.

¹⁴ For more information on this topic, see CRS Report RL30862, The Budget Reconciliation Process: The Senate's "Byrd Rule," by Bill Heniff Jr.