Budget Reconciliation & the Byrd Amendment Explained: Democrats Planned Use for COVID-19 Relief Plan

Written By:

• Travis Johnson, 1607 Strategies

As the Democratic majority in Congress seek to pass Biden’s $1.9 trillion COVID-19 relief plan to support the nation’s economic recovery, they plan to use a budget reconciliation to ensure its swift passage.  Given we often hear how many former and current Hill staffers say they could use a refresher on what this legislative process entails, we thought it would be good opportunity to review for them as well as our other market participants that haven’t come across its use previously.

Reconciliation is an expedited process used to move budget legislation through Congress by way of a simple majority (51 votes), subject to limited debate. Like the filibuster, reconciliation has become a powerful tool, ironically, to avoid the filibuster, despite its restrictions to fiscally impactful (revenue raising OR deficit increasing) legislation. As a result of the Byrd Amendment (enacted in 1990), policy provisions without (significant) attendant savings or outlays cannot be attached to reconciliation bills. Although the reconciliation process has been employed 25 times in the past 40 years (including under divided government as illustrated below), in recent years, it has provided a path for highly partisan and contentious legislation to be brought for consideration—including both passage of the Obama-era ACA and the subsequent unsuccessful Trump Administration repeal effort.

As the filibuster provides strength to the Senate minority, so reconciliation—within limits—dilutes power of the minority. At its root, however, the process was designed to facilitate changes to existing law relating to spending and revenue priorities, including increases to the debt ceiling. This original mandate, however, has somewhat dissipated over time. Reconciliation has been used by the past four Administrations (Clinton tax increases, GW Bush tax cuts, Obama ACA, and Trump tax cuts), including under divided government power.

Reconciliation in History

1980       President Reagan: Omnibus Reconciliation Act of 1980 [D Senate / D House]

1981       President Reagan: reconciliation used to dramatically cut discretionary spending for welfare and food stamp programs, Omnibus Budget Reconciliation Act of 1981 [R Senate / D House]

1982       President Reagan:  Omnibus Reconciliation Act of 1982 [R Senate / D House]

1982       President Reagan: Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) [R Senate / D House]

1983       President Reagan: Omnibus Reconciliation Act of 1983 [R Senate / D House]

1985       President Reagan: reconciliation mandated [COBRA] health insurance to provide continued access for some post-departure employees, Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) [R Senate / D House]

1986       President Reagan: Omnibus Reconciliation Act of 1986 ordered the sale of government-owned Conrail (formerly Consolidated Railroad Corporation, subsequently privatized in 1987) railroad [R Senate / D House]

1987       President Reagan: Omnibus Reconciliation Act of 1987 [D Senate / D House]

1989       President Reagan: Omnibus Reconciliation Act of 1989 [D Senate / D House]

–Adoption of the Byrd Rule in 1990 limits scope of use of reconciliation

1990       President G.H.W. Bush: reconciliation to establish pay-go rules (and tax increases: increased revenue and decreased spending), Omnibus Budget Reconciliation Act of 1990 [D Senate / D House]

1993       President Clinton: Omnibus Budget Reconciliation Act of 1993 [D Senate / D House]

1995       President Clinton: vetoed Balanced Budget Act of 1995 [R Senate / R House]

1996       President Clinton: R-led reconciliation on work requirements for welfare participants, Personal Responsibility and Work Opportunity Act of 1996 [R Senate / R House]

1997       President Clinton:  Balanced Budget Act of 1997 [R Senate / R House]

1997       President Clinton: Taxpayer Relief Act of 1997 [R Senate / R House]

1999       President Clinton: vetoed Taxpayer Refund and Relief Act (deficit increase without companion spending bill) [R Senate / R House]

2000       President Clinton: vetoed reconciliation bill, Marriage Tax Relief Reconciliation Act of 2000 (failed override vote) [R Senate / R House]

2001       President G.W. Bush: reconciliation under 50-50 Senate split for tax cuts, Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 [R Senate / R House]

2003       President G.W. Bush: reconciliation for tax cuts, Jobs and Growth Tax Relief Reconciliation Act of 2003 [R Senate / R House]

2005       President G.W. Bush: Deficit Reduction Act of 2005 (VP Quayle tie-breaker in the Senate; 217-215 in the House. Subject to federal court in E.D. Mich., which declined standing; cert. denied by SCOTUS) [R Senate / R House]

2005       President G.W. Bush: Tax Increase Prevention and Reconciliation Act (TIPRA) of 2010 (extension of reduced capital gains and AMT) [R Senate / R House]

2007       President G.W. Bush: College Cost Reduction and Access Act of 2007 (amended HEA to increase access to student aid) [D Senate / D House]

2010       President Obama: reconciliation for ACA (and student loan overhaul), Health Care and Education Reconciliation Act of 2010 [D Senate / D House]

2016       President Obama: vetoed reconciliation to repeal aspects of ACA, Restoring Americans’ Healthcare Freedom Reconciliation Act [R Senate / R House]

2017       President Trump: Tax Cuts and Jobs Act of 2017 [R Senate / R House]

 

The Budget Reconciliation Process

Budget reconciliation is the expedited legislative process designed to keep spending, revenue, and debt limit laws compliant with current fiscal priorities—as established in the annual budget resolution, pursuant to Section 310 of the Congressional Budget Act. The Congressional budget resolution—adopted annually in the form of a concurrent resolution and developed from both the House and Senate Budget Committees, is neither presented to the President nor enacted into law. Similarly, the President’s budget request acts a placeholder for priorities, lacking in substantive effect given the Congressional “power of the purse” and separate taxation authority. Statutory changes to Congressional spending or revenue collection, which are required to implement policy directives, must be enacted via legislation apart from the concurrent resolution on the budget.

The inclusion of budget reconciliation instructions in a concurrent budget resolution set forth what Committees have jurisdictional roles in the relevant budget priorities. This is critical, given the Byrd Rule violation outlined below relating to extraterritorial Committee jurisdiction. Once triggered, reconciliation requires committees with jurisdiction to develop and report legislation related to direct federal outlays, revenue, or the debt limit. From there, relevant bills are submitted to the Budget Committee for inclusion in an omnibus to be voted on in both chambers. Like all legislation, floor changes by either chamber must be negotiated in conference prior to enactment or veto. Since enactment of the budget reconciliation process in the 1974 Congressional Budget Act, the process has resulted in four Presidential vetoes.

The Byrd Rule

Named for Robert Byrd, the Democratic legislator from West Virginia (and second longest-serving Senator in U.S. history and Senate Majority Leader in the 1980s), the “Byrd Rule” aptly restricts what types of measures are considered germane to reconciliation legislation.  Under the rule, a provision that is non-budgetary, defined as not yielding changes to spending or revenue, altering Social Security, or increasing the federal deficit beyond the 10-year budget window outlook, is prohibited from inclusion in a reconciliation bill. As a result, Congress customarily passes legislation that expires within ten years to avert violating the rule. Although the Byrd Rule is only binding upon and applicable to Senate deliberation, as a practical matter the House is on notice to avoid inclusion of provisions that would be deemed violative and result in exclusion by the Senate, ordinarily keeping the House sufficiently deterred.

The more interpretive Byrd Rule exclusions, which include “merely incidental” budgetary components, measures outside the jurisdiction of the Committee submitting, or budgetary changes beyond the reconciliation instructions of the Senate, and budgetary changes impacting a fiscal year outside the years covered by the relevant reconciliation bill (unless the bill remains budget neutral), further refine how the Senate must consider measures under the budget reconciliation process.

Of course, some exceptions remain. Section 313(b)(2) permits limited exclusions for provisions—certified for exemption by the Senate Budget Chair and Ranking Member, as well as the chair and ranking of the committee of primary jurisdiction—that mitigates effects attributable to a second tied provision that together reduce net outlays, results in substantial increase or reduction during fiscal years following the period covered, is likely to reduce spending or increase revenue based on actions not currently projected by the Congressional Budget Office, or will likely produce significant reduction or increase despite insufficient data to reliably estimate the impact.

The remedy for a Byrd Rule violation is the raising of a point of order to strike the extraneous provision, which if sustained, would eliminate the segment of the conference report. Notably, as in a court of law, a point of order must be raised at the appropriate time to preserve the objection. The Byrd Rule can only be waived by a three-fifths (60 vote) Senate majority, rendering action moot given the reconciliation process attractively requires only a simple majority.

The Senate Parliamentarian

The reconciliation process highlights the expertise of the oft-background Senate Parliamentarian. The role of the Senate Parliamentarian was formally created in 1935 (the role unofficially occupied since 1923; the House initiated in 1927) under the Standing Rules of the Senate, as authorized by Article 1, Section 5 of the U.S. Constitution. The Parliamentarian is appointed by the Senate Majority Leader, with the prior two serving under the leadership of both parties. Following recent acclaim for preserving the Electoral College votes amid the January 6 riot at the Capitol, Parliamentarian Elizabeth MacDonough has become more of a household name.

MacDonough—the 6^th Senate Parliamentarian, having taken office in 2012 (but serving in the Parliamentarian office since 1999)—will serve as the non-partisan arbiter of what measures—including, for example, the controversial $15 minimum wage increase (which is unlikely to pass Byrd rule muster, especially if Executive Action is taken to raise federal worker wage, rendering budgetary effects even thinner)—meet the Byrd Rule criteria of “significant,” “likely,” and “incidental” effects on the budget, among other procedural determinations. For this reason also, the Democratic priority of immigration reform must be omitted from reconciliation and proceed on regular order.

While some Senate procedure experts (and like-minded legislators) assert that the Senate Parliamentarian is limited in power to providing advice—with the real power player as the Presiding Officer of the Senate (aka the Vice President) — this may be an overstatement of the ease with which the Presiding Officer (or the Senate as a body, for that matter—a majority technically can overrule the parliamentarian) can set aside the Parliamentarian’s advice. Even President Biden—a long-standing Senator and procedural expert himself—publicly questioned the veracity of items like minimum wage withstanding the “Byrd bath” (pre-screening the draft bill for scrutinized compliance).

Given the decorum of the body and deeply ingrained affinity for following rules of procedure in the Senate, such action to belittle the role of the Parliamentarian arguably carries an equivalent level of political rebuke as an effort to eliminate the filibuster and would be viewed as a “nuclear option” by procedural purists. This is the upper chamber, after all. Both Minority Leader McConnell (fitting into the procedural purist camp) and former Vice President Pence have indicated opposition toward discounting the advice of the Parliamentarian. Also worth noting is the fact that MacDonough has enjoyed bipartisan praise and respect from Senators on both sides of the aisle for her fairness and integrity throughout her 22 years of service in the Office of the Senate Parliamentarian.