Revenue Reconciliation Directives in the FY2004 Budget Resolution

Publication Date: May 2003

Publisher: Library of Congress. Congressional Research Service

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On April 11, 2003, the House and Senate reached agreement on a budget resolution for FY2004 (H.Con.Res. 95) which recommends that revenues be reduced by $1.225 trillion over the 11-year period covering FY2003-2013. In addition, the budget resolution recommends increases in outlays stemming from related tax policy changes (i.e., refundable tax credits). These recommendations in the aggregate roughly parallel those proposed by President George W. Bush in the FY2004 budget he submitted to Congress on February 3.

The FY2004 budget resolution recommends that a large portion of the revenue reductions (and associated outlay increases), pertaining to an economic growth package, be achieved through the budget reconciliation process. The remaining revenue reductions, amounting to about $691 billion (plus associated outlay increases), may be considered under regular legislative procedures.

The reconciliation process, authorized under Section 310 of the 1974 Congressional Budget Act, is an optional procedure that operates as an adjunct to the budget resolution process. The chief purpose of the reconciliation process is to enhance Congress's ability to change current law in order to bring revenue and mandatory spending levels into conformity with the policies of the budget resolution. While a budget resolution may rest on assumptions regarding changes in revenue and mandatory spending levels, reconciliation may make it more likely that such changes will occur by compelling committees to develop the necessary legislation and providing for its expedited consideration.

The reconciliation directives, set forth in Section 201 of the budget resolution, require the House Ways and Means Committee and the Senate Finance Committee to report reconciliation legislation to their respective chambers by May 8, 2003. Although the level of tax policy changes is the same for each committee (not more than $550 billion over the 11-year period covering FY2003-2013), the two committees have a different mix of directives to reduce revenues and increase outlays related to tax policy changes. The Ways and Means Committee is directed to reduce revenues by not more than $535 billion and to increase outlays by not more than $15 billion; the corresponding amounts for the Finance Committee are not more than $522.524 billion in revenue reductions and not more than $27.476 billion in outlay increases.

In an innovative procedure intended in part to avoid conflicts with the Senate's so-called Byrd rule (Section 313 of the 1974 Congressional Budget Act), the budget resolution also contains a point of order, set forth in Section 202, that prohibits the initial consideration in the Senate of reconciliation legislation proposing revenue reductions and associated outlay increases greater than $350 billion. The prohibition does not apply, however, to the consideration in the Senate of the conference report.

This report will be updated as developments warrant.