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The Congressional Budget and Impoundment Control Act of 1974 as amended provides Congress with a procedure establishing appropriate spending and revenue levels for each year. The congressional budget process, as set out in the 1974 Budget Act, is designed to coordinate decisions on sources and levels of revenues and on objects and levels of expenditures. Its basic method is to prescribe the overall size of the fiscal pie and the particular sizes of its various pieces. Each year the Congress adopts a concurrent resolution imposing overall constraints on revenues and spending and distributing the overall constraint on spending among groups of programs and activities.
Congress aims to complete action on a concurrent resolution on the budget for the next fiscal year by April 15. Congress may adopt a later budget resolution that revises the most recently adopted budget resolution. One of the mechanisms Congress uses to implement the constraints on revenue and spending is called the reconciliation process. Reconciliation is a two-step process designed to bring existing law in conformity with the most recently adopted concurrent resolution on the budget. The first step in the reconciliation process is the language found in a concurrent resolution on the budget instructing House and Senate committees to determine and recommend changes in laws or bills that will achieve the constraints established in the concurrent resolution on the budget. The instructions to a committee specify the amount of spending reductions or revenue changes a committee must attain and leave to the discretion of the committee the specific changes to laws or bills that must be made. The second step involves the combination of the various instructed committees' recommendations into an omnibus reconciliation bill which is reported by the Committee on the Budget or by the one committee instructed, if only one committee has been instructed, and considered by the whole House.
The Budget Act maintains that reconciliation provisions must be related to reconciling the budget. This principle is codified in section 313 of the Budget Act, the so-called Byrd Rule, named after Senator Robert C. Byrd of West Virginia. Section 313 provides a point of order in the Senate against extraneous matter in reconciliation bills. Determining what is extraneous is a difficult task for the Senate's Presiding Officer. The Byrd Rule may only be waived in the Senate by a three-fifths vote and sixty votes are required to overturn the presiding officer's ruling.
Congress aims to complete action on a reconciliation bill or resolution by June 15 of each year. After Congress has completed action on a concurrent resolution on the budget for a fiscal year, it is generally not in order to consider legislation that does not conform to the constraints on spending and revenue set out in the resolution.
Congress has enacted legislation under which breaches are remedied by "sequestration," that is, automatic cancellations of spending authority. Sequestration results when the statutory parameters for the deficit, discretionary spending, or the "Paygo" requirement have been exceeded. Paygo requires that tax reductions or increases in entitlements must be offset by tax increases or reductions in entitlements.
The Unfunded Mandates Reform Act of 1995, through an amendment to the Congressional Budget Act, established requirements on committees with respect to measures containing unfunded intergovernmental mandates. An unfunded intergovernmental mandate is the imposition of a substantial financial requirement or obligation on a state, local or tribal government. The Act also established a unique point of order to enforce the requirements of the Act with respect to intergovernmental mandates in excess of fifty million dollars annually. In the House, an unfunded mandate point of order is not disposed of by a ruling of the Chair but by the Chair putting the question of consideration to the body. The House or the Committee of the Whole then decides by vote whether or not to proceed with the measure with the alleged mandate contained therein.