Likely the most significant legislation Congress will consider this year is a budget reconciliation bill.  For weeks, congressional Republicans and President Trump have been laying the groundwork to agree on a process for advancing Trump’s agenda via the special legislative process of reconciliation, with the original aim to have a budget resolution on the floor this month and a bill on the President’s desk by May.

The major sticking points thus far have related to just how ambitious the reconciliation bill for this fiscal year should be.  While Senate Republican leadership and the House Freedom Caucus would prefer to tackle President Trump’s agenda with two reconciliation bills—a first to deliver quick wins on border, defense, and energy spending, and the second on tax cuts—House Republican leadership and House Ways & Means Chair Jason Smith (R-MO) would prefer “one big, beautiful” reconciliation bill, arguing that it is the best way to ensure as much of the Republican agenda is enacted as possible, including the extension of the 2017 Trump tax cuts.  There has also been some disagreement among congressional Republicans about how aggressive to be with deficit-reduction targets.  The razor-thin House majority as well as the differences between House and Senate leadership’s preferred strategies have made these discussions all the more challenging. 

After weeks of intense effort in the House, the Senate emerged this week as the “first mover.”  Senate Budget Chair Lindsey Graham (R-SC) released the text of the Senate’s Fiscal Year 2025 Budget Resolution and scheduled markups for the resolution next week on February 12 and 13.  House Republicans, meanwhile, continue to work toward a deal within their Conference that would allow them to proceed with a single bill inclusive of a tax title and robust offsets.

While media attention has focused on if, when, and how congressional Republicans will attempt to tackle “big ticket” budget items (e.g., extending the Trump tax cuts, spending on border security, increasing the debt limit) via reconciliation this year, clients should remain vigilant and attuned to the details of reconciliation, including potential opportunities and risks.  Because this will be Congress’ primary focus for the foreseeable future, clients should assess whether reconciliation could be a vehicle for their policy priorities and whether their favored programs will be on the chopping block as congressional Republicans seek offsets for any increased spending or tax cuts (“pay-fors”).

With the Senate set to formally begin the reconciliation process next week, this blog post provides an overview of the reconciliation process as well as the Senate FY25 Budget Resolution.

A. Budget Reconciliation Process Overview

Budget reconciliation is a special legislative process that allows Congress to quickly advance legislation with a fiscal impact.  It is intended to allow Congress to bring federal spending, revenue, and debt in line with Congress’ budget goals for the upcoming fiscal year.  The reconciliation process is optional, and Congress may only use it once per fiscal year. 

Reconciliation is an appealing process to expedite the consideration of (often controversial) legislation because it allows both the House and Senate to pass legislation with a simple majority vote, as opposed to the 60 votes typically required in the Senate to overcome a filibuster and thus pass legislation.  

Over the last few decades, reconciliation has become a common tool to advance a partisan agenda when there is unified control of the presidency, House, and Senate but the governing party lacks the 60-vote Senate majority needed to overcome a filibuster.  This is the case again this Congress, as there is unified Republican control of the presidency, House, and Senate but Republicans hold 53 Senate seats.

Since the reconciliation process was established in 1974 by the Congressional Budget Act, it has been used 23 times to enact legislation.  Recent reconciliation bills include the Tax Cuts and Jobs Act (2017) during the first Trump Administration and the American Rescue Plan Act (2021) and the Inflation Reduction Act (2022) during the Biden Administration.  

The reconciliation process begins with the adoption of a budget resolution, or “blueprint” for reconciliation with topline numbers for spending and offsets.  The budget resolution provides individual committees with reconciliation instructions, which direct their ability to recommend provisions for the bill consistent with the resolution.

In addition to the potential political roadblocks discussed above, Republicans will also face procedural limitations to what they can accomplish through reconciliation.  Reconciliation bills are subject to the Senate’s Byrd Rule, which restricts “extraneous” matter in reconciliation legislation.  A provision is considered “extraneous” if it:

  • Does not produce a change in outlays or revenues (i.e., does not “score” in the cost estimate by the Congressional Budget Office);
  • Increases outlays or decreases revenues out of line with the relevant committee’s reconciliation instructions;
  • Is outside the jurisdiction of the committee reporting it;
  • Produces a budgetary effect that is “merely incidental” to the policy objective (or non-budgetary components) of the provision;
  • Increases the deficit in any year outside the budget window (usually ten years); or
  • Makes changes to Social Security.

The most frequently invoked challenges are that a provision does not produce outlays or revenues or has a budgetary effect that is merely incidental to the policy objective.

Importantly, the Byrd Rule is not self-enforcing.  A senator must raise a point of order to invoke the Byrd Rule.  Then there is debate on the point of order and the presiding officer rules on the point of order, following the guidance of the Senate Parliamentarian.  The ruling of the presiding officer and thus the Parliamentarian can be overturned with 60 votes—the same threshold as ending a filibuster.

For example, this means that Republicans could use reconciliation to increase immigration law enforcement and border security funding but not make sweeping changes to immigration law with only incidental revenue impact.  The Byrd Rule serves as a deterrent to attempting to make substantive policy without a significant budgetary impact through reconciliation and provides the Senate Parliamentarian with a huge amount of power—effectively the ability to exclude provisions from the bill unless overruled by a Senate supermajority. 

See our colleague’s blog and this Congressional Research Service report for more background and history on the Byrd Rule.

B. Senate Blueprint for Reconciliation

On Friday, February 7, Senate Budget Chair Lindsey Graham (R-SC) released the text of the Senate’s Fiscal Year 2025 Budget Resolution, which he characterized as “the blueprint that unlocks the pathway for a fully paid for reconciliation bill to secure the border, bolster our military, increase American energy independence and begin the process of fiscal sanity.”  The bottom line of this proposal is that it is consistent with the Senate’s preferred two-bill strategy, with tax excluded this round. 

The resolution included the deficit increase and reduction targets listed in the tables below.  These numbers not only confirm the intent to exclude tax this round but also give insights into which committees will be seeking offsets.  These are placeholder numbers pending the committee’s deliberations.  The negative numbers represent deficit reduction targets of an amount “not less than” the number given.  The positive numbers represent deficit increases “not exceeding” the number given.

In a press release accompanying the resolution, Graham identified the following priorities for a first reconciliation bill:

  • Border security, including funding for:
    • The wall and upgrading technology for ground and aerial support
    • Increasing detention beds
    • Increasing the number of ICE officers, Border Patrol agents, and assistant U.S. attorneys
    • State and local law enforcement
  • National defense, including funding for:
    • U.S. military readiness “and the ability to defend U.S. interests globally”
    • “Growing the U.S. Navy and strengthening its industrial base”
    • Integrated air and missile defense
    • Nuclear defense
  • Energy independence, including:
    • On and offshore lease sales
    • Ending the methane emissions fee
  • Identifying spending reductions to offset and “fully pay[] for the investments in our border security, national security and domestic energy production up front”

Graham scheduled markups for the resolution on February 12 and 13.  You can find a copy of the resolution text here, the budget tables here, and a fact sheet on the Senate proposal here.

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Photo of Morgan Schreurs Morgan Schreurs

Morgan Schreurs helps clients develop and execute public policy strategies, counsels clients through cultural change and political risk, and builds and manages coalitions to accomplish clients’ objectives.

Morgan primarily works with wireless technology, health technology, financial technology, and other companies on public policy…

Morgan Schreurs helps clients develop and execute public policy strategies, counsels clients through cultural change and political risk, and builds and manages coalitions to accomplish clients’ objectives.

Morgan primarily works with wireless technology, health technology, financial technology, and other companies on public policy matters important to highly regulated industries.

Morgan is a skilled legislative drafter with experience drafting bills and amendments on a wide variety of topics introduced and enacted by the U.S. Congress and state legislatures.

Drawing on her experience in Minnesota State government relations, Morgan co-leads the firm’s state policy practice, advising clients on complex multistate legislative and regulatory policy matters and managing state advocacy efforts.

Morgan is also an advocate for civil rights and equal opportunity. As the Policy Director of Invent Together—an alliance of universities, nonprofits, companies, and other stakeholders dedicated to broadening participation in inventing and patenting—she has successfully advocated for the enactment of legislation to close the inventor diversity gaps. She serves on Working Group for the Council for Inclusive Innovation led by the Department of Commerce. She is also a member of the Leadership Advisory Committee (LAC) of the National Women’s Law Center (NWLC) and the Chair of the NWLC LAC Public Policy Subcommittee. In addition, Morgan maintains an active pro bono practice.

Prior to joining Covington, Morgan worked for the U.S. Senate Committee on Health, Education, Labor & Pensions (HELP) under former Ranking Member Patty Murray (D-WA). She also supported federal, state, and local political campaigns and served on the Hillary for America National Advance Team.

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Photo of Gabe Neville Gabe Neville

Gabe Neville, a non-lawyer, helps Covington’s clients navigate the complexities of federal policymaking.

Gabe helps clients in various sectors understand individual policymakers and the legislative and regulatory tools they can use to advance their agendas. Using an intimate knowledge of the government gained…

Gabe Neville, a non-lawyer, helps Covington’s clients navigate the complexities of federal policymaking.

Gabe helps clients in various sectors understand individual policymakers and the legislative and regulatory tools they can use to advance their agendas. Using an intimate knowledge of the government gained over a nearly twenty-year period as a Congressional staffer, he helps clients proactively engage the legislative and executive branches of government. He also advises clients on responding to congressional inquiries and invitations to testify.

Gabe joined Covington after nearly two decades as a senior congressional staffer, most recently serving as chief of staff for Pennsylvania Congressman Joe Pitts (R, PA-16). He previously worked for the Pennsylvania state legislature, and managed several successful political campaigns. After managing Congressman Pitts’ first campaign for Congress, he served the congressman as press secretary and then as chief of staff. In that role, he advised the congressman on a wide range of issues, with special attention to the range of health, energy, and telecommunications issues that come before the House Energy and Commerce Committee. Other issues Gabe engaged in range from agriculture to human rights.

As chief of staff to a leading conservative, Gabe also developed deep relationships within the conservative movement. He frequently chaired meetings of the Values Action Team (VAT) and attended meetings of the Republican Study Committee (RSC). Gabe continues to work with these and other right-of-center organizations in Congress, including the House Freedom Caucus.

While on Capitol Hill, Gabe worked closely with the members and staff of the Health Subcommittee while Congressman Pitts chaired that panel. The subcommittee oversees a wide range of government health programs and issues, including public health; hospital construction; mental health and research; biomedical programs and health protection in general, including public and private health insurance; food and drugs; and drug abuse. The subcommittee has jurisdiction over federal agencies responsible for public health programs, regulation, and administration. They include the Department of Health and Human Services (HHS), the Food and Drug Administration (FDA), the National Institutes of Health (NIH), the Centers for Disease Control (CDC), the Centers for Medicare and Medicaid Services (CMS), and others.

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Photo of Matthew Shapanka Matthew Shapanka

Matthew Shapanka practices at the intersection of law, policy, and politics. He advises clients before Congress, state legislatures, and government agencies, helping businesses to navigate complex legislative, regulatory, and investigations matters, mitigate their legal, political, and reputational risks, and capture business opportunities.

Drawing…

Matthew Shapanka practices at the intersection of law, policy, and politics. He advises clients before Congress, state legislatures, and government agencies, helping businesses to navigate complex legislative, regulatory, and investigations matters, mitigate their legal, political, and reputational risks, and capture business opportunities.

Drawing on more than 15 years of experience on Capitol Hill and in private practice, state government, and political campaigns, Matt develops and executes complex, multifaceted public policy initiatives for clients seeking actions by Congress, state legislatures, and federal and state government agencies. He regularly counsels and represents businesses in legislative and regulatory matters involving intellectual property, national security, regulation of critical and emerging technologies like artificial intelligence, connected and autonomous vehicles, and other tech policy issues. He also represents clients facing congressional investigations or inquiries across a range of committees and subject matters.

Matt rejoined Covington after serving as Chief Counsel for the U.S. Senate Committee on Rules and Administration, where he advised Chairwoman Amy Klobuchar (D-MN) on all legal, policy, and oversight matters before the Committee, particularly federal election and campaign finance law, Federal Election Commission nominations, and oversight of the legislative branch. Most significantly, Matt led the Committee’s staff work on the Electoral Count Reform Act – a landmark bipartisan law that updates the procedures for certifying and counting votes in presidential elections—and the Committee’s bipartisan joint investigation (with the Homeland Security Committee) into the security planning and response to the January 6th attack.

Both in Congress and at Covington, Matt has prepared dozens of corporate and nonprofit executives, academics, government officials, and presidential nominees for testimony at congressional committee hearings and depositions. He is a skilled legislative drafter who has composed dozens of bills and amendments introduced in Congress and state legislatures, including several that have been enacted into law across multiple policy areas. Matt also leads the firm’s state policy practice, advising clients on complex multistate legislative and regulatory matters and managing state-level advocacy efforts.

In addition to his policy work, Matt advises and represents clients on the full range of political law compliance and enforcement matters involving federal election, campaign finance, lobbying, and government ethics laws, the Securities and Exchange Commission’s “Pay-to-Play” rule, and the election and political laws of states and municipalities across the country.

Before law school, Matt served in the administration of former Governor Deval Patrick (D-MA) as a research analyst in the Massachusetts Recovery & Reinvestment Office, where he worked on policy, communications, and compliance matters for federal economic recovery funding awarded to the state. He has also staffed federal, state, and local political candidates in Massachusetts and New Hampshire.

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