Budget Process Innovation & The 117th Congress, Part 1: Using Reconciliation To Appropriate

Summary

The 117^th Congress used the reconciliation process to appropriate $1.2 trillion via the American Rescue Plan (ARP) and Inflation Reduction Act (IRA). Unlike appropriations in earlier reconciliation acts, which were used to primarily fund entitlements, the majority of the ARP and IRA’s appropriations will be used to support non-entitlement programs. This change represents a significant expansion of the reconciliation process. This post quantifies and contextualizes this expansion in the larger history of the budget process and discusses the its institutional implications for future Congresses.

Over the last 40 years, Congress has used the budget reconciliation and annual appropriations processes to achieve different ends. Reconciliation has been primarily used to affect entitlements, revenues, and debt, while the appropriations process provided funding for federal agencies.¹ The 117^th Congress, however, broke from this procedural division of labor and used reconciliation to appropriate $1.2 trillion through the American Rescue Plan (ARP) and Inflation Reduction Act (IRA). Unlike appropriations in past reconciliation acts, most of this spending funds dozens of non-entitlement programs.² By using reconciliation to make these types of appropriations, congressional Democrats found a new way to forcefully exercise Congress’s spending power to achieve their priorities – despite wafer-thin majorities in each chamber and the largest ideological divide between Democrats and Republicans since the creation of the budget process in 1974.

 

How the ARP and IRA Differ From Past Reconciliation Acts

 

Before the ARP and IRA, reconciliation bills rarely contained appropriations. Between 1990 and 2019, Congress passed 17 reconciliation acts.³ Seven of these acts provided new appropriations totaling $136 billion.⁴ Of this total, $122 billion (90 percent) funded entitlement programs and the majority of this funding went to the following five programs:

• the Children’s Health Insurance Program ($40 billion),
• the Pell Grant Program ($34 billion),
• the Child Care and Development Fund ($15 billion),
• the Temporary Assistance to Needy Families program’s childcare entitlement ($14 billion), and
• Medicaid ($10 billion).

 

$14 billion (10 percent) of these appropriations, however, went to federal agencies and did not directly affect entitlement payments to beneficiaries. These appropriations primarily funded agencies’ administrative expenses and ranged in size from $3.3 billion to $550,000. The Democratic majorities of the 117th Congress creatively used the precedents created by these earlier non-entitlement appropriations to appropriate $1.2 trillion via the ARP and IRA to over 50 different agencies and departments.⁵  The ARP appropriated $966 billion (82 percent of the total), and the IRA appropriated $214 billion (18 percent).⁶ 77 percent of the funding provided by the ARP and IRA is for federal non-entitlement programs. The ARP’s largest appropriations were to:

• state and local governments ($350 billion),
• state education departments and K-12 school districts ($123 billion),
• the Federal Emergency Management Agency ($50 billion), and
• the Department of Health and Human Services ($48 billion).

Similarly, IRA’s largest appropriations include $79 billion to improve the Internal Revenue Services’s (IRS) operations and tax enforcement and over $75 billion for multiple new federal programs to reduce greenhouse gas emissions. The figure below compares the total amount of funding appropriated through reconciliation acts since 1990.

 

 

 

Note: OBRA 93 = Omnibus Budget Reconciliation of 1993; PRWORA =Personal Responsibility and Work Opportunity Reconciliation Act of 1996; BBA 97 = Balanced Budget Act of 1997; Bush Tax Cut II = Jobs and Growth Tax Relief Reconciliation Act of 2003; DRA = Deficit Reduction Act; CAA = College Cost Reduction and Access Act; HCERA = Health Care and Education Reconciliation Act of 2010; ARP = American Rescue Plan Act of 2021; IRA = Inflation Reduction Act of 2022.

 

New Institutional Implications for Congress

 

Appropriating via reconciliation presents new tradeoffs for lawmakers. Since reconciliation only becomes available when Congress adopts a budget resolution (and can only be used for a single spending bill per resolution), lawmakers must assume that they will not get another opportunity to provide additional funding.⁷ Unlike the annual discretionary appropriations acts – that rarely provide funding for more than 12 months – most of the ARP and IRA’s appropriations extend over a period of years. Of the 330 appropriations in the two laws, 156 (47 percent) make funding available through fiscal year 2031 or until the funds are spent by an agency, and only 57 (17 percent) must be spent in either fiscal year 2022 or 2023.⁸

This type of long-term appropriation creates a new fiscal dynamic between Congress and the executive branch. Unlike discretionary appropriations, Congress will not be able to regularly adjust these appropriations or exercise much direct control over how agencies use the appropriated funds. For example, 99 percent of the IRA’s appropriations to the IRS are available for obligation through the end of fiscal year 2031. Although the law specifies how the Service should use this new funding, compared to the Service’s discretionary budget, the IRS will have much more control over how and when to spend these funds. While congressional supporters of this funding were able to use the IRA’s appropriations to reverse the effects of a decade of discretionary spending cuts to the Service, it illustrates a difficult tradeoff of using reconciliation to appropriate. In order to fund programs strongly opposed by the minority party, congressional majorities will likely have to relinquish more control of that spending to the executive branch.

 

The ARP and IRA’s appropriations also led to a reconfiguration of how Congress makes fiscal policy. Historically, the balance of fiscal power within Congress has fluctuated between the authorizing and Appropriations Committees, as each have vied for control over much funding federal programs receive.⁹ The IRA’s and ARP’s appropriations are another expansion of the authorizing committees’ ability to fund programs within their jurisdictions, and is the continuation of a decades-long trend.¹⁰ The most remarkable aspect of the IRA and ARP’s expansion of reconciliation, however, is that it did not lead to overt conflicts between Democratic authorizers and appropriators. In fact, the opposite is true: Democratic appropriators strongly supported both laws. The chairs of the House and Senate Appropriations Committees enthusiastically endorsed both measures, as did other Democratic appropriators.^{11 12 13}

 

This comity between Democratic authorizers and appropriators stands in stark contrast to what happened in 1981, the last time Congress used reconciliation to significantly affect non-entitlement spending. Following Ronald Reagan’s landslide victory in 1980, a bipartisan coalition in Congress – in close coordination with the Reagan Administration – used reconciliation to pass what was then the largest-ever peacetime reduction in federal in spending.¹⁴ The ensuing conflicts between authorizers and appropriators, however, were so contentious that lawmakers never again attempted, in a significant way, to use reconciliation to affect the funding of non-entitlement programs until the 117^th Congress.¹⁵ The contrast between these two uses of reconciliation show how the partisan nature of Congress has changed over the last 40 years, and how partisan necessity led congressional Democrats to transcend Congress’s typical fiscal division of labor.

 

Procedural Creativity and What Lies Ahead

The Democratic majorities of the 117^th Congress used reconciliation to find an innovative procedural solution to a difficult set of political constraints. The funding unlocked by this procedural innovation is already having significant impacts and the effects of the ARP and IRA’s appropriations will be felt for the next decade and beyond. But this analysis shows that thes laws also mark a new stage in the continued evolution of the reconciliation process. This procedural evolution has mirrored the changing politics of Congress. As the partisan divide between Democrats and Republicans has widened over the last 40 years – and as each party’s control of the House and Senate has become more unstable – reconciliation itself has evolved from a modest set of procedures to the primary method for enacting the highest legislative priorities of each party.^{16 17} So long as Congress remains highly polarized, future Democratic and Republican majorities will likely use reconciliation to make (or reduce) appropriations to non-entitlement programs when they have control of Congress and the White House.  But independent of whatever future partisan conflicts arise, Congress as a whole will also have to adapt its fiscal division of labor to effectively oversee the implementation of ARP and IRA’s funding. Accomplishing this will require additional procedural innovation and answering a number of new questions, including:

• Will appropriators require agencies to submit the same level of detailed information about the use of ARP and IRA funds that they do for their discretionary funding?
• Will appropriators share that information with the authorizing committees, or will authorizers have to make their own requests?
• And how can Congress respond if the Administration (or a future one) is unresponsive to these or other congressional requests?

 

It will be worth watching how members from both parties begin to answer these questions during the next Congress, as they will play a large rule in determining the full long-term implications of the 117^th Congress’s expansion of the reconciliation process.

 

Methodology

This analysis is based on an examination of the text of reconciliation measured passed by both the House and Senate since 1990. Reconciliation measures enacted before 1990 were excluded because the congressional budget process underwent significant procedural changes between 1974 and the passage of the Budget Enforcement Act of 1990 (Title XIII of the Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508)).

Appropriations were identified using the following search terms:

• “appropriation,”
• “the following sums were appropriated,”
• “there is appropriated to the,”
• “in addition to amounts otherwise available,”
• “in addition to any other funds made available,” and
• “not otherwise available.”

 

The categorization of entitlement and non-entitlement appropriations is based on whether the appropriations finances benefits paid to individuals or non-public entities. As defined in federal law (2 U.S.C. §622(9)), entitlement spending encompasses any spending provided in laws other than the 12 annual regular appropriations acts and spending for the SNAP program. Under this definition, a larger portion of the ARP and IRA’s funding would be classified as entitlement funding. For example, the Coronavirus State and Local Fiscal Recovery Fund and Coronavirus Local Fiscal Recovery Fund together received $350 billion of funding in the ARP. Under 2 U.S.C. §622(9), these programs are an entitlement to states and local governments, as the federal government must make payments to them under the program and ARP is not a regular appropriations act. On the other hand, however, state and local governments can use these funds for multiple purposes. And only some of the funds will be used to make payments directly to individuals (e.g., paying premium wages for essential workers). For this reason, this funding was classified as programmatic non-entitlement spending rather than as entitlement funding.

Each appropriation’s period of availability was categorized according to the availability specified in the text of the appropriation.

22 appropriations with indefinite amounts – that is, those that did not specify a specific amount of budget authority – were excluded from the analysis.

Six appropriations in the ARP and IRA provide a total of $14 billion of funding for loan guarantees or direct loan programs. These funds will finance a minimum of $335 billion in loans and loan guarantees. The totals in this analysis only include $14 billion of newly appropriated budget authority.

Amounts above a trillion dollars are rounded to the nearest $100 billion, amounts below a trillion and above $10 billion dollars are rounded to the nearest $1 billion, amounts less than $10 billion and greater than $1 billion are rounded to the nearest $100 million, amounts below $1 billion and greater than $1 million are rounded to the nearest $1 million, amounts less than $1 million are unrounded. Percentages are calculated on unrounded amounts, and totals may not add up due to rounding.