Now that Democrats have won both Georgia Senate runoff elections, and will have the barest of Senate majorities to go along with a slim House majority, there is new optimism that Democrats could enact major fiscal policy by getting around the Senate filibuster using the “budget reconciliation” technique. This is indeed possible, but there are several specific hurdles to using budget reconciliation as a vehicle for an infrastructure bill.

Background. The 1974 Budget Act created a new Congressional budget process that was to be exempt from filibuster in the Senate. This process has up to two parts. First, Congress is supposed to pass an internal budget blueprint each year (a concurrent resolution, exempt from filibuster and without the need for a Presidential signature) that sets target levels of federal spending, revenues, and debt for a fixed number of years. The resolution also tells the Appropriations Committees how much money their annual spending bills can total each year.

Then, if changes to non-appropriated (mandatory) spending laws, or to tax laws, are necessary to get non-appropriated spending and revenues in line with the numbers in the agreed-to budget resolution, the resolution can order each committee of Congress to come up with changes in the laws under its jurisdiction to provide x amount of deficit decrease – or increase – over a fixed number of years. The Budget Committees then package all of those committee recommendations together (without change) into one “reconciliation bill,” which goes to the floor of each chamber for amendment and a vote, and which is also exempt from filibuster in the Senate.

The reconciliation provision was not used until 1980, but by the mid-1980s, reconciliation bills were among the biggest pieces of legislation considered by a Congress, so one of the Senate’s guardians of the filibuster, Robert Byrd (D-WV) got some changes made in law and Senate rules starting in 1985 so that budget reconciliation could no longer be used as an all-purpose end-around of the filibuster. Senator Byrd’s new “Byrd Rule” prohibited budget reconciliation bills from carrying “extraneous” matters, defined as follows:

• A provision is extraneous if it does not produce a change in mandatory (direct) outlays, or revenues, or a change in the terms and conditions under which mandatory outlays are made or revenues are collected.
• A provision is extraneous it produces a mandatory outlay increase or revenue decrease when the instructed committee is not in compliance with its instructions.
• A provision is extraneous if it is outside of the jurisdiction of the committee that submitted the title or provision for inclusion in the reconciliation measure.
• A provision is extraneous if it produces a change in mandatory outlays or revenues which is merely incidental to the nonbudgetary components of the provision.
• A provision is extraneous if it would increase the deficit for a fiscal year beyond the “budget window” covered by the reconciliation measure.
• A provision is extraneous if it recommends changes in Social Security.

The Byrd Rule applies both to the reconciliation bills reported from the Budget Committee and to proposed amendments offered on the Senate floor (and to the final conference report versions of House-Senate compromise bills). So, even though the Byrd Rule only applies in the Senate, the House eventually has to take it into account, as well.

The Byrd Rule is not self-enforcing, however – a Senator must stand up on the Senate floor and raise a point of order against a provision or amendment. Then, if the Senate Parliamentarian agrees that a provision or amendment violates the Byrd Rule, the provision is stricken (or the amendment disallowed) unless at least 60 Senators vote, via roll call, in favor of a motion to waive the Byrd Rule for that specific provision or amendment. (60 votes is also the threshold needed to end a filibuster, which is why that number was chosen.)

Specifics. Because of some other specific budget weirdness relating to federal transportation trust fund programs, there are some unusual implications of the Byrd Rule for transportation and infrastructure spending.

If the Byrd Rule is enforced, budget reconciliation cannot be used to transfer money from the general fund to the Highway Trust Fund. Since intragovernmental transfers don’t score, they don’t change direct spending outlays or revenues, and the Byrd Rule says that every provision in a reconciliation bill has to change direct spending outlays or revenues. For example, last year’s House infrastructure bill contained a $145.3 billion transfer from the General Fund to the Highway Trust Fund in order to support the bill’s spending. Under the Byrd Rule, such a transfer would be stricken from any budget reconciliation bill.

If the Byrd Rule is enforced, budget reconciliation can be used to increase excise taxes deducted to a trust fund account. The 1990 budget reconciliation act, for example, increased federal motor fuel taxes by 5 cents per gallon and deposited half of that increase in the Highway Trust Fund. Budget scorekeeping rules don’t distinguish between tax increases deposited in a trust fund and tax increases deposited in the General Fund – just so long as they are increases in total federal revenues. And, politically speaking, if you are going to try and pass a regressive tax increase of questionable political popularity, you’re probably better off doing it as part of a much larger, once-in-a-Congress political must-pass budget package than as part of a separate infrastructure bill.

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If the Byrd Rule is enforced, budget reconciliation cannot be used to provide increased contract authority that is subject to the annual obligation limitations in appropriations bills, like the existing Federal-aid Highways and Transit Formula Grants accounts. Because the outlays from such contract authority are discretionary, not mandatory/direct, the outlays from those programs are scored against the annual appropriations bills and would not be scored against the reconciliation bill. Last year’s House infrastructure bill included reauthorization of, and massive increases in, those contract authority programs, but they would not be allowed in a reconciliation bill under the Byrd Rule.

If the Byrd Rule is enforced, budget reconciliation cannot be used to authorize or reauthorize programs subject to annual appropriation. For example, under current rules, grants for Amtrak and other rail programs, and for new subway and light rail construction, are subject to annual appropriations, which means that the outlays from those programs are scored against the annual appropriations bills, not any reconciliation bill. Changes to those programs, including increased funding authorization levels, would be extraneous under the Byrd Rule.

If the Byrd Rule is enforced, budget reconciliation can be used to provide new contract authority that is not subject to the obligation limitations in the annual appropriations bills. New trust fund contract authority accounts could be created that were specifically exempt from annual obligation limitation. (However, the Appropriations Committees in the past have fiercely opposed the creation of any new exempt CA.)

If the Byrd Rule is enforced, budget reconciliation can be used to create new general fund spending for infrastructure. A reconciliation bill could include a provision saying, for example, “There is made available to the Secretary of Transportation $10,000,000,000 to carry out intercity passenger rail grants under chapter ___ of title 49, United States Code.” Or “There is made available to the Secretary of Transportation $20,000,000,000 to make grants to states for highways and bridges as if under chapter 1 of title 23, United States Code.” That money would instantly become available from the general fund, outside the annual appropriations process. (Again, the Appropriations Committees don’t like this and usually fight it behind the scenes.)

If the Byrd Rule is enforced, budget reconciliation cannot be used to fund the slowest-spending infrastructure programs. Care must be taken so that the outlays from any new spending authority created in a reconciliation bill are shut off by the end of the time period covered by the bill (which, again, has lately meant a 10-year scoring window). This means a focus on proven programs and on projects that can be completed fairly quickly. For example, the latest Combined Statement shows that of the $2.5 billion provided in the fiscal 2010 appropriations act for high-speed rail, $1.3 billion was still sitting on the books of the Treasury, unspent, as of three months ago. The Congressional Budget Office would probably use that track record to estimate that a (hypothetical) massive amount of new mandatory spending for high-speed rail in a reconciliation bill might take so long to spend that some of it would create federal outlays after the period covered by the reconciliation bill had ended, which would trigger a Byrd Rule violation. There are ways around this, but the spending would have to be structured with explicit cutoffs to ensure that every project funded by the money would either complete construction or else be canceled by the end of the bill.

History. The Byrd Rule has actually been raised several times with relation to transportation provisions in reconciliation bills over the years. In 1990, the Byrd Rule came up in relation to three transportation provisions in the Senate reconciliation bill:

• Sen. Max Baucus (D-MT) raised a Byrd Rule point of order against sec 7405(j) of the bill, which changed highway formula distribution formulae, because that provision had been reported from the Finance Committee, not the committee of jurisdiction (Environment and Public Works). No one moved to waive the Byrd Rule, and the provision was stricken from the bill.
• Sen. Alphonse D’Amato (R-NY) raised a point of order against title  III, subtitle B of the bill (Airport Improvement Program reauthorization, reported by the Commerce Committee) because, he said, it “does not produce a change in outlays or revenue.” The Parliamentarian agreed, but Sen. Wendell Ford (D-KY) moved to waive the Byrd Rule, and the Senate backed the waiver, 69 to 31, so AIP reauthorization stayed in the bill.
• Sen. Steve Symms (R-ID) offered an amendment from the floor to transfer the entirety of the bill’s motor fuel tax increase (which was split 50-50, general fund and Highway Trust Fund in the bill as reported) to the HTF. Sen. Lloyd Bentsen (D-TX) raised a Byrd Rule point of order against the Symms amendment because, he said, it “has no budgetary effect.” The Parliamentarian agreed, and a Symms motion to waive the Byrd Rule failed, 48 yeas 52 nays, killing his amendment.

In addition, in the 1997 tax reconciliation bill, Sen. John McCain (R-AZ) raised a Byrd Rule point of order against section 702(d) of the bill, transferring $2.3 billion from the general fund to a special Amtrak Account established by the rest of section 702. Sen. Bill Roth (R-DE) moved to waive the Byrd Rule, and the waiver was agreed to, 77 to 21.

What this tells us is that the Senate sets the Byrd Rule aside when there is bipartisan agreement – but lately, the whole point of using budget reconciliation has been to pass things that don’t have bipartisan consensus, like Obamacare or the 2017 tax cuts.

*1/9/21 We deleted one paragraph that was inaccurate. The ban on fiscal effects of a reconciliation bill exceeding the duration of the bill only goes one way – no provision of a bill can cause deficit increases after the expiration of the bill, but deficit decreases are OK. One paragraph in the original version said that tax increases have to be limited in duration, but this is not so. Only tax cuts have to be limited. The original text is shown below.

If the Byrd Rule is enforced, budget reconciliation cannot be used to increase excise taxes permanently. The tax increases would have to expire at the end of the period covered by the reconciliation bill (which has lately been 10 years, to coincide with the statutory pay-as-you-go budgetary scorekeeping period, but 5-year or 3-year reconciliation bills were used before that). However, most Highway Trust Fund excise taxes already expire two years after the surface transportation reauthorization act expires, so this is not that big a deal.