The Congressional Budget Act of 1974 established the congressional budget process. (1) Under the act, the House andSenate are required to adopt at least one budget resolution each year. (2) The budget resolution, whichtakes the form of a concurrent resolution and is not sent to the President for his approval or veto,serves as a congressional statement in broad terms regarding the appropriate revenue, spending, anddebt-limit policies, as well as a guide to the subsequent consideration of legislation implementingsuch policies at agency and programmatic levels. Budget resolution policies are enforced througha variety of mechanisms, including points of order. (3) The House and Senate Budget Committees, which were createdby the 1974 act, exercise exclusive jurisdiction over budget resolutions and are responsible formonitoring their enforcement. In developing a budget resolution, the House and Senate Budget Committees use varioussources of budgetary information and analysis, including baseline budget projections of revenue,spending, and the deficit or surplus prepared by the Congressional Budget Office (CBO). A budgetresolution typically reflects many different assumptions regarding legislative action expected tooccur during a session that would cause revenue and spending levels to be changed from baselineamounts. Most revenue and direct spending, (4) however, occurs automatically each year under permanent law;therefore, if the committees with jurisdiction over the revenue and direct spending programs do notreport legislation to carry out the budget resolution policies by amending existing law, revenue anddirect spending for these programs likely will continue without change. The budget reconciliation process is an optional procedure that operates as an adjunct to thebudget resolution process. The chief purpose of the reconciliation process is to enhance Congress'sability to change current law in order to bring revenue, spending, and debt-limit levels intoconformity with the policies of the budget resolution. Accordingly, reconciliation can be a potentbudget enforcement tool for a large portion of the budget. Reconciliation is a two-stage process. First, reconciliation instructions are included in thebudget resolution, directing the appropriate committees to develop legislation achieving the desiredbudgetary outcomes. If the budget resolution instructs more than one committee in a chamber, thenthe instructed committees submit their legislative recommendations to their respective BudgetCommittees by the deadline prescribed in the budget resolution; the Budget Committees incorporatethem into an omnibus budget reconciliation bill without making any substantive revisions. (5) The second step involves consideration of the resultant reconciliation legislation by theHouse and Senate under expedited procedures. Among other things, debate in the Senate on anyreconciliation measure is limited to 20 hours (and 10 hours on a conference report) and amendmentsmust be germane and not include extraneous matter. The House Rules Committee typicallyrecommends a special rule for the consideration of a reconciliation measure in the House that placesrestrictions on debate time and the offering of amendments. In cases where only one committee has been instructed, the process allows that committeeto report its reconciliation legislation directly to its parent chamber, thus bypassing the BudgetCommittee. In some years, budget resolutions included reconciliation instructions that afforded theHouse and Senate the option of considering two or more different reconciliation bills. Once thereconciliation legislation called for in the budget resolution has been approved or vetoed by thePresident, the process is concluded; Congress cannot develop another reconciliation bill in the wakeof a veto without first adopting another budget resolution containing reconciliation instructions. As an optional procedure, reconciliation has not been used in every year that thecongressional budget process has been in effect. Beginning with the first use of reconciliation byboth the House and Senate in 1980, however, reconciliation has been used in most years. (In threeyears, 1998 (for FY1999), 2002 (for FY2003), and 2004 (for FY2005), the House and Senate did notagree on a budget resolution.) Congress has sent the President 19 reconciliation acts over the years;16 were signed into law and three were vetoed (and the vetoes not overriden). Table 1 provides alist of these 19 reconciliation acts. Not every reconciliation measure considered by one chamber has been considered by theother chamber, or been regarded as a reconciliation measure when considered by the other chamber. In 2000, for example, the House considered and passed several reconciliation measures, but theywere not considered by the Senate. (6) In 1976, the Senate considered a House-passed revenue bill under reconciliation procedures,although the measure had not been considered as a reconciliation bill in the House; the bill later wasvetoed. (7) Conversely, in1984, the House and Senate agreed to deficit-reduction legislation that had been considered as areconciliation bill by the House but not the Senate; the bill, the Deficit Reduction Act of 1984, wassigned into law by President Ronald Reagan ( P.L. 98-369 ) but was not designated as a reconciliationmeasure. The budget reconciliation process reflects a complex set of rules, procedures, and practicesemployed by the House and Senate. Like other complex processes of the House and Senate, suchas the annual appropriations process, the reconciliation process has been marked by significantchange over time. The House and Senate have adapted reconciliation procedures to fit changingpolitical and budgetary circumstances. Table 1. Reconciliation Resolutions and Resultant ReconciliationActs: FY1981-FY2005 Source : Prepared by the Congressional Research Service. The framers of the Congressional Budget Act of 1974 anticipated that changes might be madefrom time to time in the budget resolution and reconciliation processes that it established. In aneffort to provide limited procedural flexibility, the act contains a provision referred to as the "elasticclause." Originally framed as Section 301(b)(2), the elastic clause authorized the House and Senateto include in a budget resolution, at their discretion, "any other procedure which is consideredappropriate to carry out the purposes of this Act." The clause later was redesignated as Section301(b)(4) and revised to read: The concurrent resolution on the budget may-- ... (4) set forth such other matters, and require such other procedures, relating to the budget, as maybe appropriate to carry out the purposes of this Act. The House and Senate have used authority under the elastic clause to modify reconciliationprocedures over time in many significant ways, including advancing the use of reconciliation to thespring budget resolution and extending the reconciliation time frame from one year to multiple years. While some innovations in reconciliation procedure were dropped, others persisted and eventuallywere incorporated into the 1974 act as required elements of reconciliation procedure. Two of the most significant changes in reconciliation procedure involved advancing its useto the spring budget resolution and extending its time frame from one year to multiple years(paralleling the changes in budget resolution scheduling and time frame). As originally framed, the1974 act required the adoption of two budget resolutions each year. The first budget resolution, tobe adopted in the spring, set advisory budget levels for the upcoming fiscal year. The second budgetresolution, to be adopted on September 15, just before the start of the new fiscal year on October 1,set binding budget levels for the year. Reconciliation was established as an adjunct to the adoptionof the second budget resolution. Congress and the President could use reconciliation procedures toquickly make any adjustments in existing law or pending legislation that were required to achievebudget policies as they changed between the adoption of the spring and fall budget resolutions. Action on any required reconciliation legislation was expected to be completed by September 25. In the early 1980s, the House and Senate abandoned the practice of adopting a second budgetresolution, choosing instead to adopt a single budget resolution in the spring of each year (althoughthe schedule often slipped, sometimes markedly). This change in practice formally was incorporatedinto the 1974 act by the Balanced Budget and Emergency Deficit Control Act of 1985 (Title II of P.L. 99-177 ; December 12, 1985; 99 Stat. 1037-1101). The growing prominence of the spring budget resolution was indicated by the decision in1980 to use it to initiate reconciliation procedures for FY1981. Reconciliation procedures were usedagain the following year as an adjunct to the adoption of the FY1982 budget resolution in the spring,but the budget resolution and reconciliation time frame was extended to three years,FY1982-FY1984 (although figures for the latter two years were considered to be "planning" levels). These changes occurred for several reasons, including the belief that an advancement in thereconciliation schedule was needed to allow committees more time to develop their reconciliationrecommendations, and to allow the House and Senate more time to consider them on the floor andreconcile their differences in conference, and that an extended time frame would promote moreeffective and lasting changes in budgetary policy while discouraging evasions of enforcement. In addition to the changes made with respect to the timing and scheduling of reconciliation,the 1974 act has been amended to bar in the Senate the inclusion of extraneous matter inreconciliation legislation (see later discussion of Section 313 of the act, known as the "Byrd rule"). Although Section 313 operates as a rule of the Senate, it has also dramatically affected thedevelopment of reconciliation legislation in the House and, at times, been a source of frictionbetween the two chambers. Other significant changes in reconciliation practice have derived from the changing politicaland budgetary environment, or changes in precedent, and have not relied upon the elastic clause. Initial actions under reconciliation, for example, focused on deficit-reduction efforts. Consequently,the procedures were employed to achieve spending reductions and revenue increases on a net basis. In the latter part of the 1990s, particularly when large surpluses emerged in the federal budget forthe first time in decades, the focus of reconciliation action was shifted to reducing revenues, whichcontinued into the 2000s. Most recently, for FY2006, reconciliation directives entail reductions inboth revenues and spending. The principal authorities underlying the reconciliation process are set forth in two keysections of Title III ("Congressional Budget Process") of the Congressional Budget Act of 1974.