Reconciliation becomes more real | Bond Buyer

Bloomberg News

Chatter in Congress is leaning into the possibility of passing a second and perhaps a third major budget reconciliation bill, which could require new sources of revenue including eliminating tax-exempt municipal bonds.  

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“There’s an old saying, at least within our organization, until municipal bonds are taxable, they’ll always be on the table. So, you’ve got to start from that point of view,” said Brett Bolton vice president of federal legislative and regulatory policy for the Bond Dealers of America. 

The comments came during a panel discussion hosted by the Council of Development Finance Agencies in Washington D.C. Tuesday. 

A reconciliation happens when the majority party in charge uses a special budgetary process to pass laws with no input from the minority party, crucial to preventing the minority party from filibustering the bill in the Senate. The Republicans currently have a one-vote cushion in the House, allowing for four currently vacant seats. 

“If you lose, say, Thomas Massey in Kentucky, if he pulls out, you really can’t pass a bill,” said Bolton. “I’m going to be a doubter until proven wrong, like I am so often. But at this point, it seems like a long shot to get something that’s not so narrowly focused across the finish line.” 

The obstacles standing in the way of a reconciliation includes passing muster with the Byrd Rule in the Senate, which limits what can actually be eventually voted on.   

“Reconciliation is a budget gimmick, but it also requires you getting things past the parliamentarian,” said Eric Silva, CDFA legislative representative for North South Government Strategies. 

“All the provisions have to be predominantly a revenue measure. That means that the driving committee behind it is Ways and Means.” 

Passing a reconciliation bill that comes through the House Ways and Means Committee could also provide a vehicle for issues of interest to the muni community including the restoration of advance refunding and raising the cap on bank-qualified debt. 

“What have we learned from the past reconciliations is, number one, it’s always better to play offense than defense,” said Emily Brock, director of the federal liaison center at the Government Finance Officers Association “It is literally a bullet train that’s headed down the path. It goes very quickly.” 

Sources on Capitol Hill are sensing a recent shift in the wind filling the reconciliation sails.  Provisions that didn’t make the cut in the One Big Beautiful Bill Act, President Trump pushing for tightening election security, and the ongoing impasse over Department of Homeland Security are all moving Congress towards passing a new bill.  

Trump has also raised the stakes by setting a June 1 deadline to solve the Immigration and Customs Enforcement funding dilemma. 

Sen. Lindsay Graham, R-S.C., is cheerleading for a bill that will include a bump in defense spending as the war has burned through the country’s munitions stockpile. 

House members return to Congress next Tuesday; the Senate resumes full operation the following Friday. The push to get anything done will last until an August recess, followed by the end of the fiscal year in September.

Only one reconciliation bill is allowed per fiscal year so theoretically a third one could be passed after Sept. 30 and before whatever is going to happen in the midterm elections in November.