Everything You Wanted to Know About Budget Reconciliation
September 23, 2021
At this point if you are paying attention to the news you are likely aware of the $3.5 trillion climate change and social program spending package Congressional Democrats are putting together and preparing to pass alongside the Investing in a New Vision for the Environment and Surface Transportation in America Act, also known as the Bipartisan Infrastructure Bill that has already passed the Senate.
The funding package intends to address the climate crisis and critical human infrastructure needs by making major new investments ranging from clean energy and high speed rail to sustainable agriculture research and child nutrition programs over the next 10 years.
Congressional Democrats plan to pass this bill using the budget reconciliation process, an infrequently used budgetary tool which can be used to pass a bill in the Senate without a supermajority (60 votes), meaning it could pass with only Democratic support (50 votes). Reconciliation was also used to pass the most recent pandemic response stimulus bill and the Trump tax cuts.
In the following post we discuss:
Budget reconciliation is a special budget tool that can allow Congress to “reconcile” existing law with current fiscal priorities in an expedited manner. However, it is more often used as a maneuver that allows Congress, typically when one party is in control of both Chambers, and the White House, to fast track increases or decreases to direct spending levels (also known as entitlement and mandatory spending), taxes and revenue, and the debt-ceiling, allowing the Senate to side-step the filibuster and 60-vote threshold. Reconciliation lets the Majority change spending without any support from the Minority. .
Budget reconciliation is an optional tool that is available as part of the annual budget and appropriations process that typically begins with the submission of the President’s budget to Congress. Legally, this is supposed to occur on or by the first Monday of February, however that deadline is rarely met and is essentially nonbinding.
Normally, the President’s budget would be followed by the House and Senate Budget Committees developing and passing an annual concurrent budget resolution, which sets the topline level of funding available to the Appropriations Committees to spend, often referred to as the 302(a) allocation. However, the budget resolution is also the vehicle in which Congress can start the budget reconciliation process through the inclusion of reconciliation directives or instructions.
Budget reconciliation directives provide instructions to individual Congressional authorizing committees to develop and report back to the budget committee legislation that would make changes to direct spending (entitlement and mandatory spending), taxes and revenue, and the debt limit laws that are within each individual committee’s jurisdiction in accordance with the specific goals and instructions included in the budget resolutions. Not all individual committees would necessarily receive instructions. The budget committees decide which committees do and do not receive instructions.
While the reconciliation process is part of the budget and appropriations process that is predominantly focused on discretionary appropriations made by the House and Senate Appropriations Committees, budget reconciliation does not directly involve the appropriations committees and discretionary spending decisions. It is focused on what are often called ‘authorizing committees’.
Budget resolutions that include reconciliation instructions typically also include a nonbinding deadline by which time the individual committee must report their legislation back to the budget committee. Typically, each budget committee then combines individual committee’s legislation into one larger omnibus reconciliation bill and reports that omnibus measure to their respective full chamber for consideration.
At this stage in the process, the Senate Budget Committee often officially determines whether any of the provisions of the recommendations submitted by individual committees might be in violation of Byrd rule. In practice, reviewing recommendations for violations of the Bryd rule is often ongoing throughout the process, including at the committee level, before officially submitting recommendations to the budget committee. The Bryd rule, first adopted in 1985, is named after the late Senator Robert Bryd of West Virginia, and prohibits the inclusion of provisions that are extraneous to the purpose of a reconciliation bill.
Extraneous, as defined in the Budget Act, comprises provisions that (1) do not produce a change in outlays or revenues; (2) produce an outlay increase or revenue decrease when the instructed committee is not in compliance with its instructions; (3) are outside of the jurisdiction of the committee that submitted the title or provision for inclusion in the reconciliation measure; (4) produce a change in outlays or revenues that is merely incidental to the non-budgetary components of the provision; (5) would increase the deficit for a fiscal year beyond the period covered by the reconciliation measure; or (6) recommend changes in Social Security.
Once reported out from the budget committees to the full floor of each chamber of Congress, reconciliation legislation is eligible for consideration under expedited procedures in both the House and Senate. In the House, consideration is governed by special rules set by the House Rules Committee that establish parameters for debate and a limited number of amendments.
The rules governing debate in the Senate view reconciliation legislation as privileged. This means that motions to proceed to their consideration are not debatable, which allows Senate leadership to bypass the 60 vote filibuster, and go straight to debating the actual measure and amendments. In the Senate, the rules governing budget-related measures such as budget reconciliation, essentially allow for an unlimited number of amendments. The process for considering these amendments is often referred to as a “vote-a-rama” and is done under an accelerated procedure but due to the volume of amendments that can be, and often are, filed, “vote-a-ramas” can last for hours upon hours and stretch late into the evening. Once a vote-a-rama is complete, a final vote on the reconciliation bill commences.
Finally, once each chamber has passed their respective reconciliation bill, any differences must be ironed out before being sent to the President’s desk for approval or veto. The process of resolving differences between one chamber and another’s reconciliation bills is often done informally throughout the process via cross chamber negotiations as bill language is being developed. However, a conference committee formed between the two chambers that results in one final bill that then must be passed by each chamber individually is another path a reconciliation bill can take on its way to the President’s desk.
In mid-July Senate Democrats on the Budget Committee, which is chaired by Senator Bernie Sanders (I-VT), announced that they had agreed to a $3.5 trillion topline for a budget reconciliation effort aimed at enacting President Biden’s ambitious climate change and social spending agenda.
Following this announcement, major efforts were launched by advocacy organizations and members of Congress throughout the country to try to influence the parameters of the forthcoming concurrent budget resolution that would officially start the budget reconciliation legislative process, including which committees would get reconciliation instructions and how much related funding. Working in concert with climate change and sustainable agriculture champions, Representative Chellie Pingree (D-ME), Representative Abigail Spanberger (D-VA), Senator Martin Heinrich (D-NM) and Senator Cory Booker (D-NJ), and the House and Senate Agriculture Committee; the National Sustainable Agriculture Coalition launched a “big-tent” effort to organize the larger agriculture and food systems community in support of $200 bill in agriculture and climate change investments.
Following these efforts in early August, the Senate Budget Committee introduced and then adopted a concurrent budget resolution that included $3.5 trillion worth of budget reconciliation instructions to a number of Senate committees including the Senate Committee on Agriculture, Nutrition, and Forestry. The House subsequently adopted the concurrent resolution later in the month.
Falling well short of the $200 billion for agriculture and climate, the Senate Agriculture Committee received $135 billion for investments in: agriculture conservation, drought, and forestry programs to help reduce carbon emissions and prevent wildfires; rural development and rural co-op clean energy investments; agricultural climate research and research infrastructure; Civilian Climate Corps funding; child nutrition; and debt relief.
Due to variations in House and Senate committee jurisdiction over certain issues, the House Agriculture Committee allocation was only $89 billion, with the remaining $46 billion being provided to the House Education and Labor Committee which has jurisdiction over child nutrition spending. In the Senate agriculture and nutrition are both under the jurisdiction of the Senate Agriculture Committee. The resolution also included a nonbinding deadline of September 15th for committees to report bills with their recommendations to the budget committees.
During the week of September 7, both the House Education and Labor and Agriculture committees released their respective bills and proceeded to markup. The Senate Agriculture did not release or markup and report out a bill. However, because the September 15 deadline is nonbinding and the overall nature of the process it does not mean we will not see a Senate bill. But it remains unclear when and in what manner the Senate agriculture committee’s reconciliation provisions will be released to the public. Noticeably absent from the House Agriculture committee’s bill was the entire conservation title and any farmer debt relief provisions.
House Agriculture Committee Bill Highlights
Unfortunately, because the conservation title of the package has not yet been released to the public, we do not know how those resources are being invested and whether or not the majority of those resources are dedicated to proactive, long-term programs needed to address climate change, and mitigate future disasters. However, from the perspective of sustainable and climate-friendly agriculture there is a lot to be excited about in the House agriculture bill.
The bill includes $7.75 billion in new investments in agricultural research and infrastructure, split roughly in half between investments in new and upgraded research facilities, and investments in research programs. This includes (but is not limited to) $500 million for the Sustainable Agriculture Research and Education program, $200 million for the Organic Research and Education Initiative, $500 million for the Agriculture Food and Research Initiative and $200 million for the Specialty Crop Research Initiative to carry out education, extension, and research relating to climate change. These investments are also targeted towards climate change related research.
The bill also invests $250 million in the Agricultural Research Service (ARS), which includes expanded investments in USDA Climate Hubs and Long-term Agroecological Research. The research section also includes a number of equity focused provisions, investing well over $1 billion in minority serving institutions for related education, extension, and research. The bill also provides the newly created Office of Urban Agriculture and Innovative Forms of Production with $124 million.
The following chart prepared by the House Agriculture Committee summarizes the full suite of research investments:
|Research, Extension, Education, and Urban Ag Proposal (in billions)|
|Research Facilities Act – 27% MSI and insular areas||$3.65|
|Research Equipment Grants (NIFA)||$0.1|
|AGARDA (Agriculture Advanced Research & Development Authority)||$0.38|
|Foundation for Food & Agriculture Research (FFAR)||$0.54|
|Biomass Research and Development||$0.05|
|ARS (Agriculture Research Service) including funding for Climate Hubs||$0.25|
|ERS (Economic Research Service)||$0.045|
|NASS (National Agricultural Statistics Service)||$0.04|
|Office of Chief Economist, Office of Energy & Environmental Policy||$0.016|
|AFRI (Agriculture & Food Research Initiative)||$0.5|
|SARE (Sustainable Ag Research & Education)||$0.5|
|Crop Protection and Pest Management Program||$0.03|
|Agricultural Genome to Phenome Initiative||$0.02|
|OREI (Organic Research & Extension Initiative)||$0.2|
|SCRI (Specialty Crop Research Initiative)||$0.2|
|Additional funds to 1890s Centers of Excellence to do climate work||$0.015|
|NIFA Urban Ag, Indoor and other Emerging Agricultural Production (UAIP) Research, Education & Extension Initiative||$0.065|
|1890s Land Grant Institution Scholarship||$0.19|
|New Beginning for Tribal Students||$0.05|
|Higher Education Multicultural Scholars Program||$0.05|
The bill also includes $18 billion worth of investments in rural development. The vast majority of those resources are targeted towards helping rural communities and electric co-ops transition to renewable energy and build more efficient energy grids. $2.6 billion of the funds are allocated specifically for the Rural Energy for America Program (REAP), which provides grants and loans to farmers and rural businesses interested in making energy efficiency improvements and investing in renewable energy systems. The bill also increases the allowed percentage of federal investments via grants for renewable energy systems or energy efficiency upgrades from a cap of 25% of the total cost to 50% of the total project.
The following chart prepared by the House Agriculture Committee summarizes the full suite of rural development investments:
|Rural Development Proposal (in billions)|
|Waste & water grants||$0.43|
|Rural Electric’s Clean Energy Transition||$9.7|
|Rural Energy Savings Program||$0.2|
|Rural Partnership Program||$3.870|
|Rural Equity Aid Act||$0.39|
|Business and Industry Program||$0.04|
|Rural Energy for America Program||$2.555|
|Biofuels Infrastructure Program||$0.96|
|Rural Development Administrative Funding||$0.545|
The House bill also includes $40 billion worth of forestry investments focused on both private and public lands. For more detailed information about the content of the House Agriculture Committee’s reconciliation bill check out this factsheet prepared by the committee.
House Education and Labor Highlights
As noted above, those issues that are under the jurisdiction of the Senate Agriculture Committee are split between two committees in the House. Child nutrition issues are in the jurisdiction of the Senate Agriculture Committee but not the House Agriculture Committee. In the House, child nutrition issues fall under the jurisdiction of the House Education and Labor Committee. The House Education and Labor Committee was provided $46 billion for child nutrition related investments. The following is a brief summary of some of the noteworthy child nutrition related provisions that were included in the House Education and Labor Committee’s bill.
One of the more interesting food systems and sustainable agriculture provisions of the bill was the inclusion of $634 million for a Healthy School Meal Incentives Demonstration Program, which includes farm to school related activities, such as local procurement and experiential education, as eligible activities. The bill also includes $500 million for school kitchen equipment grants which is essential to growing the capacity of schools across the country to cook healthy, from scratch meals featuring locally procured farm products.
The House Education and Labor bill would also expand the Community Eligibility Provision allowing more schools to offer free meals to all students in a streamlined manner. The bill would also expand Summer EBT nationwide and make it available until 2029.
As mentioned above, the House Agriculture Committee’s proposed reconciliation package does not include any conservation program related investments nor does it include anything related to debt relief. Members of Congress and their staff have made it clear that those provisions have not been abandoned and are still forthcoming. An often cited reason for the delays is that they were largely driven by technical issues related to the Byrd Rule and ensuring specific legislative language comports with that rule (see the above budget reconciliation 101 for more information on the Byrd Rule).
The forthcoming conservation title is expected to total approximately $28 billion in new investments in conservation and climate change. Debt relief provisions have been rumored to be around $10 billion and modeled after Senator Kirsten Gillibrand’s (D-NY) The Relief for Small Farmers Act.
If you are keeping track of all these numbers, you might be saying all those billions add up to more than the $89 billion that was provided to the agriculture committees for non-child nutrition related investments, and you would be correct.
While it has not been confirmed in writing, the working assumption is that the Senate Agriculture Committee was able to successfully negotiate with the House Education and Labor Committee to use less of their original $46 billion allocation for child nutrition investments and transfer the remaining balance to agriculture. As the process moves forward, a lot of attention will be focused on the missing conservation title and debt relief provisions, and how they fit into the bigger package.
Beyond the missing pieces of the House Agriculture bill there are a number of major roadblocks, and a few speed bumps, on the path ahead for budget reconciliation.
How the actual legislative process moves forward at this point seems to be anyone’s guess. At a minimum, over the coming weeks, the House Budget Committee is expected to stitch together the recommendations reported out by all 13 House authorizing committees that provided instructions in the concurrent budget resolution, into one large $3.5 trillion omnibus.
However, in the Senate, none of the 12 committees with reconciliation directions have publicly reported out bills. Theoretically the Senate could simply take up the bill that eventually passes the House but that runs into the Byrd rule roadblock. It is unclear if all of the provisions in the forthcoming House omnibus have been written to pass the Byrd rule. This likely indicates that at some point the Senate will unveil text, either in the form of individual committee bills or one large $3.5 trillion omnibus, and that the Senate is working very closely with the budget committee as they stitch together the omnibus to make certain that any Bryd rule issues are addressed at that time.
The hurdles the Democrats face do not stop there; there are a number of intra-party divisions and differences of opinions that need to be worked out, along with some larger issues looming over the process.
The $3.5 Trillion Topline and Sequestration
In the Senate where the Democrats slim majority leaves no room for error or defections, moderate Senators Joe Manchin (D-WV) and Kristen Sinema (D-AZ) have said that $3.5 trillion is too large of a topline number after voting for the budget resolution to start the $3.5 trillion reconciliation process. If either one of them withholds their vote for the final reconciliation omnibus, it would spell doom for the process. It is unclear what those Members want in the budget reconciliation bill and whether the White House and Senate leadership can figure out a way to mollify their opposition without reducing the topline number. Many pundits are prognosticating that the topline number will be reduced to some degree but by how much remains unknown.
At the National Sustainable Agriculture Coalition, we have argued that if the topline is reduced agriculture should be spared from reductions. Farm programs, including conservation programs essential to addressing climate change, are routinely already cut by approximately 7% annually due to previous extensions of mandatory sequestration of farm programs as offsets in previous legislation.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act – H.R. 748) extended mandatory sequestration to 2030 and the bipartisan infrastructure package that has passed the Senate and awaits its final vote in the House extends sequestration by another year to 2031. That means that every year into the future until 2031, farm programs will be automatically cut by approximately 7% annually. This is in addition to previous annual cuts which have been occurring for about 10 years now, (for more information on previous cuts, see Appendix C of this CRS report).
Sequestration has unfairly diminished critical support for voluntary conservation programs, beginning farmers, local food systems, organic research, and more. Crop insurance was administratively exempt from sequestration and commodity programs have been effectively exempted from sequestration because of the way the USDA administers the programs so that sequestration cuts do not impact farmers directly.
Conservation programs that should be a central tool in efforts to address the climate crisis are oversubscribed and already forced to turn away eligible producers. Further cuts to conservation through sequestration, as included in the CARES act and the proposed bipartisan infrastructure package come at the expense of water quality, soil health, climate change mitigation, and agricultural productivity. It is critical that, as Congress moves forward with plans to pass reconciliation legislation, the allocation provided to the agriculture committee for investing in conservation programs be, at a minimum, spared from any additional reductions if the overall price tag of $3.5 trillion for the reconciliation legislation is diminished as part of ongoing negotiations. Congress should also seriously consider ending mandatory sequestration of farm programs as it makes little sense to be making significant new investments while cutting others.
Less pronounced, moderate House Democrats have also expressed some concerns over the topline figure, as well as the associated fate of the bipartisan infrastructure bill that passed the Senate but awaits a vote in the House.
The vote on the bipartisan infrastructure bill was originally scheduled for September 27 as part of a deal to keep progressive and moderate wings of the House Democratic Caucus together by moving the partisan reconciliation bill and bipartisan infrastructure bill in tandem. Yet that deadline is not likely to be met as the reconciliation process has dragged on longer than anticipated and attention has to the debt ceiling and annual discretionary funding to prevent a government shutdown. House leadership will have to figure out a way to balance all of these considerations and keep the progressive and moderate wings of the party together and moving in the same direction.
Debt Limit and Government Funding
The debt ceiling, or debt limit, was suspended for two years as part of Bipartisan Budget Act of 2019, but that suspension ended this summer and the previous limit or cap went into effect, causing the US Treasury to begin to deploy what have been called “extraordinary measures” that allow the Treasury to continue to pay its obligation, while not taking on new debt. However, those measures only buy time. Treasury Secretary Janet Yellen has been sounding the alarm that time is running out and without a debit limit or suspension increase, the US government could default in October.
In addition to the debt limit, the federal fiscal year ends on September 30 which is the date by which Congress must pass appropriations bills or a continuing resolution to prevent a Government shutdown. Neither the Chamber, the Senate, or the House has completed all 13 appropriations bills needed to keep the government funded, let alone negotiate the differences between their chambers bills.
On Monday, September 20, House Democrats unveiled and promptly passed the following day on a party line vote, a continuing resolution that would suspend the debt limit until December 2022, include disaster aid for areas impacted by recent hurricanes, and fund the government until December 3, 2021, buying time for appropriators to negotiate and finalize government spending for fiscal year 2022. Senate Republicans who are needed to overcome the filibuster in the Senate and pass the continuing resolution and debt limit suspension have already indicated they will choose brinkmanship and vote no on a continuing resolution tied to a debt limit increase.
The $125 billion in new investments in agriculture conservation programs, research, rural development, nutrition, and beyond has been described as a once-in-a-generation opportunity. In response, many food systems and agriculture stakeholders have asked how these proposed investments compare to the current farm bill and what impacts they might have on the 2023 Farm Bill reauthorizations process.
Simple program-by-program comparisons are difficult. Some of the programs that provided mandatory funding in House proposed agriculture and nutrition spending reconciliation bills were not provided mandatory funding in the 2018 Farm Bill and instead receive discretionary funding, which varies from year-to-year. While on the other hand, some of the programs have mandatory funding and are part of the permanent farm bill baseline. Furthemore, some of the investments are for new programs not directly authorized or funded in previous farm bills.
Using the full $135 billion figure and comparing that to what the 2018 Farm Bill was projected to spend helps to illustrate the relative magnitude of the proposed investments. At the time of passage, the 2018 Farm Bill was projected to spend $856 billion over 10 years. $135 billion is about a 16% increase above the ten year projection for the 2018 Farm Bill at the time of passage.
A 16% increase above the ten year spending projection for the 2018 Farm Bill might not sound like a once-in-a-generation opportunity but if we drill down deeper, the historic nature of the proposed investments comes a little further into focus. First, it is important to highlight that overall funding for a farm bill has not increased since the 2002 Farm Bill, when about $75 billion was added. Furthermore, the Budget Reconciliation Act of 2005 cut Farm Bill spending by about $3.5 billion and the 2014 Farm Bill cut spending by $23 billion, or 2% over 10 years, and the 2018 Farm Bill was budget neutral. Therefore, relative to farm bill history a 16% increase is substantial.
Furthermore, if we look at just the conservation title, the size of the increase also comes into even greater focus. While official text has not yet been released (see above), we are fairly confident that the size of the conservation title funding is approximately $28 billion. At the time of passage, the 2018 Farm Bill was projected to spend $59.7 billion over 10 year on conservation programs. $28 billion in new funding for conservation programs represents about a 47% increase.
While the previously mentioned complexities make program-by-program comparisons difficult, it is not impossible. The proposed $500 million for the Sustainable Agriculture Research and Education Program (SARE) is a good example of the scale of some of the increases in funding. SARE is one of the programs that has never been provided mandatory funding in a farm bill, and instead, is one of the programs that has had to go to the annual discretionary appropriations process to secure funding. Over the past 10 fiscal years, SARE has been provided a total of $302.2 million in discretionary funding. In comparison $500 million for SARE as proposed in the budget reconciliation package, would represent a 166% increase in funding. Currently, USDA can only fund roughly ten percent out of all eligible research and education pre-proposals submitted to the program each year. Increased funding will no doubt go a long way to expand the rate at which USDA is able to fund eligible proposals.
The 2023 Farm Bill
Providing comparisons that allow some contextualization of the proposed agriculture and nutrition investments is illuminating but tells us little about what this means for the 2023 Farm Bill. The way in which the proposed budget reconciliation funding could impact the 2023 Farm Bill is an important topic worth examining.
To fully understand the impact this funding could have on the 2023 Farm Bill, a brief overview of farm bill budgeting is in order. While farm bills only authorize programs for five years, all programs are scored in terms of the budget relative to their cost over ten years. Ten years is the long-held scoring convention for determining the cost of any authorization bill before Congress that directs (mandates) the government to spend money.
When a new mandatory program is added, or an existing mandatory program is enhanced, Congress has a choice – it can pay for the provision over the life of that five year farm bill, or make it permanent by paying for the provision for 10 years. It can therefore cost double or more to make the program reach permanent status. As a general budgeting rule, programs must also spend at least $50 million in year-five and each year beyond that for the full ten year window to be assumed to continue on into the future. When a program is made permanent and meets the $50 million per year minimum requirement, it becomes part of the ten year farm bill budget baseline. Any funding that is part of the farm bill ten year baseline is more or less assumed to be part of the farm bill as it comes up for program reauthorization every 5 years. Many of the programs authorized for five years in the farm bill are not provided mandatory funding and are beholden to the annual discretionary appropriations process. There are others that have mandatory funding but not in a manner that meets the requirements to become part of the baseline.
Many have assumed that increasing or providing direct/mandatory funding for all the programs discussed above would result in added baseline for the farm bill, however, the truth is more complicated. The Byrd rule prohibits spending beyond the ten year budget window contained in the budget reconciliation instructions and because of this and other budget rules, any increases in mandatory spending are not included in the ten year baseline. However, when one explores the specific legislative language, the bulk of the funding for many of the programs is budgeted for fiscal year (FY) 2024 and beyond. As a result, when the Agriculture committees write the 2023 Farm Bill, the funding “parked” in FY 2024 and beyond will be available to rescind and could be used as pay-fors for increasing mandatory spending for programs in a manner that would increase the farm bill baseline. Securing a significant increase in the farm bill baseline would be an important and welcome achievement and one in which authors of many of the reconciliation provisions have their eyes on.
The potentially bad news is that this means any debates and negotiations around how to allocate budget reconciliation funding within agriculture and nutrition programs will likely occur again during the 2023 Farm Bill process, as farm bill authors move to rescind the funding parked in FY 2024 and beyond, to use as pay-fors to make changes to the farm bill that build the ten year baseline.
If the Democrats retain control of Congress in the midterm elections they will no longer be boxed in by the Senate’s Byrd Rule, which largely limits the ability of Congress to make policy changes, and they will be free to renegotiate allocations while also crafting in detail new climate change focused programs and policies, all while securing significant increases to the baseline for the overall farm bill. However, if the Republicans regain control of the House in the midterms, a very possible outcome, the dynamic will likely be very different.
All of this first assumes first that Congressional Democrats will be able to stay unified and ultimately pass their $3.5 trillion climate change and social spending bill, which is by no means a certain outcome at this point.