Understanding the Budget, Reconciliation, and Appropriations

This briefing explained the processes, rules, and norms that underpin the budget, reconciliation, and appropriations debates happening right now on Capitol Hill. It explored the relationship between the presidential budget, annual appropriations, and budget reconciliation. Panelists described the different stages of the appropriations cycle and how the process interfaces with other legislative activity on the Hill. The briefing highlighted ways Congressional staff—working both on and off the budget and appropriations committees—can engage with the conversations on fiscal year (FY) 2025 appropriations, FY2026 appropriations, and budget reconciliation.

Highlights

KEY TAKEAWAYS

Congress passes a concurrent budget resolution most years that does not make or change any laws, but gives House and Senate committees their spending limits as they draft budget legislation for the upcoming fiscal year. The House and Senate Committees on Appropriations are divided into 12 subcommittees with specific jurisdictions over different parts of the discretionary budget. Budget reconciliation is a unique legislative process that allows Congress to pass spending, revenue, and debt-related bills with a simple majority in the Senate, bypassing the filibuster that would normally require a three-fifths vote.

 

Richard Kogan, Senior Fellow, Center on Budget and Policy Priorities

• Congress passes a concurrent budget resolution most years that does not make or change any laws, but gives House and Senate committees their spending limits as they draft budget legislation for the upcoming fiscal year. It tells the Appropriations Committees what the topline numbers are.
• The budget resolution also determines whether taxes and deficits may increase or decrease for the coming fiscal year. Tax law governed by the budget resolution covers a minimum of five years, but in practice it extends to 10 years.
• Fiscal year (FY) 2025 started on October 1, 2024, but the resolution for FY 2025 (which extends through FY 2034) only passed on February 13, 2025. This timing is not ideal because FY 2025 plans should have been set by September 30, 2024.
• Each decade-long plan is created, and then modified the next year. The Congressional Budget and Impoundment Control Act of 1974 (P.L. 93-344) originally created one-year plans, but Congress has not consistently followed this practice, instead relying on the ten-year continuity.
• Targets set by the resolution for the committees’ budgets are “one-way enforceable,” meaning House and Senate rules allow for spending less or taxing more but not for spending more or taxing less.
• There are laws that call for spending money either through entitlements or annual appropriations. Annual appropriations are discretionary, which means the Appropriations Committees have the legal authority to set the dollar level.
• The Richard Nixon Administration (1969-1974) initiated a practice that had not been seen before. President Nixon signed the appropriations bill, but then distributed less, or as little as possible, of the money allocated. The administration claimed it was its constitutional right to consider appropriations permissive, meaning that it could provide money up to the amount appropriated by Congress, but it did not have to appropriate all of it. Would-be recipients of the appropriations, like state governments, sued, and eventually the case went to the Supreme Court, where the Nixon Administration's argument lost 9-0. This all took place before the Congressional Budget and Impoundment Control Act of 1974 existed. Current freezes being ordered by the Trump Administration are already being handed restraining orders by courts in several cases, and the grounds for the orders are also not based on the Impoundment Control Act.
• The Impoundment Control Act defined two types of legal impoundments: deferrals and recessions. The president is allowed to defer money, for contingencies or if costs appear to be overestimated, but not indefinitely or for policy reasons. If the president wants to spend less money for policy reasons, the president must send a rescission request under the Impoundment Control Act to Congress (a rescission is a permanent cancellation of spending). The administration has 45 calendar days of continuous Congressional session during which it can withhold money. Both the House and Senate have fast tracks to approve rescission requests. In the Senate, rescission requests cannot be filibustered. President Trump is not requesting rescissions, instead he is ordering funds to be withheld without going through this process.
• The Antideficiency Act (P.L. 97–258) prohibits agencies from spending beyond their appropriations or from manipulating spending timelines. It gives the Office of Management and Budget the directive to dole out funding to the agencies on a monthly or quarterly basis. This prevents agencies from receiving funds at the start of the year, swiftly committing them, and then returning to Congress for additional allocations through coercive deficiency. The law also states that it is illegal for the president to spend money that is not appropriated or that has been previously used.
• Historically, it had been more common for parties in the House and Senate to compromise on appropriations and budget issues. This is less common now.

 

Franz Wuerfmannsdobler, Executive Director, U.S. Manufacturing Innovation Council

• The federal budget and appropriations process largely stems from reforms made 50 years ago in the Congressional Budget and Impoundment Control Act of 1974, including the creation of the Congressional Budget Office and the Budget Committees.
• The House and Senate Committees on Appropriations are divided into 12 subcommittees with specific jurisdictions over different parts of the discretionary budget.
• The budget process involves multiple stakeholders, including the president, the Budget Committees, the Appropriations Committees, tax and entitlement committees (i.e., House Ways and Means and Senate Finance), and other authorizing committees.
• The "302(a)" allocation refers to the total discretionary spending cap set by the Budget Committees, while "302(b)" allocations, set by the House and Senate Appropriations Committee chairs, divide this total among the 12 appropriations subcommittees.
• The Fiscal Responsibility Act of 2023 (P.L. 118-5), part of the debt ceiling deal, set statutory limits on discretionary spending for recent years.
• Defense and non-defense spending are allocated separately. Defense funding responsibility is distributed across seven appropriations subcommittees, but all 12 subcommittees handle non-defense funding.
• The discretionary budget funds all three branches of government, with specific subcommittees responsible for funding Congress and the judiciary.
• The appropriations cycle ideally follows the following timeline: the president’s budget request is submitted to Congress in February, then hearings and markups take place in the spring and summer. Members make specific requests depending on what they decide is important. Legislation is written in the late spring and summer. The legislation should be signed into law by October 1. However, continuing resolutions are often needed to extend funding because deadlines are frequently missed.
• A continuing resolution maintains government funding at the previous fiscal year's levels unless specific changes or anomalies are included.
• Members of Congress can engage in the appropriations process through funding requests, participation in hearings, amendment proposals, and by communicating priorities to federal agencies.
• Community project funding (House) and Congressionally-directed spending (Senate)—i.e., earmarks—were reinstated in fiscal year 2021 after being prohibited for a decade. Rules limit spending to 1% of discretionary funds and prohibit for-profit entities from receiving funds.
• The administration sometimes requests lower funding levels in the budget for certain programs while knowing that Congress is likely to increase them based on program popularity or legislative priorities.

 

Molly Reynolds, Senior Fellow - Governance Studies, Brookings

• Budget reconciliation is a unique legislative process that allows Congress to pass spending, revenue, and debt-related bills with a simple majority in the Senate, bypassing the filibuster that would normally require a three-fifths vote. It starts with a budget resolution that includes reconciliation instructions directing specific Congressional committees to draft legislation within certain fiscal parameters.
• This Congress has an opportunity to use budget reconciliation for fiscal year 2025 because no budget resolution was passed last year. If they act on a fiscal year 2025 budget resolution, the reconciliation process must be completed by September 30, 2025. Additionally, a fiscal year 2026 budget resolution could be used later in the year, with a deadline of September 30, 2026. The expiration of tax provisions at the end of calendar year 2025 makes this an urgent political consideration.
• The budget resolution determines the scope of the reconciliation bill and whether it increases or decreases the deficit. Since 1996, seven reconciliation bills have cut taxes, and one has increased the deficit through increased spending.
• Committees named in the budget resolution play a critical role in shaping the reconciliation bill. If a committee is directed to increase the deficit (e.g., cut taxes), it has a spending ceiling it cannot exceed. If required to find savings, it has a minimum threshold to meet but can cut more, if desired. This asymmetry allows deficit-reduction committees more flexibility than those increasing the deficit.
• The spending that can be changed through reconciliation is spending that is in the purview of the committees named in the instructions, which is mandatory spending handled by the authorizing committees. The Appropriations Committees have not been directly involved in a reconciliation process since the early 1980s.
• The House and Senate must pass identical budget resolutions before the reconciliation process can formally begin. Unlike most legislation, budget resolutions cannot be filibustered in the Senate.
• Once the budget resolution is passed, committees shape policy within the constraints of their instructions to form the reconciliation bill. The public can get a sense of what might be impacted by looking at the instructions and hearing what members of Congress are saying. Right now, there are signals that the House will focus on cuts to Medicaid the Supplemental Nutrition Assistance Program (SNAP).
• Senate rules impose strict limitations on the reconciliation process—some of which, if not followed, are fatal to the bill overall and some of which are fatal to an individual provision. Notably, any provision affecting Social Security is automatically disallowed.
• The Byrd rule, named after its chief architect, former Sen. Robert Byrd (D-W.Va.), sets six tests that provisions must meet to remain in the bill. A provision is a violation if it:
  1. Does not change outlays or revenue,
  2. Increases outlays or decreases spending and the committee that wrote the provision is not in compliance with its instructions,
  3. Is not in the jurisdiction of the committee that included it,
  4. Makes a budgetary change that is “merely incidental” to the non-budgetary change,
  5. Increases outlays or decreases revenues outside the budget window, or
  6. Attempts to change the rules.
• The Byrd rule is not self-enforcing, so a member needs to challenge a provision for the rule to be tested.
• The Senate parliamentarian is the gatekeeper of the reconciliation process, reviewing each provision to ensure compliance with Senate rules. Though decisions can be challenged on the Senate floor, the parliamentarian advises on whether provisions violate the Byrd rule. The House cannot repeal Senate rules, so it is unlikely that attempts to override the Byrd rule would succeed.
• The final reconciliation bill must navigate a structured legislative process with strict debate time limits in both chambers. House debate is capped at three hours with minimal amendments allowed. In the Senate, debate is limited to 20 hours, after which a marathon of amendment votes, known as "Vote-a-Rama," takes place. All Senate amendments must be directly relevant to the bill.
• The biggest challenge for reconciliation legislation is securing the necessary votes, as it must pass with at least 218 votes in the House and 51 votes in the Senate. While the process is designed to enable the majority party to pass key budgetary measures, internal party disagreements and strict procedural rules often make achieving consensus difficult.

 

Q&A

 

Q: Can you provide more information and perspective on the Byrd rule?

Kogan

• The Byrd rule is unique because it not only applies to the Senate bill, but also to Senate consideration of a House bill and of a conference agreement. The House does not have an equivalent of the Byrd rule, but must comply with it because of the bicameral Congress.
• Some examples that illustrate decisions made based on the Byrd rule: Sen. Bernie Sanders (I-Vt.) introduced an amendment to the American Rescue Plan reconciliation bill to increase the minimum wage to $15 per hour in stages, which would have cost the government an estimated $64 billion over the course of the 10-year reconciliation bill. The Senate parliamentarian ruled that this was “merely incidental” because the amendment would primarily have affected the relationship between private-sector employers and private-sector employees and its indirect effects to the federal budget would have been merely incidental. Merely incidental does not mean small.
• The Build Back Better bill, which never got to the Senate floor, included immigration provisions, including a path to citizenship. The Congressional Budget Office estimated that this provision would have cost $140 billion in the first 10 years, and $700 billion over two decades. These amounts were considered merely incidental.
• On the question of opening up federal lands to drilling and mining, it was allowed in one past reconciliation bill. The Parliamentarian has expressed some concern about this and it could be relitigated this time around.

Wuerfmannsdobler

• The Senate parliamentarian and office are very thoughtful. It takes a strong argument for both proponents and opponents to convince them of a decision.

 

Q: What problem was the Byrd rule trying to solve?

Reynolds

• The early uses of the reconciliation process in the early 1980s were quite expansive, and this offended then Sen. Byrd because it could limit or even avoid the filibuster altogether. The six tests articulated what should be allowed as part of the process not subject to the filibuster.

 

Q: What is the difference between authorization and appropriations?

Wuerfmannsdobler

• You can take the analogy of a bank and a bank account. The authorizing committees set the guidelines and structures for the account. The Appropriations Committees then put money into the checking account and oversee it from year to year.

Kogan

• But there are also plenty of laws where the authorizing committee both creates the program and funds it.

Bresette

• Sometimes the authorization is higher than the appropriation. For example, the Rural Energy Savings Program is appropriated in the single digits of millions, but is authorized at $75 million. Furthermore, some programs have authorizations that are just not funded.

Wuerfmannsdobler

• Authorizing committees provide oversight of the federal agencies.
• There have been many authorized programs that have never been appropriated dollars.

Kogan

• If the authorizing committee wants to authorize $75 million and the Appropriations Committee wants to appropriate $100 million, that violates Rule 21 of the House, but the Rules Committee can waive the rule by a majority vote.

 

Q: Are there any resources—or recommendations of what to watch for—to help Congressional staff track budget, appropriations, and reconciliation?

Wuerfmannsdobler

• On annual appropriations, there is a step-by-step process that takes several weeks to navigate.
• When the Appropriations Committees begin to issue their guidelines for member requests, it is important for offices to pay attention to the requirements and deadlines.

Reynolds

• For appropriations, it is important to keep track of the current continuing resolution’s expiration date.
• For budget reconciliation, it appears, at this time, that the House and Senate are drafting different budget resolutions for FY 2025.

 

Q: What is a common misconception about the budget committee that, if understood, would make it easier to navigate the process?

Kogan

• At the public level, people believe there is one budget that Congress passes, but this is not true. Internal budget resolutions are internal guidelines, so if there is a year without a passed budget resolution, leftover targets and multiyear targets from previous years technically still apply. The budget is a culmination of legislation made by each committee based on their opinions of the requests made by the president.

 

Q: What are you watching for as the budget reconciliation process plays out?

Reynolds

• What the ultimate budget resolution agreed upon by the House and Senate in identical form looks like. The drafts, right now, are quite different.
• The House draft is set up to extend the tax cuts under the Tax Cuts and Jobs Act (P.L. 115-97), make large cuts to entitlement programs, and accommodate potential spending increases for defense and immigration enforcement.
• The Senate draft is set up to also increase defense and border enforcement spending, but is not written to be a vehicle for tax legislation (so it would not extend the tax cuts).
• The Senate prefers to create two bills: an initial reconciliation bill focused on spending and then a tax bill later.
• Until there are identical resolutions from the House and the Senate, it is challenging to anticipate anything because any later actions must stem from an identical resolution.
• Today, reconciliation is viewed as a party line exercise, but this was not always the case. Historically, bipartisan reconciliation bills “shared the pain of deficit reduction” with every committee, so there was a cumulative responsibility for making cuts. Now, the case is different and the process is used to achieve partisan priorities.

Wuerfmannsdobler

• Fiscal year 2025 and 2026 appropriations were subject to the Fiscal Responsibility Act (P.L. 118-5). But starting in fiscal year 2026, there will be no caps on top lines for defense and nondefense spending, meaning the president can make a discretionary budget request at the level that he wants.
• If there are additional needs for the country, like emergency and disaster relief, that is on top of the 302(a) allocation, and considered supplemental. A recommended package usually comes over from the administration for consideration by the Appropriations Committees.

Kogan

• Emergencies have constituted 0.16% of U.S. GDP per year since 1989, yet the budget resolutions usually assume that there will be zero dollars needed for emergencies, which is hundreds of billions of dollars too low. This makes the budget resolutions unrealistic.
• But if you put that money in budget resolutions and gave it to the Appropriations Committees, they would use it on regular programs.
• A reform could be to put money for emergencies in the budget, but not give it to the Appropriations Committees. This would make the deficits look larger and so would not be a politically popular reform.

 

Compiled by Raneem Iftekhar and Hadley Brown and edited for clarity and length. This is not a transcript.

 

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