Leveraging the Power of Budget Reconciliation in the 119th Congress

President Donald Trump and the Republican-controlled Congress will have a significant opportunity to utilize the budget reconciliation process to advance their policy priorities in the 119th Congress. Designed to align revenue and spending levels with budget priorities, reconciliation has evolved over the years into a vital procedural tool for enacting transformative policies. Reconciliation allows the majority party in the Senate to bypass the filibuster rules for certain legislative policies, requiring only a simple majority for passage, making it particularly useful when political control of Congress and the White House aligns but does not meet the threshold needed for regular legislative order.

Notably, Congress’ failure to pass a fiscal year (FY) 2025 budget resolution in the 118th Congress will allow Republicans to deploy reconciliation twice this year — once for the FY25 budget and again for FY26 — or three times over the two years of the session (including FY27). This Advisory outlines the reconciliation process, its legal framework, and strategic considerations for navigating this legislative tool in the 119th Congress.

What Is Budget Reconciliation?

Budget reconciliation, established by the Congressional Budget and Impoundment Control Act of 1974 (CBA), allows Congress to enact legislation aligning revenues and expenditures with the fiscal goals outlined in Congress’ budget resolution.¹ Unlike most other legislation, reconciliation bills cannot be filibustered in the Senate, enabling passage with a simple majority vote.²

Reconciliation has been used to achieve significant policy outcomes, including deficit reduction and partisan policy priorities.³ Recent examples include the Health Care and Education Reconciliation Act in 2020, the Tax Cuts and Jobs Act in 2017, and the Inflation Reduction Act⁴ in 2022, underscoring its versatility as a policymaking tool during periods of unified government control.

How Reconciliation Works

Broadly, reconciliation requires two steps. First, each chamber of Congress must pass a budget resolution with reconciliation instructions directing certain committees to change spending or revenues (or both) by a specified amount. The budget resolution represents an agreement between both chambers of Congress, but it is not signed by the president and does not technically become law. Following passage of the budget resolution, if more than one committee received reconciliation instructions, each such instructed committee must draft and approve responsive legislation meeting the fiscal targets instructed in the resolution.⁵ That committee then submits its reconciliation legislation to its chamber’s Budget Committee. The Budget Committee then compiles all of the submitted reconciliation legislation into a single omnibus measure, without substantive revisions. Second, the House and Senate consider the resulting omnibus reconciliation measure under expedited procedures, which culminates with enactment of the measure to put the policies of the budget resolution into effect. Since Congress first used reconciliation in 1980, 23 reconciliation bills have been signed into law⁶ and four have been vetoed.⁷

Why Reconciliation Matters

Reconciliation is a powerful tool because of its “privileged” status, allowing expedited consideration of complex fiscal legislation. Key benefits include the ability to:

• Adjust mandatory spending programs (such as, Medicare, Medicaid, and the Supplemental Nutrition Assistance Program)
• Modify revenue policies, such as tax rates and credits
• Address the statutory debt ceiling

These benefits can be achieved without requiring consultation with the minority party. As a result, reconciliation allows the majority party to achieve its partisan policy goals.

The Byrd Rule

Between 1980 and 1985, reconciliation legislation contained many provisions unrelated to the federal government’s budget function. The provisions often had no budgetary effect, increased spending or reduced revenue, or infringed on the jurisdiction of other committees. To address these issues, the Senate adopted parts of the Byrd rule in 1985 and 1986. Introduced by then-senator Robert Byrd (D-WV), the rule aimed to protect the reconciliation process from being undermined by extraneous provisions,⁸ which Sen. Byrd argued frequently stirred controversy without advancing deficit reduction goals.⁹ Initially, the rule consisted of two components; a provision in reconciliation legislation and a Senate resolution. In 1990, Congress merged these components and made the rule permanent as Section 313 of the CBA.¹⁰

The Byrd rule only applies to the Senate. Ultimately, deciding whether a particular provision violates the Byrd Rule is often a judgment call made by the Senate Parliamentarian during the “Byrd Bath,” a behind-the-scenes process that occurs while reconciliation legislation is being drafted by relevant committees in which the Parliamentarian reviews provisions proposed for inclusion in a reconciliation bill. Determinations regarding which committee has jurisdiction over a provision, whether non-budgetary provisions are allowable terms or conditions, and whether budgetary effects are merely incidental, are vetted by the Senate Parliamentarian through the Byrd Bath. Committee staff from both sides of the aisle actively debate and respond to questions from the Parliamentarian in real-time about whether a particular provision should be struck from the legislation (i.e., the majority defends inclusion of these provisions while the minority presents arguments regarding why the provisions should be stripped). The Parliamentarian then issues a ruling on the provision in question. Once finished, the Budget Committee releases a list of provisions identified that could potentially violate the Byrd Rule. Additionally, on the floor, any senator can challenge provisions in reconciliation bills that are not budgetary in nature by raising a Byrd rule point of order. If sustained, the extraneous provision is removed. While a point of order can be waived with the support of 60 senators, this is unlikely in today’s politically charged environment. Importantly, points of order under the CBA are not self-executing, meaning a senator must actively raise them.

A provision is considered “extraneous” under the Byrd rule if it meets at least one of the following criteria:

• It does not produce a change in outlays or revenues, or in the way outlays are made or revenues are collected.
• It increases outlays or reduces revenues, and the committee responsible for the provision fails to comply with its reconciliation instructions.
• It falls outside the jurisdiction of the committee that submitted it for inclusion in the reconciliation measure.
• It produces a change in outlays or revenues that is merely incidental to its non-budgetary components.
• It increases the deficit for fiscal years beyond the time frame covered by the reconciliation measure (usually a period of 10 years).
• It recommends changes in Social Security insurance.¹¹

Certain Senate-originating provisions are exempt from being deemed extraneous if the chair and ranking member of the Budget Committee, along with the chair and ranking member of the reporting committee, certify that the provision meets at least one of the following criteria:

• It mitigates direct effects of another provision that changes outlays or revenues, and together the provisions reduce the deficit.
• It will lead to a significant reduction in outlays or a substantial increase in revenues in years beyond the reconciliation measures time frame.
• It is likely to reduce outlays or increase revenues due to new regulations, court rulings, or economic triggers, even if these effects are not currently projected by the Congressional Budget Office.
• It is expected to significantly reduce outlays or increase revenues, but reliable estimates are unavailable in cases when there is insufficient data.¹²

The most frequent challenges under the Byrd rule involve provisions that fail to produce changes in outlays or revenues. The “merely incidental” criterion is particularly subjective, and the Senate parliamentarian has the authority to determine whether a provision’s nonbudgetary impacts outweigh its budgetary significance.

Examples of Provisions Struck by the Byrd Rule

The Senate has invoked the Byrd rule on several occasions to remove provisions from reconciliation bills that were deemed extraneous to budgetary concerns. Examples of provisions that are likely to be considered extraneous include: (1) language that overturns court decisions; (2) provisions that modify behavior; (3) reports and studies; (4) Sense of the Senate statements; and (5) findings.

Examples of provisions that were struck as extraneous include:

• A provision to increase the federal minimum wage from $7.25 an hour to $15 an hour over five years. While the provision would have a significant impact on the federal budget, the Senate parliamentarian ruled the budgetary impact of the provision was “merely incidental” to the underlying policy intent of increasing wages, which violated the Byrd rule.
• An amendment to make health care coverage available to low-income adults in states that have not expanded Medicaid included budgetary impacts that were found to be outside the committee’s jurisdiction. While the budget resolution included reconciliation instructions for several committees, including the Senate Health, Education, Labor, and Pension (HELP) Committee, the amendment fell within the Senate Finance Committee jurisdiction but would have required policymaking that fell within the HELP Committee jurisdiction, which violated the Byrd rule.¹³ Notably, during the floor debate, Sen. Ron Wyden (D-OR) voiced support for the amendment, but said the amendment could not be included, to “preserve the rest of this bill’s health, climate, and tax policy.”¹⁴
• An amendment to establish a cap on costs for covered prescription drugs under Medicare parts B and D were ruled outside the committee’s jurisdiction.¹⁵ Specifically, the reconciliation bill included a provision to authorize Medicare to negotiate drug prices for 10 drugs four years after implementation of the bill. The amendment would have capped the cost of all drug and biologics covered by part B or part D to the amount paid by the Secretary of Veterans Affairs to procure the drug under the laws administered by the Secretary.¹⁶ While the provision at issue fell within the jurisdiction of the Senate Finance Committee, the amendment would have required policymaking outside the jurisdiction of the Senate Finance Committee and therefore violated the Byrd rule.
• A provision to cap cost-sharing for insulin products at $35 per month for commercial beneficiaries was found to have “merely incidental” budgetary changes to the non-budgetary components of the provision.¹⁷ While the reconciliation bill included a provision to cap insulin cost-sharing at $35 per month for Medicare beneficiaries, the Senate parliamentarian found the extension of the cost-sharing cap to commercial beneficiaries violated the Byrd rule because the budgetary impact of imposing a cost-sharing cap of $35 per month on commercial beneficiaries does not have a significant impact on federal spending.
• A policy statement related to the tax treatment of certain payments to farmers was found to make no change to outlays or revenues.¹⁸ The provision would have set aside $200 million for the Secretary of Agriculture to provide grants and loans to underserved farmers, ranchers, and forest landowners.¹⁹ The Senate parliamentarian ruled the provision would violate the Byrd rule because it did not make changes to outlays or revenues.
• An amendment to expedite consideration of permits and provide regulatory certainty for infrastructure and energy projects was found to have budgetary impacts that were merely incidental to the non-budgetary components of the provision.²⁰ During floor debate, former Sen. Tom Carper (D-DE) argued the amendment would make “sweeping changes” to “bedrock environmental laws.”²¹ While the Republican Senators supported the amendment, it did not garner enough support to overcome a Byrd rule point of order.²²
• An amendment to create a point of order against legislation that cuts Social Security, Medicare, or Medicaid benefits violated the Byrd rule because the amendment would not make changes in outlays or revenues.²³
• An amendment to increase the time limit on debate in the Senate on reconciliation legislation to 50 hours was found to make no changes in outlays or revenues, and therefore violated the Byrd rule.²⁴

Debt Limit Considerations

While the CBA generally permits addressing the debt ceiling through reconciliation, the FY16 Budget Resolution included a nonbinding Senate point of order prohibiting such action for FY16 through FY25.²⁵ This restriction, however, lacks legal force, as budget resolutions are not signed into law and apply only to the fiscal year in which they are passed unless explicitly renewed. Notably, subsequent budget resolutions did not carry forward this prohibition, effectively nullifying its applicability beyond FY16. While the Senate parliamentarian has yet to clarify whether this point of order could extend to the FY25 Budget Resolution, precedent suggests it is unlikely to apply. Furthermore, reconciliation is an impractical mechanism for addressing the debt limit with the current political dynamics, as bipartisan support will be needed to address the debt limit.

Opportunities for Dual Reconciliation

Since Congress did not adopt an FY25 budget resolution in 2024, Republicans can potentially adopt two separate budget resolutions in 2025 — one for FY25 and another for FY26. This strategy mirrors past examples:

• In 2017, Republicans adopted two budget resolutions with reconciliation instructions to repeal parts of the Affordable Care Act (which failed in the Senate) and to enact the Tax Cuts and Jobs Act.²⁶
• In the 117th Congress, Democrats passed two reconciliation bills: the American Rescue Plan²⁷ and the Inflation Reduction Act.²⁸

This dual opportunity offers the Republican-controlled Congress a powerful mechanism to pursue ambitious legislative goals and accommodate various political interests over a longer period of time.

The Power of the Parliamentarian

History shows that the Senate Parliamentarian plays a crucial role in the reconciliation process, as the Parliamentarian has the power to parse legislative language and determine if it complies with the Byrd Rule. In 2001, then Senate Majority Leader Trent Lott (R-MS) fired the Senate Parliamentarian over some rulings that ran counter to the legislative ambitions of the Republican majority. Since then, there have often been calls for the party in the Senate majority to pressure the Parliamentarian for more favorable rulings on key issues related to the Byrd Rule. There have even been Senators, and more often partisan outside advocacy groups, advocating for a “nuclear option” where the majority party in the Senate overrules a decision by the Parliamentarian. In many ways this would be akin to destroying the filibuster for legislation in the Senate, and institutionalists in both parties have resisted efforts to do so in the past. In President Trump’s first term of office, he often railed against the filibuster, since Senate Democrats used it to slow down or block legislation an all-Republican controlled Congress wanted to pass in 2017-18. Despite that, Senator John Thune (R-SD), the new Majority Leader, has promised not to overrule the Senate Parliamentarian on any Byrd-rule related decisions tied to the reconciliation process.

Conclusion

Despite its limitations, budget reconciliation is one of the most effective legislative tools for advancing complex and transformative fiscal policy objectives. By leveraging its unique advantages and navigating its procedural constraints, policymakers can unlock significant opportunities to shape fiscal policy in the 119th Congress.

For tailored insights on how reconciliation might impact your policy priorities, please contact our Legislative & Public Policy team.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.